Sonus Networks, Inc. Westford, MA 01886
Exhibit
1
Sonus
Networks, Inc.
0
Xxxxxxxxxx Xxxx Xxxxx
Xxxxxxxx,
XX 00000
January
9, 2009
Legatum
Capital Limited
Xxxxx
0, Xxxxxxxxxx Xxxxx
X.X.
Xxx 00000
Xxxxx
U.A.E.
Gentlemen:
This
letter constitutes the agreement (the "Agreement") between
Sonus Networks, Inc. (the "Company"), on the one
hand, and Legatum Capital Limited and each of the entities set forth on Schedule A, on the
other hand (collectively, "Legatum", and
individually a "Member"), with
respect to the matters set forth below:
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1.
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Following
the execution of this Agreement, Legatum will identify to the Company in
writing two candidates (the "Legatum
Designees") to serve on the Board of Directors of the Company (the
"Board"). The
Company will appoint the Legatum Designees to the Board and agrees, if
necessary, to expand the Board by up to two members to create vacancies
for such purpose. Each Legatum Designee will (i) be qualified
to serve as a member of the Board under all applicable corporate
governance policies or guidelines of the Company and the Board effective
on the date of this Agreement (copies of which have been made available or
delivered to Legatum prior to the execution of this Agreement) and
applicable legal, regulatory and stock market requirements, (ii) meet the
independence requirements with respect to the Company of Section
4200(a)(15) of the Rules of The Nasdaq Global Select Market or any
successor thereto, and (iii) be reasonably acceptable to the Board
(including the Nominating Committee of the Board) in its good faith
discretion. Subject to the foregoing standards, the Board will
not unreasonably oppose the appointment of the Legatum
Designees. Following receipt of the identification of the
Legatum Designees, the Board (including the Nominating Committee of the
Board) will review and evaluate the Legatum Designees as soon as
reasonably practicable. Promptly following approval, the Board
shall take all corporate action necessary to appoint the Legatum Designees
that have been approved to the Board. If the Board does not
accept any Legatum Designee, Legatum will have the right to identify
replacements for such Legatum Designee for appointment by the Board in
accordance with the provisions of this Paragraph 1 and Paragraph 2 below,
provided
that notwithstanding the criteria set forth above, such person may be
affiliated with Legatum and provided further that
Xxxx Xxxxxxxx shall be deemed acceptable to the Board in such
circumstance. Notwithstanding anything to the contrary
contained herein, the Board may reject any Legatum Designee in its sole
and absolute discretion if such Legatum Nominee’s appointment would
require disclosure under item 401(f) of Regulation S-K of the General
Rules and Regulations under the Securities Act of 1933, as
amended.
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Legatum
Capital Limited
January
9, 2009
Page
2
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2.
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Legatum
will use its reasonable efforts to cause the Legatum Designees to
cooperate fully with the Company in connection with the Company’s process
for selecting, evaluating and appointing directors to serve on the Board,
including to: (i) make themselves reasonably available for interviews and
other meetings as the Board or the Nominating Committee of the Board, or
both, may reasonably request, (ii) complete officers' and directors'
questionnaires provided to directors in connection with their service on
the Board, (iii) consent to and provide information to the Company for
customary reference and background checks, and (iv) provide such other
information (including information necessary to determine the nominee's
independence status under the Rules of The Nasdaq Global Select Market or
any successor thereto as well as information necessary to determine any
disclosure obligations of the Company) as the Board or the Nominating
Committee of the Board, or both, may reasonably
request.
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3.
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In
order to create classes of directors that are relatively equal in size as
required by Delaware law, one of the Legatum Designees (the "2009 Designee")
will have an initial term that expires at the 2009 Annual Meeting of
Stockholders (the "2009 Annual
Meeting"), and the other Legatum Designee will have a term that
expires at the 2010 Annual Meeting of Stockholders (the "2010 Annual
Meeting"). The 2009 Designee shall be included in the
Company's slate of directors for election at the 2009 Annual Meeting and
the Company shall publicly support and recommend that the Company's
stockholders vote for the election of the 2009 Designee at the 2009
Annual Meeting in the same manner as all other designees on the Company's
slate of directors.
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4.
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Each
of the Legatum Designees will comply with all policies, procedures,
processes, codes, rules, standards and guidelines applicable to all
members of the Board, including, but not limited to, the Company's Code of
Business Conduct and Ethics and Corporate Governance Policies, each as in
effect on the date of this Agreement (copies of which Legatum acknowledges
have been made available or delivered to Legatum prior to the execution of
this Agreement), and as may be modified by the Board from time to time in
its sole and absolute discretion. The Legatum Designees will
enjoy the same rights, privileges, powers and duties as all other
directors, and receive the same compensation and benefits (including
expense reimbursement) as all other directors, including indemnification
rights, exculpation protections associated with service on the Board, and
directors' and officers' liability insurance to the extent sent forth in
existing or future policies for directors
generally. Notwithstanding anything to the contrary in this
Agreement, the Legatum Designees, during the term of their service as
directors of the Company, will not be prohibited from acting as directors
and complying with their fiduciary duties as directors of the
Company.
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5.
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If
at any time during the Restricted Period (as defined below) a Legatum
Designee shall cease to be a member of the Board for any reason, Legatum
shall be entitled to designate another person (a "Legatum Successor
Designee"), to serve as a director in place of such Legatum
Designee for the same term as the Legatum Designee whom
is
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Legatum
Capital Limited
January
9, 2009
Page
3
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being
replaced. Any Legatum Successor Designee will be required in
all cases to be approved by the Board (including the Nominating Committee
of the Board) in the manner set forth in and subject to the provisions set
forth in Paragraph 1 and Paragraph 2 of this Agreement. If the
Board does not accept any Legatum Successor Designee, Legatum will have
the right to recommend additional Legatum Successor Designees in
accordance with this Paragraph 5. The Board will appoint such
Legatum Successor Designee to the Board no later than three business days
after the Board's approval of such Legatum Successor
Designee. Upon becoming a member of the Board, any Legatum
Successor Designee will become a Legatum Designee for all purposes under
this Agreement.
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6.
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In
accordance with the Company's Restated Certificate of Incorporation,
Amended and Restated Bylaws and applicable state law, the Board will
approve, submit and recommend, and solicit proxies in favor of, a
resolution for consideration by the Company's stockholders at the 2009
Annual Meeting to provide for the annual election of all directors in
accordance with the terms of this Paragraph 6 (the "Declassification
Proposal"). In the Company's definitive proxy statement
for the 2009 Annual Meeting, the Board will include a recommendation that
the Company's stockholders vote in favor of the Declassification
Proposal. Pursuant to the Declassification Proposal, if adopted
by the Company's stockholders, each director (other than the 2009
Designee, who shall only stand for election to a one-year term expiring at
the 2010 Annual Meeting) elected at the 2009 Annual Meeting would be
elected for a two-year term ending at the 2011 Annual Meeting, and each
director elected at the 2010 Annual Meeting would be elected for a
one-year term ending at the Company's 2011 Annual Meeting of Stockholders
(the "2011
Annual Meeting"). At the 2011 Annual Meeting and
thereafter, all of the Company's directors would be elected to one-year
terms.
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7.
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As
soon as reasonably practicable following the execution of this Agreement,
the Board shall take all action necessary to establish an ad hoc committee
of the Board (the "Corporate Development
and Investment Committee") with the responsibility of working with
management to focus on uses of the Company's cash and short-term
investments, tax planning, strategic acquisitions, mergers and joint
ventures, with the objective of enhancing stockholder
value. The Corporate Development and Investment Committee will
be composed of three directors. As long as any Legatum Designee
is serving on the Board, the Corporate Development and Investment
Committee will include at least one Legatum Designee as selected by
Legatum.
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8.
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Each
Member will not, and will cause each of its respective affiliated funds,
persons and entities not to, do any of the following for a period
commencing on the date hereof and ending on the date that is 30 days
prior to the first day of the notice period specified in the Company’s
advance notice bylaw related to any action to be taken at the 2010 Annual
Meeting (assuming, for purposes of determining the date on which the
Restricted Period shall end and regardless of the date on which the 2010
Annual Meeting is actually held, that the 2010 Annual Meeting is held
within such number of
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Legatum
Capital Limited
January
9, 2009
Page
4
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days
of the anniversary date of the 2009 Annual Meeting as shall not require a
change in the deadline under the Company’s advance notice bylaw) (such
period, the “Restricted
Period”): (a) make, engage in, or in any way participate in,
directly or indirectly, any "solicitation" (as such term is used in the
proxy rules of the Securities and Exchange Commission (the "SEC")) of
proxies in support of (i) any nominee to the Board in opposition to the
Company's slate of directors for election or (ii) the removal of any
director of the Company, or (b) initiate, propose or otherwise "solicit"
(as such term is used in the proxy rules of the SEC), directly or
indirectly, stockholders of the Company for the approval of stockholder
proposals, or conduct any other type of public referendum of
the Company’s stockholders (binding or non-binding) (subparagraphs (a) and
(b) collectively referred to herein as the “Restricted
Activities”). Notwithstanding the foregoing
restrictions in this Paragraph 8, no Member shall be prohibited from
submitting to the Company on a strictly confidential basis any shareholder
proposal pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as
amended, for inclusion in the Company's definitive proxy statement in
connection with the 2010 Annual Meeting of Stockholders (“Rule 14a-8
Notice”); provided, however, that
nothing in this sentence shall be deemed to prevent or otherwise restrict
Legatum from making such filings as are required by law, including,
without limitation, an amendment to Legatum’s Schedule 13D (any such
filing, a “Required Legatum
Filing”). If Legatum shall make a Required Legatum
Filings in connection with a Rule 14a-8 Notice or upon the termination of
the Restricted Period if any Member or any of its respective affiliated
funds, persons and entities shall engage in any Restricted Activity in
connection with the 2010 Annual Meeting, then Legatum shall immediately
cause the Legatum Designees to resign from the Board and the Company shall
condition the appointment of the Legatum Designees on agreeing to such
possible resignation. The Company and Legatum agree that, during the
Restricted Period, neither party will publicly publish or publicly
disseminate any disparaging statements, written or oral, regarding the
Company, the Board, the management of the Company, Legatum or the Legatum
Designees. The Company shall amend its advance notice bylaw
relating to the nomination of directors and the presentation of business
by stockholders to, among other things, provide that the advance
notice period for such action shall not be later than the 90th
day nor earlier than the 120th day prior to the anniversary date of
the preceding year's annual meeting, and such amendment shall be
applicable to the 2010 Annual Meeting.
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9.
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As
soon as reasonably practicable following the execution of this Agreement,
the Company will issue a press release in a form mutually and reasonably
agreeable to the Company and Legatum (the "Press
Release"). Neither the Company nor Legatum, during the
Restricted Period, will make any public statements (including in any
filing with the SEC or any other regulatory or governmental agency,
including any stock exchange) that are inconsistent with, or otherwise
contrary to, the statements in the Press Release; provided, however, that
Legatum and the Company may make such filings as are required by law,
including, without limitation, an amendment to Legatum's Schedule
13D.
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Legatum
Capital Limited
January
9, 2009
Page
5
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10.
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The
Company and Legatum each acknowledge and agree that money damages would
not be a sufficient remedy for any breach (or threatened breach) of this
Agreement by the other party and that, in the event of any breach or
threatened breach hereof, the non-breaching party shall be entitled to
seek injunctive and other equitable relief, without proof of actual
damages, that the breaching party shall not plead in defense thereto that
there would be an adequate remedy at law, and that the breaching party
agrees to waive any applicable right or requirement that a bond be posted
by the non-breaching party. Such remedies shall not be the
exclusive remedies for a breach of this Agreement, but will be in addition
to all other remedies available at law or in equity.
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11.
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All
notices and other communications under this Agreement shall be in writing
and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by facsimile, by Federal Express or by
registered or certified mail, postage pre-paid, return receipt requested,
as follows:
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If
to the Company:
Sonus
Networks, Inc.
0
Xxxxxxxxxx Xxxx Xxxxx
Xxxxxxxx,
XX 00000
Attn: Xxxx
Xxxxxxxxxx, CEO
Phone: x0
000 000 0000
Fax: x0
000 000 0000
With
a copy (which shall not constitute notice) to:
Manatt,
Xxxxxx & Xxxxxxxx, LLP
00000
Xxxx Xxxxxxx Xxxx.
Xxx
Xxxxxxx, XX 00000
Attn: Xxxxxx
Xxxx, Esq.
Xxxx Xxxxxx, Esq.
Xxxxx Xxxxxxxx, Esq.
Phone: x0
000 000 0000
Fax: x0
000 000 0000
If
to Legatum:
Legatum
Capital Limited
Xxxxx
0, Xxxxxxxxxx Xxxxx
Xxxxx
U.A.E.
Attn: Xxxx
Xxxxxxxx
Phone: x000
0 000 0000
Fax: x000
0 000 0000
Legatum
Capital Limited
January
9, 2009
Page
6
With
a copy (which shall not constitute notice) to:
Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx
Xxxxx Xxxxxx
Xxx
Xxxx, XX 00000
Attn: Xxxx
X. Xxxxxxx
Xxxxxxx X. Xxxxxxxx
Phone: x0
000 000 0000
Fax: x0
000 000 0000
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12.
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This
Agreement may be executed in any number of counterparts (including by
facsimile and .pdf file), each of which shall be deemed to be an original
and all of which together shall be deemed to be one and the same
instrument. The parties hereto need not execute the same
counterpart.
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13.
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This
Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware, without regard to its conflict of laws
principles. The parties hereto consent to personal jurisdiction
and venue in any action to enforce this Agreement in the federal or state
courts located in Wilmington, Delaware.
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14.
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This
Agreement constitutes the only agreement between Legatum and the Company
with respect to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written. This Agreement shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Agreement may not be assigned by Legatum without the prior written consent
of the Company. No amendment, modification, supplement or
waiver of any provision of this Agreement may in any event be effective
unless in writing and signed by the party or parties affected thereby, and
then only in the specific instance and for the specific purpose
given.
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15.
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This
Agreement shall automatically terminate and be of no further force or
effect, without any action on the part of any of the parties hereto, in
the event of the sale of substantially all of the Company’s assets or a
change of control of the Company, which shall be deemed to include, among
other things, (i) any transaction or series of related transactions
pursuant to which the stockholders of the Company prior to such
transaction or series of transactions hold less than a majority of the
voting power of the Company or any successor in interest thereto or less
than a majority in interest of all or substantially all of the assets of
the Company, and (ii) any transaction or series of related
transactions pursuant to which the members of the Board prior to such
transaction or series of transactions constitute less than a majority of
the members of the Board or the board of directors of any successor in
interest thereto.
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16.
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Each
Member, on behalf of itself, represents and warrants that (a) such Member
has the power and authority to execute, deliver and carry out the terms
and provisions of this Agreement and to consummate the transactions
contemplated hereby, and (b) this Agreement has been duly and validly
authorized, executed and delivered by
such
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Legatum
Capital Limited
January
9, 2009
Page
7
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Member,
constitutes a valid and binding obligation and agreement of such Member
and is enforceable against such Member in accordance with its
terms.
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17.
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The
Company represents and warrants that (a) the Company has the power and
authority to execute, deliver and carry out the terms and provisions of
this Agreement and to consummate the transactions contemplated hereby, and
(b) this Agreement has been duly and validly authorized, executed and
delivered by the Company, constitutes a valid and binding obligation and
agreement of the Company and is enforceable against the Company in
accordance with its terms.
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[Execution page
follows.]
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SONUS
NETWORKS, INC.
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By:
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/s/ Xxxxxxx X. Nottenberg | |||
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Name:
Xxxxxxx X. Nottenberg
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Title:
Chief Executive Officer
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Accepted
and Agreed:
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LEGATUM
CAPITAL LIMITED
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By:
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/s/ Xxxx X. Xxxxxxxx | |||
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Name:
Xxxx X. Xxxxxxxx
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Title:
Director
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GALAHAD
SECURITIES LIMITED
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By:
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/s/ Xxxx X. Xxxxxxxx | |||
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Name:
Xxxx X. Xxxxxxxx
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Title:
Director
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LEGATUM
GLOBAL HOLDINGS LIMITED
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By:
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/s/ Xxxx X. Xxxxxxxx | |||
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Name:
Xxxx X. Xxxxxxxx
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Title:
Director
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LEGATUM GLOBAL
INVESTMENT LIMITED
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By:
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/s/ Xxxx X. Xxxxxxxx | |||
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Name:
Xxxx X. Xxxxxxxx
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Title:
Director
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SENATE
LIMITED, acting on behalf of that
certain
trust formed under the laws of the Cayman
Islands
as of 1 July 1996
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By:
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/s/ Xxxx X. Xxxxxxxx | |||
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Name:
Xxxx X. Xxxxxxxx
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Title:
Director
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[Signature
Page to Settlement Agreement]
Schedule
A
Galahad
Securities Limited
Legatum
Global Holdings Limited
Legatum
Global Investment Limited
Senate
Limited, acting on behalf of that certain trust formed under the laws of the
Cayman Islands as of 1 July 1996
