Sonus Networks adopts shareholder rights plan

The board adopted the plan in response to recent heavy trading volume and because it has yet to reach a satisfactory agreement with its largest shareholder, Legatum Capital. A shareholder rights plan, or "poison pill" provision, generally makes a hostile takeover more difficult for the buyer.

Under the plan, preferred stock purchase rights will be distributed as a dividend at the rate of one right for each share of common stock. The rights will expire on June 26, 2011.

The rights are generally exercisable only if a person or group acquires 15 percent or more of the company's common stock. A person or group already owning 15 percent or more will not cause the rights to become exercisable upon adoption of the plan. Thus, the rights will not be triggered even though Legatum holds a 25 percent stake in the company. However, Sonus said the rights would become exercisable if Legatum buys additional shares or their ownership decreases below 15 percent and then subsequently increases to 15 percent or more.

Legatum has said the company lacks transparency and is unresponsive to shareholders. The investor has also expressed concern over a decline in Sonus' stock price, shareholder lawsuits and high senior management turnover.

Last week, the shareholder withheld its votes for three board nominees up for re-election at the company's annual meeting.

The three directors were re-elected despite Legatum's action. Sonus subsequently engaged in discussions with Legatum regarding its complaints following the meeting, but said it has been unsuccessful in reaching a satisfactory conclusion.

"We continue to remain open to discussions with Legatum about the company, its business and prospects, as well as Legatum's investment in Sonus," said Chief Executive Richard Nottenburg, in a statement. "Regrettably, we have not received the necessary assurances from Legatum under the securities laws, to allow us to have the confidential and full discussion we believe is needed to resolve Legatum's issues."