Delaware
|
3661 | 77-0443568 | ||
(State or other jurisdiction of
incorporation or organization) |
(Primary standard industrial
code number) |
(I.R.S. employer
identification no.) |
Dennis DeBroeck, Esq. | Jeffrey D. Saper, Esq. | |
Jeffrey R. Vetter, Esq. | Steven V. Bernard, Esq. | |
Fenwick & West LLP | Wilson Sonsini Goodrich & Rosati, P.C. | |
801 California Street | 650 Page Mill Road | |
Mountain View, California 94041 | Palo Alto, California 94304 | |
(650) 988-8500 | (650) 493-9300 |
Proposed Maximum
|
Proposed Maximum
|
|||||||||||||||||||
Title of Each Class of
|
Amount to
|
Offering Price
|
Aggregate
|
Amount of Registration
|
||||||||||||||||
Securities to be Registered | Be Registered(1) | Per Share | Offering Price(2) | Fee(3) | ||||||||||||||||
Common Stock, $0.001 par
value per share
|
9,085,000 | $ | 10.50 | $ | 95,392,500 | $ | 2,929 | |||||||||||||
(1) | Includes 1,185,000 shares issuable upon exercise of the underwriters option to purchase additional shares from the Registrant. |
(2) | Estimated pursuant to Rule 457(a) solely for the purpose of calculating the amount of the registration fee. |
(3) | The Registrant previously paid $9,095. |
The
information in this preliminary prospectus is not complete and
may be changed. These securities may not be sold until the
registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an
offer to sell nor does it seek an offer to buy these securities
in any jurisdiction where the offer or sale is not permitted.
|
Per Share | Total | |||||||
Initial public offering price
|
$ | $ | ||||||
Underwriting discount
|
$ | $ | ||||||
Proceeds, before expenses, to
ShoreTel
|
$ | $ |
Lehman Brothers | JPMorgan |
Piper Jaffray | JMP Securities | Wedbush Morgan Securities |
Page
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F-1
EXHIBIT 3.4
EXHIBIT 5.01
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 23.2
i
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Ease of use.
We provide a wide range of
innovative, high performance phones that we combine with our
feature-rich desktop software application, Personal Call
Manager. Personal Call Manager allows end users to control their
phones from their PCs, regardless of their location, and
integrates with enterprise software applications, such as
Microsoft Outlook and salesforce.com.
Ease of installation and management.
Our
systems are easy to install as a result of our proprietary
installation software, which automatically recognizes and
configures the elements of our solution as they are added to the
systems. Our systems also feature a single point of management
with a simple, intuitive interface that allows IT managers to
modify their systems from anywhere through a web browser. We
believe our systems are also easier to install and manage
because they require fewer hardware elements than alternative
systems.
Scalability.
We believe our distributed
software architecture and the modular design of our system
hardware allow enterprises to incrementally scale our systems
more cost-effectively than alternative systems, which can
require replacement of substantial amounts of system equipment
to increase capacity. In contrast, all of the investment an
enterprise customer makes in our systems will continue to
operate as their implementation of our systems expands to
support their growth.
Reliability.
Our switches are designed to be
highly reliable and operate independently. Each switch in our
systems is capable of independently establishing and terminating
calls without relying on a centralized call control server, as
is the case with alternative systems. As a result, enterprise
telecommunications can survive a variety of LAN, WAN and
hardware failures using our systems.
Low total cost of ownership.
Our systems allow
enterprise customers to lower the overall capital expenditures
and on-going operating expenses typically associated with the
deployment and management of enterprise telecommunications
systems.
Extend our technology advantage.
We intend to
continue our research and development activities and expand our
relationships with technology partners to enhance our product
functionality, feature set and end
2
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user experience. We also intend to continue to develop
additional applications for our systems and expand the
interoperability of our systems with additional enterprise
applications.
Grow our distribution network.
We intend to
increase our market penetration and extend our geographic reach
by expanding our business with existing channel partners and by
adding channel partners that serve specific target markets. We
are particularly focused on expanding our relationships with
channel partners that are focused on large enterprise accounts
and with channel partners that operate in strategic
international markets.
Maintain focus on customer satisfaction.
We
intend to continue to work closely with enterprise customers to
gain valuable knowledge about their existing and future product
requirements to help us develop new products and product
enhancements that address their evolving requirements. We will
continue to actively measure, and develop programs to continue
to enhance, customer satisfaction.
Increase our brand awareness.
We believe that
increased visibility and awareness of the ShoreTel brand will
enhance our ability to participate in enterprise customer
evaluations of telecommunications systems, and will enable us to
continue to grow our enterprise customer base. We intend to
increase our sales and marketing activities to both channel
partners and enterprise customers through targeted marketing
programs, such as participation in seminars, trade shows and
conferences, and advertising and public relations initiatives.
Increase penetration of our installed base.
We
plan to leverage our installed enterprise customer base to
increase future sales. Since many organizations initially deploy
our systems at a single location, we believe we can drive
further penetration of our systems at multiple locations within
these enterprises.
3
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Shares of common stock offered by ShoreTel
7,900,000 shares
Shares of common stock to be outstanding after this offering
41,255,916 shares
Use of proceeds
We estimate that we will receive net proceeds of
$67.6 million from our sale of the 7,900,000 shares of
common stock offered by us in this offering, based on an assumed
initial public offering price of $9.50 per share, the
midpoint of the range set forth on the cover page of this
prospectus, after deducting estimated underwriting discounts and
commissions and estimated expenses payable by us. We intend to
use the net proceeds of this offering for working capital and
general corporate purposes. In addition, we may use up to
$5.0 million of the net proceeds of this offering to
acquire technology to extend and enhance the functionality of
our existing products. See Use of Proceeds.
Proposed NASDAQ Global Market symbol
SHOR
3,249,485 shares of common stock issuable upon exercise of
outstanding options as of March 31, 2007, at a weighted
average exercise price of $1.31 per share;
1,302,038 shares of common stock issuable upon exercise of
options granted between April 1, 2007 and June 8,
2007, at a weighted average exercise price of $11.34 per
share;
70,883 shares of common stock issuable upon exercise of
outstanding warrants as of March 31, 2007, at a weighted
average exercise price of $2.77 per share; and
3,697,962 shares of common stock reserved for future grant
or issuance under our 2007 equity incentive plan and
500,000 shares of common stock to be available for issuance
under our 2007 employee stock purchase plan effective upon the
completion of this offering.
reflects our reincorporation into Delaware and the filing of our
restated certificate of incorporation prior to the completion of
this offering;
reflects the conversion of all our outstanding shares of
redeemable convertible preferred stock into an aggregate of
23,316,406 shares of common stock effective upon the
completion of this offering;
reflects the conversion of all outstanding warrants to purchase
shares of our redeemable convertible preferred stock into
warrants to purchase an aggregate of 67,703 shares of
common stock effective upon completion of this offering;
reflects a 1-for-10 reverse split of our outstanding capital
stock to be effective prior to the completion of this
offering; and
assumes no exercise of the underwriters option to purchase
up to an additional 1,185,000 shares from us.
4
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Year Ended June 30,
Nine Months Ended March 31,
2004
2005
2006
2006
2007
(Dollars in thousands, except per share amounts)
$
16,587
$
31,970
$
55,300
$
37,972
$
61,473
2,241
3,512
6,308
4,552
7,431
18,828
35,482
61,608
42,524
68,904
7,725
13,961
21,855
15,723
21,271
1,660
2,907
5,425
3,942
4,853
9,385
16,868
27,280
19,665
26,124
9,443
18,614
34,328
22,859
42,780
5,517
7,034
9,720
6,520
11,450
8,004
10,050
15,699
10,855
18,441
2,166
3,045
4,936
3,108
8,383
15,687
20,129
30,355
20,483
38,274
(6,244
)
(1,515
)
3,973
2,376
4,506
(7
)
124
248
96
(7
)
(6,251
)
(1,391
)
4,221
2,472
4,499
(11
)
(219
)
(140
)
(311
)
(6,251
)
(1,402
)
4,002
2,332
4,188
(26
)
(32
)
(51
)
(38
)
(38
)
$
(6,277
)
$
(1,434
)
$
3,951
$
2,294
$
4,150
$
(1.27
)
$
(0.27
)
$
0.60
$
0.36
$
0.50
$
(1.27
)
$
(0.27
)
$
0.39
$
0.24
$
0.34
4,934,507
5,351,706
6,609,170
6,358,839
8,341,561
4,934,507
5,351,706
10,114,513
9,574,631
12,176,351
$
0.13
$
0.13
$
0.12
$
0.12
29,925,576
31,657,967
33,430,919
35,492,757
5
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(1)
Includes stock-based compensation
expense as follows:
Nine Months
Year Ended June 30,
Ended March 31,
2004
2005
2006
2006
2007
(In thousands)
$
$
$
$
$
7
16
14
55
14
6
190
7
2
331
45
82
45
24
1,470
$
45
$
82
$
82
$
46
$
2,053
(2)
See note 2 to our consolidated
financial statements for a description of the method used to
compute basic and diluted net income (loss) per share available
to common shareholders, which gives effect to the
1-for-10
reverse split of our outstanding common stock prior to the
closing of this offering.
(3)
See note 2 to our consolidated
financial statements for a description of the method used to
compute basic and diluted net income (loss) per share available
to common shareholders. Unaudited pro forma basic and diluted
net income per share available to common shareholders have been
computed to give effect to the
1-for-10
reverse split of our outstanding common stock prior to the
closing of this offering and the assumed conversion of
redeemable convertible preferred stock upon the closing of this
offering on an if-converted basis for the fiscal year ended
June 30, 2006 and the nine-month period ended
March 31, 2007.
As of March 31, 2007
Pro Forma As
Actual
Pro Forma
Adjusted(1)
(In thousands)
$
16,811
$
16,811
$
84,458
22,443
22,443
90,090
48,112
48,112
115,759
666
56,329
(34,453
)
22,542
90,189
(1)
Each $1.00 increase or decrease in
the assumed initial public offering price of $9.50 per
share would increase or decrease, respectively, the amount of
cash and cash equivalents, working capital, total assets and
total shareholders equity on a pro forma as adjusted basis
by approximately $7.3 million, assuming the number of
shares offered by us, as set forth on the cover of this
prospectus, remains the same and after deducting the estimated
underwriting discounts and commissions payable by us.
6
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greater market presence, name recognition and brand reputation;
a larger installed base of telecommunications and networking
systems with enterprise customers;
larger and more geographically distributed services and support
organizations and capabilities;
a broader offering of telecommunications and networking
products, applications and services;
a more established international presence to address the needs
of global enterprises;
substantially larger patent and intellectual property portfolios;
longer operating histories;
a longer history of implementing large-scale telecommunications
or networking systems;
more established relationships with industry participants,
customers, suppliers, distributors and other technology
companies; and
the ability to acquire technologies or consolidate with other
companies in the industry to compete more effectively.
7
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8
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initial costs of implementation for a new system;
quality of infrastructure;
security concerns;
equipment, software or other technology failures;
regulatory encroachments;
inconsistent quality of service;
perceived unreliability or poor voice quality over IP networks
as compared to circuit-switched networks; and
lack of availability of cost-effective, high-speed network
capacity.
the timing and volume of shipments of our products during a
particular period;
the timing and success of new product introductions by us or our
competitors;
the timing of recognition of revenue from sales to our customers;
changes in our or our competitors pricing policies or
sales terms;
changes in the mix of our products and services sold during a
particular period;
the amount and timing of operating costs related to the
maintenance and expansion of our business, operations and
infrastructure;
our ability to control costs, including third-party
manufacturing costs and costs of components;
our ability to obtain sufficient supplies of components;
our ability to maintain sufficient production volumes for our
products;
9
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volatility in our stock price, which may lead to higher stock
compensation expenses pursuant to Statement of Financial
Accounting Standards No. 123(R),
Share-Based
Payment
, or SFAS 123(R);
the timing of costs related to the development or acquisition of
technologies or businesses;
conditions specific to the IP telecommunications market, such as
rates of adoption of IP telecommunications systems and
introduction of new standards;
changes in domestic and international regulatory environments
affecting the Internet and telecommunications industries;
seasonality in our target markets; and
the purchasing and budgeting cycles of enterprise customers.
10
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the timing of enterprise customers budget cycles and
approval processes;
a technical evaluation or trial by potential enterprise
customers;
our ability to introduce new products, features or functionality
in a manner that suits the needs of a particular enterprise
customer;
the announcement or introduction of competing products; and
the strength of existing relationships between our competitors
and potential enterprise customers.
supplier capacity constraints;
price increases;
timely delivery; and
component quality.
11
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12
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we do not have a sufficient number of accounting personnel with
the relevant technical accounting and financial reporting
experience and skills to facilitate the preparation of timely
and accurate consolidated financial statements; and
we do not have sufficient internal controls related to the
identification of all products and services associated with a
sales arrangement, including commitments made by our sales and
marketing personnel and channel partners to provide specified
upgrades, services or additional products to customers in the
future, including through product roadmap presentations to
customers.
we do not accurately maintain data sufficient to readily track
and validate the existence of fixed assets and we have no formal
procedures in place to ensure that fixed assets continue to be
held and used; and
we do not have adequate procedures for identifying and recording
period-ended accrued expenses and in-transit inventory.
13
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the ability of our products to compete with the products and
solutions offered by our competitors;
14
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the cost of our products;
the reliability of our products;
the timeliness of the introduction and delivery of our
products; and
the market acceptance of our products.
15
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our ability to comply with differing technical and environmental
standards and certification requirements outside the United
States;
difficulties and costs associated with staffing and managing
foreign operations;
greater difficulty collecting accounts receivable and longer
payment cycles;
the need to adapt our products for specific countries;
16
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availability of reliable broadband connectivity and wide area
networks in targeted areas for expansion;
unexpected changes in regulatory requirements;
difficulties in understanding and complying with local laws,
regulations and customs in foreign jurisdictions;
tariffs, export controls and other non-tariff barriers such as
quotas and local content rules;
more limited protection for intellectual property rights in some
countries;
adverse tax consequences;
fluctuations in currency exchange rates, which could increase
the price of our products outside of the United States, increase
the expenses of our international operations and expose us to
foreign currency exchange rate risk;
restrictions on the transfer of funds; and
new and different sources of competition.
17
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18
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19
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issuing additional common stock or other equity securities;
issuing debt securities; or
borrowing funds under a credit facility.
price and volume fluctuations in the overall stock market from
time to time;
significant volatility in the market price and trading volume of
technology companies;
actual or anticipated changes in our results of operations or
fluctuations in our operating results;
actual or anticipated changes in the expectations of investors
or securities analysts;
actual or anticipated developments in our competitors
businesses or the competitive landscape generally;
litigation involving us, our industry or both;
20
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regulatory developments in the United States, foreign countries
or both;
economic conditions and trends in our industry;
major catastrophic events;
sales of large blocks of our stock; or
departures of key personnel.
32,899,655 shares of common stock will be eligible for sale
in the public market, beginning on the 181st day after the
date of this prospectus, unless the
lock-up
period is otherwise extended pursuant to its terms, subject in
some cases to the provisions of Rule 144 under the
Securities Act of 1933, unless released sooner by the written
consent of Lehman Brothers Inc. and J.P. Morgan Securities Inc.,
however, we have no current intention to request that any shares
be released from lock-up restrictions prior to the expiration of
the lock-up period; and
the remainder of the shares will be eligible for sale in the
public market from time to time thereafter upon the lapse of our
right to repurchase with respect to any unvested shares.
21
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22
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prohibit stockholder action by written consent, thereby
requiring all stockholder actions to be taken at a meeting of
our stockholders;
limit who may call a special meeting of stockholders;
establish a classified board of directors, so that not all
members of our board of directors may be elected at one time;
provide our board of directors with the ability to designate the
terms of and issue a new series of preferred stock without
stockholder approval;
require the approval of two-thirds of the shares entitled to
vote at an election of directors to adopt, amend or repeal our
bylaws or repeal certain provisions of our certificate of
incorporation;
allow a majority of the authorized number of directors to adopt,
amend or repeal our bylaws without stockholder approval;
do not permit cumulative voting in the election of our
directors, which would otherwise permit less than a majority of
stockholders to elect directors; and
set limitations on the removal of directors.
23
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24
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25
on an actual basis;
on a pro forma basis to reflect (1) the conversion of all
outstanding redeemable convertible preferred stock into common
stock upon the completion of this offering and (2) the
reclassification of the preferred stock warrant liability to
common stock upon the conversion of warrants to purchase shares
of our redeemable convertible preferred stock into warrants to
purchase shares of our common stock upon the completion of this
offering; and
on a pro forma as adjusted basis to reflect the sale of the
shares of our common stock offered by us at an assumed initial
public offering price of $9.50 per share, the midpoint of
the range set forth on the cover page of this prospectus, after
deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us.
As of
March 31, 2007
Pro
Pro Forma as
Actual
Forma
Adjusted(1)
(In thousands, except share and
per share data)
$
16,811
$
16,811
$
84,458
666
56,329
52,522
109,517
177,164
(284
)
(284
)
(284
)
(86,691
)
(86,691
)
(86,691
)
$
(34,453
)
$
22,542
$
90,189
$
22,542
$
22,542
$
90,189
(1)
Each $1.00 increase or decrease in
the assumed public offering price of $9.50 per share would
increase or decrease, respectively, the amount of cash and cash
equivalents, common stock and total shareholders (deficit)
equity by approximately $7.3 million, assuming the number
of shares offered by us, as set forth on the cover of this
prospectus, remains the same and after deducting the estimated
underwriting discounts and commissions payable by us.
26
Table of Contents
3,249,485 shares of common stock issuable upon exercise of
outstanding options as of March 31, 2007, at a
weighted average exercise price of $1.31 per share;
1,302,038 shares of common stock issuable upon exercise of
options granted between April 1, 2007 and June 8,
2007, at a weighted average exercise price of $11.34 per
share;
70,883 shares of common stock issuable upon exercise of
outstanding warrants as of March 31, 2007, at a weighted
average exercise price of $2.77 per share; and
3,697,962 shares of common stock reserved for future grant
or issuance under our 2007 equity incentive plan and
500,000 shares of common stock to be available for issuance
under our 2007 employee stock purchase plan effective upon the
completion of this offering.
27
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$
9.50
giving effect to this offering
$
0.68
offering
1.51
2.19
$
7.31
28
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Average
Shares Purchased
Total Consideration
Price per
Number
Percent
Amount
Percent
Share
33,355,916
80.9
%
$
103,813,500
58.0
%
$
3.11
7,900,000
19.1
75,050,000
42.0
9.50
41,255,916
100.0
%
178,863,500
100.0
%
3,249,485 shares of common stock issuable upon exercise of
outstanding options as of March 31, 2007, at a weighted
average exercise price of $1.31 per share;
1,302,038 shares of common stock issuable upon exercise of
options granted between April 1, 2007 and June 8,
2007, at a weighted average exercise price of $11.34 per
share;
70,883 shares of common stock issuable upon exercise of
outstanding warrants as of March 31, 2007, at a weighted
average exercise price of $2.77 per share; and
3,697,962 shares of common stock reserved for future grant
or issuance under our 2007 equity incentive plan and
500,000 shares of common stock to be available for issuance
under our 2007 employee stock purchase plan effective upon the
completion of this offering.
Average
Shares Purchased
Total Consideration
Price
Number
Percent
Amount
Percent
per Share
33,355,916
74.9
%
$
103,813,500
56.6
%
$
3.11
3,320,368
7.4
4,456,116
2.4
1.34
7,900,000
17.7
75,050,000
41.0
9.50
44,576,284
100.0
%
$
183,319,616
100.0
%
(1)
Because some of the warrants may be
exercised on a net exercise basis, the actual number
of shares of common stock that may be issued upon exercise of
the warrants may be lower. In addition, warrants to purchase
3,180 shares of common stock have exercise prices that
exceed $9.50, the midpoint of the range set forth on the cover
page of this prospectus. Accordingly, these warrants may never
be exercised.
29
Table of Contents
Nine Months Ended
Year Ended June 30,
March 31,
2002
2003
2004
2005
2006
2006
2007
(Dollars in thousands, except per share amounts)
$
5,302
$
8,537
$
16,587
$
31,970
$
55,300
$
37,972
$
61,473
1,872
1,755
2,241
3,512
6,308
4,552
7,431
7,174
10,292
18,828
35,482
61,608
42,524
68,904
3,212
4,401
7,725
13,961
21,855
15,723
21,271
1,888
1,539
1,660
2,907
5,425
3,942
4,853
5,100
5,940
9,385
16,868
27,280
19,665
26,124
2,704
4,352
9,443
18,614
34,328
22,859
42,780
7,100
6,575
5,517
7,034
9,720
6,520
11,450
8,519
6,936
8,004
10,050
15,699
10,855
18,441
4,022
2,884
2,166
3,045
4,936
3,108
8,383
19,641
16,394
15,687
20,129
30,355
20,483
38,274
(17,567
)
(12,041
)
(6,244
)
(1,515
)
3,973
2,376
4,506
(31
)
19
(7
)
124
248
96
(7
)
(17,598
)
(12,022
)
(6,251
)
(1,391
)
4,221
2,472
4,499
(11
)
(219
)
(140
)
(311
)
(17,598
)
(12,022
)
(6,251
)
(1,402
)
4,002
2,332
4,188
(38
)
(26
)
(32
)
(51
)
(38
)
(38
)
$
(17,598
)
$
(12,060
)
$
(6,277
)
$
(1,434
)
$
3,951
$
2,294
$
4,150
$
(18.66
)
$
(10.97
)
$
(1.27
)
$
(0.27
)
$
0.60
$
0.36
$
0.50
$
(18.66
)
$
(10.97
)
$
(1.27
)
$
(0.27
)
$
0.39
$
0.24
$
0.34
943,211
1,099,805
4,934,507
5,351,706
6,609,170
6,358,839
8,341,561
943,211
1,099,805
4,934,507
5,351,706
10,114,513
9,574,631
12,176,351
$
0.13
$
0.13
$
0.12
$
0.12
29,925,576
31,657,967
33,430,919
35,492,757
30
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Nine Months Ended
Year Ended June 30,
March 31,
2002
2003
2004
2005
2006
2006
2007
(In thousands)
$
$
$
$
$
$
$
7
16
14
55
14
6
190
7
2
331
446
45
82
45
24
1,470
$
$
446
$
45
$
82
$
82
$
46
$
2,053
As of
As of June 30,
March 31,
2002
2003
2004
2005
2006
2007
(In thousands)
$
6,182
$
3,451
$
723
$
5,373
$
12,333
$
16,811
3,476
3,720
1,320
10,741
16,208
22,443
13,426
8,231
7,962
20,960
30,885
48,112
79,974
42,814
46,300
56,281
56,332
56,329
(74,721
)
(38,374
)
(44,596
)
(45,713
)
(41,168
)
(34,453
)
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42
II-4
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
32
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35
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Nine Months Ended
Year Ended June 30,
March 31,
2004
2005
2006
2006
2007
(In thousands)
$
16,587
$
31,970
$
55,300
$
37,972
$
61,473
2,241
3,512
6,308
4,552
7,431
18,828
35,482
61,608
42,524
68,904
7,725
13,961
21,855
15,723
21,271
1,660
2,907
5,425
3,942
4,853
9,385
16,868
27,280
19,665
26,124
9,443
18,614
34,328
22,859
42,780
5,517
7,034
9,720
6,520
11,450
8,004
10,050
15,699
10,855
18,441
2,166
3,045
4,936
3,108
8,383
15,687
20,129
30,355
20,483
38,274
(6,244
)
(1,515
)
3,973
2,376
4,506
(7
)
124
248
96
(7
)
(6,251
)
(1,391
)
4,221
2,472
4,499
(11
)
(219
)
(140
)
(311
)
$
(6,251
)
$
(1,402
)
$
4,002
$
2,332
$
4,188
Nine Months Ended
Year Ended June 30,
March 31,
2004
2005
2006
2006
2007
(In thousands)
$
$
$
$
$
7
16
14
55
14
6
190
7
2
331
45
82
45
24
1,470
$
45
$
82
$
82
$
46
$
2,053
36
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Nine Months
Ended
Year Ended June 30,
March 31,
2004
2005
2006
2006
2007
88
%
90
%
90
%
89
%
89
%
12
10
10
11
11
100
100
100
100
100
41
40
35
37
31
9
8
9
9
7
50
48
44
46
38
50
52
56
54
62
29
20
16
15
17
43
28
26
26
27
11
8
8
7
12
83
56
50
48
56
(33
)
(4
)
6
6
6
(33
)
(4
)
6
6
6
1
(33
)%
(4
)%
6
%
5
%
6
%
37
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38
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39
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40
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Three Months Ended
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
March 31,
2005
2005
2006
2006
2006
2006
2007
(In thousands)
$
$
$
$
$
1
$
3
$
3
14
2
5
24
26
6
8
17
82
91
2
5
97
111
123
9
13
2
21
702
415
353
$
23
$
13
$
10
$
36
$
822
$
635
$
596
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Three Months Ended
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
March 31,
2005
2005
2006
2006
2006
2006
2007
89
%
92
%
87
%
91
%
90
%
88
%
89
%
11
8
13
9
10
12
11
100
100
100
100
100
100
100
36
39
36
32
32
30
31
10
7
11
8
7
7
7
46
46
47
40
39
37
38
54
54
53
60
61
63
62
18
14
14
17
15
18
16
27
26
24
25
28
26
27
8
7
7
10
13
12
12
53
47
45
52
56
56
55
1
7
8
8
5
7
7
1
1
(2
)
1
1
7
8
9
6
5
8
(1
)
1
%
7
%
8
%
9
%
5
%
5
%
8
%
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Year Ended June 30,
Nine Months Ended March 31,
2004
2005
2006
2006
2007
(In thousands)
$
(5,392
)
$
(4,957
)
$
7,266
$
4,525
$
5,039
(653
)
(590
)
(1,293
)
(749
)
(1,106
)
3,317
10,197
987
865
545
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Payments Due by Period
Less Than
More Than
Total
1 Year
1-3 Years
3-5 Years
5 Years
(In thousands)
$
900
$
712
$
188
7,120
7,120
$
8,020
$
7,832
$
188
(1)
Purchase obligations represent
commitments under non-cancelable orders for finished goods
inventory with our contract manufacturers. At March 31,
2007, our purchase obligations increased by $4.5 million as
a result of increased sales.
we do not have a sufficient number of accounting personnel with
the relevant technical accounting and financial reporting
experience and skills to facilitate the preparation of timely
and accurate consolidated financial statements; and
we do not have sufficient internal controls related to the
identification of all products and services associated with a
sales arrangement, including commitments made by our sales and
marketing personnel and channel partners to provide specified
upgrades, services or additional products to customers in the
future, including through product roadmap presentations to
customers.
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we do not accurately maintain data sufficient to readily track
and validate the existence of fixed assets and we have no formal
procedures in place to ensure that fixed assets continue to be
held and used;
we do not have adequate procedures for identifying and recording
period-end accrued expenses and in-transit inventory.
Revenue recognition;
Allowance for doubtful accounts;
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Stock-based compensation;
Inventory valuation; and
Accounting for income taxes.
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Nine Months
Ended
March 31, 2007
Class One
Class Two
6.08 years
4.0 years
4.6-4.8
%
4.6-4.8
%
71
55
0
0
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Shares
Subject to
Deemed
Grant
Options
Exercise
Fair Market Value
Intrinsic Value
Date
Granted
Price per Share
per Share
per Share
July 8
30,300
$
0.40
$
0.40
$
September 8
259,000
0.40
0.40
October 3
265,500
0.40
0.50
0.10
January 12
466,500
0.80
1,20
0.40
April 13
151,000
1.00
1.50
0.50
May 1
44,500
1.00
1.60
0.60
June 1
83,250
1.00
1.90
0.90
July 10
57,500
1.00
2.50
1.50
July 28
6,000
2.50
2.50
*
August 7
41,000
2.50
4.00
1.50
September 5
125,000
1.00
6.50
5.50
September 11
96,650
2.50
6.50
4.00
October 3
523,095
3.20
6.50
3.30
October 4
40,500
3.20
6.50
3.30
November 6
96,300
3.20
7.80
4.60
December 4
34,500
3.20
9.10
5.90
December 14
89,999
3.60
9.10
5.50
April 13
737,740
11.30
11.30
*
May 21
564,298
11.40
11.40
*
*
Contemporaneous valuation
determined by our board of directors with input from management.
Retrospective valuation determined
by our board of directors with input from management.
prices for our preferred stock that we sold to outside investors
in arms-length transactions, and the rights, preferences
and privileges of our preferred stock and our common stock;
extensive valuations performed as of January 4, 2006,
July 12, 2006, October 3, 2006, December 14,
2006, April 6, 2007 and May 16, 2007;
interpolations of enterprise value based on a review of relevant
company, industry and market factors for those intervening
periods between the dates of extensive valuations
the periods between valuations were three months or less for the
period from July 1, 2006 to May 16, 2007;
our actual financial condition and results of operations during
the relevant period;
the status of strategic initiatives to increase the target
market for our products;
forecasts of our financial results and market conditions
affecting the communications equipment industry;
the fact that the option grants involved illiquid securities in
a private company; and
the likelihood of achieving a liquidity event for the shares of
common stock underlying the options, such as an initial public
offering or sale of our company, given prevailing market
conditions and our relative financial condition at the time of
grant.
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Discounted cash flow model of the income approach, which derives
the fair value based on projected future net free cash flows,
discounted at a risk-adjusted equity rate of return required by
equity investors in the technology and telecommunications
industries and for the time value of money;
The comparative analysis of publicly traded companies, which
values shares of a minority interest in a closely-held
corporation by comparing to comparable publicly traded companies
to determine appropriate multiples to apply to our financial
measures; and
The transaction method, which derives an indication of fair
value from the purchase price multiples in recent mergers and
acquisitions involving target companies operating in the IP
telephony and similar communications equipment and other related
technology industries.
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Starting with the quarter ended December 31, 2005 our
revenues have grown sequentially for each quarter from
$11.2 million for the quarter ended September 30, 2005
to $26.0 million in the quarter ended March 31, 2007,
as the number of our channel partners increased from 210 to over
400 and our enterprise customer base increased from 2,000 to
4,500 during this period. In addition, we hired our Vice
President of Sales in October 2005.
Starting with the quarter ended December 31, 2005 we have
had positive cash flows from operations.
In the quarter ending March 31, 2006, we hired our Vice
President for Engineering and Operations and our Managing
Director of European operations, and added two independent board
members. Additionally, we launched our major accounts program
and hired staff to support that program.
In the quarter ending June 30, 2006, we introduced a new
family of hardware products, with higher gross margins, that has
contributed to a measurable increase in overall gross margins.
Based on improved enterprise value, the rights and preferences
of preferred stock had less relative impact than for prior
periods and the value of our common stock began to increase more
rapidly than in prior periods.
In the quarter ended September 30, 2006 the initial public
offering market for emerging technology companies improved
substantially. Since that time the number of initial public
offerings and associated valuation multiples has been
substantially higher than for earlier periods. The changes in
the capital markets increased the likelihood of a liquidity
event through a public offering and reduced the
non-marketability discount.
In the quarter ended December 31, 2006, we hired our Vice
President of Business Development, and opened our Australian
sales office. In late December 2006, we selected our lead
investment banking team in contemplation of this offering.
In the quarter ended March 31, 2007 we held our
organizational meeting in preparation for this offering and
filed our initial registration statement with the SEC. The
marketability discount was eliminated as the likelihood of an
initial public offering was considered very high.
In April 2007 and May 2007, we hired a new Chief Financial
Officer and added three new independent board members.
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ShoreWare desktop applications.
ShoreWare
desktop applications for end users include the following primary
offerings: Personal Call Manager, Unified Messaging, Office
Anywhere, Automated Attendant and a softphone.
Personal Call Manager.
Personal Call Manager
is an application that allows end users to manage their voice
communications from their desktops. With the click of a mouse,
end users can initiate, manage, terminate, and receive calls,
convene and manage conference calls, and see the availability of
others on the network. This functionality is enhanced by the
integration of our Personal Call Manager application with
Microsoft Outlook, which allows the end user to initiate calls
from a contact list.
Unified Messaging.
Unified Messaging
integrates our voicemail application with Microsoft Outlook.
This enables end users to receive, send, be notified of and play
voice mail messages through their Microsoft Outlook email.
Office Anywhere.
Office Anywhere enables end
users outside the office to manage calls with Personal Call
Manager and to enjoy the same call handling productivity
benefits as their office-based colleagues. Communications
directed to the end users office phone are forwarded to
the end users location, and the end users outbound
calls appear to the called party as if they originated in the
end users office. Using Office Anywhere, end users have
the same call management and unified messaging features and
functionality at remote locations as they have in their offices.
Softphone.
ShoreTels softphone
application allows an end user to turn a PC into an IP phone by
simply connecting a headset to the PC and activating the
application.
Automated Attendant.
Automated Attendant
provides end users with a
24-hour
automated call answering and routing capability that enables the
enterprise to direct callers to appropriate individuals,
workgroups or messages.
Workgroup.
Workgroup is an entry-level contact
center application that provides real-time handling of incoming
calls to enterprises, with call routing, queuing and reporting
tools.
ShoreWare system management.
Our browser-based
system management applications consist of ShoreWare Director and
ShoreWare System Monitor.
ShoreWare Director.
ShoreWare Director
provides enterprises with a single point of system management,
enabling IT administrators to view and manage the entire
telecommunications system of the enterprise from any location
using a single application. A new end users extension,
mailbox and automated attendant profile can be added from a
single management screen, avoiding the additional work required
with most PBXs, voice mail systems and automated attendants.
ShoreWare System Monitor.
ShoreWare System
Monitor is an IP voice management tool that is designed to
continuously measure the performance of every link in the
network, enabling an enterprise to identify and address voice
quality issues.
Additional business applications.
We offer
other business applications, such as ShoreTel Contact Center,
ShoreTel Converged Conferencing and salesforce.com integration.
ShoreTel Contact Center allows enterprises to efficiently manage
significant inbound or outbound call activities. ShoreTel
Converged Conferencing enables enterprises to conduct large
audio conferences and provides collaboration tools for
application sharing, desktop sharing, instant messaging and end
user availability information. Our salesforce.com integration
application is designed to improve the productivity of end users
that use salesforce.com by seamlessly integrating voice
communications capabilities into their data driven workflow.
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Post-contractual support services include web-based access
support services and tools, access to technical support
engineers, hardware replacement and software updates. These
services are typically offered under support contracts with
terms of up to five years.
Training services include certification programs for channel
partners, training programs at enterprise customer or channel
partner locations and self-paced, desktop training programs.
System design and installation services include the assessment
of the telecommunications requirements of a particular
enterprise, the configuration of a system to maximize its
efficiency, the management of the installation, and the
subsequent testing and implementation of our systems.
Professional services include software development to improve
system performance, enable integration of our systems with third
party applications or legacy systems, streamline business
processes and address enterprise customer-specific business
opportunities.
software that enables calling between switches and allows calls
to be distributed among switches instead of using a single
centralized switch;
software that enables ShoreGear switches to obtain call routing
information;
software that monitors the bandwidth consumed on each WAN
segment and prevents the system from exceeding bandwidth
limitations;
software that monitors all call activity on ShoreGear switches,
and enables integration of ShoreTel and third-party applications;
software that coordinates the functions of all servers on the
system, allowing them to perform as a single, virtual server;
software that enables remote ShoreTel and third-party
applications to access and modify our systems;
software that enables the switch to communicate with the
application server, and receive system configuration information;
software that allows each switch to maintain a comprehensive
view of the system; and
software that provides a graphical user interface for our phones.
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avoid costly capital expenditures for the establishment of
manufacturing operations;
focus on the design, development, sales and support of our
hardware products; and
leverage the scale, expertise and purchasing power of
specialized contract manufacturers.
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Providers of IP systems, including 3Com and Cisco
Systems; and
Providers of hybrid systems, including Alcatel-Lucent, Avaya,
Inter-Tel, Mitel Networks (which recently announced plans to
acquire Inter-Tel) and Nortel Networks.
price of products and services and total cost of ownership;
system reliability;
voice quality and product features;
ease of administration and installation, including system
scalability;
customer service and technical support;
relationships with buyers and decision makers and brand
recognition;
an installed base of similar or related products;
the ability to integrate various products into an enterprise
customers existing networks, including the ability of a
providers products to interoperate with other
providers communications products; and
size and financial stability of our operations compared to those
of our competitors.
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Age
59
Chairman, President and Chief
Executive Officer
58
Founder, Chief Technology Officer
and Director
57
Vice President, Finance
45
Chief Financial Officer
51
Vice President, Engineering and
Operations
48
Vice President, Marketing
45
Vice President, Sales
51
Vice President, Global Support
Services
49
Director
55
Director
48
Director
59
Director
57
Director
68
Director
*
Lead independent director.
(1)
Member of our audit committee.
(2)
Member of our compensation committee.
(3)
Member of our corporate governance and nominating committee.
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the Class I directors will be Dr. Bregman and Messrs. Combs and
Thompson, and their terms will expire at the annual meeting of
stockholders to be held in 2007;
the Class II directors will be Messrs. Basart, Denman and van
Overbeek, and their terms will expire at the annual meeting of
stockholders to be held in 2008; and
the Class III directors will be Messrs. Daichendt and Kissner,
and their terms will expire at the annual meeting of
stockholders to be held in 2009.
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evaluates the qualifications, independence and performance of
our independent registered public accounting firm;
determines the engagement of our independent registered public
accounting firm and reviews and approves the scope of the annual
audit and the audit fee;
discusses with management and our independent registered public
accounting firm the results of the annual audit and the review
of our quarterly financial statements;
approves the retention of our independent registered public
accounting firm to perform any proposed permissible non-audit
services;
monitors the rotation of partners of our independent registered
public accounting firm on our engagement team as required by law;
reviews our critical accounting policies and estimates; and
annually reviews the audit committee charter and the
committees performance.
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Fees Earned
Non-Equity
or Paid
Option
Incentive Plan
All Other
in Cash
Awards(1)
Compensation
Compensation
Total
(2)
(3)
(1)
Under the SFAS 123(R) modified prospective transition
method, we did not record any amounts in our consolidated
financial statements for fiscal 2006 with respect to these
awards.
(2)
As of June 30, 2006, Mr. Kissner held an immediately
exercisable stock option to purchase 50,000 shares of our
common stock, with an exercise price of $1.00 per share,
that was granted during fiscal 2006, which option vests as to
25% of the shares in April 2007 and as to 1/48 of the shares
each month over three years thereafter.
(3)
As of June 30, 2006, Mr. Thompson held
50,000 shares of our common stock issued upon early
exercise of a stock option, with an exercise price of
$0.80 per share, that was granted during fiscal 2006, which
shares vest as to 25% of the shares in January 2007 and as to
1/48 of the shares each month over three years thereafter.
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Non-Equity
Option
Incentive Plan
All Other
Salary(1)
Bonus
Awards(2)
Compensation(3)
Compensation
Total
$
287,500
$
188,162
$
25,868
(4)
$
501,530
200,000
55,000
255,000
214,038
80,000
39,211
(4)
333,249
Global Support Services
155,000
134,767
(6)
289,767
200,000
65,000
265,000
(1)
The amounts in this column include payments by us in respect of
accrued vacation, holidays, and sick days, as well as any salary
contributed by the named executive officer to our 401(k) plan.
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(2)
Under the SFAS 123(R) modified prospective transition
method, we did not record any amounts in our consolidated
financial statements for fiscal year 2006 with respect to option
awards.
(3)
Except as otherwise noted below, all non-equity incentive plan
compensation were paid pursuant to the ShoreTel Executive Bonus
Incentive Plan for the second half of fiscal 2006. For a
description of this plan, see Executive
Compensation Compensation discussion and
analysis Cash bonuses.
(4)
Represents travel expenses and rent.
(5)
Mr. Finegan ceased serving as our Chief Financial Officer in May
2007 and currently serves as our Vice President of Finance.
(6)
Also includes $74,567 in sales commissions.
Estimated Future Payouts
Number of
Exercise
Under Non-Equity
Securities
Price of
Grant
Incentive Plan Awards(1)
Underlying
Option
Date
Target
Maximum
Options(2)
Awards(3)
$
105,625
$
237,656
45,000
101,250
9/8/2005
180,000
(4)
$
0.40
1/12/2006
20,000
(5)
0.80
50,625
113,906
10/3/2005
265,500
(6)
0.40
45,000
101,250
45,000
101,250
(1)
Represents bonuses payable pursuant to the ShoreTel Executive
Bonus Incentive Plan for the second half of fiscal 2006. For a
description of this plan, see Executive
Compensation Additional Employee Benefit
Plans Executive Bonus Plans.
(2)
Each stock option was granted pursuant to our 1997 Stock Option
Plan.
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(3)
Represents the fair market value of a share of our common stock
on the grant date of the option, as determined by our board of
directors.
(4)
An immediately exercisable stock option that vested as to 25% of
the shares in July 2006, and vests as to 1/48 of the shares each
month over the next three years thereafter.
(5)
An immediately exercisable stock option that vests as to 1/48 of
the shares each month over four years.
(6)
An immediately exercisable stock option that vested as to 25% of
the shares in October 2006, and vests as to
1/48
of the
shares each month over the next three years thereafter.
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Option
Option
Number of Securities Underlying Unexercised Options(1)
Exercise
Expiration
Exercisable
Unexercisable
Price(2)
Date
59,812
(4)
$
0.10
5/7/2013
4,791
(5)
0.30
3/2/2014
6,000
(6)
0.40
3/14/2015
160,000
(7)
0.40
9/8/2015
132,750
(8)
0.40
10/3/2015
82,500
(9)
1.00
8/1/2011
2,310
(9)
0.10
1/7/2013
123,500
(10)
0.10
1/7/2013
143,000
(11)
0.30
3/2/2014
20,000
(12)
0.40
3/14/2015
(1)
Each stock option was granted pursuant to our 1997 Stock Option
Plan. The vesting and exercisability of each stock option is
described in the footnotes below for each option. Each of these
stock options expires 10 years from the date of grant.
These stock options are also subject to accelerated vesting upon
involuntary termination or constructive termination following a
change of control of ShoreTel, as discussed below in
Executive compensation Employment, Severance
and Change of Control Arrangements.
(2)
Represents the fair market value of a share of our common stock
on the options grant date, as determined by our board of
directors.
(3)
Mr. Combs early-exercised in full a stock option to
purchase 2,081,799 shares during fiscal 2005 and 2006, as
indicated in the table below. This option/shares vested as to
12.5% of the shares in January 2005, and vests as to 1/48 of the
shares each month thereafter.
(4)
Represents shares remaining subject to an immediately
exercisable stock option. Mr. Finegan has early-exercised
the remaining 201,187 shares subject to this option, as
indicated in the table below. The option/shares vested as to 25%
of the shares in March 2004, and vests as to 1/48 of the shares
each month thereafter.
(5)
Represents shares remaining subject to an outstanding stock
option. Mr. Finegan has exercised 5,208 shares subject
to this option, as indicated in the table below. The option
vests as to 1/48 of the shares each month over four years from
the date of grant.
(6)
Represents shares remaining subject to an outstanding stock
option. Mr. Finegan has exercised 2,000 shares subject
to this option, as indicated in the table below. The option
vested as to 25% of the shares in March 2006, and vests as to
1/48 of the shares each month over three years thereafter.
(7)
Represents shares remaining subject to an immediately
exercisable stock option to purchase 180,000 shares that
was partially exercised. Mr. Weisner has early-exercised
20,000 shares subject to this option, as indicated in the
table below. The option/shares vested as to 25% of the shares in
July 2006, and vests as to 1/48 of the shares each month over
three years thereafter. Mr. Weisner also early-exercised in
full an immediately-exercisable stock option to purchase
20,000 shares during fiscal 2006, as indicated in the table
below. This option/shares vests as to 1/48 of the shares each
month over four years from the date of grant.
(8)
Represents shares remaining subject to an immediately
exercisable stock option to purchase 265,500 shares that was
partially exercised. Mr. Vitalone has early-exercised
132,750 shares subject to this option, as indicated in the
table below. The option/shares vested as to 25% of the shares in
October 2006, and vests as to 1/48 of the shares each month over
three years thereafter.
(9)
This stock option is fully vested.
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(10)
Represents shares remaining subject to an immediately
exercisable stock option. Mr. Basart has early-exercised
the remaining 200,000 shares subject to this option as
indicated in the table below. These shares are fully vested.
(11)
Represents shares subject to an outstanding exercisable stock
option. This option vested as to 25% of the shares in October
2003, and vests as to 1/48 of the shares each month over the
next three years thereafter.
(12)
Represents shares subject to an outstanding exercisable stock
option. This option vested as to 25% of the shares in March
2006, and vests as to 1/48 of the shares each month over three
years thereafter.
Number of Shares
Value Realized
Acquired on Exercise
on Exercise(1)
2,081,779
(2)
$
19,152,367
208,395
(3)
1,957,272
40,000
(4)
356,000
132,750
(5)
1,208,025
200,000
(6)
1,880,000
(1)
The aggregate dollar amount realized upon the exercise of an
option represents the difference between the aggregate market
price of the shares of our common stock underlying that option
on the date of exercise (assumed to be the midpoint of the price
range set forth on the cover page of this prospectus) and the
aggregate exercise price of the option.
(2)
Represents the exercise of an immediately exercisable stock
option that continued to be subject to vesting, as described in
footnote 3 to the Outstanding Option Awards at
June 30, 2006 table above. Of these shares, 520,444
became vested during fiscal year 2006.
(3)
Represents the exercise of immediately exercisable stock options
that continued to be subject to vesting, as described in
footnotes 4-6 to the Outstanding Option Awards at
June 30, 2006 table above. Of these shares, 70,250
became vested during fiscal year 2006.
(4)
Represents the exercise of immediately exercisable stock options
that continued to be subject to vesting, as described in
footnote 7 to the Outstanding Option Awards at
June 30, 2006 table above. Of these shares, 2,083
became vested during fiscal year 2006.
(5)
Represents the exercise of an immediately exercisable stock
option that continued to be subject to vesting, as described in
footnote 8 to the Outstanding Option Awards at
June 30, 2006 table above. None of these shares
vested during fiscal year 2006.
(6)
Represents the exercise of an immediately exercisable stock
option that continued to be subject to vesting, as described in
footnote 10 to the Outstanding Option Awards at
June 30, 2006 table above. Of these shares, 80,875
became vested during fiscal year 2006.
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83
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Termination
Change of Control
Acceleration of
Acceleration of
Salary
Equity Vesting(1)
Salary
Equity Vesting(1)
$
325,000
(2)
$
4,788,085
(3)
$
9,576,183
(4)
613,350
(3)
728,000
(5)
604,013
(5)
(1)
Calculated based on the termination or change of control taking
place as of June 30, 2006, the last day of our most recent
fiscal year, and based on assumed initial public offering price
of $9.50 per share, the midpoint of the range set forth on
the cover page of this prospectus.
(2)
Reflects continued base salary for 12 months following
termination.
(3)
Reflects accelerated vesting as if the officer had continued to
be employed for an additional 12 months.
(4)
Reflects acceleration of vesting as to 100% of the shares.
(5)
Reflects acceleration of vesting as to 50% of the shares.
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on the first day of each January from 2008 through 2017, the
number of shares of our common stock will be increased by 5% of
the number of shares of our common stock issued and outstanding
on the preceding
December 31
st
; or
a lesser number of shares of our common stock as determined by
our board of directors.
85
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86
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87
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88
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89
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Shares of Series G
Aggregate
Percentage of
Preferred Stock
Purchase Price
Total Issued
706,378
$
1,229,099.98
35.1
%
607,424
1,056,920.89
30.2
504,222
877,348.54
25.1
132,929
231,298.37
6.6
(1)
Represents 633,854 shares held by Crosspoint Venture
Partners 2000 Q L.P. and 72,524 shares held by Crosspoint
Venture Partners 2000 L.P.
(2)
Represents 351,570 shares held by LB I Group, Inc.;
116,261 shares held by Lehman Brothers P.A LLC;
73,627 shares held by Lehman Brothers Venture Capital
Partners II, L.P.; 52,381 shares held by Lehman
Brothers Partnership Account 2000/2001, L.P.; and
13,585 shares held by Lehman Brothers Offshore Partnership
Account 2000/2001, L.P.
(3)
Represents 491,113 shares held by Foundation Capital
Leadership Fund, L.P. and 13,109 shares held by Foundation
Capital Leadership Principals Fund, LLC.
(4)
Represents 116,711 shares held by JP Morgan Direct Venture
Capital Institutional Investors LLC; 15,554 shares held by
J.P. Morgan Direct Venture Capital Private Investors LLC
and 664 shares held by 522 Fifth Avenue Fund, L.P.
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Shares of Series H
Aggregate
Percentage of
Preferred Stock
Purchase Price
Total Issued
1,729,575
$
3,666,699.64
36.7
%
1,424,409
3,019,749.41
30.2
1,234,594
2,617,340.34
26.2
325,480
690,018.66
6.9
(1)
Represents 1,551,998 shares held by Crosspoint Venture
Partners 2000 Q L.P. and 177,577 shares held by Crosspoint
Venture Partners 2000 L.P.
(2)
Represents 824,431 shares held by LB I Group, Inc.;
272,632 shares held by Lehman Brothers P.A LLC;
172,655 shares held by Lehman Brothers Venture Capital
Partners II, L.P.; 122,834 shares held by Lehman
Brothers Partnership Account 2000/2001, L.P.; and
31,857 shares held by Lehman Brothers Offshore Partnership
Account 2000/2001, L.P.
(3)
Represents 1,202,527 shares held by Foundation Capital
Leadership Fund, L.P. and 32,067 shares held by Foundation
Capital Leadership Principals Fund, LLC.
(4)
Represents 285,769 shares held by JP Morgan Direct Venture
Capital Institutional Investors LLC; 38,084 shares held by
J.P. Morgan Direct Venture Capital Private Investors LLC
and 1,627 shares held by 522 Fifth Avenue Fund, L.P.
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each of the executive officers listed in the summary
compensation table;
each of our directors;
all of our directors and executive officers as a group; and
each stockholder known by us to be the beneficial owner of more
than 5% of our common stock.
Number of
Percentage of Shares
Shares
Beneficially Owned
Beneficially
Before
After
Owned
Offering
Offering
2,081,779
6.2
%
5.0
%
279,000
*
*
239,999
*
*
315,500
*
*
777,476
2.3
1.9
*
*
*
*
*
*
50,000
*
*
1,351,296
4.0
3.3
50,000
*
*
5,680,549
16.5
13.4
9,321,548
27.9
22.6
6,815,679
20.4
16.5
1,760,553
5.3
4.3
7,566,831
22.7
18.3
*
Less than 1%
(1)
Consists of shares issued upon early exercise of a stock option,
a portion of which shares remain subject to vesting. The vesting
schedule for these shares is described in footnote 3 to the
Outstanding Option Awards at June 30, 2006
table under Executive Compensation.
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(2)
Consists of 208,395 shares issued upon early exercise of
stock options, a portion of which shares remain subject to
vesting, and 70,605 shares subject to outstanding stock
options, which options are immediately exercisable subject to
our lapsing right of repurchase. The vesting schedules for these
shares and stock options are described in footnotes 4-6 to
the Outstanding Option Awards at June 30, 2006
table under Executive Compensation. Mr. Finegan
ceased serving as our Chief Financial Officer in May 2007.
(3)
Consists of 82,500 shares issued upon early exercise of a
stock option, a portion of which shares remain subject to
vesting, and 157,499 shares subject to immediately
exercisable stock options subject to our lapsing right of
repurchase. The vesting schedules for these shares and stock
option are described in footnote 7 to the Outstanding
Option Awards at June 30, 2006 table under
Executive Compensation.
(4)
Consists of 132,750 shares issued upon early exercise of a
stock option, a portion of which shares remain subject to
vesting, and 182,750 shares subject to outstanding stock
options, which options are immediately exercisable subject to
our lapsing right of repurchase. The vesting schedules for these
shares and stock option are described in footnote 8 to the
Outstanding Option Awards at June 30, 2006
table under Executive Compensation.
(5)
Consists of 452,000 shares held by Mr. Basart, and
325,476 shares subject to outstanding stock options, which
options are immediately exercisable subject to our lapsing right
of repurchase. The vesting schedules for these stock options are
described in footnotes 9-12 to the Outstanding Option
Awards at June 30, 2006 table under Executive
Compensation.
(6)
Consists of shares issued upon early exercise of a stock option,
all of which shares remain subject to vesting in accordance with
the vesting schedule described in footnote 2 to the
Director Compensation table under Management
Director Compensation.
(7)
Consists of 1,344,004 shares held by Mr. van Overbeek
and 7,292 shares issuable upon exercise of outstanding
stock options which shares will be exercisable within sixty days
of May 31, 2007.
(8)
Consists of shares issued upon early exercise of a stock option,
of which 50,000 shares remain subject to vesting in
accordance with the vesting schedule described in
footnote 3 to the Director Compensation table.
(9)
Includes 1,318,014 shares subject to options that are
immediately exercisable, and remain subject to vesting, and
5,534,715 shares which were issued pursuant to immediately
exercisable stock options, a portion of which remain subject to
our right of repurchase upon termination of employment, which
rights lapse according to the vesting schedule of the original
options.
(10)
Consists of 8,915,465 shares held by Crosspoint Venture
Partners 2000 Q, L.P., 1,020,091 shares held by Crosspoint
Venture Partners 2000, L.P., 1,015,392 shares held by
Crosspoint Venture Partners 1996, L.P., and 700,987 shares
held by Crosspoint Venture Partners LS 2000, L.P. Crosspoint
Associates 2000, L.L.C. is the general partner of Crosspoint
Venture Partners 2000 Q, L.P., Crosspoint Venture Partners 2000,
L.P. and Crosspoint Venture Partners LS 2000, L.P. Crosspoint
Associates 1996, L.L.C. is the general partner of Crosspoint
Venture Partners 1996, L.P. Seth D. Neiman, a managing
member of Crosspoint Associates 2000, L.L.C. and Crosspoint
Associates 1996, L.L.C., has voting and investment authority
over the shares held by Crosspoint Venture Partners 2000 Q,
L.P., Crosspoint Venture Partners 2000, L.P., Crosspoint Venture
Partners 1996, L.P. and Crosspoint Venture Partners LS 2000,
L.P. The address of Crosspoint Venture Partners is 2925 Woodside
Road, Woodside, CA 94062.
(11)
Consists of 5,122,994 shares held by Foundation Capital,
L.P., 2,753,934 shares held by Foundation Capital
Leadership Fund, L.P., 569,220 shares held by Foundation
Capital Entrepreneurs Fund, L.L.C. and 73,453 shares held
by Foundation Capital Leadership Principals Fund, L.L.C.
Foundation Capital Management, L.L.C. is the general partner of
Foundation Capital, L.P. and managing member of Foundation
Capital Entrepreneurs, L.L.C. Jim Anderson, William Elmore,
Kathryn Gould and Paul Koontz are the managing members of
Foundation Capital Management, L.L.C. and share voting and
investment control over the shares. The managing members of
Foundation Capital Management, L.L.C. disclaim beneficial
ownership of the shares, except to the extent of their direct
pecuniary interest in the shares. Foundation Capital Leadership
Management Company, L.L.C. is the general partner of Foundation
Capital Leadership Fund, L.P. and managing member of Foundation
Capital Leadership Principals Fund, L.L.C. William Elmore,
Kathryn Gould, Adam Grosser, Paul Koontz, and Mike Schuh are the
managing members of Foundation Capital
93
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Leadership Management Company, L.L.C. and share voting and
investment power of the shares. The managing members of
Foundation Capital Leadership Management Company, L.L.C.
disclaim beneficial ownership of the shares, except to the
extent of their direct pecuniary interest in the shares. Each of
these entities is affiliated with Foundation Capital. The
address of Foundation Capital is 70 Willow Road, Suite 200,
Menlo Park, CA 94025.
(12)
Consists of 1,902,556 shares held by J.P. Morgan Direct
Venture Capital Institutional Investors LLC, 253,548 shares
held by J.P. Morgan Direct Venture Capital Private Investors LLC
and 44,589 shares held by 522 Fifth Avenue Fund, L.P.
JPMorgan Chase Bank, N.A. serves as investment advisor of J.P.
Morgan Direct Venture Capital Institutional Investors LLC. J.P.
Morgan Investment Management Inc. serves as investment advisor
of J.P. Morgan Direct Venture Capital Private Investors LLC.
J.P. Morgan Investment Management Inc. serves as investment
advisor of 522 Fifth Avenue Fund, L.P. Jarrod Fong and Lawrence
Unrein, portfolio managers for J.P. Morgan Direct Venture
Capital Institutional Investors LLC, J.P. Morgan Direct Venture
Capital Private Investors LLC and 522 Fifth Avenue Fund, L.P.,
share voting and investment control over the shares held by
these entities. The address of J.P. Morgan Direct Venture
Capital is 245 Park Avenue, New York, NY 10167. These
stockholders are affiliated with J.P. Morgan Securities Inc.,
which is acting as an underwriter of this offering.
(13)
Consists of 4,004,491 shares held by Lehman Brothers VC
Partners 2002 L.P., 1,810,365 shares held by Lehman
Brothers P.A. LLC, 1,410,001 shares held by LB I Group
Inc., 1,146,489 shares held by Lehman Brothers Venture
Capital Partners II, L.P., 815,656 shares held by Lehman
Brothers Partnership Account 2000/2001, L.P. and
211,538 shares held by Lehman Brothers Offshore Partnership
Account 2000/2001, L.P. Lehman Brothers Holdings Inc., a
reporting company under the Securities Exchange Act of 1934, has
voting and investment control over the shares held by these
entities. The address of Lehman Brothers Venture Partners is
3000 Sand Hill Road, Building 3, Suite 190, Menlo Park, CA
94025. These stockholders are affiliated with Lehman Brothers
Inc., which is acting as an underwriter of this offering.
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33,367,249 shares of our common stock held by approximately
225 stockholders;
4,521,431 shares issuable upon exercise of outstanding
stock options; and
70,883 shares issuable upon exercise of outstanding
warrants.
95
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96
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the transaction is approved by the board of directors prior to
the time that the interested stockholder became an interested
stockholder;
upon consummation of the transaction which resulted in the
stockholders becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of
the corporation outstanding at the time the transaction
commenced; or
at or subsequent to such time that the stockholder became an
interested stockholder the business combination is approved by
the board of directors and authorized at an annual or special
meeting of stockholders by at least two-thirds of the
outstanding voting stock which is not owned by the interested
stockholder.
following the completion of this offering, no action shall be
taken by our stockholders except at an annual or special meeting
of our stockholders called in accordance with our bylaws and
that our stockholders may not act by written consent;
our stockholders may not call special meetings of our
stockholders or fill vacancies on our board of directors;
our board of directors is divided into three classes and the
directors in each class will serve for a three-year term, with
our stockholders electing one class each year;
our board of directors may designate the terms of and issue a
new series of preferred stock with voting or other rights
without stockholder approval;
the approval of holders of two-thirds of the shares entitled to
vote at an election of directors will be required to adopt,
amend or repeal our bylaws or amend or repeal the provisions of
our bylaws or repeal the provisions of our certificate of
incorporation regarding the fixing of the authorized number of
directors, the election and removal of directors the
classification of our board of directors into three classes,
indemnification of directors and the ability of stockholders to
take action or call special meetings of stockholders;
a majority of the authorized number of directors will have the
power to adopt, amend or repeal our bylaws without stockholder
approval
our stockholders may not cumulate votes in the election of
directors;
directors can only be removed for cause by the holders of at
least two-thirds of the shares entitled to vote at an election
of directors;
97
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we will indemnify directors and officers against losses that
they may incur in investigations and legal proceedings resulting
from their services to us, which may include services in
connection with takeover defense measures.
98
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no shares will be eligible for sale on the date of this
prospectus;
32,899,655 shares will be eligible for sale upon the
expiration of
lock-up
agreements, as described below under Underwriters,
beginning on the 181st day (subject to a possible extension
of up to 34 additional days), after the date of this prospectus,
subject to early release by Lehman Brothers Inc. and
J.P. Morgan Securities Inc., in their sole discretion and
subject in some cases to the provisions of Rule 144 under
the Securities Act of 1933; and
the remainder of the shares will be eligible for sale in the
public market from time to time thereafter upon the lapse of our
right of repurchase with respect to any unvested shares.
1% of the then outstanding shares of our common stock, which
will be approximately 412,647 shares immediately after this
offering; or
99
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the average weekly trading volume in our common stock on the
NASDAQ Global Market during the four calendar weeks preceding
the filing of a notice on Form 144 with respect to such
sale.
100
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Number of Shares
7,900,000
the representations and warranties made by us to the
underwriters are true;
there is no material change in our business or the financial
markets; and
we deliver customary closing documents to the underwriters.
No Exercise
Full Exercise
$
$
$
$
101
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during the last 17 days of the
180-day
restricted period we issue an earnings release or material news
or a material event relating to us occurs; or
prior to the expiration of the
180-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
180-day
period,
the history and prospects for the industry in which we compete;
our financial information;
the ability of our management and our business potential and
earning prospects;
the prevailing securities markets at the time of this
offering; and
the recent market prices of, and the demand for, publicly traded
shares of generally comparable companies.
Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a
specified maximum.
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A short position involves a sale by the underwriters of shares
in excess of the number of shares the underwriters are obligated
to purchase in the offering, which creates the syndicate short
position. This short position may be either a covered short
position or a naked short position. In a covered short position,
the number of shares involved in the sales made by the
underwriters in excess of the number of shares they are
obligated to purchase is not greater than the number of shares
that they may purchase by exercising their option to purchase
additional shares. In a naked short position, the number of
shares involved is greater than the number of shares in their
option to purchase additional shares. The underwriters may close
out any short position by either exercising their option to
purchase additional shares
and/or
purchasing shares in the open market. In determining the source
of shares to close out the short position, the underwriters will
consider, among other things, the price of shares available for
purchase in the open market as compared to the price at which
they may purchase shares through their option to purchase
additional shares. A naked short position is more likely to be
created if the underwriters are concerned that there could be
downward pressure on the price of the shares in the open market
after pricing that could adversely affect investors who purchase
in the offering.
Syndicate covering transactions involve purchases of the common
stock in the open market after the distribution has been
completed in order to cover syndicate short positions.
Penalty bids permit the representatives to reclaim a selling
concession from a syndicate member when the common stock
originally sold by the syndicate member is purchased in a
stabilizing or syndicate covering transaction to cover syndicate
short positions.
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to any legal entity that is authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in
securities; or
to any legal entity that has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts; or
in any other circumstances that do not require the publication
of a prospectus pursuant to Article 3 of the Prospectus
Directive.
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released, issued, distributed or caused to be released, issued
or distributed to the public in France; or
used in connection with any offer for subscription or sale of
the shares to the public in France.
to qualified investors (investisseurs qualifiés)
and/or
to a
restricted circle of investors (cercle restreint
dinvestisseurs), in each case investing for their own
account, all as defined in, and in accordance with,
Article L.411-2,
D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the
French Code monétaire et financier; or
to investment services providers authorized to engage in
portfolio management on behalf of third parties; or
in a transaction that, in accordance with article
L.411-2-II-1°-or-2°-or 3°of the French Code
monétaire et financier and
article 211-2
of the General Regulations (Règlement Général) of
the Autorité des Marchés Financiers, does not
constitute a public offer (appel public à
lépargne).
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106
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-1
Table of Contents
ShoreTel, Inc.
Sunnyvale, California
April 30, 2007
(June , 2007 as to the effect of the reverse
stock split described in the first paragraph of
Note 8)
June 8, 2007
F-2
Table of Contents
F-3
Table of Contents
Nine Months Ended
Year Ended June 30,
March 31,
2004
2005
2006
2006
2007
(Unaudited)
(Dollars in thousands, except per share amounts)
$
16,587
$
31,970
$
55,300
$
37,972
$
61,473
2,241
3,512
6,308
4,552
7,431
18,828
35,482
61,608
42,524
68,904
7,725
13,961
21,855
15,723
21,271
1,660
2,907
5,425
3,942
4,853
9,385
16,868
27,280
19,665
26,124
9,443
18,614
34,328
22,859
42,780
5,517
7,034
9,720
6,520
11,450
8,004
10,050
15,699
10,855
18,441
2,166
3,045
4,936
3,108
8,383
15,687
20,129
30,355
20,483
38,274
(6,244
)
(1,515
)
3,973
2,376
4,506
9
137
292
140
611
(22
)
(21
)
(31
)
(31
)
(624
)
6
8
(13
)
(13
)
6
(7
)
124
248
96
(7
)
(6,251
)
(1,391
)
4,221
2,472
4,499
(11
)
(219
)
(140
)
(311
)
(6,251
)
(1,402
)
4,002
2,332
4,188
(26
)
(32
)
(51
)
(38
)
(38
)
$
(6,277
)
$
(1,434
)
$
3,951
$
2,294
$
4,150
$
(1.27
)
$
(0.27
)
$
0.60
$
0.36
$
0.50
$
(1.27
)
$
(0.27
)
$
0.39
$
0.24
$
0.34
4,934,507
5,351,706
6,609,170
6,358,839
8,341,561
4,934,507
5,351,706
10,114,513
9,574,631
12,176,351
$
0.13
$
0.13
$
0.12
$
0.12
29,925,576
31,657,967
33,430,919
35,492,757
F-4
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Redeemable
Notes
Convertible Preferred
Deferred
Receivable
Total
Stock
Common Stock
Stock
from
Accumulated
Shareholders
Shares
Amount
Shares
Amount
Compensation
Shareholders
Deficit
Deficit
16,587,940
$
42,814
5,641,638
$
49,611
$
(163
)
$
(594
)
$
(87,228
)
$
(38,374
)
2,011,488
3,449
26
(26
)
(26
)
99,140
10
10
11
45
45
(6,251
)
(6,251
)
18,599,428
46,300
5,740,778
49,595
(118
)
(594
)
(93,479
)
(44,596
)
4,716,978
9,949
32
(32
)
(32
)
252,013
13
13
82
82
222
222
(1,402
)
(1,402
)
23,316,406
56,281
5,992,791
49,576
(36
)
(372
)
(94,881
)
(45,713
)
51
(51
)
(51
)
3,428,668
521
521
381
(299
)
82
(46,000
)
(141
)
141
(87,067
)
(9
)
(9
)
4,002
4,002
23,316,406
56,332
9,288,392
50,277
(335
)
(231
)
(90,879
)
(41,168
)
38
(38
)
(38
)
808,789
534
534
2,002
51
2,053
12
12
157
157
(41
)
(57,671
)
(410
)
219
(191
)
4,188
4,188
23,316,406
$
56,329
10,039,510
$
52,522
$
(284
)
$
$
(86,691
)
$
(34,453
)
*
Unaudited
F-5
Table of Contents
Year Ended June 30,
Nine Months Ended March 31,
2004
2005
2006
2006
2007
(Unaudited)
$
(6,251
)
$
(1,402
)
$
4,002
$
2,332
$
4,188
721
592
716
499
651
45
82
82
46
2,053
160
31
11
624
(191
)
(2,788
)
(4,486
)
(2,145
)
(685
)
(7,311
)
(80
)
(3,537
)
7
1,357
(2,127
)
352
(338
)
(335
)
(222
)
(1,327
)
11
39
4
(1
)
(1,210
)
1,199
1,020
809
(1,066
)
3,780
(103
)
198
605
442
398
324
34
1,856
886
82
1,167
2,841
1,505
937
5,398
(5,392
)
(4,957
)
7,266
4,525
5,039
(653
)
(590
)
(1,308
)
(749
)
(1,106
)
15
(653
)
(590
)
(1,293
)
(749
)
(1,106
)
6,000
1,000
1,000
(6,000
)
(1,000
)
(1,000
)
(142
)
(26
)
(7
)
(5
)
(1
)
3,449
9,949
10
52
1,003
879
534
(9
)
(9
)
222
12
3,317
10,197
987
865
545
(2,728
)
4,650
6,960
4,641
4,478
3,451
723
5,373
5,373
12,333
$
723
$
5,373
$
12,333
$
10,014
$
16,811
$
9
$
21
$
31
$
31
$
11
11
82
59
483
$
26
$
32
$
51
$
38
$
38
19
141
141
536
3
28
79
53
349
11
387
41
157
F-6
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
1.
THE
COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
F-7
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
June 30,
March 31,
2004
2005
2006
2007
(unaudited)
$
135
$
119
$
200
$
378
202
250
135
(16
)
(121
)
(72
)
(257
)
$
119
$
200
$
378
$
256
F-8
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
F-9
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
June 30,
March 31,
2004
2005
2006
2007
(unaudited)
$
70
$
112
$
100
$
206
124
190
646
463
(82
)
(202
)
(540
)
(372
)
(135
)
$
112
$
100
$
206
$
162
F-10
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
Nine Months Ended
Year Ended June 30,
March 31,
2004
2005
2006
2006
2007
(unaudited)
$
$
$
$
$
7
16
14
55
14
6
190
7
2
331
45
82
45
24
1,470
$
45
$
82
$
82
$
46
$
2,053
F-11
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
a)
Income from continuing operations would have been $72,000 higher
for the nine months ended March 31, 2007.
b)
Net income would have been $65,000 higher for the
nine months ended March 31, 2007.
c)
Basic and diluted earnings per share would have been $0.01
higher for the nine months ended March 31, 2007.
F-12
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
F-13
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
2.
NET
INCOME (LOSS) PER COMMON SHARE AND UNAUDITED PRO FORMA NET
INCOME PER COMMON SHARE
F-14
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
Nine Months Ended
Year Ended June 30,
March 31,
2004
2005
2006
2006
2007
(Unaudited)
$
(6,277
)
$
(1,434
)
$
3,951
$
2,294
$
4,150
4,934,507
5,351,706
6,609,170
6,358,839
8,341,561
792,574
453,681
1,245,694
2,650,402
2,699,744
2,521,393
62,367
62,367
67,703
4,934,507
5,351,706
10,114,513
9,574,631
12,176,351
$
(1.27
)
$
(0.27
)
$
0.60
$
0.36
$
0.50
$
(1.27
)
$
(0.27
)
$
0.39
$
0.24
$
0.34
23,316,406
23,316,406
29,925,576
31,657,967
33,430,919
35,492,757
$
0.13
$
0.13
$
0.12
$
0.12
*
Unaudited
F-15
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
3.
BALANCE
SHEET COMPONENTS
As of
As of June 30,
March 31,
2005
2006
2007
(unaudited)
$
256
$
$
76
2,058
100
2,550
2,349
4,556
4,157
$
4,663
$
4,656
$
6,783
$
517
$
786
$
1,505
528
66
146
$
517
$
852
$
2,179
$
3,057
$
4,143
$
3,544
946
1,034
1,273
283
350
384
220
202
311
310
4,708
5,838
5,511
3,663
4,282
3,181
$
1,045
$
1,556
$
2,330
4.
RELATED-PARTY
TRANSACTIONS
F-16
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
5.
DEBT
6.
INCOME
TAXES
Nine Months
Ended
Year Ended June 30,
March 31,
2004
2005
2006
2006
2007
(unaudited)
$
$
4
$
114
$
71
$
164
99
65
131
7
6
4
16
$
$
11
$
219
$
140
$
311
F-17
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
2004
2005
2006
$
$
(478
)
$
1,450
(214
)
(242
)
(284
)
(284
)
99
129
327
858
(1,131
)
$
$
11
$
219
2005
2006
$
32,848
$
31,246
3,915
4,514
2,038
1,908
38,801
37,668
(38,801
)
(37,668
)
$
$
F-18
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
7.
REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND PREFERRED STOCK
WARRANTS
March 31, 2007
Shares
Shares
Carrying
Redemption and
Authorized
Outstanding
Value
Liquidation Value
(unaudited)
3,386,412
3,178,942
$
29,756,000
$
20,000,000
13,471,374
13,408,998
10,724,000
10,750,000
2,011,488
2,011,488
3,482,000
3,500,000
4,716,978
4,716,978
9,978,000
10,000,000
2,389,000
23,586,252
23,316,406
$
56,329,000
$
44,250,000
June 30, 2006
Shares
Shares
Carrying
Redemption and
Authorized
Outstanding
Value
Liquidation Value
3,386,412
3,178,942
$
29,746,000
$
20,000,000
13,471,374
13,408,998
10,712,000
10,750,000
2,011,488
2,011,488
3,475,000
3,500,000
4,716,978
4,716,978
9,969,000
10,000,000
2,430,000
23,586,252
23,316,406
$
56,332,000
$
44,250,000
June 30, 2005
Shares
Shares
Carrying
Redemption and
Authorized
Outstanding
Value
Liquidation Value
3,386,412
3,178,942
$
29,732,000
$
20,000,000
13,471,374
13,408,998
10,698,000
10,750,000
2,011,488
2,011,488
3,464,000
3,500,000
4,716,978
4,716,978
9,957,000
10,000,000
2,430,000
23,586,252
23,316,406
$
56,281,000
$
44,250,000
F-19
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
F-20
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
Warrants to purchase 685 shares of common stock issued with
respect to the equipment lease line signed in June 1998,
exercisable at $21.18 per share.
Warrants to purchase 1,271 shares of common stock issued
with respect to the equipment lease line signed in March 2000,
exercisable at $39.33 per share.
Warrants to purchase 1,224 shares of common stock issued in
February 2001 for consulting services, exercisable at $26.22 per
share.
Warrants to purchase 5,336 shares of Series E redeemable
convertible preferred stock issued with respect to the line of
credit in March 2001, exercisable at $9.37 per share which
shares are convertible to 5,336 shares of common stock.
Warrants to purchase 62,367 shares of Series F
redeemable convertible preferred stock issued with respect to
the line of credit in September 2003, exercisable at
$0.80 per share which shares are convertible to
62,367 shares of common stock.
8.
COMMON
STOCK
Reverse
Stock Split
F-21
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
9,222,466
3,178,942
13,408,998
2,011,488
4,716,978
70,883
32,609,755
9.
STOCK
OPTION PLAN
F-22
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
F-23
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
Shares
Weighted-
Shares
Subject to
Average
Available
Options
Exercise
for Grant
Outstanding
Price
1,505,869
2,130,935
$
0.70
(20,575
)
(426,600
)
426,600
0.30
(478,000
)
478,000
0.30
(99,140
)
0.10
262,881
(262,881
)
0.40
843,575
2,673,514
$
0.70
2,531,780
(470,850
)
470,850
0.40
(2,509,780
)
2,509,780
0.30
(252,013
)
0.90
66,258
(66,258
)
1.60
460,983
5,335,873
$
0.40
1,500,000
(449,050
)
449,050
0.80
(851,000
)
851,000
0.60
(3,428,668
)
0.30
133,067
1.10
129,445
(129,445
)
0.50
923,445
3,077,810
$
0.60
6,030,000
(580,550
)
580,550
2.80
(529,994
)
529,994
2.70
(808,789
)
0.70
130,080
(130,080
)
0.80
5,972,981
3,249,485
$
1.31
2,120,181
$
1.10
F-24
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
As of June 30, 2006
As of March 31, 2007
Weighted-
Weighted-
Shares
Average
Weighted-
Shares
Average
Weighted-
Subject to
Remaining
Average
Subject to
Remaining
Average
Aggregate
Options
Contractual
Exercise
Options
Contractual
Exercise
Intrinsic
Outstanding
Life (Years)
Price
Outstanding
Life (Years)
Price
Value
(unaudited)
(Dollars in thousands, except per share data)
513,815
6.62
$
0.10
368,675
5.88
$
0.10
538,588
7.58
$
0.30
431,302
6.97
$
0.30
903,712
8.91
$
0.40
685,784
8.19
$
0.40
363,666
9.53
$
0.80
324,344
8.79
$
0.80
701,470
7.13
$
1.00
478,489
8.24
$
1.00
26,134
3.39
$
2.50
158,272
8.45
$
2.51
.00
$
684,145
9.53
$
3.20
.00
$
89,999
9.71
$
3.60
30,425
4.22
$
6.00
28,475
3.46
$
6.00
3,077,810
7.87
$
0.60
3,249,485
8.13
$
1.31
$
32,460
1,310,099
6.52
$
0.70
2,120,181
7.72
$
1.10
$
21,623
3,077,810
7.36
$
0.60
2,860,788
7.34
$
1.22
$
28,825
10.
COMMITMENTS
AND CONTINGENCIES
$
186
188
$
374
F-25
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
11.
EMPLOYEE
BENEFIT PLAN
12.
SEGMENT
INFORMATION
F-26
Table of Contents
MARCH 31, 2006 AND 2007 IS UNAUDITED)
Nine Months
Ended
Year Ended June 30,
March 31,
2004
2005
2006
2006
2007
(Unaudited)
$
18,633
$
34,863
$
60,954
$
42,033
$
67,195
195
619
654
491
1,709
$
18,828
$
35,482
$
61,608
$
42,524
$
68,904
13.
SUBSEQUENT
EVENTS
F-27
Table of Contents
Table of Contents
Table of Contents
ITEM 13.
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
Amount to be Paid
$
2,929
10,040
5,000
1,000,000
800,000
300,000
10,000
10,000
12,031
$
2,150,000
ITEM 14.
INDEMNIFICATION
OF DIRECTORS AND OFFICERS.
the Registrant is required to indemnify its directors and
officers to the fullest extent permitted by the Delaware General
Corporation Law, subject to certain limited exceptions;
the Registrant may also indemnify its other employees and agents
in its discretion;
the Registrant is required to advance expenses, as incurred, to
its directors and officers in connection with a legal proceeding
subject to certain limited exceptions, and to the extent the
Delaware General Corporation Law so requires, such advances may
be conditioned on the director or officers agreement to
repay any such advanced expenses if it is determined that the
director or officer is not entitled to be indemnified under the
Registrants bylaws; and
the rights conferred in the bylaws are not exclusive.
II-1
Table of Contents
Number
1.1
3.1
3.2
3.3
3.4
10.1
ITEM 15.
RECENT
SALES OF UNREGISTERED SECURITIES
II-2
Table of Contents
ITEM 16.
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES.
Exhibit
1
.1*
Form of Underwriting Agreement.
3
.1**
Certificate of Incorporation of
the Registrant.
3
.2**
Third Restated Certificate of
Incorporation of the Registrant, to be filed upon completion of
this offering with the Delaware Secretary of State.
3
.3**
Bylaws of the Registrant.
3
.4
Form of Second Amended and
Restated Bylaws of the Registrant, to be effective upon
completion of this offering.
4
.1*
Form of Registrants Common
Stock certificate.
4
.2**
Seventh Amended and Restated
Rights Agreement dated October 20, 2004 by and among the
Registrant and certain of its equityholders.
5
.1
Form of Opinion of
Fenwick & West LLP.
10
.1**
Form of Indemnity Agreement
between the Registrant and each of its directors and executive
officers.
10
.2**
1997 Stock Option Plan and forms
of stock option agreement and stock option exercise agreement.
10
.3
2007 Equity Incentive Plan and
forms of stock option agreement and stock option exercise
agreement.
10
.4
2007 Employee Stock Purchase Plan.
10
.5**
ShoreTel Executive Bonus Incentive
Plan for the second half of fiscal 2006.
10
.6**
Description of ShoreTel Executive
Bonus Incentive Plan for the first and second half of fiscal
2007.
10
.7**
Offer Letter, dated as of
July 14, 2004, by the Registrant and John W. Combs.
10
.8**
Offer Letter, dated as of
March 10, 2003, by the Registrant and John Finegan.
10
.9**
Offer Letter, dated as of
September 8, 2005, by the Registrant and Joseph A. Vitalone.
10
.10**
Offer Letter, dated as of
April 13, 2005, by the Registrant and Walter Weisner.
10
.11**
Change of Control Agreement, dated
as of August 5, 2004, between the Registrant and John W.
Combs.
10
.12**
Change of Control Agreement, dated
as of May 7, 2003, between the Registrant and John Finegan.
10
.13**
Change of Control Agreement, dated
as of August 1, 2001, between the Registrant and Edwin J.
Basart.
10
.14**
Separation Agreement, dated as of
August 9, 2004, between the Registrant and Thomas van
Overbeek.
10
.15**
Sublease, dated as of October
1998, between Registrant and Applied Materials, Inc., as amended.
10
.16**
ODM Product Development and
Purchase Agreement, dated as of March 19, 2004, between
Registrant and Giant Electronics Ltd., as amended.
10
.17**
Manufacturing Services Agreement,
dated October 28, 2005, between Registrant and Jabil
Circuit, Inc.
10
.18**
Office Lease Oakmead West, dated
April 20, 2007, between Registrant and Carr NP Properties,
L.L.C.
10
.19**
Offer Letter, dated April 22,
2007, by the Registrant and Michael E. Healy
23
.1*
Consent of Fenwick &
West LLP (included in Exhibit 5.1).
23
.2
Consent of Deloitte &
Touche LLP, independent registered public accounting firm.
24
.1**
Power of Attorney.
II-3
Table of Contents
Exhibit
24
.2**
Power of Attorney of Gary J.
Daichendt.
24
.3**
Power of Attorney of Mark F.
Bregman
24
.4**
Power of Attorney of Kenneth D.
Denman
*
To be filed by amendment.
**
Previously filed.
An application for confidential treatment of selected portions
of this agreement has been filed with the Commission.
ITEM 17.
UNDERTAKINGS.
Table of Contents
By:
II-5
Table of Contents
Exhibit
1
.1*
Form of Underwriting Agreement.
3
.1**
Certificate of Incorporation of
the Registrant.
3
.2**
Third Restated Certificate of
Incorporation of the Registrant, to be filed upon completion of
this offering with the Delaware Secretary of State.
3
.3**
Bylaws of the Registrant.
3
.4
Form of Second Amended and
Restated Bylaws of the Registrant, to be effective upon
completion of this offering.
4
.1*
Form of Registrants Common
Stock certificate.
4
.2**
Seventh Amended and Restated
Rights Agreement dated October 20, 2004 by and among the
Registrant and certain of its equityholders.
5
.1
Form of Opinion of
Fenwick & West LLP.
10
.1**
Form of Indemnity Agreement
between the Registrant and each of its directors and executive
officers.
10
.2**
1997 Stock Option Plan and forms
of stock option agreement and stock option exercise agreement.
10
.3
2007 Equity Incentive Plan and
forms of stock option agreement and stock option exercise
agreement.
10
.4
2007 Employee Stock Purchase Plan.
10
.5**
ShoreTel Executive Bonus Incentive
Plan for the second half of fiscal 2006.
10
.6**
Description of ShoreTel Executive
Bonus Incentive Plan for the first and second half of fiscal
2007.
10
.7**
Offer Letter, dated as of
July 14, 2004, by the Registrant and John W. Combs.
10
.8**
Offer Letter, dated as of
March 10, 2003, by the Registrant and John Finegan.
10
.9**
Offer Letter, dated as of
September 8, 2005, by the Registrant and Joseph A. Vitalone.
10
.10**
Offer Letter, dated as of
April 13, 2005, by the Registrant and Walter Weisner.
10
.11**
Change of Control Agreement, dated
as of August 5, 2004, between the Registrant and John W.
Combs.
10
.12**
Change of Control Agreement, dated
as of May 7, 2003, between the Registrant and John Finegan.
10
.13**
Change of Control Agreement, dated
as of August 1, 2001, between the Registrant and Edwin J.
Basart.
10
.14**
Separation Agreement, dated as of
August 9, 2004, between the Registrant and Thomas van
Overbeek.
10
.15**
Sublease, dated as of October
1998, between Registrant and Applied Materials, Inc., as amended.
10
.16**
ODM Product Development and
Purchase Agreement, dated as of March 19, 2004, between
Registrant and Giant Electronics Ltd., as amended.
10
.17**
Manufacturing Services Agreement,
dated October 28, 2005, between Registrant and Jabil
Circuit, Inc.
10
.18**
Office Lease Oakmead West, dated
April 20, 2007, between Registrant and Carr NP Properties,
L.L.C.
10
.19**
Offer Letter, dated April 22,
2007, by the Registrant and Michael E. Healy
23
.1*
Consent of Fenwick &
West LLP (included in Exhibit 5.1).
23
.2
Consent of Deloitte &
Touche LLP, independent registered public accounting firm.
24
.1**
Power of Attorney.
24
.2**
Power of Attorney of Gary J.
Daichendt.
Table of Contents
PAGE | ||||
Article I STOCKHOLDERS
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Section 1.1: Annual Meetings
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1 | |||
Section 1.2: Special Meetings
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1 | |||
Section 1.3: Notice of Meetings
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1 | |||
Section 1.4: Adjournments
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1 | |||
Section 1.5: Quorum
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2 | |||
Section 1.6: Organization
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2 | |||
Section 1.7: Voting; Proxies
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2 | |||
Section 1.8: Fixing Date for Determination of Stockholders of Record
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2 | |||
Section 1.9: List of Stockholders Entitled to Vote
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3 | |||
Section 1.10: Inspectors of Elections
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3 | |||
Section 1.11: Notice of Stockholder Business; Nominations
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4 | |||
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Article II BOARD OF DIRECTORS
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Section 2.1: Number; Qualifications
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7 | |||
Section 2.2: Election; Resignation; Removal; Vacancies
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7 | |||
Section 2.3: Regular Meetings
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7 | |||
Section 2.4: Special Meetings
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7 | |||
Section 2.5: Remote Meetings Permitted
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8 | |||
Section 2.6: Quorum; Vote Required for Action
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8 | |||
Section 2.7: Organization
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8 | |||
Section 2.8: Written Action by Directors
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8 | |||
Section 2.9: Powers
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8 |
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Section 2.10: Compensation of Directors
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8 | |||
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Article III COMMITTEES
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Section 3.1: Committees
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9 | |||
Section 3.2: Committee Rules
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9 | |||
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Article IV OFFICERS
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Section 4.1: Generally
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9 | |||
Section 4.2: Chief Executive Officer
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9 | |||
Section 4.3: Chairperson of the Board
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10 | |||
Section 4.4:
Lead Independent Director
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10 | |||
Section 4.5:
President
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10 | |||
Section 4.6:
Vice President
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11 | |||
Section 4.7: Chief Financial Officer
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11 | |||
Section 4.8: Treasurer
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11 | |||
Section 4.9:
Controller or Principal Accounting Officer
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11 | |||
Section 4.10: Secretary
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11 | |||
Section 4.11:
Delegation of Authority
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11 | |||
Section 4.12: Removal
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12 | |||
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Article V STOCK
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Section 5.l:
Certificates, Uncertificated Shares
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12 | |||
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates
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12 | |||
Section 5.3: Other Regulations
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12 | |||
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Article VI INDEMNIFICATION
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Section 6.1: Indemnification of Officers and Directors
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12 | |||
Section 6.2: Advance of Expenses
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13 |
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PAGE | ||||
Section 6.3: Non-Exclusivity of Rights
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13 | |||
Section 6.4: Indemnification Contracts
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13 | |||
Section 6.5:
Nature of Rights
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14 | |||
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Article VII NOTICES
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Section 7.l: Notice
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14 | |||
Section 7.2: Waiver of Notice
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15 | |||
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Article VIII INTERESTED DIRECTORS
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Section 8.1: Interested Directors; Quorum
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15 | |||
Section 8.2: Quorum
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16 | |||
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Article IX MISCELLANEOUS
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Section 9.1: Fiscal Year
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16 | |||
Section 9.2: Seal
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16 | |||
Section 9.3: Form of Records
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16 | |||
Section 9.4: Reliance Upon Books and Records
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16 | |||
Section 9.5: Certificate of Incorporation Governs
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16 | |||
Section 9.6: Severability
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16 | |||
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Article X AMENDMENT
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Section 10.1: Amendments
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(1) | the Companys Second Restated Certificate of Incorporation, certified by the Delaware Secretary of State on June ___, 2007, and the Third Restated Certificate of Incorporation that the Company intends to file in connection with the consummation of the sale of the Stock. | ||
(2) | the Companys Amended and Restated Bylaws, certified by the Companys Secretary on June ___, 2007, and the Second Amended and Restated Bylaws that the Company intends to adopt in connection with the consummation of the sale of the Stock. | ||
(3) | the Registration Statement, together with the Exhibits filed as a part thereof. | ||
(4) | the preliminary prospectus, dated June ___, 2007, prepared in connection with the Registration Statement (the Prospectus ). | ||
(5) | the minutes of meetings and actions by written consent of the incorporators, stockholders and Board of Directors that are contained in the Companys minute books and the minute books of its predecessor, ShoreTel, Inc. a California corporation ( ShoreTel California ), that are in our possession. | ||
(6) | the stock records for both the Company and ShoreTel California that the Company has provided to us (consisting of a list of stockholders, including a list of option and warrant holders respecting your capital stock and any rights to |
purchase shares of capital stock that was prepared by you and dated as of June ___, 2007 verifying the number of such issued and outstanding securities and a certificate from the Company of even date herewith verifying the number of the Companys issued and outstanding shares of capital stock as of the date hereof) as of the date hereof and a list of option and warrant holders respecting the Companys capital stock and of any rights to purchase capital stock that was prepared by the Company and dated June ___, 2007 verifying the number of such issued and outstanding securities). | |||
(7) | a Management Certificate addressed to us and dated of even date herewith executed by the Company containing certain factual representations (the Management Certificate ). | ||
(8) | the Agreement and Plan of Merger, dated June ___, 2007, between the Company and ShoreTel California, filed with the California Secretary of State on June ___, 2007. | ||
(9) | the form of Certificate of Merger filed with the Delaware Secretary of State on June ___, 2007, certified by the Delaware Secretary of State on June ___, 2007. | ||
(10) | the Registration Statement on Form 8-A filed with the Commission on May 25, 2007 to register the Companys securities under the Securities Exchange Act of 1934, as amended. |
Very truly yours,
FENWICK & WEST LLP |
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By: | ||||
Jeffery R. Vetter, a Partner | ||||
1 | Share amounts herein have been adjusted to reflect a 1-for-10 reverse stock split approved by the Board in June 2007, following stockholder approval. |
2
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4
5
6
7
8
9
10
11
12
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14
| 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. |
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17
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Name: | |||||
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Address: | |||||
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Grant Number | |||||
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Date of Grant | |||||
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Vesting Commencement Date | |||||
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Exercise Price per Share | |||||
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Total Number of Shares | |||||
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Total Exercise Price | |||||
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Type of Option | Non-Qualified Stock Option | |||||
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Incentive Stock Option | ||||||
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Expiration Date | |||||
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Post-Termination Exercise Period: |
Termination for Cause = None
Voluntary Termination = 3 Months Termination without Cause = 3 Months Disability = 12 Months Death = 12 Months |
PARTICIPANT: | SHORETEL, INC. | |||||||
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Signature:
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By: | |||||||
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Print Name:
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Its: | |||||||
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Date:
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Date: | |||||||
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2
2
3
4
Purchaser:
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Social Security Number:
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Address:
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Total Number of Shares:
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Exercise Price Per Share:
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Type of Stock Option
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(Check one):
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o Incentive Stock Option | |
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o Nonqualified Stock Option |
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o
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in cash (by check) in the amount of $ , receipt of which is acknowledged by the Company; | |
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o
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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; | |
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o
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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 | |
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o
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through a margin commitment from Purchaser or Authorized Transferee and an NASD Dealer meeting the requirements of the Companys margin procedures and in accordance with law. |
SHORETEL, INC. | PURCHASER | |||||
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By:
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(Signature) | ||||||
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(Please print name) | (Please print name) | |||||
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(Please print title) | ||||||
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Address: | Address: | |||||
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Fax No.:
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Fax No. | |||||
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Phone No.:
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Phone No.: | |||||
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1. |
Name of Grantee:
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2. |
Total Number of Restricted Shares Awarded:
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3. |
Fair Market Value per Restricted Share:
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$ | ||||||
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4. |
Total Fair Market Value of Award:
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$ | ||||||
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5. |
Purchase Price per Restricted Share:
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$ | ||||||
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6. |
Total Purchase Price for all Restricted Shares:
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$ | ||||||
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7. |
Date of Grant:
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8. |
Vesting Commencement Date.
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SHORETEL, INC. | RECIPIENT: | |||||||||
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By:
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Signature | |||||||||
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Its:
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Please Print Name | |||||||||
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1
2
3
4
SHORETEL, INC. | ||||||
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By:
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Its:
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RECIPIENT: | ||||||
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Signature | |||||
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Please Print Name |
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5
o | A check in the amount of $ | |
o | The cancellation of indebtedness in the amount of $ |
SHORETEL, INC. | ||||||
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By: | |||||
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Its: | |||||
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PARTICIPANT | |||
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Name: | |||||
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Address: | |||||
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PARTICIPANT | SHORETEL, INC. | |||||||
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Signature:
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By: | |||||||
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Print Name:
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Its: | |||||||
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PARTICIPANT | SHORETEL, INC. | |||||||||
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Signature:
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By: |
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Print Name:
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Its: |
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1 | Share amounts herein have been adjusted to reflect a 1-for-10 reverse stock split approved by the Board in June 2007, following stockholder approval. |
- 1 -
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- 5 -
- 6 -
- 7 -
- 8 -
ShoreTel, Inc. (the Company)
|
||
2007 Employee Stock Purchase Plan (ESPP)
|
Enrollment/Change Form |
Check Desired Action : | and Complete Sections : | |||
o
|
Enroll in the ESPP | 2 + 3 + 4 + 6 | ||
o
|
Change Contribution Percentage | 2 + 4 + 6 | ||
o
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Discontinue Contributions | 2 + 5 + 6 |
Name: |
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Home Address: | ||
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Note: | You may change your contribution percentage only once within an Offering Period to be effective during such Offering Period and such change can only be to decrease your contribution percentage. An increase in your contribution percentage can only take effect with the next Offering Period . Each change will become effective as soon as reasonably practicable after the form is received by the Company. |
o | I hereby elect to stop my contributions under the ESPP , effective as soon as reasonably practicable after this form is received by the Company. Please o -refund all contributions to me in cash, without interest OR o - use my contributions to purchase shares on the next Purchase Date. I understand that I cannot resume participation until the start of the next Offering Period and must timely file a new enrollment form to do so. |
Signature:
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Date: | ||||||
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We consent to the use in this
Amendment No. 3 to
Registration Statement No. 333-140630 of
our report dated April 30, 2007 (June , 2007 as to the first paragraph
of Note 8) appearing in the
Prospectus, which is a part of such Registration Statement, and to the reference to us under the heading "Experts" in
such Prospectus.
San Jose, California
/s/DELOITTE & TOUCHE LLP
San Jose, California
June , 2007
June 8, 2007