Exhibit 10.1


 


Sonus Networks, Inc.


Retention and Restricted
Stock Agreement


 


This Agreement (the “Agreement”) is made between Sonus Networks, Inc.
(the “Company”) and Hassan M. Ahmed (the “Executive”) as of November 14, 2007
(the “Award Date”). Capitalized terms used and not otherwise defined in this
Agreement are used as defined in the Company’s 1997 Stock Incentive Plan, as
amended (the “Plan”).


 


For
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Executive agree as follows:


 


1.                                      CEO
Retention.  The Company’s Board of Directors recognizes the contributions
the Executive has made to continued success of the Company and wishes to retain
the Executive as set forth in this Agreement.


 


2.                                      Award and Issuance of Shares.  The Company shall issue to the Executive,
in consideration of employment services rendered and to be rendered, 750,000 shares
of common stock, $0.001 par value, of the Company (the “Shares”). This
Award is being issued to the Executive pursuant to the Plan and the Award is in
all respects subject to the terms and conditions of the Plan, a copy of which
has been provided to the Executive (the receipt of which the Executive hereby
acknowledges). The Executive hereby accepts the Award subject to all the terms
and provisions of the Plan. The Executive further agrees that all decisions
under and interpretations of the Plan by the Company will be final, binding,
and conclusive upon the Executive and his successors, permitted assigns, heirs,
and legal representatives. The Company
shall issue to the Executive one or more certificates in the name of the Executive
for the Shares being acquired by the Executive. The Executive agrees that
unvested Shares shall be subject to forfeiture as set forth in Section 3 of
this Agreement and the restrictions on transfer set forth in Section 5 of this
Agreement. The Shares shall be deposited in Escrow in accordance with Section 6
of this Agreement.


 


3.                                      Vesting.


 


(a)                                  The Shares shall vest on November 14,
2009 subject to the Executive’s continued service as an executive or as a board
director for the Company through November  14, 2009 unless as otherwise set forth herein. Notwithstanding the foregoing:


 


(i)                                     187,500 Shares shall vest on the date on
which the closing price of the common stock of the Company, as reported on the
NASDAQ Global Select Market (or such other securities exchange on which the
common stock is then listed) is at least $10.00 per share (subject to
proportionate adjustment in the event of any stock split, reverse stock split,
stock dividend or similar recapitalization event affecting the common stock)
for the 10th consecutive trading day, provided the Executive is then
an employee or board director of the Company.


 


(ii)                                  187,500 Shares shall vest on the date the
Company first reports its operating results for the fiscal year ending December
31, 2008 in a report furnished to or filed with the Securities and Exchange
Commission if the Company’s revenue for such year, as so reported, achieves the
Company’s 2008 operating plan, as approved by the Board of Directors. The
Compensation Committee of the Board of Directors shall determine whether clause
3(a)(ii) above has been achieved, provided the Executive is then an employee or
board director of the Company.


 


(iii)                               375,000 of the Shares shall vest if the Company hires a successor
President or Chief Executive Officer or appoints a successor Chairman, on the
date that is three (3) months after the date on which the new President, Chief
Executive Officer or Chairman commences employment or service provided the
Executive shall assist with the transition as reasonably requested by the
Company during such three (3) month period.


 

















 


(iv)                              All of the unvested Shares shall become vested in full upon (A) an
Acquisition of the Company provided the Executive is then an employee or board
director of the Company; (B) the termination of the Executive’s employment with
the Company by the Company or removal as Chairman without Cause (as defined
below); (C) the termination of the Executive’s employment with the Company by
the Executive for Good Reason (as defined below) other than in connection with
the Company’s hiring of a successor President or Chief Executive Officer or
appointment of a successor Chairman; or (D) the termination of the Executive’s
employment or service as Chairman as a result of the Executive’s total or
partial incapacity due to physical or mental illness, or death.


 


(b)                                 The
Compensation Committee of the Board of Directors may in its discretion
accelerate the vesting schedule at any time.


 


(c)                                  For
purposes of this Agreement:


 


(i)                                     “Cause” means (A) the Executive’s willful
failure substantially to perform his duties as President and Chief Executive
Officer that the non-executive Directors of the Board unanimously conclude occurred
more than thirty (30) days after receiving written notice of a unanimous vote
by the non-executive Directors of such non-performance (other than (x) as a
result of total or partial incapacity due to physical or mental illness, or death,
or (y) for Good Reason); (B) the Executive’s willful commission of any material
act of fraud on the Company as determined by a unanimous vote of the
non-executive Directors of the Board; or (C) the Executive’s conviction of, or
the entry of a plea of guilty by the Executive to, a felony involving his
personal conduct under the laws of the United States or any state thereof; and


 


(ii)                                  “Good Reason” means (A) the removal of the
Executive from any of the positions as Chief Executive Officer, President or Chairman of the Company without
Cause; (B) the assignment to the Executive of duties or responsibilities that
are inconsistent with his position as Chief Executive Officer, President or
Chairman  of the Company; (C) a reduction
of the Executive’s annual base salary or target bonus as Chief Executive
Officer, President or Chairman of the Company other than as part of a
broad-based management or employee reduction; (D) the relocation of the
Executive’s place of work such that the distance from the Executive’s current residence
to his place of work is increased by more than 30 miles.


 


4.                                      Forfeiture of Shares.  In the event that the Executive’s employment
is terminated by the Company for Cause or by the Executive without Good Reason
prior to November 14, 2009, then, effective upon the cessation of his
employment and subject to any accelerated vesting provided for in this
Agreement, the Executive shall automatically forfeit (“Forfeiture”), without
any action required on the part of the Executive, all of the unvested Shares (“Forfeited
Shares”) that the Executive received under the Award without the payment of any
consideration by the Company and the Forfeited Shares shall revert to the
Company. Upon and after Forfeiture, the Company shall not pay any dividend to the
Executive on account of such Forfeited Shares or permit the Executive to
exercise any of the privileges or rights of a stockholder with respect to such
Forfeited Shares, but shall, in so far as permitted by law, treat the Company
as the owner of the Forfeited Shares. Military or sick leave or other bona fide
leave will not be deemed a termination of employment provided that it does not
exceed the longer of ninety (90) days or the period during which the absent Executive’s
re-employment rights are guaranteed by statute or by contract.


 


5.                                      Restrictions on Transfer.  The Executive shall not, during the term of
this Agreement, sell, assign, transfer, pledge, hypothecate or otherwise
dispose of, by operation of law or otherwise (collectively “Transfer”), any of
the Shares, or any interest therein, unless and until such Shares are no longer
subject to risk of Forfeiture. Notwithstanding the foregoing, the Executive may
transfer (i) any or all of his Shares (A) to his parents, spouse, children,
stepchildren, grandchildren, or siblings, or spouse of any such person
(collectively, “Immediate Family”), (B) to a trust established for the benefit
of his Immediate Family or himself, or (C) to a limited liability 


 


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company
or limited partnership, the members or partners of which are members of his
Immediate Family or himself, or (ii) any or all of his Shares under his will, provided
that all such Shares transferred under (i) or (ii) shall remain subject to this
Agreement (including without limitation the restrictions on transfer set forth
in this Section 5 and the Forfeiture provision in Section 4) and such permitted
transferee shall, as a condition to such transfer, deliver to the Company a
written instrument confirming that such transferee shall be bound by all of the
terms and conditions of this Agreement. The Company shall not be required (a)
to transfer on its books any of the Shares which shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement,
or (b) to treat as owner of such Shares or to pay dividends to any transferee
to whom any such Shares shall have been so sold or transferred.


 


6.                                      Escrow.  Certificates representing the Shares, along
with stock powers duly executed by the Executive in blank, shall be deposited
by the Executive in escrow upon (or as promptly as practicable following) the
execution of this Agreement and shall be held in escrow by the Secretary of the
Company, as escrow agent (the “Escrow Agent”). Upon vesting of the Shares, the
Escrow Agent shall release to the Executive, upon request, a stock certificate
for those Shares which have vested (other than any withheld by the Company
pursuant to Section 10(b)). In the event Shares are forfeited pursuant to Section
4 or withheld by the Company pursuant to Section 10(b), the Company shall give
written notice to the Executive and to the Escrow Agent within ten (10) days specifying
the number of Forfeited Shares or Shares to be withheld. The Executive and the
Company authorize the Escrow Agent to take all necessary or appropriate actions
consistent with the terms of this Agreement, including the delivery to the
Company of stock certificates and stock powers for the Shares being forfeited
or withheld by the Company. The escrow shall terminate upon the earliest of (i)
the vesting and lapse of forfeiture of all Shares awarded under this Agreement,
(ii) the election by the Company to waive forfeiture on all of the unvested
Shares, or (iii) the election by the Company to terminate this escrow. If at
the time of such termination the Escrow Agent should have in its possession any
Shares owed to the Executive, the Escrow Agent shall promptly deliver such Shares
to the Executive and shall be discharged of all further obligations hereunder. The
Escrow Agent shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by the Escrow Agent
to be genuine and to have been signed or presented by the proper party or
parties. The Escrow Agent or the Company shall not be liable for any act or
omission in good faith and in the exercise of reasonable judgment. It is
understood and agreed that should any dispute arise with respect to the
delivery and/or ownership or right of possession of the Shares held by the
Escrow Agent hereunder, the Escrow Agent is authorized to retain such Shares in
its possession without liability to anyone all until such dispute shall have
been settled either by mutual written agreement of the parties concerned or by
a final order, decree or judgment of a court of competent jurisdiction after the
time for appeal has expired. All
reasonable costs, fees and disbursements incurred by the Executive and the Escrow
Agent in connection with the performance of its duties hereunder shall be borne
by the Company.


 


7.                                      Adjustments.  If during the term of this Agreement, there
is a stock split, stock dividend, stock distribution or other reclassification
of the common stock of the Company, any and all new, substituted or additional
securities to which the Executive is entitled by reason of his ownership of the
Shares shall be immediately subject to conditions of Forfeiture, the restrictions
on transfer and other provisions of this Agreement in the same manner and to
the same extent as the Shares. If the Shares are converted into or exchanged
for, or stockholders of the Company receive, securities of another corporation,
or other property (including cash), pursuant to an Acquisition, then the rights
of the Company under this Agreement shall inure to the benefit of the Company’s
successor or acquiring company and this Agreement shall apply to the securities
or other property received upon such conversion, exchange or distribution in
the same manner, and to the same extent as the Shares.


 


8.                                      No Obligation to Continue Employment.  The Company and
any related corporation are not by the Plan or this Award obligated to continue
the Executive’s employment.


 


9.                                      Compliance
with Laws.  The obligations of the Company and the Executive under
this Agreement are subject to all applicable laws, rules, and regulations,
including all applicable federal and state securities laws 


 


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and the obtaining of all such approvals by government agencies as may
be deemed necessary or appropriate by the Board of Directors (“Board”) or the
relevant committee of the Board.


 


10.                               Tax Matters.


 


(a)                                  Section 83(b) Election.  The Executive has decided not to make an
election under Section 83(b) of the Internal Revenue Code of 1986, as amended,
to be taxed at the time the Shares are acquired.


 


(b)                                  Withholding
Taxes.  The Executive acknowledges and agrees
that the Executive is 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 vesting of the Shares. The Executive shall satisfy such tax
withholding obligations by delivery to the Company, on each date on which
Shares vest under this Agreement, 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 or such other
exchange on which the common stock is then listed 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). The Company is hereby authorized to take such actions as are necessary
to effect such delivery of Shares to the Company.


 


(c)                                  Tax
Advice.   The Executive should review
with the Executive’s own tax advisors the federal, state, local and other tax
consequences of this investment and the transactions contemplated by this Agreement.
The Executive acknowledges that he is not relying on any statements or
representations of the Company or any of its agents. The Executive understands
that the Executive (and not the Company) shall be responsible for the Executive’s
own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.


 


11.                               Severance.
 Subject to Section 14, in the
event that the Executive’s employment with the Company is terminated by the
Company for any reason other than Cause, or in the event that the Executive
terminates his employment with Good Reason, within one-hundred and eighty (180)
days of Good Reason arising, the Executive will be eligible to receive a lump
sum equal to eighteen (18) months base salary and 1.5 times annual bonus at
plan at the greater of the Executive’s then applicable annual rates or the
annual rates prior to the Good Reason event, paid upon termination.


 


12.                               Stock Options.


 


(a)                                  In the event that the Executive’s employment
with the Company is terminated by the Company for any reason other than Cause,
or in the event that the Executive terminates his employment with Good Reason,
within one-hundred and eighty (180) days of Good Reason arising, (a) any stock
options granted to the Executive by the Company that are unvested as of the termination
date will continue to vest in accordance with the terms of the applicable
Option Agreements during the eighteen (18) month period following the date of
employment termination and, upon vesting, will remain outstanding and
exercisable for a period equal to the lesser of eighteen (18) months from the
date of termination or the remaining life of the option, and (b) the Executive’s
vested and unexercised stock options will remain outstanding and exercisable
for a period equal to the lesser of eighteen (18) months from the date of
termination or the remaining life of the option.


 


(b)                                  In the event that the Executive’s employment
with the Company is terminated by the Company for Cause or by the Executive without
Good Reason, any stock options that are unvested as of the termination date
will cease to vest and the Executive’s vested and unexercised stock options
will remain 


 


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outstanding
and exercisable for a period equal to the lesser of one-hundred and eighty (180)
days from the date of termination or the remaining life of the option.


 


13.                               Health Benefits.  Subject to Section 14, in the event that the
Executive’s employment with the Company is terminated by the Company for any
reason other than Cause, or in the event that the Executive terminates his
employment with Good Reason, within one-hundred eighty (180) days of Good
Reason arising, the Company will pay the COBRA premiums for health benefits
(medical, dental and vision) through eighteen (18) months from the date of
termination, with payments to be made on a monthly basis.


 


14.                               Distributions.  The following rules shall apply with respect to
distribution of the payments and benefits (“Payments”), if any, to be provided
to the Executive under Sections 11 and 13.


 


(a)                                  It is intended that each installment of payments and
benefits provided under Sections 11 and 13 shall be treated as a separate Payment
for purposes of Section 409A. Neither the Company nor the Executive shall have
the right to accelerate or defer the delivery of any such Payments except to
the extent specifically permitted or required by Section 409A;


 


(b)                                 If, as of the date of the “Separation from Service” of the
Executive from the Company, the Executive is not a “Specified Employee” (each
within the meaning of Section 409A), then each Payment shall be made on the
dates and terms set forth in Sections 11 and 13; and


 


(c)                                  If, as of the date of the Separation
from Service of the Executive from the Company, the Executive is a Specified Employee,
then:


 


(i)  Each of the Payments due under Sections 11 and 13 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 hereinafter defined) and 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. For
purposes of this Agreement, the “Short-Term Deferral Period” means the period
ending on the later of the 15th day of the third month following the end of the
Executive’s tax year in which the Executive’s Separation from Service occurs
and the 15th day of the third month following the end of the Company’s tax year
in which the Executive’s Separation from Service occurs; and


 


(ii)  Each of the Payments due under Sections 11 and 13 that is
not paid within the Short-Term Deferral Period and that would, absent this
subsection, be paid within the six-month period following the Separation from Service
of the Executive of the Company shall not be paid until the date that is six
months and one day after such Separation from Service (or, if earlier, the
death of the Executive), with any such installments that are required to be
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 the Executive’s 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 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) or Treasury
Regulation 1.409A-1(b)(9)(v) (relating to reimbursements and certain other
separation payments). Such Payments shall bear interest at an annual rate equal
to the prime rate as set forth in the Eastern edition of the Wall Street
Journal on the Date of Termination, from the Date of Termination to the date of
payment. 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 of the Executive following the taxable year of the
Executive in which the Separation from Service occurs.


 


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15.                               Indemnity.   The Company will continue to honor its
existing indemnification obligations to the Executive to the extent allowable
by law.


 


16.                               General.
 This Agreement will be governed by and interpreted and construed in
accordance with the internal laws of the State of Delaware (without reference
to principles of conflicts or choice of law). The captions of the sections of
this Agreement are for reference only and will not affect the interpretation or
construction of this Agreement. This Agreement will bind and inure to the
benefit of the parties and their respective successors, permitted assigns,
heirs, devisees, and legal representatives. This Agreement (including the Plan)
supersedes all prior agreements, written or oral, between the Executive and the
Company relating to the subject matter of this Agreement. This Agreement may be
amended or modified only by a written agreement signed by the Company and the Executive.


 


Executed as of the date first written above.


 


	
  SONUS NETWORKS, INC.

  	
   

  	
  HASSAN M. AHMED

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Charles J. Gray

  	
   

  	
   

  	
  /s/ Hassan M. Ahmed

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Charles J. Gray

  	
   

  	
   

  	
   

  
							



 


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