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|   | 2.1 | Prior Obligations.  In the event that Executive’s employment terminates for any reason, including voluntary resignation and termination for Cause, Executive shall be entitled to the benefits under this Section 2.1: |
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|   | 2.1.1 | Accrued Salary and Vacation.  A lump sum payment of all salary and accrued vacation earned through the Termination Date. |
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|   | 2.1.2 | Expense Reimbursement.  Upon submission of proper expense reports by the Executive, the Company shall reimburse the Executive for all expenses incurred by the Executive, consistent with past practices, in connection with the business of the Company prior to the Executive’s Termination Date. |
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|   | 2.1.3 | Employee Benefits.  Benefits, if any, under any 401(k) plan, nonqualified deferred compensation plan, employee stock purchase plan and other Company benefit plans under which the Executive may be entitled to benefits, subject to and payable pursuant to the terms of such plans. |
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|   | 2.2 | Termination in Absence of a Change of Control:  Subject to the Executive executing a binding Termination Release Agreement in a form specified by the Company substantially as attached as Exhibit A, in the event of the Executive’s Termination in the Absence of a Change of Control, in addition to the benefits provided under Section 2.1 of this Agreement, Executive shall be entitled to the following benefits: |
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|   | 2.2.1 | Executive shall receive a lump sum payment in an amount equal to the sum of (x) two (2) months of Base Salary plus (y) one (1) additional month of Base Salary (each an “Additional Month of Severance”) for each full year of employment completed after the Executive’s first full year of employment (the “Executive’s First Full Year”); provided, however, each Additional Month of Severance will be prorated for each full month of employment completed during any year subsequent to the Executive’s First Full Year (not to exceed four (4) subsequent years), less applicable withholding, payable in one lump sum. |
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|   | 2.2.2 | Provided that Executive timely elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company will reimburse Executive for premiums paid for such continuation coverage for a period of two (2) months after Executive’s Termination Date plus one (1) additional month of COBRA reimbursement (each an “Additional Month of COBRA”) for each full year of employment completed after the Executive’s First Full Year; provided, however, that each Additional Month of COBRA will be prorated for each full month of employment completed during any year subsequent to the Executive’s First Full Year (not to exceed four (4) subsequent years). |
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|   | 2.3 | Additional Benefits on Termination Upon Change of Control.  Subject to the Executive executing a binding Termination Release Agreement in a form specified by the Company substantially as attached as Exhibit A, in the event of the Executive’s Termination Upon a Change of Control, in addition to the benefits provided under Section 2.1 of this Agreement (and in place of the benefits provided under Section 2.2 of this Agreement), Executive shall be entitled to the following benefits: |
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|   | 2.3.1 | Executive shall receive a lump sum payment in an amount equal to six (6) months of Executive’s Base Salary, less applicable withholding. |
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|   | 2.3.2 | Executive shall receive a lump sum payment in an amount equal to fifty percent (50%) of Executive’s annual target bonus, less applicable withholding. |
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|   | 2.3.3 | Provided that Executive timely elects continuation coverage pursuant to COBRA, the Company will reimburse Executive for premiums paid for such continuation coverage for a period of six (6) months after Executive’s Termination Date. |
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|   | 2.3.4 | Fifty percent (50%) of Executive’s unvested, outstanding Equity Awards granted to Executive prior to the Change of Control shall have their vesting and exercisability accelerated in full.  The Executive shall be entitled to exercise any Equity Award within the period as specified by the Equity Award, but in no event later than the expiration date of the Equity Award; provided, however, to the extent permitted by Section 409A (as defined below), the regulations thereunder, and the terms of the Equity Awards, that if such Equity Awards are not assumed by the Successor in a Change of Control, they shall accelerate in full and must be exercised or cashed out in full prior to the consummation of the Change of Control regardless of whether there occurs a Termination Upon Change of Control. |
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|   | 2.4 | Timing of Payments.  Other than COBRA premium reimbursements, all payments made under Section 2 of this Agreement shall be made as soon as practicable but in no event later than March 15 of the year following the Termination Date provided that, for any payments where a release is required, such release has been executed and is effective within sixty (60) days following the Executive’s Termination Date, and provided further that any payments owed under this Agreement in connection with a Change of Control will be paid within sixty (60) days following the consummation of such Change of Control if Executive’s Termination Date is prior to the consummation of the Change of Control. |
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|   | 4.1 | Capitalized Terms Defined.  Capitalized terms used in this Agreement shall have the meanings set forth in this Section 4, unless the context clearly requires a different meaning. |
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|   | 4.2 | “Base Salary” means the base salary of the Executive immediately preceding the Executive’s Termination Date. |
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|   | (a) | material failure to perform Executive’s duties; provided that no termination for Cause under this subsection (a) shall occur unless the Executive: (i) has been provided with notice of the Company’s intention to terminate the Executive for Cause, and (ii) has had at least 30 days to cure or correct Executive’s behavior; or |
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|   | (b) | engagement in intentional misconduct which is materially detrimental to the Company; provided that no termination for Cause under this subsection (b) shall occur unless the Executive: (i) has been provided with notice of the Company’s intention to terminate the Executive for Cause, and (ii) has had at least 30 days to cure or correct his or her behavior; or |
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|   | (c) | failure or refusal to comply in any material respect with the terms of the Company’s Assignment and Confidentiality Agreement, the Company’s insider trading policy, or any other reasonable policies of the Company; provided that no termination for Cause under this subsection (c) shall occur unless the Executive: (i) has been provided with notice of the Company’s intention to terminate the Executive for Cause, and (ii) has had at least 30 days to cure or correct his or her behavior; |
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|   | (d) | an act or acts of material fraud or dishonesty undertaken by Executive and intended to result in Executive’s substantial gain or personal enrichment at the expense of the Company; |
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|   | (e) | conviction of or plea of no contest to any felony; or |
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|   | (f) | a good faith determination by the Company Board of Directors (“Board”) that Executive has failed to cooperate with the Company in any investigation or formal proceeding. |
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|   | (a) | any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than a trustee or other fiduciary holding securities of the Company under an employee benefit plan of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing fifty (50%) percent or more of (A) the outstanding shares of common stock of the Company or (B) the combined voting power of the Company’s outstanding securities; |
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|   | (b) | the consummation of a merger or consolidation, or series of related transactions, which results in the voting securities of the Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), directly or indirectly, at least fifty (50%) percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; |
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|   | (c) | the sale or disposition of all or substantially all of the Company’s assets (or consummation of any transaction, or series of related transactions, having similar effect); or |
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|   | (d) | a change in the composition of the Board occurring within a twelve (12) month period, as a result of which fewer than a majority of the Directors are “Incumbent Directors.”  “Incumbent  Directors shall mean Directors who either (i) are Directors as of the date of this Agreement, or (ii) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company (other than those directors who are directors on the date when this Agreement is executed by Executive. |
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|   | 4.5 | “Company” shall mean ShoreTel, Inc. and, following a Change of Control, any Successor. |
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|   | 4.6 | “Equity Award” shall mean any option, restricted stock award, restricted stock unit award, stock appreciation right or other equity award to acquire shares of the Company’s common stock granted or issued to the Executive. |
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|   | 4.7 | “Good Reason” means a material negative change in the service relationship by the occurrence of any of the following conditions, without the Executive’s written consent: |
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|   | (a) | a material reduction of Executive’s authority, duties, or responsibilities relative to Executive’s authority, duties, or responsibilities in effect immediately prior to such reduction, or the removal of Employee from such position, duties and responsibilities, unless Employee is provided with comparable authority, duties, and responsibilities; provided, however, that a reduction in authority, duties, or responsibilities solely by virtue of the Company being acquired and made part of a larger entity (as, for example, when the Chief Financial Officer of the Company performs similar duties for the Company or its business operations following a Change of Control but is not made the Chief Financial Officer of the acquiring corporation) shall not, in and of itself, constitute a “Good Reason Event”; |
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|   | (b) | a ten percent (10%) or more reduction in the Executive’s Base Salary (other than an equivalent percentage reduction in annual base salaries that applies to Executive’s entire business unit); |
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|   | (c) | the Company’s requiring the Executive to be based at any office or location more than 35 miles from the office where the Executive was based immediately preceding the Change of Control; or |
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|   | (d) | The Company’s failure to obtain the assumption of this Agreement by any successor corporation to or acquirer of the Company. |
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|   | 4.8 | “Permanent Disability” means “disability” as defined in Section 409A and Treasury Regulations promulgated thereunder: |
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|   | 4.9 | “Successor” means the Company as defined above and any successor to or assignee of substantially all of its business and/or assets whether or not as part of a Change of Control. |
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|   | 4.10 | “Termination Date” means the effective date of an Executive’s “separation from service” (as defined in Section 409A and Treasury Regulations promulgated thereunder). |
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|   | 4.11 | “Termination in Absence of Change of Control” means: |
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|   | 4.11.1 | any termination of the Executive’s employment by the Company without Cause other than during the period beginning three (3) months prior to the consummation of a Change of Control and ending on the date which is twelve (12) months following a Change of Control. |
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|   | 4.11.2 | any resignation by the Executive for Good Reason where (i) such Good Reason occurs other than during the period commencing during the period beginning three (3) months prior to the consummation of a Change of Control and ending on the date which is twelve (12) months following the Change of Control, (ii) notice is provided to the Company within ninety (90) days of the existence of Good Reason with a thirty (30) day opportunity to cure and (iii) the Executive terminates employment within thirty (30) days following the expiration of such cure period. |
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|   | 4.11.3 | Notwithstanding the foregoing, the term “Termination in Absence of Change of Control” shall not include any termination of the Executive’s employment (1) by the Company for Cause; (2) by the Company as a result of Executive’s Permanent Disability; (3) as a result of Executive’s death; or (4) as a result of the Executive voluntarily terminating Executive’s employment with the Company voluntarily or for other than Good Reason. |
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|   | 4.12.1 | any termination of the employment of the Executive by the Company without Cause during the period commencing during the period beginning three (3) months prior to the consummation of a Change of Control and ending on the date which is twelve (12) months following the consummation of a Change of Control; or |
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|   | 4.12.2 | any resignation by the Executive for Good Reason where (i) such Good Reason occurs during the period commencing during the period beginning three (3) months prior to the consummation of a Change of Control and ending on the date which is twelve (12) months following the Change of Control, (ii) notice is provided to the Company within ninety (90) days of the existence of Good Reason with a thirty (30) day opportunity to cure and (iii) the Executive terminates employment within thirty (30) days following the expiration of such cure period. |
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|   | 4.12.3 | Notwithstanding the foregoing, the term “Termination Upon Change of Control” shall not include any termination of Executive’s employment (1) by the Company for Cause; (2) by the Company as a result of Executive’s Permanent Disability; (3) as a result of Executive’s death; or (4) as a result of Executive’s voluntary termination of Executive’s employment with the Company other than for Good Reason. |
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|   | 7.1 | No Limitation of Regular Benefit Plans.  Except as provided in Section 7.2 below, this Agreement is not intended to and shall not affect, limit or terminate any plans, programs or arrangements of the Company that are regularly made available to a significant number of employees or officers of the Company, including without limitation the Company’s equity incentive plans. |
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|   | 7.2 | Noncumulation of Benefits.  The Executive may not cumulate cash severance payments, acceleration of Equity Award vesting or other termination benefits under both this Agreement, any other written agreement with the Company and/or another plan or policy of the Company.  If the Executive has any other binding written agreement or other binding arrangement with the Company that provide that upon a change of control or termination of employment the Executive shall receive change of control, termination, severance or similar benefits, then Executive hereby expressly waives Executive’s rights to such other benefits and any agreement providing such benefits terminates and is superseded on the Effective Date of this Agreement. |
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|   | 10.1 | Disputes Subject to Arbitration.  Any claim, dispute or controversy arising out of this Agreement, the interpretation, validity or enforceability of this Agreement or the alleged breach thereof shall be submitted by the parties to binding arbitration by a sole arbitrator under the rules of the American Arbitration Association; provided, however, that (1) the arbitrator shall have no authority to make any ruling or judgment that would confer any rights with respect to the trade secrets, confidential and proprietary information or other intellectual property of the Company upon the Executive or any third party; and (2) this arbitration provision shall not preclude the Company from seeking legal and equitable relief from any court having jurisdiction with respect to any disputes or claims relating to or arising out of the misuse or misappropriation of the Company’s intellectual property. Judgment may be entered on the award of the arbitrator in any court having jurisdiction. |
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|   | 10.2 | Site of Arbitration.  The site of the arbitration proceeding shall be in Santa Clara County, California. |
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|   | 12.1 | Heirs and Representatives of the Executive; Successors and Assigns of the Company.  This Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devises and legatees.  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors and assigns of the Company. |
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|   | 12.2 | No Assignment of Rights.  The interest of the Executive in this Agreement or in any distribution to be made under this Agreement may not be assigned, pledged, alienated, anticipated, or otherwise encumbered (either at law or in equity) and shall not be subject to attachment, bankruptcy, garnishment, levy, execution, or other legal or equitable process. Any act in violation of this Section 13.2 shall be void. |
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|   | 12.3 | Amendment; Waiver.  No provision of this Agreement shall be modified, amended, waived or discharged unless the modification, amendment, waiver or discharge is agreed to in writing and signed by the Executive and by an authorized officer of the Company (other than the Executive).  No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. |
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|   | 12.4 | Entire Agreement.  This Agreement represents the entire agreement and understanding between the parties as to the subject matter herein (whether oral or written and whether express or implied) and expressly supersedes any existing agreement or understanding providing for any change control, severance, termination or similar benefits by and between the Executive and the Company. |
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|   | 12.5 | Withholding Taxes; 409A.  All payments made under this Agreement shall be subject to reduction to reflect all federal, state, local and other taxes required to be withheld by applicable law.   For purposes of this Agreement, to the extent required, any termination of employment will be determined consistent with the rules relating to “separation from service” as defined in Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”).  Notwithstanding anything else provided herein, to the extent any payments provided under this Agreement in connection with Executive’s termination of employment constitute deferred compensation subject to Section 409A, and Executive is deemed at the time of such termination of employment to be a “specified employee” under Section 409A, then such payment shall not be made or commence until the earlier of (i) the expiration of the 6-month period measured from Executive’s separation from service from the Company or (ii) the date of Executive’s death following such a separation from service; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to Executive including, without limitation, the additional twenty-percent (20%) tax for which Executive would otherwise be liable under Section 409A(a)(1)(B) in the absence of such a deferral.  The first payment thereof will include a catch-up payment covering the amount that would have otherwise been paid during the period between Executive’s termination of employment and the first payment date but for the application of this provision (in a lump sum and without interest), and the balance of the installments (if any) will be payable in accordance with their original schedule.  All forms of compensation referred to in this Agreement are subject to reduction to reflect applicable withholding and payroll taxes and other deductions required by law.  It is intended that each installment of the payments provided hereunder constitute separate “payments” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i).  To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A, the provision will be read in such a manner so that all payments hereunder comply with Section 409A.  To the extent any payment under this Agreement may be classified as a “short-term deferral” within the meaning of Section 409A (or any state law of similar effect), such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A.  Except as otherwise expressly provided herein, to the extent any expense reimbursement or the provision of any in-kind benefit under this Agreement is determined to be subject to Section 409A of the Code, the amount of any such expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses), in no event shall any expenses be reimbursed after the last day of the calendar year following the calendar year in which Executive incurred such expenses, and in no event shall any right to reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit. |
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|   | 12.6 | Severability.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. |
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|   | 12.7 | Choice of Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California, without regard to where the Executive has his residence or principal office or where he performs his duties hereunder. |
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|   | 12.8 | Effective Date; Term of Agreement. |
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|   | 12.8.1 | Term of Agreement.  The term of this Agreement shall commence on the Effective Date and continue until the earlier of (a) [________], and (b) such time as all of the obligations of the parties hereto with respect to this Agreement have been satisfied. The term of this Agreement may be renewed or extended by written agreement between Executive and the Company. |
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|   | Executive      |
|--------|----------------|
|   |           |   |
|   |           |
|   | [NAME]         |   |
|   |           |   |
|   | Address:       |   |
|   |           |   |
|   |           |   |
|   |           |   |
|   | shoretel, inc. |
|   |           |   |
|   | By:            |   |
|   |           |   |
|   | Title:         |   |

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|   | Signature           |   |
|--------|---------------------|--------|
|   |                |   |
|   |                |   |
|   | Name (Please Print) |   |

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