8x8 2009 Annual Report Download - page 89

Stock Options shall be taken into account in the order in which they were granted, and the Fair
Market Value of stock shall be determined as of the time the option with respect to such stock is
granted. If the Code is amended to provide for a different limitation from that set forth in this
Section 5.3, such different limitation shall be deemed incorporated herein effective as of the date
and with respect to such Options as required or permitted by such amendment to the Code. If an
Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part
by reason of the limitation set forth in this Section 5.3, the Participant may designate which
portion of such Option the Participant is exercising. In the absence of such designation, the
Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option
first. Separate certificates representing each such portion shall be issued upon the exercise of the
Option.
6. TERMS AND CONDITIONS OF OPTIONS.
Options shall be evidenced by Option Agreements specifying the number of
shares of Stock covered thereby, in such form as the Board shall from time to time establish. No
Option or purported Option shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Option Agreement. Option Agreements may incorporate all or
any of the terms of the Plan by reference and shall comply with and be subject to the following
terms and conditions:
6.1 Exercise Price. The exercise price for each Option shall be established in
the discretion of the Board; provided, however, to the extent required by applicable law, that
(a) the exercise price per share for an Incentive Stock Option shall be not less than the Fair
Market Value of a share of Stock on the effective date of grant of the Option; (b) the exercise
price per share for a Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of a share of Stock on the effective date of grant of the Option, and
(c) no Option granted to a Ten Percent Stockholder shall have an exercise price per share less
than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the
effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price
lower than the minimum exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying under the provisions of
Section 424(a) of the Code.
6.2 Exercisability and Term of Options. Options shall be exercisable at
such time or times, or upon such event or events, and subject to such terms, conditions,
performance criteria and restrictions as shall be determined by the Board and set forth in the
Option Agreement evidencing such Option; provided, however, to the extent required by
applicable law, that (a) no Option shall be exercisable after the expiration of ten (10) years after
the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent
Stockholder shall be exercisable after the expiration of five (5) years after the effective date of
grant of such Option, and (c) with the exception of an Option granted to an Officer, a Director or
a Consultant, no Option shall become exercisable at a rate less than twenty percent (20%) per
year over a period of five (5) years from the effective date of grant of such Option, subject to the
Participant’ s continued Service. Subject to the foregoing, unless otherwise specified by the
Board in the grant of an Option, any Option granted hereunder shall terminate ten (10) years
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