Document:

exv10w2

 

Exhibit 10.2

SHORELINE COMMUNICATIONS, INC

1997 STOCK OPTION PLAN

(Amended on October 2, 2002)

     1. Establishment, Purpose and Term of Plan

          1.1 Establishment. The Shoreline Communications, Inc. 1997 Stock Option Plan (the “Plan”) was
established and became effective on January 28, 1997 (the “Effective Date”).

          1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company
Group and its shareholders by providing an incentive to attract, retain and reward persons
performing services for the Participating Company Group and by motivating such persons to
contribute to the growth and profitability of the Participating Company Group.

          1.3 Term of Plan. The Plan shall continue in effect until the earlier of its termination by
the Board or the date on which all of the shares of Stock available for issuance under the Plan
have been issued and all restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed. However, all Options shall be granted, if
at all, within ten (10) years from the earlier of the date the Plan is adopted by the Board or the
date the Plan is duly approved by the shareholders of the Company.

     2. Definitions and Construction.

          2.1 Definitions. Whenever used herein, the following terms shall have their respective
meanings set forth below:

               (a) “Board” means the Board of Directors of the Company. If one or more Committees have been
appointed by the Board to administer the Plan, “Board” also means such Committee(s).

               (b) “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.

               (c) “Committee” means the Compensation Committee or other committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified by the Board. Unless
the powers of the Committee have been specifically limited, the Committee shall have all of the
powers of the Board granted herein, including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by
law.

               (d) “Company” means Shoreline Communications, Inc., a California corporation, or any successor
corporation thereto.

Exhibit 10.2 — 1997 Stock Plan

 

 

               (e) “Consultant” means any person, including an advisor, engaged by a Participating Company to
render services other than as an Employee or a Director.

               (f) “Director” means a member of the Board or of the board of directors of any other
Participating Company.

               (g) “Employee” means any person treated as an employee (including an officer or a Director who
is also treated as an employee) in the records of a Participating Company; provided, however, that
neither service as a Director nor payment of a director’s fee shall be sufficient to constitute
employment for purposes of the Plan.

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

               (i) “Fair Market Value” means, as of any date, the value of a share of Stock or other property
as determined by the Board, in its sole discretion, or by the Company, in its sole discretion, if
such determination is expressly allocated to the Company herein, subject to the following:

                    (i) If, on such date, there is a public market for the Stock, the Fair Market Value of a share
of Stock shall be the closing sale price of a share of Stock (or the mean of the closing bid and
asked prices of a share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq
National Market, the Nasdaq Small-Cap Market or such other national or regional securities exchange
or market system constituting the primary market for the Stock, as reported in The Wall Street
Journal or such other source as the Company deems reliable. If the relevant date does not fall
on a day on which the Stock has traded on such securities exchange or market system, the date on
which the Fair Market Value shall be established shall be the last day on which the Stock was so
traded prior to the relevant date, or such other appropriate day as shall be determined by the
Board, in its sole discretion.

                    (ii) If, on such date, there is no public market for the Stock, the Fair Market Value of a
share of Stock shall be as determined by the Board without regard to any restriction other than a
restriction which, by its terms, will never lapse.

               (j) “Incentive Stock Option” means an Option intended to be (as set forth in the Option
Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of
the Code.

               (k) “Insider” means an officer or a Director of the Company or any other person whose
transactions in Stock are subject to Section 16 of the Exchange Act.

               (l) “Nonstatutory Stock Option” means an Option not intended to be (as set forth in the Option
Agreement) or which does not qualify as an Incentive Stock Option.

               (m) “Option” means a right to purchase Stock (subject to adjustment as provided in Section
4.2) pursuant to the terms and conditions of the Plan. An Option may be either an Incentive Stock
Option or a Nonstatutory Stock Option.

Exhibit 10.2 — 1997 Stock Plan

-2-

 

               (n) “Option Agreement” means a written agreement between the Company and an Optionee setting
forth the terms, conditions and restrictions of the Option granted to the Optionee and any shares
acquired upon the exercise thereof.

               (o) “Optionee” means a person who has been granted one or more Options.

               (p) “Parent Corporation” means any present or future “parent corporation” of the Company, as
defined in Section 424(e) of the Code.

               (q) “Participating Company” means the Company or any Parent Corporation or Subsidiary
Corporation.

               (r) “Participating Company Group” means, at any point in time, all corporations collectively
which are then Participating Companies.

               (s) “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended from time to time, or any
successor rule or regulation.

               (t) “Stock” means the common stock, without par value, of the Company, as adjusted from time
to time in accordance with Section 4.2.

               (u) “Subsidiary Corporation” means any present or future “subsidiary corporation” of the
Company, as defined in Section 424(f) of the Code.

               (v) “Ten Percent Owner Optionee” means an Optionee who, at the time an Option is granted to
the Optionee, owns stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of a Participating Company within the meaning of Section 422(b)(6) of the
Code.

          2.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated
by the context, the singular shall include the plural and the plural shall include the singular.
Use of the term “or” is not intended to be exclusive, unless the context clearly requires
otherwise.

     3. Administration.

          3.1 Administration by the Board. The Plan shall be administered by the Board. All questions
of interpretation of the Plan or of any Option shall be determined by the Board, and such
determinations shall be final and binding upon all persons having an interest in the Plan or such
Option. Any officer of a Participating Company shall have the authority to act on behalf of the
Company with respect to any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, determination or election.

Exhibit 10.2 — 1997 Stock Plan

-3-

 

          3.2 Administration with Respect to Insiders. With respect to participation by Insiders in the
Plan, at any time that any class of equity security of the Company is registered pursuant to
Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements,
if any, of Rule 16b-3.

          3.3 Powers of the Board. In addition to any other powers set forth in the Plan and subject to
the provisions of the Plan, the Board shall have the full and final power and authority, in its
sole discretion:

               (a) to determine the persons to whom, and the time or times at which, Options shall be granted
and the number of shares of Stock to be subject to each Option;

               (b) to designate Options as Incentive Stock Options or Nonstatutory Stock Options;

               (c) to determine the Fair Market Value of shares of Stock or other property;

               (d) to determine the terms, conditions and restrictions applicable to each Option (which need
not be identical) and any shares acquired upon the exercise thereof, including, without limitation,
(i) the exercise price of the Option, (ii) the method of payment for shares purchased upon the
exercise of the Option, (iii) the method for satisfaction of any tax withholding obligation arising
in connection with the Option or such shares, including by the withholding or delivery of shares of
stock, (iv) the timing, terms and conditions of the exercisability of the Option or the vesting of
any shares acquired upon the exercise thereof, (v) the time of the expiration of the Option, (vi)
the effect of the Optionee’s termination of employment or service with the Participating Company
Group on any of the foregoing, and (vii) all other terms, conditions and restrictions applicable to
the Option or such shares not inconsistent with the terms of the Plan;

               (e) to approve one or more forms of Option Agreement;

               (f) to amend, modify, extend, or renew, or grant a new Option in substitution for, any Option
or to waive any restrictions or conditions applicable to any Option or any shares acquired upon the
exercise thereof;

               (g) to amend the exercisability of any Option or the vesting of any shares acquired upon the
exercise thereof, including with respect to the period following an Optionee’s termination of
employment or service with the Participating Company Group;

               (h) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to
adopt supplements to, or alternative versions of, the Plan, including, without limitation, as the
Board deems necessary or desirable to comply with the laws of, or to accommodate the tax policy or
custom of, foreign jurisdictions whose citizens may be granted Options; and

               (i) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or
any Option Agreement and to make all other determinations and take

Exhibit 10.2 — 1997 Stock Plan

-4-

 

such other actions with respect to the Plan or any Option as the Board may deem advisable to
the extent consistent with the Plan and applicable law.

     4. Shares Subject to Plan.

          4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the
maximum aggregate number of shares of Stock that may be issued under the Plan shall be Fifty-Four
Million Seven Hundred Twenty-One Thousand, Two Hundred and Two (54,721,202) and shall consist of
authorized but unissued or reacquired shares of Stock or any combination thereof. If an
outstanding Option for any reason expires or is terminated or canceled, or if shares of Stock
acquired, subject to repurchase, upon the exercise of an Option are repurchased by the Company, the
shares of Stock allocable to the unexercised portion of such Option or such repurchased shares of
Stock shall again be available for issuance under the Plan.

          4.2 Adjustments for Changes in Capital Structure. In the event of any stock dividend, stock
split, reverse stock split, recapitalization, combination, reclassification or similar change in
the capital structure of the Company, appropriate adjustments shall be made in the number and class
of shares subject to the Plan and to any outstanding Options and in the exercise price per share of
any outstanding Options. If a majority of the shares which are of the same class as the shares
that are subject to outstanding Options are exchanged for, converted into, or otherwise become
(whether or not pursuant to an Ownership Change Event, as defined in Section 8.1) shares of another
corporation (the “New Shares”), the Board may unilaterally amend the outstanding Options to provide
that such Options are exercisable for New Shares. In the event of any such amendment, the number
of shares subject to, and the exercise price per share of, the outstanding Options shall be
adjusted in a fair and equitable manner as determined by the Board, in its sole discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this
Section 4.2 shall be rounded up or down to the nearest whole number, as determined by the Board,
and in no event may the exercise price of any Option be decreased to an amount less than the par
value, if any, of the stock subject to the Option. The adjustments determined by the Board
pursuant to this Section 4.2 shall be final, binding and conclusive.

     5. Eligibility and Option Limitations.

          5.1 Persons Eligible for Options. Options may be granted only to Employees, Consultants, and
Directors. For purposes of the foregoing sentence, “Employees,” “Consultants” and “Directors”
shall include prospective Employees, prospective Consultants and prospective Directors to whom
Options are granted in connection with written offers of employment or other service relationship
with the Participating Company Group. Eligible persons may be granted more than one (1) Option.

          5.2 Option Grant Restrictions. Any person who is not an Employee on the effective date of the
grant of an Option to such person may be granted only a Nonstatutory Stock Option. An Incentive
Stock Option granted to a prospective Employee upon the condition that such person become an
Employee shall be deemed granted effective on the date such person commences service with a
Participating Company, with an exercise price determined as of such date in accordance with Section
6.1.

Exhibit 10.2 — 1997 Stock Plan

-5-

 

          5.3 Fair Market Value Limitation. To the extent that options designated as Incentive Stock
Options (granted under all stock option plans of the Participating Company Group, including the
Plan) become exercisable by an Optionee for the first time during any calendar year for stock
having an aggregate Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the
portion of such options which exceeds such amount shall be treated as Nonstatutory Stock Options.
For purposes of this Section 5.3, options designated as Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of stock shall be
determined as of the time the option with respect to such stock is granted. If the Code is amended
to provide for a different limitation from that set forth in this Section 5.3, such different
limitation shall be deemed incorporated herein effective as of the date and with respect to such
Options as required or permitted by such amendment to the Code. If an Option is treated as an
Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 5.3, the Optionee may designate which portion of such Option
the Optionee is exercising. In the absence of such designation, the Optionee shall be deemed to
have exercised the Incentive Stock Option portion of the Option first. Separate certificates
representing each such portion shall be issued upon the exercise of the Option.

     6. Terms and Conditions of Options. Options shall be evidenced by Option Agreements
specifying the number of shares of Stock covered thereby, in such form as the Board shall from time
to time establish. Option Agreements may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and conditions:

          6.1 Exercise Price. The exercise price for each Option shall be established in the sole
discretion of the Board; provided, however, that (a) the exercise price per share for an Incentive
Stock Option shall be not less than the Fair Market Value of a share of Stock on the effective date
of grant of the Option, (b) the exercise price per share for a Nonstatutory Stock Option shall be
not less than eighty-five percent (85%) of the Fair Market Value of a share of Stock on the
effective date of grant of the Option, and (c) no Option granted to a Ten Percent Owner Optionee
shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market
Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than the minimum exercise price set forth above if such Option
is granted pursuant to an assumption or substitution for another option in a manner qualifying
under the provisions of Section 424(a) of the Code.

          6.2 Exercise Period. Options shall be exercisable at such time or times, or upon such event or
events, and subject to such terms, conditions, performance criteria, and restrictions as shall be
determined by the Board and set forth in the Option Agreement evidencing such Option; provided,
however, that (a) no Option shall be exercisable after the expiration of ten (10) years after the
effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent
Owner Optionee shall be exercisable after the expiration of five (5) years after the effective date
of grant of such Option, and (c) no Option granted to a prospective Employee, prospective
Consultant or prospective Director may become exercisable prior to the date on which such person
commences service with a Participating Company.

Exhibit 10.2 — 1997 Stock Plan

-6-

 

          6.3 Payment of Exercise Price.

               (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
exercise price for the number of shares of Stock being purchased pursuant to any Option shall be
made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company of shares of Stock
owned by the Optionee having a Fair Market Value (as determined by the Company without regard to
any restrictions on transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company) not less than the exercise
price, (iii) by the assignment of the proceeds of a sale or loan with respect to some or all of the
shares being acquired upon the exercise of the Option (including, without limitation, through an
exercise complying with the provisions of Regulation T as promulgated from time to time by the
Board of Governors of the Federal Reserve System) (a “Cashless Exercise”), (iv) by the Optionee’s
promissory note in a form approved by the Company, (v) by such other consideration as may be
approved by the Board from time to time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Board may at any time or from time to time, by adoption of or by
amendment to the standard forms of Option Agreement described in Section 7, or by other means,
grant Options which do not permit all of the foregoing forms of consideration to be used in payment
of the exercise price or which otherwise restrict one or more forms of consideration.

               (b) Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender
to the Company of shares of Stock to the extent such tender of Stock would constitute a violation
of the provisions of any law, regulation or agreement restricting the redemption of the Company’s
stock. Unless otherwise provided by the Board, an Option may not be exercised by tender to the
Company of shares of Stock unless such shares either have been owned by the Optionee for more than
six (6) months or were not acquired, directly or indirectly, from the Company.

               (c) Cashless Exercise. The Company reserves, at any and all times, the right, in the
Company’s sole and absolute discretion, to establish, decline to approve or terminate any program
or procedures for the exercise of Options by means of a Cashless Exercise.

               (d) Payment by Promissory Note. No promissory note shall be permitted if the exercise of an
Option using a promissory note would be a violation of any law. Any permitted promissory note
shall be on such terms as the Board shall determine at the time the Option is granted. The Board
shall have the authority to permit or require the Optionee to secure any promissory note used to
exercise an Option with the shares of Stock acquired upon the exercise of the Option or with other
collateral acceptable to the Company. Unless otherwise provided by the Board, if the Company at
any time is subject to the regulations promulgated by the Board of Governors of the Federal Reserve
System or any other governmental entity affecting the extension of credit in connection with the
Company’s securities, any promissory note shall comply with such applicable regulations, and the
Optionee shall pay the unpaid principal and accrued interest, if any, to the extent necessary to
comply with such applicable regulations.

          6.4 Tax Withholding. The Company shall have the right, but not the obligation, to deduct from
the shares of Stock issuable upon the exercise of an Option, or to accept from the Optionee the
tender of, a number of whole shares of Stock having a Fair Market Value, as

Exhibit 10.2 — 1997 Stock Plan

-7-

 

determined by the Company, equal to all or any part of the federal, state, local and foreign
taxes, if any, required by law to be withheld by the Participating Company Group with respect to
such Option or the shares acquired upon the exercise thereof. Alternatively or in addition, in its
sole discretion, the Company shall have the right to require the Optionee, through payroll
withholding, cash payment or otherwise, including by means of a Cashless Exercise, to make adequate
provision for any such tax withholding obligations of the Participating Company Group arising in
connection with the Option or the shares acquired upon the exercise thereof. The Company shall
have no obligation to deliver shares of Stock or to release shares of Stock from an escrow
established pursuant to the Option Agreement until the Participating Company Group’s tax
withholding obligations have been satisfied by the Optionee.

          6.5 Repurchase Rights. Shares issued under the Plan may be subject to a right of first
refusal, one or more repurchase options, or other conditions and restrictions as determined by the
Board, in its sole discretion, at the time the Option is granted. The Company shall have the right
to assign at any time any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the Company. Upon request by the
Company, each Optionee shall execute any agreement evidencing such transfer restrictions prior to
the receipt of shares of Stock hereunder and shall promptly present to the Company any and all
certificates representing shares of Stock acquired hereunder for the placement on such certificates
of appropriate legends evidencing any such transfer restrictions.

     7. Standard Forms of Option Agreement.

          7.1 Incentive Stock Options. Unless otherwise provided by the Board at the time the Option is
granted, an Option designated as an “Incentive Stock Option” shall comply with and be subject to
the terms and conditions set forth in the form of Immediately Exercisable Incentive Stock Option
Agreement adopted by the Board concurrently with its adoption of the Plan and as amended from time
to time.

          7.2 Nonstatutory Stock Options. Unless otherwise provided by the Board at the time the Option
is granted, an Option designated as a “Nonstatutory Stock Option” shall comply with and be subject
to the terms and conditions set forth in the form of Immediately Exercisable Nonstatutory Stock
Option Agreement adopted by the Board concurrently with its adoption of the Plan and as amended
from time to time.

          7.3 Standard Term of Options. Except as otherwise provided in Section 6.2 or by the Board in
the grant of an Option, any Option granted hereunder shall have a term of ten (10) years from the
effective date of grant of the Option.

          7.4 Authority to Vary Terms. The Board shall have the authority from time to time to vary the
terms of any of the standard forms of Option Agreement described in this Section 7 either in
connection with the grant or amendment of an individual Option or in connection with the
authorization of a new standard form or forms; provided, however, that the terms and conditions of
any such new, revised or amended standard form or forms of Option Agreement are not inconsistent
with the terms of the Plan. Such authority shall include, but not by way of limitation, the
authority to grant Options which are not immediately exercisable.

Exhibit 10.2 — 1997 Stock Plan

-8-

 

     8. Transfer of Control.

          8.1 Definitions.

               (a) An “Ownership Change Event” shall be deemed to have occurred if any of the following
occurs with respect to the Company:

                    (i) the direct or indirect sale or exchange in a single or series of related transactions by
the shareholders of the Company of more than fifty percent (50%) of the voting stock of the
Company;

                    (ii) a merger or consolidation in which the Company is a party;

                    (iii) the sale, exchange, or transfer of all or substantially all of the assets of the
Company; or

                    (iv) a liquidation or dissolution of the Company.

               (b) A “Transfer of Control” shall mean an Ownership Change Event or a series of related
Ownership Change Events (collectively, the “Transaction”) wherein the shareholders of the Company
immediately before the Transaction do not retain immediately after the Transaction, in
substantially the same proportions as their ownership of shares of the Company’s voting stock
immediately before the Transaction, direct or indirect beneficial ownership of more than fifty
percent (50%) of the total combined voting power of the outstanding voting stock of the Company or
the corporation or corporations to which the assets of the Company were transferred (the
"Transferee Corporation(s) ”), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest resulting from
ownership of the voting stock of one or more corporations which, as a result of the Transaction,
own the Company or the Transferee Corporation(s), as the case may be, either directly or through
one or more subsidiary corporations. The Board shall have the right to determine whether multiple
sales or exchanges of the voting stock of the Company or multiple Ownership Change Events are
related, and its determination shall be final, binding and conclusive.

          8.2 Effect of Transfer of Control on Options. In the event of a Transfer of Control, the
surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the
case may be (the “Acquiring Corporation”), may either assume the Company’s rights and obligations
under outstanding Options or substitute for outstanding Options substantially equivalent options
for the Acquiring Corporation’s stock. For purposes of this Section 8.2, an Option shall be deemed
assumed if, following the Transfer of Control, the Option confers the right to purchase in
accordance with its terms and conditions, for each share of Stock subject to the Option immediately
prior to the Transfer of Control, the consideration (whether stock, cash or other securities or
property) to which a holder of a share of Stock on the effective date of the Transfer of Control
was entitled. Any Options which are neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the date of the Transfer
of Control shall terminate and cease to be outstanding effective as of the date of the Transfer of
Control. Notwithstanding the foregoing, shares acquired upon exercise of an Option prior to the

Exhibit 10.2 — 1997 Stock Plan

-9-

 

Transfer of Control and any consideration received pursuant to the Transfer of Control with
respect to such shares shall continue to be subject to all applicable provisions of the Option
Agreement evidencing such Option except as otherwise provided in such Option Agreement.
Furthermore, notwithstanding the foregoing, if the corporation the stock of which is subject to the
outstanding Options immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Transfer of Control is the surviving or continuing corporation and immediately after
such Ownership Change Event less than fifty percent (50%) of the total combined voting power of its
voting stock is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions
of Section 1504(b) of the Code, the outstanding Options shall not terminate unless the Board
otherwise provides in its sole discretion.

     9. Provision of Information. At least annually, copies of the Company’s balance sheet
and income statement for the just completed fiscal year shall be made available to each Optionee
and purchaser of shares of Stock upon the exercise of an Option. The Company shall not be required
to provide such information to persons whose duties in connection with the Company assure them
access to equivalent information.

     10. Nontransferability of Options. During the lifetime of the Optionee, an Option
shall be exercisable only by the Optionee or the Optionee’s guardian or legal representative. No
Option shall be assignable or transferable by the Optionee, except by will or by the laws of
descent and distribution.

     11. Transfer of Company’s Rights. In the event any Participating Company assigns,
other than by operation of law, to a third person, other than another Participating Company, any of
the Participating Company’s rights to repurchase any shares of Stock acquired upon the exercise of
an Option, the assignee shall pay to the assigning Participating Company the value of such right as
determined by the Company in the Company’s sole discretion. Such consideration shall be paid in
cash. In the event such repurchase right is exercisable at the time of such assignment, the value
of such right shall be not less than the Fair Market Value of the shares of Stock which may be
repurchased under such right (as determined by the Company) minus the repurchase price of such
shares. The requirements of this Section 11 regarding the minimum consideration to be received by
the assigning Participating Company shall not inure to the benefit of the Optionee whose shares of
Stock are being repurchased. Failure of a Participating Company to comply with the provisions of
this Section 11 shall not constitute a defense or otherwise prevent the exercise of the repurchase
right by the assignee of such right.

     12. Indemnification. In addition to such other rights of indemnification as they may
have as members of the Board or officers or employees of the Participating Company Group, members
of the Board and any officers or employees of the Participating Company Group to whom authority to
act for the Board or the Company is delegated shall be indemnified by the Company against all
reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection
with the defense of any action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or failure to act under or
in connection with the Plan, or any right granted hereunder, and against all amounts paid by them
in settlement thereof (provided such settlement is approved by independent legal counsel

Exhibit 10.2 — 1997 Stock Plan

-10-

 

selected by the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such person is liable for gross negligence, bad faith or intentional
misconduct in duties; provided, however, that within sixty (60) days after the institution of such
action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at
its own expense to handle and defend the same.

     13. Termination or Amendment of Plan. The Board may terminate or amend the Plan at
any time. However, subject to changes in applicable law, regulations or rules that would permit
otherwise, without the approval of the Company’s shareholders there shall be (a) no increase in the
maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation
of the provisions of Section 4.2), (b) no change in the class of persons eligible to receive
Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the
Company’s shareholders under any applicable law, regulation or rule. In any event, no termination
or amendment of the Plan may adversely affect any then outstanding Option or any unexercised
portion thereof, without the consent of the Optionee, unless such termination or amendment is
required to enable an Option designated as an Incentive Stock Option to qualify as an Incentive
Stock Option or is necessary to comply with any applicable law, regulation or rule.

     14. Shareholder Approval. The Plan or any increase in the maximum number of shares of
Stock issuable thereunder as provided in Section 4.1 (the “Maximum Shares”) shall be approved by
the shareholders of the Company within twelve (12) months of the date of adoption thereof by the
Board. Options granted prior to shareholder approval of the Plan or in excess of the Maximum
Shares previously approved by the shareholders shall become exercisable no earlier than the date of
shareholder approval of the Plan or such increase in the Maximum Shares, as the case may be.

**********

Exhibit 10.2 — 1997 Stock Plan

-11-

 

SHORETEL, INC.

1997 STOCK OPTION PLAN

IMMEDIATELY EXERCISABLE

INCENTIVE STOCK OPTION AGREEMENT

(Form B — Executives Only, Exercisable Subject to $100,000 Annual Limit)

 

 

THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE
PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102, OR
25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.

SHORETEL, INC.

IMMEDIATELY EXERCISABLE

INCENTIVE STOCK OPTION AGREEMENT

(including Notice of Stock Option Grant)

     THIS IMMEDIATELY EXERCISABLE INCENTIVE STOCK OPTION AGREEMENT (the “Option Agreement”) is made
and entered into as of «Date_of_Grant», by and between ShoreTel, Inc., a California corporation,
and «Name» (the “Optionee”).

     The Company has granted to the Optionee pursuant to the ShoreTel, Inc. 1997 Stock Option Plan
(the “Plan”) an option to purchase certain shares of the common stock of the Company (the “Stock”),
upon the terms and conditions set forth in this Option Agreement (the “Option”). The Option shall
in all respects be subject to the terms and conditions of the Plan, the provisions of which are
incorporated herein by reference.

     1. Definitions and Construction.

          1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings
assigned to such terms in the Plan. Whenever used herein, the following terms shall have their
respective meanings set forth below:

          (a) “Date of Option Grant” means «Date_of_Grant».

          (b) “Number of Option Shares” means «Number_of_Shares» shares of Stock, as adjusted from time
to time pursuant to Section 9.

-2-

 

          (c) “Exercise Price” means $«price_per_share» per share of Stock, as adjusted from time to
time pursuant to Section 9.

          (d) “Initial Exercise Date” means the Date of Option Grant.

          (e) “Initial Vesting Date” means the date occurring Twelve (12) months after (check one):

          ___the Date of Option Grant.

          ___«Commencement_Date»

          (f) “Vested Ratio” means, on any relevant date, the ratio determined as follows:

	 	 	 	 	 
	 	 	Vested Ratio
	Prior to Initial Vesting Date

	 	 	0	 
	 
	 	 	 	 
	On Initial Vesting Date, provided the Optionee’s Service has
not terminated prior to such date

	 	 	1/4	 
	 
	 	 	 	 
	Plus
	 	 	 	 
	 
	 	 	 	 
	For each full month of the Optionee’s continuous Service from
the Initial Vesting Date until the Vested Ratio equals 1/1,
an additional

	 	 	1/48	 

          (g) “Option Expiration Date” means the date ten (10) years after the Date of Option Grant.

          (h) “Company” means ShoreTel, Inc., a California corporation, or any successor corporation
thereto.

          (i) “Disability” means the inability of the Optionee, in the opinion of a qualified physician
acceptable to the Company, to perform the major duties of the Optionee’s position with the
Participating Company Group because of the sickness or injury of the Optionee.

          (j) “Securities Act” means the Securities Act of 1933, as amended.

          (k) “Service” means the Optionee’s employment or service with the Participating Company Group,
whether in the capacity of an Employee, a Director or a Consultant. The Optionee’s Service shall
not be deemed to have terminated merely because of the change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption or termination of
the Optionee’s Service. Furthermore, the Optionee’s Service with the Participating Company Group
shall not be deemed to have terminated if the Optionee takes any

-3-

 

military leave, sick leave, or other bona fide leave of absence approved by the Company;
provided, however, that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day
of such leave the Optionee’s Service shall be deemed to have terminated unless the Optionee’s right
to return to Service with the Participating Company Group is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, a
leave of absence shall not be treated as Service for purposes of determining Optionee’s Vested
Ratio. The Optionee’s Service shall be deemed to have terminated either upon an actual termination
of Service or upon the corporation for which the Optionee performs Service ceasing to be a
Participating Company. Subject to the foregoing, the Company, in its sole discretion, shall
determine whether the Optionee’s Service has terminated and the effective date of such termination.

          1.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of this Option Agreement. Except when
otherwise indicated by the context, the singular shall include the plural and the plural shall
include the singular. Use of the term “or” is not intended to be exclusive, unless the context
clearly requires otherwise.

     2. Tax Consequences.

          2.1 Tax Status of Option. This Option is intended to be an Incentive Stock Option within the
meaning of Section 422(b) of the Code and is not intended to be subject to Section 409A of the
Code, but the Company does not represent or warrant that this Option qualifies as an Incentive
Stock Option, nor does the Company represent or warrant that this Option is not subject to Section
409A of the Code. The Optionee should consult with the Optionee’s own tax advisor regarding the
tax effects of this Option and the requirements necessary to obtain favorable income tax treatment
under Sections 409A and 422 of the Code, including, but not limited to, the Exercise Price and
holding period requirements. (NOTE: If the aggregate Exercise Price of the Option (that is, the
Exercise Price multiplied by the Number of Option Shares) plus the aggregate exercise price of
other Incentive Stock Options held by the Optionee (whether granted pursuant to the Plan or any
other stock option plan of the Participating Company Group) is greater than One Hundred Thousand
Dollars ($100,000), the Optionee should contact the Chief Financial Officer of the Company to
ascertain whether the entire Option qualifies as an Incentive Stock Option).

          2.2 Election Under Section 83(b) of the Code. If the Optionee exercises this Option to
purchase shares of Stock that are both nontransferable and subject to a substantial risk of
forfeiture, the Optionee understands that the Optionee should consult with the Optionee’s tax
advisor regarding the advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days after the date on
which the Optionee exercises the Option. Shares acquired upon exercise of the Option are
nontransferable and subject to a substantial risk of forfeiture if, for example, (a) they are
unvested and are subject to a right of the Company to repurchase such shares at the Optionee’s
original purchase price if the Optionee’s Service terminates, (b) the Optionee is an Insider and
exercises the Option within six (6) months of the Date of Option Grant (if a class of equity
security of the Company is registered under Section 12 of the Exchange Act), or (c) the Optionee is
subject to a restriction on transfer to comply with “Pooling-of-Interests Accounting” rules.
Failure to file an election under Section 83(b), if appropriate, may result in adverse tax
consequences to the Optionee. The Optionee acknowledges
 

-4-

 

that the Optionee has been advised to consult with a tax advisor prior to the exercise of the
Option regarding the tax consequences to the Optionee of the exercise of the Option. AN ELECTION
UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE PURCHASES
SHARES THAT ARE SUBJECT TO A SUBSTANTIAL RISK OF FORFEITURE OR NONTRANSFERABLE. THIS TIME PERIOD
CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS
THE OPTIONEE’S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE
TO FILE SUCH ELECTION ON HIS OR HER BEHALF.

     3. Administration. All questions of interpretation concerning this Option Agreement
shall be determined by the Board. All determinations by the Board shall be final and binding upon
all persons having an interest in the Option. Any officer of a Participating Company shall have
the authority to act on behalf of the Company with respect to any matter, right, obligation, or
election which is the responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation, or election.

     4. Exercise of the Option.

          4.1 Right to Exercise.

          (a) Except as otherwise provided herein, the Option shall be exercisable on and after the
Initial Exercise Date and prior to the termination of the Option (as provided in Section 6) in an
amount not to exceed the Number of Option Shares less the number of shares previously acquired upon
exercise of the Option, subject to the Optionee’s agreement that any shares purchased upon exercise
are subject to the Company’s repurchase rights set forth in Section 11. Notwithstanding the
foregoing, except as set forth in Section 4.1(b), the aggregate Fair Market Value of the shares of
Stock with respect to which the Optionee may exercise the Option for the first time during any
calendar year, when added to the aggregate Fair Market Value of the shares subject to any other
options designated as Incentive Stock Options granted to the Optionee under all stock option plans
of the Participating Company Group prior to the Date of Option Grant with respect to which such
options are exercisable for the first time during the same calendar year, shall not exceed One
Hundred Thousand Dollars ($100,000). For purposes of the preceding sentence, options designated as
Incentive Stock Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of shares of stock shall be determined as of the time the option with respect
to such shares is granted. Such limitation on exercise shall be referred to in this Option
Agreement as the “ISO Exercise Limitation.” If Section 422 of the Code is amended to provide for a
different limitation from that set forth in this Section 4.1(a), the ISO Exercise Limitation shall
be deemed amended effective as of the date required or permitted by such amendment to the Code.
The ISO Exercise Limitation shall terminate upon the earlier of (i) the Optionee’s termination of
Service, (ii) the day immediately prior to the effective date of a Transfer of Control in which the
Option is not assumed or substituted for by the Acquiring Corporation as provided in Section 8, or
(iii) the day ten (10) days prior to the Option Expiration Date. Upon such termination of the ISO
Exercise Limitation, the Option shall be deemed a Nonstatutory Stock Option to the extent of the
number of shares subject to the Option which would otherwise exceed the ISO Exercise Limitation.

-5-

 

          (b) Notwithstanding any other provision of this Option Agreement, if compliance with the ISO
Exercise Limitation as set forth in Section 4.1(a) will result in the exercisability of any Vested
Shares (as defined in Section 11.2) being delayed more than thirty (30) days beyond the date such
shares become Vested Shares (the “Vesting Date”), the Option shall be deemed to be two (2) options.
The first option shall be for the maximum portion of the Number of Option Shares that can comply
with the ISO Exercise Limitation without causing the Option to be unexercisable in the aggregate as
to Vested Shares on the Vesting Date for such shares. The second option, which shall not be treated
as an Incentive Stock Option as described in Section 422(b) of the Code, shall be for the balance
of the Number of Option Shares; that is, those such shares which, on the respective Vesting Date
for such shares, would be unexercisable if included in the first option and thereby made subject to
the ISO Exercise Limitation. Shares treated as subject to the second option shall be exercisable
on the same terms and at the same time as set forth in this Option Agreement; provided, however,
that (i) the second sentence of Section 4.1(a) shall not apply to the second option and (ii) each
such share shall become a Vested Share on the Vesting Date on which such share must first be
allocated to the second option pursuant to the preceding sentence. Unless the Optionee
specifically elects to the contrary in the Optionee’s written notice of exercise, the first option
shall be deemed to be exercised first to the maximum possible extent and then the second option
shall be deemed to be exercised.

          4.2 Method of Exercise. Exercise of the Option shall be by written notice to the Company
which must state the election to exercise the Option, the number of whole shares of Stock for which
the Option is being exercised and such other representations and agreements as to the Optionee’s
investment intent with respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be delivered in
person, by certified or registered mail, return receipt requested, by confirmed facsimile
transmission, or by such other means as the Company may permit, to the Chief Financial Officer of
the Company, or other authorized representative of the Participating Company Group, prior to the
termination of the Option as set forth in Section 6, accompanied by (i) full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased and (ii) an executed
copy, if required, herein, of the then current forms of escrow and security agreement referenced
below. The Option shall be deemed to be exercised upon receipt by the Company of such written
notice, the aggregate Exercise Price, and, if required by the Company, such executed agreements.

          4.3 Payment of Exercise Price.

          (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
aggregate Exercise Price of the number of shares of Stock for which the Option is being exercised
shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company of whole
shares of Stock owned by the Optionee having a Fair Market Value (as determined by the Company
without regard to any restrictions on transferability applicable to such stock by reason of federal
or state securities laws or agreements with an underwriter for the Company) not less than the
aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined in Section 4.3(c), or
(iv) by any combination of the foregoing.

          (b) Tender of Stock. Notwithstanding the foregoing, the Option may not be exercised by tender
to the Company of shares of Stock to the extent such tender of Stock would

-6-

 

constitute a violation of the provisions of any law, regulation or agreement restricting the
redemption of the Company’s stock. The Option may not be exercised by tender to the Company of
shares of Stock unless such shares either have been owned by the Optionee for more than six (6)
months or were not acquired, directly or indirectly, from the Company.

          (c) Cashless Exercise. A “Cashless Exercise” means the assignment in a form acceptable to the
Company of the proceeds of a sale or loan with respect to some or all of the shares of Stock
acquired upon the exercise of the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the provisions of Regulation T
as promulgated from time to time by the Board of Governors of the Federal Reserve System). The
Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion,
to decline to approve or terminate any such program or procedure.

          4.4 Tax Withholding. At the time the Option is exercised, in whole or in part, or at any time
thereafter as requested by the Company, the Optionee hereby authorizes withholding from payroll and
any other amounts payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding obligations of the
Participating Company Group, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the Option, (iii) the
operation of any law or regulation providing for the imputation of interest, or (iv) the lapsing of
any restriction with respect to any shares acquired upon exercise of the Option. The Optionee is
cautioned that the Option is not exercisable unless the tax withholding obligations of the
Participating Company Group are satisfied. Accordingly, the Optionee may not be able to exercise
the Option when desired even though the Option is vested, and the Company shall have no obligation
to issue a certificate for such shares or release such shares from any escrow provided for herein.

          4.5 Certificate Registration. Except in the event the Exercise Price is paid by means of a
Cashless Exercise, the certificate for the shares as to which the Option is exercised shall be
registered in the name of the Optionee, or, if applicable, in the names of the heirs of the
Optionee.

          4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and
the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all
applicable requirements of federal, state or foreign law with respect to such securities. The
Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other law or regulations
or the requirements of any stock exchange or market system upon which the Stock may then be listed.
In addition, the Option may not be exercised unless (i) a registration statement under the
Securities Act shall at the time of exercise of the Option be in effect with respect to the shares
issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the
shares issuable upon exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED.

-7-

 

Questions concerning this restriction should be directed to the Chief Financial Officer of the
Company. The inability of the Company to obtain from any regulatory body having jurisdiction the
authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and
sale of any shares subject to the Option shall relieve the Company of any liability in respect of
the failure to issue or sell such shares as to which such requisite authority shall not have been
obtained. As a condition to the exercise of the Option, the Company may require the Optionee to
satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any
applicable law or regulation and to make any representation or warranty with respect thereto as may
be requested by the Company.

          4.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise of the Option.

     5. Nontransferability of the Option. The Option may be exercised during the lifetime
of the Optionee only by the Optionee or the Optionee’s guardian or legal representative and may not
be assigned or transferred in any manner except by will or by the laws of descent and distribution.
Following the death of the Optionee, the Option, to the extent provided in Section 7, may be
exercised by the Optionee’s legal representative or by any person empowered to do so under the
deceased Optionee’s will or under the then applicable laws of descent and distribution.

     6. Termination of the Option. The Option shall terminate and may no longer be
exercised on the first to occur of (a) the Option Expiration Date, (b) the last date for exercising
the Option following termination of the Optionee’s Service as described in Section 7, or (c) a
Transfer of Control to the extent provided in Section 8.

     7. Effect of Termination of Service.

          7.1 Option Exercisability.

          (a) Disability. If the Optionee’s Service with the Participating Company Group is terminated
because of the Disability of the Optionee, the Option, to the extent unexercised and exercisable on
the date on which the Optionee’s Service terminated, may be exercised by the Optionee (or the
Optionee’s guardian or legal representative at any time prior to the expiration of six (6) months
after the date on which the Optionee’s Service terminated, but in any event no later than the
Option Expiration Date. (NOTE: If the Option is exercised more than three (3) months after the
date on which the Optionee’s Service as an Employee terminated as a result of a Disability other
than a permanent and total disability as defined in Section 22(e)(3) of the Code, the Option will
be treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent
required by Section 422 of the Code.)

          (b) Death. If the Optionee’s Service with the Participating Company Group is terminated
because of the death of the Optionee, the Option, to the extent unexercised and exercisable on the
date on which the Optionee’s Service terminated, may be exercised by the Optionee’s legal
representative or other person who acquired the right to exercise the Option by reason of the
Optionee’s death at any time prior to the expiration of six (6) months after the date on which the
Optionee’s Service terminated, but in any event no later than the Option Expiration Date.

-8-

 

The Optionee’s Service shall be deemed to have terminated on account of the death if the
Optionee dies within thirty (30) days after the Optionee’s termination of Service.

              (c) Other Termination of Service. If the Optionee’s Service with the Participating Company
Group terminates for any reason, except Disability or death, the Option, to the extent unexercised
and exercisable by the Optionee on the date on which the Optionee’s Service terminated, may be
exercised by the Optionee within thirty (30) days (or such other longer period of time as
determined by the Board, in its sole discretion) after the date on which the Optionee’s Service
terminated, but in any event no later than the Option Expiration Date.

          7.2 Additional Limitations on Option Exercise. Notwithstanding the provisions of Section 7.1,
the Option may not be exercised after the Optionee’s termination of Service to the extent that the
shares to be acquired upon exercise of the Option would be subject to the Unvested Share Repurchase
Option as provided in Section 11.

          7.3 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of
the Option within the applicable time periods set forth in Section 7.1 is prevented by the
provisions of Section 4.6, the Option shall remain exercisable until three (3) months after the
date the Optionee is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date. The Company makes no representation as to the tax
consequences of any such delayed exercise. The Optionee should consult with the Optionee’s own tax
advisor as to the tax consequences to the Optionee of any such delayed exercise.

          7.4 Extension if Optionee Subject to Section 16(b). Notwithstanding the foregoing, if a sale
within the applicable time periods set forth in Section 7.1 of shares acquired upon the exercise of
the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date
on which a sale of such shares by the Optionee would no longer be subject to such suit, (ii) the
one hundred and ninetieth (190th) day after the Optionee’s termination of Service, or (iii) the
Option Expiration Date. The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee’s own tax advisor as to the tax
consequences to the Optionee of any such delayed exercise.

     8. Transfer of Control.

          8.1 Definitions.

          (a) An “Ownership Change Event” shall be deemed to have occurred if any of the following
occurs with respect to the Company:

                    (i) the direct or indirect sale or exchange in a single or series of related transactions by
the shareholders of the Company of more than fifty percent (50%) of the voting stock of the
Company;

                    (ii) a merger or consolidation in which the Company is a party;

-9-

 

               (iii) the sale, exchange, or transfer of all or substantially all of the assets of the
Company; or

               (iv) a liquidation or dissolution of the Company.

                (b) A “Transfer of Control” shall mean an Ownership Change Event or a series of related
Ownership Change Events (collectively, the “Transaction”) wherein the shareholders of the Company
immediately before the Transaction do not retain immediately after the Transaction, in
substantially the same proportions as their ownership of shares of the Company’s voting stock
immediately before the Transaction, direct or indirect beneficial ownership of more than fifty
percent (50%) of the total combined voting power of the outstanding voting stock of the Company or
the corporation or corporations to which the assets of the Company were transferred (the
“Transferee Corporation(s)”), as the case may be. For purposes of the preceding sentence, indirect
beneficial ownership shall include, without limitation, an interest resulting from ownership of the
voting stock of one or more corporations which, as a result of the Transaction, own the Company or
the Transferee Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether multiple sales or
exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and
its determination shall be final, binding and conclusive.

          8.2 Effect of Transfer of Control on Option. In the event of a Transfer of Control, the
surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the
case may be (the “Acquiring Corporation”), may either assume the Company’s rights and obligations
under the Option or substitute for the Option a substantially equivalent option for the Acquiring
Corporation’s stock. For purposes of this Section 8.2, the Option shall be deemed assumed if,
following the Transfer of Control, the Option confers the right to purchase in accordance with its
terms and conditions, for each share of Stock subject to the Option immediately prior to the
Transfer of Control, the consideration (whether stock, cash or other securities or property) to
which a holder of a share of Stock on the effective date of the Transfer of Control was entitled.
The Option shall terminate and cease to be outstanding effective as of the date of the Transfer of
Control to the extent that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the date of the Transfer
of Control. Notwithstanding the foregoing, shares acquired upon exercise of the Option prior to
the Transfer of Control and any consideration received pursuant to the Transfer of Control with
respect to such shares shall continue to be subject to all applicable provisions of this Option
Agreement except as otherwise provided herein. Furthermore, notwithstanding the foregoing, if the
corporation the stock of which is subject to the Option immediately prior to an Ownership Change
Event described in Section 8.1(a)(i) constituting a Transfer of Control is the surviving or
continuing corporation and immediately after such Ownership Change Event less than fifty percent
(50%) of the total combined voting power of its voting stock is held by another corporation or by
other corporations that are members of an affiliated group within the meaning of Section 1504(a) of
the Code without regard to the provisions of Section 1504(b) of the Code, the Option shall not
terminate unless the Board otherwise provides in its sole discretion.

     9. Adjustments for Changes in Capital Structure. In the event of any stock dividend,
stock split, reverse stock split, recapitalization, combination, reclassification, or similar
change in the

-10-

 

capital structure of the Company, appropriate adjustments shall be made in the number,
Exercise Price and class of shares of stock subject to the Option. If a majority of the shares
which are of the same class as the shares that are subject to the Option are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares
of another corporation (the “New Shares”), the Board may unilaterally amend the Option to provide
that the Option is exercisable for New Shares. In the event of any such amendment, the Number of
Option Shares and the Exercise Price shall be adjusted in a fair and equitable manner, as
determined by the Board, in its sole discretion. Notwithstanding the foregoing, any fractional
share resulting from an adjustment pursuant to this Section 9 shall be rounded up or down to the
nearest whole number, as determined by the Board, and in no event may the Exercise Price be
decreased to an amount less than the par value, if any, of the stock subject to the Option. The
adjustments determined by the Board pursuant to this Section 9 shall be final, binding and
conclusive.

     10. Rights as a Shareholder, Employee or Consultant. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until the date of the
issuance of a certificate for the shares for which the Option has been exercised (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized transfer agent of the
Company). No adjustment shall be made for dividends, distributions or other rights for which the
record date is prior to the date such certificate is issued, except as provided in Section 9. If
the Optionee is an Employee, the Optionee understands and acknowledges that, except as otherwise
provided in a separate, written employment agreement between a Participating Company and the
Optionee, the Optionee’s employment is “at will” and is for no specified term. Nothing in this
Option Agreement shall confer upon the Optionee, whether an Employee or Consultant, any right to
continue in the Service of a Participating Company or interfere in any way with any right of the
Participating Company Group to terminate the Optionee’s Service as an Employee or Consultant, as
the case may be, at any time.

     11. Unvested Share Repurchase Option.

          11.1 Grant of Unvested Share Repurchase Option. In the event the Optionee’s Service with the
Participating Company Group is terminated for any reason or no reason, with or without cause, or if
the Optionee, the Optionee’s legal representative, or other holder of shares acquired upon exercise
of the Option attempts to sell, exchange, transfer, pledge, or otherwise dispose of (other than
pursuant to an Ownership Change Event) any shares acquired upon exercise of the Option which exceed
the Vested Shares as defined in Section 11.2 below (the “Unvested Shares”), the Company shall have
the right to repurchase the Unvested Shares under the terms and subject to the conditions set forth
in this Section 11 (the “Unvested Share Repurchase Option”).

          11.2 Vested Shares and Unvested Shares Defined. The “Vested Shares” shall mean, on any given
date, a number of shares of Stock equal to the Number of Option Shares multiplied by the Vested
Ratio determined as of such date and rounded down to the nearest whole share. On such given date,
the “Unvested Shares” shall mean the number of shares of Stock acquired upon exercise of the Option
which exceed the Vested Shares determined as of such date.

          11.3 Exercise of Unvested Share Repurchase Option. The Company may exercise the Unvested
Share Repurchase Option by written notice to the Optionee within sixty (60)

-11-

 

days after (a) termination of the Optionee’s Service (or exercise of the Option, if later) or
(b) the Company has received notice of the attempted disposition of Unvested Shares. If the
Company fails to give notice within such sixty (60) day period, the Unvested Share Repurchase
Option shall terminate unless the Company and the Optionee have extended the time for the exercise
of the Unvested Share Repurchase Option. The Unvested Share Repurchase Option must be exercised,
if at all, for all of the Unvested Shares, except as the Company and the Optionee otherwise agree.

          11.4 Payment for Shares and Return of Shares to Company. The purchase price per share being
repurchased by the Company shall be an amount equal to the Optionee’s original cost per share, as
adjusted pursuant to Section 9 (the “Repurchase Price”). The Company shall pay the aggregate
Repurchase Price to the Optionee in cash within thirty (30) days after the date of the written
notice to the Optionee of the Company’s exercise of the Unvested Share Repurchase Option. For
purposes of the foregoing, cancellation of any indebtedness of the Optionee to any Participating
Company shall be treated as payment to the Optionee in cash to the extent of the unpaid principal
and any accrued interest canceled. The shares being repurchased shall be delivered to the Company
by the Optionee at the same time as the delivery of the Repurchase Price to the Optionee.

          11.5 Assignment of Unvested Share Repurchase Option. The Company shall have the right to
assign the Unvested Share Repurchase Option at any time, whether or not such option is then
exercisable, to one or more persons as may be selected by the Company.

          11.6 Ownership Change Event. Upon the occurrence of an Ownership Change Event, any and all
new, substituted or additional securities or other property to which the Optionee is entitled by
reason of the Optionee’s ownership of Unvested Shares shall be immediately subject to the Unvested
Share Repurchase Option and included in the terms “Stock” and “Unvested Shares” for all purposes of
the Unvested Share Repurchase Option with the same force and effect as the Unvested Shares
immediately prior to the Ownership Change Event. While the aggregate Repurchase Price shall remain
the same after such Ownership Change Event, the Repurchase Price per Unvested Share upon exercise
of the Unvested Share Repurchase Option following such Ownership Change Event shall be adjusted as
appropriate. For purposes of determining the Vested Ratio following an Ownership Change Event,
credited Service shall include all Service with any corporation which is a Participating Company at
the time the Service is rendered, whether or not such corporation is a Participating Company both
before and after the Ownership Change Event.

     12. Escrow.

          12.1 Establishment of Escrow. To ensure that shares subject to the Unvested Share Repurchase
Option will be available for repurchase, the Company may require the Optionee to deposit the
certificate evidencing the shares which the Optionee purchases upon exercise of the Option with an
escrow agent designated by the Company under the terms and conditions of escrow and security
agreements approved by the Company. If the Company does not require such deposit as a condition of
exercise of the Option, the Company reserves the right at any time to require the Optionee to so
deposit the certificate in escrow. Upon the occurrence of an Ownership Change Event or a change,
as described in Section 9, in the character or amount of any of the outstanding stock of the
corporation the stock of which is subject to the provisions of this Option Agreement, any and all
new, substituted or additional securities or other property to which the Optionee is entitled by

-12-

 

reason of the Optionee’s ownership of shares of Stock acquired upon exercise of the Option
that remain, following such Ownership Change Event or change described in Section 9, subject to the
Unvested Share Repurchase Option or any security interest held by the Company shall be immediately
subject to the escrow to the same extent as such shares of Stock immediately before such event.
The Company shall bear the expenses of the escrow.

          12.2 Delivery of Shares to Optionee. As soon as practicable after the expiration of the
Unvested Share Repurchase Option, but not more frequently than twice each calendar year, the escrow
agent shall deliver to the Optionee the shares and any other property no longer subject to such
restrictions.

          12.3 Notices and Payments. In the event the shares and any other property held in escrow are
subject to the Company’s exercise of the Unvested Share Repurchase Option the notices required to
be given to the Optionee shall be given to the escrow agent, and any payment required to be given
to the Optionee shall be given to the escrow agent. Within thirty (30) days after payment by the
Company, the escrow agent shall deliver the shares and any other property which the Company has
purchased to the Company and shall deliver the payment received from the Company to the Optionee.

     13. Stock Distributions Subject to Option Agreement. If, from time to time, there is
any stock dividend, stock split or other change, as described in Section 9, in the character or
amount of any of the outstanding stock of the corporation the stock of which is subject to the
provisions of this Option Agreement, then in such event any and all new, substituted or additional
securities to which the Optionee is entitled by reason of the Optionee’s ownership of the shares
acquired upon exercise of the Option shall be immediately subject to the Unvested Share Repurchase
Option and any security interest held by the Company with the same force and effect as the shares
subject to the Unvested Share Repurchase Option and such security interest immediately before such
event.

     14. Notice of Sales Upon Disqualifying Disposition. The Optionee shall dispose of the
shares acquired pursuant to the Option only in accordance with the provisions of this Option
Agreement. In addition, the Optionee shall promptly notify the Chief Financial Officer of the
Company if the Optionee disposes of any of the shares acquired pursuant to the Option within one
(1) year after the date the Optionee exercises all or part of the Option or within two (2) years
after the Date of Option Grant and shall provide the Company with a description of the terms and
circumstances of such disposition. Until such time as the Optionee disposes of such shares in a
manner consistent with the provisions of this Option Agreement, unless otherwise expressly
authorized by the Company, the Optionee shall hold all shares acquired pursuant to the Option in
the Optionee’s name (and not in the name of any nominee) for the one-year period immediately after
the exercise of the Option and the two-year period immediately after Date of Option Grant. At any
time during the one-year or two-year periods set forth above, the Company may place a legend on any
certificate representing shares acquired pursuant to the Option requesting the transfer agent for
the Company’s stock to notify the Company of any such transfers. The obligation of the Optionee to
notify the Company of any such transfer shall continue notwithstanding that a legend has been
placed on the certificate pursuant to the preceding sentence.

-13-

 

     15. Legends. The Company may at any time place legends referencing the Unvested Share
Repurchase Option and any applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this Option Agreement. The
Optionee shall, at the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the possession of the Optionee
in order to carry out the provisions of this Section. Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to, the following:

          15.1 “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE
SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY,
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.”

          15.2 Any legend required to be placed thereon by the Commissioner of Corporations of the State
of California.

          15.3 “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN UNVESTED SHARE REPURCHASE
OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”

          15.4 “THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE
REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (“ISO”). IN ORDER TO OBTAIN THE PREFERENTIAL TAX
TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO THE TERMINATION OF THE
REPURCHASE RIGHT OF THE COMPANY. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES
PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE
CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE
STOCK OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS
DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.”

     16. Public Offering. The Optionee hereby agrees that in the event of any underwritten
public offering of stock, including an initial public offering of stock, made by the Company
pursuant to an effective registration statement filed under the Securities Act, the Optionee shall
not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any
short sale of, or

-14-

 

otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the
Company for such period of time from and after the effective date of such registration statement as
may be established by the underwriter for such public offering; provided, however, that such period
of time shall not exceed one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing limitation shall not
apply to shares registered in the public offering under the Securities Act. The Optionee shall be
subject to this Section provided and only if the officers and directors of the Company are also
subject to similar arrangements.

     17. Restrictions on Transfer of Shares. No shares acquired upon exercise of the
Option may be sold, exchanged, transferred (including, without limitation, any transfer to a
nominee or agent of the Optionee), assigned, pledged, hypothecated or otherwise disposed of,
including by operation of law, in any manner which violates any of the provisions of this Option
Agreement and, except pursuant to an Ownership Change Event, until the date on which such shares
become Vested Shares, and any such attempted disposition shall be void. The Company shall not be
required (a) to transfer on its books any shares which will have been transferred in violation of
any of the provisions set forth in this Option Agreement or (b) to treat as owner of such shares or
to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares
will have been so transferred.

     18. Binding Effect. Subject to the restrictions on transfer set forth herein, this
Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their
respective heirs, executors, administrators, successors and assigns.

     19. Termination or Amendment. The Board may terminate or amend the Plan or the Option
at any time; provided, however, that except as provided in Section 8.2 in connection with a
Transfer of Control, no such termination or amendment may adversely affect the Option or any
unexercised portion hereof without the consent of the Optionee unless such termination or amendment
is necessary to comply with any applicable law or government regulation or is required to enable
the Option to qualify as an Incentive Stock Option. No amendment or addition to this Option
Agreement shall be effective unless in writing.

     20. Notices. Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given (except to the extent that this Option Agreement provides for
effectiveness only upon actual receipt of such notice) upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail, with postage and fees prepaid,
addressed to the other party at the address shown below that party’s signature or at such other
address as such party may designate in writing from time to time to the other party.

     21. Integrated Agreement. This Option Agreement and the Plan constitute the entire
understanding and agreement of the Optionee and the Participating Company Group with respect to the
subject matter contained herein or therein, and there are no agreements, understandings,
restrictions, representations, or warranties among the Optionee and the Participating Company Group
with respect to such subject matter other than those as set forth or provided for herein or
therein. To the extent contemplated herein or therein, the provisions of this Option Agreement
shall survive any exercise of the Option and shall remain in full force and effect.

-15-

 

     22. Sections 409A and 422 Release and Reimbursement Agreement. Unless expressly
determined otherwise by the Committee or Board, this Option is intended to be compliant with
Sections 409A and 422 of the Code, including, without limitation, the Exercise Price underlying
this Option being set at not less than 100% of the Fair Market Value at the Date of Grant of this
Option. Optionee acknowledges that, if the Exercise Price is less than the Fair Market Value as of
the Date of Grant of this Option, then Optionee may have significant tax liabilities with respect
to this Option. Optionee further acknowledges that, at any time hereafter, it may be determined by
the Committee, a court of law, the Internal Revenue Service or other governmental entity that this
Option is subject to Section 409A of the Code and not subject to Section 422 of the Code,,
including without limitation because the Exercise Price underlying this Option is less than the
Fair Market Value as of the Date of Grant of this Option (a “Determination”). Optionee expressly
agrees, by accepting this Option and in partial consideration for the grant of this Option to
Optionee, as follows:

          22.1 Optionee hereby irrevocably waives and releases any and all claims or causes of action
that Optionee may have against the Participating Company Group, its agents, officers, stockholders,
employees, directors, attorneys, subscribers, subsidiaries, affiliates, successors and assigns, for
any damages, injury or loss arising out of, related to or connected with such a Determination or
otherwise under Sections 409A and 422 of the Code, including without limitation with respect to
taxes, interest and penalties that may be due from Optionee with respect to this Option under
Section 409A of the Code; and

          22.2 Optionee agrees to promptly reimburse the Participating Company Group upon its request,
whether by way of a deduction from wages due (if and to the extent permitted by law) or otherwise,
as determined by the Participating Company Group in its sole discretion, and regardless of whether
or not Optionee is then an employee, for any taxes (together with interest due thereon) paid by the
Participating Company Group on Optionee’s behalf in connection with such a Determination.

     23. Applicable Law. This Option Agreement shall be governed by the laws of the State
of California as such laws are applied to agreements between California residents entered into and
to be performed entirely within the State of California.

	 	 	 	 	 	 	 
	 	 	SHORETEL, INC.,	 	 
	 	 	a California corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	                    , President and

Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 	960 Stewart Drive	 	 
	 	 	Sunnyvale, California 94085	 	 

-16-

 

     The Optionee represents that the Optionee is familiar with the terms and provisions of this
Option Agreement, including the Unvested Share Repurchase Option set forth in Section 11 and hereby
accepts the Option subject to all of the terms and provisions thereof. The Optionee hereby agrees
to accept as binding, conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Option Agreement. The undersigned acknowledges receipt of a copy of
the Plan.

	 	 	 	 	 
	 

	 	OPTIONEE	 	 
	 
	 	 	 	 
	Date: «Date_of_Grant»

	 	 	 	 
	 

	 	 	 	 
	 

	 	«Name»	 	 
	 
	 	 	 	 
	 

	 	Optionee Address:	 	 
	 
	 	 	 	 
	 

	 	«Address»	 	 

-17-

 

1997 STOCK OPTION PLAN

EXERCISE NOTICE

ShoreTel, Inc.

Attention: Stock Option Administration

     1. Exercise of Option. Effective as of today, «Exercise_date», the undersigned
(“Optionee”) hereby elects to exercise Optionee’s option to purchase «Number_of_Shares» shares of
the Common Stock (the “Shares”) of ShoreTel, Inc. (the “Company”) under and pursuant to the 1997
Stock Option Plan, as amended (the “Plan”) and the Immediately Exercisable Incentive Stock Option
Agreement dated «Date_of_Grant» (the “Option Agreement”).

     2. Representations of Optionee. Optionee acknowledges that Optionee has received,
read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their
terms and conditions.

     3. Rights as Shareholder. Until the stock certificate evidencing such Shares is
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
shareholder shall exist with respect to the Shares, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate 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 stock certificate is issued, except as provided in Section 4.2 of the Plan.

          Optionee shall enjoy rights as a shareholder until such time as Optionee disposes of the
Shares or the Company and/or its assignee(s) exercises the Unvested Share Repurchase Option
pursuant to the Option Agreement. Upon such exercise, Optionee shall have no further rights as a
holder of the Shares so purchased except the right to receive payment for the Shares so purchased
in accordance with the provisions of this Agreement, and Optionee shall forthwith cause the
certificate(s) evidencing the Shares so purchased to be surrendered to the Company for transfer or
cancellation.

     4. Tax Consultation. Optionee understands that Optionee may suffer adverse tax
consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents
that Optionee has consulted with any tax consultants Optionee deems advisable in connection with
the purchase or disposition of the Shares and that Optionee is not relying on the Company for any
tax advice.

     5. Restrictive Legends and Stop-Transfer Orders.

          a. Legends. Optionee understands and agrees that the Company shall cause the legends
set forth below or legends substantially equivalent thereto, to be placed upon any

-1-

 

certificate(s) evidencing ownership of the Shares together with any other legends that may be
required by state or federal securities laws or as the Company may otherwise determine:

                    (i) “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE
SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY,
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.”

                    (ii) Any legend required to be placed thereon by the Commissioner of Corporations of the State
of California.

                    (iii) If applicable: “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN UNVESTED
SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT
BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY
OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”

                    (iv) If applicable: “THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION
TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (“ISO”). IN ORDER TO OBTAIN THE PREFERENTIAL TAX
TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO THE TERMINATION OF THE
REPURCHASE RIGHT OF THE COMPANY. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES
PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE
CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE
STOCK OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS
DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.”

          b. Stop-Transfer Notices. Optionee 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.

          c. 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

-2-

 

this 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 shall have been so transferred.

     6. Successors and Assigns. The Company may assign any of its rights under this
Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the
successors and assigns of the Company. Subject to the restrictions on transfer herein set forth,
this Agreement shall be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.

     7. Interpretation. Any dispute regarding the interpretation of this Agreement shall
be submitted by Optionee or by the Company forthwith to the Company’s Board of Directors or the
committee thereof that administers the Plan, which shall review such dispute at its next regular
meeting. The resolution of such a dispute by the Board or committee shall be final and binding on
the Company and on Optionee.

     8. Governing Law; Severability. This Agreement shall be governed by and construed in
accordance with the laws of the State of California excluding that body of law pertaining to
conflicts of law. Should any provision of this Agreement be determined by a court of law to be
illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain
enforceable.

     9. Notices. Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery or upon deposit in the United States mail
by certified mail, with postage and fees prepaid, addressed to the other party at its address as
shown below beneath its signature, or to such other address as such party may designate in writing
from time to time to the other party.

     10. Further Instruments. The parties agree to execute such further instruments and to
take such further action as may be reasonably necessary to carry out the purposes and intent of
this Agreement.

     11. Delivery of Payment. Optionee herewith delivers to the Company the full Exercise
Price for the Shares.

     12. Entire Agreement. The Plan and Notice of Grant/Option Agreement are incorporated
herein by reference. This Agreement, the Plan, the Option Agreement (including without limitation
the Unvested Share Repurchase Option of Sec. 11 thereof), and the Investment Representation
Statement constitute the entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the subject matter hereof.

	 	 	 	 	 	 	 	 	 
	Submitted by:	 	 	 	Accepted by:	 	 
	 
	 	 	 	 	 	 	 	 
	OPTIONEE:	 	 	 	SHORETEL, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	«Name»

	 	 	 	 	 	                    , President and	 	 
	Address: «Address»

	 	 	 	 	 	Chief Executive Officer	 	 

-3-

 

INVESTMENT REPRESENTATION STATEMENT

	 	 	 	 	 	 	 
	OPTIONEE

	 	:
	 	«Name»
	 	 
	 
	 	 	 	 	 	 
	COMPANY

	 	:
	 	SHORETEL, INC.	 	 
	 
	 	 	 	 	 	 
	SECURITY

	 	:
	 	COMMON STOCK	 	 
	 
	 	 	 	 	 	 
	AMOUNT

	 	:
	 	$«Total_price»

«number_of_shares» Shares	 	 
	 
	 	 	 	 	 	 
	DATE

	 	:
	 	«Exercise_date»	 	 

In connection with the purchase of the above-listed Securities, the undersigned Optionee represents
to the Company the following:

          (a) Optionee is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision
to acquire the Securities. Optionee is acquiring these Securities for investment for Optionee’s
own account only and not with a view to, or for resale in connection with, any “distribution”
thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

          (b) Optionee acknowledges and understands that the Securities constitute “restricted
securities” under the Securities Act and have not been registered under the Securities Act in
reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Optionee’s investment intent as expressed herein. In this connection, Optionee
understands that, in the view of the Securities and Exchange Commission, the statutory basis for
such exemption may be unavailable if Optionee’s representation was predicated solely upon a present
intention to hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the market price of the
Securities, or for a period of one year or any other fixed period in the future. Optionee further
understands that the Securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register the Securities.
Optionee understands that the certificate evidencing the Securities will be imprinted with a legend
which prohibits the transfer of the Securities unless they are registered or such registration is
not required in the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of Corporations of the State of California and any
other legend required under applicable state securities laws.

          (c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under
the Securities Act, which, in substance, permit limited public resale of “restricted securities”
acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to

-1-

 

the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under
Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from
registration under the Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days
thereafter (or such longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited
“broker’s transaction” or in transactions directly with a market maker (as said term is defined
under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability
of certain public information about the Company, (3) the amount of Securities being sold during any
three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.

          (d) In the event that the Company does not qualify under Rule 701 at the time of grant of the
Option, then the Securities may be resold in certain limited circumstances subject to the
provisions of Rule 144, which requires the resale to occur not less than two years after the later
of the date the Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than
three years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the
paragraph immediately above.

          (e) Optionee further understands that in the event all of the applicable requirements of Rule
701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A,
or some other registration exemption will be required; and that, notwithstanding the fact that
Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden
of proof in establishing that an exemption from registration is available for such offers or sales,
and that such persons and their respective brokers who participate in such transactions do so at
their own risk. Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.

          (f) Optionee understands that the certificate evidencing the Securities will be imprinted with
a legend which prohibits the transfer of the Securities without the consent of the Commissioner of
Corporations of California. Optionee has read the applicable Commissioner’s Rules with respect to
such restriction, a copy of which is attached.

	 	 	 
	 

	 	Signature of Optionee:
	 
	 	 
	 
	 	 
	 

	 	 
	 

	 	«Name»
	Date: «Exercise_date»
	 	 

-2-

 

ASSIGNMENT SEPARATE FROM CERTIFICATE

     FOR VALUE RECEIVED I,                     , hereby sell, assign and transfer unto
                     (                    ) shares of the Common Stock of
ShoreTel, Inc. standing in my name of the books of said corporation represented by Certificate No.
                     herewith and do hereby irrevocably constitute and appoint                      to transfer
the said stock on the books of the within named corporation with full power of substitution in the
premises.

     This Stock Assignment may be used only in accordance with the Joint Escrow Instructions
between
                    
and the undersigned dated                     ,                     .

Dated:
                    ,                     

Signature:                                        

INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this
assignment is to enable the Company to exercise its “repurchase option,” as set forth in the
Agreement, without requiring additional signatures on the part of the Purchaser.

-3-

 

JOINT ESCROW INSTRUCTIONS

«Exercise_date»

ShoreTel, Inc.

Corporate Secretary

960 Stewart Drive

Sunnyvale, California 94085

Dear Corporate Secretary:

     As Escrow Agent for both ShoreTel, Inc. (the “Company”), and the undersigned purchaser of
stock of the Company (the “Purchaser”), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Immediately Exercisable Incentive
Stock Option Agreement (“Agreement”) between the Company and the undersigned, in accordance with
the following instructions:

     1. In the event the Company and/or any assignee of the Company (referred to collectively for
convenience herein as the “Company”) exercises the Company’s repurchase option set forth in Section
11 of the Agreement, the Company shall give to Purchaser and you a written notice specifying the
number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder
at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and
direct you to close the transaction contemplated by such notice in accordance with the terms of
said notice.

     2. At the closing, you are directed (a) to date the stock assignments necessary for the
transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver
same, together with the certificate evidencing the shares of stock to be transferred, to the
Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a
check, or some combination thereof) for the number of shares of stock being purchased pursuant to
the exercise of the Company’s repurchase option.

     3. Purchaser irrevocably authorizes the Company to deposit with you any certificates
evidencing shares of stock to be held by you hereunder and any additions and substitutions to said
shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you
as Purchaser’s attorney-in-fact and agent for the term of this escrow to execute with respect to
such securities all documents necessary or appropriate to make such securities negotiable and to
complete any transaction herein contemplated, including but not limited to the filing with any
applicable state blue sky authority of any required applications for consent to, or notice of
transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the stock is held by you.

     4. If the Company has not otherwise directed you to hold all certificates, then: (A) upon
written request of the Purchaser, but no more than once per calendar year, unless the Company’s
repurchase option has been exercised, you will deliver to Purchaser a certificate or certificates

-1-

 

representing so many shares of stock as are not then subject to the Company’s repurchase
option; and (B) within 120 days after cessation of Purchaser’s continuous employment by or services
to the Company, or any parent or subsidiary of the Company, you will deliver to Purchaser a
certificate or certificates representing the aggregate number of shares held or issued pursuant to
the Agreement and not purchased by the Company or its assignees pursuant to exercise of the
Company’s repurchase option.

     5. If at the time of termination of this escrow you should have in your possession any
documents, securities, or other property belonging to Purchaser, you shall deliver all of the same
to Purchaser and shall be discharged of all further obligations hereunder.

     6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed
by all of the parties hereto.

     7. You shall be obligated only for the performance of such duties as are specifically set
forth herein and may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed by you to be genuine and to have been signed or presented by the
proper party or parties. You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any
act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.

     8. You are hereby expressly authorized to disregard any and all warnings given by any of the
parties hereto or by any other person or corporation, excepting only orders or process of courts of
law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree, you shall not be liable
to any of the parties hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

     9. You shall not be liable in any respect on account of the identity, authorities or rights of
the parties executing or delivering or purporting to execute or deliver the Agreement or any
documents or papers deposited or called for hereunder.

     10. You shall not be liable for the outlawing of any rights under the Statute of Limitations
with respect to these Joint Escrow Instructions or any documents deposited with you.

     11. You shall be entitled to employ such legal counsel and other experts as you may deem
necessary properly to advise you in connection with your obligations hereunder, may rely upon the
advice of such counsel, and may pay such counsel reasonable compensation therefor.

     12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be
an officer or agent of the Company or if you shall resign by written notice to each party. In the
event of any such termination, the Company shall appoint a successor Escrow Agent.

-2-

 

     13. If you reasonably require other or further instruments in connection with these Joint
Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in
furnishing such instruments.

     14. It is understood and agreed that should any dispute arise with respect to the delivery
and/or ownership or right of possession of the securities held by you hereunder, you are authorized
and directed to retain in your possession without liability to anyone all or any part of said
securities until such disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of competent jurisdiction
after the time for appeal has expired and no appeal has been perfected, but you shall be under no
duty whatsoever to institute or defend any such proceedings.

     15. Any notice required or permitted hereunder shall be given in writing and shall be deemed
effectively given upon personal delivery or upon deposit in the United States Post Office, by
registered or certified mail with postage and fees prepaid, addressed to each of the other parties
thereunto entitled at the following addresses or at such other addresses as a party may designate
by ten days’ advance written notice to each of the other parties hereto.

	 	 	 
	COMPANY:

	 	ShoreTel, Inc.
	 

	 	960 Stewart Drive
	 

	 	Sunnyvale, CA 94085
	 
	 	 
	PURCHASER:

	 	«Name»
	 

	 	«Address»
	 
	 	 
	ESCROW AGENT:

	 	ShoreTel, Inc.
	 

	 	Corporate Secretary
	 

	 	960 Stewart Drive
	 

	 	Sunnyvale, California 94085

     16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose
of said Joint Escrow Instructions; you do not become a party to the Agreement.

     17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and
their respective successors and permitted assigns.

-3-

 

     18. These Joint Escrow Instructions shall be governed by, and construed and enforced in
accordance with, the laws of the State of California.

	 	 	 	 	 	 	 
	 	 	ShoreTel, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

                    , President and

Chief Executive Officer
	 	 
	 
	 	 	 	 	 	 
	 	 	Purchaser:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	«Name»	 	 
	 
	 	 	 	 	 	 
	 	 	Escrow Agent:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	(Signature)	 	 

-4-

 

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code
of 1986, as amended, to include in taxpayer’s gross income for the current taxable year the amount
of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property
described below:

	1.	 	The name, address, taxpayer identification number and taxable year of the undersigned are as
follows:

	 	 	 	 	 
	 	 	TAXPAYER:	 	SPOUSE:
	NAME:

	 	«Name»	 	 
	ADDRESS:

	 	«Address»	 	 
	IDENTIFICATION NO.:
	 	 	 	 
	TAXABLE YEAR:
	 	 	 	 

	2.	 	The property with respect to which the election is made is described as follows:
«number_of_shares» shares (the “Shares”) of the Common Stock of ShoreTel, Inc. (the
“Company”).
	 
	3.	 	The date on which the property was transferred is: «Exercise_date»
	 
	4.	 	The property is subject to the following restrictions:
	 
	 	 	The Shares may not be transferred and are subject to forfeiture under the terms of an
agreement between the taxpayer and the Company. These restrictions lapse upon the
satisfaction of certain conditions contained in such agreement.
	 
	5.	 	The fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its
terms will never lapse, of such property is:            $«Total_price»
	 
	6.	 	The amount (if any) paid for such property is:                 $«Total_price»

The undersigned has submitted a copy of this statement to the person for whom the services were
performed in connection with the undersigned’s receipt of the above-described property. The
transferee of such property is the person performing the services in connection with the transfer
of said property.

The undersigned understands that the foregoing election may not be revoked except with the
consent of the Commissioner.

	 	 	 	 	 
	Dated:                    ,                     

	 	 

«Name»
	 	 

The undersigned spouse of taxpayer joins in this election.

	 	 	 	 	 
	Dated:                    ,                     

	 	 

Spouse of Taxpayer Signature
	 	 

-5-

 

SHORETEL, INC.

1997 STOCK OPTION PLAN

STOCK OPTION AGREEMENT

     Unless otherwise defined herein, the terms defined in the Plan shall have the same defined
meanings in this Option Agreement.

I. NOTICE OF STOCK OPTION GRANT

     «Name»

     «Address»

     The undersigned Optionee has been granted an Option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as follows:

	 	 	 	 	 
	Date of Grant:

	 	 	 	«Date_of_Grant»
	 
	 	 	 	 
	Vesting Commencement Date:

	 	 	 	«Commencement_Date»
	 
	 	 	 	 
	Exercise Price per Share:

	 	 	 	$«price_per_share»
	 
	 	 	 	 
	Total Number of Shares Granted:

	 	 	 	«number_of_shares»
	 
	 	 	 	 
	Total Exercise Price:

	 	 	 	$«total_price»
	 
	 	 	 	 
	Type of Option:

	 	þ
	 	Incentive Stock Option
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	o	 	Nonstatutory Stock Option
	 

	 	 	 	 
	 
	 	 	 	 
	Term/Expiration Date:

	 	 	 	«Expiration_Date»

Vesting Schedule:

     This Option shall be exercisable, in whole or in part, according to the following vesting
schedule:

     25% of the Stock subject to the Option shall vest twelve months after the Vesting Commencement
Date, and 1/48 of the Stock subject to the Option shall vest each month thereafter, subject to
Optionee’s continuing to be an Employee, Director or Consultant (a “Service Provider”) on such
dates.

 

 

     Termination Period:

     This Option shall be exercisable for three months after Optionee ceases to be a Service
Provider. Upon Optionee’s death or Disability (defined in Paragraph 2(d) below), this Option may
be exercised for one year after Optionee ceases to be a Service Provider. In no event may Optionee
exercise this Option after the Term/Expiration Date as provided above.

II. AGREEMENT

     1. Grant of Option. The Board hereby grants to the Optionee named in the Notice of
Stock Option Grant (the “Optionee”), an option (the “Option”) to purchase the number of shares of
Stock set forth in the Notice of Stock Option Grant, at the exercise price per share of Stock set
forth in the Notice of Stock Option Grant (the “Exercise Price”), and subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to Section 13 of the
Plan, in the event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.

     If designated in the Notice of Stock Option Grant as an Incentive Stock Option (“ISO”), this
Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code.
Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option
shall be treated as a Nonstatutory Stock Option (“NSO”).

     2. Exercise of Option.

          (a) Right to Exercise. This Option shall be exercisable during its term in accordance
with the Vesting Schedule set out in the Notice of Stock Option Grant and with the applicable
provisions of the Plan and this Option Agreement. Except in the case of Options granted to (i) a
person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and
the rules and requirements promulgated thereunder (an “Officer”), (ii) Directors and (iii)
Consultants, Options shall become exercisable at a rate of no less than 20% per year over five (5)
years from the date the Options are granted. Unless the Board provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence. An Option may not be
exercised for a fraction of a share of Stock.

          (b) Method of Exercise. This Option shall be exercisable by delivery of an exercise
notice in the form attached as Exhibit A (the “Exercise Notice”) which shall state the election to
exercise the Option, the number of shares of Stock with respect to which the Option is being
exercised, and such other representations and agreements as may be required by the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised
Stock. An Option shall be deemed exercised when the Company receives: (i) written or electronic
notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise
the Option, and (ii) full payment for the shares of Stock with respect to which the Option is
exercised. Stock issued upon exercise of an Option shall be issued in the name of the Optionee or,
if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Stock
is issued (as evidenced by the appropriate entry on the books of the Company or of a dully
authorized transfer agent of the Company), no right to vote or receive dividends or any other
rights as a

 -2- 

 

shareholder shall exist with respect to the Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Stock 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 Stock is issued, except as provided in the Plan.

     No Stock shall be issued pursuant to the exercise of an Option unless such issuance and such
exercise complies with U.S. state corporate laws, U.S. federal and state securities laws, the Code,
any stock exchange or quotation system on which the Common Stock is listed or quoted and the
applicable laws of any other country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan (“Applicable Law”). Assuming such compliance, for income tax purposes the
Stock shall be considered transferred to the Optionee on the date on which the Option is exercised
with respect to such Stock.

          (c) Termination of Relationship as a Service Provider. If an Optionee ceases to be a
Service Provider, such Optionee may exercise his or her Option within such period of time as is
specified in Section I of this Option Agreement to the extent that the Option is vested on the date
of termination (but in no event later than the expiration of the term of the Option as set forth in
the Option Agreement). In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for three (3) months following the Optionee’s termination. If, on the
date of termination, the Optionee is not vested as to his or her entire Option, the Stock covered
by the unvested portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the Board, the Option
shall terminate, and the Stock covered by such Option shall revert to the Plan.

          (d) Disability of Optionee. If an Optionee ceases to be a Service Provider as a
result of the Optionee’s total and permanent disability as defined in Section 22(e)(3) of the Code
(“Disability”), the Optionee may exercise his or her Option within such period of time as is
specified in Section I of the Option Agreement (of at least six (6) months) to the extent the
Option is vested on the date of termination (but in no event later than the expiration of the term
of such Option as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for twelve (12) months following the
Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or
her entire Option, the Stock covered by the unvested portion of the Option shall revert to the
Plan. If, after termination, the Optionee does not exercise his or her Option within the time
specified herein, the Stock Option shall terminate, and the Stock covered by such Option shall
revert to the Plan.

          (e) Death of Optionee. If an Optionee dies while a Service Provider, the Option may
be exercised within such period of time as is specified in Section I of this Option Agreement to
the extent that the Option is vested on the date of death (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement) by the Optionee’s
estate or by a person who acquires the right to exercise the Option by bequest or inheritance. In
the absence of a specified time in the Option Agreement, the Option shall remain exercisable for
twelve (12) months following the Optionee’s termination. If, at the time of death, the Optionee is
not vested as to the entire Option, the Stock covered by the unvested portion of the Option shall
immediately revert to the Plan. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Stock covered by such Option shall revert to the Plan.

 -3- 

 

          (f) Buy out Provisions. The Board may at any time offer to buy out for a payment in
cash or Stock, an Option previously granted, based on such terms and conditions as the Board shall
establish and communicate to the Optionee at the time that such offer is made.

     3. Optionee’s Representations. In the event the Stock has not been registered under
the Securities Act of 1933, as amended (the “Securities Act”), at the time this Option is
exercised, the Optionee shall, if required by the Company, concurrently with the exercise of all or
any portion of this Option, deliver to the Company his or her Investment Representation Statement
in the form attached hereto as Exhibit B and shall read the applicable rules of the Commissioner of
Corporations attached to such Investment Representation Statement.

     4. Lock-Up Period. Optionee hereby agrees that, if so requested by the Company or any
representative of the underwriters (the “Managing Underwriter”) in connection with any registration
of the offering of any securities of the Company under the Securities Act, Optionee shall not sell
or otherwise transfer any Stock or other securities of the Company during the 180-day period (or
such other period as may be requested in writing by the Managing Underwriter and agreed to in
writing by the Company) (the “Market Standoff Period”) following the effective date of a
registration statement of the Company filed under the Securities Act. Such restriction shall apply
only to the first registration statement of the Company to become effective under the Securities
Act that includes securities to be sold on behalf of the Company to the public in an underwritten
public offering under the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of such Market Standoff
Period.

     5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:

          (a) cash or check;

          (b) consideration received by the Company under a formal cashless exercise program adopted by
the Company in connection with the Plan; or

          (c) surrender of other Stock which, (i) in the case of Stock acquired upon exercise of an
option, have been owned by the Optionee for more than six (6) months on the date of surrender, and
(ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the
exercised Stock.

     6. Restrictions on Exercise. This Option may not be exercised until such time as the
Plan has been approved by the shareholders of the Company, or if the issuance of such Stock upon
such exercise or the method of payment of consideration for such shares would constitute a
violation of any requirements relating to the administration of stock option plans under Applicable
Law.

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

 -4- 

 

     8. Term of Option. This Option may be exercised only within the term set out in the
Notice of Stock Option Grant, and may be exercised during such term only in accordance with the
Plan and the terms of this Option.

     9. Tax Consequences. Set forth below is a brief summary as of the date of this Option
of some of the federal tax consequences of exercise of this Option and disposition of the Stock.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE STOCK.

          (a) Exercise of ISO. If this Option qualifies as an ISO, there will be no regular
federal income tax liability upon the exercise of the Option, although the excess, if any, of the
Fair Market Value of the Stock on the date of exercise over the Exercise Price will be treated as
an adjustment to the alternative minimum tax for federal tax purposes and may subject the Optionee
to the alternative minimum tax in the year of exercise.

          (b) Exercise of NSO. There may be a regular federal income tax liability upon the
exercise of an NSO. The Optionee will be treated as having received compensation income (taxable
at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Stock on
the date of exercise over the Exercise Price. If Optionee is an Employee or a former Employee, the
Company will be required to withhold from Optionee’s compensation or collect from Optionee and pay
to the applicable taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Stock if
such withholding amounts are not delivered at the time of exercise.

          (c) Disposition of Stock. In the case of an NSO, if Stock is held for at least one
year, any gain realized on disposition of the Stock will be treated as long-term capital gain for
federal income tax purposes. In the case of an ISO, if Stock transferred pursuant to the Option is
held for at least one year after exercise and of at least two years after the Date of Grant, any
gain realized on disposition of the Stock will also be treated as long-term capital gain for
federal income tax purposes. If Stock purchased under an ISO is disposed of within one year after
exercise or two years after the Date of Grant, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the Stock on the date of
exercise, or (2) the sale price of the Stock. Any additional gain will be taxed as capital gain,
short-term or long-term depending on the period that the ISO Stock was held.

          (d) Notice of Disqualifying Disposition of ISO Stock. If the Option granted to
Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Stock acquired
pursuant to the ISO on or before the later of (1) the date two years after the Date of Grant, or
(2) the date one year after the date of exercise, the Optionee shall immediately notify the Company
in writing of such disposition. Optionee agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income recognized by the Optionee.

     10. Entire Agreement; Governing Law. The Plan is incorporated herein by reference.
Capitalized terms not otherwise defined herein shall have the same meaning as used in the Plan.
The

 -5- 

 

Plan and this Option Agreement (including all exhibits attached hereto) constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede in their entirety
all prior undertakings and agreements of the Company and Optionee with respect to the subject
matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a
writing signed by the Company and Optionee. This agreement is governed by the internal substantive
laws but not the choice of law rules of California.

     11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
VESTING OF STOCK PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION
OR ACQUIRING STOCK HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN
EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE
COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.

     12. Sections 409A and 422 Release and Reimbursement Agreement. Unless expressly
determined otherwise by the Committee or Board, this Option is intended to be compliant with
Sections 409A and 422 of the Code, including, without limitation, the Exercise Price per Share
underlying this Option being set at not less than 100% of the Fair Market Value of such Share at
the Date of Grant of this Option. Optionee acknowledges that, if the Exercise Price per Share is
less than the Fair Market Value of such Share as of the Date of Grant of this Option, then Optionee
may have significant tax liabilities with respect to this Option. Optionee further acknowledges
that, at any time hereafter, it may be determined by the Committee, a court of law, the Internal
Revenue Service or other governmental entity that this Option is subject to Section 409A of the
Code, and not subject to Section 422 of the Code, including without limitation because the Exercise
Price per Share underlying this Option is less than the Fair Market Value of such Share as of the
Date of Grant of this Option (a “Determination”). Optionee expressly agrees, by accepting this
Option and in partial consideration for the grant of this Option to Optionee, as follows:

          (a) Optionee hereby irrevocably waives and releases any and all claims or causes of action
that Optionee may have against the Participating Company Group, its agents, officers, stockholders,
employees, directors, attorneys, subscribers, subsidiaries, affiliates, successors and assigns, for
any damages, injury or loss arising out of, related to or connected with such a Determination or
otherwise under Sections 409A and 422 of the Code, including without limitation with respect to
taxes, interest and penalties that may be due from Optionee with respect to this Option under
Section 409A of the Code; and

          (b) Optionee agrees to promptly reimburse the Participating Company Group upon its request,
whether by way of a deduction from wages due (if and to the extent permitted by law) or otherwise,
as determined by the Participating Company Group in its sole discretion, and regardless of whether
or not Optionee is then an employee, for any taxes (together with interest due

 -6- 

 

thereon) paid by the Participating Company Group on Optionee’s behalf in connection with such
a Determination.

     Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar
with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had
an opportunity to obtain the advice of counsel prior to executing this Option and fully understands
all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Board upon any questions arising under the Plan or this
Option. Optionee further agrees to notify the Company upon any change in the residence address
indicated below.

	 	 	 	 	 	 	 	 	 	 	 
	OPTIONEE:	 	 	 	SHORETEL, INC.	 	 	 	 
	 
	 

	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	«Name»
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	President and Chief Executive Officer	 	 
	«Address»
	 	 	 	 	 	 	 	 	 	 

 -7- 

 

SHORETEL, INC.

1997 STOCK OPTION PLAN

IMMEDIATELY EXERCISABLE

INCENTIVE STOCK OPTION AGREEMENT

(Form A — Executives Only, Fully Exercisable)

 

 

THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN

QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF

CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR

RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH

QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM

QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA

CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE

EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS

THE SALE IS SO EXEMPT.

THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.

SHORETEL, INC.

IMMEDIATELY EXERCISABLE

INCENTIVE STOCK OPTION AGREEMENT

(including Notice of Stock Option Grant)

     THIS IMMEDIATELY EXERCISABLE INCENTIVE STOCK OPTION AGREEMENT (the “Option Agreement”) is made and entered into as of «Date_of_Grant», by and between
ShoreTel, Inc., a California corporation, and «Name» (the “Optionee”).

     The Company has granted to the Optionee pursuant to the ShoreTel, Inc. 1997 Stock Option Plan
(the “Plan”) an option to purchase certain shares of the common stock of the Company (the “Stock”),
upon the terms and conditions set forth in this Option Agreement (the “Option”). The Option shall
in all respects be subject to the terms and conditions of the Plan, the provisions of which are
incorporated herein by reference.

     1. Definitions and Construction.

          1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings
assigned to such terms in the Plan. Whenever used herein, the following terms shall have their
respective meanings set forth below:

               (a)
“Date of Option Grant” means «Date_of_Grant».

               (b)
“Number of Option Shares” means «Number_of_Shares» shares of Stock, as adjusted from time to time pursuant to Section 9.

 -2- 

 

               (c) “Exercise Price” means $«price_per_share» per share of Stock, as adjusted from time to time pursuant to Section 9.

               (d) “Initial Exercise Date” means the Date of Option Grant.

               (e) “Initial Vesting Date” means the date occurring Twelve (12) months after (check one):

                         ___      the Date of Option Grant.

                         ___     «Commencement_Date»

               (f) “Vested Ratio” means, on any relevant date, the ratio determined as follows:

	 	 	 	 	 
	 	 	Vested Ratio
	 
	 	 	 	 
	Prior to Initial Vesting Date

	 	 	0	 
	 
	 	 	 	 
	On Initial Vesting Date, provided the Optionee’s Service has
not terminated prior to such date

	 	 	1/4	 

	 	 	 
	Plus	 	 
	 
	 	 
	For each full month of the Optionee’s continuous Service from
the Initial Vesting Date until the Vested Ratio equals 1/1,
an additional

	 	1/48

               (g) “Option Expiration Date” means the date ten (10) years after the Date of Option Grant.

               (h) “Company” means ShoreTel, Inc., a California corporation, or any successor corporation
thereto.

               (i) “Disability” means the inability of the Optionee, in the opinion of a qualified physician
acceptable to the Company, to perform the major duties of the Optionee’s position with the
Participating Company Group because of the sickness or injury of the Optionee.

               (j) “Securities Act” means the Securities Act of 1933, as amended.

               (k) “Service” means the Optionee’s employment or service with the Participating Company Group,
whether in the capacity of an Employee, a Director or a Consultant. The Optionee’s Service shall
not be deemed to have terminated merely because of the change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption or termination of
the Optionee’s Service. Furthermore, the Optionee’s Service with the Participating Company Group
shall not be deemed to have terminated if the Optionee takes any

 -3- 

 

military leave, sick leave, or
other bona fide leave of absence approved by the Company; provided, however, that if any such leave
exceeds ninety (90) days, on the ninety-first (91st) day of such leave the Optionee’s Service shall
be deemed to have terminated unless the Optionee’s right to return to Service with the
Participating Company Group is guaranteed by statute or contract. Notwithstanding the foregoing,
unless otherwise designated by the Company or required by law, a leave of absence shall not be
treated as Service for purposes of determining Optionee’s Vested Ratio. The Optionee’s Service
shall be deemed to have terminated either upon an actual termination of Service or upon the
corporation for which the Optionee performs Service ceasing to be a Participating Company. Subject
to the foregoing, the Company, in its sole discretion, shall determine whether the Optionee’s
Service has terminated and the effective date of such termination.

          1.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of this Option Agreement. Except when
otherwise indicated by the context, the singular shall include the plural and the plural shall
include the singular. Use of the term “or” is not intended to be exclusive, unless the context
clearly requires otherwise.

     2. Tax Consequences.

          2.1 Tax Status of Option. This Option is intended to be an Incentive Stock Option within the
meaning of Section 422(b) of the Code and is not intended to be subject to Section 409A of the
Code, but the Company does not represent or warrant that this Option qualifies as an Incentive
Stock Option, nor does the Company represent or warrant that this Option is not subject to Section
409A of the Code. The Optionee should consult with the Optionee’s own tax advisor regarding the
tax effects of this Option and the requirements necessary to obtain favorable income tax treatment
under Sections 409A and 422 of the Code, including, but not limited to, the Exercise Price and
holding period requirements. (NOTE: If the aggregate Exercise Price of the Option (that is, the
Exercise Price multiplied by the Number of Option Shares) plus the aggregate exercise price of
other Incentive Stock Options held by the Optionee (whether granted pursuant to the Plan or any
other stock option plan of the Participating Company Group) is greater than One Hundred Thousand
Dollars ($100,000), the Optionee should contact the Chief Financial Officer of the Company to
ascertain whether the entire Option qualifies as an Incentive Stock Option).

          2.2 Election Under Section 83(b) of the Code. If the Optionee exercises this Option to
purchase shares of Stock that are both nontransferable and subject to a substantial risk of
forfeiture, the Optionee understands that the Optionee should consult with the Optionee’s tax
advisor regarding the advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days after the date on
which the Optionee exercises the Option. Shares acquired upon exercise of the Option are
nontransferable and subject to a substantial risk of forfeiture if, for example, (a) they are
unvested and are subject to a right of the Company to repurchase such shares at the Optionee’s
original purchase price if the Optionee’s Service terminates, (b) the Optionee is an Insider and
exercises the Option within six (6) months of the Date of Option Grant (if a class of equity
security of the Company is registered under Section 12 of the Exchange Act), or (c) the Optionee is
subject to a restriction on transfer to comply with “Pooling-of-Interests Accounting” rules.
Failure to file an election under Section 83(b), if appropriate, may result in adverse tax
consequences to the Optionee. The Optionee acknowledges

 -4- 

 

that the Optionee has been advised to
consult with a tax advisor prior to the exercise of the Option regarding the tax consequences to
the Optionee of the exercise of the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN
30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE PURCHASES SHARES THAT ARE SUBJECT TO A SUBSTANTIAL
RISK OF FORFEITURE OR NONTRANSFERABLE. THIS TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE
ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE OPTIONEE’S SOLE RESPONSIBILITY,
EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER
BEHALF.

     3. Administration. All questions of interpretation concerning this Option Agreement
shall be determined by the Board. All determinations by the Board shall be final and binding upon
all persons having an interest in the Option. Any officer of a Participating Company shall have
the authority to act on behalf of the Company with respect to any matter, right, obligation, or
election which is the responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation, or election.

     4. Exercise of the Option.

          4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be exercisable
on and after the Initial Exercise Date and prior to the termination of the Option (as provided in
Section 6) in an amount not to exceed the Number of Option Shares less the number of shares
previously acquired upon exercise of the Option, subject to the Optionee’s agreement that any
shares purchased upon exercise are subject to the Company’s repurchase rights set forth in Section
11.

          4.2 Method of Exercise. Exercise of the Option shall be by written notice to the Company
which must state the election to exercise the Option, the number of whole shares of Stock for which
the Option is being exercised and such other representations and agreements as to the Optionee’s
investment intent with respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be delivered in
person, by certified or registered mail, return receipt requested, by confirmed facsimile
transmission, or by such other means as the Company may permit, to the Chief Financial Officer of
the Company, or other authorized representative of the Participating Company Group, prior to the
termination of the Option as set forth in Section 6, accompanied by (i) full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased and (ii) an executed
copy, if required, herein, of the then current forms of escrow and security agreement referenced
below. The Option shall be deemed to be exercised upon receipt by the Company of such written
notice, the aggregate Exercise Price, and, if required by the Company, such executed agreements.

          4.3 Payment of Exercise Price.

               (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
aggregate Exercise Price of the number of shares of Stock for which the Option is being exercised
shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company of whole
shares of Stock owned by the Optionee having a Fair Market Value (as

 -5- 

 

determined by the Company
without regard to any restrictions on transferability applicable to such stock by reason of federal
or state securities laws or agreements with an underwriter for the Company) not less than the
aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined in Section 4.3(c), or
(iv) by any combination of the foregoing.

               (b) Tender of Stock. Notwithstanding the foregoing, the Option may not be exercised by tender
to the Company of shares of Stock to the extent such tender of Stock would constitute a violation
of the provisions of any law, regulation or agreement restricting the redemption of the Company’s
stock. The Option may not be exercised by tender to the Company of shares of Stock unless such
shares either have been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.

               (c) Cashless Exercise. A “Cashless Exercise” means the assignment in a form acceptable to the
Company of the proceeds of a sale or loan with respect to some or all of the shares of Stock
acquired upon the exercise of the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the provisions of Regulation T
as promulgated from time to time by the Board of Governors of the Federal Reserve System). The
Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion,
to decline to approve or terminate any such program or procedure.

          4.4 Tax Withholding. At the time the Option is exercised, in whole or in part, or at any time
thereafter as requested by the Company, the Optionee hereby authorizes withholding from payroll and
any other amounts payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding obligations of the
Participating Company Group, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the Option, (iii) the
operation of any law or regulation providing for the imputation of interest, or (iv) the lapsing of
any restriction with respect to any shares acquired upon exercise of the Option. The Optionee is
cautioned that the Option is not exercisable unless the tax withholding obligations of the
Participating Company Group are satisfied. Accordingly, the Optionee may not be able to exercise
the Option when desired even though the Option is vested, and the Company shall have no obligation
to issue a certificate for such shares or release such shares from any escrow provided for herein.

          4.5 Certificate Registration. Except in the event the Exercise Price is paid by means of a
Cashless Exercise, the certificate for the shares as to which the Option is exercised shall be
registered in the name of the Optionee, or, if applicable, in the names of the heirs of the
Optionee.

          4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and
the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all
applicable requirements of federal, state or foreign law with respect to such securities. The
Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other law or regulations
or the requirements of any stock exchange or market system upon which the Stock may then be listed.
In addition, the Option may not be exercised unless (i) a registration statement under

 -6- 

 

the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares
issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the
shares issuable upon exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. Questions concerning this restriction should be directed to the Chief Financial
Officer of the Company. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the
lawful issuance and sale of any shares subject to the Option shall relieve the Company of any
liability in respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the Option, the Company
may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the Company.

          4.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise of the Option.

     5. Nontransferability of the Option. The Option may be exercised during the lifetime
of the Optionee only by the Optionee or the Optionee’s guardian or legal representative and may not
be assigned or transferred in any manner except by will or by the laws of descent and distribution.
Following the death of the Optionee, the Option, to the extent provided in Section 7, may be
exercised by the Optionee’s legal representative or by any person empowered to do so under the
deceased Optionee’s will or under the then applicable laws of descent and distribution.

     6. Termination of the Option. The Option shall terminate and may no longer be
exercised on the first to occur of (a) the Option Expiration Date, (b) the last date for exercising
the Option following termination of the Optionee’s Service as described in Section 7, or (c) a
Transfer of Control to the extent provided in Section 8.

     7. Effect of Termination of Service.

          7.1 Option Exercisability.

               (a) Disability. If the Optionee’s Service with the Participating Company Group is terminated
because of the Disability of the Optionee, the Option, to the extent unexercised and exercisable on
the date on which the Optionee’s Service terminated, may be exercised by the Optionee (or the
Optionee’s guardian or legal representative at any time prior to the expiration of six (6) months
after the date on which the Optionee’s Service terminated, but in any event no later than the
Option Expiration Date. (NOTE: If the Option is exercised more than three (3) months after the
date on which the Optionee’s Service as an Employee terminated as a result of a Disability other
than a permanent and total disability as defined in Section 22(e)(3) of the Code, the Option will
be treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent
required by Section 422 of the Code.)

 -7- 

 

               (b) Death. If the Optionee’s Service with the Participating Company Group is terminated
because of the death of the Optionee, the Option, to the extent unexercised and exercisable on the
date on which the Optionee’s Service terminated, may be exercised by the Optionee’s legal
representative or other person who acquired the right to exercise the Option by reason of the
Optionee’s death at any time prior to the expiration of six (6) months after the date on which the
Optionee’s Service terminated, but in any event no later than the Option Expiration Date. The
Optionee’s Service shall be deemed to have terminated on account of the death if the Optionee dies
within thirty (30) days after the Optionee’s termination of Service.

               (c) Other Termination of Service. If the Optionee’s Service with the Participating Company
Group terminates for any reason, except Disability or death, the Option, to the extent unexercised
and exercisable by the Optionee on the date on which the Optionee’s Service terminated, may be
exercised by the Optionee within thirty (30) days (or such other longer period of time as
determined by the Board, in its sole discretion) after the date on which the Optionee’s Service
terminated, but in any event no later than the Option Expiration Date.

               7.2 Additional Limitations on Option Exercise. Notwithstanding the provisions of Section 7.1,
the Option may not be exercised after the Optionee’s termination of Service to the extent that the
shares to be acquired upon exercise of the Option would be subject to the Unvested Share Repurchase
Option as provided in Section 11.

               7.3 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of
the Option within the applicable time periods set forth in Section 7.1 is prevented by the
provisions of Section 4.6, the Option shall remain exercisable until three (3) months after the
date the Optionee is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date. The Company makes no representation as to the tax
consequences of any such delayed exercise. The Optionee should consult with the Optionee’s own tax
advisor as to the tax consequences to the Optionee of any such delayed exercise.

               7.4 Extension if Optionee Subject to Section 16(b). Notwithstanding the foregoing, if a sale
within the applicable time periods set forth in Section 7.1 of shares acquired upon the exercise of
the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date
on which a sale of such shares by the Optionee would no longer be subject to such suit, (ii) the
one hundred and ninetieth (190th) day after the Optionee’s termination of Service, or (iii) the
Option Expiration Date. The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee’s own tax advisor as to the tax
consequences to the Optionee of any such delayed exercise.

     8. Transfer of Control.

          8.1 Definitions.

               (a) An “Ownership Change Event” shall be deemed to have occurred if any of the following
occurs with respect to the Company:

 -8- 

 

               (i) the direct or indirect sale or exchange in a single or series of related transactions by
the shareholders of the Company of more than fifty percent (50%) of the voting stock of the
Company;

               (ii) a merger or consolidation in which the Company is a party;

               (iii) the sale, exchange, or transfer of all or substantially all of the assets of the
Company; or

               (iv) a liquidation or dissolution of the Company.

          (b) A “Transfer of Control” shall mean an Ownership Change Event or a series of related
Ownership Change Events (collectively, the “Transaction”) wherein the shareholders of the Company
immediately before the Transaction do not retain immediately after the Transaction, in
substantially the same proportions as their ownership of shares of the Company’s voting stock
immediately before the Transaction, direct or indirect beneficial ownership of more than fifty
percent (50%) of the total combined voting power of the outstanding voting stock of the Company or
the corporation or corporations to which the assets of the Company were transferred (the
“Transferee Corporation(s)”), as the case may be. For purposes of the preceding sentence, indirect
beneficial ownership shall include, without limitation, an interest resulting from ownership of the
voting stock of one or more corporations which, as a result of the Transaction, own the Company or
the Transferee Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether multiple sales or
exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and
its determination shall be final, binding and conclusive.

     8.2 Effect of Transfer of Control on Option. In the event of a Transfer of Control, the
surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the
case may be (the “Acquiring Corporation”), may either assume the Company’s rights and obligations
under the Option or substitute for the Option a substantially equivalent option for the Acquiring
Corporation’s stock. For purposes of this Section 8.2, the Option shall be deemed assumed if,
following the Transfer of Control, the Option confers the right to purchase in accordance with its
terms and conditions, for each share of Stock subject to the Option immediately prior to the
Transfer of Control, the consideration (whether stock, cash or other securities or property) to
which a holder of a share of Stock on the effective date of the Transfer of Control was entitled.
The Option shall terminate and cease to be outstanding effective as of the date of the Transfer of
Control to the extent that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the date of the Transfer
of Control. Notwithstanding the foregoing, shares acquired upon exercise of the Option prior to
the Transfer of Control and any consideration received pursuant to the Transfer of Control with
respect to such shares shall continue to be subject to all applicable provisions of this Option
Agreement except as otherwise provided herein. Furthermore, notwithstanding the foregoing, if the
corporation the stock of which is subject to the Option immediately prior to an Ownership Change
Event described in Section 8.1(a)(i) constituting a Transfer of Control is the surviving or
continuing corporation and immediately after such Ownership Change Event less than fifty percent
(50%) of the total combined voting power of its voting stock is held by another corporation or by
other corporations that are

 -9- 

 

members of an affiliated group within the meaning of Section 1504(a) of
the Code without regard to the provisions of Section 1504(b) of the Code, the Option shall not
terminate unless the Board otherwise provides in its sole discretion.

     9. Adjustments for Changes in Capital Structure. In the event of any stock dividend,
stock split, reverse stock split, recapitalization, combination, reclassification, or similar
change in the capital structure of the Company, appropriate adjustments shall be made in the
number, Exercise Price and class of shares of stock subject to the Option. If a majority of the
shares which are of the same class as the shares that are subject to the Option are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares
of another corporation (the “New Shares”), the Board may unilaterally amend the Option to provide
that the Option is exercisable for New Shares. In the event of any such amendment, the Number of
Option Shares and the Exercise Price shall be adjusted in a fair and equitable manner, as
determined by the Board, in its sole discretion. Notwithstanding the foregoing, any fractional
share resulting from an adjustment pursuant to this Section 9 shall be rounded up or down to the
nearest whole number, as determined by the Board, and in no event may the Exercise Price be
decreased to an amount less than the par value, if any, of the stock subject to the Option. The
adjustments determined by the Board pursuant to this Section 9 shall be final, binding and
conclusive.

     10. Rights as a Shareholder, Employee or Consultant. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until the date of the
issuance of a certificate for the shares for which the Option has been exercised (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized transfer agent of the
Company). No adjustment shall be made for dividends, distributions or other rights for which the
record date is prior to the date such certificate is issued, except as provided in Section 9. If
the Optionee is an Employee, the Optionee understands and acknowledges that, except as otherwise
provided in a separate, written employment agreement between a Participating Company and the
Optionee, the Optionee’s employment is “at will” and is for no specified term. Nothing in this
Option Agreement shall confer upon the Optionee, whether an Employee or Consultant, any right to
continue in the Service of a Participating Company or interfere in any way with any right of the
Participating Company Group to terminate the Optionee’s Service as an Employee or Consultant, as
the case may be, at any time.

     11. Unvested Share Repurchase Option.

          11.1 Grant of Unvested Share Repurchase Option. In the event the Optionee’s Service with the
Participating Company Group is terminated for any reason or no reason, with or without cause, or if
the Optionee, the Optionee’s legal representative, or other holder of shares acquired upon exercise
of the Option attempts to sell, exchange, transfer, pledge, or otherwise dispose of (other than
pursuant to an Ownership Change Event) any shares acquired upon exercise of the Option which exceed
the Vested Shares as defined in Section 11.2 below (the “Unvested Shares”), the Company shall have
the right to repurchase the Unvested Shares under the terms and subject to the conditions set forth
in this Section 11 (the “Unvested Share Repurchase Option”).

          11.2 Vested Shares and Unvested Shares Defined. The “Vested Shares” shall mean, on any given
date, a number of shares of Stock equal to the Number of Option Shares

 -10- 

 

multiplied by the Vested
Ratio determined as of such date and rounded down to the nearest whole share. On such given date,
the “Unvested Shares” shall mean the number of shares of Stock acquired upon exercise of the Option
which exceed the Vested Shares determined as of such date.

          11.3 Exercise of Unvested Share Repurchase Option. The Company may exercise the Unvested
Share Repurchase Option by written notice to the Optionee within sixty (60) days after (a)
termination of the Optionee’s Service (or exercise of the Option, if later) or (b) the Company has
received notice of the attempted disposition of Unvested Shares. If the Company fails to give
notice within such sixty (60) day period, the Unvested Share Repurchase Option shall terminate
unless the Company and the Optionee have extended the time for the exercise of the Unvested Share
Repurchase Option. The Unvested Share Repurchase Option must be exercised, if at all, for all of
the Unvested Shares, except as the Company and the Optionee otherwise agree.

          11.4 Payment for Shares and Return of Shares to Company. The purchase price per share being
repurchased by the Company shall be an amount equal to the Optionee’s original cost per share, as
adjusted pursuant to Section 9 (the “Repurchase Price”). The Company shall pay the aggregate
Repurchase Price to the Optionee in cash within thirty (30) days after the date of the written
notice to the Optionee of the Company’s exercise of the Unvested Share Repurchase Option. For
purposes of the foregoing, cancellation of any indebtedness of the Optionee to any Participating
Company shall be treated as payment to the Optionee in cash to the extent of the unpaid principal
and any accrued interest canceled. The shares being repurchased shall be delivered to the Company
by the Optionee at the same time as the delivery of the Repurchase Price to the Optionee.

          11.5 Assignment of Unvested Share Repurchase Option. The Company shall have the right to
assign the Unvested Share Repurchase Option at any time, whether or not such option is then
exercisable, to one or more persons as may be selected by the Company.

          11.6 Ownership Change Event. Upon the occurrence of an Ownership Change Event, any and all
new, substituted or additional securities or other property to which the Optionee is entitled by
reason of the Optionee’s ownership of Unvested Shares shall be immediately subject to the Unvested
Share Repurchase Option and included in the terms “Stock” and “Unvested Shares” for all purposes of
the Unvested Share Repurchase Option with the same force and effect as the Unvested Shares
immediately prior to the Ownership Change Event. While the aggregate Repurchase Price shall remain
the same after such Ownership Change Event, the Repurchase Price per Unvested Share upon exercise
of the Unvested Share Repurchase Option following such Ownership Change Event shall be adjusted as
appropriate. For purposes of determining the Vested Ratio following an Ownership Change Event,
credited Service shall include all Service with any corporation which is a Participating Company at
the time the Service is rendered, whether or not such corporation is a Participating Company both
before and after the Ownership Change Event.

     12. Escrow.

          12.1 Establishment of Escrow. To ensure that shares subject to the Unvested Share Repurchase
Option will be available for repurchase, the Company may require the Optionee to deposit the
certificate evidencing the shares which the Optionee purchases upon exercise of the Option with an
escrow agent designated by the Company under the terms and conditions of escrow

 -11- 

 

and security
agreements approved by the Company. If the Company does not require such deposit as a condition of
exercise of the Option, the Company reserves the right at any time to require the Optionee to so
deposit the certificate in escrow. Upon the occurrence of an Ownership Change Event or a change,
as described in Section 9, in the character or amount of any of the outstanding stock of the
corporation the stock of which is subject to the provisions of this Option Agreement, any and all
new, substituted or additional securities or other property to which the Optionee is entitled by
reason of the Optionee’s ownership of shares of Stock acquired upon exercise of the Option that
remain, following such Ownership Change Event or change described in Section 9, subject to the
Unvested Share Repurchase Option or any security interest held by the Company shall be immediately
subject to the escrow to the same extent as such shares of Stock immediately before such event.
The Company shall bear the expenses of the escrow.

          12.2 Delivery of Shares to Optionee. As soon as practicable after the expiration of the
Unvested Share Repurchase Option, but not more frequently than twice each calendar year, the escrow
agent shall deliver to the Optionee the shares and any other property no longer subject to such
restrictions.

          12.3 Notices and Payments. In the event the shares and any other property held in escrow are
subject to the Company’s exercise of the Unvested Share Repurchase Option the notices required to
be given to the Optionee shall be given to the escrow agent, and any payment required to be given
to the Optionee shall be given to the escrow agent. Within thirty (30) days after payment by the
Company, the escrow agent shall deliver the shares and any other property which the Company has
purchased to the Company and shall deliver the payment received from the Company to the Optionee.

     13. Stock Distributions Subject to Option Agreement. If, from time to time, there is
any stock dividend, stock split or other change, as described in Section 9, in the character or
amount of any of the outstanding stock of the corporation the stock of which is subject to the
provisions of this Option Agreement, then in such event any and all new, substituted or additional
securities to which the Optionee is entitled by reason of the Optionee’s ownership of the shares
acquired upon exercise of the Option shall be immediately subject to the Unvested Share Repurchase
Option and any security interest held by the Company with the same force and effect as the shares
subject to the Unvested Share Repurchase Option and such security interest immediately before such
event.

     14. Notice of Sales Upon Disqualifying Disposition. The Optionee shall dispose of the
shares acquired pursuant to the Option only in accordance with the provisions of this Option
Agreement. In addition, the Optionee shall promptly notify the Chief Financial Officer of the
Company if the Optionee disposes of any of the shares acquired pursuant to the Option within one
(1) year after the date the Optionee exercises all or part of the Option or within two (2) years
after the Date of Option Grant and shall provide the Company with a description of the terms and
circumstances of such disposition. Until such time as the Optionee disposes of such shares in a
manner consistent with the provisions of this Option Agreement, unless otherwise expressly
authorized by the Company, the Optionee shall hold all shares acquired pursuant to the Option in
the Optionee’s name (and not in the name of any nominee) for the one-year period immediately after
the exercise of the Option and the two-year period immediately after Date of Option Grant. At any
time during the one-year or two-year periods set forth above, the Company may place a legend on any

 -12- 

 

certificate representing shares acquired pursuant to the Option requesting the transfer agent for
the Company’s stock to notify the Company of any such transfers. The obligation of the Optionee to
notify the Company of any such transfer shall continue notwithstanding that a legend has been
placed on the certificate pursuant to the preceding sentence.

     15. Legends. The Company may at any time place legends referencing the Unvested Share
Repurchase Option and any applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this Option Agreement. The
Optionee shall, at the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the possession of the Optionee
in order to carry out the provisions of this Section. Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to, the following:

          15.1 “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE
SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY,
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.”

          15.2 Any legend required to be placed thereon by the Commissioner of Corporations of the State
of California.

          15.3 “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN UNVESTED SHARE REPURCHASE
OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”

          15.4 “THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE
REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (“ISO”). IN ORDER TO OBTAIN THE PREFERENTIAL TAX
TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO THE TERMINATION OF THE
REPURCHASE RIGHT OF THE COMPANY. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES
PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE
CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE
STOCK OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS
DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.”

 -13- 

 

     16. Public Offering. The Optionee hereby agrees that in the event of any underwritten public offering of stock, including an initial public
offering of stock, made by the Company pursuant to an effective registration statement filed under the Securities Act, the Optionee shall not offer,
sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the
Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be
established by the underwriter for such public offering; provided, however, that such period of time shall not exceed one hundred eighty (180) days from the
effective date of the registration statement to be filed in connection with such public offering. The foregoing limitation shall not apply to shares registered in the
public offering under the Securities Act. The Optionee shall be subject to this Section provided and only if the officers and directors of the Company are also subject to
similar arrangements.

     17.
Restrictions on Transfer of Shares. No shares acquired upon exercise of the Option may be sold, exchanged, transferred (including, without limitation,
any transfer to a nominee or agent of the Optionee), assigned, pledged, hypothecated or otherwise disposed of, including by operation of law, in any manner
which violates any of the provisions of this Option Agreement and, except pursuant to an Ownership Change Event, until the date on which such shares become
Vested Shares, and any such attempted disposition shall be void. The Company shall not be required (a) to transfer on its books any shares which will have been
transferred in violation of any of the provisions set forth in this Option Agreement or (b) to treat as owner of such shares or to accord the right to vote as such
owner or to pay dividends to any transferee to whom such shares will have been so transferred.

     18.
Binding Effect. Subject to the restrictions on transfer set forth herein, this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors and assigns.

     19.
Termination or Amendment. The Board may terminate or amend the Plan or the Option at any time; provided, however, that except as provided in
Section 8.2 in connection with a Transfer of Control, no such termination or amendment may adversely affect the Option or any unexercised portion hereof without
the consent of the Optionee unless such termination or amendment is necessary to comply with any applicable law or government regulation or is required to enable
the Option to qualify as an Incentive Stock Option. No amendment or addition to this Option Agreement shall be effective unless in writing.

     20.
Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Option
Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery or upon deposit in the United States Post Office, by registered
or certified mail, with postage and fees prepaid, addressed to the other party at the address shown below that party’s signature or at such other address as such party may
designate in writing from time to time to the other party.

     21.
Integrated Agreement. This Option Agreement and the Plan constitute the entire understanding and agreement of the Optionee and the Participating
Company Group with respect to the subject matter contained herein or therein, and there are no agreements, understandings,

 -14- 

 

restrictions, representations, or warranties among the Optionee and the Participating Company
Group with respect to such subject matter other than those as set forth or provided for herein or
therein. To the extent contemplated herein or therein, the provisions of this Option Agreement
shall survive any exercise of the Option and shall remain in full force and effect.

     22. Sections 409A and 422 Release and Reimbursement Agreement. Unless expressly
determined otherwise by the Committee or Board, this Option is intended to be compliant with
Sections 409A and 422 of the Code, including, without limitation, the Exercise Price underlying
this Option being set at not less than 100% of the Fair Market Value at the Date of Grant of this
Option. Optionee acknowledges that, if the Exercise Price is less than the Fair Market Value as of
the Date of Grant of this Option, then Optionee may have significant tax liabilities with respect
to this Option. Optionee further acknowledges that, at any time hereafter, it may be determined by
the Committee, a court of law, the Internal Revenue Service or other governmental entity that this
Option is subject to Section 409A of the Code and not subject to Section 422 of the Code,,
including without limitation because the Exercise Price underlying this Option is less than the
Fair Market Value as of the Date of Grant of this Option (a “Determination"). Optionee expressly
agrees, by accepting this Option and in partial consideration for the grant of this Option to
Optionee, as follows:

          22.1 Optionee hereby irrevocably waives and releases any and all claims or causes of action
that Optionee may have against the Participating Company Group, its agents, officers, stockholders,
employees, directors, attorneys, subscribers, subsidiaries, affiliates, successors and assigns, for
any damages, injury or loss arising out of, related to or connected with such a Determination or
otherwise under Sections 409A and 422 of the Code, including without limitation with respect to
taxes, interest and penalties that may be due from Optionee with respect to this Option under
Section 409A of the Code; and

          22.2 Optionee agrees to promptly reimburse the Participating Company Group upon its request,
whether by way of a deduction from wages due (if and to the extent permitted by law) or otherwise,
as determined by the Participating Company Group in its sole discretion, and regardless of whether
or not Optionee is then an employee, for any taxes (together with interest due thereon) paid by the
Participating Company Group on Optionee’s behalf in connection with such a Determination.

-15-

 

     23. Applicable Law. This Option Agreement shall be governed by the laws of the State
of California as such laws are applied to agreements between California residents entered into and
to be performed entirely within the State of California.

	 	 	 	 	 	 	 
	 	 	SHORETEL, INC.,

	 	 	a California corporation
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	                    , President and	 	 
	 

	 	 	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Address:
	 
	 	 	 	 	 	 
	 	 	960 Stewart Drive

	 	 	Sunnyvale, California 94085

-16-

 

     The Optionee represents that the Optionee is familiar with the terms and provisions of this
Option Agreement, including the Unvested Share Repurchase Option set forth in Section 11 and hereby
accepts the Option subject to all of the terms and provisions thereof. The Optionee hereby agrees
to accept as binding, conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Option Agreement. The undersigned acknowledges receipt of a copy of
the Plan.

	 	 	 	 	 	 	 
	 

	 	 	 	OPTIONEE	 	 
	Date: «Date_of_Grant»

	 	 	 	 

«Name»
	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Optionee Address:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	«Address»	 	 

-17-

 

1997 STOCK OPTION PLAN

EXERCISE NOTICE

ShoreTel, Inc.

Attention: Stock Option Administration

     1. Exercise of Option. Effective as of today, «Exercise_date», the undersigned
(“Optionee”) hereby elects to exercise Optionee’s option to purchase «Number_of_Shares» shares of
the Common Stock (the “Shares”) of ShoreTel, Inc. (the “Company”) under and pursuant to the 1997
Stock Option Plan, as amended (the “Plan”) and the Immediately Exercisable Incentive Stock Option
Agreement dated «Date_of_Grant» (the “Option Agreement”).

     2. Representations of Optionee. Optionee acknowledges that Optionee has received,
read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their
terms and conditions.

     3. Rights as Shareholder. Until the stock certificate evidencing such Shares is
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
shareholder shall exist with respect to the Shares, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate 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 stock certificate is issued, except as provided in Section 4.2 of the Plan.

          Optionee shall enjoy rights as a shareholder until such time as Optionee disposes of the
Shares or the Company and/or its assignee(s) exercises the Unvested Share Repurchase Option
pursuant to the Option Agreement. Upon such exercise, Optionee shall have no further rights as a
holder of the Shares so purchased except the right to receive payment for the Shares so purchased
in accordance with the provisions of this Agreement, and Optionee shall forthwith cause the
certificate(s) evidencing the Shares so purchased to be surrendered to the Company for transfer or
cancellation.

     4. Tax Consultation. Optionee understands that Optionee may suffer adverse tax
consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents
that Optionee has consulted with any tax consultants Optionee deems advisable in connection with
the purchase or disposition of the Shares and that Optionee is not relying on the Company for any
tax advice.

     5. Restrictive Legends and Stop-Transfer Orders.

          a. Legends. Optionee understands and agrees that the Company shall cause the legends
set forth below or legends substantially equivalent thereto, to be placed upon any

-1-

 

certificate(s) evidencing ownership of the Shares together with any other legends that may be
required by state or federal securities laws or as the Company may otherwise determine:

               (i) “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE
SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY,
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.”

               (ii) Any legend required to be placed thereon by the Commissioner of Corporations of the State
of California.

               (iii) If applicable: “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN UNVESTED
SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT
BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY
OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”

               (iv) If applicable: “THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION
TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (“ISO”). IN ORDER TO OBTAIN THE PREFERENTIAL TAX
TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO THE TERMINATION OF THE
REPURCHASE RIGHT OF THE COMPANY. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES
PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE
CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE
STOCK OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS
DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.”

          b. Stop-Transfer Notices. Optionee 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.

          c. 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

-2-

 

this 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 shall have been so transferred.

     6. Successors and Assigns. The Company may assign any of its rights under this
Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the
successors and assigns of the Company. Subject to the restrictions on transfer herein set forth,
this Agreement shall be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.

     7. Interpretation. Any dispute regarding the interpretation of this Agreement shall
be submitted by Optionee or by the Company forthwith to the Company’s Board of Directors or the
committee thereof that administers the Plan, which shall review such dispute at its next regular
meeting. The resolution of such a dispute by the Board or committee shall be final and binding on
the Company and on Optionee.

     8. Governing Law; Severability. This Agreement shall be governed by and construed in
accordance with the laws of the State of California excluding that body of law pertaining to
conflicts of law. Should any provision of this Agreement be determined by a court of law to be
illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain
enforceable.

     9. Notices. Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery or upon deposit in the United States mail
by certified mail, with postage and fees prepaid, addressed to the other party at its address as
shown below beneath its signature, or to such other address as such party may designate in writing
from time to time to the other party.

     10. Further Instruments. The parties agree to execute such further instruments and to
take such further action as may be reasonably necessary to carry out the purposes and intent of
this Agreement.

     11. Delivery of Payment. Optionee herewith delivers to the Company the full Exercise
Price for the Shares.

     12. Entire Agreement. The Plan and Notice of Grant/Option Agreement are incorporated
herein by reference. This Agreement, the Plan, the Option Agreement (including without limitation
the Unvested Share Repurchase Option of Sec. 11 thereof), and the Investment Representation
Statement constitute the entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the subject matter hereof.

	 	 	 	 	 	 	 	 	 
	Submitted by:	 	 	 	Accepted by:	 	 
	 
	 	 	 	 	 	 	 	 
	OPTIONEE:	 	 	 	SHORETEL, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

«Name»

	 	 	 	 	 	 

                    , President and
	 	 
	Address: «Address»

	 	 	 	 	 	Chief Executive Officer	 	 

-3-

 

INVESTMENT REPRESENTATION STATEMENT

	 	 	 	 	 
	OPTIONEE

	 	:
	 	«Name»
	 
	 	 	 	 
	COMPANY

	 	:
	 	SHORETEL, INC.
	 
	 	 	 	 
	SECURITY

	 	:
	 	COMMON STOCK
	 
	 	 	 	 
	AMOUNT

	 	:
	 	$«Total_price»
	 
	 	 	 	 
	 

	 	 	 	«number_of_shares» Shares
	 
	 	 	 	 
	DATE

	 	:
	 	«Exercise_date»

In connection with the purchase of the above-listed Securities, the undersigned Optionee represents
to the Company the following:

     (a) Optionee is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision
to acquire the Securities. Optionee is acquiring these Securities for investment for Optionee’s
own account only and not with a view to, or for resale in connection with, any “distribution”
thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

     (b) Optionee acknowledges and understands that the Securities constitute “restricted
securities” under the Securities Act and have not been registered under the Securities Act in
reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Optionee’s investment intent as expressed herein. In this connection, Optionee
understands that, in the view of the Securities and Exchange Commission, the statutory basis for
such exemption may be unavailable if Optionee’s representation was predicated solely upon a present
intention to hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the market price of the
Securities, or for a period of one year or any other fixed period in the future. Optionee further
understands that the Securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register the Securities.
Optionee understands that the certificate evidencing the Securities will be imprinted with a legend
which prohibits the transfer of the Securities unless they are registered or such registration is
not required in the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of Corporations of the State of California and any
other legend required under applicable state securities laws.

     (c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under
the Securities Act, which, in substance, permit limited public resale of “restricted securities”
acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to

 - 1 - 

 

the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under
Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from
registration under the Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days
thereafter (or such longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited
“broker’s transaction” or in transactions directly with a market maker (as said term is defined
under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability
of certain public information about the Company, (3) the amount of Securities being sold during any
three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.

     (d) In the event that the Company does not qualify under Rule 701 at the time of grant of the
Option, then the Securities may be resold in certain limited circumstances subject to the
provisions of Rule 144, which requires the resale to occur not less than two years after the later
of the date the Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than
three years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the
paragraph immediately above.

     (e) Optionee further understands that in the event all of the applicable requirements of Rule
701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A,
or some other registration exemption will be required; and that, notwithstanding the fact that
Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden
of proof in establishing that an exemption from registration is available for such offers or sales,
and that such persons and their respective brokers who participate in such transactions do so at
their own risk. Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.

     (f) Optionee understands that the certificate evidencing the Securities will be imprinted with
a legend which prohibits the transfer of the Securities without the consent of the Commissioner of
Corporations of California. Optionee has read the applicable Commissioner’s Rules with respect to
such restriction, a copy of which is attached.

Signature of Optionee:

                                                            

«Name»

Date: «Exercise_date»

 - 2 - 

 

ASSIGNMENT SEPARATE FROM CERTIFICATE

     FOR VALUE RECEIVED I,                              , hereby sell, assign and transfer unto
                                        (                    )shares of the Common Stock of
ShoreTel, Inc. standing in my name of the books of said corporation represented by Certificate No.
      herewith and do hereby irrevocably constitute and appoint                     to transfer
the said stock on the books of the within named corporation with full power of substitution in the
premises.

     This Stock Assignment may be used only in accordance with the Joint Escrow Instructions
between                                        and the undersigned dated                     ,          .

Dated: _______________, ___

Signature:______________________________

INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this
assignment is to enable the Company to exercise its “repurchase option,” as set forth in the
Agreement, without requiring additional signatures on the part of the Purchaser.

 - 3 - 

 

JOINT ESCROW INSTRUCTIONS

«Exercise_date»

ShoreTel, Inc.

Corporate Secretary

960 Stewart Drive

Sunnyvale, California 94085

Dear Corporate Secretary:

     As Escrow Agent for both ShoreTel, Inc. (the “Company”), and the undersigned purchaser of
stock of the Company (the “Purchaser”), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Immediately Exercisable Incentive
Stock Option Agreement (“Agreement”) between the Company and the undersigned, in accordance with
the following instructions:

     1. In the event the Company and/or any assignee of the Company (referred to collectively for
convenience herein as the “Company”) exercises the Company’s repurchase option set forth in Section
11 of the Agreement, the Company shall give to Purchaser and you a written notice specifying the
number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder
at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and
direct you to close the transaction contemplated by such notice in accordance with the terms of
said notice.

     2. At the closing, you are directed (a) to date the stock assignments necessary for the
transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver
same, together with the certificate evidencing the shares of stock to be transferred, to the
Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a
check, or some combination thereof) for the number of shares of stock being purchased pursuant to
the exercise of the Company’s repurchase option.

     3. Purchaser irrevocably authorizes the Company to deposit with you any certificates
evidencing shares of stock to be held by you hereunder and any additions and substitutions to said
shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you
as Purchaser’s attorney-in-fact and agent for the term of this escrow to execute with respect to
such securities all documents necessary or appropriate to make such securities negotiable and to
complete any transaction herein contemplated, including but not limited to the filing with any
applicable state blue sky authority of any required applications for consent to, or notice of
transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the stock is held by you.

     4. If the Company has not otherwise directed you to hold all certificates, then: (A) upon
written request of the Purchaser, but no more than once per calendar year, unless the Company’s
repurchase option has been exercised, you will deliver to Purchaser a certificate or certificates

 -1- 

 

representing so many shares of stock as are not then subject to the Company’s repurchase
option; and (B) within 120 days after cessation of Purchaser’s continuous employment by or services
to the Company, or any parent or subsidiary of the Company, you will deliver to Purchaser a
certificate or certificates representing the aggregate number of shares held or issued pursuant to
the Agreement and not purchased by the Company or its assignees pursuant to exercise of the
Company’s repurchase option.

     5. If at the time of termination of this escrow you should have in your possession any
documents, securities, or other property belonging to Purchaser, you shall deliver all of the same
to Purchaser and shall be discharged of all further obligations hereunder.

     6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed
by all of the parties hereto.

     7. You shall be obligated only for the performance of such duties as are specifically set
forth herein and may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed by you to be genuine and to have been signed or presented by the
proper party or parties. You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any
act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.

     8. You are hereby expressly authorized to disregard any and all warnings given by any of the
parties hereto or by any other person or corporation, excepting only orders or process of courts of
law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree, you shall not be liable
to any of the parties hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

     9. You shall not be liable in any respect on account of the identity, authorities or rights of
the parties executing or delivering or purporting to execute or deliver the Agreement or any
documents or papers deposited or called for hereunder.

     10. You shall not be liable for the outlawing of any rights under the Statute of Limitations
with respect to these Joint Escrow Instructions or any documents deposited with you.

     11. You shall be entitled to employ such legal counsel and other experts as you may deem
necessary properly to advise you in connection with your obligations hereunder, may rely upon the
advice of such counsel, and may pay such counsel reasonable compensation therefor.

     12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be
an officer or agent of the Company or if you shall resign by written notice to each party. In the
event of any such termination, the Company shall appoint a successor Escrow Agent.

 -2- 

 

     13. If you reasonably require other or further instruments in connection with these Joint
Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in
furnishing such instruments.

     14. It is understood and agreed that should any dispute arise with respect to the delivery
and/or ownership or right of possession of the securities held by you hereunder, you are authorized
and directed to retain in your possession without liability to anyone all or any part of said
securities until such disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of competent jurisdiction
after the time for appeal has expired and no appeal has been perfected, but you shall be under no
duty whatsoever to institute or defend any such proceedings.

     15. Any notice required or permitted hereunder shall be given in writing and shall be deemed
effectively given upon personal delivery or upon deposit in the United States Post Office, by
registered or certified mail with postage and fees prepaid, addressed to each of the other parties
thereunto entitled at the following addresses or at such other addresses as a party may designate
by ten days’ advance written notice to each of the other parties hereto.

	 	 	 
	COMPANY:

	 	ShoreTel, Inc.
	 

	 	960 Stewart Drive
	 

	 	Sunnyvale, CA 94085
	 
	 	 
	PURCHASER:

	 	«Name»
	 

	 	«Address»
	 
	 	 
	ESCROW AGENT:

	 	ShoreTel, Inc.
	 

	 	Corporate Secretary
	 

	 	960 Stewart Drive
	 

	 	Sunnyvale, California 94085

     16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose
of said Joint Escrow Instructions; you do not become a party to the Agreement.

     17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and
their respective successors and permitted assigns.

 -3- 

 

     18. These Joint Escrow Instructions shall be governed by, and construed and enforced in
accordance with, the laws of the State of California.

	 	 	 	 	 	 	 
	 	 	ShoreTel, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:  	 	 	 	 
	 

	 	 	 	 	 
	 

	 	 	                    ,President and	 	 
	 

	 	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Purchaser:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	«Name»	 	 
	 
	 	 	 	 	 	 
	 	 	Escrow Agent:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	(Signature)	 	 

 -4- 

 

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

     The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code
of 1986, as amended, to include in taxpayer’s gross income for the current taxable year the amount
of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property
described below:

	1.	 	The name, address, taxpayer identification number and taxable year of the undersigned are as
follows:

	 	 	 	 	 
	 	 	TAXPAYER:	 	SPOUSE:
	NAME:

	 	«Name»
	 	 
	ADDRESS:

	 	«Address»	 	 
	IDENTIFICATION NO.:
	 	 	 	 
	TAXABLE YEAR:
	 	 	 	 

	2.	 	The property with respect to which the election is made is described as follows:
«number_of_shares» shares (the “Shares”) of the Common Stock of ShoreTel, Inc. (the
“Company”).

	3.	 	The date on which the property was transferred is: «Exercise_date»
	 
	4.	 	The property is subject to the following restrictions:

The Shares may not be transferred and are subject to forfeiture under the terms of an
agreement between the taxpayer and the Company. These restrictions lapse upon the
satisfaction of certain conditions contained in such agreement.

	5.	 	The fair market value at the time of transfer, determined without $«Total_price»
regard to any restriction other than a restriction which by its
terms will never lapse, of such property is:
	 
	6.	 	The amount (if any) paid for such property is: $«Total_price»

The undersigned has submitted a copy of this statement to the person for whom the services were
performed in connection with the undersigned’s receipt of the above-described property. The
transferee of such property is the person performing the services in connection with the transfer
of said property.

The undersigned understands that the foregoing election may not be revoked except with the
consent of the Commissioner.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	, 	 	 	 	 	 	 	 	 	 
	 	 
	 

	 	 

	,  	 

	 	 	 	 

	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	«Name»	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	The undersigned spouse of taxpayer joins in this election.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	, 	 	 	 	 	 	 	 	 	 
	 	 
	 

	 	 

	,  	 

	 	 	 	 

	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	Spouse of Taxpayer Signature	 	 

 -5-exv10w3

 

Exhibit 10.3

2007 Equity Incentive Plan

 

 

SHORETEL, INC.

2007 Equity Incentive Plan

(adopted by the Board on February 2, 2007)

     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 Fifty
Million (50,000,000) 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 Four Hundred Fifty Million (450,000,000) 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,

 

 

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 twenty-five million (25,000,000) 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;

2

 

               (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:

3

 

          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

4

 

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

5

 

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.

6

 

          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

7

 

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).

8

 

     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;

9

 

               (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 and

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}]]