Exhibit 10.5

ShoreTel FY 2009 Executive Bonus Plan

The purpose of the ShoreTel Executive Bonus Plan is to incentivize executives,
including the CEO, to achieve key company objectives. Executives will have the
opportunity to earn a cash bonus based on their individual and departmental
performance and the achievement of company objectives. The bonus plan applies to
all executives, except as set forth in “Exceptions” below. To participate in the
plan, an executive must be employed on a regular basis and meet other
requirements set forth below.

Company Objectives; Bonus Pool

The key measurement metrics are revenues, non-GAAP operating profit and customer
satisfaction ratings (“Company Performance Targets”). The goals for these three
metrics will be established and approved by the Board of Directors near the
beginning of each six-month fiscal period (July-December and January-June). The
six-month targets will be recommended by the CEO and approved by the Board of
Directors near the beginning of each six-month period. The Board of Directors
has discretion to modify the key measurement metrics and weighting thereof.

The total amount of incentive compensation available for distribution to
participants under this bonus plan in each six-month period (the “Bonus Pool”)
is equal to the product of (a) percentage achievement of the Company Performance
Targets (which may be subject to minimum and maximum percentages), and (b) the
sum of each participant’s base salary for the six-month period multiplied by 45%
(85% in the case of the CEO).

Individual Target Levels

Payments to participants are based on the size of the Bonus Pool and each
participant’s individual performance rating. The actual amount paid to a
participant is equal to the product of (a) percentage achievement of the Company
Performance Target (which may be subject to minimum and maximum percentages),
(b) the participant’s base salary for the six-month period, (c) 45% (85% in the
case of the CEO) and (d) the participant’s performance rating, as adjusted
(which could be zero, or could be subject to a maximum multiplier).

The CEO will have the discretion to recommend bonus payment allocations for the
executive officers, up to a maximum of 150% of the Bonus Pool. However, to
prevent total bonus payments under this plan from exceeding the Bonus Pool, each
participant’s performance rating is subject to downward adjustment to reflect
his/her achievement relative to the achievement of other participants.

Exceptions

SVP Worldwide Sales.    The SVP Worldwide Sales is not part of the Bonus Pool.
The SVP Worldwide sales bonus arrangement is a target of $250,000 per year,
instead of 45% of base salary. The performance targets are based on revenues,
expenses, and customer satisfaction and individual goals and objectives. The SVP
Worldwide Sales bonus is paid quarterly.

VP Sales.    The VP Sales bonus is not part of the Bonus Pool. The VP Sales
bonus arrangement is a target of $150,000 per year, instead of 45% of base
salary. The performance targets are based on revenues, expenses, and customer
satisfaction and individual goals and objectives. The VP Sales bonus is paid
quarterly.

Plan Payout

Based on company performance for each six-month period, the CFO will compute the
overall Bonus Pool for the executives. The CEO will recommend allocation of the
Bonus Pool for all executives other than himself. For the CEO, the Compensation
Committee will review CEO performance against strategic company goals and
objectives and recommend a bonus to the Board. The Compensation Committee of the
Board of Directors will recommend to the Board all executive bonus payments. The
Board of Directors will approve the pool of funds payable to employees and
directors and will approve the specific bonus payments to the executive
officers, including the CEO. Payments will be made no later than the last day of
the 2 1/2 month period following the end of the applicable six-month bonus
period.

--------------------------------------------------------------------------------

Other Provisions

 

  •  

Participation in this plan is not an agreement (express or implied) between the
plan participant and ShoreTel that the participant will be employed by ShoreTel
for any specific period of time, nor is there any agreement for continuing or
long-term employment. The plan participant and ShoreTel each have right to
terminate the employment relationship at any time for any reason. This at-will
employment relationship can only be modified by an agreement signed by the
participant and CEO or VP of Human Resources.

 

  •  

Any determination of performance, payment or other matter under this plan by the
Board of Directors or Compensation Committee is binding.

 

  •  

This summary highlights the principle features of the ShoreTel Executive Bonus
Plan, but does not describe every situation that can occur. The Board of
Directors retains the right to interpret, revise, modify or delete the plan at
its sole discretion at any time.

 

  •  

The executive must be employed in a full time capacity for at least three
consecutive months in the six-month bonus period to be eligible to participate
in the executive bonus plan, and must be employed at the time bonuses are paid
in order to receive a bonus.

 

  •  

This plan is intended to be effective for at least fiscal year 2009, and shall
remain in effect until amended or terminated by the Board of Directors.