Exhibit 10.1

 

Sonus Networks, Inc.

4 Technology Park Drive, Westford, MA 01886

 

November 19, 2012

 

Mr. Brian O’Donnell

Sonus Networks, Inc.

4 Technology Park Drive

Westford, MA 01886

 

Dear Brian:

 

This letter confirms that you have accepted the role of Vice President of
Finance and Corporate Controller of Sonus Networks, Inc. (the “Company”) and
will report to me, effective December 3, 2012.  Your current duties as Senior
Director of Finance will be transferred as soon as acceptable candidate(s) are
identified and/or hired; until that time, you will retain those duties.  As the
Company’s organization evolves, in addition to performing duties and
responsibilities associated with the position of Vice President of Finance and
Corporate Controller, you may be assigned other management duties and
responsibilities as the Company may determine.

 

As discussed, the March 3, 2011 letter (your “Agreement”) outlining the terms
and conditions of your employment by Sonus Networks, Inc. is hereby amended as
follows:

 

1.              Base Compensation.  Effective December 3, 2012, your base salary
will be at the annualized rate of $200,000.00, less applicable state and federal
tax withholdings, paid twice monthly in accordance with the Company’s normal
payroll practices.

 

2.              Target Bonus.  With this promotion, you will remain eligible to
participate in the Company’s annual cash incentive program, known as TIPS,
during each year you are employed by the Company with a target bonus of 30% of
your then-current annual base salary (“Target Bonus”).

 

3.              Stock Options Grant.  You will be granted non-statutory options
to purchase up to 50,000 shares of common stock of the Company, $0.001 par value
per share, under the Company’s 2007 Incentive Stock Plan, as amended (the
“Plan”), subject to the terms of the Plan, requisite approval from the
Compensation Committee of the Board of Directors of the Company (the
“Compensation Committee”), and the terms of a stock option agreement to be
entered into between you and the Company, which shall reflect the terms of this
letter.  If approved by the Compensation Committee, the grant date of such
options will be on the earliest 15th day of the month that next follows your
promotion date or the first business day thereafter if that day is not a
business day or is a holiday (the “Grant Date”).  The per share exercise price
will be the per share closing price of the Company’s common stock on the Grant
Date.  Subject to the terms of this letter, the options shall vest and become
exercisable as follows: (A) 25% of the shares (12,500 shares) shall vest on the
first anniversary of the Grant Date and (B) the remaining 75%

 

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of the shares (37,500) shall vest in equal monthly increments thereafter through
the fourth anniversary of the Grant Date.

 

4.              Restricted Stock Grant.  You will also be granted 50,000
restricted shares of the Company’s common stock under the Plan (the “Restricted
Shares”), subject to the terms of the Plan, requisite approval from the
Compensation Committee, and the terms of a restricted stock agreement to be
entered into between you and the Company, which shall reflect the terms of this
letter.  The grant date of the Restricted Shares will be on the Grant Date and
the Restricted Shares will vest as follows: (A) 25% of the Restricted Shares (or
12,500 Restricted Shares) shall vest on the first anniversary of the Grant Date
and (B) 75% of the Restricted Shares (or 37,500 Restricted Shares) shall vest in
six equal increments semi-annually thereafter through the fourth anniversary of
the Grant Date.

 

You may elect under Section 83(b) of the Internal Revenue Code of 1986, as
amended, to be taxed at the time the Restricted Shares are acquired on the Grant
Date (“Section 83(b) Election”).  A Section 83(b) Election, if made, must be
filed with the Internal Revenue Service within thirty (30) days of the Grant
Date.  You are obligated to pay to the Company the amount of any federal, state,
local or other taxes of any kind required by law to be withheld with respect to
the granting (if a Section 83(b) Election is made) or vesting (if a
Section 83(b) Election is not made) of the shares.  If you do not make a
Section 83(b) Election, you shall satisfy such tax withholding obligations by
delivery to the Company, on each date on which shares vest, such number of
shares that vest on such date as have a fair market value (calculated using the
last reported sale price of the common stock of the Company on the NASDAQ Global
Select Market on the trading date immediately prior to such vesting date) equal
to the amount of the Company’s withholding obligation; provided, however, that
the total tax withholding cannot exceed the Company’s minimum statutory
withholding obligations (based on minimum statutory withholding rates for
federal and state tax purposes, including payroll taxes, that are applicable to
such supplemental taxable income).  Such delivery of shares to the Company shall
be deemed to happen automatically, without any action required on your part, and
the Company is hereby authorized to take such actions as are necessary to effect
such delivery of shares to the Company.

 

5.              Termination and Eligibility for Severance.  Upon any termination
of your employment (the “Date of Termination”), you will be paid (i) any and all
earned and unpaid portion your base salary through the Date of Termination;
(ii) any accrued but unused vacation pay owed to you in accordance with Company
practices up to and including the Date of Termination; and (iii) any allowable
and unreimbursed business expenses incurred through the Date of Termination that
are supported by appropriate documentation in accordance with the Company’s
policies.  Hereafter, items (i) through (iii) in this Section 5 are referred to
as “Accrued Benefits.”  If you terminate your employment for any reason, or if
the Company terminates your employment for Cause (as defined below), you will be
entitled to receive only the Accrued Benefits.

 

If your employment with the Company is terminated by the Company without Cause,
the Company will provide you with the Accrued Benefits and, subject to the
additional conditions of this letter, will continue to pay your then-current
base salary, less applicable state and federal withholdings, in accordance with
the Company’s usual payroll practices, for a period of six (6) months following
the Date of Termination.

 

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If a Change of Control (as defined below) occurs to the Company and within the
first 12-month period after such occurrence your employment is terminated by the
Company for any reason other than Cause, or you terminate your employment for
Good Reason (as defined below) at least six (6) months after the Change of
Control occurs, the Company will provide you with the following severance and
related post-termination benefits, subject to the additional conditions of this
letter:

 

(a)                                 The Company will continue to pay your
then-current base salary, less applicable state and federal withholdings, in
accordance with the Company’s usual payroll practices, for a period of twelve
(12) months following the Date of Termination;

 

(b)                                 The Company will pay your then-current
annual Target Bonus at 100% of target, less applicable state and federal
withholdings, with such bonus to be paid at the same time and in the same form
as the Target Bonus otherwise would be paid;

 

(c)                                  The Company will continue to pay the
Company’s share of medical, dental and vision insurance premiums for you and
your dependents between the Date of Termination and the earlier of (i) the date
you accept other employment that provides you with commensurate insurance
coverage; and (ii) the twelve (12) month anniversary of the Date of Termination;
provided, that if immediately prior to the termination of your employment you
were required to contribute towards the cost of such premiums as a condition of
receiving such insurance, you may be required to continue contributing towards
the cost of such premiums under the same terms and conditions as applied to you
and your dependents immediately prior to the termination of your employment in
order to receive such continued insurance coverage;

 

(d)                                 Any stock options granted to you by the
Company to purchase the Company’s common stock that are unvested as of the Date
of Termination and would have vested in the twelve (12) month period immediately
following the Date of Termination will accelerate and immediately vest and
become exercisable upon termination, and your stock options that are or become
vested will remain outstanding and exercisable for the shorter of three
(3) years following the Date of Termination or the original remaining life of
the options; and

 

(e)                                  Any Restricted Shares that are unvested as
of the termination date and that would vest during the twelve (12) months
following your termination will accelerate and immediately vest upon termination
and such shares will be freely marketable.

 

Except for circumstances described in the first paragraph of this Section 5, the
Company’s provision of the benefits described in the remainder of Sections 5
hereof shall be conditioned upon (y) your executing and delivering to the
Company a release of all claims of any kind or nature in favor of the Company in
a form acceptable to the Company (the “Release Agreement”), and on such Release
Agreement becoming effective as a matter of law; and (z) your compliance with
the covenants in your Confidentiality Agreement.  You will have twenty-one (21)
days following your receipt of the Release Agreement to consider whether or not
to accept it.  If the Release Agreement is signed and delivered by you to the
Company, you will have seven (7) days from the date of the delivery to revoke
your acceptance of such agreement.  All of the benefits described in this
Section 5 will commence on the eighth (8th) day following your

 

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delivery of the executed Release Agreement to the Company, provided that you
have not revoked the Release Agreement.  The Company shall have no further
obligation to you in the event your employment with the Company terminates at
any time, other than those obligations specifically set forth in this Section 5.

 

The Company may terminate your employment at any time with or without Cause by
written notice to you specifying the Date of Termination.  If you wish to
terminate your employment for any reason, you agree to provide written notice to
the Company at least thirty (30) days prior to the Date of Termination.  If you
seek to terminate your employment for Good Reason, the Company shall have ten
(10) business days following its receipt of written notice of termination to
cure the circumstance giving rise to Good Reason.

 

6.              Tax Implications of Termination Payments.  Subject to this
Section 6, any payments or benefits required to be provided under Section 5
shall be provided only after the date of your “separation from service” with the
Company as defined under Section 409A of the U.S. Internal Revenue Code of 1986,
as amended, and the guidance issued thereunder (“Section 409A”). The following
rules shall apply with respect to distribution of the payments and benefits, if
any, to be provided to you under Section 5:

 

(a)                           It is intended that each installment of the
payments and benefits provided under Section 5 shall be treated as a separate
“payment” for purposes of Section 409A.  Neither the Company nor you shall have
the right to accelerate or defer the delivery of any such payments or benefits
except to the extent specifically permitted or required by Section 409A.

 

(b)                         If, as of the date of your “separation from service”
with the Company, you are not a “specified employee” (each within the meaning of
Section 409A), then each installment of the payments and benefits shall be made
on the dates and terms set forth in Section 5; and

 

(c)                          If, as of the date of your “separation from
service” with the Company, you are a “specified employee” (each, for purposes of
this Agreement, within the meaning of Section 409A), then:

 

(i)                                     Each installment of the payments and
benefits due under Section 5 that, in accordance with the dates and terms set
forth herein, will in all circumstances, regardless of when the separation from
service occurs, be paid within the short-term deferral period (as defined for
the purposes of Section 409A) shall be treated as a short-term deferral within
the meaning of Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent
permissible under Section 409A; and

 

(ii)                                  Each installment of the payments and
benefits due under Section 10 that is not paid within the short-term deferral
period or otherwise cannot be treated as a short-term deferral within the
meaning of Treasury Regulation Section 1.409A-1(b)(4) and that would, absent
this subsection, be paid within the six-month period following your “separation
from service” with the Company shall not be paid until the date that is six
(6) months and one day after such separation from service (or, if earlier, upon
your death), with any such installments that are required to be

 

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delayed being accumulated during the six-month period and paid in a lump sum on
the date that is six months and one day following your separation from service
and any subsequent installments, if any, being paid in accordance with the dates
and terms set forth herein; provided, however, that the preceding provisions of
this sentence shall not apply to any installment of payments if and to the
maximum extent that that such installment is deemed to be paid under a
separation pay plan that does not provide for a deferral of compensation by
reason of the application of Treasury Regulation 1.409A-1(b)(9)(iii) (relating
to separation pay upon an involuntary separation from service).  Any
installments that qualify for the exception under Treasury Regulation
Section 1.409A-1(b)(9)(iii) must be paid no later than the last day of the
second taxable year following the taxable year in which your separation from
service occurs.

 

7.              Section 409A of the Code.  This Agreement is intended to comply
with the provisions of Section 409A and this Agreement shall, to the extent
practicable, be construed in accordance therewith.  Terms used in this Agreement
shall have the meanings given such terms under Section 409A if and to the extent
required in order to comply with Section 409A.  Notwithstanding the foregoing,
to the extent that this Agreement or any payment or benefit hereunder shall be
deemed not to comply with Section 409A, then neither the Company, the Board of
Directors nor its or their designees or agents shall be liable to you or any
other person for any actions, decisions or determinations made in good faith.

 

8.              Definitions.  As used in this letter, the following terms shall
have the following meanings:

 

(a)                     “Cause” means the occurrence of any of the following:
(i) your indictment for, formal admission to (including a plea of guilty or nolo
contendere to), or conviction of, a felony, a crime of moral turpitude,
dishonesty, breach of trust or unethical business conduct, or any crime
involving the Company, (ii) gross negligence or willful misconduct by you in the
performance of your duties that is likely to have an adverse affect on the
Company or its reputation; (iii) your commission of an act of fraud or
dishonesty in the performance of your duties; (iv) repeated failure by you to
perform your duties which are reasonably and in good faith requested by your
manager, the Chief Executive Officer or the Board of Directors of the Company;
or (v) material breach of this Agreement by you, which you do not cure within
ten (10) days following receipt by you of such written notice notifying you of
such breach, or (vi) breach by you of any obligation under your Noncompetition
and Confidentiality Agreement with the Company.

 

(b)                     “Change in Control” as used in this Agreement shall mean
the first to occur of any of the following:

 

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 the Company or its Affiliates), is or becomes the “beneficial owner”
(as defined in Rule 1 3d-3 under the Exchange Act), directly or indirectly, of
securities of the Company (not including in the securities beneficially owned by
such person any securities acquired directly from the Company or you)
representing fifty percent (50%) or more of the combined voting power of the
Company’s then outstanding securities; or

 

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b.              in the event that the individuals who as of the date hereof
constitute the Board of Directors, 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 a majority of the Board then still in office who either were
members of the Board as of the date hereof or whose election or nomination for
election was previously so approved, cease for any reason to constitute at least
a majority thereof; or

 

c.               the consummation of a merger or consolidation of the Company
with or the sale of the Company to any other entity and, in connection with such
merger, consolidation or sale; individuals who constitute the Board immediately
prior to the time any agreement to effect such merger or consolidation is
entered into fail for any reason to constitute at least a majority of the board
of directors of the surviving or acquiring corporation following the
consummation of such merger, consolidation or sale;

 

d.              the stockholders of the Company approve a plan of complete
liquidation of the Company; or

 

e.               the consummation of the sale or disposition by the Company of
all or substantially all of the Company’s assets to an entity not controlled by
the Company.

 

(c)                      “Good Reason” means the occurrence of any of the
following without your consent: (A) a reduction in your annual Base Salary set
forth above; or (B) the assignment to you of a substantially lower position in
the organization in terms of your title, responsibility, authority or status
unless agreed to in writing by you, or (C) the relocation of the Company to a
location that is more than fifty (50) miles from the Company’s current
headquarters location in Westford, MA.

 

You are, and will remain, an employee at will; nothing in this letter
constitutes a guaranty of employment for any particular period.  Except as
modified by the terms of this letter, the terms of the Agreement will remain in
full force and effect.  Capitalized terms not defined in this letter have the
same definitions given to them in the Agreement.

 

Very truly yours,

 

 

 

 

 

/s/ Maurice Castonguay

 

 

Maurice Castonguay

 

 

Senior Vice President & Chief Financial Officer

 

 

 

 

 

 

 

 

Accepted:

 

 

 

 

 

 

 

 

/s/ Brian O’Donnell

 

November 19, 2012

Brian O’Donnell

 

Date

 

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