Exhibit 10.4


 


Sonus Networks, Inc.


 


7 Technology Park Drive, Westford, MA 01886


 


October 2,
2008


 


Mohammed
Shanableh


 


Re:  Executive Severance and Arbitration
Agreement


 


Dear
Mohammed:


 


I
am pleased to provide you this letter (the “Agreement”)
pertaining to your relationship with 
Sonus Networks, Inc. (the “Company”).


 


1.             Position.  You currently serve as the Company’s Vice
President Worldwide Sales and report directly to the Chief Executive
Officer.  As a full-time employee of the
Company, you are expected to devote all of your business time and energies to
the business and affairs of the Company.


 


2.             Nature of Relationship.  Your employment is not for any specified
period of time.  Employment at Sonus
Networks, Inc. is “at will” and either you or the Company may terminate
the employment relationship at any time and for any reason or no reason upon
written notice as described in Section 6 below.


 


3.             Restricted Stock Grant.  On November 15, 2008 (the “Grant Date”), the Company will grant you 133,000 shares of
the Company’s common stock $0.001 par value per share (“Restricted
Shares”), under the Company’s 2007 Stock Plan, subject to the terms
of the Company’s 2007 Stock Plan and the Company’s restricted stock agreement
which shall reflect the terms of this Agreement.  Provided that you continue in employment with
the Company, the Restricted Shares shall vest as follows: (a) 25% of the
Restricted Shares (33,250 Restricted Shares) shall vest on September 15,
2009, (b) an additional 25% of the Restricted Shares (33,250 Restricted
Shares) shall vest on September 15, 2010, and the final 50% of the
Restricted Shares (66,500 Restricted Shares) shall vest on September 15,
2011.


 


4.             Performance Stock Grant.  In addition to the grant of Restricted
Shares, you will be entitled to a grant of 66,000 shares of common stock upon
the Company’s achieving, during your employment, certain performance metrics
for the three fiscal years ended December 31, 2010, 2011 and 2012, as
determined by the Compensation Committee of the Board of Directors.  You shall be eligible to be granted 1/3 of
such performance shares during each of such fiscal years.  Subject to the achievement of such
performance metrics for each of such fiscal years, a specified number of shares
would be granted to you within thirty (30) days of the Company’s reporting of
its financial results for such years. 
Any shares issued shall be fully vested on the date of grant.


 


5.             Change in Control.  In the event of a Change in Control (defined
below), (i) 100% of all unvested options granted to you to purchase the
Company’s common stock shall accelerate and all such options shall immediately
become vested and exercisable, and (ii) 100% of all Restricted Shares
granted to you shall accelerate and become fully vested and any and all



 

















 


restrictions
on such Restricted Shares shall be terminated and any and all legends shall be
removed.


 


6.             Termination and Eligibility for
Severance.  If your employment with
the Company is terminated by the Company without Cause (as defined below) or
you terminate your employment with the Company for Good Reason (as defined
below), the Company will provide you the following severance and related
post-termination benefits:


 


(a)                                 a lump sum payment equal to the sum of your
then annual base salary and your then target annual bonus, less applicable
state and federal withholdings;


 


(b)                                continuation of payment of the Company’s
share of medical, dental and vision insurance premiums for you and your
dependents for the twelve (12) month period following the termination of your
employment; 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;


 


(c)                                 any allowable unreimbursed expenses and any
accrued but unused vacation pay owing to you at the time of termination;


 


(d)                                any stock options granted to you by the
Company to purchase the Company’s common stock that are unvested as of the
termination date and would vest during the twelve (12) months following your
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
your termination date or the original remaining life of the options; and


 


(e)                                 any Restricted Shares granted to you by the
Company that are unvested as of the termination date will accelerate and
immediately vest upon termination, and any and all restrictions on such
Restricted Shares shall be terminated and any and all legends shall be removed
so that the shares be and are freely marketable.


 


The
Company’s provision of the benefits described in Section 6(a), (b), (d) and
(e) above shall be contingent upon your execution of a release of all
claims of any kind or nature in favor of the Company in a form to be provided
by the Company (the “Release Agreement”). 
The lump sum payment described in Section 6(a) above shall be
made after the Company’s receipt of the executed Release Agreement and the
expiration of any revocation period described in 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 6.


 


The
Company may terminate your employment at any time with or without Cause by
written notice to you specifying the date of termination.  You may terminate your employment with or
without Good Reason by providing 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.


 


7.             Definitions.  As used in this Agreement, the following
terms shall have the following meanings:


 


(a)                                 “Change in Control”
as used in this Agreement shall have the meaning set forth on Annex A attached hereto.


 


(b)                                “Good Reason” as
used in this Agreement means the occurrence of any of the following without
your consent: (A) a reduction in your annual base salary; (B) the
assignment to you of a 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.


 


(c)                                 “Cause” as used
in this Agreement 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 in writing by the Chief Executive Officer of the Company or the Board
of Directors of the Company; (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 material breach by you of
any confidentiality agreement with the Company.


 


8.             Tax Implications of Termination
Payments. Subject to this Section 8, any
payments or benefits under Section 6 shall begin only upon the date of a “separation
from service” as defined under Section 409A of the U.S. Internal Revenue
Code of 1986, as amended, and the guidance issued thereunder (“Section 409A”),
which occurs on or after the date of termination under Section 6. The
following rules shall apply with respect to distribution of the payments
and benefits, if any, to be provided to you under Section 6:


 


(a)                                 It is intended that each installment of the
payments and benefits provided under Section 6 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 6; 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 6 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) 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
tax year in which your separation from service occurs and the 15th day of the
third month following the end of the Company’s tax year in which your
separation from service occurs; and


 


(ii)                                Each installment of the payments and benefits
due under Section 6 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 months and one day after such separation
from service (or, if earlier, your death), 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
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 of following the
taxable year of in which your separation from service occurs.


 


9.             Section 409A
of the Code.   This Agreement is
intended to comply with the provisions of Section 409A and the Agreement
shall, to the extent practicable, be construed in accordance therewith.  Terms defined in the 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 the 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.


 


10.           Section 83(b) Election and Withholding Taxes.  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.


 


11.           Assignment.  This Agreement is personal in nature and
neither of the parties hereto shall, without the written consent of the other,
assign or otherwise transfer this Agreement or its obligations, duties and
rights under this Agreement; provided, however, that in the event of the
merger, consolidation, transfer or sale of all or substantially all of the
assets of the Company, this Agreement shall, subject to the provisions hereof,
be binding upon and inure to the benefit of such successor and such successor
shall discharge and perform all of the promises, covenants, duties and
obligations of the Company hereunder.


 


12.           General.


 


(a)                                 Entire Agreement; Modification. This Agreement contains the entire agreement
of the parties relating to the subject matter hereof, and the parties hereto
have made no agreements, representations or warranties relating to the subject
matter of this Agreement that are not set forth otherwise herein.  This Agreement supersedes any and all prior
agreements, written or oral, between you and the Company.  No modification of this Agreement shall be
valid unless made in writing and signed by the parties hereto.


 


(b)                                Severable Provisions.  This
provisions of this Agreement are severable and if any one or more provisions
may be determined to be illegal or otherwise unenforceable, in whole or in
part, the remaining provisions of the Agreement shall nevertheless be binding
and enforceable.


 


(c)                                 Governing Law.  This
Agreement shall be governed by and interpreted in accordance with the laws of
the Commonwealth of Massachusetts, without regard to the conflict of laws
provisions hereof.


 


(d)                                 Arbitration.


 


(i)                                   Any controversy, dispute or claim arising out
of or relating to this Agreement or the breach hereof which cannot be settled
by mutual agreement will be finally settled by binding arbitration in
Massachusetts under the jurisdiction of the American Arbitration Association,
before a single arbitrator appointed in accordance with the arbitration rules of
the American Arbitration Association, modified only as herein expressly
provided.  The arbitrator may enter a
default decision against any party who fails to participate in the arbitration
proceedings.


 

















 


(ii)                               The decision of the arbitrator on the points
in dispute will be final, non-appealable and binding, and judgment on the award
may be entered in any court having jurisdiction thereof.


 


(iii)                            The fees and expenses of the arbitrator will
be shared equally by the parties, and each party will bear the fees and
expenses of its own attorney.


 


(iv)                           The parties agree that this Section 12(d) has
been included to resolve any disputes between them with respect to this
Agreement, and that this Section 12(d) will be grounds for dismissal
of any court action commenced by either party with respect to this Agreement,
other than post-arbitration actions seeking to enforce an arbitration award or
actions seeking an injunction or temporary restraining order. In the event that
any court determines that this arbitration procedure is not binding, or
otherwise allows any litigation regarding a dispute, claim, or controversy
covered by this Agreement to proceed, the parties hereto hereby waive any and
all right to a trial by jury in or with respect to such litigation.


 


(v)                              The parties will keep confidential, and will
not disclose to any person, except as may be required by law, the existence of
any controversy hereunder, the referral of any such controversy to arbitration
or the status or resolution thereof.


 


(e)                                 Notices.  All notices shall be in writing and shall be
delivered personally (including by courier), sent by facsimile transmission
(with appropriate documented receipt thereof), by overnight receipted courier
service (such as UPS or FedEx) or sent by certified, registered or express
mail, postage prepaid, to the Company at the following address:  Chief Executive Officer, Sonus Networks, Inc.,
7 Technology Park Drive, Westford, MA 01886, and to you at the following
address:                                                                                       .  Any such notice shall be deemed given when so
delivered personally, or if sent by facsimile transmission, when transmitted,
or, if by certified, registered or express mail, postage prepaid mailed,
forty-eight (48) hours after the date of deposit in the mail.  Any party may, by notice given in accordance
with this paragraph to the other party, designate another address or person for
receipt of notices hereunder.


 


(f)                                   Counterparts.  This Agreement may be executed in more than
one counterpart, each of which shall be deemed to be an original, and all such
counterparts together shall constitute one and the same instrument.


 


****


 


You
must confirm your acceptance of this Agreement in writing.  Please sign and return a copy of this letter
to me at the Company’s address above, or via e-mail at 


 

















 


rnottenburg@sonusnet.com
to evidence your agreement with the terms and conditions set forth herein.


 


Very truly yours,


 


 


Richard N. Nottenburg


President and Chief Executive Officer


 


 


Accepted by:


 


 


	
  /s/ Mohammed Shanableh

  	
   

  	
  October 7, 2008

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
  Date

  	
   

  	
   

  
							



 

















 


Annex A


 


A “Change in
Control” as used in the Agreement of which this Annex is a part 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


 


(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.