ShoreTel Inc

On July 26, 2017, we entered into a definitive Agreement and Plan of Merger (“Merger Agreement”) with Mitel US Holdings, Inc., a Delaware corporation, Shelby Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”) and, with respect to certain obligations set forth in the Merger Agreement, Mitel Networks Corporation, a Canadian corporation. Pursuant to and subject to the terms and conditions of the Merger Agreement, Merger Sub has commenced an all-cash tender offer for any and all of ShoreTel’s outstanding shares of common stock, par value $0.001 per share, at a purchase price of $7.50 per share, net to the seller in cash, without interest, and subject to any required withholding of taxes. The transaction is subject to certain conditions, including the tender of at least one share more than half of all our common stock outstanding as well as regulatory and other related approvals. We have agreed to operate our business in the ordinary course during the period between the execution of the Merger Agreement and the effective time of the merger and have agreed to certain other customary restrictions on its operations, as set forth in the Merger Agreement.

If the merger is not completed for any reason, our ongoing business and relationships may be adversely affected and the price of our common stock may be negatively impacted.

In addition, the Merger Agreement may be terminated by the Company or Mitel under certain circumstances. The restrictions on the conduct of our business prior to the consummation of the merger, and the uncertainties and risks concerning completion of the merger, may cause our business, sales, operations and financial results to suffer during the executory period or in the event the merger is not completed. The merger agreement requires us to conduct business in the ordinary course, subject to specific limitations, which may delay or prevent us from undertaking business opportunities that, absent the Merger Agreement, we might have pursued. The announcement of the merger and any delay in completing the merger may divert management’s attention from ongoing business operations, affect our ability to retain or recruit key employees and negatively impact our business relationships with customers and suppliers. In addition, the nature, cost and outcome of pending and future litigation and other legal proceedings, including any such proceedings related to the merger and instituted against us and others, may be material.

The Company is in the process of evaluating the impact of its pending adoption of this guidance on its revenue transactions, including any impacts on associated processes, systems, and internal controls. The Company has started reviewing each of its revenue streams that may be impacted by the adoption of this guidance, including the determination whether the performance obligations will change as compared to current generally accepted accounting principles in the United States of America (“GAAP”), as well as determining the stand-alone selling price of each performance obligation. The Company is also assessing if sales commissions will need to be capitalized upon adoption of the new ASU and evaluating the proper period over which to amortize these capitalized costs. In addition, the Company is evaluating revenue recognition related to sales made to resellers and value-added distributors. The Company continues to evaluate the impact of this guidance on its consolidated financial statements and any preliminary assessments are subject to change.

Pursuant to the definitive agreement entered into with Mitel, the Company’s ESPP was suspended on July 26, 2017, the date of the Merger Agreement, and the Company subsequently refunded contributions received from participating employees. The ESPP will be terminated upon the consummation of the merger. The Company expects that there will be no further offering periods under the ESPP prior to its termination in connection with the closing of the merger. Refer to Note 18 for additional details regarding this definitive agreement.

On August 31, 2017, Gianfranca De Angelis, a purported stockholder of the Company, filed a putative stockholder class action complaint in the United States District Court in the Northern District of California against the Company and the individual members of the ShoreTel Board, captioned De Angelis v. ShoreTel, Inc., et al., Case No. 3:17-cv-05091 (“De Angelis Complaint” and together with the Scarantino, Frydman, Mozee, Simonson and Herrera Complaints, “Complaints”).

The Scarantino, Frydman, Simonson and De Angelis Complaints each assert that defendants violated Sections 14(e), 14(d)(4), and 20(a) of the Exchange Act by making untrue statements of material fact and omitting certain material facts related to the Merger Agreement and related transactions (“Transactions”) in the Company’s Schedule 14D-9. The Mozee and Herrera Complaints likewise assert that defendants violated Sections 14(e) and 20(a) of the Exchange Act by making untrue statements of material fact and omitting certain material facts related to the Transactions in the Company’s Schedule 14D-9. The Mozee Complaint also alleges that the members of the ShoreTel Board breached their fiduciary duties in connection with the Transactions because the Transactions do not appropriately value the Company, were the result of a flawed sale process, the Merger Agreement includes preclusive deal terms, and the Company’s officers and directors have potential conflicts. The Complaints seek, among other things, an order enjoining defendants from consummating the Transactions, money damages and an award of attorneys’ and experts’ fees. The Company believes that the lawsuits are without merit and, if the lawsuits are pursued, the Company will vigorously defend itself. The Company is unable to estimate a reasonably possible loss or range of loss, if any, at the current time.