Document:

exv10w3

 

Exhibit 10.3

2007 Equity Incentive Plan

 

 

SHORETEL, INC.

2007 Equity Incentive Plan

(adopted
by the Board on February 2,
2007)1

     1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain and
motivate eligible persons whose present and potential contributions are important to the success of
the Company, and any Parents and Subsidiaries that exist now or in the future, by offering them an
opportunity to participate in the Company’s future performance through the grant of Awards.
Capitalized terms not defined elsewhere in the text are defined in Section 27. Prior to the date
that the Company’s Shares are first listed on a national securities exchange, this Plan is intended
to be a written compensatory benefit plan within the meaning of Rule 701 promulgated under the
Securities Act, grants may be made pursuant to this plan which do not qualify for exemption under
Rule 701 or Section 25102(o) of the California Corporations Code and any requirement of this Plan
which is required in law only because of Section 25102(o) need not apply if the Committee so
provides.

     2. SHARES SUBJECT TO THE PLAN.

          2.1 Number of Shares Available. Subject to Sections 2.6 and 22 and any other
applicable provisions hereof, the total number of Shares reserved and available for grant and
issuance pursuant to this Plan as of the date of adoption of the Plan
by the Board is Five Million (5,000,000) Shares.

          2.2 Lapsed, Returned Awards. Shares subject to Awards, and Shares issued upon
exercise of Awards, will again be available for grant and issuance in connection with subsequent
Awards under this Plan to the extent such Shares: (i) are subject to issuance upon exercise of an
Option or SAR granted under this Plan but which cease to be subject to the Option or SAR for any
reason other than exercise of the Option or SAR; (ii) are subject to Awards granted under this
Plan that are forfeited or are repurchased by the Company at the original issue price; (iii) are
surrendered pursuant to an Exchange Program; or (iv) are subject to Awards granted under this Plan
that otherwise terminate without such Shares being issued. With respect to SARs, only Shares
actually issued pursuant to a SAR will cease to be available under the Plan; all remaining Shares
under SARs will remain available for future grant or sale under the Plan. Shares used to pay the
exercise price of an Award or to satisfy the tax withholding obligations related to an Award will
become available for future grant or sale under the Plan. To the extent an Award under the Plan is
paid out in cash rather than Shares, such cash payment will not result in reducing the number of
Shares available for issuance under the Plan.

          2.3 Minimum Share Reserve. At all times the Company shall reserve and keep available
a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding
Awards granted under this Plan and all other outstanding but unvested Awards granted under this
Plan.

          2.4 Automatic Share Reserve Increase. The number of Shares available for grant and
issuance under the Plan shall be increased on January 1, of each of 2008 through 2017, by the
lesser of (i) five percent (5%) of the number of Shares issued and outstanding on each December 31
immediately prior to the date of increase or (ii) such number of Shares determined by the Board.

          2.5
Limitations. No more than Forty Five Million (45,000,000) Shares shall
be issued pursuant to the exercise of ISOs.

          2.6 Adjustment of Shares. If the number of outstanding Shares is changed by a stock
dividend, recapitalization, stock split, reverse stock split, subdivision, combination,

 

			
	1	 	Share amounts herein have been adjusted to reflect a 1-for-10
reverse stock split approved by the Board in June 2007, following
stockholder approval.

 

 

reclassification or similar change in the capital structure of the Company, without
consideration, then (a) the number of Shares reserved for issuance and future grant under the Plan
set forth in Section 2.1, (b) the Exercise Prices of and number of Shares subject to outstanding
Options and SARs, (c) the number of Shares subject to other outstanding Awards, (d) the maximum
number of shares that may be issued as ISOs set forth in Section 2.5, and (e) the maximum number
of Shares that may be issued to an individual or to a new Employee in any one calendar year set
forth in Section 3, shall be proportionately adjusted, subject to any required action by the Board
or the stockholders of the Company and in compliance with applicable securities laws; provided
that fractions of a Share will not be issued.

     3. ELIGIBILITY. ISOs may be granted only to Employees. All other Awards may be
granted to Employees, Consultants, and Directors of the Company or any Parent or Subsidiary of the
Company; provided such Consultants, and Directors render bona fide services not in
connection with the offer and sale of securities in a capital-raising transaction. No Participant
will be eligible to receive more than two million five hundred
thousand (2,500,000) Shares in any calendar year
under this Plan pursuant to the grant of Awards.

     4. ADMINISTRATION.

          4.1 Committee Composition; Authority. This Plan will be administered by the
Committee or by the Board acting as the Committee. Subject to the general purposes, terms and
conditions of this Plan, and to the direction of the Board, the Committee will have full power to
implement and carry out this Plan except however, the Board shall establish the terms for the
grant of Awards to Outside Directors. The Committee will have the authority to:

               (a) construe and interpret this Plan, any Award Agreement and any other agreement or document
executed pursuant to this Plan;

               (b) prescribe, amend and rescind rules and regulations relating to this Plan or any Award;

               (c) select persons to receive Awards;

               (d) determine the form and terms and conditions, not inconsistent with the terms of the Plan,
of any Award granted hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Awards may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Award or the Shares relating thereto, based in each case on such factors
as the Committee will determine;

               (e) determine the number of Shares or other consideration subject to Awards;

               (f) determine Fair Market Value, if necessary;

               (g) determine whether Awards will be granted singly, in combination with, in tandem with, in
replacement of, or as alternatives to, other Awards under this Plan or any other incentive or
compensation plan of the Company or any Parent or Subsidiary of the Company;

               (h) grant waivers of Plan or Award conditions;

               (i) determine the vesting, exercisability and payment of Awards;

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               (j) correct any defect, supply any omission or reconcile any inconsistency in this Plan, any
Award or any Award Agreement;

               (k) determine whether an Award has been earned;

               (l) determine the terms and conditions of any Exchange Program;

               (m) reduce or waive any criteria with respect to Performance Factors;

               (n) adjust Performance Factors to take into account changes in law and accounting or tax
rules as the Committee deems necessary or appropriate to reflect the impact of extraordinary or
unusual items, events or circumstances to avoid windfalls or hardships provided that such
adjustments are consistent with the regulations promulgated under Section 162(m) of the Code with
respect to persons whose compensation is subject to Section 162(m) of the Code; and

               (o) make all other determinations necessary or advisable for the administration of this Plan.

          4.2 Committee Interpretation and Discretion. Any determination made by the Committee
with respect to any Award shall be made in its sole discretion at the time of grant of the Award
or, unless in contravention of any express term of the Plan or Award, at any later time, and such
determination shall be final and binding on the Company and all persons having an interest in any
Award under the Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement
shall be submitted by the Participant or Company to the Committee for review. The resolution of
such a dispute by the Committee shall be final and binding on the Company and the Participant.
The Committee may delegate to one or more executive officers the authority to review and resolve
disputes with respect to Awards held by Participants who are not Insiders, and such resolution
shall be final and binding on the Company and the Participant.

          4.3 Section 162(m) of the Code and Section 16 of the Exchange Act. When necessary or
desirable for an Award to qualify as “performance-based compensation” under Section 162(m) of the
Code the Committee shall include at least two persons who are “outside directors” (as defined
under Section 162(m) of the Code) and at least two (or a majority if more than two then serve on
the Committee) such “outside directors” shall approve the grant of such Award and timely determine
(as applicable) the Performance Period and any Performance Factors upon which vesting or
settlement of any portion of such Award is to be subject. When required by Section 162(m) of the
Code, prior to settlement of any such Award at least two (or a majority if more than two then
serve on the Committee) such “outside directors” then serving on the Committee shall determine and
certify in writing the extent to which such Performance Factors have been timely achieved and the
extent to which the Shares subject to such Award have thereby been earned. Awards granted to
Insiders must be approved by two or more “non-employee directors” (as defined in the regulations
promulgated under Section 16 of the Exchange Act).

     5. OPTIONS. The Committee may grant Options to Participants and will determine
whether such Options will be Incentive Stock Options within the meaning of the Code (“ISOs”) or
Nonqualified Stock Options (“NQSOs”), the number of Shares subject to the Option, the Exercise
Price of the Option, the period during which the Option may be exercised, and all other terms and
conditions of the Option, subject to the following:

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          5.1 Option Grant. Each Option granted under this Plan will identify the Option as an
ISO or an NQSO. An Option may be, but need not be, awarded upon satisfaction of such Performance
Factors during any Performance Period as are set out in advance in the Participant’s individual
Award Agreement. If the Option is being earned upon the satisfaction of Performance Factors, then
the Committee will: (x) determine the nature, length and starting date of any Performance Period
for each Option; and (y) select from among the Performance Factors to be used to measure the
performance, if any. Performance Periods may overlap and Participants may participate
simultaneously with respect to Options that are subject to different performance goals and other
criteria.

          5.2 Date of Grant. The date of grant of an Option will be the date on which the
Committee makes the determination to grant such Option, or a specified future date. The Award
Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time
after the granting of the Option.

          5.3 Exercise Period. Options may be exercisable within the times or upon the
conditions as set forth in the Award Agreement governing such Option; provided,
however, that no Option will be exercisable after the expiration of ten (10) years from
the date the Option is granted; and provided further that no ISO granted to a person who,
at the time the ISO is granted, directly or by attribution owns more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary
of the Company (“Ten Percent Shareholder”) will be exercisable after the expiration of five (5)
years from the date the ISO is granted. The Committee also may provide for Options to become
exercisable at one time or from time to time, periodically or otherwise, in such number of Shares
or percentage of Shares as the Committee determines. To the extent then required by applicable
law, no Option granted to a non-officer employee shall become exercisable at an annual rate of
less than twenty percent (20%) of the Shares subject to such Option.

          5.4 Exercise Price. The Exercise Price of an Option will be determined by the
Committee when the Option is granted; provided that: (i) the Exercise Price of an ISO will be not
less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant
and (ii) the Exercise Price of any ISO granted to a Ten Percent Shareholder will not be less than
one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant.
Payment for the Shares purchased may be made in accordance with Section 11. The Exercise Price of
a NQSO may be less than one hundred percent (100%) of the Fair Market Value per Share on the date
of grant in the Committee’s discretion.

          5.5 Method of Exercise. Any Option granted hereunder will be exercisable according
to the terms of the Plan and at such times and under such conditions as determined by the
Committee and set forth in the Award Agreement. An Option may not be exercised for a fraction of a
Share. An Option will be deemed exercised when the Company receives: (i) notice of exercise (in
such form as the Committee may specify from time to time) from the person entitled to exercise the
Option, and (ii) full payment for the Shares with respect to which the Option is exercised
(together with applicable withholding taxes). Full payment may consist of any consideration and
method of payment authorized by the Committee and permitted by the Award Agreement and the Plan.
Shares issued upon exercise of an Option will be issued in the name of the Participant. Until the
Shares are issued (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 will exist with respect to the Shares, notwithstanding the exercise of the
Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which the record date is
prior to the date the Shares are issued, except as provided in Section 2.6 of the Plan. Exercising
an Option in any manner will decrease the number of

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Shares thereafter available, both for purposes of the Plan and for sale under the Option, by
the number of Shares as to which the Option is exercised.

          5.6 Termination. The exercise of an Option will be subject to the following (except
as may be otherwise provided in an Award Agreement):

               (a) If the Participant is Terminated for any reason except for Cause or the Participant’s
death or Disability, then the Participant may exercise such Participant’s Options only to the
extent that such Options would have been exercisable by the Participant on the Termination Date no
later than three (3) months after the Termination Date (or such shorter time period not less than
thirty (30) days or longer time period not exceeding five (5) years as may be determined by the
Committee, with any exercise beyond three (3) months after the Termination Date deemed to be an
NQSO), but in any event no later than the expiration date of the Options.

               (b) If the Participant is Terminated because of the Participant’s death (or the Participant
dies within three (3) months after a Termination other than for Cause or because of the
Participant’s Disability), then the Participant’s Options may be exercised only to the extent that
such Options would have been exercisable by the Participant on the Termination Date and must be
exercised by the Participant’s legal representative, or authorized assignee, no later than twelve
(12) months after the Termination Date (or such shorter time period not less than six (6) months or
longer time period not exceeding five (5) years as may be determined by the Committee, with any
exercise beyond (a) three (3) months after the Termination Date when the Termination is for any
reason other than the Participant’s death, or (b) twelve (12) months after the Termination Date
when the Termination is for the Participant’s death, deemed to be an NQSO), but in any event no
later than the expiration date of the Options.

               (c) If the Participant is Terminated because of the Participant’s Disability, then the
Participant’s Options may be exercised only to the extent that such Options would have been
exercisable by the Participant on the Termination Date and must be exercised by the Participant (or
the Participant’s legal representative or authorized assignee) no later than twelve (12) months
after the Termination Date (with any exercise beyond (a) three (3) months after the Termination
Date when the Termination is for a Disability that is not a “permanent and total
disability” as defined in Section 22(e)(3) of the Code, or (b) twelve (12) months after the
Termination Date when the Termination is for a Disability that is a “permanent and total
disability” as defined in Section 22(e)(3) of the Code, deemed to be exercise of an NQSO), but in
any event no later than the expiration date of the Options.

               (d) If the Participant is terminated for Cause, then Participant’s Options shall expire on
such Participant’s Termination Date, or at such later time and on such conditions as are determined
by the Committee, but in any no event later than the expiration date of the Options.

          5.7 Limitations on Exercise. The Committee may specify a minimum number of Shares
that may be purchased on any exercise of an Option, provided that such minimum number will not
prevent any Participant from exercising the Option for the full number of Shares for which it is
then exercisable.

          5.8 Limitations on ISOs. With respect to Awards granted as ISOs, to the extent that
the aggregate Fair Market Value of the Shares with respect to which such ISOs are exercisable for
the first time by the Participant during any calendar year (under all plans of the Company and any
Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be
treated as NQSOs. For purposes of this Section 5.8, ISOs will be taken into account in the order
in which they were granted. The Fair Market Value of the Shares will be determined as of the time
the Option with respect to such Shares is granted. In the event that the Code or the regulations
promulgated thereunder

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are amended after the Effective Date to provide for a different limit on the Fair Market
Value of Shares permitted to be subject to ISOs, such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective date of such
amendment.

          5.9 Modification, Extension or Renewal. The Committee may modify, extend or renew
outstanding Options and authorize the grant of new Options in substitution therefor, provided that
any such action may not, without the written consent of a Participant, impair any of such
Participant’s rights under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the
Code. Subject to Section 18 of this Plan, by written notice to affected Participants, the
Committee may reduce the Exercise Price of outstanding Options without the consent of such
Participants; provided, however, that the Exercise Price may not be reduced below
the Fair Market Value on the date the action is taken to reduce the Exercise Price.

          5.10 No Disqualification. Notwithstanding any other provision in this Plan, no term
of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or
authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of
the Code or, without the consent of the Participant affected, to disqualify any ISO under Section
422 of the Code.

     6. RESTRICTED STOCK AWARDS.

          6.1 Awards of Restricted Stock. A Restricted Stock Award is an offer by the Company
to sell to a Participant Shares that are subject to restrictions (“Restricted Stock”). The
Committee will determine to whom an offer will be made, the number of Shares the Participant may
purchase, the Purchase Price, the restrictions under which the Shares will be subject and all
other terms and conditions of the Restricted Stock Award, subject to the Plan.

          6.2 Restricted Stock Purchase Agreement. All purchases under a Restricted Stock
Award will be evidenced by an Award Agreement. A Participant accepts a Restricted Stock Award by
signing and delivering to the Company an Award Agreement with full payment of the Purchase Price,
within thirty (30) days from the date the Award Agreement was delivered to the Participant. If
the Participant does not accept such Award within thirty (30) days, then the offer of such
Restricted Stock Award will terminate, unless the Committee determines otherwise.

          6.3 Purchase Price. The Purchase Price for a Restricted Stock Award will be
determined by the Committee and may be less than Fair Market Value on the date the Restricted
Stock Award is granted. Payment of the Purchase Price must be made in accordance with Section 11
of the Plan, and the Award Agreement.

          6.4 Terms of Restricted Stock Awards. Restricted Stock Awards will be subject to
such restrictions as the Committee may impose or are required by law. These restrictions may be
based on completion of a specified number of years of service with the Company or upon completion
of Performance Factors, if any, during any Performance Period as set out in advance in the
Participant’s Award Agreement. Prior to the grant of a Restricted Stock Award, the Committee
shall: (a) determine the nature, length and starting date of any Performance Period for the
Restricted Stock Award; (b) select from among the Performance Factors to be used to measure
performance goals, if any; and (c) determine the number of Shares that may be awarded to the
Participant. Performance Periods may overlap and a Participant may participate simultaneously
with respect to Restricted Stock Awards that are subject to different Performance Periods and
having different performance goals and other criteria.

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          6.5 Termination of Participant. Except as may be set forth in the Participant’s
Award Agreement, vesting ceases on such Participant’s Termination Date (unless determined
otherwise by the Committee).

     7. STOCK BONUS AWARDS.

          7.1 Awards of Stock Bonuses. A Stock Bonus Award is an award to an eligible person
of Shares (which may consist of Restricted Stock or Restricted Stock Units) for services to be
rendered or for past services already rendered to the Company or any Parent or Subsidiary. All
Stock Bonus Awards shall be made pursuant to an Award Agreement. No payment from Participant will
be required for Shares awarded pursuant to a Stock Bonus Award.

          7.2 Terms of Stock Bonus Awards. The Committee will determine the number of Shares
to be awarded to the Participant under a Stock Bonus Award and any restrictions thereon. These
restrictions may be based upon completion of a specified number of years of service with the
Company or upon satisfaction of performance goals based on Performance Factors during any
Performance Period as set out in advance in the Participant’s Stock Bonus Agreement. Prior to the
grant of any Stock Bonus Award the Committee shall: (a) determine the nature, length and starting
date of any Performance Period for the Stock Bonus Award; (b) select from among the Performance
Factors to be used to measure performance goals; and (c) determine the number of Shares that may
be awarded to the Participant. Performance Periods may overlap and a Participant may participate
simultaneously with respect to Stock Bonus Awards that are subject to different Performance
Periods and different performance goals and other criteria.

          7.3 Form of Payment to Participant. Payment may be made in the form of cash, whole
Shares, or a combination thereof, based on the Fair Market Value of the Shares earned under a
Stock Bonus Award on the date of payment.

          7.4 Termination of Participation. Except as may be set forth in the Participant’s
Award Agreement, vesting ceases on such Participant’s Termination Date (unless determined
otherwise by the Committee).

     8. STOCK APPRECIATION RIGHTS.

          8.1 Awards of SARs. A Stock Appreciation Right (“SAR”) is an award to a Participant
that may be settled in cash, or Shares (which may consist of Restricted Stock), having a value
equal to (a) the difference between the Fair Market Value on the date of exercise over the
Exercise Price multiplied by (b) the number of Shares with respect to which the SAR is being
settled (subject to any maximum number of Shares that may be issuable as specified in an Award
Agreement). All SARs shall be made pursuant to an Award Agreement.

          8.2 Terms of SARs. The Committee will determine the terms of each SAR including,
without limitation: (a) the number of Shares subject to the SAR; (b) the Exercise Price and the
time or times during which the SAR may be settled; (c) the consideration to be distributed on
settlement of the SAR; and (d) the effect of the Participant’s Termination on each SAR. The
Exercise Price of the SAR will be determined by the Committee when the SAR is granted, and may be
less than Fair Market Value. A SAR may be awarded upon satisfaction of Performance Factors, if
any, during any Performance Period as are set out in advance in the Participant’s individual Award
Agreement. If the SAR is being earned upon the satisfaction of Performance Factors, then the
Committee will: (x) determine the nature, length and starting date of any Performance Period for
each SAR; and (y) select from among the Performance Factors to be used to measure the performance,
if any. Performance

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Periods may overlap and Participants may participate simultaneously with respect to SARs that
are subject to different Performance Factors and other criteria.

          8.3 Exercise Period and Expiration Date. A SAR will be exercisable within the times
or upon the occurrence of events determined by the Committee and set forth in the Award Agreement
governing such SAR. The SAR Agreement shall set forth the expiration date; provided that no
SAR will be exercisable after the expiration of ten (10) years from the date the SAR is granted.
The Committee may also provide for SARs to become exercisable at one time or from time to
time, periodically or otherwise (including, without limitation, upon the attainment during a
Performance Period of performance goals based on Performance Factors), in such number of Shares or
percentage of the Shares subject to the SAR as the Committee determines. Except as may be set
forth in the Participant’s Award Agreement, vesting ceases on such Participant’s Termination Date
(unless determined otherwise by the Committee). Notwithstanding the foregoing, the rules of
Section 5.6 also will apply to SARs.

          8.4 Form of Settlement. Upon exercise of a SAR, a Participant will be entitled to
receive payment from the Company in an amount determined by multiplying (i) the difference between
the Fair Market Value of a Share on the date of exercise over the Exercise Price; times (ii) the
number of Shares with respect to which the SAR is exercised. At the discretion of the Committee,
the payment from the Company for the SAR exercise may be in cash, in Shares of equivalent value,
or in some combination thereof.

     9. RESTRICTED STOCK UNITS.

          9.1 Awards of Restricted Stock Units. A Restricted Stock Unit (“RSU”) is an award to
a Participant covering a number of Shares that may be settled in cash, or by issuance of those
Shares (which may consist of Restricted Stock). All RSUs shall be made pursuant to an Award
Agreement.

          9.2 Terms of RSUs. The Committee will determine the terms of an RSU including,
without limitation: (a) the number of Shares subject to the RSU; (b) the time or times during
which the RSU may be settled; and (c) the consideration to be distributed on settlement, and the
effect of the Participant’s Termination on each RSU. An RSU may be awarded upon satisfaction of
such Performance Factors (if any) during any Performance Period as are set out in advance in the
Participant’s Award Agreement. If the RSU is being earned upon satisfaction of Performance
Factors, then the Committee will: (x) determine the nature, length and starting date of any
Performance Period for the RSU; (y) select from among the Performance Factors to be used to
measure the performance, if any; and (z) determine the number of Shares deemed subject to the RSU.
Performance Periods may overlap and participants may participate simultaneously with respect to
RSUs that are subject to different Performance Periods and different performance goals and other
criteria.

          9.3 Form and Timing of Settlement. Payment of earned RSUs shall be made as soon as
practicable after the date(s) determined by the Committee and set forth in the Award Agreement.
The Committee, in its sole discretion, may settle earned RSUs in cash, Shares, or a combination of
both.

          9.4 Termination of Participant. Except as may be set forth in the Participant’s
Award Agreement, vesting ceases on such Participant’s Termination Date (unless determined
otherwise by the Committee).

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     10. PERFORMANCE SHARES.

          10.1 Awards of Performance Shares. A Performance Share Award is an award to a
Participant denominated in Shares that may be settled in cash, or by issuance of those Shares
(which may consist of Restricted Stock). Grants of Performance Shares shall be made pursuant to
an Award Agreement.

          10.2 Terms of Performance Shares. The Committee will determine, and each Award
Agreement shall set forth, the terms of each award of Performance Shares including, without
limitation: (a) the number of Shares deemed subject to such Award; (b) the Performance Factors and
Performance Period that shall determine the time and extent to which each award of Performance
Shares shall be settled; (c) the consideration to be distributed on settlement, and the effect of
the Participant’s Termination on each award of Performance Shares. In establishing Performance
Factors and the Performance Period the Committee will: (x) determine the nature, length and
starting date of any Performance Period; (y) select from among the Performance Factors to be used;
and (z) determine the number of Shares deemed subject to the award of Performance Shares. Prior
to settlement the Committee shall determine the extent to which Performance Shares have been
earned. Performance Periods may overlap and Participants may participate simultaneously with
respect to Performance Shares that are subject to different Performance Periods and different
performance goals and other criteria.

          10.3 Value, Earning and Timing of Performance Shares. Each Performance Share will
have an initial value equal to the Fair Market Value of a Share on the date of grant. After the
applicable Performance Period has ended, the holder of Performance Shares will be entitled to
receive a payout of the number of Performance Shares earned by the Participant over the
Performance Period, to be determined as a function of the extent to which the corresponding
Performance Factors or other vesting provisions have been achieved. Payment of earned Performance
Shares will be made as soon as practicable after the expiration of the applicable Performance
Period. The Committee, in its sole discretion, may pay earned Performance Shares in the form of
cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned
Performance Shares at the close of the applicable Performance Period) or in a combination thereof.

          10.4 Termination of Participant. Except as may be set forth in the Participant’s
Award Agreement, vesting ceases on such Participant’s Termination Date (unless determined
otherwise by the Committee).

     11. PAYMENT FOR SHARE PURCHASES.

          Payment from Participant for Shares purchased pursuant to this Plan may be made in cash or by
check or, where expressly approved for the Participant by the Committee and where permitted by law
(and to the extent not otherwise set forth in the applicable Award Agreement):

               (a) by cancellation of indebtedness of the Company to the Participant;

               (b) by surrender of shares of the Company held by the Participant that have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said
Award will be exercised or settled;

               (c) by waiver of compensation due or accrued to the Participant for services rendered or to be
rendered to the Company or a Parent or Subsidiary of the Company;

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               (d) by consideration received by the Company pursuant to a broker-assisted and/or same day
sale (or other) cashless exercise program implemented by the Company in connection with the Plan;

               (e) by any combination of the foregoing; or

               (f) by any other method of payment as is permitted by applicable law.

     12. GRANTS TO OUTSIDE DIRECTORS.

          12.1 Types of Awards. Outside Directors are eligible to receive any type of Award
offered under this Plan except ISOs. Awards pursuant to this Section 12 may be automatically made
pursuant to policy adopted by the Board, or made from time to time as determined in the discretion
of the Board.

          12.2 Eligibility. Awards pursuant to this Section 12 shall be granted only to
Outside Directors. An Outside Director who is elected or re-elected as a member of the Board will
be eligible to receive an Award under this Section 12.

          12.3 Vesting, Exercisability and Settlement. Except as set forth in Section 21,
Awards shall vest, become exercisable and be settled as determined by the Board. With respect to
Options and SARs, the exercise price granted to Outside Directors shall not be less than the Fair
Market Value of the Shares at the time that such Option or SAR is granted.

     13. WITHHOLDING TAXES.

          13.1 Withholding Generally. Whenever Shares are to be issued in satisfaction of
Awards granted under this Plan, the Company may require the Participant to remit to the Company an
amount sufficient to satisfy applicable federal, state, local and international withholding tax
requirements prior to the delivery of Shares pursuant to exercise or settlement of any Award.
Whenever payments in satisfaction of Awards granted under this Plan are to be made in cash, such
payment will be net of an amount sufficient to satisfy applicable federal, state, local and
international withholding tax requirements.

          13.2 Stock Withholding. The Committee, in its sole discretion and pursuant to such
procedures as it may specify from time to time, may require or permit a Participant to satisfy
such tax withholding obligation, in whole or in part by (without limitation) (i) paying cash, (ii)
electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market
Value equal to the minimum statutory amount required to be withheld, or (iii) delivering to the
Company already-owned Shares having a Fair Market Value equal to the minimum statutory amount
required to be withheld. The Fair Market Value of the Shares to be withheld or delivered will be
determined as of the date that the taxes are required to be withheld.

     14. TRANSFERABILITY. Unless determined otherwise by the Committee, an Award may not
be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution. If the Committee makes an Award transferable, such
Award will contain such additional terms and conditions as the Committee deems appropriate. All
Awards shall be exercisable: (i) during the Participant’s lifetime only by (A) the Participant, or
(B) the Participant’s guardian or legal representative; and (ii) after the Participant’s death, by
the legal representative of the Participant’s heirs or legatees

10

 

     15. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.

          15.1 Voting and Dividends. No Participant will have any of the rights of a
shareholder with respect to any Shares until the Shares are issued to the Participant. After
Shares are issued to the Participant, the Participant will be a shareholder and have all the
rights of a shareholder with respect to such Shares, including the right to vote and receive all
dividends or other distributions made or paid with respect to such Shares; provided, that
if such Shares are Restricted Stock, then any new, additional or different securities the
Participant may become entitled to receive with respect to such Shares by virtue of a stock
dividend, stock split or any other change in the corporate or capital structure of the Company
will be subject to the same restrictions as the Restricted Stock; provided,
further, that the Participant will have no right to retain such stock dividends or stock
distributions with respect to Shares that are repurchased at the Participant’s Purchase Price or
Exercise Price, as the case may be, pursuant to Section 15.2.

          15.2 Restrictions on Shares. At the discretion of the Committee, the Company may
reserve to itself and/or its assignee(s) a right to repurchase (a “Right of Repurchase”) a portion
of any or all Unvested Shares held by a Participant following such Participant’s Termination at
any time within ninety (90) days after the later of the Participant’s Termination Date and the
date the Participant purchases Shares under this Plan, for cash and/or cancellation of purchase
money indebtedness, at the Participant’s Purchase Price or Exercise Price, as the case may be.

     16. CERTIFICATES. All certificates for Shares or other securities delivered under
this Plan will be subject to such stock transfer orders, legends and other restrictions as the
Committee may deem necessary or advisable, including restrictions under any applicable federal,
state or foreign securities law, or any rules, regulations and other requirements of the SEC or any
stock exchange or automated quotation system upon which the Shares may be listed or quoted.

     17. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Participant’s Shares,
the Committee may require the Participant to deposit all certificates representing Shares, together
with stock powers or other instruments of transfer approved by the Committee, appropriately
endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until
such restrictions have lapsed or terminated, and the Committee may cause a legend or legends
referencing such restrictions to be placed on the certificates. Any Participant who is permitted
to execute a promissory note as partial or full consideration for the purchase of Shares under this
Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased
as collateral to secure the payment of the Participant’s obligation to the Company under the
promissory note; provided, however, that the Committee may require or accept other
or additional forms of collateral to secure the payment of such obligation and, in any event, the
Company will have full recourse against the Participant under the promissory note notwithstanding
any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the
Shares, the Participant will be required to execute and deliver a written pledge agreement in such
form as the Committee will from time to time approve. The Shares purchased with the promissory
note may be released from the pledge on a pro rata basis as the promissory note is paid.

     18. REPRICING; EXCHANGE AND BUYOUT OF AWARDS. The Committee may reprice Options or
SARS without prior stockholder approval. The Committee may, at any time or from time to time
authorize the Company, in the case of an Option or SAR exchange, and with the consent of the
respective Participants (unless not required pursuant to Section 5.9 of the Plan), to pay cash or
issue new Awards in exchange for the surrender and cancellation of any, or all, outstanding Awards.
The Committee may reduce the Exercise Price of outstanding Options or SARs without the consent of
affected Participants by a written notice to them; provided, however, that the Exercise Price may
not be reduced

11

 

below the minimum Exercise Price necessary to avoid treatment as a “deferral of compensation”
under Section 409A of the Code.

     19. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be effective
unless such Award is in compliance with all applicable federal and state securities laws, rules and
regulations of any governmental body, and the requirements of any stock exchange or automated
quotation system upon which the Shares may then be listed or quoted, as they are in effect on the
date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any
other provision in this Plan, the Company will have no obligation to issue or deliver certificates
for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that
the Company determines are necessary or advisable; and/or (b) completion of any registration or
other qualification of such Shares under any state or federal law or ruling of any governmental
body that the Company determines to be necessary or advisable. The Company will be under no
obligation to register the Shares with the SEC or to effect compliance with the registration,
qualification or listing requirements of any state securities laws, stock exchange or automated
quotation system, and the Company will have no liability for any inability or failure to do so.

     20. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this
Plan will confer or be deemed to confer on any Participant any right to continue in the employ of,
or to continue any other relationship with, the Company or any Parent or Subsidiary of the Company
or limit in any way the right of the Company or any Parent or Subsidiary of the Company to
terminate Participant’s employment or other relationship at any time.

     21. CORPORATE TRANSACTIONS.

          21.1 Assumption or Replacement of Awards by Successor. In the event of a Corporate
Transaction any or all outstanding Awards may be assumed or replaced by the successor corporation,
which assumption or replacement shall be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially similar
consideration to Participants as was provided to stockholders (after taking into account the
existing provisions of the Awards). The successor corporation may also issue, in place of
outstanding Shares of the Company held by the Participant, substantially similar shares or other
property subject to repurchase restrictions no less favorable to the Participant. In the event
such successor or acquiring corporation (if any) refuses to assume, convert, replace or substitute
Awards, as provided above, pursuant to a Corporate Transaction, then notwithstanding any other
provision in this Plan to the contrary, such Awards will expire on such transaction at such time
and on such conditions as the Board will determine; the Board (or, the Committee, if so designated
by the Board) may, in its sole discretion, accelerate the vesting of such Awards in connection
with a Corporate Transaction. In addition, in the event such successor or acquiring corporation
(if any) refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to
a Corporate Transaction, the Committee will notify the Participant in writing or electronically
that such Award will be exercisable for a period of time determined by the Committee in its sole
discretion, and such Award will terminate upon the expiration of such period. Awards need not be
treated similarly in a Corporate Transaction.

     Notwithstanding anything to the contrary in this Section 21.1, the Committee, in its sole
discretion, may grant Awards that provide for acceleration upon a Corporate Transaction or in other
events in the specific Award Agreements.

          21.2 Assumption of Awards by the Company. The Company, from time to time, also may
substitute or assume outstanding awards granted by another company, whether in connection with an
acquisition of such other company or otherwise, by either; (a) granting an Award under this

12

 

Plan in substitution of such other company’s award; or (b) assuming such award as if it had
been granted under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if the holder of the
substituted or assumed award would have been eligible to be granted an Award under this Plan if
the other company had applied the rules of this Plan to such grant. In the event the Company
assumes an award granted by another company, the terms and conditions of such award will remain
unchanged (except that the Purchase Price or the Exercise Price, as the case may be, and
the number and nature of Shares issuable upon exercise or settlement of any such Award will be
adjusted appropriately pursuant to Section 424(a) of the Code).

          21.3 Outside Directors’ Awards. Notwithstanding any provision to the contrary
herein, in the event of a Corporate Transaction, the vesting of all Awards granted to Outside
Directors shall accelerate and such Awards shall become exercisable (as applicable) in full prior
to the consummation of such event at such times and on such conditions as the Committee
determines.

     22. ADOPTION AND SHAREHOLDER APPROVAL. This Plan shall be submitted for the approval
of the Company’s shareholders, consistent with applicable laws, within twelve (12) months before or
after the date this Plan is adopted by the Board.

     23. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this
Plan will become effective on the Effective Date and will terminate ten (10) years from the date
this Plan is adopted by the Board. This Plan and all Awards granted hereunder shall be governed
by, and construed in accordance with, the laws of the State of Delaware.

     24. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate or amend
this Plan in any respect, including, without limitation, amendment of any form of Award Agreement
or instrument to be executed pursuant to this Plan; provided, however, that the
Board will not, without the approval of the shareholders of the Company, amend this Plan in any
manner that requires such shareholder approval; provided further, that a Participant’s
Award shall be governed by the version of this Plan then in effect at the time such Award was
granted.

     25. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, the
submission of this Plan to the shareholders of the Company for approval, nor any provision of this
Plan will be construed as creating any limitations on the power of the Board to adopt such
additional compensation arrangements as it may deem desirable, including, without limitation, the
granting of stock awards and bonuses otherwise than under this Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.

     26. INSIDER TRADING POLICY. Each Participant who receives an Award shall comply with
any policy adopted by the Company from time to time covering transactions in the Company’s
securities by Employees, officers and/or directors of the Company.

     27. DEFINITIONS. As used in this Plan, and except as elsewhere defined herein, the
following terms will have the following meanings:

     “Award” means any award under the Plan, including any Option, Restricted Stock, Stock Bonus,
Stock Appreciation Right, Restricted Stock Unit or award of Performance Shares.

     “Award Agreement” means, with respect to each Award, the written or electronic agreement
between the Company and the Participant setting forth the terms and conditions of the Award, which
shall

13

 

be in substantially a form (which need not be the same for each Participant) that the
Committee has from time to time approved, and will comply with and be subject to the terms and
conditions of this Plan.

     “Board” means the Board of Directors of the Company.

     “Cause” means (a) the commission of an act of theft, embezzlement, fraud, dishonesty, (b) a
breach of fiduciary duty to the Company or a Parent or Subsidiary, or (c) a failure to materially
perform the customary duties of Employee’s employment.

     “Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.

     “Committee” means the Compensation Committee of the Board or those persons to whom
administration of the Plan, or part of the Plan, has been delegated as permitted by law.

     “Company” means ShoreTel, Inc., or any successor corporation.

     “Consultant” means any person, including an advisor or independent contractor, engaged by the
Company or a Parent or Subsidiary to render services to such entity.

     “Corporate Transaction” means the occurrence of any of the following events: (i) any “person”
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial
owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the total voting power represented by the
Company’s then-outstanding voting securities; (ii) the consummation of the sale or disposition by
the Company of all or substantially all of the Company’s assets; (iii) the consummation of a merger
or consolidation of the Company with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting
power represented by the voting securities of the Company or such surviving entity or its parent
outstanding immediately after such merger or consolidation; or (iv) any other transaction which
qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the stockholders of
the Company give up all of their equity interest in the Company (except for the acquisition, sale
or transfer of all or substantially all of the outstanding shares of the Company).

     “Director” means a member of the Board.

     “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code,
provided, however, that except with respect to Awards granted as ISOs, the Committee in its
discretion may determine whether a total and permanent disability exists in accordance with
non-discriminatory and uniform standards adopted by the Committee from time to time, whether
temporary or permanent, partial or total, as determined by the Committee.

     “Effective Date” means the date of the Plan’s adoption by the Board.

     “Employee” means any person, including Officers and Directors, employed by the Company or any
Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee
by the Company will be sufficient to constitute “employment” by the Company.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

14

 

     “Exercise Price” means the price at which a holder of an Option or SAR may purchase the Shares
issuable upon exercise of an Option or SAR.

     “Exchange Program” means a program pursuant to which outstanding Awards are surrendered,
cancelled or exchanged for cash, the same type of Award or a different Award (or combination
thereof).

     “Fair Market Value” means, as of any date, the value of a share of the Company’s Common Stock
determined as follows:

               (a) if such Common Stock is then quoted on the Nasdaq Global Select Market, the Nasdaq Global
Market or the Nasdaq Capital Market (collectively, the “Nasdaq Market”), its closing price on the
Nasdaq Market on the date of determination, or if there are no sales for such date, then the last
preceding business day on which there were sales, as reported in The Wall Street Journal or such
other source as the Board or the Committee deems reliable;

               (b) if such Common Stock is publicly traded and is then listed on a national securities
exchange, its closing price on the date of determination on the principal national securities
exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street
Journal or such other source as the Board or the Committee deems reliable;

               (c) if such Common Stock is publicly traded but is neither quoted on the Nasdaq Market nor
listed or admitted to trading on a national securities exchange, the average of the closing bid and
asked prices on the date of determination as reported in The Wall Street Journal or such other
source as the Board or the Committee deems reliable; or

               (d) if none of the foregoing is applicable, by the Board or the Committee in good faith and by
taking into account such factors as may be required by applicable law.

     “Insider” means an officer or director of the Company or any other person whose transactions
in the Company’s Common Stock are (or would be if the Company’s Shares are not then publicly
traded) subject to Section 16 of the Exchange Act.

     “Option” means an award of an option to purchase Shares pursuant to Section 5.

     “Outside Director” means a Director who is not an Employee of the Company or any Parent or
Subsidiary.

     “Parent” means any corporation (other than the Company) in an unbroken chain of corporations
ending with the Company if each of such corporations other than the Company owns 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.

     “Participant” means an Employee, Consultant or Director (including Outside Directors) who
receives an Award under this Plan.

     “Performance Factors” means the factors selected by the Committee, which may include, but are
not limited to the, the following measures (whether or not in comparison to other peer companies)
to determine whether the performance goals established by the Committee and applicable to Awards
have been satisfied:

	 	•	 	Net revenue and/or net revenue growth;

15

 

	 	•	 	Earnings per share and/or earnings per share growth;
	 
	 	•	 	Earnings before income taxes and amortization and/or earnings before income
taxes and amortization growth;
	 
	 	•	 	Operating income and/or operating income growth;
	 
	 	•	 	Net income and/or net income growth;
	 
	 	•	 	Total stockholder return and/or total stockholder return growth;
	 
	 	•	 	Return on equity;
	 
	 	•	 	Operating cash flow return on income;
	 
	 	•	 	Adjusted operating cash flow return on income;
	 
	 	•	 	Economic value added;
	 
	 	•	 	Individual business objectives; and
	 
	 	•	 	Company specific operational metrics.

     “Performance Period” means the period of service determined by the Committee, not to exceed
five (5) years, during which years of service or performance is to be measured for the Award.

     “Performance Share” means an Award granted pursuant to Section 10 of the Plan.

     “Plan” means this ShoreTel, Inc. 2007 Equity Incentive Plan.

     “Purchase Price” means the price to be paid for Shares acquired under the Plan, other than
Shares acquired upon exercise of an Option or SAR.

     “Restricted Stock Award” means an award of Shares pursuant to Section 6 of the Plan, or issued
pursuant to the early exercise of an Option.

     “Restricted Stock Unit” means an Award granted pursuant to Section 9 of the Plan.

     “SEC” means the United States Securities and Exchange Commission.

     “Securities Act” means the United States Securities Act of 1933, as amended.

     “Shares” means shares of the Company’s Common Stock as adjusted pursuant to Sections 2 and 21,
and any successor security.

     “Stock Appreciation Right” means an Award granted pursuant to Section 8 of the Plan.

     “Stock Bonus” means an Award granted pursuant to Section 7 of the Plan.

     “Subsidiary” means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if each of the corporations other than the last corporation
in the

16

 

unbroken chain owns 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.

     “Termination” or “Terminated” means, for purposes of this Plan with respect to a Participant,
that the Participant has for any reason ceased to provide services as an employee, officer,
director, consultant, independent contractor or advisor to the Company or a Parent or Subsidiary of
the Company. An employee will not be deemed to have ceased to provide services in the case of (i)
sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Committee;
provided, that such leave is for a period of not more than 90 days, unless reemployment
upon the expiration of such leave is guaranteed by contract or statute or unless provided otherwise
pursuant to formal policy adopted from time to time by the Company and issued and promulgated to
employees in writing. In the case of any employee on an approved leave of absence, the Committee
may make such provisions respecting suspension of vesting of the Award while on leave from the
employ of the Company or a Parent or Subsidiary of the Company as it may deem appropriate, except
that in no event may an Award be exercised after the expiration of the term set forth in the
applicable Award Agreement. The Committee will have sole discretion to determine whether a
Participant has ceased to provide services and the effective date on which the Participant ceased
to provide services (the “Termination Date”).

     “Unvested Shares” means Shares that have not yet vested or are subject to a right of
repurchase in favor of the Company (or any successor thereto).

17

 

 

SHORETEL, INC.

2007 EQUITY INCENTIVE PLAN

NOTICE OF STOCK OPTION GRANT

	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Address:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 

	 	 	 	 

	 	 

     You (the “Participant”) have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of this Notice of Stock Option Grant (the “Notice”), the 2007
Equity Incentive Plan, as amended from time to time (the “Plan”) and the Stock Option Award
Agreement (the “Option Agreement”) attached hereto, as follows. The terms defined in the Plan
shall have the same meanings in this Notice.

	 	 	 	 	 	 	 
	 

	 	Grant Number
	 	                    	 	 
	 
	 	 	 	 	 	 
	 

	 	Date of Grant
	 	                    	 	 
	 
	 	 	 	 	 	 
	 

	 	Vesting Commencement Date
	 	                    	 	 
	 
	 	 	 	 	 	 
	 

	 	Exercise Price per Share
	 	                    	 	 
	 
	 	 	 	 	 	 
	 

	 	Total Number of Shares
	 	                    	 	 
	 
	 	 	 	 	 	 
	 

	 	Total Exercise Price
	 	                    	 	 
	 
	 	 	 	 	 	 
	 	 	Type of Option	 	           Non-Qualified Stock Option  
	 
	 	 	 	 	 	 
	 	 	 	 	           Incentive Stock Option
	 
	 	 	 	 	 	 
	 

	 	Expiration Date
	 	                    	 	 
	 
	 	 	 	 	 	 
	 	 	Post-Termination Exercise Period:	 	Termination for Cause = None

Voluntary Termination = 3 Months

Termination without Cause = 3 Months

Disability = 12 Months

Death = 12 Months

Vesting Schedule:

     Subject to the limitations set forth in this Notice, the Plan and the Option Agreement, the
Option will vest and may be exercised, in whole or in part, in accordance with the following
schedule:

     [INSERT VESTING SCHEDULE]

     You acknowledge receipt of a copy of the Plan and the Option Agreement, and represent that you
are familiar with the terms and provisions thereof, and hereby accept the Option subject to all of
the terms and provisions hereof. You understand that your employment or consulting relationship,
or service with the Company is for an unspecified duration and can be terminated at any time (i.e.,
is “at-will”), and that

 

 

nothing in this Notice, the Stock Option Award Agreement or the Plan changes the at-will nature of
that relationship. You acknowledge that the vesting of shares pursuant to this Notice is earned
only by your continuing service as an Employee or Consultant of the Company.

	 	 	 	 	 	 	 	 	 
	PARTICIPANT:	 	 	 	SHORETEL, INC.
	 
	 	 	 	 	 	 	 	 
	Signature:  

	 	 	 	 	 	By:	 	 
	 

	 

	 	 	 	 	 
 
	Print Name: 

	 	 	 	 	 	Its:	 	 
	 

	 

	 	 	 	 	 
 
	Date:

	 	 	 	 	 	Date: 	 	 
	 

	 

	 	 	 	 	 
 

2

 

SHORETEL, INC.

STOCK OPTION AWARD AGREEMENT

2007 EQUITY INCENTIVE PLAN

     Unless otherwise defined herein, the terms defined in the Company’s 2007 Equity Incentive Plan
(the “Plan”) shall have the same defined meanings in this Award Agreement (the “Agreement”).

     Participant has been granted an option to purchase Shares (the “Option”), subject to the terms
and conditions of the Plan, the Notice of Stock Option Grant (“Notice of Grant”) and this
Agreement.

     1. Vesting Rights. Subject to the applicable provisions of the Plan and this
Agreement, this Option may be exercised, in whole or in part, in accordance with the schedule set
forth in the Notice of Grant.

     2. Termination Period.

          (a) General Rule. Except as provided below, and subject to the Plan, this Option may
be exercised for 3 months after termination of Participant’s employment with the Company. In no
event shall this Option be exercised later than the Term/Expiration Date set forth in the Notice of
Grant.

          (b) Death; Disability. Upon the termination of Participant’s employment with the
Company by reason of his or her Disability or death, or if a Participant dies within three months
of the Termination Date, this Option may be exercised for twelve months in the case of death, and
six months in the case of Disability, after the Termination Date, provided that in no event shall
this Option be exercised later than the Term/Expiration Date set forth in the Notice of Grant.

          (c) Cause. Upon the termination of Participant’s employment by the Company for Cause,
the Option shall expire on such date of Participant’s Termination Date.

     3. Grant of Option. The Participant named in the Notice of Grant has been granted an
Option for 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”). In the event of a conflict between the
terms and conditions of the Plan and the terms and conditions of this 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 under Section 422 of the Code. However, if this
Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule
of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option (“NSO”).

     4. Exercise of Option.

          (a) Right to Exercise. This Option is exercisable during its term in accordance with
the Vesting Schedule set forth in the Notice of Grant and the applicable provisions of the Plan and
this Agreement. In the event of Participant’s death, Disability, Termination for Cause or other
Termination, the exercisability of the Option is governed by the applicable provisions of the Plan,
the Notice of Stock Option Grant and this Agreement.

          (b) Method of Exercise. This Option is exercisable by delivery of an exercise notice
(the “Exercise Notice”), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other
representations and agreements as may be required by the Company pursuant to the provisions of the
Plan. The Exercise Notice shall be delivered in person, by mail, via electronic mail or facsimile
or by other authorized method to the Secretary of the Company or other person designated 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 such aggregate Exercise Price.

          (c) No Shares shall be issued pursuant to the exercise of this Option unless such issuance and
exercise complies with all relevant provisions of law and the requirements of any stock exchange or
quotation service upon which the Shares are then listed. Assuming such compliance, for income tax
purposes the Exercised Shares shall be considered transferred to the Participant on the date the
Option is exercised with respect to such Exercised Shares.

     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 Participant:

          (a) cash; or

          (b) check; or

          (c) a “broker-assisted” or “same day sale” (as described in Section 11(d) of the Plan); or

          (d) other method authorized by the Company.

     6. Non-Transferability of Option. This Option may not be transferred in any manner
other than by will or by the laws of descent or distribution or court order and may be exercised
during the lifetime of Participant only by the Participant. The terms of the Plan and this
Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the
Participant.

     7. 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 Notice of Grant,
the Plan and the terms of this Agreement.

     8. U.S. Tax Consequences. For Participants subject to U.S. income tax, some of the
federal tax consequences relating to this Option, as of the date of this Option, are set forth
below. All other Participants should consult a tax advisor for tax consequences relating to this
Option in their respective jurisdiction. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS
AND REGULATIONS ARE SUBJECT TO CHANGE. THE PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE
EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

          (a) Exercising the Option.

               (i) Nonstatutory Stock Option. The Participant may incur regular federal income tax
liability upon exercise of a NSO. The Participant 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 Exercised Shares on the date of exercise over their aggregate Exercise Price. If the
Participant is an Employee or a former Employee, the Company will be required to withhold from his
or her compensation or collect from Participant 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.

               (ii) Incentive Stock Option. If this Option qualifies as an ISO, the Participant will
have no regular federal income tax liability upon its exercise, although the excess, if any, of the
aggregate Fair Market Value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price will be treated as an adjustment to alternative minimum taxable income for federal
tax purposes and may subject the Participant to alternative minimum tax in the year of exercise.

2

 

          (b) Disposition of Shares.

               (i) NSO. If the Participant holds NSO Shares 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.

               (ii) ISO. If the Participant holds ISO Shares for at least one year after exercise
and two years after the grant date, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes. If the Participant disposes of ISO
Shares within one year after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income rates) to the extent
of the excess, if any, of the lesser of (A) the difference between the Fair Market Value of the
Shares acquired on the date of exercise and the aggregate Exercise Price, or (B) the difference
between the sale price of such Shares and the aggregate Exercise Price.

          (c) Notice of Disqualifying Disposition of ISO Shares. If the Participant sells or
otherwise disposes of any of the Shares acquired pursuant to an ISO on or before the later of (i)
two years after the grant date, or (ii) one year after the exercise date, the Participant shall
immediately notify the Company in writing of such disposition. The Participant agrees that he or
she may be subject to income tax withholding by the Company on the compensation income recognized
from such early disposition of ISO Shares by payment in cash or out of the current earnings paid to
the Participant.

          (d) Possible Effect of Section 409A of the Code. Section 409A of the Code applies to
arrangements that provide for the deferral of compensation. Generally, a stock option granted with
an exercise price per share of not less than the “fair market value” (determined in a manner
consistent with Section 409A of the Code and the regulations and other guidance promulgated
thereunder) per share on the date of grant of the stock option and with no other feature providing
for the deferral of compensation will not be subject to Section 409A of the Code. However, if the
exercise price of the stock option is less than such “fair market value” or the stock option has
another feature for the deferral of compensation, then if the stock option is not administered
within the parameters established under Section 409A the optionholder will be subject to additional
taxes. Also, the amount deemed to be deferred compensation under Section 409A of the Code will be
subject to ordinary income and employment taxes (in this respect the IRS has not yet indicated how
it will calculate the amount of deferred compensation subject to tax and the timing and frequency
of taxation, but it seems likely that the income will be measured and taxes imposed at least on the
vesting dates of the stock option). If Section 409A of the Code does apply to this Option, then
special rules apply to the timing of making and effecting certain amendments of this Option with
respect to distribution of any deferred compensation.

     9. Entire Agreement; Governing Law. The Plan is incorporated herein by reference.
The Plan, the Notice of Grant, and this 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 Participant with respect to the subject matter hereof, and may
not be modified adversely to the Participant’s interest except by means of a writing signed by the
Company and Participant. This agreement is governed by Delaware law except for that body of law
pertaining to conflict of laws.

     10. No Rights as Employee, Director or Consultant. Nothing in this Agreement shall
affect in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary of the
Company, to terminate Participant’s employment, for any reason, with or without cause.

     By your signature and the signature of the Company’s representative on the Notice of Grant,
you and the Company agree that this Option is granted under and governed by the terms and
conditions of the Plan, the Notice of Grant, and this Agreement. Participant has reviewed the
Plan, the Notice of Grant, and this Agreement in their entirety, has had an opportunity to obtain
the advice of counsel prior to executing the Notice of Grant, and fully understands all provisions
of the Plan, the Notice of Grant, and this Agreement. Participant hereby agrees to accept as
binding, conclusive and final all decisions or

3

 

interpretations of the Committee upon any questions relating to the Plan, the Notice of Grant, and
the Agreement. Participant further agrees to notify the Company upon any change in the residence
address indicated on the Notice of Grant.

4

 

No.                     

SHORETEL, INC.

2007 EQUITY INCENTIVE PLAN

STOCK OPTION EXERCISE AGREEMENT

     This Stock Option Exercise Agreement (the “Exercise Agreement”) is made and entered into as of
                    , ___(the “Effective Date”) by and between ShoreTel, Inc., a Delaware
corporation (the “Company”), and the purchaser named below (the “Purchaser”). Capitalized terms
not defined herein shall have the meanings ascribed to them in the Company’s 2006 Equity Incentive
Plan (the “Plan”).

	 	 	 
	Purchaser:
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	Social Security Number:
	 	 
	 

	 	 
	 
	 	 
	Address:
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	Total Number of Shares:
	 	 
	 

	 	 
	 
	 	 
	Exercise Price Per Share:
	 	 
	 

	 	 
	 
	 	 
	Type of Stock Option
	 	 
	 
	 	 
	(Check one):

	 	o Incentive Stock Option
	 

	 	o Nonqualified Stock Option

1. EXERCISE OF OPTION.

          1.1 Exercise. Pursuant to exercise of that certain option (the “Option”) granted to
Purchaser under the Plan and subject to the terms and conditions of this Exercise Agreement,
Purchaser hereby purchases from the Company, and the Company hereby sells to Purchaser, the Total
Number of Shares set forth above (the “Shares”) of the Company’s Common Stock, at the Exercise
Price Per Share set forth above (the “Exercise Price”). As used in this Exercise Agreement, the
term “Shares” refers to the Shares purchased under this Exercise Agreement and includes all
securities received (i) in replacement of the Shares, (ii) as a result of stock dividends or stock
splits with respect to the Shares, and (iii) all securities received in replacement of the Shares
in a merger, recapitalization, reorganization or similar corporate transaction.

          1.2 Title to Shares. The exact spelling of the name(s) under which Purchaser will
take title to the Shares is:

	 	 	 
	 

	 	 
	 
	 	 
	 

	 	 

          Purchaser desires to take title to the Shares as follows:

               o Individual, as separate property

 

 

               o Husband and wife, as community property

               o Joint Tenants

               o Other; please specify:                                             
                                   

          1.3 Payment. Purchaser hereby delivers payment of the Exercise Price in the manner
permitted in the Stock Option Agreement as follows (check and complete as appropriate):

	 	 	 
	o

	 	in cash (by check) in the amount of $                    , receipt of which
is acknowledged by the Company;
	 
	 	 
	o

	 	by delivery of                      fully-paid, nonassessable and vested shares
of the Common Stock of the Company owned by Purchaser which have been
paid for within the meaning of SEC Rule 144, (if purchased by use of a
promissory note, such note has been fully paid with respect to such
vested shares), or obtained by Purchaser in the open public market, and
owned free and clear of all liens, claims, encumbrances or security
interests, valued at the current fair market value of $                    per
share;
	 
	 	 
	o

	 	through a “broker-assisted” or “same day sale” program, commitment
from the Purchaser or Authorized Transferee and an NASD Dealer meeting
the requirements set forth by the Company; or
	 
	 	 
	o

	 	through a “margin” commitment from Purchaser or Authorized
Transferee and an NASD Dealer meeting the requirements of the Company’s
“margin” procedures and in accordance with law.

     2. DELIVERY.

          2.1 Deliveries by Purchaser. Purchaser hereby delivers to the Company (i) this
Exercise Agreement and (ii) the Exercise Price and payment or other provision for any applicable
tax obligations.

          2.2 Deliveries by the Company. Upon its receipt of the Exercise Price, payment or
other provision for any applicable tax obligations and all the documents to be executed and
delivered by Purchaser to the Company under Section 2.1, the Company will issue a duly executed
stock certificate evidencing the Shares in the name of Purchaser.

     3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and warrants to
the Company that:

          3.1 Agrees to Terms of the Plan. Purchaser has received a copy of the Plan and the
Stock Option Agreement, has read and understands the terms of the Plan, the Stock Option Agreement
and this Exercise Agreement, and agrees to be bound by their terms and conditions. Purchaser
acknowledges that there may be adverse tax consequences upon exercise of the Option or disposition
of the Shares, and that Purchaser should consult a tax adviser prior to such exercise or
disposition.

          3.2 Access to Information. Purchaser has had access to all information regarding the
Company and its present and prospective business, assets, liabilities and financial condition that
Purchaser reasonably considers important in making the decision to purchase the Shares, and
Purchaser has had ample opportunity to ask questions of the Company’s representatives concerning
such matters and this investment.

 

 

          3.3 Understanding of Risks. Purchaser has received and reviewed the Form S-8
prospectus for the Plan and Shares and is fully aware of: (i) the highly speculative nature of the
investment in the Shares; (ii) the financial hazards involved; (iii) the qualifications and
backgrounds of the management of the Company; and (iv) the tax consequences of investment in the
Shares. Purchaser is capable of evaluating the merits and risks of this investment, has the
ability to protect Purchaser’s own interests in this transaction and is financially capable of
bearing a total loss of this investment.

     4. COMPLIANCE WITH SECURITIES LAWS. Purchaser understands and acknowledges that the
exercise of any rights to purchase any Shares is expressly conditioned upon compliance with the
Securities Act and all applicable state securities laws. Purchaser agrees to cooperate with the
Company to ensure compliance with such laws.

     5. RESTRICTED SECURITIES.

          5.1 No Transfer Unless Registered or Exempt. Purchaser understands that Purchaser may
not transfer any Shares except when such Shares are registered under the Securities Act or
qualified under applicable state securities laws or unless, in the opinion of counsel to the
Company, exemptions from such registration and qualification requirements are available. Purchaser
understands that only the Company may file a registration statement with the SEC and that the
Company is under no obligation to do so with respect to the Shares, and may withdraw any such
registration statement at any time after filing. Purchaser has also been advised that exemptions
from registration and qualification may not be available or may not permit Purchaser to transfer
all or any of the Shares in the amounts or at the times proposed by Purchaser.

          5.2 SEC Rule 144. If Purchaser is an “affiliate” for purposes of Rule 144 promulgated
under the Securities Act, then in addition, Purchaser has been advised that Rule 144 requires that
the Shares be held for a minimum of one (1) year, and in certain cases two (2) years, after they
have been purchased and paid for (within the meaning of Rule 144). Purchaser understands
that Rule 144 may indefinitely restrict transfer of the Shares so long as Purchaser remains an
“affiliate” of the Company or if “current public information” about the Company (as defined in Rule
144) is not publicly available.

     6. RIGHTS AS A STOCKHOLDER. Subject to the terms and conditions of this Exercise
Agreement, Purchaser will have all of the rights of a stockholder of the Company with respect to
the Shares from and after the date that Shares are issued to Purchaser until such time as Purchaser
disposes of the Shares.

     7. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.

          7.1 Legends. Purchaser understands and agrees that the Company will place any legends
that may be required by state or U.S. Federal securities laws, the Company’s Certificate of
Incorporation or Bylaws, any other agreement between Purchaser and the Company or, subject to the
assent of the Company, any agreement between Purchaser and any third party.

          7.2 Stop-Transfer Instructions. Purchaser agrees that, to ensure compliance with any
restrictions imposed by this Exercise Agreement, the Company may issue appropriate “stop-transfer”
instructions to its transfer agent, if any, and if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.

          7.3 Refusal to Transfer. The Company will not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Exercise Agreement or (ii) to treat as owner of such Shares, or to accord the right to vote
or pay dividends to any purchaser or other transferee to whom such Shares have been so transferred.

     8. TAX CONSEQUENCES. PURCHASER UNDERSTANDS AND REPRESENTS: (i) THAT PURCHASER HAS
REVIEWED THE PROSPECTUS PREPARED FOR THE PLAN AND

 

 

CONSULTED PURCHASER’S PERSONAL TAX ADVISER IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF
THE SHARES AND (ii) THAT PURCHASER IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE. SET FORTH
BELOW IS A BRIEF SUMMARY AS OF THE DATE THE PLAN WAS ADOPTED BY THE BOARD OF SOME OF THE U.S.
FEDERAL TAX CONSEQUENCES OF EXERCISE OF THE OPTION AND DISPOSITION OF THE SHARES. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PURCHASER SHOULD
CONSULT THE PROSPECTUS AND PURCHASER’S PERSONAL TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.

          8.1 Exercise of Incentive Stock Option. If the Option qualifies as an ISO, there will
be no regular U.S. 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 a tax preference item for U.S. Federal alternative minimum tax purposes
and may subject Purchaser to the alternative minimum tax in the year of exercise.

          8.2 Exercise of Nonqualified Stock Option. If the Option does not qualify as an ISO,
there may be a regular U.S. Federal income tax liability upon the exercise of the Option.
Purchaser 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 Purchaser is or was an employee of the Company, the Company may be
required to withhold from Purchaser’s compensation or collect from Purchaser and pay to the
applicable taxing authorities an amount equal to a percentage of this compensation income at the
time of exercise.

          8.3 Disposition of Shares. The following tax consequences may apply upon disposition
of the Shares.

               (a) Incentive Stock Options. If the Shares are held for more than twelve (12) months
after the date of the transfer of the Shares pursuant to the exercise of an ISO and are disposed of
more than two (2) years after the Date of Grant, any gain realized on disposition of the Shares
will be treated as long term capital gain for federal income tax purposes. If Shares purchased
under an ISO are disposed of within the applicable one (1) year or two (2) year period, any gain
realized on such disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price.

               (b) Nonqualified Stock Options. If the Shares are held for more than twelve (12)
months after the date of the transfer of the Shares pursuant to the exercise of an NQSO, any gain
realized on disposition of the Shares will be treated as long-term capital gain.

               (c) Withholding. The Company may be required to withhold from the Purchaser’s
compensation or collect from the Purchaser and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income.

     9. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of the Shares will
be subject to and conditioned upon compliance by the Company and Purchaser with all applicable
state and federal laws and regulations and with all applicable requirements of any stock exchange
or automated quotation system on which the Company’s Common Stock may be listed or quoted at the
time of such issuance or transfer.

     10. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under this
Exercise Agreement. No other party to this Exercise Agreement may assign, whether voluntarily or
by operation of law, any of its rights and obligations under this Exercise Agreement, except with
the prior written consent of the Company. This Exercise Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company. Subject to the restrictions on
transfer herein set forth, this

 

 

Exercise Agreement will be binding upon Purchaser and Purchaser’s heirs, executors,
administrators, legal representatives, successors and assigns.

     11. GOVERNING LAW. This Exercise Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to that body of laws
pertaining to conflict of laws.

     12. NOTICES. Any and all notices required or permitted to be given to a party
pursuant to the provisions of this Exercise Agreement will be in writing and will be effective and
deemed to provide such party sufficient notice under this Exercise Agreement on the earliest of the
following: (i) at the time of personal delivery, if delivery is in person; (ii) one (1) business
day after deposit with an express overnight courier for United States deliveries, or two (2)
business days after such deposit for deliveries outside of the United States, with proof of
delivery from the courier requested; or (iii) three (3) business days after deposit in the United
States mail by certified mail (return receipt requested) for United States deliveries. All notices
for delivery outside the United States will be sent by express courier. All notices not delivered
personally will be sent with postage and/or other charges prepaid and properly addressed to the
party to be notified at the address set forth below the signature lines of this Exercise Agreement,
or at such other address as such other party may designate by one of the indicated means of notice
herein to the other parties hereto. Notices to the Company will be marked “Attention: Stock Plan
Administration”.

     13. FURTHER ASSURANCES. The parties agree to execute such further documents and
instruments and to take such further actions as may be reasonably necessary to carry out the
purposes and intent of this Exercise Agreement.

     14. TITLES AND HEADINGS. The titles, captions and headings of this Exercise Agreement
are included for ease of reference only and will be disregarded in interpreting or construing this
Exercise Agreement. Unless otherwise specifically stated, all references herein to “sections” will
mean “sections” to this Exercise Agreement.

     15. ENTIRE AGREEMENT. The Plan, the Notice, the Stock Option Agreement and this
Exercise Agreement constitute the entire agreement and understanding of the parties with respect to
the subject matter of this Exercise Agreement, and supersede all prior understandings and
agreements, whether oral or written, between or among the parties hereto with respect to the
specific subject matter hereof.

     16. COUNTERPARTS. This Exercise Agreement may be executed in any number of
counterparts, each of which when so executed and delivered will be deemed an original, and all of
which together shall constitute one and the same agreement.

     17. SEVERABILITY. If any provision of this Exercise Agreement is determined by any
court or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any
respect, such provision will be enforced to the maximum extent possible given the intent of the
parties hereto. If such clause or provision cannot be so enforced, such provision shall be
stricken from this Exercise Agreement and the remainder of this Exercise Agreement shall be
enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not
enforceable) never been contained in this Exercise Agreement. Notwithstanding the forgoing, if the
value of this Exercise Agreement based upon the substantial benefit of the bargain for any party is
materially impaired, which determination as made by the presiding court or arbitrator of competent
jurisdiction shall be binding, then both parties agree to substitute such provision(s) through good
faith negotiations.

 

 

     IN WITNESS WHEREOF, the Company has caused this Exercise Agreement to be executed in
triplicate by its duly authorized representative and Purchaser has executed this Exercise Agreement
as of the Effective Date, indicated above.

	 	 	 	 	 	 	 
	SHORETEL, INC.	 	PURCHASER
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	(Signature)
	 
	 	 	 	 	 	 
	 	 	 
	(Please print name)	 	(Please print name)
	 
	 	 	 	 	 	 
	 	 	 	 	 
	(Please print title)	 	 	 	 
	 
	 	 	 	 	 	 
	Address:	 	Address:
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	Fax No.:

	 	 	 	Fax No.	 	 
	 

	 	 

	 
	 	 	 	 	 	 
	Phone No.:

	 	 	 	Phone No.:	 	 
	 

	 	 

[Signature page to ShoreTel, Inc. Stock Option Exercise Agreement]

 

 

SHORETEL, INC.

2007 EQUITY INCENTIVE PLAN

NOTICE OF RESTRICTED STOCK AWARD

GRANT NUMBER:                     

     You have been granted an award of Restricted Shares of Common Stock of ShoreTel, Inc. (the
“Company”) under the Company’s 2007 Equity Incentive Plan (the “Plan”) on the following terms:

	 	 	 	 	 	 	 	 	 
	 	1.	 	 	Name of Grantee:
	 	 	 	 
	 	 	 	 	 
	 	 	 
	 
	 	2.	 	 	Total Number of Restricted Shares Awarded:
	 	 	 	 
	 	 	 	 	 
	 	 	 
	 
	 	3.	 	 	Fair Market Value per Restricted Share:
	 	$	 	 
	 	 	 	 	 
	 	 	 
	 
	 	4.	 	 	Total Fair Market Value of Award:
	 	$	 	 
	 	 	 	 	 
	 	 	 
	 
	 	5.	 	 	Purchase Price per Restricted Share:
	 	$	 	 
	 	 	 	 	 
	 	 	 
	 
	 	6.	 	 	Total Purchase Price for all Restricted Shares:
	 	$	 	 
	 	 	 	 	 
	 	 	 
	 
	 	7.	 	 	Date of Grant:
	 	 	 	 
	 	 	 	 	 
	 	 	 
	 
	 	8.	 	 	Vesting Commencement Date.
	 	 	 	 
	 	 	 	 	 
	 	 	 

  9.      Vesting Schedule: [Subject to your continued service as an employee, director or
consultant of the Company,                                 .]

     By your signature and the signature of the Company’s representative below, you and the Company
agree that the Award of Restricted Shares is governed by the terms and conditions of the Plan and
the Restricted Share Agreement (together with this notice the “Restricted Stock Purchase
Agreement”), which is attached hereto. If the Restricted Stock Purchase Agreement is not executed
by you within thirty (30) days of the Date of Grant above, then this grant shall be void.

	 	 	 	 	 	 	 	 	 	 	 
	SHORETEL, INC.	 	 	 	RECIPIENT:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	Signature	 	 	 	 
	 

	 	 

	 	 	 	 

	 	 
	 
	Its:

	 	 	 	 	 	Please Print Name	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 

 

 

SHORETEL, INC.

2007 Equity Incentive Plan

RESTRICTED SHARE AGREEMENT

     THIS RESTRICTED SHARE AGREEMENT (this “Agreement”) is made as of                     , 20___by
and between ShoreTel, Inc., a Delaware corporation (the “Company”), and
                                         (“Participant”) pursuant to the Company’s 2007 Equity Incentive
Plan (the “Plan”). To the extent any capitalized terms used in this Agreement are not defined, they
shall have the meaning ascribed to them in the Plan.

     1. Sale of Stock. Subject to the terms and conditions of this Agreement, on
the Purchase Date (as defined below) the Company will issue and sell to Participant, and
Participant agrees to purchase from the Company the number of Shares shown on the Notice of
Restricted Stock Award at a purchase price of $                     per Share. The per Share purchase price of
the Shares shall be not less than the par value of the Shares as of the date of the offer of such
Shares to the Participant. The term “Shares” refers to the purchased Shares and all securities
received in replacement of or in connection with the Shares pursuant to stock dividends or splits,
all securities received in replacement of the Shares in a recapitalization, merger, reorganization,
exchange or the like, and all new, substituted or additional securities or other properties to
which Participant is entitled by reason of Participant’s ownership of the Shares.

     2. Time and Place of Exercise. The purchase and sale of the Shares under
this Agreement shall occur at the principal office of the Company simultaneously with the execution
of this Agreement by the parties, or on such other date as the Company and Participant shall agree
(the “Purchase Date”). On the Purchase Date, the Company will issue in Participant’s name a stock
certificate representing the Shares to be purchased by Participant against payment of the purchase
price therefor by Participant by (a) check made payable to the Company, (b) cancellation of
indebtedness of the Company to Participant, (c) Participant’s personal services that the Committee
has determined have already been rendered to the Company and have a value not less than aggregate
par value of the Shares to be issued Participant, or (d) a combination of the foregoing.

     3. Restrictions on Resale. By signing this Agreement, Participant agrees
not to sell any Shares acquired pursuant to the Plan and this Agreement at a time when applicable
laws, regulations or Company or underwriter trading policies prohibit exercise or sale. This
restriction will apply as long as Participant is providing Service to the Company or a Subsidiary
of the Company.

          3.1 Repurchase Right on Termination Other Than for Cause. For the purposes
of this Agreement, a “Repurchase Event” shall mean an occurrence of one of:

               (i) termination of Participant’s service, whether voluntary or involuntary and with
or without cause;

               (ii) resignation, retirement or death of Participant; or

               (iii) any attempted transfer by Participant of the Shares, or any interest therein,
in violation of this Agreement.

1

 

Upon the occurrence of a Repurchase Event, the Company shall have the right (but not an obligation)
to purchase the Shares of Participant at a price equal to the Price (the “Repurchase Right”). The
Repurchase Right shall lapse in accordance with the vesting schedule set forth in the Notice of
Restricted Stock Award. For purposes of this Agreement, “Unvested Shares” means Stock pursuant to
which the Company’s Repurchase Right has not lapsed.

     3.2 Exercise of Repurchase Right. Unless the Company provides written
notice to Participant within 90 days from the date of termination of Participant’s employment or
consulting relationship that the Company does not intend to exercise its Repurchase Right with
respect to some or all of the Unvested Shares, the Repurchase Right shall be deemed automatically
exercised by the Company as of the 90th day following such termination, provided that the Company
may notify Participant that it is exercising its Repurchase Right as of a date prior to such 90th
day. Unless Participant is otherwise notified by the Company pursuant to the preceding sentence
that the Company does not intend to exercise its Repurchase Right as to some or all of the Unvested
Shares, execution of this Agreement by Participant constitutes written notice to Participant of the
Company’s intention to exercise its Repurchase Right with respect to all Unvested Shares to which
such Repurchase Right applies at the time of Termination of Participant. The Company, at its
choice, may satisfy its payment obligation to Participant with respect to exercise of the
Repurchase Right by either (A) delivering a check to Participant in the amount of the purchase
price for the Unvested Shares being repurchased, or (B) in the event Participant is indebted to the
Company, canceling an amount of such indebtedness equal to the purchase price for the Unvested
Shares being repurchased, or (C) by a combination of (A) and (B) so that the combined payment and
cancellation of indebtedness equals such purchase price. In the event of any deemed automatic
exercise of the Repurchase Right by canceling an amount of such indebtedness equal to the purchase
price for the Unvested Shares being repurchased, such cancellation of indebtedness shall be deemed
automatically to occur as of the 90th day following termination of Participant’s employment or
consulting relationship unless the Company otherwise satisfies its payment obligations. As a
result of any repurchase of Unvested Shares pursuant to the Repurchase Right, the Company shall
become the legal and beneficial owner of the Unvested Shares being repurchased and shall have all
rights and interest therein or related thereto, and the Company shall have the right to transfer to
its own name the number of Unvested Shares being repurchased by the Company, without further action
by Participant.

     3.3 Acceptance of Restrictions. Acceptance of the Shares shall constitute
Participant’s agreement to such restrictions and the legending of his or her certificates with
respect thereto. Notwithstanding such restrictions, however, so long as Participant is the holder
of the Shares, or any portion thereof, he or she shall be entitled to receive all dividends
declared on and to vote the Shares and to all other rights of a stockholder with respect thereto.

     3.4 Non-Transferability of Unvested Shares. In addition to any other
limitation on transfer created by applicable securities laws or any other agreement between the
Company and Participant, Participant may not transfer any Unvested Shares, or any interest therein,
unless consented to in writing by a duly authorized representative of the Company. Any purported
transfer is void and of no effect, and no purported transferee thereof will be recognized as a
holder of the Unvested Shares for any purpose whatsoever. Should such a transfer purport to occur,
the Company may refuse to carry out the transfer on its books, set aside the transfer, or exercise
any other legal or equitable remedy. In the event the Company consents to a transfer of Unvested
Shares, all transferees of Shares or any interest therein will receive and hold such Shares or
interest subject to the provisions of this Agreement, including, insofar as applicable, the
Repurchase Right. In the event of any purchase by the Company hereunder where the Shares or
interest are held by a transferee, the transferee shall be obligated, if requested by the Company,
to transfer the Shares or interest to the Participant for consideration equal to the amount to be
paid by the Company hereunder. In the event the Repurchase Right is deemed exercised by the
Company, the Company may deem any transferee to have transferred the Shares or interest to
Participant

2

 

prior to their purchase by the Company, and payment of the purchase price by the Company to
such transferee shall be deemed to satisfy Participant’s obligation to pay such transferee for such
Shares or interest, and also to satisfy the Company’s obligation to pay Participant for such Shares
or interest.

          3.5 Assignment. The Repurchase Right may be assigned by the Company in
whole or in part to any persons or organization.

     4. Restrictive Legends and Stop Transfer Orders.

          4.1 Legends. The certificate or certificates representing the Shares shall
bear the following legend (as well as any legends required by applicable state and federal
corporate and securities laws):

THE SHARE REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND
THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY.

          4.2 Stop-Transfer Notices. Participant agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue appropriate “stop
transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own
securities, it may make appropriate notations to the same effect in its own records.

          4.3 Refusal to Transfer. The Company shall not be required (i) to transfer
on its books any Shares that have been sold or otherwise transferred in violation of any of the
provisions of this Agreement or (ii) to treat as the owner or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

     5. No Rights as Employee, Director or Consultant. Nothing in this Agreement
shall affect in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary
of the Company, to terminate Participant’s employment, for any reason, with or without
cause.

     6. Miscellaneous.

          6.1 Governing Law. This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed, construed and
interpreted in accordance with the laws of the State of California, without giving effect to
principles of conflicts of law.

          6.2 The Plan and Other Agreements; Enforcement of Rights. The text of the
Plan and the Notice of Restricted Stock Award to which this Agreement is attached are incorporated
into this Agreement by reference. This Agreement, the Plan and the Notice of Restricted Stock Award
to which this Agreement is attached constitute the entire agreement and understanding of the
parties relating to the subject matter herein and supersede all prior discussions between them. Any
prior agreements, commitments or negotiations concerning the purchase of the Restricted Shares
hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any
rights under this Agreement, shall be effective unless in writing and signed by the parties to this
Agreement. The failure by either party to enforce any rights under this Agreement shall not be
construed as a waiver of any rights of such party.

          6.3 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, the parties agree to renegotiate such provision in good
faith. In the

3

 

event that the parties cannot reach a mutually agreeable and enforceable replacement for such
provision, then (i)such provision shall be excluded from this Agreement, (ii) the balance of this
Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this
Agreement shall be enforceable in accordance with its terms.

          6.4 Construction. This Agreement is the result of negotiations between and
has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly,
this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity
shall be construed in favor of or against any one of the parties hereto.

          6.5 Notices. Any notice to be given under the terms of the Plan shall be
addressed to the Company in care or its principal office, and any notice to be given to the
Participant shall be addressed to such Participant at the address maintained by the Company for
such person or at such other address as the Participant may specify in writing to the Company.

          6.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall he deemed an original and all of which together shall constitute
one instrument.

          6.7 Successors and Assigns. The rights and benefits of this Agreement shall
inure to the benefit of., and be enforceable by, the Company’s successors and assigns.
The rights and obligations of Participant under this Agreement may only be assigned with the prior
written consent of the Company.

          6.8 U.S. Tax Consequences. Upon vesting of Shares, Participant will include
in taxable income the difference between the fair market value of the vesting Shares, as determined
on the date of their vesting, and the price paid for the Shares. This will be treated as ordinary
income by Participant and will be subject to withholding by the Company when required by applicable
law. In the absence of an Election (defined below) the Company shall withhold a number of vesting
Shares with a fair market value (determined on the date of their vesting) equal to the amount the
Company is required to withhold for income and employment taxes. If Participant makes an Election,
then Participant must, prior to making the Election, pay in cash (or check) to the Company an
amount equal to the amount the Company is required to withhold for income and employment taxes.

     7. Section 83(b) Election. Participant hereby acknowledges that he or she
has been informed that, with respect to the purchase of the Shares, an election may be filed by the
Participant 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 (the “Election”).
Making the Election will result in recognition of taxable income to the Participant on the date of
purchase, measured by the excess, if any, of the Fair Market Value of the Shares over the purchase
price for the Shares. Absent such an Election, taxable income will be measured and recognized by
Participant at the time or times on which the Company’s Repurchase Right lapses. Participant 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. PARTICIPANT ACKNOWLEDGES
THAT IT IS SOLELY PARTICIPANT’S RESPONSIBILITY, AND NOT THE COMPANY’S RESPONSIBILITY, TO TIMELY
FILE THE

4

 

ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF PARTICIPANT REQUESTS THE COMPANY, OR ITS
REPRESENTATIVE, TO MAKE THIS FILING ON PARTICIPANT’S BEHALF.

     The parties have executed this Agreement as of the date first set forth above.

	 	 	 	 	 	 	 
	 	 	SHORETEL, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

 

	 	 
	 
	 

	 	Its:

 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	RECIPIENT:	 	 
	 
	 	 	 	 	 	 
	 

	 	Signature 	 	 	 
	 
	 

	 	Please Print Name
	 

	 	 
	 

	 	 	 	 

	 	 

5

 

RECEIPT

     ShoreTel, Inc. hereby acknowledges receipt of (check as applicable):

	o	 	A check in the amount of $                    
	 
	o	 	The cancellation of indebtedness in the amount of $                    

given by                                          as consideration for Certificate
No. -               
      for                     
shares of Common Stock of ShoreTel, Inc.

Dated:                                         

	 	 	 	 	 	 	 
	 	 	SHORETEL, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Its:	 	 	 	 
	 

	 	 	 	 

	 	 

 

 

RECEIPT AND CONSENT

     The undersigned Participant hereby acknowledges receipt of a photocopy of Certificate No.
-                     for                                        shares of Common Stock of ShoreTel, Inc. (the “Company”)

     The undersigned further acknowledges that the Secretary of the Company, or his or her
designee, is acting as escrow holder pursuant to the Restricted Shares Agreement that Participant
has previously entered into with the Company. As escrow holder, the Secretary of the Company, or
his or her designee, holds the original of the aforementioned certificate issued in the
undersigned’s name. To facilitate any transfer of Shares to the Company pursuant to the Restricted
Shares Agreement, Participant has executed the attached Assignment Separate from Certificate.

Dated:                                         , 20                    

Signature
                                                                                

Please Print Name
                                                            

 

 

STOCK POWER AND ASSIGNMENT

SEPARATE FROM STOCK CERTIFICATE

     FOR VALUE RECEIVED and pursuant to that certain Restricted Share Agreement dated as of
                    ,
                    , [COMPLETE AT THE TIME OF PURCHASE] (the “Agreement”), the undersigned
Participant hereby sells, assigns and transfers unto                                                             ,
                    
shares
of the Common Stock $0.001, par value per share, of ShoreTel, Inc., a Delaware corporation (the
“Company”), standing in the undersigned’s name on the books of the Company represented by
Certificate No(s).                     [COMPLETE AT THE TIME OF PURCHASE] delivered herewith, and does hereby
irrevocably constitute and appoint the Secretary of the Company as the undersigned’s
attorney-in-fact, with full power of substitution, to transfer said stock on the books of the
Company. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS THERETO.

Dated:                                         , ___

	 	 	 	 	 
	 

	 	PARTICIPANT	 	 
	 
	 	 	 	 
	 

	 	 

(Signature)
	 	 
	 
	 	 	 	 
	 

	 	 

(Please Print Name)
	 	 

Instructions to Participant: Please do not fill in any blanks other than the signature
line. The purpose of this document is to enable the Company and/or its assignee(s) to acquire the
shares upon exercise of its “Repurchase Right” set forth in the Agreement without requiring
additional action by the Participant.

 

 

SHORETEL, INC.

2007 EQUITY INCENTIVE PLAN

NOTICE OF STOCK BONUS AWARD

GRANT NUMBER:

     The terms defined in the Company’s 2007 Equity Incentive Plan (the “Plan”) shall have the same
meanings in this Notice of Stock Bonus Award (“Notice of Grant”).

	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:	 	 	 	 
	 

	 	 	 	 

	 	 

You (“Participant”) have been granted an award of Shares, subject to the terms and conditions of
the Plan and the attached Stock Bonus Award Agreement to the Plan (available in hard copy by
request), as follows:

	 	 	 	 	 	 	 
	 

	 	Number of Shares:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Date of Grant:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	First Vesting Date:
	 	[        
               
                
               
               
     ]	 	 
	 
	 	 	 	 	 	 
	 	 	Expiration Date:	 	The date on which all the Shares granted hereunder become vested, with

earlier expiration upon the Termination Date
	 
	 	 	[Vesting Schedule: The Shares will vest as follows: Subject to your continued
service as an employee, director or consultant of the Company, on     
                                             .]

Participant understands that his or her employment or consulting relationship with the Company is
for an unspecified duration, can be terminated at any time (i.e., is “at-will”), and that nothing
in this Notice of Grant, the Stock Bonus Agreement or the Plan changes the at-will nature of that
relationship. Participant acknowledges that the vesting of the Stock Bonus Shares pursuant to this
Notice of Grant is earned only by continuing service as an employee, director or consultant of the
Company. Participant also understands that this Notice of Grant is subject to the terms and
conditions of both the Stock Bonus Agreement and the Plan, both of which are incorporated herein by
reference. Participant has read both the Stock Bonus Agreement and the Plan.

	 	 	 	 	 	 	 	 	 
	PARTICIPANT	 	SHORETEL, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	Signature:

	 	 	 	By:	 	 	 	 
	 

	 	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	Print Name:

	 	 	Its:	 	 	 	 
	 

	 	 

	 	 	 	 

	 	 

 

 

SHORETEL, INC.

STOCK BONUS AGREEMENT TO THE

SHORETEL, INC. 2007 EQUITY INCENTIVE PLAN

Unless otherwise defined herein, the terms defined in the Company’s 2007 Equity Incentive Plan (the
“Plan”) shall have the same defined meanings in this Stock Bonus Agreement (the “Agreement”).

You have been granted a Stock Bonus Award (“Stock Bonus Award”) subject to the terms, restrictions
and conditions of the Plan, the Notice of Stock Bonus Award (“Notice of Grant”) and this Agreement.

1. Settlement. Stock Bonus Awards shall be settled in Shares and the Company’s
transfer agent shall record ownership of such Shares in Participant’s name as soon as reasonably
practicable.

2. Stockholder Rights. Participant shall have no right to dividends or to vote
such Shares other than as provided under an applicable section of the Plan and applicable law.

3. Non-Transferable. Unvested Shares, and unvested Stock Bonus Awards, and any
interest in either shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise
disposed of by Participant or any person whose interest derives from Participant’s interest.
“Unvested Shares” are Shares that have not yet vested pursuant to the terms of the vesting schedule
set forth in the Notice of Grant.

4. Termination. If Participant’s continuous employment with the Company or any
of its subsidiaries shall terminate for any reason, all Unvested Shares shall be forfeited to the
Company forthwith, and all rights of Participant to such Unvested Shares shall immediately
terminate. In case of any dispute as to whether Termination has occurred, the Committee shall have
sole discretion to determine whether such Termination has occurred and the effective date of such
Termination.

5. Acknowledgement. The Company and Participant agree that the Stock Bonus Award
is granted under and governed by the Notice of Grant, this Agreement and by the provisions of the
Plan (incorporated herein by reference). Participant: (i) acknowledges receipt of a copy of the
Plan and the Plan prospectus, (ii) represents that Participant has carefully read and is familiar
with their provisions, and (iii) hereby accepts the Stock Bonus Award subject to all of the terms
and conditions set forth herein and those set forth in the Plan, this Agreement and the Notice of
Grant.

6. Tax Consequences. Participant acknowledges that there will be tax
consequences upon vesting of the Stock Bonus Awards or disposition of the Shares, if any, received
in connection therewith, and Participant should consult a tax adviser regarding Participant’s tax
obligations prior to such vesting or disposition. The included amount will be treated as
ordinary income by Participant and will be subject to withholding by the Company. Before any
shares subject to this Agreement are issued, the Participant must provide funds to the Company
equal to the amount of the Company’s tax withholding obligations(s). Information on possible
arrangements can be obtained from the Company. Upon disposition of the Shares, any subsequent
increase or decrease in value will be treated as short-term or long-term capital gain or loss,
depending on whether the Shares are held for more than one year from the date of settlement.

7. Compliance with Laws and Regulations. The issuance of Shares will be subject
to and conditioned upon compliance by the Company and Participant with all applicable state and
federal laws and regulations and with all applicable requirements of any stock exchange or
automated quotation system on which the Company’s Common Stock may be listed or quoted at the time
of such issuance or transfer.

8. Successors and Assigns. The Company may assign any of its rights under this
Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Company. Subject

 

 

to the restrictions on transfer set forth herein, this Agreement will be binding upon Participant
and Participant’s heirs, executors, administrators, legal representatives, successors and assigns.

9. Governing Law; Severability. The Plan and Notice of Grant are incorporated
herein by reference. The Plan, the Notice of Grant and this 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 Participant with respect to the subject
matter hereof. This Agreement is governed by Delaware law except for that body of law pertaining
to conflict of laws. If any provision of this Agreement is determined by a court of law to be
illegal or unenforceable, then such provision will be enforced to the maximum extent possible and
the other provisions will remain fully effective and enforceable.

10. No Rights as Employee, Director or Consultant. Nothing in this Agreement shall affect
in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary of the
Company, to terminate Purchaser’s employment, for any reason, with or without cause.

     By your signature and the signature of the Company’s representative on the Notice of Grant,
Participant and the Company agree that this Stock Bonus Award is granted under and governed by the
terms and conditions of the Plan, the Notice of Grant and this Agreement. Participant has reviewed
the Plan, the Notice of Grant and this Agreement in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Agreement, and fully understands all
provisions of the Plan, the Notice of Grant and this Agreement. Participant hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the Committee upon any
questions relating to the Plan, the Notice of Grant and this Agreement. Participant further agrees
to notify the Company upon any change in Participant’s residence address.

 

 

SHORETEL, INC.

2007 EQUITY INCENTIVE PLAN

NOTICE OF RESTRICTED STOCK UNIT AWARD

(U.S. FORM)

GRANT NUMBER:                     

     The terms defined in the Company’s 2007 Equity Incentive Plan (the “Plan”) shall have the same
meanings in this Notice of Restricted Stock Unit Award (“Notice of Grant”).

	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	 	 	 
 

	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Address:
	 	 	 	 
 

	 	 
	 
	You (“Participant”) have been granted an award of Restricted Stock Units (“RSUs”), subject to the
terms and conditions of the Plan and the attached Award Agreement (Restricted Stock Units)
(hereinafter “RSU Agreement”) to the Plan (available in hard copy by request), as follows:

	 
	 

	 	Number of RSUs:
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	Date of Grant:
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	First Vesting Date:
	 	 	 	[
	 	]	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	Expiration Date:	 	 	 	The date on which settlement of all RSUs granted hereunder occurs, with
earlier expiration upon the Termination Date
	 
	 	 	Vesting Schedule: The RSUs will vest as follows: [Subject to your continued service
as an employee, director or consultant of the Company,                                         .]

Participant understands that his or her employment or consulting relationship with the Company is
for an unspecified duration, can be terminated at any time (i.e., is “at-will”), and that nothing
in this Notice of Grant, the Award Agreement (Restricted Stock Units) or the Plan changes the
at-will nature of that relationship. Participant acknowledges that the vesting of the RSUs
pursuant to this Notice of Grant is earned only by continuing service as an employee, director or
consultant of the Company. Participant also understands that this Notice of Grant is subject to
the terms and conditions of both the Award Agreement (Restricted Stock Units) and the Plan, both of
which are incorporated herein by reference. Participant has read both the Award Agreement
(Restricted Stock Units) and the Plan.

	 	 	 	 	 	 	 	 	 	 	 
	PARTICIPANT	 	 	 	SHORETEL, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Signature:

	 	 
 

	 	 	 	By:
	 	 
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Print Name:

	 	 
 

	 	 	 	Its:
	 	 
 

	 	 

 

 

SHORETEL, INC.

AWARD AGREEMENT (RESTRICTED STOCK UNITS) TO THE

SHORETEL, INC. 2007 EQUITY INCENTIVE PLAN

(U.S. FORM)

Unless otherwise defined herein, the terms defined in the Company’s 2007 Equity Incentive Plan (the
“Plan”) shall have the same defined meanings in this Award Agreement (Restricted Stock Units) (the
“Agreement”).

You have been granted Restricted Stock Units (“RSUs”) subject to the terms, restrictions and
conditions of the Plan, the Notice of Restricted Stock Unit Grant (“Notice of Grant”) and this
Agreement.

1. Settlement. Settlement of RSUs shall be made within 30 days following the
applicable date of vesting under the vesting schedule set forth in the Notice of Grant. Settlement
of RSUs shall be in Shares.

2. No Stockholder Rights. Unless and until such time as Shares are issued in
settlement of vested RSUs, Participant shall have no ownership of the Shares allocated to the RSUs
and shall have no right dividends or to vote such Shares.

3. Dividend Equivalents. Dividends, if any (whether in cash or Shares), shall
not be credited to Participant.

4. No Transfer. The RSUs and any interest therein shall not be sold, assigned,
transferred, pledged, hypothecated, or otherwise disposed of.

5. Termination. If Participant’s service Terminates for any reason, all unvested
RSUs shall be forfeited to the Company forthwith, and all rights of Participant to such RSUs shall
immediately terminate. In case of any dispute as to whether Termination has occurred, the
Committee shall have sole discretion to determine whether such Termination has occurred and the
effective date of such Termination.

6. Acknowledgement. The Company and Participant agree that the RSUs are granted
under and governed by the Notice of Grant, this Agreement and by the provisions of the Plan
(incorporated herein by reference). Participant: (i) acknowledges receipt of a copy of the Plan
and the Plan prospectus, (ii) represents that Participant has carefully read and is familiar with
their provisions, and (iii) hereby accepts the RSUs subject to all of the terms and conditions set
forth herein and those set forth in the Plan and the Notice of Grant.

7. U.S. Tax Consequences. Participant acknowledges that there will be tax
consequences upon settlement of the RSUs or disposition of the Shares, if any, received in
connection therewith, and Participant should consult a tax adviser regarding Participant’s tax
obligations prior to such settlement or disposition. Upon vesting of the RSU, Participant will
include in income the fair market value of the Shares subject to the RSU. The included amount will
be treated as ordinary income by Participant and will be subject to withholding by the Company when
required by applicable law. Before any Shares subject to this Agreement are issued the Company
shall withhold a number of Shares with a fair market value (determined on the date the Shares are
issued) equal to the amount the Company is required to withhold for income and employment taxes.
Upon disposition of the Shares, any subsequent increase or decrease in value will be treated as
short-term or long-term capital gain or loss, depending on whether the Shares are held for more
than one year from the date of settlement. Further, a RSU is considered a deferral of compensation
that is subject to Section 409A of the Code. Section 409A of the Code imposes special rules to the
timing of making and effecting certain amendments of this RSU with respect to distribution of any
deferred compensation. You should consult your personal tax advisor for more information on the
actual and potential tax consequences of this RSU.

8. Compliance with Laws and Regulations. The issuance of Shares will be subject
to and conditioned upon compliance by the Company and Participant with all applicable state and
federal laws and regulations andexv10w4

 

Exhibit 10.4

2007 Employee Stock Purchase Plan

 

 

SHORETEL, INC.

2007 Employee Stock
Purchase Plan

(adopted
by the Board of Directors on February 2, 2007)1

     1. Establishment of Plan. ShoreTel, Inc. (the “Company”) proposes to grant options for
purchase of the Company’s Common Stock to eligible employees of the Company and its Participating
Corporations (as hereinafter defined) pursuant to this Employee Stock Purchase Plan (this “Plan”).
For purposes of this Plan, “Parent” and “Subsidiary” shall have the same meanings as “parent
corporation” and “subsidiary corporation” in Sections 424(e) and 424(f), respectively, of the
Internal Revenue Code of 1986, as amended (the “Code”), and “Corporate Group” shall refer
collectively to the Company and all its Parents and Subsidiaries. “Participating Corporations” are
the Company and any Parents or Subsidiaries that the Board of Directors of the Company (the
“Board”) designates from time to time as corporations that shall participate in this Plan. The
Company intends this Plan to qualify as an “employee stock purchase plan” under Section 423 of the
Code (including any amendments to or replacements of such Section), and this Plan shall be so
construed. Any term not expressly defined in this Plan but defined for purposes of Section 423 of
the Code shall have the same definition herein. A total of five
hundred thousand (500,000) shares of the
Company’s Common Stock is reserved for issuance under this Plan. In addition, on each January 1
after the first Offering Date, the aggregate number of shares of the Company’s Common Stock
reserved for issuance under the Plan shall be increased automatically by the number of shares equal
to one percent (1%) of the total number of outstanding shares of the Company Common Stock on the
immediately preceding December 31 (rounded down to the nearest whole share);
provided, that the Board or the Committee may in its sole discretion reduce the amount of
the increase in any particular year; and, provided further, that the aggregate number of
shares issued over the term of this Plan shall not exceed five million (5,000,000) shares of
Common Stock. The number of shares reserved for issuance under this Plan and the maximum number of
shares that may be issued under this Plan shall be subject to adjustments effected in accordance
with Section 14 of this Plan.

     2. Purpose. The purpose of this Plan is to provide eligible employees of the Company and
Participating Corporations with a means of acquiring an equity interest in the Company through
payroll deductions, to enhance such employees’ sense of participation in the affairs of the Company
and Participating Corporations, and to provide an incentive for continued employment.

     3. Administration. This Plan shall be administered by the Compensation Committee of the Board
or by the Board (either referred to herein as the “Committee”). Subject to the provisions of this
Plan and the limitations of Section 423 of the Code or any successor provision in the Code, all
questions of interpretation or application of this Plan shall be determined by the Committee and
its decisions shall be final and binding upon all Participants. Members of the Committee shall
receive no compensation for their services in connection with the administration of this Plan,
other than standard fees as established from time to time by the Board for services rendered by
Board members serving on Board committees. All expenses incurred in connection with the
administration of this Plan shall be paid by the Company.

     4. Eligibility. Any employee of the Company or the Participating Corporations is eligible to
participate in an Offering Period (as hereinafter defined) under this Plan except the following:

          (a) employees who are not employed by the Company or a Participating Corporation at the
beginning of such Offering Period or at such other time period as specified by the Committee;

          (b) employees who are customarily employed for twenty (20) hours or less per week;

          (c) employees who are customarily employed for five (5) months or less in a calendar year;

 

			
	1	 	Share amounts herein have been adjusted to reflect a 1-for-10
reverse stock split approved by the Board in June 2007, following
stockholder approval.

- 1 -

 

          (d) employees who, together with any other person whose stock would be attributed to such
employee pursuant to Section 424(d) of the Code, own stock or hold options to purchase stock
possessing five percent (5%) or more of the total combined voting power or value of all classes of
stock of the Company or any of its Participating Corporations or who, as a result of being granted
an option under this Plan with respect to such Offering Period, would own stock or hold options to
purchase stock possessing five percent (5%) or more of the total combined voting power or value of
all classes of stock of the Company or any of its Participating Corporations;

          (e) employees who do not meet any other eligibility requirements that the Committee may
choose to impose (within the limits permitted by the Code); and

          (f) individuals who provide services to the Company or any of its Participating Corporations
as independent contractors who are reclassified as common law employees for any reason
except for federal income and employment tax purposes.

     5. Offering Dates.

          (a) The offering periods of this Plan (each, an “Offering Period”) may be of up to
twenty-four (24) months duration and shall commence and end at the times designated by the
Committee during which payroll deductions of Participants are accumulated under this Plan.

          (b) The initial Offering Period shall commence on the date on which the Registration
Statement covering the initial public offering of shares of the Company’s Common Stock is declared
effective by the U.S. Securities and Exchange Commission (the “Effective Date”), and shall end with
the Purchase Date that occurs on or prior to the February 14 or August 14 that first occurs six
months or more after the Effective Date. Thereafter, a six-month Offering Period shall commence on
each February 15 and August 15.

          (c) The first business day of each Offering Period is referred to as the “Offering Date,”
however, for the initial Offering Period this shall be the Effective Date. The last business day
of each Offering Period is referred to as the “Purchase Date.” The Committee shall have the power
to change these terms as provided in Section 25 below.

     6. Participation in this Plan.

          Eligible employees may become participants (a “Participant” or collectively, “Participants”)
in an Offering Period under this Plan on the Offering Date by delivering a subscription agreement
to the Company prior to such Offering Date, or such other time period as specified by the
Committee, and timely satisfying any other eligibility requirements for participating in such
Offering Period; provided, however, that all employees who satisfy the eligibility conditions
(determined as of the Effective Date) will be automatically enrolled in the initial Offering Period
(the “Initial Enrollment”). Notwithstanding the foregoing, (i) an eligible employee may elect to
decrease the number of shares of Common Stock that such employee would otherwise be permitted to
purchase pursuant to Section 7 below for the initial Offering Period under the Plan and/or purchase
shares of Common Stock for the initial Offering Period through payroll deductions by delivering a
subscription agreement to the Company within thirty (30) days after the filing of an effective
registration statement pursuant to Form S-8 and (ii) the Committee may set a later time for filing
the subscription agreement authorizing payroll deductions for all eligible employees with respect
to a given Offering Period. Once an employee becomes a participant in an Offering Period, then
such employee will automatically participate in the Offering Period commencing immediately
following the last day of such prior Offering Period unless the employee withdraws or is deemed to
withdraw from this Plan or terminates further participation in the Offering Period as set forth in
Section 11 below. Such participant is not required to file any additional subscription agreement
in order to continue participation in this Plan.

- 2 -

 

     7. Grant of Option on Enrollment. Becoming a Participant with respect to an Offering Period
will constitute the grant (as of the Offering Date) by the Company to such Participant of an option
to purchase on the Purchase Date up to that number of shares of Common Stock of the Company
determined by a fraction, the numerator of which is the amount accumulated in such Participant’s
payroll deduction account during such Offering Period and the denominator of which is the lower of
(i) ninety percent (90%) of the fair market value of a share of the Company’s Common Stock on the
Offering Date (but in no event less than the par value of a share of the Company’s Common Stock),
or (ii) ninety percent (90%) of the fair market value of a share of the Company’s Common Stock on
the Purchase Date (but in no event less than the par value of a share of the Company’s Common
Stock) provided, however, that for the initial Offering Period the numerator shall be fifteen
percent (15%) of the Participant’s compensation for such Offering Period and provided,
further, that the number of shares of the Company’s Common Stock subject to any option
granted pursuant to this Plan shall not exceed the lesser of (x) the maximum number of shares set
by the Committee pursuant to Section 10(b) below with respect to the applicable Purchase Date, or
(y) the maximum number of shares which may be purchased pursuant to Section 10(a) below with
respect to the applicable Purchase Date. The fair market value of a share of the Company’s Common
Stock shall be determined as provided in Section 8 below.

     8. Purchase Price. The purchase price per share at which a share of Common Stock will be sold
in any Offering Period shall be ninety percent (90%) of the lesser of:

          (a) The fair market value on the Offering Date; or

          (b) The fair market value on the Purchase Date.

     The term “fair market value” means, as of any date, the value of a share of the Company’s
Common Stock determined as follows:

          (i) if such Common Stock is then listed on a national securities exchange, its closing price
on the date of determination on the principal national securities exchange on which the Common
Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source
as the Committee deems reliable; or

          (ii) if such Common Stock is publicly traded but is not admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on the date of determination
as reported in The Wall Street Journal or such other source as the Committee deems reliable; and

          (iii) with respect to the initial Offering Period, “fair market value” on the Offering Date
shall be the price at which shares of Common Stock are offered to the public pursuant to the
Registration Statement covering the initial public offering of shares of the Company’s Common
Stock.

     9. Payment Of Purchase Price; Payroll Deduction Changes; Share Issuances.

          (a) The purchase price of the shares is accumulated by regular payroll deductions made during
each Offering Period. The deductions are made as a percentage of the Participant’s compensation in
one percent (1%) increments not less than one percent (1%), nor greater than fifteen percent (15%)
or such higher or lower limit as may be set by the Committee for a particular Offering Period.
Compensation shall mean all W-2 cash compensation categorized by the Company as base salary or
regular hourly wages, bonuses, overtime pay, commissions, and shift premiums, provided,
however, that for purposes of determining a Participant’s compensation, any election by
such Participant to reduce his or her regular cash remuneration under Sections 125 or 401(k) of the
Code shall be treated as if the Participant did not make such election. Payroll deductions shall
commence on the first payday following the last Purchase Date (first payday following the effective
date of filing with the U.S. Securities and Exchange Commission a securities registration statement
for the Plan with respect to the initial Offering Period) and shall continue to the end of the
Offering Period unless sooner altered or terminated as provided in this Plan.

- 3 -

 

          (b) A Participant may decrease the rate of payroll deductions during an Offering Period by
filing with the Company a new authorization for payroll deductions, with the new rate to become
effective for the next payroll period commencing after the Company’s receipt of the authorization
and continuing for the remainder of the Offering Period unless changed as described below. Such
change in the rate of payroll deductions may be made at any time during an Offering Period, but not
more than one (1) decrease may be made effective during any Offering Period. A Participant may
increase or decrease the rate of payroll deductions for any subsequent Offering Period by filing
with the Company a new authorization for payroll deductions prior to the beginning of such Offering
Period, or such other time period as specified by the Committee.

          (c) A Participant may reduce his or her payroll deduction percentage to zero during an
Offering Period by filing with the Company a request for cessation of payroll deductions. Such
reduction shall be effective beginning with the next payroll period after the Company’s receipt of
the request and no further payroll deductions will be made for the duration of the Offering Period.
Payroll deductions credited to the Participant’s account prior to the effective date of the
request shall be used to purchase shares of Common Stock of the Company in accordance with Section
(e) below. A reduction of the payroll deduction percentage to zero shall be treated as such
Participant’s withdrawal from such Offering Period, and the Plan, effective as of the day after the
next Purchase Date following the filing date of such request with the Company.

          (d) All payroll deductions made for a Participant are credited to his or her account under
this Plan and are deposited with the general funds of the Company. No interest accrues on the
payroll deductions. All payroll deductions received or held by the Company may be used by the
Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll
deductions.

          (e) On each Purchase Date, so long as this Plan remains in effect and provided that the
Participant has not submitted a signed and completed withdrawal form before that date which
notifies the Company that the Participant wishes to withdraw from that Offering Period under this
Plan and have all payroll deductions accumulated in the account maintained on behalf of the
Participant as of that date returned to the Participant, the Company shall apply the funds then in
the Participant’s account to the purchase of whole shares of Common Stock reserved under the
option granted to such Participant with respect to the Offering Period to the extent that such
option is exercisable on the Purchase Date. The purchase price per share shall be as specified in
Section 8 of this Plan. Any amount remaining in a Participant’s account on a Purchase Date which
is less than the amount necessary to purchase a full share of the Company’s Common Stock shall be
carried forward, without interest, into the next Offering Period, as the case may be. In the event
that this Plan has been oversubscribed, all funds not used to purchase shares on the Purchase Date
shall be returned to the Participant, without interest. No Common Stock shall be purchased on a
Purchase Date on behalf of any employee whose participation in this Plan has terminated prior to
such Purchase Date.

          (f) As promptly as practicable after the Purchase Date, the Company shall issue shares for
the Participant’s benefit representing the shares purchased upon exercise of his or her option.

          (g) During a Participant’s lifetime, his or her option to purchase shares hereunder is
exercisable only by him or her. The Participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.

     10. Limitations on Shares to be Purchased.

          (a) No Participant shall be entitled to purchase stock under any Offering Period at a rate
which, when aggregated with such Participant’s rights to purchase stock, that are also outstanding
in the same calendar year(s) (whether under other Offering Periods or other employee stock purchase
plans of the Corporate Group), exceeds $25,000 in fair market value, determined as of the Offering
Date, (or such other limit as may be imposed by the Code) for each calendar year in which such
Offering Period is in

- 4 -

 

effect (hereinafter the “Maximum Share Amount”). The Company shall automatically suspend the
payroll deductions of any Participant as necessary to enforce such limit provided that when the
Company automatically resumes such payroll deductions, the Company must apply the rate in effect
immediately prior to such suspension.

          (b) The Committee may, in its sole discretion, set a lower maximum number of shares which may
be purchased by any Participant during any Offering Period than that determined under Section 10(a)
above, which shall then be the Maximum Share Amount for subsequent Offering Periods. If a new
Maximum Share Amount is set, then all Participants must be notified of such Maximum Share Amount
prior to the commencement of the next Offering Period for which it is to be effective. The Maximum
Share Amount shall continue to apply with respect to all succeeding Offering Periods unless revised
by the Committee as set forth above.

          (c) If the number of shares to be purchased on a Purchase Date by all Participants exceeds
the number of shares then available for issuance under this Plan, then the Company will make a pro
rata allocation of the remaining shares in as uniform a manner as shall be reasonably practicable
and as the Committee shall determine to be equitable. In such event, the Company shall give
written notice of such reduction of the number of shares to be purchased under a Participant’s
option to each Participant affected.

          (d) Any payroll deductions accumulated in a Participant’s account which are not used to
purchase stock due to the limitations in this Section 10, and not covered by Section 9(e), shall be
returned to the Participant as soon as practicable after the end of the applicable Offering Period,
without interest.

     11. Withdrawal.

          (a) Each Participant may withdraw from an Offering Period under this Plan by signing and
delivering to the Company a written notice to that effect on a form provided for such purpose by
the Company. Such withdrawal may be elected at any time prior to the end of an Offering Period, or
such other time period as specified by the Committee.

          (b) Upon withdrawal from this Plan, the accumulated payroll deductions shall be returned to
the withdrawn Participant, without interest, and his or her interest in this Plan shall terminate.
In the event a Participant voluntarily elects to withdraw from this Plan, he or she may not resume
his or her participation in this Plan during the same Offering Period, but he or she may
participate in any Offering Period under this Plan which commences on a date subsequent to such
withdrawal by filing a new authorization for payroll deductions in the same manner as set forth in
Section 6 above for initial participation in this Plan.

     12. Termination of Employment. Termination of a Participant’s employment for any reason,
including retirement, death, disability, or the failure of a Participant to remain an eligible
employee of the Company or of a Participating Corporation, immediately terminates his or her
participation in this Plan. In such event, accumulated payroll deductions credited to the
Participant’s account will be returned to him or her or, in the case of his or her death, to his or
her legal representative, without interest. For purposes of this Section 12, an employee will not
be deemed to have terminated employment or failed to remain in the continuous employ of the Company
or of a Participating Corporation in the case of sick leave, military leave, or any other leave of
absence approved by the Company; provided that such leave is for a period of not more than
ninety (90) days or reemployment upon the expiration of such leave is guaranteed by contract or
statute.

     13. Return of Payroll Deductions. In the event a Participant’s interest in this Plan is
terminated by withdrawal, termination of employment or otherwise, or in the event this Plan is
terminated by the Board, the Company shall deliver to the Participant all accumulated payroll
deductions credited to such Participant’s account. No interest shall accrue on the payroll
deductions of a Participant in this Plan.

- 5 -

 

     14. Capital Changes. In the event that any dividend or other distribution (whether in the
form of cash, Common Stock, other securities, or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Common Stock or other securities of the Company, or other change in the
corporate structure of the Company affecting the Common Stock such that an adjustment is determined
by the Committee (in its sole discretion) to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust the number and class of
Common Stock which may be delivered under the Plan, the purchase price per share and the number of
shares of Common Stock covered by each option under the Plan which has not yet been exercised, and
the numerical limits of Sections 1 and 10 shall be proportionately adjusted.

     15. Nonassignability. Neither payroll deductions credited to a Participant’s account nor any
rights with regard to the exercise of an option or to receive shares under this Plan may be
assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of
descent and distribution or as provided in Section 22 below) by the Participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be void and without effect.

     16. Reports. Individual accounts will be maintained for each Participant in this Plan. Each
Participant shall receive promptly after the end of each Offering Period a report of his or her
account setting forth the total payroll deductions accumulated, the number of shares purchased, the
per share price thereof and the remaining cash balance, if any, carried forward to the next
Offering Period.

     17. Notice of Disposition. Each Participant shall notify the Company in writing if the
Participant disposes of any of the shares purchased in any Offering Period pursuant to this Plan if
such disposition occurs within two (2) years from the Offering Date or within one (1) year from the
Purchase Date on which such shares were purchased (the “Notice Period”). The Company may, at any
time during the Notice Period, place a legend or legends on any certificate representing shares
acquired pursuant to this Plan requesting the Company’s transfer agent to notify the Company of any
transfer of the shares. The obligation of the Participant to provide such notice shall continue
notwithstanding the placement of any such legend on the certificates.

     18. No Rights to Continued Employment. Neither this Plan nor the grant of any option
hereunder shall confer any right on any employee to remain in the employ of the Company or any
Participating Corporation, or restrict the right of the Company or any Participating Corporation to
terminate such employee’s employment.

     19. Equal Rights And Privileges. All eligible employees shall have equal rights and
privileges with respect to this Plan so that this Plan qualifies as an “employee stock purchase
plan” within the meaning of Section 423 or any successor provision of the Code and the related
regulations. Any provision of this Plan which is inconsistent with Section 423 or any successor
provision of the Code shall, without further act or amendment by the Company, the Committee or the
Board, be reformed to comply with the requirements of Section 423. This Section 19 shall take
precedence over all other provisions in this Plan.

     20. Notices. All notices or other communications by a Participant to the Company under or in
connection with this Plan shall be deemed to have been duly given when received in the form
specified by the Company at the location, or by the person, designated by the Company for the
receipt thereof.

     21. Term; Stockholder Approval. This Plan will become effective on the Effective Date. This
Plan shall be approved by the stockholders of the Company, in any manner permitted by applicable
corporate law, within twelve (12) months before or after the date this Plan is adopted by the
Board. No purchase of shares that are subject to such stockholder approval before becoming
available under this Plan shall occur prior to stockholder approval of such shares and the Board or
Committee may delay any

- 6 -

 

Purchase Date and postpone the commencement of any Offering Period subsequent to such Purchase Date
as deemed necessary or desirable to obtain such approval (provided that if a Purchase Date would
occur more than twenty-four (24) months after commencement of the Offering Period to which it
relates, then such Purchase Date shall not occur and instead such Offering Period shall terminate
without the purchase of such shares and Participants in such Offering Period shall be refunded
their contributions without interest). This Plan shall continue until the earlier to occur of (a)
termination of this Plan by the Board (which termination may be effected by the Board at any time
pursuant to Section 25 below), (b) issuance of all of the shares of Common Stock reserved for
issuance under this Plan, or (c) the tenth anniversary of the first Purchase Date under the Plan.

     22. Designation of Beneficiary.

          (a) A Participant may file a written designation of a beneficiary who is to receive any
shares and cash, if any, from the Participant’s account under this Plan in the event of such
Participant’s death subsequent to the end of an Offering Period but prior to delivery to him of
such shares and cash. In addition, a Participant may file a written designation of a beneficiary
who is to receive any cash from the Participant’s account under this Plan in the event of such
Participant’s death prior to a Purchase Date.

          (b) Such designation of beneficiary may be changed by the Participant at any time by written
notice. In the event of the death of a Participant and in the absence of a beneficiary validly
designated under this Plan who is living at the time of such Participant’s death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of the Participant, or
if no such executor or administrator has been appointed (to the knowledge of the Company), the
Company, in its discretion, may deliver such shares or cash to the spouse or to any one or more
dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.

     23. Conditions Upon Issuance of Shares; Limitation on Sale of Shares. Shares shall not be
issued with respect to an option unless the exercise of such option and the issuance and delivery
of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or
foreign, including, without limitation, the Securities Act, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements of any stock
exchange or automated quotation system upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such compliance.

     24. Applicable Law. The Plan shall be governed by the substantive laws (excluding the
conflict of laws rules) of the State of Delaware.

     25. Amendment or Termination. The Committee, in its sole discretion, may amend, suspend, or
terminate the Plan, or any part thereof, at any time and for any reason. If the Plan is terminated,
the Committee, in its discretion, may elect to terminate all outstanding Offering Periods either
immediately or upon completion of the purchase of shares of Common Stock on the next Purchase Date
(which may be sooner than originally scheduled, if determined by the Committee in its discretion),
or may elect to permit Offering Periods to expire in accordance with their terms (and subject to
any adjustment pursuant to Section 14). If an Offering Period is terminated prior to its
previously-scheduled expiration, all amounts then credited to Participants’ accounts for such
Offering Period, which have not been used to purchase shares of the Company’s Common Stock, shall
be returned to those Participants (without interest thereon, except as otherwise required under
local laws) as soon as administratively practicable. Further, the Committee will be entitled to
change the Offering Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by
a Participant in order to adjust for delays or mistakes in the administration of the Plan,
establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of the Company’s Common Stock for each Participant

- 7 -

 

properly correspond with amounts withheld from the Participant’s base salary or regular hourly
wages, and establish such other limitations or procedures as the Committee determines in its sole
discretion advisable which are consistent with the Plan. Such actions will not require stockholder
approval or the consent of any Participants. However, no amendment shall be made without approval
of the stockholders of the Company (obtained in accordance with Section 21 above) within twelve
(12) months of the adoption of such amendment (or earlier if required by Section 21) if such
amendment would: (a) increase the number of shares that may be issued under this Plan; or (b)
change the designation of the employees (or class of employees) eligible for participation in this
Plan.

     26. Corporate Transactions.

          (a) In the event of a Corporate Transaction (as defined below), each outstanding right to
purchase Company Common Stock will be assumed or an equivalent option substituted by the successor
corporation or a parent or a subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the purchase right, the Offering Period
with respect to which such purchase right relates will be shortened by setting a new Purchase Date
(the “New Purchase Date” and will end on the New Purchase Date. The New Purchase Date shall occur
on or prior to the consummation of the Corporate Transaction.

          (b) “Corporate Transaction” means the occurrence of any of the following events: (i) any
“person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the
“beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the total voting power
represented by the Company’s then outstanding voting securities; or (ii) the consummation of the
sale or disposition by the Company of all or substantially all of the Company’s assets; or (iii)
the consummation of a merger or consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or its parent) at least fifty percent
(50%) of the total voting power represented by the voting securities of the Company or such
surviving entity or its parent outstanding immediately after such merger or consolidation.

- 8 -

 

	 	 	 
	ShoreTel, Inc. (the “Company”)
	 	 
	2007 Employee Stock Purchase Plan (“ESPP”)

	 	Enrollment/Change Form

Section 1:

 

Actions

					
	Check Desired Action:	 	and Complete Sections:
	o

	 	Enroll in the ESPP
	 	2 + 3 + 4 + 6
	o

	 	Change Contribution Percentage
	 	2 + 4 + 6
	o

	 	Discontinue Contributions
	 	2 + 5 + 6

Section 2:

 

Personal Data

			
	Name:	 	 

	 	 	 
 

			
	Home Address:	 	 
	 	 	 
 

	 	 	 
	 
 

Social Security No.: o o o - o o - o o o o

Department:

 

 

Section 3:

 

Enroll

I hereby elect to participate in the ESPP, effective at the
beginning of the next Offering Period (or with the first Offering
Period). I elect to purchase shares of the Common Stock of the
Company pursuant to the ESPP. I understand that the stock
certificate(s) for the shares purchased on my behalf will be issued
in street name and deposited directly into my brokerage account. I
hereby agree to take all steps, and sign all forms, required to
establish an account with [                    ] for this purpose.

My participation will continue as long as I remain eligible, unless
I withdraw from the ESPP by filing a new Enrollment/Change Form
with the Company. I understand that I must notify the Company of
any disposition of shares purchased under the ESPP.

Section 4:

 

Elect

Contribution

Percentage

I hereby authorize the Company to withhold from each of my
paychecks such amount as is necessary to equal at the end of the
applicable Offering Period     % of my compensation (as defined in
the ESPP) paid during such Offering Period as long as I continue to
participate in the ESPP. That amount will be applied to the
purchase of shares of the Company’s Common Stock pursuant to the
ESPP. The percentage must be a whole number (from 1%, up to a
maximum of 15%).

Please o-increase o-decrease my contribution percentage.

			
	Note:	 	You may change your contribution percentage only once within
an Offering Period to be effective during such Offering Period and
such change can only be to decrease your contribution percentage.
An increase in your contribution percentage can only take effect
with the next Offering Period. Each change will become effective
as soon as reasonably practicable after the form is received by the Company.

Section 5:

 

Discontinue

Contributions

			
	o	 	I hereby elect to stop my contributions under the ESPP, effective
as soon as reasonably practicable after this form is received by
the Company. Please o-refund all contributions to me in cash,
without interest OR o- use my contributions to purchase shares on
the next Purchase Date. I understand that I cannot resume
participation until the start of the next Offering Period and must
timely file a new enrollment form to do so.

Section 6:

 

Acknowledgment

and Signature

I acknowledge that I have received a copy of the ESPP and of the
Prospectus (which summarizes the major features of the ESPP). I
have read the Prospectus and my signature below (or my clicking on
the Accept box if this is an electronic form) indicates that I
hereby agree to be bound by the terms of the ESPP.

	 	 	 	 	 	 	 	 
	Signature:

	 	 
	 	Date:

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