8x8 1998 Annual Report Download - page 47

8X8, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Significant option groups outstanding at March 31, 1998 and related weighted average exercise price and contractual life information are as
follows:
During the year ended March 31, 1997, options to purchase 2,156,800 shares under the Key Personnel Plan were exercised for partial recourse
notes. Shares issued under this plan are subject to repurchase at their original issuance price of $0.50 if the employee departs prior to vesting.
During fiscal 1998, the Company repurchased 46,638 unvested shares and 579,647 shares were not vested at March 31, 1998.
In June 1996, the Board of Directors approved a proposal under which employees elected to cancel approximately 2,467,000 options in
exchange for grants of new options with an exercise price equal to the then current fair market value as determined by the Board of Directors.
In conjunction with the Offering, the Company recorded a deferred compensation charge of approximately $7,267,000 with respect to options
repriced and certain additional options granted in fiscal 1997. The Company recognized $1,265,000 and $4,486,000 of said amount as
compensation expense in the fiscal years ended March 31, 1998 and 1997, respectively. The Company is recognizing the deferred
compensation over the related vesting period of the options (which is generally 48 months). At March 31, 1998 the balance of this deferred
compensation was $744,000. This deferred compensation is subject to reduction for any employee who terminates employment prior to the
expiration of such employee's option vesting period.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model, using the multiple option
approach with the following weighted-average assumptions:
1996 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1996 Stock Purchase Plan (the Purchase Plan) was adopted in June 1996 and became effective upon the closing of the
Offering. Under the Purchase Plan a total of 500,000 shares of common stock have been reserved for issuance to participating employees who
meet eligibility requirements. During fiscal 1998, 70,560 shares were issued under the Purchase Plan.
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OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------- --------------------- WEIGHTED
WEIGHTED WEIGHTED AVERAGE
AVERAGE AVERAGE REMAINING
EXERCISE EXERCISE CONTRACTUAL LIFE
RANGE OF EXERCISE PRICES SHARES PRICE SHARES PRICE (YEARS)
------------------------ --------- -------- --------- -------- ----------------
$0.50 to $1.40 887,164 $ 0.50 356,197 $ 0.50 7.7
$4.20 to $5.60 130,200 $ 5.21 72,876 $ 5.01 9.1
$5.60 to $7.00 1,492,800 $ 6.78 333,216 $ 6.80 9.0
$8.40 to $9.80 62,800 $ 9.32 -- -- 9.5
$9.80 to $11.20 98,500 $10.61 6,665 $10.50 9.5
$11.20 to $12.60 184,400 $11.33 7,622 $11.25 9.4
$12.60 to $14.00 4,000 $14.00 -- -- 9.6
--------- ---------
2,859,864 $ 5.26 776,576 $ 3.82 8.6
========= =========
YEAR ENDED MARCH 31,
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1998 1997 1996
------------- ------------- -------------
Expected volatility............... 65% 0.0% 0.0%
Expected dividend yield........... 0.0% 0.0% 0.0%
Risk-free interest rate........... 5.7% to 6.5% 5.7% to 6.5% 5.1% to 6.7%
Weighted average expected option
term............................ 5.3 years 5.0 years 5.0 years
Weighted average fair value of
options granted................. $4.89 $0.60 $0.40