Exhibit 10.3
Sonus Networks, Inc.
7 Technology Park Drive, Westford, MA
01886
October 2, 2008
Richard Gaynor
Re: Executive Severance and
Arbitration Agreement
Dear Rick:
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 Chief Financial Officer 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
200,000 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 (50,000 Restricted Shares) shall vest on
September 15, 2009, (b) an additional 25% of the
Restricted Shares (50,000 Restricted Shares) shall vest on
September 15, 2010, and the final 50% of the Restricted Shares
(100,000 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 100,000 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 distributio
