Document:

exv10w1

 

Exhibit 10.1

INDEMNITY AGREEMENT

          This Indemnity Agreement (this “Agreement”), dated as of                     , ___ is
made by and between ShoreTel, Inc., a Delaware corporation (the “Company”), and
                    , a director, officer or key employee of the Company or one of the Company’s
subsidiaries or other service provider who satisfies the definition of Indemnifiable Person set
forth below (“Indemnitee”).

RECITALS

          A. The Company is aware that competent and experienced persons are increasingly reluctant
to serve as representatives of corporations unless they are protected by comprehensive liability
insurance and indemnification, due to increased exposure to litigation costs and risks resulting
from their service to such corporations, and due to the fact that the exposure frequently bears
no relationship to the compensation of such representatives;

          B. The members of the Board of Directors of the Company (the “Board”) have
concluded that to retain and attract talented and experienced individuals to serve as
representatives of the Company and its Subsidiaries and Affiliates and to encourage such
individuals to take the business risks necessary for the success of the Company and its
Subsidiaries and Affiliates, it is necessary for the Company to contractually indemnify certain
of its representatives and the representatives of its Subsidiaries and Affiliates, and to assume
for itself maximum liability for Expenses and Other Liabilities in connection with claims
against such representatives in connection with their service to the Company and its
Subsidiaries and Affiliates;

          C. Section 145 of the Delaware General Corporation Law (“Section 145”), empowers
the Company to indemnify by agreement its officers, directors, employees and agents, and persons
who serve, at the request of the Company, as directors, officers, employees or agents of other
corporations, partnerships, joint ventures, trusts or other enterprises, and expressly provides
that the indemnification provided thereby is not exclusive; and

          D. The Company desires and has requested Indemnitee to serve or continue to serve as a
representative of the Company and/or the Subsidiaries or Affiliates of the Company free from
undue concern about inappropriate claims for damages arising out of or related to such services
to the Company and/or the Subsidiaries or Affiliates of the Company.

AGREEMENT

          NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

     1. Definitions.

          (a) Affiliate. For purposes of this Agreement, “Affiliate” of the Company means any
corporation, partnership, limited liability company, joint venture, trust or

 

 

other enterprise in
respect of which Indemnitee is or was or will be serving as a director, officer, trustee, manager,
member, partner, employee, agent, attorney, consultant, member of the entity’s governing body
(whether constituted as a board of directors, board of managers, general partner or otherwise),
fiduciary, or in any other similar capacity at the request, election or direction of the Company,
and including, but not limited to, any employee benefit plan of the Company or a Subsidiary or
Affiliate of the Company.

          (b) Change in Control. For purposes of this Agreement, “Change in Control” means (i)
any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended), other than a Subsidiary or a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or Subsidiary, is or becomes the “Beneficial Owner” (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company
representing 20% or more of the total voting power represented by the Company’s then outstanding
capital stock, or (ii) during any period of two consecutive years, individuals who at the beginning
of such period constitute the Board and any new director whose election by the Board or nomination
for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or consolidation that
would result in the outstanding capital stock of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted into capital stock
of the surviving entity) at least 80% of the total voting power represented by the capital stock of
the Company or such surviving entity outstanding immediately after such merger or consolidation, or
the stockholders of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company (in one transaction or a series of
transactions) of all or substantially all of the Company’s assets.

          (c) Expenses. For purposes of this Agreement, “Expenses” means all direct and
indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees
and related disbursements, and other out-of-pocket costs), paid or incurred by Indemnitee in
connection with either the investigation, defense or appeal of, or being a witness in a Proceeding
(as defined below), or establishing or enforcing a right to indemnification under this Agreement,
Section 145 or otherwise; provided, however, that Expenses shall not include any judgments, fines,
ERISA excise taxes or penalties or amounts paid in settlement of a Proceeding.

          (d) Indemnifiable Event. For purposes of this Agreement, “Indemnifiable Event” means
any event or occurrence related to Indemnitee’s service for the Company or any Subsidiary or
Affiliate as an Indemnifiable Person (as defined below), or by reason of anything done or not done,
or any act or omission, by Indemnitee in any such capacity.

          (e) Indemnifiable Person. For the purposes of this Agreement, “Indemnifiable Person”
means any person who is or was a director, officer, employee, attorney, trustee, manager, member,
partner, consultant, member of an entity’s governing body (whether constituted as a
board of directors, board of managers, general partner or otherwise) or other agent or
fiduciary of the Company or a Subsidiary or Affiliate of the Company.

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          (f) Independent Counsel. For purposes of this Agreement, “Independent Counsel” means
legal counsel that has not performed services for the Company or Indemnitee in the five years
preceding the time in question and that would not, under applicable standards of professional
conduct, have a conflict of interest in representing either the Company or Indemnitee.

          (g) Other Liabilities. For purposes of this Agreement, “Other Liabilities” means any
and all liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA
(or other benefit plan related) excise taxes or penalties, and amounts paid in settlement and all
interest, taxes, assessments and other charges paid or payable in connection with or in respect of
any such judgments, fines, ERISA (or other benefit plan related) excise taxes or penalties, or
amounts paid in settlement).

          (h) Proceeding. For the purposes of this Agreement, “Proceeding” means any
threatened, pending, or completed action, suit or other proceeding, whether civil, criminal,
administrative, investigative, legislative or any other type whatsoever, formal or informal,
including any arbitration or other alternative dispute resolution and including any appeal of any
of the foregoing.

          (i) Subsidiary. For purposes of this Agreement, “Subsidiary” means any corporation of
which more than 50% of the outstanding voting securities is owed directly by the Company.

     2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an
Indemnifiable Person in the capacity or capacities in which Indemnitee currently serves the Company
as an Indemnifiable Person, and any additional capacity in which Indemnitee may agree to serve,
until such time as Indemnitee’s service in a particular capacity shall end according to the terms
of an agreement, the Company’s Certificate of Incorporation or Bylaws, governing law, or otherwise.
Nothing contained in this Agreement is intended to create any right to continued employment or
other form of service for the Company or a Subsidiary or Affiliate of the Company by Indemnitee.

     3. Mandatory Indemnification.

          (a) Agreement to Indemnity. In the event Indemnitee is a person who was or is a party
to or witness in or is threatened to be made a party to or witness in any Proceeding by reason of
an Indemnifiable Event, the Company shall indemnify Indemnity from and against any and all Expenses
and Other Liabilities incurred by Indemnitee in connection with (including in preparation for) such
Proceeding to the fullest extent not prohibited by the provisions of the Company’s Bylaws and the
Delaware General Corporation Law (“GCL”), as the same may be amended from time to time (but only to
the extent that such amendment permits the Company to provide broader indemnification rights than
the Bylaws or the GCL permitted prior to the adoption of such amendment).

          (b) Exception for Amounts Covered by Insurance and Other Sources. Notwithstanding the
foregoing, the Company shall not be obligated to indemnify Indemnitee for Expenses or Other
Liabilities of any type whatsoever (including, but not limited to judgments, fines,
ERISA excise taxes or penalties and amounts paid in settlement) to the extent such have

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been paid directly to Indemnitee by any directors and officers insurance maintained by the Company or
other indemnity arrangements with third parties.

     4. Partial Indemnification. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of any Expenses or Other
Liabilities but not entitled, however, to indemnification for the total amount of such Expenses or
Other Liabilities, the Company shall nevertheless indemnify Indemnitee for such total amount except
as to the portion thereof to which Indemnitee is not entitled by the provisions of the Company’s
Bylaws or the GCL. In any review or Proceeding to determine the extent of indemnification, the
Company shall bear the burden to establish, by clear and convincing evidence, the lack of a
successful resolution of a particular claim, issue or matter and which amounts sought in indemnity
are allocable to claims, issues or matters which were not successfully resolved.

     5. Mandatory Advancement of Expenses. If requested by Indemnitee, the Company shall
advance prior to the final disposition of the Proceeding all Expenses reasonably incurred by
Indemnitee in connection with (including in preparation for) a Proceeding related to an
Indemnifiable Event. Indemnitee hereby undertakes to repay such amounts advanced if, and only if
and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be
indemnified by the Company under the provisions of this Agreement, the Company’s Bylaws or the GCL.
The advances to be made hereunder shall be paid by the Company to Indemnitee or directly to a
third party designated by Indemnitee within ten (30) days following delivery of a written request
therefor by Indemnitee to the Company. Indemnitee’s undertaking to repay any Expenses advanced to
Indemnitee hereunder shall be unsecured and shall not be subject to the accrual or payment of any
interest thereon.

     6. Notice and Other Indemnification Procedures.

          (a) Notification. Promptly after receipt by Indemnitee of notice of the commencement
of or the threat of commencement of any Proceeding, Indemnitee shall, if Indemnitee believes that
indemnification or advancement of Expenses with respect thereto may be sought from the Company
under this Agreement, notify the Company of the commencement or threat of commencement thereof.
However, a failure so to notify the Company promptly following Indemnitee’s receipt of such notice
shall not relieve the Company from any liability that it may have to Indemnitee except to the
extent that the Company is materially prejudiced in its defense of such Proceeding as a result of
such failure.

          (b) Insurance and Other Matters. If, at the time of the receipt of a notice of the
commencement of a Proceeding pursuant to Section 6(a) above, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the commencement of such
Proceeding to the issuers in accordance with the procedures set forth in the respective policies.
The Company shall thereafter take all reasonable action to cause such insurers to pay, on behalf of
Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such
insurance policies.

          (c) Assumption of Defense. In the event the Company shall be obligated to advance the
Expenses for any Proceeding against Indemnitee, the Company, if deemed appropriate by
the Company, shall be entitled to assume the defense of such Proceeding

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as provided herein.
Following delivery of written notice to Indemnitee of the Company’s election to assume the defense
of such Proceeding, the approval by Indemnitee (which approval shall not be unreasonably withheld)
of counsel designated by the Company and the retention of such counsel by the Company, the Company
will not be liable to Indemnitee under this Agreement for any fees and expenses of counsel
subsequently incurred by Indemnitee with respect to the same Proceeding. If (A) the employment of
counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have
notified the Board in writing that Indemnitee has reasonably concluded that there may be a conflict
of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the
Company fails to employ counsel to assume the defense of such Proceeding, the fees and expenses of
Indemnitee’s counsel shall be subject to indemnification and/or advancement pursuant to the terms
of this Agreement. Nothing herein shall prevent Indemnitee from employing counsel for any such
Proceeding at Indemnitee’s expense.

          (d) Settlement. The Company shall not be liable to indemnify Indemnitee under this
Agreement or otherwise for any amounts paid in settlement of any Proceeding effected without the
Company’s written consent. Neither the Company nor any Subsidiary or Affiliate of the Company
shall enter into a settlement of any Proceeding that might result in the imposition of any Expense,
Other Liability, penalty, limitation or detriment on Indemnitee, whether indemnifiable under this
Agreement or otherwise, without Indemnitee’s written consent. Neither the Company nor Indemnitee
shall unreasonably withhold consent from any settlement of any Proceeding; provided,
however, that if a Change in Control has occurred, the Company shall be liable for
indemnification of Indemnitee for amounts paid in settlement if the Independent Counsel has
approved the settlement.

     7. Determination of Right to Indemnification.

          (a) Success on the Merits or Otherwise. To the extent that Indemnitee has been
successful on the merits or otherwise in defense of any Proceeding referred to in Section 3(a)
above or in the defense of any claim, issue or matter described therein, the Company shall
indemnify Indemnitee against Expenses actually and reasonably incurred in connection therewith.

          (b) Indemnification in Other Situations. In the event that Section 8(a) is
inapplicable, the Company shall also indemnify Indemnitee if he or she has not failed to meet the
applicable standard of conduct for indemnification.

          (c) Forum. Indemnitee shall be entitled to select the forum in which determination of
whether or not Indemnitee has met the applicable standard of conduct shall be decided, and such
election will be made from among the following:

               (1) Those members of the Board who are Independent Directors even though less than a quorum;

               (2) By a committee of Independent Directors designated by a majority vote of Independent
Directors, even though less than a quorum; or

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               (3) Independent Counsel selected by Indemnitee and approved by the Board, which approval may
not be unreasonably withheld, which counsel shall make such determination in a written opinion.

               If Indemnitee is an officer or a director of the Company at the time that Indemnitee is
selecting the forum, then Indemnitee shall not select Independent Counsel as such forum unless
there are no Independent Directors or unless the Independent Directors agree to the selection of
independent counsel as the forum.

The selected forum shall be referred to herein as the “Reviewing Party”. Notwithstanding the
foregoing, following any Change in Control, the Reviewing Party shall be Independent Counsel
selected in the manner provided in (3) above.

          (d) As soon as practicable, and in no event later than thirty (30) days after receipt by the
Company of written notice of Indemnitee’s choice of forum pursuant to Section 7(c) above, the
Company and Indemnitee shall each submit to the Reviewing Party such information as they believe is
appropriate for the Reviewing Party to consider. The Reviewing Party shall arrive at its decision
within a reasonable period of time following the receipt of all such information from the Company
and Indemnitee, but in no event later than thirty (30) days following the receipt of all such
information, provided that the time by which the Reviewing Party must reach a decision may be
extended by mutual agreement of the Company and Indemnitee. All Expenses associated with the
process set forth in this Section 7(d), including but not limited to the Expenses of the Reviewing
Party, shall be paid by the Company.

          (e) Delaware Court of Chancery. Notwithstanding a final determination by any
Reviewing Party that Indemnitee is not entitled to indemnification with respect to a specific
Proceeding, Indemnitee shall have the right to apply to the Court of Chancery, for the purpose of
enforcing Indemnitee’s right to indemnification pursuant to this Agreement.

          (f) Expenses. The Company shall indemnify Indemnitee against all Expenses incurred by
Indemnitee in connection with any hearing or Proceeding under this Section 7 involving Indemnitee
and against all Expenses and Other Liabilities incurred by Indemnitee in connection with any other
Proceeding between the Company and Indemnitee involving the interpretation or enforcement of the
rights of Indemnitee under this Agreement unless a court of competent jurisdiction finds that each
of the material claims of Indemnitee in any such Proceeding was frivolous or made in bad faith.

          (g) Determination of “Good Faith”. For purposes of any determination of whether
Indemnitee acted in “good faith”, Indemnitee shall be deemed to have acted in good faith if in
taking or failing to take the action in question Indemnitee relied on the records or books of
account of the Company or a Subsidiary or Affiliate of the Company, including financial statements,
or on information, opinions, reports or statements provided to Indemnitee by the officers or other
employees of the Company or a Subsidiary or Affiliate of the Company in the course of their duties,
or on the advice of legal counsel for the Company or a Subsidiary or Affiliate of the Company, or
on information or records given or reports made to the Company or a Subsidiary or Affiliate of the
Company by an independent certified public accountant or by an appraiser or other expert selected
by the Company or a Subsidiary or Affiliate of the

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Company, or by any other person (including legal counsel,
accountants and financial advisors) as to matters Indemnitee reasonably believes are within such
other person’s professional or expert competence and who has been selected with reasonable care by
or on behalf of the Company. In connection with any determination as to whether Indemnitee is
entitled to be indemnified hereunder, or to advancement of expenses, the Reviewing Party or court
shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to
indemnification or advancement of Expenses, as the case may be, and the burden of proof shall be on
the Company to establish, by clear and convincing evidence, that Indemnitee is not so entitled.
The provisions of this Section 7(g) shall not be deemed to be exclusive or to limit in any way the
other circumstances in which Indemnitee may be deemed to have met the applicable standard of
conduct set forth in this Agreement. In addition, the knowledge and/or actions, or failures to
act, of any other person serving the Company or a Subsidiary or Affiliate of the Company as an
Indemnifiable Person shall not be imputed to Indemnitee for purposes of determining the right to
indemnification hereunder.

     8. Exceptions. Any other provision herein to the contrary notwithstanding,

          (a) Claims Initiated by Indemnitee. The Company shall not be obligated pursuant to
the terms of this Agreement to indemnify or advance Expenses to Indemnitee with respect to
Proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense,
except (1) with respect to Proceedings brought to establish or enforce a right to indemnification
under this Agreement, any other statute or law, as permitted under Section 145, or otherwise, (2)
where the Board has consented to the initiation of such Proceeding, or (3) with respect to
Proceedings brought to discharge Indemnitee’s fiduciary responsibilities, whether under ERISA or
otherwise, but such indemnification or advancement of Expenses may be provided by the Company in
specific cases if the Board finds it to be appropriate; or

          (b) 16(b) Actions. The Company shall not be obligated pursuant to the terms of this
Agreement to indemnify Indemnitee on account of any suit in which judgment is rendered against
Indemnitee for an accounting of profits made from the purchase or sale by Indemnitee of securities
of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of l934
and amendments thereto or similar provisions of any federal, state or local statutory law; or

          (c) Unlawful Indemnification. The Company shall not be obligated pursuant to the
terms of this Agreement to indemnify Indemnitee for Other Liabilities if such indemnification is
prohibited by law.

     9. Non-exclusivity. The provisions for indemnification and advancement of Expenses
set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may
have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote of
the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to
acts or omissions in his or her official capacity and to acts or omissions in another capacity
while serving the Company or a Subsidiary or Affiliate of the Company as an Indemnifiable Person
and Indemnitee’s rights hereunder shall continue after Indemnitee has ceased serving the Company or
a Subsidiary or Affiliate of the Company as an Indemnifiable Person and shall inure to the benefit
of the heirs, executors and administrators of Indemnitee.

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     10. Severability. If any provision or provisions of this Agreement shall be held to
be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and
enforceability of the remaining provisions of the Agreement (including, without limitation, all
portions of any paragraphs of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in
any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of
this Agreement (including, without limitation, all portions of any paragraphs of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that are not themselves
invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.

     11. Modification and Waiver. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) and except as expressly provided herein, no such waiver
shall constitute a continuing waiver.

     12. Successors and Assigns. The terms of this Agreement shall bind, and shall inure
to the benefit of, the successors and assigns of the parties hereto.

     13. Notice. All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and a receipt
is provided by the party to whom such communication is delivered, (ii) if mailed by certified or
registered mail with postage prepaid, return receipt requested, on the signing by the recipient of
an acknowledgement of receipt form accompanying delivery through the U.S. mail, (iii) personal
service by a process server, or (iv) delivery to the recipient’s address by overnight delivery
(e.g., FedEx, UPS or DHL) or other commercial delivery service. Addresses for notice to either
party are as shown on the signature page of this Agreement, or as subsequently modified by written
notice complying with the provisions of this Section 13. Delivery of communications to the Company
with respect to this Agreement shall be sent to the attention of the Company’s General Counsel.

     14. No Presumptions. For purposes of this Agreement, the termination of any
Proceeding, by judgment, order, settlement (whether with or without court approval) or conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption
that Indemnitee did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable law or otherwise.
In addition, neither the failure of the Company or a Reviewing Party to have made a determination
as to whether Indemnitee has met any particular standard of conduct or had any particular belief,
nor an actual determination by the Company, or a Reviewing Party that Indemnitee has not met such
standard of conduct or did not have such belief, prior to the commencement of Proceedings by
Indemnitee to secure a judicial determination by exercising Indemnitee’s rights under 8(e) of this
Agreement shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has
failed to meet any particular standard of conduct or did not have any particular belief or is not
entitled to indemnification under applicable law or otherwise.

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     15. Survival of Rights. The rights conferred on Indemnitee by this Agreement shall
continue after Indemnitee has ceased to serve the Company or a Subsidiary or Affiliate of the
Company as an Indemnifiable Person and shall inure to the benefit of Indemnitee’s heirs, executors
and administrators.

     16. Subrogation. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall
execute all documents required and shall do all acts that may be necessary to secure such rights
and to enable the Company effectively to bring suit to enforce such rights.

     17. Specific Performance, Etc. The parties recognize that if any provision of this
Agreement is violated by the Company, Indemnitee may be without an adequate remedy at law.
Accordingly, in the event of any such violation, Indemnitee shall be entitled, if Indemnitee so
elects, to institute Proceedings, either in law or at equity, to obtain damages, to enforce
specific performance, to enjoin such violation, or to obtain any relief or any combination of the
foregoing as Indemnitee may elect to pursue.

     18. Counterparts. This Agreement may be executed in counterparts, each of which shall
for all purposes be deemed to be an original but all of which together shall constitute one and the
same agreement. Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.

     19. Headings. The headings of the sections and paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this Agreement or to
affect the construction or interpretation thereof.

     20. Governing Law. This Agreement shall be governed exclusively by and construed
according to the laws of the State of Delaware, as applied to contracts between Delaware residents
entered into and to be performed entirely with Delaware.

     21. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably
consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection
with any Proceeding which arises out of or relates to this Agreement.

[Signature Page Follows]

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     IN WITNESS WHEREOF, the parties hereto have entered into this Indemnity Agreement effective as
of the date first written above.

	 	 	 	 	 	 	 	 	 
	COMPANY:	 	 	 	INDEMNITEE:
	 
	 	 	 	 	 	 	 	 
	SHORETEL, INC.	 	 	 	[NAME OF INDEMNITEE]
	 
	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Address

	 	 	 	 	 	Address:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 

10exv10w6

 

Exhibit 10.6

Description of Executive Bonus Incentive Plan

For the First and Second Half of Fiscal 2007

     ShoreTel, Inc. (the “Company”) provides its executive officers with an opportunity to earn
cash bonuses pursuant to an incentive bonus plan (the “Bonus Plan”). Individual and Company goals
and objectives under the Bonus Plan are established for each half of the Company’s fiscal year
prior to or early in the applicable six-month period, and bonuses with respect to the applicable
six-month period are paid (less applicable taxes and deductions) following the completion of that
period.

     Payments to participants under the Bonus Plan are based on the size of the Bonus Pool (as
defined below) and each participant’s performance rating. The actual amount paid to a participant
is equal to the product of (a) the Company Performance Percentage (as defined below), (b) the
participant’s base salary for the six-month period, (c) 45% (75% in the case of the Company’s Chief
Executive Officer) and (d) the participant’s performance rating, as adjusted.

     The total amount of incentive compensation available for distribution to participants under
the Bonus Plan in each six-month period (the “Bonus
Pool”) is equal to the product of (a) the Company
Performance Percentage and (b) the sum of each participant’s base salary for the six-month period
multiplied by 45%, 75% in the case of the Company’s Chief Executive Officer.

     The Bonus Plan provides for the determination of a percentage for use in determining the Bonus
Pool (the “Company Performance Percentage”). This percentage is based 50% on the achievement of
certain pre-defined revenue goals, 25% on the achievement of certain pre-defined profit goals and
25% on the achievement of certain pre-defined customer satisfaction scores. The Company Performance Percentage
will be zero if the Company does not achieve these goals within pre-defined ranges and, if
achievement is within these pre-defined ranges, the Company performance factor may be as low as 50%
for achievement at the low-end of the range and as high as 150% for achievement at the high-end of
the range, and will equal a percentage in between these percentages to the extent achievement is
between the low- and high-end of the range.

     Each participant’s performance rating depends on the participant’s achievement of pre-defined
individual performance goals and objectives established for the participant. Each participant will
receive a performance rating ranging from 0 to 1.5, based on his achievement of his individual
performance goals and objectives. To prevent total bonus payments under the Bonus Plan from
exceeding the Bonus Pool, each participant’s performance rating is subject to downward adjustment
to reflect his achievement relative to the achievement of other participants.

     Achievement determinations under the Bonus Plan are made following completion of the
applicable six-month period by the Compensation Committee of the Company’s Board of Directors. In
the case of performance ratings for participants other than the Company’s Chief Executive Officer,
the Compensation Committee of the Company’s Board of Directors may take into account the
recommendations of the Company’s Chief Executive Officer in determining a participant’s performance rating.

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