Exhibit 10.4
LOAN MODIFICATION AGREEMENT
THIS LOAN MODIFICATION AGREEMENT (this "Agreement") is entered into as of
March 27, 2003, by and between CALLIDUS SOFTWARE, INC. ("Borrower") whose
address is ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and
SILICON VALLEY BANK ("Bank") whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, a Loan and Security Agreement, dated September 26, 2002, together
with Schedule A thereto (the "Schedule"; as may be amended from time to time,
the "Loan Agreement"). The Loan Agreement provides for, among other things, a
committed line of credit in the original maximum principal amount of Four
Million Dollars ($4,000,000) (the "Revolving Facility") and a Term Loan in the
principal amount of One Million Five Hundred Thousand Dollars ($1,500,000).
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Obligations."
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement and an Intellectual Property
Security Agreement dated September 26, 2002. Hereinafter, the above-described
security documents, together with all other documents securing repayment of the
Obligations shall be referred to as the "Security Documents". Hereinafter, the
Security Documents, together with all other documents evidencing or securing the
Obligations shall be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modifications to Loan Agreement.
1. The following is added to the Loan Agreement immediately after
Section 1.1.2 of the Loan Agreement as Section 1.1.2A of the
Loan Agreement:
1.1.2 TERM LOAN TWO.
(a) From March 27, 2003 until December 31, 2003 (the
"Term Loan Two Availability End Date"), Bank will make a term
loan available to Borrower to purchase "Eligible Equipment".
Each advance (a "Term Loan Two Advance") shall be payable in
thirty six (36) equal installments of principal, plus accrued
interest (each a "Term Loan Two Payment").
Each Term Loan Two Payment is payable on the first day of the
first month after the date of the Term Loan Two Advance.
(b) The first Term Loan Two Advance may be used to
finance or refinance Eligible Equipment purchased on or after
April 1, 2002, provided such Term Loan Two Advance is made on
or before April __, 2003. Thereafter all Term Loan Two
Advances shall be only used to finance the purchase of new
Eligible Equipment. Term Loan Two Advances may not exceed one
hundred percent (100%) of the equipment invoice, excluding
taxes, shipping, warranty charges, freight discounts and
installation expense. Transferable licenses, leasehold
improvements, and other soft cost, including taxes, shipping,
warranty charges, freight discounts and installation expenses
may constitute up to forty percent (40%) of the aggregate
amount of all Term Loan Two Advances. Each Term Loan Two
Advance must be for a minimum of One Hundred Thousand Dollars
($100,000). The number of Equipment Advances is limited to
seven (7).
2. The following definition is added to Section 8 of the Loan
Agreement:
"Eligible Equipment" means Equipment in which Bank has a valid
first priority security interest and may include new or used
computer, office, lab and test equipment, and furnishings.
B. Modifications to Schedule.
1. CREDIT LIMIT. Section 1.1 of the Schedule is amended and
restated in its entirety as follows:
CREDIT LIMIT (Section 1.1):
Silicon has agreed to provide three (3) credit
facilities to the Borrower consisting of a term loan
(the "Term Loan") a revolving loan (the "Loans" or the
"Revolving Facility") and a second term loan ("Term Loan
Two").
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The Term Loan: The Term Loan is in the original amount
not to exceed One Million Five Hundred Thousand Dollars
($1,500,000).
Term Loan Two: Term Loan Two shall be in the original
principal amount not to exceed One Million Dollars
($1,000,000).
The Revolving Loan: In an amount not to exceed the
lesser of: (i) Seven Million Dollars ($7,000,000) at any
one time outstanding (the "Maximum Credit Limit"); or
(ii) Eighty Percent (80%) (the "Advance Rate") of the
amount of Borrower's Eligible Accounts (as defined in
Section 8 above), and at all times prior to the EBITDA
Qualification Date, less the then outstanding principal
balance of the Term Loan.
Silicon may, from time to time, modify the Advance Rate,
in its good faith business judgment, upon notice to the
Borrower, based on changes in collection experience with
respect to Accounts or other issues or factors relating
to the Accounts or other Collateral.
2. INTEREST RATE. Section 1.2 of the Schedule is amended and
restated in its entirety as follows:
INTEREST RATE (Section 1.2):
(a) Loans: Interest on the Loans shall accrue
interest at a rate equal to the higher of (i) the Prime
Rate (as hereinafter defined) in effect from time to
time, plus two percent (2.00%) per annum, or (ii) six
and one quarter percent (6.25%) per annum.
(b) Term Loan: Interest on the Term Loan shall
accrue at a rate equal to the higher of (i) the Prime
Rate in effect from time to time, plus two and one
quarter of one percent (2.25%) per annum, or (ii) six
and one half percent (6.50%) per annum.
(c) Term Loan Two: Interest on Term Loan Two shall
accrue at a rate equal to the higher of (i) the Prime
Rate in effect from time to time, plus three and one
half percent (3.50%) per annum, or (ii) seven
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and three quarters of one percent (7.75%) per annum.
(d) Interest shall be calculated on the basis of a
360-day year for the actual number of days elapsed.
"Prime Rate" means the rate announced from time to time
by Silicon as its "prime rate;" it is a base rate upon
which other rates charged by Silicon are based, and it
is not necessarily the best rate available at Silicon.
The interest rate applicable to the Obligations shall
change on each date there is a change in the Prime Rate.
3. MATURITY DATES. Section 4 of the Schedule is amended and
restated in its entirety as follows:
4. MATURITY DATES (Section 6.1):
(a) Line of Credit Maturity Date: March ___, 2004.
(b) Term Loan Maturity Date: September 1, 2005.
(c) Term Loan Two Maturity Date: December 31, 2006
4. FINANCIAL COVENANTS. Section 5 of the Schedule is amended and
restated in its entirety as follows:
5. FINANCIAL COVENANTS (Section 5.1):
Borrower shall comply with each of the following
covenants. Compliance shall be determined as of the end
of each month, except as otherwise specifically provided
below:
MONTHLY CASH COLLECTIONS: Borrower shall maintain
minimum cash collections of not less than the following
amounts for the three (3) month period ending as of the
following dates:
1. February 28, 2003 $6,000,000;
2. March 31, 2003 $6,500,000;
3. April 30, 2003 $7,000,000;
4. May 31, 2003 $7,000,000;
5. June 30, 2003 $7,000,000;
6. July 31, 2003 $7,500,000;
7. August 31, 2003 $8,000,000
and as of the end of each month
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thereafter
QUARTERLY REVENUES: Borrower will maintain (the "Revenue
Covenant") total aggregate quarterly revenues of not
less than the following amounts as of the following
quarterly periods:
1. Quarter ending March 31, 2003 $8,500,000;
2 Quarter ending June 30, 2003 $9,500,000;
3. Quarter ending September 30, 2003 $10,500,000;
4. Quarter ending December 31, 2003
and each quarter thereafter $11,500,000.
MINIMUM BOOKINGS: Borrower will maintain license
bookings of not less than the following amounts as of
the following quarterly periods:
1. Quarter ending March 31, 2003 $4,000,000;
2 Quarter ending June 30, 2003 $4,750,000;
3. Quarter ending September 30, 2003 $5,500,000;
4. Quarter ending December 31, 2003
and each quarter thereafter $6,250,000.
5. STREAMLINE PERIOD. Notwithstanding anything set forth in the
Loan Agreement and the Schedule to the contrary, from and
after the date hereof, the Streamline Period will
automatically and without notice terminate and the standard
terms and conditions as provided for in this Agreement will
immediately take effect without any further action on the part
of Silicon or Borrower upon the earliest to occur of: (a) the
request by Borrower for a Loan under the Revolving Facility
after the date hereof; (b) the occurrence of a Default or
Event of Default; (c) a breach of Borrower's obligations under
this Agreement; or (d) the date on which the Bank makes the
first Term Loan Two Advance. In addition, the Streamline
Period shall automatically terminate upon Borrower giving Bank
the 30 Day Notice described in the Loan Agreement.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. In consideration of Bank's Agreement to increase the
Revolving Facility and make Term Loan Two, Borrower shall pay to Bank a non
refundable fee in the amount of Twenty Thousand Dollars ($20,000)
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(the "Loan Fee"), plus all out-of-pocket expenses, including without limitation,
the Bank's legal fees.
6. NO DEFENSES OF BORROWER. Borrower agrees that as of the date hereof, the
outstanding principal balance of the Term Loan is One Million Two Hundred
Thousand Forty Nine Thousand Nine Hundred Ninety Nine and 98/100 Dollars
($1,249,999.98) and that it has no defenses against the payment of any of the
Obligations.
7. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Agreement, the terms of the Existing Loan
Documents remain unchanged and in full force and effect. Bank's agreement to
modifications to the existing Obligations pursuant to this Agreement in no way
shall obligate Bank to make any future modifications to the Obligations. Nothing
in this Agreement shall constitute a satisfaction of the Obligations. It is the
intention of Bank and Borrower to retain as liable parties all makers and
endorsers of Existing Loan Documents, unless the party is expressly released by
Bank in writing. No maker, endorser, or guarantor will be released by virtue of
this Agreement. The terms of this paragraph apply not only to this Agreement,
but also to all subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Agreement is conditioned upon the
following:
1. Borrower's payment of the Loan Fee;
2. Delivery of a Warrant to Purchase Stock in the form of Exhibit
A, attached hereto.
9. RENEWAL. Bank agrees that in the event it provides Borrower with an
opportunity to renew the Revolving Facility at maturity, among the options it
will provide to the Borrower will be an option to renew the Revolving Facility
without the requirement that Bank receive additional warrants. Nothing in this
paragraph shall be construed or interpreted as a commitment to extend the
Revolving Facility beyond the maturity date set forth herein.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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This Agreement is executed as of the date first written above.
BORROWER: BANK:
CALLIDUS SOFTWARE, INC. SILICON VALLEY BANK
By: /s/ ▇▇▇ ▇. ▇▇▇▇ By: /s/ Illegible
------------------ -----------------
Name: ▇▇▇ ▇. ▇▇▇▇ Name:
Title: VP/CFO Title: SVP
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COMPLIANCE CERTIFICATE
To: Silicon Valley Bank
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▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
From: Callidus Software, Inc.
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▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
The undersigned authorized Officer of Callidus Software, Inc.
("Borrower"), hereby certifies that in accordance with the terms and conditions
of the Loan and Security Agreement, as modified from time to time, the Borrower
is in complete compliance for the period ending ____________ of all required
conditions and terms except as noted below. Attached herewith are the required
documents supporting the above certification. The Officer further certifies that
these are prepared in accordance with Generally Accepted Accounting Principles
(GAAP) and are consistent from one period to the next except as explained in an
accompanying letter or footnotes.
Please indicate compliance status by circling Yes/No under "Complies"
column.
REPORTING COVENANT REQUIRED COMPLIES
Financials & Comp. Cert. Monthly w/in 30 days YES/NO
Receivable agings Monthly w/in 15 days YES/NO
(invoice date)
Reconciliations of Monthly w/in 15 days YES/NO
A/R agings,
Transactions Weekly YES/NO
reports, GIL
Payables agings Monthly w/in 15 days YES/NO
Held Checks YES/NO
If YES, Held Checks Monthly w/in 15 days YES/NO
Register
Audited Annual Financials FYE w/in 120 days YES/NO
Annual Operating Budget W/in 30 days prior to FYE YES/NO
During any Streamline Period, Borrower will provide:
Receivable agings Monthly w/in 15 days YES/NO
(invoice date)
Transactions Monthly w/in 15 days YES/NO
reports, GIL
Payables agings Monthly w/in 15 days YES/NO
FINANCIAL COVENANTS
1. Monthly Cash Collections
PERIOD REQUIRED ACTUAL COMPLIES
------ -------- ------ --------
February 28, 2003 $6,000,000 ___________ YES/NO
March 31, 2003 $6,500,000 ___________ YES/NO
April 30, 2003 $7,000,000 ___________ YES/NO
May 31, 2003 $7,500,000 ___________ YES/NO
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PERIOD REQUIRED ACTUAL COMPLIES
------ -------- ------ --------
June 30, 2003 $8,000,000 ___________ YES/NO
And as of the end
of each month
thereafter
2. Quarterly Revenues
PERIOD REQUIRED ACTUAL COMPLIES
------ -------- ------ --------
March 31, 2003 $8,500,000 $___________ YES/NO
June 30, 2003 $9,500,000 $___________ YES/NO
September 30, 2003 $10,500,000 $___________ YES/NO
December 31, 2003 $11,500,000 $___________ YES/NO
and as of the end
of each quarter
thereafter
3. Minimum Bookings:
PERIOD REQUIRED ACTUAL COMPLIES
------ -------- ------ --------
March 31, 2003 $4,000,000 $___________ YES/NO
June 30, 2003 $4,250,000 $___________ YES/NO
September 30, 2003 $5,250,000 $___________ YES/NO
December 31, 2003 $6,250,000 $___________ YES/NO
and as of the end
of each quarter
thereafter
Terms are defined in the Schedule to the Loan Agreement, Section 5.1.
Comments regarding financial covenants:
Callidus Software, Inc.
By:
_________________________________
Name:
_______________________________
Title:
______________________________
Received:
By:
_________________________________
Name:
_______________________________
Title:
______________________________
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WARRANT TO PURCHASE STOCK
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT'), OR THE SECURITIES LAWS OF
ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE
OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS
EXEMPT FROM REGISTRATION.
WARRANT TO PURCHASE STOCK
Company: CALLIDUS SOFTWARE, INC., a Delaware corporation
Number of Shares: The amount of shares equal to $80,000 divided by the
Warrant Price.
Class of Stock: Series H Preferred Stock; provided, however, that in the
event that the Company does not close on its Series H round
of equity financing on or before the Expiration Date, this
Warrant shall be for the Company's Series G Preferred Stock.
Warrant Price: The lesser of (i) $1.00 or (ii) the price per share paid by
the lead investor (as determined by the Holder) in the
Company's Series H round of equity financing for the
Company's Series H Preferred Stock.
Issue Date: March 27, 2003
Expiration Date: March 27, 2013
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the company (the "Company") at the Warrant
Price, all as set forth above and as adjusted pursuant to Article 2 of this
Warrant, subject to the provisions and upon the terms and conditions set forth
in this Warrant.
ARTICLE 1. EXERCISE.
1.1 Method of Exercise. Holder may exercise this Warrant by
delivering a duly executed Notice of Exercise in substantially the form attached
as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Article 1.2, Holder shall also
deliver to the Company a check, wire transfer (to an account designated by the
Company), or
other from of payment acceptable to the Company for the aggregate Warrant Price
for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as
specified in Article 1.1, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this Warrant minus the aggregate Warrant Price of such Shares
by (b) the fair market value of one Share. The fair market value of the Shares
shall be determined pursuant to Article 1.3.
1.3 Fair Market Value. If the Company's common stock is traded in
a public market and the shares are common stock, the fair market value of each
Share shall be the closing price of a Share reported for the business day
immediately before Holder delivers its Notice of Exercise to the Company (or in
the instance where the Warrant is exercised immediately prior to the
effectiveness of the Company's initial public offering, the "price to public"
per share price specified in the final prospectus relating to such offering). If
the Company's common stock is traded in a public market and the Shares are
preferred stock, the fair market value of a Share shall be the closing price of
a share of the Company's common stock reported for the business day immediately
before Holder delivers its Notice of Exercise to the Company (or, in the
instance where the Warrant is exercised immediately prior to the effectiveness
of the Company's initial public offering, the initial "price to public" per
share price specified in the final prospectus relating to such offering), in
both cases, multiplied by the number of shares of the Company's common stock
into which a Share is convertible. If the Company's common stock is not traded
in a public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment.
1.4 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, but in any event within ten (10) days of
such exercise or conversion, and, if applicable, the Company receives payment of
the aggregate Warrant Price, the Company shall deliver to Holder certificates
for the Shares acquired and, if this Warrant has not been fully exercised or
converted and has not expired, a new Warrant representing the Shares not so
acquired.
1.5 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company shall, at its expense, execute and deliver, in lieu of this Warrant,
a new warrant of like tenor.
1.6 Treatment of Warrant Upon Acquisition of Company.
1.6.1 "Acquisition". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially
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all of the assets of the Company, or any reorganization, consolidation, or
merger of the Company where the holders of the Company's securities before the
transaction beneficially own less than 50% of the outstanding voting securities
of the surviving entity after the transaction.
1.6.2 Treatment of Warrant at Acquisition.
(a) Upon the written request of the Company, Holder agrees
that, in the event of an Acquisition in which the sole consideration is cash,
either (a) Holder shall exercise its conversion or purchase right under this
Warrant and such exercise will be deemed effective immediately prior to the
consummation of such Acquisition or (b) if Holder elects not to exercise the
Warrant, this Warrant will expire upon the consummation of such Acquisition. The
Company shall provide the Holder with written notice of its request relating to
the foregoing (together with such reasonable information as the Holder may
request in connection with such contemplated Acquisition giving rise to such
notice), which is to be delivered to Holder not less than ten (10) days prior to
the closing of the proposed Acquisition.
(b) Upon the written request of the Company, Holder agrees
that, in the event of an Acquisition that is an "arms length" sale of all or
substantially all of the Company's assets (and only its assets) to a third party
that is not an Affiliate (as defined below) of the Company (a "True Asset
Sale"), either (a) Holder shall exercise its conversion or purchase right under
this Warrant and such exercise will be deemed effective immediately prior to the
consummation of such Acquisition or (b) if Holder elects not to exercise the
Warrant, this Warrant will continue until the Expiration Date if the Company
continues as a going concern following the closing of any such True Asset Sale.
The Company shall provide the Holder with written notice of its request relating
to the foregoing (together with such reasonable information as the Holder may
request in connection with such contemplated Acquisition giving rise to such
notice), which is to be delivered to Holder not less than ten (10) days prior to
the closing of the proposed Acquisition.
(c) Upon the closing of any Acquisition other than those
particularly described in subsections (A) and (B) above, the successor entity
shall assume the obligations of this Warrant, and this Warrant shall be
exercisable for the same securities, cash, and property as would be payable for
the Shares issuable upon exercise of the unexercised portion of this Warrant as
if such Shares were outstanding on the record date for the Acquisition and
subsequent closing. The Warrant Price and/or number of Shares shall be adjusted
accordingly.
As used herein "Affiliate" shall mean any person or entity that owns or controls
directly or indirectly ten (10) percent or more of the stock of Company, any
person or entity that controls or is controlled by or is under common control
with such persons or entities, and each of such person's or entity's officers,
directors, joint venturers or partners, as applicable.
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ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays
a dividend on the Shares payable in common stock, or other securities, then upon
exercise of this Warrant, for each Share acquired, Holder shall receive, without
cost to Holder, the total number and kind of securities to which Holder would
have been entitled had Holder owned the Shares of record as of the date the
dividend occurred. If the Company subdivides the Shares by reclassification or
otherwise into a greater number of shares or takes any other action which
increase the amount of stock into which the Shares are convertible, the number
of shares purchasable hereunder shall be proportionately increased and the
Warrant Price shall be proportionately decreased. If the outstanding shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased and the number
of Shares shall be proportionately decreased.
2.2 Reclassification, Exchange, Combinations or Substitution. Upon
any reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles or
Certificate (as applicable) of Incorporation upon the closing of a registered
public offering of the Company's common stock. The Company or its successor
shall promptly issue to Holder an amendment to this Warrant setting forth the
number and kind of such new securities or other property issuable upon exercise
or conversion of this Warrant as a result of such reclassification, exchange,
substitution or other event that results in a change of the number and/or class
of securities issuable upon exercise or conversion of this Warrant. The
amendment to this Warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
2 including, without limitation, adjustments to the Warrant Price and to the
number of securities or property issuable upon exercise of the new Warrant. The
provisions of this Article 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.
2.3 Adjustments for Diluting Issuances. The Warrant Price and the
number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to adjustment, from time to time in the manner
set forth in the Company's Articles or Certificate of Incorporation as if the
Shares were issued and outstanding on and as of the date of any such required
adjustment. The provisions set forth for the Shares in the Company's Articles or
Certificate (as applicable) of Incorporation relating to the above in effect as
of the Issue Date may not be amended, modified or waived, without the prior
written
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consent of Holder unless such amendment, modification or waiver affects the
rights associated with the Shares in the same manner as such amendment,
modification or waiver affects the rights associated with all other shares of
the same series and class as the Shares granted to the Holder.
2.4 No Impairment. The Company shall not, by amendment of its
Articles or Certificate (as applicable) of Incorporation or through a
reorganization, transfer of assets, consolidation, merger, dissolution, issue,
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed under
this Warrant by the Company, but shall at all times in good faith assist in
carrying out of all the provisions of this Article 2 and in taking all such
action as may be necessary or appropriate to protect Holder's rights under this
Article against impairment.
2.5 Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder the amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.6 Certificate as to Adjustments. Upon each adjustment of the
Warrant Price, the Company shall promptly notify Holder in writing, and, at the
Company's expense, promptly compute such adjustment, and furnish Holder with a
certificate of its Chief Financial Officer setting forth such adjustment and the
facts upon which such adjustment is based. The Company shall, upon written
request, furnish Holder a certificate setting forth the Warrant Price in effect
upon the date thereof and the series of adjustments leading to such Warrant
Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page
of this Warrant is not greater than (i) the price per share at which the Shares
were last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
(b) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
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(c) The Company further covenants and agrees that, during
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved for the purpose of
issue or transfer upon exercise of the subscription rights evidenced by this
Warrant, a sufficient number of Shares of authorized but unissued stock, or
other securities and property, when and as required to provide for the exercise
of the rights represented by this Warrant.
(d) The Capitalization Table previously provided to Holder
remains true and complete as of the Issue Date.
3.2 Notice of Certain Events, If the Company proposes at any time
(a) to declare any dividend or distribution upon any of its stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for sale additional shares of any class or series of the
Company's stock; (c) to effect any reclassification or recapitalization of any
of its stock; (d) to merge or consolidate with or into any other corporation, or
sell, tease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the company's
securities for cash, then, in connection with each such event, the Company shall
give Holder: (1) at least 10 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 10 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Registration Under Securities Act of 1933, as amended. The
Company agrees that the Shares or, if the Shares are convertible into common
stock of the Company, such common stock, shall have certain incidental, or
"Piggyback," registration rights pursuant to and as set forth in the Company's
Investor Rights Agreement or similar agreement. The provisions set forth in the
Company's Investors' Right Agreement or similar agreement relating to the above
in effect as of the Issue Date may not be amended, modified or waived without
the prior written consent of Holder unless such amendment, modification or
waiver affects the rights associated with the Shares in the same manner as such
amendment, modification, or waiver affects the rights associated with all other
shares of the same series and class as the Shares granted to the Holder.
3.4 No Shareholder Rights. Except as provided in this Warrant, the
Holder will not have any rights as a shareholder of the Company until the
exercise of this Warrant.
3.5 REPRESENTATIONS, WARRANTIES OF THE
6
HOLDER. The Holder represents and warrants to the Company as follows:
3.6 Purchase for Own Account. This Warrant and the securities to
be acquired upon exercise of this Warrant by the Holder will be acquired for
investment for the Holder's account, not as a nominee or agent, and not with a
view to the public resale or distribution within the meaning of the Act. Holder
also represents that the Holder has not been formed for the specific purpose of
acquiring this Warrant or the Shares.
3.7 Disclosure of Information. The Holder has received or has had
full access to all the information it considers necessary or appropriate to make
an informed investment decision with respect to the acquisition of this Warrant
and its underlying securities. The Holder further has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of this Warrant and its underlying securities and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Holder or to which the
Holder has access.
3.8 Investment Experience. The Holder understands that the
purchase of this Warrant and its underlying securities involves substantial
risk. The Holder has experience as an investor in securities of companies in the
development stage and acknowledges that the Holder can bear the economic risk of
such Holder's investment in this Warrant and its underlying securities and has
such knowledge and experience in financial or business matters that the Holder
is capable of evaluating the merits and risks of its investment in this Warrant
and its underlying securities and/or has a preexisting personal or business
relationship with the Company and certain of its officers, directors or
controlling persons of a nature and duration that enables the Holder to be aware
of the character, business acumen and financial circumstances of such persons.
3.9 Accredited Investor Status. The Holder is an "accredited
investor" within the meaning of Regulation D promulgated under the Act.
3.10 The Act. The Holder understands that this Warrant and the
Shares issuable upon exercise or conversion hereof have not been registered un
the Act in reliance upon a specific exemption therefrom, which exemption depends
upon, among other things, the bona fide nature of the Holder's investment intent
as expressed herein. The Holder understands that this Warrant and the Shares
issued upon any exercise or conversion hereof must be held indefinitely unless
subsequently registered under the 1933 Act and qualified under applicable state
securities laws, or unless exemption from such registration and qualification
are otherwise available.
ARTICLE 4. MISCELLANEOUS.
4.1 Term: This Warrant is exercisable in whole or in part at any
time and from time to time on or before the Expiration Date.
7
4.2 Legends. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE ACT, OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT
AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE
OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION
IS EXEMPT FROM REGISTRATION.
4.3 Compliance with Securities Laws on Transfer. This Warrant and
the Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to Silicon Valley Bancshares (Holder's
parent company) or any other affiliate of Holder. Additionally, the Company
shall also not require an opinion of counsel if there is no material question as
to the availability of current information as referenced in Rule 144(c), Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holder's notice of proposed sale. At the
written request of the Holder, who proposes to sell Stock issuable upon the
exercise of the Warrant in compliance with Rule 144, within ten (10) days after
receipt of such request, a written statement confirming the Company's compliance
with the filing requirements of the Securities and Exchange Commission as set
forth in such Rule, as such Rule may be amended from time to time. In addition,
the Company agrees to provide the Holder within ten (10) days of written request
such additional documents as the Holder may require in order to exercise its
rights under this Warrant and transfer the Shares issued hereunder and carry out
the intent of this Warrant, including, without limitation, an opinion of counsel
for the benefit of the Holder or any underwriter or broker.
4.4 Transfer Procedure. Upon receipt by Holder of the executed
Warrant, Holder will transfer all of this Warrant to Silicon Valley Bancshares,
Holder's parent company, by execution of an Assignment substantially in the form
of Appendix 2. Subject to the provisions of Article 5.3
8
and upon providing Company with written notice, Silicon Valley Bancshares and
any subsequent Holder may transfer all or part of this Warrant or the Shares
issuable upon exercise of this Warrant (or the Shares issuable directly or
indirectly, upon conversion of the Shares, if any) to any transferee, provided,
however, in connection with any such transfer, Silicon Valley Bancshares or any
subsequent Holder will give the Company notice of the portion of the Warrant
being transferred with the name, address and taxpayer identification number of
the transferee and Holder will surrender this Warrant to the Company for
reissuance to the transferee(s) (and Holder if applicable). The Company may
refuse to transfer this Warrant or the Shares to any person who directly
competes with the Company, unless, in either case, the stock of the Company is
publicly traded.
4.5 Notices. All notices and other communications from the Company
to the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may (or on the first business day after transmission by
facsimile) be, in writing by the Company or such holder from time to time.
Effective upon receipt of the fully executed Warrant and the initial transfer
described in Article 5.4 above, all notices to the Holder shall be addressed as
follows until the Company receives notice of a change of address in connection
with a transfer or otherwise:
Silicon Valley Bancshares
Attn: Treasury Department
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Notice to the Company shall be addressed as follows until the Holder
receives notice of a change in address:
Callidus Software, Inc.
Attn:_______________________
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:_________________
Facsimile:__________________
4.6 Waiver. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
9
4.7 Attorney's Fees. In the event of any dispute between the
parties concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the other party all
costs incurred in such dispute, including reasonable attorney's fees.
4.8 Automatic Conversion upon Expiration. In the event that, upon
the Expiration Date, the fair market value of one Share (or other security
issuable upon the exercise hereof) as determined in accordance with Section 1.3
above is greater than the Warrant Price in effect on such date, then this
Warrant shall automatically be deemed on and as of such date to be converted
pursuant to Section 1.2 above as to all Shares (or such other securities) for
which it shall not previously have been exercised or converted, and the Company
shall promptly deliver a certificate representing the Shares (or such other
securities) issued upon such conversion to the Holder.
4.9 Counterparts. This Warrant may be executed in counterparts,
all of which together shall constitute one and the same agreement.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
10
4.10 Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
"COMPANY"
CALLIDUS SOFTWARE, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇ By:
--------------- ---------------------
Name: ▇▇▇ ▇. ▇▇▇▇ Name:
Title: VP/CFO Title:
"HOLDER"
SILICON VALLEY BANK
By: /s/ Illegible
-------------
Name:
Title:
11
APPENDIX 1
NOTICE OF EXERCISE
1. Holder elects to purchase ____________ shares of the Series ______
Preferred Stock of Callidus Software, Inc. pursuant to the terms of the attached
Warrant, and tenders payment of the purchase price of the shares in full.
[or]
1. Holder elects to convert the attached Warrant into Shares/cash
[strike one] in the manner specified in the Warrant. This conversion is
exercised for ______________________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing the shares
in the name specified below:
-----------------------------------
Holders Name
-----------------------------------
-----------------------------------
(Address)
3. By its execution below and for the benefit of the Company, Holder
hereby restates each of the representations and warranties in Article 4 of the
Warrant as the date hereof.
HOLDER:
-----------------------
By:
--------------------
Name:
Title:
(Date):
12
APPENDIX 2
ASSIGNMENT
FOR VALUE RECEIVED, SILICON VALLEY BANK HEREBY SELLS, ASSIGNS AND
TRANSFERS UNTO
NAME: SILICON VALLEY BANCSHARES
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (▇▇-▇▇▇)
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TAX ID: ▇▇-▇▇▇▇▇▇▇
THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY CALLIDUS SOFTWARE, INC.
(THE "COMPANY"), ON MARCH ___, 2003 (THE "WARRANT") TOGETHER WITH ALL
RIGHTS, TITLE AND INTEREST THEREIN.
SILICON VALLEY BANK
By:
------------------------------
Name:
Title:
Date: [insert Issue Date]
-----------------
By its execution below, and for the benefit of the Company, Silicon Valley
Bancshares makes each of the representations and warranties set forth in Article
4 of the Warrant as of the date hereof.
SILICON VALLEY BANCSHARES
By:
------------------------------
Name:
Title:
13