Ribbon Communications Annual Report 2019

Plain-text annual report

Dear Ribbon Stockholders, I am excited to have recently joined Ribbon as President and Chief Executive Officer, at a time of significant change for the company. In addition to having recently closed an important acquisition, we are collectively managing unprecedented uncertainty in the global economy and concerns over public health. I have spent my 30+ year career in the telecommunications industry and know the Ribbon products and technology well. We believe we will successfully navigate through this period of change by maintaining a laser focus on our customers, and investing in our employees to maintain product pipeline velocity and differentiation. In order to expand and strengthen the Ribbon portfolio offering and to address new markets, we recently completed the merger with ECI Telecom Group Ltd. (“ECI”) on March 3, 2020. ECI is a strong player in the optical and packet networking market and participates in the metro, core and edge portions of both mobile and fixed service provider networks. ECI has also established an enviable position with critical infrastructure players, including utilities and large‐scale education networks. We aim to extend ECI’s offerings through Ribbon’s strong position with service providers in North America and Asia, while extending the Ribbon portfolio within the critical infrastructure segment. During my first 60 days at Ribbon, I have reviewed the details of our expanded portfolio, met with many employees, and talked with many customers. I am pleased to report that we have a very strong team with a loyal customer base that relies on our technology differentiation and world‐class support services. The COVID‐19 pandemic has had a profound impact on the world, changing the way we all work and communicate. Ribbon has quickly and efficiently transitioned to a predominantly work‐from‐home posture, minimizing impact on product development with no interruption of our customer support services. We have worked closely with our customers to rapidly address network congestion and to add capacity to support the dramatic increase in network traffic. As a result, portions of our business have been highly resilient throughout this crisis, and we expect a gradual recovery in the areas of our business that are tied more directly to deployment services that have been paused or delayed during this time. I am confident that we will efficiently manage the COVID‐19 crisis while successfully integrating Ribbon and ECI and strengthening our reputation for innovation, service, and quality. Ribbon’s portfolio directly enables and supports the exponential growth in demand for bandwidth, connectivity, and applications from both businesses and consumers. This growth is best supported by a cloud‐centric network architecture, with software‐driven applications deployed in the cloud, network core and edge. Notable achievements from last year include:  Increased software sales ‐ In the second half of 2019, more than half of Ribbon’s product revenue came from software‐only sales. Our software and appliance‐based Session Border Controller (SBC) products continue to realize increased market penetration. By the end of 2019, 850 customers had purchased our fully virtualized software SBC products, which run on private service provider and public clouds, including __________________________ 1 Please refer to the inside back cover for Important Information Regarding Forward‐Looking Statements. Amazon Web Services, Microsoft Azure and Google Cloud. We continued our market leadership position for SBC, with Omdia (IHS) ranking us as the #2 market leader globally in 2019. Our focus on the enterprise market segment ‐ As adoption of cloud communications continues globally, wemade great strides last year working with partners to increase adoption of our enterprise edge solutions.Westcon‐Comstor deployed our Network Edge Orchestration solution to resellers in Europe. We alsoannounced Peerless Communications Inc. as a new customer for our Cloud2Edge solution, a key win for ourIntelligent Edge products. In addition, forty‐five percent of our software SBC customers are leveraging ourtechnology for Microsoft Skype for Business and Teams, reflecting solid progress in our partnership withMicrosoft.Significant footprint in global service provider networks – The implementation of our products in globalservice provider networks supports our business with predictable and sustained earnings and we believe itpositions us well for new opportunities with these service providers based on our long‐term partnership andtrack record with them.Moving forward, the Ribbon and ECI combination is a major step to expand Ribbon’s strategy beyond voice services into the data domain. ECI unlocks significant opportunities for Ribbon to compete for 5G mobile networks business while at the same time serving the ever‐increasing data demands on non‐5G infrastructure. The ECI portfolio also exposes Ribbon to the capital spend in adjacent markets, such as Internet‐of‐Things and Mobile Edge Computing. We also firmly believe that adhering to Environmental, Social and Governance principles is key to creating long‐term value. Proof points behind this commitment include: Our network transformation solutions have enabled lower carbon footprints in large service providersnetworks. These solutions have been shown to reduce power consumption by 70% and real estate by 85%compared to the legacy systems they replace.This past year, we consolidated many of our R&D labs, reducing our footprint and overall power demand aswell as recycling over 140,000 pounds of electronic hardware.We cut our greenhouse emissions by nearly half in 2019 compared to the prior year and we also loweredour total scoped emissions per employee by over one‐third in the last five years.While we all adapt to the short‐term abrupt changes introduced by the global pandemic, I continue to connect virtually with employees, customers, partners, and stockholders. I am proud of how our team has performed during these challenging times and under stressful conditions. We continue to serve our customers in creative, safe ways and are leveraging collaboration tools and technology to take care of each other, our families and our communities. Thank you for your continued support and it is our fervent hope that you are all safe and healthy. Best regards, Bruce McClelland President and Chief Executive Officer ⑦⑩➁➐➒⑦⑤⑥❸⑥⑧⑨⑤⑥⑥⑥❷28APR202010344105RIBBON COMMUNICATIONS INC.4 Technology Park DriveWestford, MA 01886April 29, 2020Dear Fellow Stockholders:On behalf of the board of directors, we want to thank you for your investment and trusting usto manage the long-term success of Ribbon Communications Inc. In light of the current globalpandemic, our hearts go out to all those impacted during these extraordinary times. We are especiallygrateful to the medical personnel and all those on the front lines helping those in need. Our principalattention is on the health, safety and well-being of our global workforce, their families and thecommunities in which we operate.Our board of directors and the management team have substantial experience in successfullynavigating challenging conditions. We remain confident about the importance of Ribbon’s role in ourindustry and the long-term positive future of our business that we believe will benefit all stakeholders—our employees, our communities, our customers, our partners, and you—our stockholders.We cordially invite you to the annual meeting of stockholders at 10:00 a.m. on Tuesday, June 2,2020. Due to the public health impact of the novel coronavirus pandemic and to support the health andwell-being of our stockholders, this year’s annual meeting will be held in a virtual meeting format only.You will be able to attend the 2020 annual meeting online and submit your questions during themeeting by visiting http://viewproxy.com/RBBN/2020/vm.Whether or not you plan to attend the annual meeting virtually, it is important that your sharesbe represented and voted. Therefore, I urge you to promptly vote your proxy. You may submit yourproxy by signing, dating, and returning the enclosed proxy card in the enclosed envelope, whichrequires no postage if mailed in the United States, or provide voting instructions to your broker, bankor other nominee. However, in light of possible disruptions in mail service related to the COVID-19pandemic, we encourage stockholders to submit their proxy via the telephone or online. If you decideto attend the annual meeting, you will be able to vote electronically, even if you have previouslysubmitted your proxy. Every stockholder’s vote is important.Thank you very much for your continued trust and confidence in Ribbon. Please remember tovote your shares at your earliest convenience.Sincerely,Bruce W. McClellandPresident and Chief Executive Officer⑦⑩➁➐➒⑦⑤⑥❸⑥⑧⑨⑤⑥⑥⑥❷NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OFRIBBON COMMUNICATIONS INC.AGENDA(cid:129)Election of directors as named in the Proxy Statement(cid:129)Approval of the Amended and Restated RibbonMeeting URL:Communications Inc. 2019 Incentive Award Planhttp://viewproxy.com/(cid:129)Ratification of the appointment of Deloitte &RBBN/2020/vmTouche LLP as Ribbon Communications’ independentDate:registered public accounting firm for 2020June 2, 2020(cid:129)Approval, on a non-binding advisory basis, of theTime:compensation of our named executive officers10:00 a.m. Eastern time(cid:129)Transaction of other business, if any, as may properlycome before the meeting or any adjournment,continuation or postponement thereofRecord Date: You can vote electronically at, and are entitled to notice of, the annual meeting if youwere a stockholder of record on April 6, 2020.A complete list of our stockholders as of the record date will be available for examination by anystockholder during the ten days prior to the Annual Meeting for a purpose germane to the AnnualMeeting by sending an email to ir@rbbn.com, stating the purpose of the request and providing proof ofownership of Company stock. The list of stockholders will also be available during the virtual meetingvia a secure link in the chat box after you enter the virtual meeting using the password you received viae-mail in your registration confirmation. Such list of stockholders will be protected and cannot bedownloaded and/or printed and access to such list will expire immediately after the Annual Meetingends. For additional information, see ‘‘How can I attend the virtual meeting?’’ in the section entitled‘‘Information about the Annual Meeting’’ in the Proxy Statement.You may attend the webcast of the meeting via the Internet at http://viewproxy.com/RBBN/2020/vm byentering the event password you received during your registration process. Whether or not you expectto attend the annual meeting electronically, we urge you to vote your shares as promptly as possible toensure your representation and the presence of a quorum at the annual meeting. If you send in yourproxy card, you may still decide to attend the annual meeting and vote your shares electronically. Notethat, in light of possible disruptions in mail service related to the COVID-19 pandemic, we encourage26APR201818531418stockholders to submit their proxy via telephone or online. Your proxy is revocable in accordance withthe procedures set forth in the accompanying proxy statement.By Order of the Board of Directors,Westford, MassachusettsJustin K. FergusonApril 29, 2020Executive Vice President, General Counsel andCorporate SecretaryTABLE OF CONTENTSPageCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS...........i PROPOSAL 1—ELECTION OF DIRECTORS...................................5SWARTH DESIGNEES FOLLOWING RECEIPT OF CFIUS APPROVAL FOR ECIMERGER............................................................14PROPOSAL 2—APPROVAL OF THE AMENDED AND RESTATED RIBBONCOMMUNICATIONS INC. 2019 INCENTIVE AWARD PLAN.....................16EQUITY COMPENSATION PLAN INFORMATION..............................21PROPOSAL 3—RATIFICATION OF THE APPOINTMENT OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRM................................35PROPOSAL 4—APPROVAL, ON A NON-BINDING, ADVISORY BASIS, OF THECOMPENSATION OF OUR NAMED EXECUTIVE OFFICERS...................37CORPORATE GOVERNANCE AND BOARD MATTERS..........................38AUDIT COMMITTEE REPORT.............................................47DIRECTOR COMPENSATION..............................................48EXECUTIVE OFFICERS OF THE REGISTRANT...............................50BENEFICIAL OWNERSHIP OF OUR COMMON STOCK.........................53TRANSACTIONS WITH RELATED PERSONS..................................56COMPENSATION COMMITTEE REPORT.....................................59COMPENSATION DISCUSSION AND ANALYSIS...............................60EXECUTIVE COMPENSATION TABLES......................................78INFORMATION ABOUT THE ANNUAL MEETING.............................93STOCKHOLDER PROPOSALS FOR INCLUSION IN 2021 PROXY STATEMENT.......98STOCKHOLDER NOMINATIONS AND PROPOSALS FOR PRESENTATION AT 2021ANNUAL MEETING....................................................98STOCKHOLDERS SHARING THE SAME ADDRESS............................99FORM 10-K............................................................99OTHER MATTERS.......................................................100APPENDIX A............................................................A-1APPENDIX B............................................................B-1CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSThe accompanying Proxy Statement contains ‘‘forward-looking statements’’ within the meaningof the U.S. Private Securities Litigation Reform Act of 1995, which are subject to a number of risksand uncertainties. All statements other than statements of historical fact contained in the accompanyingProxy Statement, including statements regarding the receipt of the requisite approval from theCommittee on Foreign Investment in the United States (‘‘CFIUS’’) in connection with our acquisition(the ‘‘ECI Merger’’) of ECI Telecom Group Ltd. (‘‘ECI’’); our future results of operations and financialposition, business strategy, plans and objectives of management for future operations and plans forfuture product offerings, development and manufacturing, are forward-looking statements. Withoutlimiting the foregoing, the words ‘‘anticipates’’, ‘‘believes’’, ‘‘could’’, ‘‘estimates’’, ‘‘expects’’, ‘‘intends’’,‘‘may’’, ‘‘plans’’, ‘‘seeks’’, ‘‘projects’’, ‘‘will’’ and other similar language, whether in the negative oraffirmative, are intended to identify forward-looking statements, although not all forward-lookingstatements contain these identifying words. Forward-looking statements are based on our currentexpectations and assumptions regarding our business, the economy and other future conditions.Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risksand changes in circumstances that are difficult to predict. Our actual results could differ materiallyfrom those anticipated in these forward-looking statements as a result of various important factors,including, but not limited to: risks related to the ongoing COVID-19 pandemic; failure to obtainCFIUS approval in connection with the ECI Merger in a timely manner or at all; risks that the ECIbusinesses will not be integrated successfully or that the combined companies will not realize estimatedcost savings; failure to realize anticipated benefits of the ECI Merger; potential litigation relating to theECI Merger and disruptions from the integration efforts that could harm our business; our ability torecruit and retain key personnel; reductions in customer spending; a slowdown in customer paymentsand changes in customer requirements, including the timing of customer purchasing decisions and ourrecognition of revenues; the potential impact of the consummation of the proposed transaction onrelationships with third parties, including customers, employees and competitors; conditions in thecredit markets, credit risks and risks related to the terms of our credit agreement; risks associated withassumptions the parties make in connection with the parties’ critical accounting estimates and legalproceedings; the parties’ international operations, which are subject to the risks of currency fluctuationsand foreign exchange controls; ability to attract new customers and retain existing customers in themanner anticipated; reliance on and integration of information technology systems; changes inlegislation or governmental regulations affecting the companies; international, national or localeconomic, social, health or political conditions that could adversely affect the companies or ourcustomers; our successful integration activities with respect to our acquisitions; our ability to realizebenefits from other mergers and acquisitions; the effects of disruption from acquisitions, making itmore difficult to maintain relationships with employees, customers, business partners or governmententities; unpredictable fluctuations in quarterly revenue and business from our existing customers;failure to compete successfully against telecommunications equipment and networking companies;failure to grow our customer base or generate recurring business from existing customers; consolidationin the telecommunications industry; difficulties supporting our strategic focus on channel sales;difficulties retaining and expanding our customer base; difficulties leveraging market opportunities; theimpact of restructuring and cost-containment activities; litigation; actions taken by significantstockholders; difficulties providing solutions that meet the needs of customers; market acceptance ofour products and services; rapid technological and market change; our ability to protect our intellectualproperty rights and obtain necessary licenses; our ability to maintain partner, reseller, distribution andvendor support and supply relationships; our negotiation position relative to our large customers; thelimited supply of certain components of our products; the potential for defects in our products; higherrisks in international operations and markets; the impact of increased competition; increases in tariffs,trade restrictions or taxes on our products; currency fluctuations; data privacy and cyber security risks;changes in the market price of our common stock; failure or circumvention of our controls andiprocedures; and the important factors discussed in the ‘‘Risk Factors’’, ‘‘Management’s Discussion andAnalysis of Financial Condition and Results of Operations’’, and ‘‘Quantitative and QualitativeDisclosures About Market Risk’’ sections in our Annual Report on Form 10-K for the year endedDecember 31, 2019 and our other filings with the U.S. Securities and Exchange Commission. Wetherefore caution you against relying on any of these forward-looking statements. Also, any forward-looking statement made by us in the accompanying Proxy Statement speaks only as of the date of theaccompanying Proxy Statement. Factors or events that could cause our actual results to differ mayemerge from time to time, and it is not possible for us to predict all of them. We undertake noobligation to publicly update any forward-looking statement, whether as a result of new information,future developments or otherwise, except as may be required by law.iiRIBBON COMMUNICATIONS INC.PROXY STATEMENTSummary InformationTo assist you in reviewing the proposals to be acted upon at our 2020 annual meeting ofstockholders (the ‘‘2020 Annual Meeting’’), Ribbon Communications Inc. would like to call yourattention to the following information about Ribbon’s 2019 financial performance, key executivecompensation actions and decisions, and corporate governance highlights. Please note that the followingdescription is only a summary. For more complete information about these topics, please review ourAnnual Report on Form 10-K for the year ended December 31, 2019 (the ‘‘2019 Annual Report’’) andthis proxy statement (‘‘Proxy Statement’’). This Proxy Statement and our 2019 Annual Report will befirst mailed to our stockholders of record on or about April 29, 2020.Effective October 27, 2017, we completed a merger (the ‘‘GENBAND Merger’’) of SonusNetworks, Inc. (‘‘Sonus’’), GENBAND Holdings Company, GENBAND, Inc. and GENBAND II, Inc.(collectively, ‘‘GENBAND’’). Because the GENBAND Merger occurred on October 27, 2017, theinformation reported in this Proxy Statement for the period prior to that date principally relates toSonus, our predecessor entity. Unless the content otherwise requires, references in this Proxy Statementto ‘‘Ribbon,’’ ‘‘Ribbon Communications,’’ ‘‘Company,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ and ‘‘the Company’’ referto (i) Sonus and its subsidiaries prior to the GENBAND Merger and (ii) Ribbon Communications Inc.and its subsidiaries upon closing of the GENBAND Merger, as applicable.Effective March 3, 2020 (the ‘‘ECI Closing Date’’), we completed the ECI Merger with ECI.On ECI Closing Date, we entered into a First Amended and Restated Stockholders Agreement (the‘‘Stockholders Agreement’’) with JPMC Heritage Parent LLC (‘‘JPMC’’), Heritage PE (OEP) III, L.P.(together with JPMC, entities affiliated with the Company’s largest stockholder, JPMorganChase & Co. (collectively with any successor entities, the ‘‘JPM Stockholders’’)), and ECI Holding(Hungary) Kft (‘‘Swarth’’).Business OverviewWe are a leading provider of next generation software solutions and services totelecommunications, wireless and cable service providers and enterprises of all sizes across industryverticals. With the March 3, 2020 completion of the merger with ECI, we now also provide optical andpacket networking products and software-defined solutions to service providers and criticalinfrastructure sectors, like utilities, government and defense. With over 1,000 customers around theglobe, including some of the largest telecommunications service providers, enterprises and utilities inthe world, we enable our customers to evolve and modernize their communications networks andpacket optical networking infrastructures with innovative state-of-the-art solutions. By enabling highlysecure, reliable and scalable Internet Protocol (‘‘IP’’) and packet optical networks and applications, wehelp our customers adopt the next generation of software, cloud and edge-based technologies to drivenew, incremental revenue, while protecting their existing revenue streams and significantly reducingoperating costs. Our software solutions provide a secure way for our customers to connect and leveragemultivendor, multiprotocol communications systems and applications across their networks and thecloud, in a rapidly changing ecosystem of IP-enabled devices, such as smartphones and tablets. Inaddition, our software solutions secure cloud-based delivery of unified communications solutions—bothfor service providers transforming to a cloud-based network and for enterprises using cloud-basedunified communications. These networks support the ever increasing demand on network infrastructurecreated by IP traffic growth as well as the expected increase in traffic from 5G applications and devices.We sell our software solutions through both direct sales and indirect channels, leveraging the assistance128APR202010160755of resellers, and provide ongoing support to our customers through a global services team withexperience in design, deployment and maintenance of some of the world’s largest IP networks.TransformingCommunicationsNetworksSecuring Communications Intelligent EdgeFive Decades of Combined LeadershipExperience in Real-Time Communications>4,000 Employees (1) Doing Business in 100+Countries (1)1,500+ (1) Service Provider and EnterpriseCustomers Globally#1 in Media Gateways (2), #2 in SessionBorder Controllers (2), #3 in VoIP Switching,#3 in Global Optical Network (2)1,000+ Patents Worldwide (1)Publicly Traded Company on Nasdaq (RBBN)Packet-OpticalTransport andSDN/NFV solutionsEnabling Cloud CommunicationsOrchestrating the(1)As of March 31, 2020(2)Leadership Ranking Source: IHS Research Q3’19. Market share data for past 12 months. SeeAppendix section ‘‘TAM and Market Share References’’Following the March 3, 2020 completion of the ECI Merger, Ribbon now also provides opticaland packet networking, Software Defined Networking and Network Functions Virtualization portfolioof products and solutions to service providers and critical infrastructure sectors like utilities,government and defense. These solutions support the increasing demand on network infrastructurecreated by ongoing internet protocol traffic growth and the forecast demand and buildouts to becreated by increased traffic from 5G applications and devices.2019 Financial Highlights(cid:129)GAAP total revenue was $563 million, compared to $578 million in 2018.(cid:129)GAAP net loss was $130 million, compared to $77 million in 2018.(cid:129)Non-GAAP net income was $51 million, compared to $39 million in 2018.(cid:129)GAAP loss per share was $1.19, compared to $0.74 in 2018.(cid:129)Non-GAAP diluted earnings per share was $0.47, compared to $0.37 in 2018.(cid:129)Non-GAAP Adjusted EBITDA was $86 million, compared to $62 million in 2018.228APR20201016102328APR20201016116528APR20201016154428APR20201016154428APR20201016154428APR20201016154428APR20201016154428APR20201016154428APR20201016154428APR20201016089328APR20201016089328APR20201016089328APR202010160893Please see the reconciliation of non-GAAP to GAAP financial measures, and additionalinformation about non-GAAP measures, in Appendix A.Cash Flow From Operating ActivitiesImproving Profitability MarginOperating Cash Flow of $56M in FY19, upRecord Adjusted EBITDA Margin(2)(3) of 27%$66M(1)in Q419, up 10 ppts(4) Adjusted EBITDA(3) of$86M in FY19, 39% increase, up 5 ppts(1)(1)Twelve months ended December 31, 2019 compared with corresponding period in 2018.(2)Since the launch of Ribbon in October 2017.(3)Please see the basis of presentation and the non-GAAP reconciliation in the appendix.(4)Three months ended December 31, 2019 as compared with the corresponding period in 2018.Executive Compensation HighlightsIn 2019, we engaged in a thorough review of our compensation programs and practices inconnection with the unified Ribbon executive compensation program for our executive officers. Webelieve that our compensation program has established a strong foundation to support the continuedgrowth of our business and the attainment of key synergies and other goals of our business. Theongoing compensation programs and practices are governed by effective and sound pay practices as setforth below.Strong pay-for-performance philosophyIndependent compensation committee and compensation consultantAnnual market-based review of compensation levels and peer groupsAnnual risk assessment of compensation plans and policiesShare ownership guidelines for our executives and board membersFormal clawback policy with respect to incentive compensationInsider trading policy that prohibits hedging, pledging and other similar actions by our executiveofficers and directorsNo pension plans or other post-employment benefit plansNo base pay severance multipliers in excess of twoNo multi-year guaranteed incentive awards for executivesNo liberal share recycling3What We DoWhat We Don’t DoBoard of Directors and CommitteesR. Stewart Ewing, Jr.,YesMarch 2020068Bruns H. Grayson, 72YesOctober 2017(cid:129)Audit Committee1(cid:129)Compensation CommitteeBeatriz V. Infante, 66YesOctober 2017(cid:129)Audit Committee2(cid:129)Compensation CommitteeRichard J. Lynch, 71YesOctober 2017(cid:129)Chairman of the Board2(cid:129)Nominating and CorporateGovernance CommitteeKent J. Mathy, 60YesOctober 20171Bruce W. McClelland,NoMarch 2020053Krish A. Prabhu, 65YesMarch 20201Scott E. Schubert, 66YesOctober 2017(cid:129)Audit Committee (Chair, ACFE*)0(cid:129)Nominating and CorporateGovernance CommitteeRichard W. Smith, 67NoOctober 20170*ACFE—Denotes that Mr. Schubert is an ‘‘audit committee financial expert’’ as defined in Item 407(d)(5) ofRegulation S-K.Annual Meeting Proposals1:Election of the nine directors named in this ProxyStatementFOR each of the nominees2:Approval of the Amended and Restated RibbonCommunications Inc. 2019 Incentive Award PlanFOR3:Ratification of the appointment of auditorsFOR4:Approval, on a non-binding, advisory basis, of thecompensation of our named executive officersFOR4Name, AgeIndependentDirectorCommittee MembershipOther Public BoardsSinceProposalRecommendation of the BoardPROPOSAL 1 — ELECTION OF DIRECTORSThe Board has nominated the following nine director nominees for election to the Board tohold office until the 2021 Annual Meeting and until his or her respective successor is duly elected andqualified:NomineeDesignated ByR. Stewart Ewing, Jr.*JPM StockholdersKrish A. Prabhu*JPM StockholdersRichard W. SmithJPM StockholdersBruns H. GraysonNominating and Corporate Governance CommitteeBeatriz V. InfanteNominating and Corporate Governance CommitteeRichard J. LynchNominating and Corporate Governance CommitteeBruce W. McClelland*Nominating and Corporate Governance CommitteeKent J. MathyNominating and Corporate Governance CommitteeScott E. SchubertNominating and Corporate Governance Committee*Each of Messrs. Ewing, Prabhu and McClelland are current directors who have not beenpreviously elected by our stockholders.All of the nominees are currently directors. Each agreed to be named in this Proxy Statementand to serve if elected. All nominees are expected to attend the 2020 Annual Meeting.DESIGNATION RIGHTSOn the ECI Closing Date, we entered into the Stockholders Agreement with the JPMStockholders, and Swarth. Pursuant to the Stockholders Agreement, the Board of Directors (the‘‘Board’’) is required to consist of (i) three individuals designated by the JPM Stockholders, (ii) onceCFIUS approval has been obtained, three individuals designated by Swarth, (iii) our Chief ExecutiveOfficer, and (iv) a number of other individuals designated by the Nominating and CorporateGovernance Committee sufficient to ensure that there are no vacancies on the Board. Our Boardconsists of nine directors. The authorized number of directors is determined from time to time by theBoard, subject to the requirements of the Stockholders Agreement. Until the first anniversary of thedate of the Stockholders Agreement, no member of the Board appointed by either the JPMStockholders or Swarth will be removed from the Board, regardless of any sell down of Ribboncommon stock by the nominating stockholder.Each of the JPM Stockholders and Swarth owned 34.50% and 17.82%, respectively, ofRibbon’s common stock as of April 6, 2020. Under the Stockholders Agreement, the JPM Stockholdershave designated R. Stewart Ewing, Jr., Krish A. Prabhu and Richard W. Smith for election to ourBoard. Swarth cannot designate directors to serve on our Board until we obtain the required approvalfrom CFIUS in connection with the ECI Merger. As of April 29, 2020, we have not yet received therequisite approval. For additional information regarding Swarth’s designation right and the anticipatedcomposition of our Board of Directors following our receipt of CFIUS approval, should such approvalbe received, see the section of this Proxy Statement entitled ‘‘Swarth Designees Following Receipt ofCFIUS Approval for ECI Merger’’ and ‘‘Board Composition and Stockholders Agreement’’ in thesection entitled ‘‘Corporate Governance’’ below.5The Company has agreed to take all necessary actions within its control to include the JPMStockholders’ designees in the slate of nominees recommended by the Board for election of directorsand to cause the stockholders of the Company to elect the designees of the JPM Stockholders. For solong as the JPM Stockholders or Swarth has the right to designate a director under the StockholdersAgreement, with respect to any proposal or resolution relating to the election of directors, each of theJPM Stockholders and Swarth, respectively, has agreed to take all necessary actions within their controlto vote their shares (A) affirmatively in favor of the election of the other’s designees and (B) withrespect to each person nominated to serve as a director by the Nominating and Corporate GovernanceCommittee, either affirmatively in favor of such nominee, or in the same proportion to all shares votedby other stockholders of the Company.INDEPENDENCE OF DIRECTOR NOMINEESExcept for Bruce W. McClelland, our President and CEO, and Richard W. Smith, each of ournominees is independent according to the director independence standards set forth in our CorporateGovernance Guidelines, which meet the director independence standards of Nasdaq. For moreinformation, see ‘‘Corporate Governance and Board Matters—Director Independence’’. We have no reasonto believe that any of the nominees will be unable or unwilling to serve if elected. However, if anynominee should become unable to serve, or for good cause will not serve as a director, proxies may bevoted for another person nominated as a substitute by the Board, or the Board may reduce the numberof directors. In the event any director designated by the JPM Stockholders is unable to serve, the JPMStockholders are entitled to designate a replacement director, subject to the conditions set forth in theStockholders Agreement.Board of Directors’ Recommendation6The Board of Directors recommends that stockholders vote ‘‘FOR’’ the election of R. Stewart Ewing,Jr., Bruns H. Grayson, Beatriz V. Infante, Richard J. Lynch, Kent J. Mathy, Bruce W. McClelland,Krish A. Prabhu, Scott E. Schubert and Richard W. Smith.28APR20200554246928APR202005532436Director NomineesThe biographies below describe the skills, qualities, attributes and experience of the directornominees that led the Board and its Nominating and Corporate Governance Committee to determinethat it is appropriate to nominate these individuals as directors.Former Executive Vice President and Chief Financial Officer of CenturyLink, Inc.Director Since: March 2020Age: 68BiographyMr. Ewing most recently served as Executive Vice President and Chief FinancialOfficer of CenturyLink, Inc., a global technology company that offerscommunications, network services, security, cloud solutions, and voice and managed services(‘‘CenturyLink’’) until 2017. He joined CenturyLink as its Vice President of Finance in 1983 andassumed the role of Executive Vice President and Chief Financial Officer in 1989. During his 28 yearsas Chief Financial Officer, he played a significant role in CenturyLink’s acquisition strategy. Mr. Ewingbegan his career at KPMG in 1973. He has served on the Board of Directors of ProgressiveBancorp, Inc. and is the Chairman of its Audit Committee since 2002. He also has served on the Boardof Directors of TelUSA, LLC, a subsidiary of CenturyLink, since January 2020. Mr. Ewing has beenactive with several non-profit organizations, including the Monroe Chamber of Commerce, the UnitedWay of Northeast Louisiana, Northeast University of Louisiana at Monroe, Northwester StateUniversity, Wellspring, ARCO and Northeast Louisiana Soccer Association. Additionally, Mr. Ewinghas served on the Board of Directors of Louisiana Endowment for the Humanities since 2019. Heholds a Bachelor of Science Degree in Business from Northwestern State University. Among otherqualifications, Mr. Ewing brings to the Board executive leadership experience at CenturyLink, alongwith extensive financial expertise. The Board believes Mr. Ewing is qualified to serve on the Boardbecause of his experience as a chief financial officer at CenturyLink and his experience leading theintegration of acquired companies into CenturyLink’s corporate structure and philosophy.Managing Partner at ABS VenturesDirector Since: October 2017Age: 72BiographyMr. Grayson is a Managing Partner at ABS Ventures, a venture capital firm, wherehe has managed all of the firm’s partnerships since 1983. A majority of hisinvestments has been in data communication and software and he has served as a director of manyprivate and public companies over the last 30 years. Prior to ABS Ventures, Mr. Grayson was anassociate at McKinsey and Co., a management consulting firm, from 1978 to 1980 and a venturecapitalist at Adler & Co. from 1980 to 1983. Mr. Grayson has also served as a Director ofEverbridge, Inc., a provider of communications solutions, since 2012. Mr. Grayson holds a Bachelor ofArts degree from Harvard College, a Master’s degree from Oxford University, and a Juris Doctordegree from the University of Virginia Law School, and was elected a Rhodes Scholar from Californiain 1974. He served in the U.S. Army in Vietnam and separated as a captain in 1970. The Boardbelieves Mr. Grayson is qualified to serve on the Board based on his knowledge of the datacommunication and software industries, his investment experience as a Managing Partner at ABSVentures, and his experience as a director of various public companies.7R. Stewart Ewing, Jr.Bruns H. Grayson28APR202005525092Chief Executive Officer of BusinessExcelleration LLCDirector Since: October 2017Age: 66BiographyMs. Infante was previously a director of Sonus from January 2010 until the closingof the GENBAND Merger. Since 2009, Ms. Infante has served as Chief ExecutiveOfficer of BusinessExcelleration LLC, a business consultancy specializing in corporate transformationand renewal. From 2010 until its acquisition by Infor in 2011, Ms. Infante was the Chief ExecutiveOfficer and a director of ENXSUITE Corporation, a leading supplier of energy management solutions.From 2006 until its acquisition by Voxeo Corporation in 2008, she was the Chief Executive Officer anda director of VoiceObjects Inc., a market leader in voice applications servers. Ms. Infante served as adirector and Interim Chief Executive Officer of Sychron Inc., a data center automation company, from2004 to 2005 until its sale to an investor group. Ms. Infante was Chief Executive Officer and Presidentof Aspect Communications Corporation (which we refer to as Aspect), a market leader incommunications solutions, from April 2000 until October 2003. She was named Board Chair of Aspectin February 2001 and between October 1998 and April 2000, held additional executive roles, includingCo-President. Since January 2018, she has served on the Board of Directors and the Audit Committeeof PriceSmart Inc., and additionally became Chair of the Compensation Committee and Chair of theDigital Transformation Committee in November 2018 and January 2019, respectively. She has served onthe Board of Directors and Audit Committee of Liquidity Services Inc. since May 2014, and hasadditionally served as Chair of the Compensation Committee since November 2015. From July 2016until its acquisition by Veeco in May 2017, Ms. Infante served on the Board of Directors and theNominating and Corporate Governance Committee of Ultratech. From May 2012 until its acquisitionby Broadcom Limited in May 2015, she served on the Board of Directors and CompensationCommittee of Emulex Corporation, and additionally became Chair of the Nominating and CorporateGovernance Committee in February 2014. Ms. Infante has previously served as a director at a numberof privately held companies. Ms. Infante has also served since June 2016 as an Advisory Board memberof Guardian Analytics and since July 2015 as the Chair of the Advisory Board of Infrascale.Additionally, Ms. Infante is a National Association of Corporate Directors Board Leadership Fellow,and in 2016 was named to the 2016 NACD Directorship 100, which honors the most influentialboardroom leaders each year. In 2013, she was named to the Financial Times Agenda ‘‘Top 50 DigitalDirectors’ List.’’ Ms. Infante holds a Bachelor of Science and Engineering degree in ElectricalEngineering and Computer Science from Princeton University and holds a Master of Science degree inEngineering Science from California Institute of Technology. Among other qualifications, the Boardbelieves Ms. Infante is qualified to serve on the Board due to her executive leadership experience,including as a chief executive officer of various companies, along with extensive operational expertiseand experience in engineering, sales, and marketing.8Beatriz V. Infante28APR202005535516President of FB Associates, LLCDirector and Chairman of the Board Since: October 2017 Age: 71BiographyMr. Lynch was a director of Sonus from February 2014, and Chairman of the Boardof Sonus from June 2016, until the closing of the GENBAND Merger. SinceSeptember 2011, Mr. Lynch has served as the President of FB Associates, LLC, which provides advisoryand consulting services at the intersection of technology, marketing and business operations. Mr. Lynchwas the Executive Vice President and Chief Technology Officer for Verizon Communications between2007 and 2011, and the Executive Vice President and Chief Technology Officer of Verizon Wireless andits predecessors from 1990 until 2007. Mr. Lynch has been at the forefront of wireless technologysolutions and was responsible for the selection of CDPD, CDMA, EV-DO and LTE for use within theVerizon network. Building on these and other key technology decisions, Mr. Lynch has driven theintroduction of key innovative products and services into the marketplace. Mr. Lynch is a Life Fellowof the Institute of Electrical and Electronic Engineers and has been awarded patents in the field ofwireless communications. Mr. Lynch has served as a member of the Board of Directors and theCompensation, Nominating and Governance Committee of Blackberry Limited since February 2013. Hewas also on the Board of Directors of VectoIQ Acquisition Corporation since February 2017. FromMarch 2012 to May 2016, he served as a member of the Board of Directors, Chairman of theNominating and Corporate Governance Committee and a member of the Compensation Committee ofRuckus Wireless, Inc. Mr. Lynch also serves as a member of the Board of Directors of two privatelyheld companies. He has also sat on the boards of numerous industry organizations, including the GSMAssociation and the CDMA Development Group, and as a member of the Federal CommunicationsCommission Technical Advisory Committee and Communications Security Reliability andInteroperability Council. For his leadership in the early years of wireless data, Mr. Lynch was honoredwith the President’s Award by the Cellular Telecommunications Industry Association. He has also beeninducted into the Wireless History Foundation’s Hall of Fame. Mr. Lynch is a graduate of LowellTechnological Institute (now the University of Massachusetts, Lowell), where he received Bachelor ofScience and Master of Science degrees in electrical engineering. He has also completed post-graduatework at the Wharton School of the University of Pennsylvania and the Johnson School of Managementat Cornell University. Among other qualifications, the Board believes Mr. Lynch is qualified to serve onthe Board based on his significant experience in technology leadership positions, in particular atVerizon Communications, and as a director of various public companies in the telecommunicationsindustry.9Richard J. Lynch28APR20200553339828APR202005531544Chief Executive Officer of Sequential Technology InternationalDirector Since: October 2017Age: 60BiographyMr. Mathy has been Chief Executive Officer of Sequential Technology International,a provider of customer care and customer experience outsourcing, since January2017. Previously, beginning in November 2013, Mr. Mathy served as President, Southeast Region ofAT&T Mobility, a wireless telecommunications provider. From November 2008 to November 2013,Mr. Mathy was President, North Central Region for AT&T Mobility, and from December 2007 toNovember 2008, he was President, Small Business for AT&T Mobility. From January 2003 to December2007, he was President, Business Markets Group at Cingular Wireless (as AT&T Mobility was formerlyknown). Mr. Mathy has also served as a director of Everbridge, Inc. since 2013. Earlier in his career,Mr. Mathy held a variety of management positions at AT&T over a period of 18 years. Mr. Mathyholds a Bachelor of Arts degree in marketing from the University of Wisconsin-Oshkosh and attendedthe University of Michigan, Executive Program in 1993. Among other qualifications, the Board believesMr. Mathy is qualified to serve on the Board because of his extensive leadership roles at varioustelecommunications companies, in particular at AT&T.President and Chief Executive Officer of Ribbon Communications Inc.Director Since: March 2020Age: 53BiographyMr. McClelland has been our President, Chief Executive Officer and a director sinceMarch 2020, and is responsible for the strategic direction and management of ourCompany. He has served in numerous leadership roles throughout his three-decades long career, whichincludes twenty years at ARRIS International plc (‘‘Arris’’), a telecommunications equipmentmanufacturing company, where he most recently served as its Chief Executive Officer from September2016 to April 2019 and led the sale of ARRIS to CommScope Inc. (‘‘CommScope’’), a global networkinfrastructure provider company, in April 2019. While at ARRIS, Mr. McClelland managed thesuccessful acquisition and integration of the Ruckus Wireless and Brocade ICX Campus switchingbusiness from Broadcom Inc., a major step in diversifying the ARRIS business beyond the serviceprovider market into the broader enterprise market, while strengthening the company’s wirelesstechnology capabilities. Mr. McClelland held several other roles at ARRIS, including President ofNetwork & Cloud and Global Services from April 2013 to August 2016 and has authored severalcommunications-related patents. Following the acquisition of ARRIS by CommScope, Mr. McClellandserved as the Chief Operating Officer of CommScope from April 2019 to August 2019, where he wasresponsible for the combined portfolio of products and services. Previously, Mr. McClelland spenteleven years at Nortel Networks Corporation (‘‘Nortel’’) and Bell Northern Research (‘‘BNR’’). Hebegan his career with BNR in Ottawa, Canada and was responsible for the development of Nortel’sSS7 switching products immediately prior to joining ARRIS. Mr. McClelland earned his Bachelor ofScience degree in Electrical Engineering from the University of Saskatchewan. Among otherqualifications, the Board believes Mr. McClelland is qualified to serve on the Board due to hisexecutive leadership experience, including as a chief executive officer of ARRIS, along with extensiveoperational expertise and experience in engineering.10Kent J. MathyBruce W. McClelland28APR202005534541Former Chief Technology Officer and President of AT&T LabsDirector Since: March 2020Age: 65BiographyMr. Prabhu is currently an independent technology consultant and advisor totechnology start-ups. Most recently, he was Chief Technology Officer and Presidentof AT&T Labs, the research and development division of the telecommunications company AT&T,from June 2011 to September 2016. During his tenure, he was responsible for AT&T Labs’ globaltechnology direction, including network innovation, product development and research, intellectualproperty organization and global supply chain organization. Prior to this, he served as President andChief Executive Officer of Tellabs, a networking technology company. Mr. Prabhu was a venturepartner at Morgenthaler Ventures, where he was involved with the funding and development of startupcompanies specializing in networking hardware and software. Earlier in his career, Mr. Prabhu heldvarious leadership positions at Alcatel, an international telecom company, including Chief OperatingOfficer, Chief Executive Officer of Alcatel USA, and Executive Vice President and Chief TechnologyOfficer of US operations. Mr. Prabhu has served on the Board of Directors of Sanmina Corporation, aleading integrated manufacturing solutions company, as well as its Compensation Committee sinceSeptember 2019, and served on the Board of Directors of Altera Corporation, as well as itsCompensation Committee, from 2013 to 2015. He also serves on the boards of directors of threeprivate companies. Mr. Prabhu obtained a Master of Science degree in Physics from the IndianInstitute of Technology in Bombay, India and a Master of Science degree and Ph. D. in electricalengineering from the University of Pittsburgh. The Board believes Mr. Prabhu is qualified to serve onthe Board because of his technical experience and expertise, including his role as a Chief TechnologyOfficer at AT&T Labs, and his executive leadership experience at various companies.11Krish A. PrabhuFormer Chief Financial Officer of TransUnion LLCDirector Since: October 2017Age: 66BiographyMr. Schubert was a director of Sonus from February 2009 until the closing of the GENBAND Merger.From 2005 until 2008, he served as Chief Financial Officer of TransUnion LLC, a leading globalinformation solutions company. From 2003 to 2005, Mr. Schubert served as Chief Financial Officer and,prior to that, Executive Vice President of Corporate Development of NTL, Inc. (now VirginMedia, Inc.). From 1999 to 2003, Mr. Schubert held the position of Chief Financial Officer of WilliamsCommunications Group, Inc., a high-technology company. Mr. Schubert also was the head of BPAmoco’s Global Financial Services from 1995 to 1999, leading the initial integration of BP andAmoco’s worldwide financial operations following the merger of the two companies in 1998. FromAugust 2011 to October 2014, he served as a member of the Board of Directors, the CompensationCommittee, the Audit Committee and the Compliance Committee of Isle of Capri Casinos, Inc.Mr. Schubert is a graduate of the Krannert School of Business at Purdue University, where hecompleted his Master of Business Administration degree in Finance and Economics. He also earned hisBachelor of Science degree at Purdue University, with dual majors in Engineering and Accounting.Among other qualifications, Mr. Schubert brings to the Board executive leadership experience,including from his service as a chief financial officer of various companies, along with extensivefinancial expertise. The Board believes Mr. Schubert is qualified to serve on the Board because of hisexperience as a Chief Financial Officer, in particular at TransUnion LLC and NTL, Inc. (now VirginMedia, Inc.), and his experience leading the integration of two large public companies.12Scott E. Schubert28APR202005540662Head of Private Investments at JPMorgan Chase & Co.Director Since: October 2017Age: 67BiographyMr. Smith has been the Head of Private Investments at JPMorgan Chase & Co., amultinational banking and financial services holding company, since November 2014,which position includes private and public company investments on the bank’s balance sheet. He hasheld positions as Managing Director and Managing Partner and General Partner at private equity andventure funds since 1981, including One Equity Partners from 2002 to November 2014 and AllegraPartners and predecessor entities from 1981 to 2013. From 1979 to 1981, Mr. Smith was SeniorInvestment Manager at Citicorp Venture Capital Ltd., a former venture and private equity investmentdivision of Citigroup Inc. Prior to that, he worked in the International Money Management Group ofMorgan Guaranty Trust Company of New York from 1974 to 1979. Mr. Smith was previously a Directorof GENBAND from 2014 to 2017 and has over 40 years’ experience as a technology investor and as aboard member of both public and private companies. He has also served as a Director ofSmartrac N.V., a provider of software and RFID tags targeted at the Internet of Things market, since2012, Alorica, Inc., a provider of outsourced customer care solutions, since July 2016, andMerchant-Link, LLC, a provider of cloud-based payment gateway and data security solutions, sinceOctober 2016. He also served as Chairman of Schoeller Allibert Group, a manufacturer of ReturnableTransit Packaging, from July 2016 to May 2018. Additionally, he has served as a Director of thePrinceton National Rowing Association since 2008. Mr. Smith earned his Bachelor of Arts fromHarvard College and is co-author of the book Treasury Management: A Practitioner’s Handbook, JohnWiley & Sons, 1980. The Board believes Mr. Smith is qualified to serve on the Board due to hisextensive background in finance and private equity and his experience serving as a director ofcompanies in the telecommunications industry.13Richard W. SmithSWARTH DESIGNEES FOLLOWING RECEIPT OF CFIUS APPROVAL FOR ECI MERGERAs described in ‘‘Proposal 1—Election of Directors’’ under ‘‘Designation Rights,’’ Swarth willhave the right to designate three of our Board members upon our receipt of CFIUS approval for theECI Merger (the ‘‘Swarth Designees’’).If we receive CFIUS approval prior to the 2020 Annual Meeting, we expect that as soon aspracticable following the 2020 Annual Meeting, three members of our Board will resign and the Boardwill elect Swarth Designees Mariano S. de Beer, Shaul Shani and Tanya Tamone to the Board. If wereceive CFIUS approval following the 2020 Annual Meeting, we expect to take the same action as soonas practicable following the receipt of such approval.The biographies below describe the skills, qualities, attributes and experience of the SwarthDesignees. The Board has determined that Mariano S. de Beer and Tanya Tamone each qualify as an‘‘independent director’’ under the listing rules of Nasdaq and the Stockholders Agreement. Shaul Shanidoes not qualify as an independent director under the Nasdaq listing rules or the StockholdersAgreement.The Swarth Designees are not current directors of Ribbon and are not being recommended toRibbon’s stockholders as director nominees for the 2020 Annual Meeting. The biographicalinformation below is being provided to stockholders for informational purposes only.Former Chief Commercial and Digital Officer of Telefonica S.A.Swarth DesigneeAge:49BiographyMr. de Beer was Chief Commercial and Digital Officer of Telefonica S.A., a large public multinationaltelecommunications company, from 2017 until 2019. In this role, he was responsible for driving revenuegrowth globally, developing a holistic view for the consumer and enterprise segments, curating thecommercial offer and evolving the channels to ensure the best commercial experience for Telef´onicacustomers. Mr. De Beer was also member of the Telef´onica Group Executive Committee. From 2013 to2015, he was General Manager (President) of Microsoft in Brazil and, from 2015 to 2016, GeneralManager (President) of the multi-country Region Latam New Markets, responsible for several countriesin South and Central America and the Caribbean. From 2012 to 2013 he was CEO of RBS Educa¸c˜ao,part of the Brazilian conglomerate RBS Group. Prior to 2012, he worked in different capacities atcompanies of the Telefonica Group. Previously, Mr. de Beer was a consultant at McKinsey & Co. Hegraduated from UADE in Argentina, and obtained an MBA from Georgetown University. The Boardbelieves Mr. de Beer is qualified to serve on the Board due to his extensive leadership experience inthe telecommunications industry, in particular at Telefonica S.A., and his global business perspective.14Mariano S. de BeerFounder and Chairman of Swarth GroupSwarth DesigneeAge:65BiographyMr. Shani has been the founder and Chairman of Swarth Group, a private global investment companyinvesting in public and private companies primarily in the communication services, technology, IT,cyber, renewable energy and real estate sectors as well as financial markets, since 2006. Mr. Shani in anentrepreneur and investor and has held board positions at many private and public companies in thefield of telecommunications and technology over the last 30 years. He served as a director of ECI—where Swarth Group was the controlling shareholder—from 2007 to 2012 and held the position ofChairman from 2009 to 2012. From 1997 until its acquisition by the Vivendi Group in 2009, SwarthGroup was the lead investor in, and Mr. Shani was Executive Chairman of, Global Village Telecom, atelecommunications service provider in Brazil which was listed on Ibovespa in 2007. Prior to this, in1994 Mr. Shani founded the Magnum Group, an investment group investing in telecom and techventures, including DSP Group—a major shareholder of AudioCodes which was taken public in 1999—where he served as a director on behalf of the Magnum Group from 1999 to 2000. Mr. Shani was afounder of Sapiens International Corporation, a software development company which was listed on theNasdaq stock exchange in 1992, where he also served as CEO and Chairman from 1989 to 1993. Hewas a founder and the CEO of Eurosoft, an IT company, from 1987 to 1985. In 1982, he foundedOshap Technologies Ltd, a developer of flexible automation software for robotics, where he held theposition of CEO from 1982 to 1985 when the company was listed on the Nasdaq stock exchange. In1983, Mr. Shani founded Tecnomatix Technologies, which was listed on the Nasdaq stock exchange in1993. The Board believes Mr. Shani is qualified to serve on the Board due to his extensive backgroundin finance and private equity, his extensive knowledge of ECI’s business and his experience serving as adirector of companies in the telecommunications industry.Chief Executive Officer of Sogerco S.A.Swarth DesigneeAge:59BiographyMs. Tamone has held the position of CEO of Sogerco S.A., a private trust company, since 2007. Shehas held a variety of senior positions at a number of private trust companies since 1996 and currentlyserves as a director for several privately held companies. Between 1985 to 1996, Ms. Tamone served asa trader for Bank Leu, Fuji Bank and Cedef S.A in Switzerland, specializing in currency and interesttrading. The Board believes Ms. Tamone is qualified to serve on the Board due to her experience as aChief Executive Officer and her financial expertise.15Shaul ShaniTanya TamonePROPOSAL 2 — APPROVAL OF THE AMENDMENT AND RESTATEMENT OFRIBBON’S 2019 INCENTIVE AWARD PLANOur Board believes that the future success of Ribbon depends, in large part, on our ability tomaintain a competitive position in attracting, retaining and motivating key employees with relevantexperience and superior ability. On June 5, 2019, our stockholders approved the RibbonCommunications Inc. 2019 Incentive Award Plan (the ‘‘2019 Plan’’). Awards granted under the 2019Plan are intended to attract, retain and motivate personnel who are expected to make importantcontributions to the Company, thereby promoting shareholder interests and enhancing shareholdervalue. On April 27, 2020, our Board adopted, subject to stockholder approval, the RibbonCommunications Inc. Amended and Restated 2019 Incentive Award Plan, an amendment andrestatement of our 2019 Plan (the ‘‘A&R 2019 Plan’’).Summary of Material Change to 2019 PlanThe proposed A&R 2019 Plan would:(cid:129)Increase in Aggregate Share Limit.Our 2019 Plan currently limits the aggregate number ofshares of our common stock that may be issued pursuant to all awards granted under the2019 Plan to 8,051,611 shares (7,000,000 shares of common stock that were requestedunder the 2019 Plan; plus 1,051,611 shares of common stock reserved under the Amendedand Restated Stock Incentive Plan that were available for issuance as of June 5, 2019, thedate on which our stockholders approved the 2019 Plan), plus any shares subject tooutstanding awards under the Prior Plans (as defined below) (which totaled 3,853,656shares as of July 26, 2019), which may become available for issuance under the 2019 Planas a result of such outstanding awards expiring or terminating or being cancelled orforfeited for any other reason pursuant to the terms of the Prior Plans (‘‘Prior PlanAwards’’). Our A&R 2019 Plan will increase this limit by an additional 7,500,000 shares sothat the new aggregate share limit for the 2019 Plan will be 15,551,611 shares, plus anyshares subject to Prior Plan Awards, which have, or may in the future, become available forissuance under the A&R 2019 Plan as a result of such Prior Plan Awards expiring orterminating or being cancelled or forfeited for any other reason pursuant to the terms ofthe Prior Plans.When we requested stockholders to approve the 2019 Plan last year, we expected the aggregateshare reserve under the 2019 Plan to provide us with sufficient shares for awards for at least two years.However, due to the Company’s activities in 2019, the price of our shares, the increase in share usagedue to the ECI Merger and other unexpected circumstances, we now anticipate that the existing sharereserve under the 2019 Plan will not be sufficient for awards through the 2020 Annual Meeting. As aresult, we are requesting an increase in the aggregate share reserve under the A&R 2019 Plan, whichwe expect will be sufficient shares for awards for at least the remainder of 2020 and full year 2021,assuming we continue to grant awards consistent with our current practices and historical usage, asreflected in our historical share usage rate. Note, however, that future circumstances may require us tochange our current equity grant practices and the sufficiency of the share reserve will be dependent on,among other things, the price of our shares, the occurrence of mergers or acquisitions, hiring activity,and forfeitures of outstanding awards. We cannot predict our future equity grant practices, the futureprice of our shares, future merger or acquisition activity, future hiring activity or the future forfeituresof outstanding awards with any degree of certainty at this time, and the share reserve under the A&R2019 Plan could last for a shorter or longer time. If stockholders do not approve the A&R 2019 Plan,the existing 2019 Plan will remain in effect in its current form. However, there will be insufficientshares available under the 2019 Plan to make additional awards in 2020 and annual awards in 2021 and16to provide grants to critical new hires. In this event, the Compensation Committee may be required torevise its compensation philosophy and formulate other cash-based programs to attract, retain, andcompensate key employees and non-employee directors.Attached as Appendix B to this Proxy Statement is a copy of the A&R 2019 Plan, marked toshow changes proposed to be made. This description of the effect of the proposed A&R 2019 Plan is asummary and is qualified by the full text of the A&R 2019 Plan.Reasons to Adopt the Proposed A&R 2019 PlanShares currently available under the 2019 Plan are insufficient to meet our current needs based onour historical grant rate, our recent growth and our anticipated hiring and retention needs.We believe thatour future success depends, in large part, upon our ability to maintain a competitive position inattracting, motivating and retaining key employees, consultants, officers and directors who are expectedto make important contributions to the Company and by providing such key employees, consultants,officers and directors with equity ownership opportunities and performance-based incentives that areintended to align their interests with those of our stockholders. If we are not able to provide long-termequity value to our key employees, consultants, officers and directors, we will risk losing a capable andproven workforce. Based on our history of grants over the last several years and our current grantpractices, the shares currently available under the 2019 Plan are not sufficient to meet our needsthrough the 2020 Annual Meeting given (i) the increase in usage of shares due to the material increasein employee headcount as a result of the recent ECI Merger, effectively doubling the size of ourworkforce, (ii) the decrease in the share price of our common stock since our 2019 annual meeting ofstockholders; and (iii) the critical need to retain executives and employees during these uncertain times.Stock-based incentive compensation encourages and rewards performance while aligning our keyemployees’, consultants’, officers’ and directors’ interests with those of our stockholders.We continue tobelieve that alignment of the interests of our stockholders and our key employees, consultants, officersand directors is best advanced through the issuance of equity incentives as a portion of their totalcompensation. Stock-based incentive compensation encourages and rewards performance by increasingthe value of their compensation if our stock performance improves. This results in key employees,consultants, officers and directors being motivated to increase our share price.Stock-based incentive compensation supports long-term tenure.We believe that delivering aportion of total compensation in the form of equity compensation helps to encourage a long-term view.Imposing vesting requirements also encourages long-term retention, which is beneficial to our growthand success. We believe it is imperative to maintain the continued ability to use equity compensation tomotivate existing high-performing employees, hire additional qualified employees and align the interestsof our key employees, consultants, officers and directors with those of our stockholders. With the ECIMerger, our workforce has nearly doubled in size and therefore we now believe it is important toreserve additional shares under the 2019 Plan to retain and incentivize our executives and employees.17Highlights of the A&R 2019 PlanConsistent with the existing 2019 Plan, the following reflects certain highlights of the A&R2019 Plan:No ‘‘Evergreen’’ Provision(cid:129)Shares authorized for issuance under the 2019 Plan are notautomatically replenished.No Liberal Share Counting(cid:129)The 2019 Plan prohibits the reuse of shares withheld ordelivered to satisfy the exercise price of an award or to satisfytax withholding requirements with respect to any award.No Repricing of Stock Options(cid:129)The 2019 Plan prohibits the direct or indirect repricing of stockor Stock Appreciation Rightsoptions or stock appreciation rights (‘‘SARs’’) withoutstockholder approval, including a prohibition on the exchangeof ‘‘underwater’’ stock options or SARs for a cash payment.No Discounted Stock Options or(cid:129)All stock options and SARs (other than substitute awards) mustStock Appreciation Rightshave an exercise price or measurement price equal to or greaterthan the fair market value of the underlying common stock onthe grant date.Minimum One-Year Vesting(cid:129)Awards under the 2019 Plan are subject to a minimum vestingPeriod on All Awardsperiod of one year, except awards granted, in the aggregate, forup to 5% of the maximum number of authorized shares underthe 2019 Plan and awards subject to certain other limitedexceptions.Awards Subject to Forfeiture/(cid:129)All awards granted under the 2019 Plan and payments madeClawbackthereunder are subject to the Company’s Clawback Policy orany other clawback policy established from time to time by theCompany.No Dividends or Dividend(cid:129)No participant will be paid dividends or dividend equivalentsEquivalents on Unvestedwith respect to any award until the applicable vesting conditionsAwardshave been satisfied.No ‘‘Liberal’’ Change in Control(cid:129)The change in control definition in the 2019 Plan is notDefinition‘‘liberal’’ and, for example, would not occur merely uponshareholder approval of a transaction. A change in control mustactually occur in order for the change in control provisions inthe 2019 Plan to be triggered.Administration by an(cid:129)Administration of the 2019 Plan has been delegated to theIndependent CommitteeCompensation Committee, which is comprised of independentdirectors.Material Amendments Require(cid:129)Stockholder approval is required prior to an amendment of theStockholder Approval2019 Plan that would (i) materially increase the number ofshares available, (ii) expand the types of available awards or(iii) materially expand the class of participants eligible toparticipate.Analysis of Share ReserveIn approving the A&R 2019 Plan, the Compensation Committee and our Board, respectively,reviewed and relied upon the analysis prepared by Frederic W. Cook & Co., Inc. (‘‘FW Cook’’), theCompensation Committee’s independent compensation consultant, which analyzed the costs of the plan,the Company’s past practices regarding its equity compensation program (including share usage rate),provisions associated with the A&R 2019 Plan and trends, as well as practices of Company peers and18other companies. Specifically, the Compensation Committee and our Board considered, among otherthings, the information set forth below.Stock Available for AwardsThe 2019 Plan provides for the grant of incentive stock options intended to qualify underSection 422 of the Internal Revenue Code of 1986, as amended (the ‘‘Code’’), non-statutory stockoptions, SARs, restricted stock, restricted stock units, and other stock unit awards and performanceawards as described below (collectively referred to as ‘‘awards’’). Awards may be made under the 2019Plan for an aggregate number of shares equal to 8,051,611 (which consists of 7,000,000 shares ofcommon stock that were requested under the 2019 Plan, and 1,051,611 shares of common stockreserved under the Amended and Restated Stock Incentive Plan that were available for issuance as ofJune 5, 2019, the date on which our stockholders approved the 2019 Plan), plus any shares subject tothe Prior Plan Awards (which totaled 3,853,656 shares as of July 26, 2019) which have, or may in thefuture, become available for issuance as a result of such Prior Plan Awards expiring or terminating orbeing cancelled or forfeited for any other reason pursuant to the terms of the Prior Plans.There were 3,801,182 shares available for future issuance under the 2019 Plan as of March 31,2020.Our Board has approved, and recommends that stockholders approve, an increase of 7,500,000shares so that the new aggregate share limit for the A&R 2019 Plan will be 15,551,611 shares, plus anyshares subject to Prior Plan Awards, which have, or may in the future, become available for issuanceunder the A&R 2019 Plan as a result of such Prior Plan Awards expiring or terminating or beingcancelled or forfeited for any other reason pursuant to the terms of the Prior Plans.Share Usage and OverhangThe following table sets forth information regarding all awards, including stock options,restricted and fully-vested shares, restricted share units, and performance stock units granted over eachof the last three fiscal years:201920182017Stock Options/SARs Granted——7,760Stock-Settled Time-Vested Restricted Shares/Units2,828,8322,032,2561,763,912GrantedStock-Settled Performance-Based Stock Units9,46657,768145,357EarnedWeighted-Average Basic Common Shares109,734,118103,916,07858,822,0003-YearOutstandingAverageShare Usage Rate2.6%2.0%3.2%2.6%The Board recognizes that the increase in the number of shares under the A&R 2019 Plan willresult in additional dilution or ‘‘overhang’’ for our stockholders, although we believe that theincremental dilution would be appropriate to continue to, among other things, recruit, motivate andretain our employees, directors, consultants and advisors. As commonly calculated, the total potentialoverhang resulting from the adoption of the A&R 2019 Plan would be approximately 11.7%, with theincremental overhang resulting from the share increase due to amendment and restatement equal to19approximately 4.6%. This overhang is calculated as follows, as of December 31, 2019 (unless otherwisenoted):(a) Stock Options Outstanding297,124Weighted-Average Exercise Price of Outstanding Stock Options$11.55Weighted-Average Remaining Term of Outstanding Stock Options4.95(b) Total Stock-Settled Full-Value Awards Outstanding4,345,109(c) Shares Remaining Available for Future Issuance(1)7,051,559(d) Incremental Share Request Subject to Shareholder Approval7,500,000(e) Total shares authorized for, or outstanding under, equity awards (a + b + c + d)19,193,792(f) Common shares outstanding as of the record date of April 6, 2020144,744,861(g) Total fully-diluted overhang (e / (e + f))11.7%(1)Amount includes 6,956,776 shares of common stock were available for issuance under the 2019Plan and 94,783 shares available for issuance under the Edgewater Networks, Inc. Amendedand Restated 2002 Stock Option Plan, as amended (assumed in connection with the Company’sAugust 3, 2018 acquisition of Edgewater) (the ‘‘2002 Plan’’). The Company does not intend tomake any future grants under the 2002 Plan.In fiscal year 2020, in connection with Mr. McClelland’s commencement of employment, theCompany awarded him 462,963 restricted stock units and 4,750,000 performance stock units. Theserestricted stock units and performance stock units were not granted pursuant to the 2019 Plan, but maymaterially affect the current overhang for our stockholders. For a further discussion regarding suchawards, see ‘‘Post-2019 Executive Compensation Matters’’ below.In light of the factors described above and the fact that the ability to continue to grant equitycompensation is integral to our ability to continue to attract and retain talented employees in themarkets in which we compete, the Compensation Committee and our Board have determined that thesize of the share reserve under the A&R 2019 Plan, is reasonable and appropriate at this time. TheBoard will not create a subcommittee to evaluate the risks and benefits for issuing the additionalauthorized shares requested.Our Board believes that approving the A&R 2019 Plan is appropriate and in the best interestsof stockholders given, among other things, (i) the recent ECI Merger; (ii) our current expectations ofthe number of shares likely to be needed for future grants, (iii) the importance of equity as aproportion of total compensation; and (iv) the need to effectively incent and motivate our employeesand other service providers to drive stockholder value creation.20EQUITY COMPENSATION PLAN INFORMATIONThe following table provides information as of December 31, 2019 with respect to the shares ofour common stock that may be issued under our existing equity compensation plans:(A)(B)(C)Number of SecuritiesRemaining Available forNumber of Securities toFuture Issuance Underbe Issued upon ExerciseWeighted AverageEquity Compensationof OutstandingExercise Price ofPlans (ExcludingOptions,Outstanding Options,Securities ReflectedPlan CategoryWarrants and RightsWarrants and Rightsin Column (A))Equity Compensation Plans Approvedby Stockholders................3,857,133(1)$—8,105,643(2)Equity Compensation Plans NotApproved by Stockholders........297,124(3)$11.55(4)94,783(5)4,154,2578,200,426(1)Consists of 2,790,060 restricted stock units (‘‘RSUs’’) and 1,067,073 performance stock units(‘‘PSUs’’) at target, all of which do not have voting or other rights of ownership under theCompany’s Amended and Restated Stock Incentive Plan (the ‘‘2007 Equity Plan’’) and the2019 Plan.(2)Consists of shares available for future issuance under the 2019 Plan and the Amended andRestated 2000 Employee Stock Purchase Plan (the ‘‘ESPP’’). As of December 31, 2019,6,956,776 shares of common stock were available for issuance under the 2019 Plan and1,148,867 shares of common stock were available for issuance under the ESPP. The ESPPexpires on May 20, 2020. In addition to being available for future issuance upon exercise ofoptions that may be granted after December 31, 2019, the shares available under the 2019 Planmay also be issued in the form of restricted stock, RSUs, SARs, performance-based awards orother equity-based awards.(3)Consists of 162,054 options outstanding under the 2008 Stock Incentive Plan (the ‘‘2008 Plan’’,which was assumed in connection with the Company’s August 24, 2012 acquisition of NetworkEquipment Technologies, Inc. (‘‘NET’’)), 30,560 options outstanding under the 2012 AmendedPerformance Technologies, Incorporated Omnibus Incentive Plan (the ‘‘2012 Plan’’, which wasassumed in connection with the Company’s February 19, 2014 acquisition of PerformanceTechnologies, Incorporated (‘‘PT’’)), and 104,510 options outstanding under the 2002 Plan.These amounts include options that were either outstanding as of the respective dates ofacquisition of NET, PT and Edgewater and assumed by the Company or granted under eitherthe 2008 Plan or the 2012 Plan since the respective acquisition dates. No future awards may begranted under any of the 2008 Plan or 2012 Plan.(4)Represents the weighted average exercise price for options to purchase the Company’s commonstock outstanding under the 2008 Plan, the 2012 Plan and the 2002 Plan.(5)Consists of shares available for future issuance under the 2002 Plan, which is further describedin Note 16 to our 2019 Annual Report. The Company does not intend to make any futuregrants under the 2002 Plan. At the Company’s special meeting of stockholders on December 2,2014, our stockholders approved amendments to the 2007 Equity Plan that, among othermatters, transferred all shares available for future issuance from each of the 2008 Plan and2012 Plan to the 2007 Equity Plan and provided that any outstanding awards under the 2008Plan and 2012 Plan that expire, are terminated, cancelled, surrendered or forfeited, or are21repurchased by the Company at their original issuance price pursuant to a contractualrepurchase right under the 2008 Plan or 2012 Plan will be returned to the 2007 Equity Plan.Subsequently, at the Company’s annual stockholder meeting on June 5, 2019, our stockholdersapproved the 2019 Plan that, among other matters, transferred all shares for future issuancefrom each of the 2007 Equity Plan, the 2008 Plan and the 2012 Plan (collectively, the ‘‘PriorPlans’’) to the 2019 Plan and provided that any outstanding awards under the Prior Plans thatexpire, are terminated, cancelled, surrendered or forfeited, or are repurchased by the Companyat their original issuance price pursuant to a contractual repurchase right under the Prior Planswill be returned to the 2019 Plan.Summary of the A&R 2019 Plan (as proposed to be amended and restated)The following is a summary of the material terms of the A&R 2019 Plan, as proposed to beamended and restated, and is qualified by its entirety by the full text of the A&R 2019 Plan, a copy ofwhich is attached as Appendix B to this Proxy Statement. References to our Board in this summaryinclude the Compensation Committee or any similar committee appointed by our Board to administerthe A&R 2019 Plan.Shares Available for Issuance under the A&R 2019 PlanAwards may be made under the A&R 2019 Plan for an aggregate number of shares equal to15,551,611 shares, consisting of (i) 7,000,000 shares of common stock that were previously approved bystockholders at our 2019 annual meeting of stockholders; (ii) 1,051,611 shares of common stockreserved under the Amended and Restated Stock Incentive Plan that were available for issuance as ofJune 5, 2019, the date on which our stockholders approved the 2019 Plan; and (iii) 7,500,000 additionalshares that the Board has approved and has recommended that stockholders approve, plus any sharessubject to outstanding awards under the Prior Plans as of June 5, 2019, the date on which ourstockholders approved the 2019 Plan, which may become available for issuance under the A&R 2019Plan as a result of such outstanding awards expiring or terminating or being cancelled or forfeited forany other reason pursuant to the terms of the Prior Plans (as described below). The number of sharesissuable under the A&R 2019 Plan is subject to adjustment for changes in capitalization, includingstock splits and other similar events. No more than 15,551,611 shares of common stock may be issuedas incentive stock options under the A&R 2019 Plan.If an award expires, terminates, is surrendered or cancelled or otherwise results in shares notbeing issued, the unused shares covered by such award will generally become available for future grantunder the A&R 2019 Plan. However, any shares tendered to pay the exercise price of an award or tosatisfy a tax withholding obligation will not become available for future grant under the A&R 2019Plan. Furthermore, any shares repurchased by us on the open market using the proceeds from theexercise of an award will not increase the number of shares available for the future grant of awardsunder the A&R 2019 Plan. In addition, shares subject to a SAR that are not issued in connection withits share settlement on exercise thereof will not increase the number of shares of common stockavailable for the future grant of awards under the A&R 2019 Plan.If any award (or award under the Prior Plans) expires or is terminated, surrendered orcanceled without having been fully exercised, is cash-settled, is forfeited in whole or in part (includingas the result of shares of common stock subject to such award (or award under a Prior Plan) beingrepurchased by the Company at the original issuance price pursuant to a contractual repurchase right),then shares of common stock covered by such award (or award under a Prior Plan) will, to the extentof such termination, surrender, cancellation, cash-settlement or forfeiture, again become available forthe grant of awards under the A&R 2019 Plan.22In connection with a corporate transaction with another entity, such as a merger orconsolidation of an entity with us or our acquisition of property or stock of an entity, our Board maygrant awards under the A&R 2019 Plan in substitution for any options or other stock or stock-basedawards granted by such entity or an affiliate thereof on such terms as our Board determinesappropriate in the circumstances, notwithstanding any limitation on awards contained in the A&R 2019Plan (subject to compliance with the applicable requirements of Section 424 of the Code andSection 409A of the Code (together with the Department of Treasury regulations and other interpretiveguidance issued thereunder, ‘‘Section 409A’’)). No such substitute awards will count against the overallshare limits described above, except as required by Section 422 and related provisions of the Code.Administration of the A&R 2019 PlanThe A&R 2019 Plan is administered by our Board, which has the authority to adopt, amendand repeal the administrative rules, guidelines and practices relating to the A&R 2019 Plan and tointerpret the provisions of the A&R 2019 Plan. Pursuant to the terms of the A&R 2019 Plan and tothe extent permitted by applicable law, our Board may delegate authority under the A&R 2019 Plan toone or more committees or subcommittees of our Board. Our Board has authorized the CompensationCommittee to administer the A&R 2019 Plan.Subject to any applicable limitations contained in the A&R 2019 Plan, our Board, theCompensation Committee, or any other committee to whom our Board delegates authority, as the casemay be, selects the recipients of awards and determines the terms of the awards.Subject to any requirements of applicable law, our Board may delegate to one or more of ourofficers the power to grant awards to our employees, officers, and non-executive directors (each, a‘‘Director’’), as well as consultants and advisors to the Company (as the terms consultants and advisorsare defined and interpreted for purposes of Form S-8 under the Securities Act or any successor form)and to exercise such other powers under the A&R 2019 Plan as our Board may determine; providedthat our Board will fix the maximum number of shares subject to awards that the officers may grant,and the time period in which such awards may be granted. No officer shall be authorized to grantawards to himself or herself or any of our other officers.Our Board may make equitable adjustments in connection with the A&R 2019 Plan and anyoutstanding awards to reflect stock splits, stock dividends, recapitalizations, combination or exchange ofshares, consolidation, reclassification of shares, spin-offs and other similar changes in capitalization orevent, or any other dividend or distribution other than an ordinary cash dividend, or any other changeaffecting the shares of common stock or the share price of the common stock (other than an EquityRestructuring, as such term is defined below). In the event of an Equity Restructuring, the Companywill equitably adjust in the manner determined by our Board the number and class of security subjectto each outstanding award and the exercise or purchase price thereof, if applicable (and suchadjustments shall be nondiscretionary and final and binding) and/or the aggregate number and class ofsecurity that may be issued under the A&R 2019 Plan (including, without limitation, any share countingprovisions related thereto). ‘‘Equity Restructuring’’ means a nonreciprocal transaction between theCompany and our stockholders, such as a stock dividend, stock split, spin-off, rights offering orrecapitalization through a large, nonrecurring cash dividend, that affects the number or kind of sharesof common stock (or other securities of the Company) or the share price of common stock (or othersecurities) and causes a change in the per-share value of the common stock underlying outstandingawards.The A&R 2019 Plan also contains provisions addressing the consequences of a ReorganizationEvent, which is defined as: (i) any merger or consolidation of the Company with or into another entity23as a result of which all of our common stock is converted into or exchanged for the right to receivecash, securities or other property, or is cancelled; (ii) any exchange of all of our common stock forcash, securities or other property pursuant to a share exchange transaction; (iii) any liquidation ordissolution of our Company; or (iv) certain capitalization events described in the A&R 2019 Plan orany other unusual or nonrecurring transaction or event affecting the Company or any of its subsidiaries(or their respective financial statements).In connection with a Reorganization Event, our Board may take any one or more of thefollowing actions as to all or any (or any portion of) outstanding awards, on such terms as our Boarddetermines:(cid:129)provide that awards will be assumed, or substantially equivalent awards will be substituted,by the acquiring or succeeding corporation (or an affiliate thereof);(cid:129)upon written notice, provide that all unexercised awards will terminate immediately priorto the consummation of such Reorganization Event unless exercised within a specifiedperiod following the date of such notice;(cid:129)provide that outstanding awards will become exercisable, realizable or deliverable, orrestrictions applicable to an award will lapse, in whole or in part prior to or upon suchReorganization Event;(cid:129)in the event of a Reorganization Event under the terms of which holders of our commonstock will receive upon consummation thereof a payment of cash and/or property for eachshare surrendered in the Reorganization Event (the value of such payment, the‘‘Acquisition Price’’), make or provide for a payment of cash and/or property to an awardholder with a value equal to the excess, if any, of (A) the Acquisition Price times thenumber of shares of common stock subject to the holder’s awards (to the extent theexercise price does not exceed the Acquisition Price) over (B) the aggregate exercise priceof all such outstanding awards and any applicable tax withholdings, in exchange for thetermination of such awards (and, if as of the Reorganization Event, our Board determinesin good faith that there is no such excess with respect to an award, then such award maybe terminated by the Company without payment);(cid:129)provide that awards will be replaced with other rights or property selected by our Board(including in connection with a liquidation or dissolution of our company, conversion intothe right to receive liquidation proceeds (if applicable, net of the exercise price thereof andany applicable tax withholdings);(cid:129)provide that awards cannot vest, be exercised or become payable after the ReorganizationEvent; and(cid:129)any combination of the foregoing.In taking any of the actions permitted directly above, the Board is not obligated by the A&R 2019 Planto treat identically all awards, all awards held by a holder of such awards or all awards of the sametype.The A&R 2019 Plan also contains provisions addressing a Change in Control and our Board’sauthority to determine whether a Change in Control has occurred pursuant to the below definition, the24date of the occurrence of a Change in Control, and any incidental matters related thereto. Under theA&R 2019 Plan, a Change in Control means:(i)a transaction or series of transactions (other than an offering of common stock to thegeneral public through a registration statement filed with the SEC) whereby any‘‘person’’ or related ‘‘group’’ of ‘‘persons’’ (as such terms are used in Sections 13(d)and 14(d)(2) of the Exchange Act) directly or indirectly acquires beneficial ownership(within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) of securities ofthe Company possessing more than 50% of the total combined voting power of theCompany’s securities outstanding immediately after such acquisition; provided,however, that the following acquisitions shall not constitute a Change in Control underthe A&R 2019 Plan: (A) any acquisition by the Company; (B) any acquisition by anemployee benefit plan maintained by the Company, (C) any acquisition which is not aChange in Control under subsection (iii) below as a result of compliance withsubsections (A), (B) and (C) of subsection (iii) below; or (D) in respect of an awardheld by a particular participant, any acquisition by the participant or any group ofpersons including the participant (or any entity controlled by the participant or anygroup of persons including the participant); or(ii)the Incumbent Directors cease for any reason to constitute a majority of our Board;(iii)the consummation by the Company (whether directly involving the Company orindirectly involving the Company through one or more intermediaries) of (x) a merger,consolidation, reorganization, or business combination, (y) a sale or other dispositionof all or substantially all of the Company’s assets in any single transaction or series ofrelated transactions or (z) the acquisition of assets or stock of another entity, in eachcase other than a transaction:(A)which results in the Company’s voting securities outstandingimmediately before the transaction continuing to represent (either by remainingoutstanding or by being converted into voting securities of the Company or the personthat, as a result of the transaction, controls, directly or indirectly, the Company orowns, directly or indirectly, all or substantially all of the Company’s assets or otherwisesucceeds to the business of the Company (the Company or such person, the ‘‘SuccessorEntity’’)) directly or indirectly, at least a majority of the combined voting power of theSuccessor Entity’s outstanding voting securities,(B)after which no person or group beneficially owns voting securitiesrepresenting 50% or more of the combined voting power of the Successor Entity;provided, however, that no person or group shall be treated for purposes of thissubsection (B) as beneficially owning 50% or more of the combined voting power ofthe Successor Entity solely as a result of the voting power held in the Company priorto the consummation of the transaction; and(C)immediately after which at least a majority of the members of theboard of directors (or the analogous governing body) of the Successor Entity wereBoard members at the time of our Board’s approval of the execution of the initialagreement providing for such transaction; or(iv)The effective date of a liquidation or dissolution of the Company.25‘‘Incumbent Directors’’ means for any period of 12 consecutive months, individualswho, at the beginning of such period, constitute our Board together with any newDirector(s) (other than a Director designated by a person who shall have entered intoan agreement with the Company to effect a transaction described in subsection (i) or(iii) above) whose election or nomination for election to our Board was approved by avote of at least a majority (either by a specific vote or by approval of the proxystatement of the Company in which such person is named as a nominee for Directorwithout objection to such nomination) of the Directors then still in office who eitherwere Directors at the beginning of the 12-month period or whose election ornomination for election was previously so approved. No individual initially elected ornominated as a director of the Company as a result of an actual or threatened electioncontest with respect to Directors or as a result of any other actual or threatenedsolicitation of proxies by or on behalf of any person other than our Board shall be anIncumbent Director.Notwithstanding the foregoing, if a Change in Control constitutes a payment eventwith respect to any award (or any portion of an award) that provides for the deferralof compensation that is subject to Section 409A, to the extent required to avoid theimposition of additional taxes under Section 409A, the transaction or event describedin subsection (i), (ii), (iii) or (iv) above with respect to such award (or portion thereof)will only constitute a Change in Control for purposes of the payment timing of suchaward if such transaction also constitutes a ‘‘change in control event,’’ as defined inTreasury Regulation Section 1.409A-3(i)(5).Our Board may at any time provide that any award will become immediately exercisable in fullor in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as thecase may be, including, without limitation, (A) upon the death or disability of the holder of such awardor (B) in connection with an Acquisition of the Company (as defined in the A&R 2019 Plan).Except as otherwise provided in the A&R 2019 Plan with respect to repricing outstanding stockoptions or SARs, our Board may amend, modify or terminate any outstanding award, including but notlimited to, substituting another award of the same or a different type, changing the date of exercise orrealization, and converting an incentive stock option to a non-statutory stock option, provided that theparticipant’s consent to any such action will be required unless our Board determines that the action,taking into account any related action, would not materially and adversely affect the participant or thechange is otherwise permitted under the terms of the A&R 2019 Plan in connection with a change incapitalization or Reorganization Event (as defined below).Descriptions of AwardsThe A&R 2019 Plan provides for the grant of incentive stock options intended to qualify underSection 422 of the Code, non-statutory stock options, SARs, restricted stock, RSUs and other stock unitawards and performance awards as described below.26Incentive Stock Options and Non-statutory Stock Options.Optionees receive the right topurchase a specified number of shares of common stock at a specified option price and subject to suchother terms and conditions as are specified in connection with the option grant. Options must begranted at an exercise price that is not less than the fair market value of our common stock at theclose of trading on the date of grant. Options may not be granted for a term in excess of 10 years;provided that, notwithstanding the foregoing and unless determined otherwise by the Company, in theevent that on the last business day of the term of an option (other than an incentive stock option)(i) the exercise of the option is prohibited by applicable law, as determined by the Company, or(ii) shares of common stock may not be purchased or sold by the applicable participant due to anyCompany insider trading policy (including blackout periods) or a ‘‘lock-up’’ agreement undertaken inconnection with an issuance of securities by the Company, the term of the option shall be extendeduntil the date that is thirty (30) days after the end of the legal prohibition, black-out period or lock-upagreement, as determined by the Company; provided, the extension will not last beyond the term of theapplicable option (which will in no event exceed 10 years from the date of grant). The A&R 2019 Planpermits the following forms of payment for the exercise price of options: payment by cash or check (ifdetermined appropriate by the Company, electronic payment); via broker-assisted sale; subject tocertain conditions and if permitted by our Board, withholding of shares of our common stock otherwiseissuable under an award or surrender to the Company of shares of our common stock held by theoptionee; any other lawful means as provided for in the applicable option agreement or approved bythe Board; or any combination of these forms of payment. Stock options granted under the A&R 2019Plan may not provide for the payment or accrual of dividend equivalents or contain any provisionentitling the grantee to the automatic grant of additional stock options in connection with the exerciseof the original stock option.Stock Appreciation Rights.A SAR is an award entitling the holder, upon exercise, to receivean amount in common stock or cash or a combination thereof determined by reference to appreciation,from and after the date of grant, in the fair market value of a share of common stock over the exerciseprice, which may not be less than the fair market value of the common stock on the date the SAR isgranted. SARs may be granted independently or in tandem with an option granted under the A&R2019 Plan. Each SAR granted under the A&R 2019 Plan will be exercisable subject to terms andconditions as the Board may specify in the applicable SAR agreement; provided that, notwithstandingthe foregoing and unless determined otherwise by the Company, in the event that on the last businessday of the term of an SAR (i) the exercise of the SAR is prohibited by applicable law, as determinedby the Company, or (ii) shares of common stock may not be purchased or sold by the applicableparticipant due to any Company insider trading policy (including blackout periods) or a ‘‘lock-up’’agreement undertaken in connection with an issuance of securities by the Company, the term of theSAR will be extended until the date that is thirty (30) days after the end of the legal prohibition,black-out period or lock-up agreement, as determined by the Company; provided, that the extensionwill not last beyond the term of the applicable SAR (which, in no event will exceed 10 years from thedate of grant) SARs granted under the A&R 2019 Plan may not provide for the payment or accrual ofdividend equivalents or contain any provision entitling the grantee to the automatic grant of additionalSARs in connection with the exercise of the original SAR.Restricted Stock Awards.Restricted stock awards entitle recipients to acquire shares ofcommon stock, subject to our right to repurchase all or part of such shares at their issue price or otherstated or formula price or to require forfeiture if issued at no cost if the conditions specified in theapplicable award are not satisfied prior to the end of the applicable restriction period established bythe Board for such award. Our Board will determine the terms and conditions of the applicable award,including the conditions for vesting and repurchase and the issue price, if any. Any dividends, whetherpaid in cash, stock or property, declared and paid by us with respect to shares of restricted stock willbe paid to a participant only if and when such shares become free from the restrictions on27transferability and forfeitability that apply to such shares. No interest will be paid on unvesteddividends.Restricted Stock Unit Awards.RSU awards entitle the recipient to receive shares of commonstock or cash to be delivered at the time such award vests pursuant to the terms and conditionsestablished by our Board. The award agreement for RSUs may provide the participant with a right toreceive dividend equivalents, which will be subject to the same restrictions on transfer and forfeitabilityas the underlying RSUs. No interest will be paid on dividend equivalents.Other Stock or Cash-Based Awards.Under the A&R 2019 Plan, our Board has the right togrant other awards of shares of common stock and other awards that are valued in whole or in part byreference to, or otherwise based on, shares of common stock or other property (‘‘Other Stock-BasedAwards’’), which may include, without limitation, deferred shares or deferred stock units, as well ascash payments and other cash bonus awards (‘‘Cash-Based Awards’’), and dividend equivalents andawards entitling recipients to receive shares of common stock or cash to be delivered in the future(collectively, ‘‘Other Stock- Based Awards and Cash-Based Awards’’). Other Stock-Based Awards andCash-Based Awards will have such terms and conditions as our Board may determine. An Other Stock-Based Award may provide the participant with a right to receive dividend equivalents, which may besettled in cash and/or shares of common stock and will be subject to the same restrictions on transferand forfeitability as the underlying Other Stock-Based Award. No interest will be paid on dividendequivalents.Performance Awards.Under the A&R 2019 Plan, any award may be made subject to theachievement of performance goals. For any performance award, our Board may specify that the degreeof vesting, settlement and/or payout (or other term or condition of the performance award) shall besubject to the achievement of one or more performance measures established by the Board, which mayinclude, without limitation, the relative or absolute attainment of specified levels of one or anycombination of the following: (i) bookings, (ii) backlog, (iii) revenue, (iv) gross margin ($), (v) grossprofit (%), (vi) operating expenses, (vii) operating income (loss), (viii) net income (loss), (ix) earnings(loss) per share, (x) earnings before interest, taxes, depreciation and/or amortization (‘‘EBITDA’’),(xi) adjusted EBITDA, (xii) earnings before interest and/or taxes (‘‘EBIT’’), (xiii) adjusted EBIT,(xiv) cost reduction or savings, (xv) productivity ratios or other similar metrics, (xvi) performanceagainst budget, (xvii) cash flow from operations, (xviii) stock price, (xix) financial ratings, (xx) financialmetrics and ratios, (xxi) exit rate operating metrics, (xxii) total stockholder return (whether in theabsolute or measured against or in relationship to other companies comparably, similarly or otherwisesituated), (xxiii) regulatory achievements or compliance (including, without limitation, regulatory bodyapproval for commercialization of a product), (xxiv) implementation or completion of critical projects,(xxv) economic value or economic value added, (xxvi) customer satisfaction, (xxvii) working capitaltargets, (xxviii) organization/transformation metrics, (xxix) return measures (including but not limitedto, return on assets, capital, invested capital, equity, sales or revenue), (xxx) market share, and(xxxi) any other objective or subjective measure determined by our Board.The Board may specify that such performance measures shall be adjusted to consider events orcircumstances determined appropriate by the Board. Performance measures may vary by participantand may be different for different awards and may be particular to a participant or the department,branch, line of business, subsidiary or other unit in which the participant works and may cover suchperiod as may be specified by the Board. Performance measures may be calculated on generallyaccepted accounting principles (‘‘GAAP’’) or non-GAAP basis or otherwise in accordance withapplicable accounting principles or such other methodology as determined appropriate by our Board.28Restrictions on RepricingsUnless approved by our stockholders, our Board may not: (i) lower the exercise price of anoption or a SAR; (ii) cancel an option or SAR when the exercise price per share exceeds the fairmarket value of one share in exchange for cash or another award (other than in connection with achange in control); or (iii) take any other action with respect to an option or SAR that would betreated as repricing under the rules and regulations of the principal U.S. national securities exchangeon which the shares of common stock are listed.Transferability of AwardsAwards, other than vested shares of restricted stock, may not be sold, assigned, transferred,pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or byoperation of law, except by will or the laws of descent and distribution or, other than in the case of anincentive stock option, pursuant to a qualified domestic relations order. During the life of the holder ofan award, awards, other than vested shares of restricted stock, are exercisable only by such holder. OurBoard may permit the gratuitous transfer of an award by the holder of an award to or for the benefitof any immediate family member, family trust or other entity established for the benefit of such holderor an immediate family member of such holder if, with respect to such transferee, the Company wouldbe eligible to use a Form S-8 for the registration of the sale of the common stock subject to such awardunder the Securities Act of 1933, as amended.Eligibility to Receive AwardsOur employees, non-employee directors, consultants and advisors and those of our subsidiariesare eligible to be granted awards under the A&R 2019 Plan.As of April 24, 2020, approximately 3,924 employees, 8 non-employee directors and zeroconsultants and advisors were eligible to receive awards under the A&R 2019 Plan, including ourexecutive officers and non-employee directors. On April 27, 2020, the last reported sale price ofcommon stock on the Nasdaq Global Select Market was $3.18.Director Award LimitDuring any calendar year, the sum of the grant date fair value of awards and the amount ofany cash fees granted or paid to non-employee directors in respect of such director’s services for suchyear, may not exceed $650,000, provided that the Board may make exception to such limit inextraordinary circumstances.Clawback PolicyAll awards granted under the A&R 2019 Plan are subject to clawback pursuant to theCompany’s Clawback Policy and any other clawback policy that the Company may adopt in the future.Minimum Vesting PeriodsUnder the A&R 2019 Plan, no award (other than cash-based awards) will vest earlier than thefirst anniversary of its date of grant; provided, however, such minimum vesting requirement will notapply to (i) any substitute award, (ii) shares of common stock delivered in lieu of full-vested cash-basedawards (or other cash awards or payments), (iii) awards to non-employee directors of the Companythat vest on the earlier of the one-year anniversary of the date of grant and the next annual meeting of29stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting, and(iv) any additional awards our Board may grant, up to a maximum of five percent (5%) of the availableshare reserve authorized for issuance under the A&R 2019 Plan (subject to adjustment for certaincapitalization and reorganization events); and, provided, further, that the foregoing restriction does notapply to our Board’s discretion to provide for accelerated exercisability or vesting of any awards upon(A) the death or disability of a participant, (B) in connection with retirement, termination ofemployment or other separation from service, or (C) in connection with a change in control.Treatment of Dividends and Dividend Equivalents on Unvested AwardsNotwithstanding any other provision of the A&R 2019 Plan to the contrary, with respect to anyaward that provides for or includes a right to dividends or dividend equivalents, if dividends aredeclared during the period that an equity award is outstanding, such dividends (or dividend equivalents)shall either (i) not be paid or credited with respect to such award or (ii) be accumulated but remainsubject to vesting requirement(s) to the same extent as the applicable award and shall only be paid atthe time or times such vesting requirement(s) are satisfied.Provisions for Foreign ParticipantsOur Board may modify awards granted to participants who are foreign nationals or employedoutside the United States or establish subplans or procedures under the A&R 2019 Plan to recognizedifferences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax,securities, currency, employee benefit or other matters.Effective Date and Term of A&R 2019 Plan; Amendment or TerminationThe A&R 2019 Plan will be adopted upon stockholder approval at our 2020 Annual Meeting.Our Board may at any time amend, suspend or terminate the A&R 2019 Plan; provided that, to theextent determined by our Board, no amendment requiring stockholder approval under any applicablelegal, regulatory or listing requirement will become effective until such stockholder approval isobtained. No awards will be granted under the A&R 2019 Plan after June 4, 2029, but awardspreviously granted thereunder may extend beyond that date.30New Plan Benefits / Interest of Certain PersonsShareholders should understand that our executive officers and non-employee directors may beconsidered to have an interest in the approval of the A&R 2019 Plan because they may in the futurereceive awards under such plan. In particular, to the extent the A&R 2019 Plan is approved by ourstockholders, certain of our named executive officers, other executive officers, non-executive directorsand non-executive officer employees are expected to receive certain RSU and PSU grants in theamounts set forth below:Number ofName and PositionDollar Value(1)SharesSteven Bruny, Executive Vice President, Sales—Americas Region andformer Interim Co-President and Chief Executive Officer$350,000—Kevin Riley, Executive Vice President, Chief Technical Officer andformer Interim Co-President and Chief Executive Officer$325,000—Daryl E. Raiford, our Executive Vice President, Chief Financial Officer$350,000—Justin K. Ferguson, our Executive Vice President, General Counsel$325,000—John McCready, our Executive Vice President, Chief TransformationOfficer$200,000—Anthony Scarfo, Executive Vice President, General Manager, Cloud andEdge Business$350,000—Executive Group$2,100,000—Non-Executive Director Group$840,000—Non-Executive Officer Employee Group$2,925,0001,103,000(1)Number of shares underlying awards is not determinable at this time and will be determinedby dividing the dollar value of each individual’s grant by the closing price of our commonstock on the date of grant.The benefits that will be received by participants, including the named executive officers, otherexecutive officers, non-executive directors and other non-executive officer employees, under the A&R2019 Plan will depend on a variety of factors, including the fair market value of the Company’scommon stock at various future dates and the Board’s or Compensation Committee’s discretion ingranting awards. Therefore, except as set forth in the table above, it is not possible to determine thebenefits that will be received by or allocated to, any participants, including the name executive officers,other executive officers, non-executive directors and other non-executive officer employees if the A&R2019 Plan is approved by our stockholders. For additional information regarding our equity grants in2019, please see the tables entitled ‘‘Grants of Plan-Based Awards’’ and ‘‘Director Compensation’’ in thisProxy Statement.31The following table sets forth the number of shares subject to awards granted under the Plansince its adoption. These share numbers do not take into account the effect of awards that have beencancelled or that expired unexercised under the 2019 Plan.Restricted StockName and Position(1)Options (#)Units (#)Franklin W. Hobbs, former President and Chief Executive Officer—432,901Steven Bruny, Executive Vice President, Sales, Americas Regionand former Interim Co-President and Chief Executive Officer—268,207Kevin Riley, Executive Vice President, Chief Technical Officerand former Interim Co-President and Chief Executive Officer—218,754Daryl E. Raiford, Executive Vice President, Chief FinancialOfficer—237,796Anthony Scarfo, Executive Vice President, General Manager,Cloud and Edge Business—243,207Justin Ferguson, Executive Vice President, General Counsel—220,810John McCready, Executive Vice President, Chief TransformationOfficer—135,894All Current Executive Officers as a Group—1,876,467All Current Non-Executive Officer Directors as a Group—369,032Each Nominee for Election as a Director——Each Associate of any Executive Officer, Non-Executive OfficerDirector or Nominee——Each Other Person who Received or is to Receive 5% ofawards——All Employees as a Group—4,859,007(1)David Walsh, former Executive Vice President, Kandy, and Michael Swade, former ExecutiveVice President, Global Sales, have not received any equity awards under the 2019 Plan.Federal Income Tax ConsequencesThe following summarizes the United States federal income tax consequences that generallywill arise with respect to awards granted under the A&R 2019 Plan. This summary is based on thefederal tax laws in effect as of the date of this Proxy Statement. In addition, this summary assumes thatall awards are exempt from, or comply with, the rules under Section 409A of the Code regardingnonqualified deferred compensation. Changes to these laws or assumptions could alter the taxconsequences described below.Incentive Stock Options.A participant will not have income upon the grant of an incentivestock option. Also, except as described below, a participant will not have income upon exercise of anincentive stock option if the participant has been employed by us or our corporate parent or a 50% ormore-owned corporate subsidiary at all times beginning with the option grant date and ending threemonths before the date the participant exercises the option. If the participant has not been soemployed during that time, then the participant will be taxed as described below under the sectionentitled ‘‘Non-statutory Stock Options.’’ The exercise of an incentive stock option may subject theparticipant to the alternative minimum tax.A participant will have income upon the sale of the stock acquired under an incentive stockoption at a profit (if sales proceeds exceed the exercise price). The type of income will depend on32when the participant sells the stock. If a participant sells the stock more than two years after the optionwas granted and more than one year after the option was exercised, then all of the profit will belong-term capital gain. If a participant sells the stock prior to satisfying these waiting periods, then theparticipant will have engaged in a disqualifying disposition and a portion of the profit will be ordinaryincome and a portion may be capital gain. This capital gain will be long-term if the participant has heldthe stock for more than one year and otherwise will be short-term. If a participant sells the stock at aloss (sales proceeds are less than the exercise price), then the loss will be a capital loss. This capitalloss will be long-term if the participant held the stock for more than one year and otherwise will beshort-term.Non-statutory Stock Options.A participant will not have income upon the grant of anon-statutory stock option. A participant will have ordinary income upon the exercise of anon-statutory stock option equal to the value of the stock on the day the participant exercised theoption less the exercise price. Upon sale of the stock, the participant will have capital gain or loss equalto the difference between the sales proceeds and the value of the stock on the day the option wasexercised. This capital gain or loss will be long-term if the participant has held the stock for more thanone year and otherwise will be short-term.Stock Appreciation Rights.A participant will not have income upon the grant of a SAR. Aparticipant will recognize ordinary income upon the exercise of a SAR equal to the amount of the cashand the fair market value of any stock received. Upon the sale of the stock, the participant will havecapital gain or loss equal to the difference between the sales proceeds and the value of the stock onthe day the SAR was exercised. This capital gain or loss will be long-term if the participant held thestock for more than one year and otherwise will be short-term.Restricted Stock Awards.A participant will not have income upon the grant of restricted stockunless the participant voluntarily makes an election under Section 83(b) of the Code within 30 days ofthe date of grant. If a timely Section 83(b) election is made, then a participant will have ordinaryincome equal to the value of the stock on the date of grant less the purchase price. When the stock issold, the participant will have capital gain or loss equal to the difference between the sales proceedsand the value of the stock on the date of grant, if a timely Section 83(b) election has been made.If the participant does not make a Section 83(b) election, then when the stock vests (i.e., thetransfer restrictions and forfeiture provisions lapse) the participant will have ordinary income equal tothe value of the stock on the vesting date less the purchase price. When the stock is sold, theparticipant will have capital gain or loss equal to the sales proceeds less the value of the stock on thevesting date, if no Section 83(b) election has been made. Any capital gain or loss will be long-term ifthe participant held the stock for more than one year following (i) the day after the grant date if atimely Section 83(b) election has been made or (ii) the day after the vesting date if no Section 83(b)election has been made, and otherwise will be short-term.Restricted Stock Units.A participant will not have income upon the grant of an RSU. Aparticipant is not permitted to make a Section 83(b) election with respect to an RSU award. When theRSU vests, the participant will have income on the vesting date in an amount equal to the amount ofcash received or the fair market value of the stock on the vesting date less the purchase price, if any.When the stock is sold, the participant will have capital gain or loss equal to the sales proceeds less thevalue of the stock on the vesting date. Any capital gain or loss will be long-term if the participant heldthe stock for more than one year and otherwise will be short-term.Other Stock- or Cashed-Based Awards and Performance Awards.The tax consequencesassociated with any other stock- or cashed-based award or performance award granted under the A&R332019 Plan will vary depending on the specific terms of such award. Among the relevant factors arewhether or not the award has a readily ascertainable fair market value, whether or not the award issubject to forfeiture provisions or restrictions on transfer, the nature of the property to be received bythe participant under the award and the participant’s holding period and tax basis for the award orunderlying common stock.Tax Consequences to the Company.There will be no tax consequences to us except that we willbe entitled to a deduction when a participant has ordinary income. Any such deduction may be subjectto the limitations of Sections 162(m) of the Code.34The Board of Directors recommends that stockholders vote ‘‘FOR’’ the approval of the amendmentand restatement of Ribbon’s 2019 Incentive Award Plan.PROPOSAL 3 — RATIFICATION OF THE APPOINTMENT OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRMThe Audit Committee of the Board of Directors has appointed Deloitte & Touche LLP(‘‘Deloitte’’) as the Company’s independent registered public accounting firm for the fiscal year endingDecember 31, 2020. Deloitte has acted as the independent registered accounting firm of Ribbon sincethe closing of the GENBAND Merger, and of Sonus from August 2005 until the closing of theGENBAND Merger. We are asking our stockholders to ratify this appointment. Although ratificationof our appointment of Deloitte is not required, we value the opinions of our stockholders and believethat stockholder ratification of our appointment is a good corporate governance practice. If thisproposal is not approved at the 2020 Annual Meeting, our Audit Committee may consider this factwhen it appoints our independent registered public accounting firm for the fiscal year endingDecember 31, 2021. Even if the proposal is approved at the 2020 Annual Meeting, the AuditCommittee may, in its discretion, direct the appointment of a different independent registered publicaccounting firm at any time during the year if it determines that such change would be in the interestsof the Company and its stockholders.Representatives of Deloitte are expected to virtually attend the 2020 Annual Meeting and willhave the opportunity to make a statement and be available to respond to appropriate questions bystockholders.Deloitte FeesThe following is a summary and description of fees for services provided by Deloitte in 2019and 2018:Fee Category20192018Audit Fees....................$1,647,342$1,586,871Audit-Related Fees..............172,000205,960Tax Fees......................300,667120,666All Other Fees.................10,78019,910Total........................$2,130,789$1,933,407Audit Fees.These amounts represent fees for the audit of our consolidated financialstatements included in our 2019 Annual Report, the review of financial statements included in ourQuarterly Reports on Form 10-Q, the audit of internal control over financial reporting and the servicesthat an independent auditor would customarily provide in connection with subsidiary audits, statutoryrequirements, regulatory filing and similar engagements for the fiscal year, such as consents andassistance with review of documents filed with the SEC. Audit fees also include advice on accountingmatters that may arise in connection with or as a result of the audit or the review of periodicconsolidated financial statements and statutory audits that non-U.S. jurisdictions require.Audit-Related Fees.Audit-related fees consist of fees related to due diligence services andaccounting consultations regarding the application of generally accepted accounting principles toproposed transactions.Tax Fees.Tax fees consist of professional services for tax compliance, tax advice and taxplanning. These services include assistance regarding federal, state and international tax compliance,value-added tax compliance, and transfer pricing advice and planning.35All Other Fees.All other fees consist of professional products and services other than theservices reported above, including fees for our subscription to Deloitte’s online accounting researchtool.Policy on Audit Committee Pre-Approval of Audit and Non-Audit ServicesThe Audit Committee had adopted a policy to pre-approve audit and permissible non-auditservices provided by the independent registered public accounting firm. These services may includeaudit services, audit-related services, tax services and other services. Prior to engagement of theindependent registered public accounting firm for the next year’s audit, the independent registeredpublic accounting firm and our management submit a list of services expected to be rendered duringthat year for each of the four categories of services to the Audit Committee for approval. Pre-approvalis generally provided for up to one year and any pre-approval is detailed as to the particular service orcategory of services. The independent registered public accounting firm and our managementperiodically report to the Audit Committee regarding the extent of services provided by theindependent registered public accounting firm in accordance with this pre-approval process. The AuditCommittee may also pre-approve particular services on a case-by-case basis. The Audit Committeepre-approved all of the services and fees of Deloitte set forth above in accordance with such policy.Our Audit Committee requires the regular rotation of the lead audit partner and concurringpartner as required by Section 203 of the Sarbanes-Oxley Act of 2002 and is responsible forrecommending to our Board policies for hiring employees or former employees of the independentregistered public accounting firm. The Audit Committee has determined that the provision of servicesdescribed above to us by Deloitte is compatible with maintaining Deloitte’s independence.36Board of Directors’ RecommendationThe Board of Directors recommends that stockholders vote ‘‘FOR’’ the ratification of the appointmentof Deloitte & Touche LLP as our independent registered public accounting firm for 2020.PROPOSAL 4 — APPROVAL, ON A NON-BINDING, ADVISORY BASIS, OF THE COMPENSATIONOF OUR NAMED EXECUTIVE OFFICERSThe Board is dedicated to excellence in governance and is mindful of the interests ourstockholders have in our executive compensation program. As part of that commitment and pursuant tothe rules of the SEC, our stockholders are being asked to approve a non-binding advisory resolution onthe compensation of our named executive officers. This proposal, which is typically called the‘‘Say-on-Pay’’ proposal, offers stockholders the opportunity to express their opinions on our 2019executive compensation program and policies for our named executive officers through the followingresolution:‘‘RESOLVED, that the stockholders of Ribbon Communications Inc. (the ‘‘Company’’)approve, on an advisory basis, the compensation paid to the Company’s named executiveofficers as disclosed pursuant to the compensation disclosure rules of the U.S. Securities andExchange Commission, including the ‘‘Compensation Discussion and Analysis’’ section and theaccompanying compensation tables and the related narratives in the Proxy Statement for theCompany’s 2020 annual meeting of stockholders.’’This vote is not intended to address any specific element of compensation, but rather theoverall compensation policies and practices relating to the named executive officers. Even though theoutcome of this advisory vote on the compensation of our named executive officers is non-binding, theCompensation Committee and the Board will, as they have done in prior years, take into account theoutcome of this vote when making future compensation arrangements. The outcome of this advisoryvote does not overrule any decision by the Company or the Board (or any committee thereof), createor imply any change to the fiduciary duties of the Company or the Board (or any committee thereof),or create or imply any additional fiduciary duties for the Company or the Board (or any committeesthereof).We believe that for the reasons summarized in the ‘‘Compensation Discussion and Analysis’’section of this Proxy Statement, we have a compensation program deserving of stockholder support.Unless the Board modifies its policy regarding the frequency of holding ‘‘say on pay’’ advisory votes,such votes will take place every year and the next such vote will occur at the 2021 Annual Meeting.37Board of Directors’ RecommendationThe Board of Directors recommends that stockholders vote ‘‘FOR’’ the approval, on a non-binding,advisory basis, of the compensation of our named executive officers.28APR20201016154428APR20201016154428APR20201016154428APR20201016154428APR20201016154428APR20201016154428APR20201016154428APR20201016154428APR20201016154428APR20201016154428APR20201016154428APR20201016154428APR20201016154428APR202010161544CORPORATE GOVERNANCE AND BOARD MATTERSWe are committed to strong corporate governance practices, which include building long-termvalue for our stockholders and assuring the success of the Company for its stockholders andstakeholders, including employees, customers, suppliers and the communities in which we operate. Toachieve these goals, our Board is charged with monitoring the performance of the Company and itsofficers as well as its programs and procedures to ensure compliance with law and our overall success.Governance is an ongoing focus at Ribbon, starting with the Board and extending to management andall employees. In addition, we solicit feedback from stockholders on governance and executivecompensation practices in order to improve our practices.Annual Election of Directors: Yes (no staggered board)Majority Voting for Director Elections: YesSeparate Chairman and CEO: YesSubstantial Majority of Independent Directors: YesIndependent Directors Meet without Management: YesBoard with Wide Range of Experience and Skills: YesAnnual Equity Grant to Non-Employee Directors: YesAnnual Board and Committee Self-Evaluations: YesAnnual Advisory Approval of Executive Compensation: YesDisclosure Committee for Financial Reporting: YesReview and Approval Policy for Related Party Transactions: YesShare Ownership Guidelines for our CEO, Certain Officers and our Non-EmployeeDirectors: YesClawback Policy for Recovering Incentive-Based Compensation Following an AccountingRestatement: YesInsider Trading Policy that Prohibits Hedging, Pledging and Other Similar Actions for ourExecutive Officers and Directors: YesOversight of Risk ManagementAt Ribbon, we believe that innovation and leadership are impossible without taking risks. Wealso recognize that imprudent acceptance of risk or the failure to appropriately identify and mitigaterisks could be destructive to stockholder value. The Board is responsible for assessing the Company’sapproach to risk management and overseeing management’s execution of its responsibilities foridentifying and managing risk. The Board exercises its responsibilities through discussions in Boardmeetings and also through its committees, each of which examines various components of enterpriserisk as part of its responsibilities. Generally, strategic risks, including risks relating to the COVID-19pandemic and its impact on the Company, our employees, customers and suppliers, and the risksrelated to management delegation are overseen and evaluated by the full Board; financial, internalcontrol and cybersecurity risks are overseen and evaluated by the Audit Committee; risks relating toour compensation policies are overseen and evaluated by the Compensation Committee; and risksrelated to governance are overseen and evaluated by the Nominating and Corporate Governance38Strong Governance PracticesCommittee. Each committee assesses identified risks and informs the Board about the risks as needed.Management also regularly reports on each such risk to the relevant committee or the Board.Moreover, an overall review of risk is inherent in the Board’s consideration of our long-term strategiesand in the transactions and other matters presented to the Board, including capital expenditures,acquisitions and divestitures, and financial matters. Additional review or reporting on risks is conductedas needed or as requested by the Board or one of its committees. The Board believes that its role inthe oversight of the Company’s risks complements our current Board structure, as our structure allowsour independent directors, through our three fully independent Board committees, to exercise effectiveoversight of the actions of management in identifying risks and implementing effective riskmanagement policies and controls.Board Composition and Stockholders AgreementOur Board consists of nine directors, one of whom is employed by the Company(Mr. McClelland). On March 3, 2019, in connection with the ECI Merger, the Company entered intothe Stockholders Agreement with the JPM Stockholders and Swarth.The Stockholders Agreement provides, among other things, that:(i)until March 3, 2022, there will be nine directors on the Board, except (A) if otherwiseapproved by the Board, including a majority of the independent directors as defined in theStockholders Agreement, in connection with (x) an acquisition of another business by the Company or(y) an equity investment in the Company, or (B) as may otherwise be approved by the Board, includinga majority of the independent directors as defined in the Stockholders Agreement and the writtenconsent of the JPM Stockholders and Swarth;(ii)following March 3, 2022, the Board, including a majority of the independent directorsas defined in the Stockholders Agreement, may approve a different number of directors that comprisethe Board;(iii)with respect to the JPM Stockholders: (A) for so long as the JPM Stockholdersbeneficially own at least 43% of the Company’s common stock beneficially owned by the JPMStockholders in the aggregate on the ECI Closing Date, the JPM Stockholders will have the right todesignate three directors to serve on the Board, at least two of whom must be independent directors asdefined in the Stockholders Agreement; (B) from and after the first time that the JPM Stockholdersbeneficially own less than 43% and at least 29% of the Company’s common stock beneficially owned bythe JPM Stockholders in the aggregate on the ECI Closing Date, the number of directors that the JPMStockholders will have the right to designate will be reduced to two, at least one of whom must be anindependent director as defined in the Stockholders Agreement; (C) from and after the first time thatthe JPM Stockholders beneficially own less than 29% and at least 14% of the Company’s commonstock beneficially owned by the JPM Stockholders in the aggregate on the ECI Closing Date, thenumber of directors that the JPM Stockholders will have the right to designate will be reduced to one,who need not qualify as an independent director as defined in the Stockholders Agreement; and(D) from and after the first time that the JPM Stockholders beneficially own less than 14% of theshares of the Company’s common stock beneficial owned by the JPM Stockholders in the aggregate onthe ECI Closing Date, the JPM Stockholders will have no right to designate any members of theBoard; and(iv)with respect to Swarth: (A) upon receipt of approval from CFIUS and for so long asSwarth beneficially owns at least 88% of the shares of the Company’s common stock beneficially ownedby Swarth in the aggregate on the ECI Closing Date, Swarth will have the right to designate three39directors to serve on the Board, of which at least two must be independent directors as defined in theStockholders Agreement; (B) upon receipt of approval from CFIUS, from and after the first time thatSwarth beneficially owns less than 88% and at least 58% of the shares of the Company’s common stockbeneficially owned by Swarth in the aggregate on the ECI Closing Date, the number of directors thatSwarth will have the right to nominate will be reduced to two Board members, of which at least onemust be an independent director as defined in the Stockholders Agreement; (C) upon receipt ofapproval from CFIUS, from and after the first time that Swarth beneficially owns less than 58% and atleast 29% of the shares of the Company’s common stock beneficially owned by Swarth in the aggregateon the ECI Closing Date, the number of directors that Swarth will have the right to nominate will bereduced to one Board member, who needs not qualify as an independent director as defined in theStockholders Agreement; and (D) upon receipt of approval from CFIUS, from and after the first timethat Swarth beneficially owns less than 29% of the shares of Company’s common stock beneficiallyowned by Swarth in the aggregate on the ECI Closing Date, Swarth will have no right to nominate anymembers of the Board.The Stockholders Agreement further provides that the Nominating and Corporate GovernanceCommittee will designate the Company’s then-serving CEO as a director, as well as such additionalnumber of directors as constitutes the full Board so that the Board has no vacancies.Notwithstanding the foregoing, until March 3, 2021, no member of the Board appointed byeither the JPM Stockholders or Swarth will be removed from the Board, regardless of any sell down ofthe Company’s common stock by the nominating stockholder. In the event any director designated bythe JPM Stockholders or Swarth is unable to serve, the JPM Stockholders are and/or Swarth is, asapplicable, entitled to designate a replacement director, subject to the conditions set forth in theStockholders Agreement.Director Experience and TenureOur directors collectively possess a broad mix of skills, qualifications and proven leadershipabilities. The Nominating and Corporate Governance Committee practices a long-term approach toboard refreshment. The Nominating and Corporate Governance Committee regularly identifiesindividuals who would complement and enhance the current directors’ skills and experience.It is of great importance to the Company that the Nominating and Corporate GovernanceCommittee recruit directors who help achieve the goal of an experienced, diverse Board that functionseffectively as a group. The Nominating and Corporate Governance Committee expects each of theCompany’s directors to have proven leadership skills, sound judgment, integrity, and a commitment tothe success of the Company. In evaluating director candidates and considering incumbent directors fornomination to the Board, the Committee considers a variety of factors, including independence,financial literacy, personal and professional accomplishments, and experience in light of the needs ofthe Company. For incumbent directors, the factors also include attendance, past performance on theBoard and contributions to the Board and its respective committees.Director IndependenceOur Corporate Governance Guidelines provide that, in determining the independence of adirector, the Board will be guided by the definitions of ‘‘independent director’’ in the listing rules ofNasdaq and applicable laws and regulations as well as the definition of ‘‘independent director’’ set forthin the Stockholders Agreement.40During its annual review of director independence, the Board considers all information itdeems relevant, including without limitation, any transactions and relationships between each directoror any member of his or her immediate family and the Company and its subsidiaries and affiliates. TheBoard conducted an annual review of director independence and affirmatively determined that each ofR. Stewart Ewing, Jr., Bruns H. Grayson, Beatriz V. Infante, Richard J. Lynch, Kent J. Mathy, Krish A.Prabhu, and Scott E. Schubert meets the definition of ‘‘independent director’’ under the Nasdaq listingrules and the Stockholders Agreement. The Board also determined that Kim S. Fennebresque was alsoan ‘‘independent director’’ as defined under Nasdaq listing rules prior to his resignation in March 2020.Following a review of their respective relationships, including, with respect to Mr. Smith, his affiliationwith the JPM Stockholders, the Board determined that neither Bruce W. McClelland nor Richard W.Smith qualify as independent directors under the Nasdaq listing rules or the Stockholders Agreement.There are no family relationships among any of our directors, nominees for director andexecutive officers.Meeting AttendanceOur Board recognizes the importance of director attendance at Board and committee meetings.Our Board held 11 meetings during 2019, four of which were regular meetings and seven of which werespecial meetings. Each of the incumbent directors attended at least 75% of the combined totalmeetings of the Board and its committees on which they served. While we do not have a formal policyregarding the attendance of directors at our annual meetings of stockholders, it is expected that, absentcompelling circumstances, all of our directors will attend. All of the then-current members of the Boardattended our 2019 annual meeting of stockholders.Board CommitteesOur Board has three standing committees: the Audit Committee, the CompensationCommittee, and the Nominating and Corporate Governance Committee. Each of the standingcommittees is composed entirely of independent directors as defined under applicable rules, includingthe Nasdaq rules and, in the case of all members of the Audit Committee, the independencerequirements of Rule 10A-3 under the Exchange Act and, in the case of all members of theCompensation Committee, the heightened independence requirements for Compensation Committeemembers under the Nasdaq rules.Under the Stockholders Agreement and subject to the Company’s obligation to comply withany applicable independence requirements under the Nasdaq rules and the rules of the SEC, for solong as the JPM Stockholders have the right to nominate at least two directors to the Board, (i) theNominating and Corporate Governance Committee will be comprised of three ‘‘independent directors’’under the Stockholder Agreement, at least one of whom must be a designee of JPM Stockholders;(ii) a designee of the JPM Stockholders must be the Chairman of each of the Nominating andCorporate Governance Committee and the Compensation Committee and (iii) only in the case thatSwarth does not have the right to nominate at least two directors to the Board, a designee of the JPMStockholders must be the Chairman of the Audit Committee.Also under the Stockholders Agreement and subject to the Company’s obligation to complywith any applicable independence requirements under the Nasdaq rules and the rules of the SEC, forso long as Swarth has the right to nominate at least two directors to the Board, (i) the Nominating andCorporate Governance Committee must be comprised of three ‘‘independent directors’’ under theStockholders Agreement, at least one of whom must be a designee of Swarth, (ii) a designee of Swarthmust be the Chairman of the Audit Committee; and (iii) only in the case that the JPM Stockholders do41not have the right to nominate at least two directors to the Board, a designee of Swarth must be theChairman of each of the Nominating and Corporate Governance Committee and the CompensationCommittee.The Nominating and Corporate Governance Committee determines the size and membershipof each of the Audit Committee, the Compensation Committee and all other committees established bythe Board, provided that (i) such determination will comply with mandatory legal and listingrequirements; (ii) for as long as the JPM Stockholders have the right to nominate at least one directorto the Board who is eligible to serve on such committee, at least one member of each such committeewill be a designee of the JPM Stockholders; and (c) for so long as Swarth has the right to nominate atleast one director to the Board who is eligible to serve on such committee, at least one member ofeach such committee must be a designee of Swarth.Audit Committee.Our Board has established an Audit Committee consisting of threemembers: Messrs. Schubert (Chair) and Grayson and Ms. Infante. Our Board has determined thatMr. Schubert is an ‘‘audit committee financial expert’’ as defined in Item 407(d)(5) of Regulation S-K.This designation is a disclosure requirement of the SEC related to Mr. Schubert’s experience andunderstanding with respect to certain accounting and auditing matters, but it does not impose uponMr. Schubert any duties, obligations or liability that are greater than are generally imposed on him as amember of the Audit Committee and the Board, and his designation as an audit committee financialexpert pursuant to this SEC requirement does not affect the duties, obligations or liability of any othermember of the Audit Committee or the Board. The Audit Committee held eight meetings during 2019.As described more fully in its charter, the Audit Committee’s responsibilities include, amongother things: (i) appointing, evaluating, compensating, overseeing the work of and, if appropriate,terminating the appointment of the independent auditor; (ii) overseeing the Company’s financialreporting, including reviewing and discussing with management, the independent auditor and a memberof the internal audit function, prior to public release, the Company’s annual and quarterly financialstatements to be filed with the SEC; (iii) overseeing management’s design and maintenance of theCompany’s internal control over financial reporting and disclosure controls and procedures; and(iv) reviewing and discussing with management and the independent auditor the Company’s financialrisk exposures and assessing the policies and procedures management has implemented to monitor andcontrol such exposures. The Audit Committee operates pursuant to a written charter adopted by theBoard that reflects standards and requirements adopted by the SEC and Nasdaq, a current copy ofwhich is available at www.ribboncommunications.com, in the section entitled Company—InvestorRelations—Corporate Governance—Governance Highlights.Compensation Committee.The Compensation Committee consists of two members:Mr. Grayson and Ms. Infante. The Compensation Committee held seven meetings during 2019.As described more fully in its charter, the Compensation Committee’s responsibilities include,among other things: (i) reviewing and approving the Company’s compensation plans, practices andpolicies for directors and executive officers, including a review of any risks arising from compensationpractices and policies for employees that are reasonably likely to have a material adverse effect on theCompany; (ii) reviewing the Company’s succession plans for executive officers, where requested to doso by the Board; (iii) making recommendations to the Board regarding the establishment and terms ofany incentive compensation or equity-based plans and monitoring their administration; and (iv) beforeselecting or receiving advice from a compensation advisor (other than in-house legal counsel),considering various factors relating to the independence of such advisor. The Compensation Committeemay delegate its authority under its charter to one or more subcommittees or members of management,consistent with applicable law and SEC and Nasdaq rules. Specifically, the Compensation Committee42may delegate to one or more executive officers of the Company the power to grant options or otherstock awards pursuant to the Company’s equity plans to certain employees of the Company.The Compensation Committee operates pursuant to a written charter adopted by the Boardthat reflects standards and requirements adopted by Nasdaq, a current copy of which is available atwww.ribboncommunications.com, in the section entitled Company—Investor Relations—CorporateGovernance—Governance Highlights.Nominating and Corporate Governance Committee.The Nominating and CorporateGovernance Committee consists of two members: Messrs. Lynch and Schubert. The Nominating andCorporate Governance Committee held four meetings during 2019.As described more fully in its charter, the Nominating and Corporate Governance Committee’sresponsibilities include, among other things: (i) identifying, screening and reviewing individuals qualifiedto serve as directors, consistent with criteria approved by the Board, and recommending to the Boardcandidates for: (a) nomination for election by the stockholders and (b) any Board vacancies that are tobe filled by the Board, subject to any rights regarding the selection of directors by holders of preferredshares and any other contractual or other commitments of the Company; (ii) developing andrecommending to the Board, overseeing the implementation and effectiveness of, and recommendingmodifications as appropriate to, a set of corporate governance guidelines applicable to the Company;(iii) reviewing annually with the Board the composition of the Board as a whole and a succession planin the event one or more directors ceases to serve for any reason; (iv) overseeing the annualself-evaluation of the Board, its committees, individual directors and management; and (v) identifyingappropriate director development and continuing education opportunities and making recommendationsto the Board as appropriate.The Nominating and Corporate Governance Committee operates under a written charteradopted by the Board that reflects standards and requirements adopted by Nasdaq, a current copy ofwhich is available at www.ribboncommunications.com, in the section entitled Company—InvestorRelations—Corporate Governance—Governance Highlights.Swarth Irrevocable ProxyAll of Swarth’s governance rights, including its right to designate members of the Board, aresubject to our receipt of CFIUS approval. Swarth has granted an irrevocable proxy to the Company tovote the shares of the Company’s common stock held by Swarth that represent more than 9.99% of theconsolidated voting power of all issued and outstanding Company common stock pro rata in accordancewith how the other holders of Company common stock vote their shares, and such proxy will remain inplace until CFIUS approval is obtained.Director Nomination ProcessThe Nominating and Corporate Governance Committee screens and recommends candidatesfor nomination by the full Board, other than those directors designated pursuant to the StockholdersAgreement. There are no specific minimum qualifications for a recommended nominee to our Board;however, the Nominating and Corporate Governance Committee considers, among other skills andcriteria, the following for nomination as a director: demonstrated business knowledge, technical skillsand experience; an ability to exercise sound judgment in matters that relate to our current andlong-term objectives; commitment to understanding us and our industry and to regularly attend andparticipate in meetings of our Board and its committees; a reputation for integrity, honesty andadherence to high ethical standards; diversity of background and other desired qualities; the ability and43experience to understand the sometimes conflicting interests of our various constituencies and to act inthe interests of all stockholders; and the absence of any conflict of interest that would impair thenominee’s ability to represent the interest of all our stockholders and to fulfill the responsibilities ofbeing a director.In considering whether to recommend any particular candidate for inclusion in our Board’sslate of recommended director nominees, the Nominating and Corporate Governance Committeeapplies the criteria generally set forth in the Nominating and Corporate Governance CommitteeCharter. The process followed by the Nominating and Corporate Governance Committee to identifyand evaluate director candidates includes requests to our Board members and others forrecommendations, meetings from time to time to evaluate biographical information and backgroundmaterial relating to potential candidates and interviews of selected candidates by members of theNominating and Corporate Governance Committee and our Board. Our Board believes that thebackgrounds and qualifications of its directors, considered as a group, should provide a composite mixof experience, knowledge and abilities that will allow our Board to fulfill its responsibilities. Inidentifying potential director candidates, the Nominating and Corporate Governance Committee andthe Board also focus on ensuring that the Board reflects a diversity of experiences, backgrounds andskills. The Nominating and Corporate Governance Committee has the authority to engage independentadvisors to assist in the process of identifying and evaluating director candidates, but has not engagedany such advisors to date.Stockholder Nominations and Recommendations of Director CandidatesStockholders who wish to recommend candidates to the Nominating and CorporateGovernance Committee for consideration as potential director candidates should send theirrecommendation to the Nominating and Corporate Governance Committee, c/o Corporate Secretary,Ribbon Communications Inc., 4 Technology Park Drive, Westford, MA 01886. In considering candidatessubmitted by stockholders, the Nominating and Corporate Governance Committee will take intoconsideration the current make-up of the Board, what skills should be added (if any) and thequalifications of the candidate. The Nominating and Corporate Governance Committee will considerdirector candidates recommended by stockholders in the same manner as candidates recommended bythe Nominating and Corporate Governance Committee, as described above in ‘‘Director NominationProcess.’’Stockholders who wish to nominate director candidates or propose business to be considereddirectly at an annual meeting in accordance with the procedures set forth in our by-laws should followthe procedures set forth under the sections entitled ‘‘Stockholder Nominations and Proposals ForPresentation At 2021 Annual Meeting.’’Board Leadership StructureThe Company’s Corporate Governance Guidelines provide that the Board leadership structurethat is most appropriate for the Company at this time is a non-executive Chairman. The Boardevaluates its leadership structure and role in risk oversight on an ongoing basis, and makes decisions onthe basis of what it considers to be best for the Company at any given point in time. Currently, ourBoard leadership structure consists of an independent Chairman, a separate CEO and strongcommittee chairs. The Board believes its leadership structure provides for appropriate independencebetween the Board and management because the current leadership structure offers the followingbenefits: (i) increasing the independent oversight of Ribbon and enhancing our Board’s objectiveevaluation of our CEO, (ii) focusing the CEO on company operations instead of Board administration,(iii) providing the CEO with an experienced sounding board, (iv) providing greater opportunities for44communication between stockholders and our Board, (v) enhancing the independent and objectiveassessment of risk by our Board, and (vi) providing an independent spokesperson for our Company.Executive Sessions of the BoardThe Company’s Board is structured to promote independence and is designed so thatindependent directors exercise oversight of the Company’s management and key issues related tostrategy and risk. Under our Corporate Governance Guidelines, our independent directors are requiredto meet in executive session at regularly scheduled Board meetings without management present todiscuss any matters the independent directors consider appropriate. We expect the Board to have aleast four executive sessions each year.Stock Ownership GuidelinesThe Board believes that it is important to link the interests of our directors and managementto those of our stockholders. Accordingly, our non-employee directors, our Chief Executive Officer andour other officers required to file reports under Section 16 of the Exchange Act are subject to a stockownership policy. For additional information regarding our stock ownership policy, please see thesection entitled ‘‘Compensation Discussion and Analysis—Stock Ownership Requirements’’ below.Anti-Hedging and Pledging PolicyOur Amended and Restated Insider Trading Policy prohibits all executive officers, directors andemployees from engaging in transactions involving hedging, monetization, margin accounts, pledges,puts, calls and other derivative securities.Additional Governance MattersCode of Ethics.Our Board has adopted a written Amended and Restated Code of Conduct,which qualifies as a ‘‘code of ethics’’ as defined by SEC rules. The Amended and Restated Code ofConduct is intended to provide guidance on the conduct expected of Ribbon’s employees, officers anddirectors in the interests of preserving Ribbon’s reputation for integrity, accountability and fair dealing.To ensure that our business is conducted in a consistently legal and ethical manner, our Amended andRestated Code of Conduct applies to all of our directors, officers and employees.We intend to disclose any amendment to or waiver of a provision of the Amended andRestated Code of Conduct that applies to our principal executive officer, principal financial officer,principal accounting officer or controller, or persons performing similar functions, by posting suchinformation on our website at www.ribboncommunications.com.Sustainability, Social and Environmental Responsibility.Ribbon has a mature sustainabilityprogram and an active environmental management system (‘‘EMS’’). This is highlighted by ourcontinuous ISO 14001 certification since 2010 for our global sites and our compliance with internationallaws relating to environmental management. In our Environmental Policy, we state our commitment to:(i) protecting the environment and preventing pollution within our products’ lifecycle with responsibleproduct design and by requiring our suppliers to adhere to sustainable practices, (ii) fulfilling ourcompliance obligations by complying with all applicable environmental legislation and otherrequirements, and (iii) continually improving our EMS to enhance environmental performance.We implement administrative controls to assess our compliance obligations, processes andpractices, and to identify opportunities for reductions in energy use, carbon emissions and waste. We45also take appropriate measures to meet the following objectives: (i) reduce and optimize ourconsumption of nature resources, (ii) prevent hazardous and/or banned substances from entering ourproducts, and (iii) recycle those materials required for operations in the global marketplace. TheCompany takes its corporate social responsibilities seriously, as evidenced through its publicly availablestatement on slavery and human trafficking as well as its published Supplier Code of Conduct. Ribbondemonstrates leadership in environmental management to all of our suppliers through our ISO 14001certification and ensuring that in all of our business dealings, we comply with applicable national andinternational legislation and human rights. Our company policy documents are available athttps://ribboncommunications.com/company/company-policies/policies.Public Availability of Corporate Governance Documents.For more corporate governanceinformation, you are invited to access our key corporate governance documents, including ourCorporate Governance Guidelines, Amended and Restated Code of Conduct and the charters of ourAudit Committee, Compensation Committee, and Nominating and Corporate Governance Committeeon our corporate website at www.ribboncommunications.com, in the section entitled Company—InvestorRelations—Corporate Governance—Governance Highlights. The references in this Proxy Statement to ourcorporate website are not intended to, and do not, incorporate by reference into this Proxy Statementany materials contained on such website.Stockholder Communications with the Board of Directors.Stockholders may communicate withour Board by writing, calling or e-mailing our Investor Relations Department at RibbonCommunications Inc., 4 Technology Park Drive, Westford, MA 01886, Attention: Investor Relations,(978) 614-8440, ir@rbbn.com. Our Investor Relations Department will review all such communicationsand will forward to the Chairman of the Audit Committee all communications that raise an issueappropriate for consideration by our Board.46AUDIT COMMITTEE REPORTThe information contained in this report shall not be deemed to be ‘‘soliciting material’’ or ‘‘filed’’or incorporated by reference in future filings with the U.S. Securities and Exchange Commission, or subjectto the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent thatwe specifically request that it be treated as soliciting material or specifically incorporate it by reference into adocument filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, asamended.We reviewed Ribbon’s audited financial statements for the fiscal year ended December 31,2019 and discussed these financial statements with Ribbon’s management, including a discussion of thequality, not just the acceptability, of the accounting principles, the reasonableness of significantjudgments and the clarity of disclosures in the financial statements. Ribbon’s management isresponsible for Ribbon’s financial reporting process, including its system of internal controls, and forthe preparation of consolidated financial statements in accordance with generally accepted accountingprinciples. Ribbon’s independent registered public accounting firm, Deloitte & Touche LLP(‘‘Deloitte’’), is responsible for performing an independent audit of Ribbon’s financial statements inaccordance with standards of the Public Company Accounting Oversight Board (United States)(‘‘PCAOB’’) and issuing a report on those financial statements and issuing a report on the effectivenessof Ribbon’s internal control over financial reporting as of the end of the fiscal year. Our responsibilityis to monitor and review these processes. We also reviewed and discussed with Deloitte the auditedfinancial statements and the matters required by the SEC and PCAOB.Deloitte provided us with, and we reviewed, the written disclosures and the letter required bythe applicable requirements of the PCAOB that independent registered public accounting firmsannually to disclose in writing all relationships that in the independent registered public accountingfirm’s professional opinion may reasonably be thought to bear on independence, to confirm theirindependence and to engage in a discussion of independence. In addition to engaging in this discussionwith Deloitte regarding its independence, we also considered whether Deloitte’s provision of other,non-audit related services to Ribbon is compatible with maintaining Deloitte’s independence.Based on our discussions with management and Deloitte, and our review of informationprovided by management and Deloitte, we recommended to the Ribbon Board of Directors that theaudited financial statements be included in Ribbon’s Annual Report on Form 10-K for the year endedDecember 31, 2019.Submitted by,AUDIT COMMITTEE:Scott E. Schubert (Chairman)Bruns H. GraysonBeatriz V. Infante47DIRECTOR COMPENSATIONThe Compensation Committee reviews the compensation of our non-employee directorsperiodically and recommends changes to the Board when it deems appropriate. During 2019, theCompensation Committee recommended to the Board, and the Board approved, amendments to thecompensation of non-employee directors and stock ownership guidelines. The amendments to thenon-employee director compensation included (i) eliminating the new director equity grant of $180,000of restricted stock and (ii) changing the form of equity granted from shares of restricted stock torestricted stock units. The amendments to the stock ownership guidelines included requiringnon-employee directors to maintain the amount of stock throughout their tenure as non-employeedirectors.The following table describes the components of the non-employee directors’ compensation for2019:Annual Retainer$60,000+$120,000+ in restricted stock units that vest after one year (or, if earlier, on the dateAnnual Equity Retainerof the next annual meeting if the non-employee director does not stand forre-election or is not re-elected by stockholders of the Company))$15,000 for the Audit CommitteeCommittee Fees*$10,000 for the Compensation Committee$5,000 for the Nominating and Corporate Governance Committee$100,000 for the Non-Executive Chairman of the Board*$25,000 for the Audit Committee**Chair Fee$17,000 for the Compensation Committee**$10,000 for the Nominating and Corporate Governance Committee**New non-employee directors will receive a pro rata annual equity award ofNew Director Retainer++restricted stock units, with the pro ration based on the number of months of serviceuntil the month of the Company’s next annual stockholders meetingOwnership of common stock that has a value equivalent to five times the annualStock Ownershipcash retainer; to be satisfied on or before (i) October 27, 2022 for Messrs. Lynch,Guidelines+++Grayson, Mathy and Schubert and Ms. Infante; (ii) March 1, 2025 for Mr. Ewingand Mr. Prabhu or (iii) within five years of joining the Board for future directors*Compensation for service as the chairman of the Board or a committee member is in additionto the compensation paid for Board service.**Compensation for service as a committee chair is in addition to the compensation paid forservice on such committee.+Mr. Smith is not entitled to any annual director equity grants. In lieu of such grants,Mr. Smith’s annual retainer is $160,000. All compensation paid to Mr. Smith is paid directly toHeritage PE (OEP) III L.P. (‘‘Heritage III’’).++During 2019, the Compensation Committee recommended to the Board, and the Boardapproved, the elimination of the new director equity grant of $180,000 of restricted stock.+++During 2019, the Compensation Committee recommended to the Board, and the Boardapproved, amendments to the stock ownership guidelines for non-employee directors to maintain theamount of stock throughout their tenure as non-employee directors.48Compensation ElementCompensation PaymentTotal Director Compensation for 2019The following table contains information on compensation earned by each non-employeemember of our Board during 2019:2019 Director CompensationFees Earned orStock AwardsTotalDirectorPaid in Cash ($)($)(1)($)(2)Kim S. Fennebresque(3)........................102,000120,004222,004Bruns H. Grayson.............................85,000120,004205,004Beatriz V. Infante.............................85,000120,004205,004Richard J. Lynch.............................165,000120,004285,004Kent J. Mathy...............................60,000120,004180,004Scott E. Schubert.............................105,000120,004225,004Richard W. Smith(4)...........................160,000—160,000(1)The amounts in this column do not reflect compensation actually received by the applicabledirector. Instead, the amounts reflect the grant date fair value of restricted stock awards, ascalculated in accordance with Accounting Standards Codification 718, Compensation—Stock-Based Compensation (‘‘ASC 718’’).The $120,004 reported for each member of the Board, with the exception of Mr. Smith,represents the grant date fair value of his or her 2019 annual director grant of 25,975 shares ofrestricted stock, which shares were granted on June 17, 2019 and which will vest on June 17,2020 (or, if earlier, on the date of the next annual meeting if the non-employee director doesnot stand for re-election or is not re-elected by stockholders of the Company)).As of December 31, 2019, our non-employee directors held an aggregate of 155,850 unvestedrestricted stock units as follows:Number of UnvestedShares Held as ofNon-Employee DirectorsDecember 31, 2019Kim S. Fennebresque.................................25,975Bruns H. Grayson...................................25,975Beatriz V. Infante....................................25,975Richard J. Lynch....................................25,975Kent J. Mathy......................................25,975Scott E. Schubert....................................25,975Richard W. Smith....................................—(2)Non-employee directors also are eligible to be reimbursed for reasonable out-of-pocketexpenses incurred in connection with attendance at our Board or committee meetings.(3)On February 17, 2020, Mr. Fennebresque resigned as a director of the Company, effective onMarch 1, 2020. In connection with his resignation from the Board, we accelerated the vestingof Mr. Fennebresque’s 25,975 unvested shares.(4)Mr. Smith is not entitled to any equity compensation in connection with his services as amember of the Board. Fees paid to Mr. Smith included herein represent annual director fees,consistent with other non-employee directors, and additional fees in lieu of the 2019 annualdirector grant. More specifically, Mr. Smith’s cash compensation for 2019 includes $100,000 ofcash that was paid quarterly in arrears in lieu of his 2019 annual director grant. Allcompensation for Mr. Smith’s services is paid directly to Heritage III.49EXECUTIVE OFFICERS OF THE REGISTRANTThe executive officers of the Company as of the date hereof are listed below:NameAgePositionBruce W. McClelland..........53President and Chief Executive OfficerDaryl E. Raiford.............57Executive Vice President, Chief Financial OfficerSteven Bruny................62Executive Vice President, Sales—Americas RegionJustin K. Ferguson............42Executive Vice President, General Counsel and CorporateSecretaryKevin Riley.................49Executive Vice President, Chief Technical OfficerAnthony Scarfo..............59Executive Vice President and General Manager, Cloudand Edge Business UnitFernando Valdivielso..........52Executive Vice President, Sales—EMEA and APACBiographical information regarding each executive officer other than Bruce W. McClelland isset forth below. Mr. McClelland’s biographical information is set forth above under the section entitled‘‘Proposal 1—Election of Directors.’’Daryl E. Raiford has served as our Executive Vice President, Chief Financial Officer sinceOctober 2017. He previously served in the same position at GENBAND since 2010, and wasresponsible for global financial, business operations and supply chain functions. Between 2007 and2010, Mr. Raiford served as Vice President and Chief Accounting Officer and then as Vice President ofBusiness Transformation at Freescale Semiconductor, which was headquartered in Austin, Texas. From2004 through 2007, Mr. Raiford was Executive Vice President and Chief Financial Officer of TravelportWorldwide Limited, and was responsible for the global financial, communications, productmanagement, information technology, and general administrative functions of this UK-based globaltravel distribution firm. Before Travelport, Mr. Raiford served as Vice President, Finance andAdministration, Americas for Hewlett Packard between 2002 and 2004, and as Corporate Controller forCompaq Computer Corporation from 1999 until its acquisition by Hewlett Packard in 2002. He alsowas the Chief Financial Officer for Shell Technology Ventures, based in Houston, Texas and TheHague, Netherlands. Mr. Raiford served for ten years at the accounting firm Price Waterhouse inLondon and Houston, and is a Certified Public Accountant. Effective February 2019, Mr. Raiford wasappointed to serve on the Board of Directors and as Chair of the Audit Committee of LeoneMedia Inc., a global media technology company that acquired Ericsson’s Media Solutions business andwhich operates under the trade name MediaKind. He earned a Bachelor of Business Administrationdegree in Accounting from The University of Texas at Austin. In 2012, Mr. Raiford was honored as afinalist for the Outstanding CFO, Private Company by D CEO Magazine.Steven Bruny has served as our Executive Vice President, Sales—Americas Region since March2020. He previously served as our Executive Vice President, Global Sales and Services from January2019 to March 2020; our Interim Co-President and Chief Executive Officer from November 2019 toFebruary 2020; our Executive Vice President, Global Operations from October 2017 to January 2019; asChief Operating Officer of GENBAND from January 2015 to October 2017; and as Senior VicePresident of Major Accounts Sales for GENBAND from July 2012 to January 2015. Prior to joiningGENBAND, from July 2005 to March 2012, Mr. Bruny served as Chief Executive Officer of AztekNetworks, Inc., a telecommunications company, which was acquired by GENBAND in 2012. Prior tojoining Aztek Networks, Inc., in 1999, Mr. Bruny co-founded Connexn Technologies, Inc., atelecommunications company, which was acquired by Azure Solutions, Ltd., in 2004. Prior to hisposition at Connexn Technologies, Inc., Mr. Bruny was Founder and CEO of IGS, atelecommunications software supplier, from 1993 to 1998. From 1988 to 1993, Mr. Bruny was also50Founder and CEO of Information + Graphics Systems, Inc., a GIS software provider that was acquiredby Hitachi Software Engineering in 1993. Mr. Bruny holds a Bachelor of Science degree in Physicsfrom Colorado State University and a Master of Business Administration degree from the University ofColorado.Justin K. Ferguson has served as Executive Vice President, General Counsel and CorporateSecretary since April 2018. Prior to joining Ribbon, from 2015 to 2018, Mr. Ferguson was the VicePresident, General Counsel and Corporate Secretary of Zix Corporation, a Nasdaq listed company thatprovides email security solutions. From 2011 to 2015, Mr. Ferguson served as Senior Vice President—Director of Legal for GENBAND. Prior to GENBAND, he was an attorney at the law firms of Weil,Gotshal & Manges LLP and Baker Botts L.L.P. Mr. Ferguson received a Juris Doctorate degree fromTexas Tech University School of Law and a Bachelor’s degree in Business Administration from TexasTech University. He is a member of the State Bar of Texas.Kevin Riley has served as our Executive Vice President, Chief Technical Officer since March2020. Previously, Mr. Riley served as our Chief Technology Officer and Advanced Research andDevelopment from October 2017 to March 2020; our Interim Co-President and Chief Executive Officerfrom November 2019 to February 2020; Sonus’ Senior Vice President, Engineering and Operations andChief Technology Officer from February 2016 until the GENBAND Merger; Sonus’ Vice President,Engineering and Chief Technology Officer from July 2014 to January 2016; Vice President of PlatformEngineering from October 2012 to July 2014; and a Sonus Fellow from May 2011 to September 2012.Prior to joining Sonus, he was the Software Development Director at Verivue, Inc., a content deliverynetwork software company, from August 2009 to May 2011. Mr. Riley holds a Bachelor of Sciencedegree in Electrical Engineering from the University of Massachusetts, Amherst and a Master ofScience degree in Electrical Engineering from Northeastern University.Anthony Scarfo has served as our Executive Vice President and General Manager, Cloud andEdge Business. He previously served as our Executive Vice President, Products and Research andDevelopment from January 2018 to March 2020. From October 2016 to January 2018, he consulted forVTCSecure, a global communications solutions company. He has also served on the advisory board ofVTCSecure since 2012. From October 2017 to January 2018, he was a consultant for the Visiting NurseAssociation Health Group, helping to launch a new company focused on helping people age in place.Mr. Scarfo was previously Sonus’ Executive Vice President, Services, Product Management andCorporate Development from October 2013 to October 2016; Senior Vice President, TechnologyDevelopment from May 2012 to October 2013; Vice President and General Manager of Trunking,Policy and Business Development from February 2012 to May 2012; and Vice President of BusinessDevelopment from September 2011 to February 2012. Prior to joining Sonus, Mr. Scarfo was the VicePresident of Global Services Providers and System Integrators at Polycom, Inc., a leader in open,standards-based unified communications and collaboration solutions for voice and video collaboration,from February 2010 to May 2011, where he was responsible for developing Polycom, Inc.’s cloudstrategy to deploy video and voice infrastructure for Managed and Hosted Unified Communicationservices. Previously, Mr. Scarfo was the Chief Strategy Officer and Head of Global Channels at ECITelecom, which delivers communications platforms to carriers and services providers worldwide, fromJuly 2006 to January 2010, where he led the development of a multi-faceted business strategy anddeveloped a partner program with strategic and original equipment manufacturer partners. He alsoserved as Vice President of Global Alliances and Partnerships at Juniper Networks, Inc., which designs,develops and sells network infrastructure products and services, from July 2002 to June 2006.Mr. Scarfo started his career at AT&T Inc., a premier communications holding company, and heldleadership roles at Lucent Technologies, which designed and delivered systems, services and softwarefor next-generation communications networks. Mr. Scarfo holds a Bachelor of Science degree in51computer information systems from Manhattan College and a Master of Business Administrationdegree from Seton Hall University.Fernando Valdivielso, 52, has served as our Executive Vice President, Sales—EMEA and APACRegion since March 2020. He previously served as Executive Vice President, Global Sales andMarketing of ECI from December 2017 to March 2020 and as Vice President, EMEA of ECI fromMarch 2015 to November 2019. Prior to joining ECI, from April 2010 to August 2014, Mr. Valdivielsoserved as Vice President Telefonica Global Operations of Nokia Corporation. From November 2006 toMarch 2010, Mr. Valdivielso served as Managing Director Iberia & Italy, and Telefonica GlobalAccount VP at Nortel Networks Corporation. Earlier positions held by Mr. Valdivielso include: DivisionDirector Iberia at Samsung Electronics Co., Ltd. from January 2003 to October 2006, as well as severalpositions at Lucent Technologies, Inc. and AT&T Inc., from February 1991 to September 2002.Mr. Valdivielso holds a Bachelor of Science degree in Telecommunications from UniversidadPolitecnica de Madrid and an Executive Master of Business Administration degree from the IEBusiness School in Madrid.52BENEFICIAL OWNERSHIP OF OUR COMMON STOCKThe following table sets forth information regarding beneficial ownership of our common stockas of April 6, 2020 by:(cid:129)each person who beneficially owns, to the best of our knowledge, more than 5% of theoutstanding shares of our common stock;(cid:129)each of our named executive officers;(cid:129)each of our directors; and(cid:129)all of our current executive officers and directors as a group (together, the ‘‘BeneficialHolders’’).Beneficial ownership is determined in accordance with the rules of the SEC, and includesvoting or investment power with respect to shares. In computing the number of shares beneficiallyowned by each person named in the following table and the percentage ownership of that person,shares of common stock that the person has the right to acquire within 60 days of April 6, 2020,through the exercise of any stock option or other equity right, are deemed owned by that person andare also deemed outstanding. These shares are not, however, deemed outstanding for purposes ofcomputing the percentage ownership of any other person.Unless otherwise indicated below, to our knowledge, all persons named in the table have solevoting and investment power with respect to their shares of common stock, except to the extentauthority is shared by spouses under applicable law. The percentage of common stock outstanding as ofApril 6, 2020 is based upon 144,744,861 shares of common stock outstanding on that date, including53unvested shares of restricted stock. Unless otherwise indicated, the address of all listed stockholders is4 Technology Drive, Westford, Massachusetts 01886.Number ofSharesPercentage ofBeneficiallyCommon StockName and Address of Beneficial OwnerOwnedOutstandingNamed Executive Officers:Franklin W. Hobbs(1)317,930—Steven Bruny(2)110,941*Kevin Riley193,579*Daryl E. Raiford(3)190,489*Anthony Scarfo66,954*Justin K. Ferguson(4)71,139*John McCready(5)93,777*Michael Swade(6)202,050*David Walsh(7)358,671*Directors and Nominees:R. Stewart Ewing Jr.—*Bruns H. Grayson184,076*Beatriz V. Infante150,929*Richard J. Lynch172,408*Kent J. Mathy133,076*Bruce W. McClelland75,575Krish A. Prabhu—*Scott E. Schubert146,036*Richard W. Smith——All current executive officers and directors as a group (15 persons)(8)1,495,2021.03%5% Owners:JPMorgan Chase & Co.(9)49,940,22234.50%Equiom (Guernesey) Ltd. and ECI Holding (Hungary) Kft.(10)25,796,39517.82%*Less than 1% of the outstanding shares of common stock.(1)Mr. Hobbs no longer served as our President and Chief Executive Vice President, effectiveNovember 13, 2019. Mr. Hobbs resigned from our Board, effective December 27, 2019.Mr. Hobbs’ employment with us terminated effective as of the close of business onDecember 31, 2019.According to Mr. Hobbs’ last Form 4 filed on May 15, 2019 with the SEC relating to hisshares of our common stock, as of May 15, 2019, Mr. Hobbs beneficially owned 317,930shares of our common stock.(2)Includes 25,277 shares of restricted stock, 12,638 of which will vest within 60 days of April 6,2020.(3)Includes 32,277 shares of restricted stock, 16,138 of which will vest within 60 days of April 6,2020.(4)Includes 37,499 shares of restricted stock, 12,500 of which will vest within 60 days of April 6,2020.(5)Includes 25,277 shares of restricted stock, 12,638 of which will vest within 60 days of April 6,2020.54(6)Mr. Swade stepped down from his position as our Executive Vice President, Global Sales,effective January 14, 2019. He continued to be employed by us to assist with the transitions ofhis duties through March 31, 2019.According to Mr. Swade’s last Form 4 filed on October 2, 2018 with the SEC relating to hisshares of our common stock, as of October 2, 2018, Mr. Swade beneficially owned 202,050shares of our common stock.(7)Mr. Walsh stepped down as Founder and President, Kandy, effective February 1, 2019. Heagreed to provide consulting services to us pursuant to an independent consultancy agreementthrough October 21, 2019.According to Mr. Walsh’s last Form 4 filed on November 19, 2018 with the SEC relating tohis shares of our common stock, as of November 19, 2018, Mr. Walsh beneficially owned358,671 shares of our common stock.(8)Includes 210,956 shares of restricted stock, 53,914 of which will vest within 60 days of April 6,2020, owned by our current directors and officers.(9)Based solely on a Schedule 13D/A filed with the SEC on March 5, 2020, reporting thebeneficial ownership of 49,940,222 shares of our common stock. JPMorgan Chase & Co.(‘‘JPMorgan Chase’’) reported shared voting and dispositive power with respect to all49,940,222 shares, JPMC Heritage Parent LLC (‘‘JPMC Heritage’’) reported shared votingand dispositive power with respect to 48,190,718 shares, OEP II Partners Co-Invest, L.P.(‘‘OEP II Partners Co-Invest’’) reported shared voting and dispositive power with respect to1,749,504 shares, and Heritage III reported shared voting and dispositive power with respectto 47,048,711 shares. JPMorgan Chase, JPMC Heritage, OEP II Partners Co-Invest andHeritage III are collectively referred to as the ‘‘JPMorgan Reporting Persons’’. JPMorganChase is a publicly traded entity listed on the New York Stock Exchange, which is the solemember of JPMorgan Chase Holdings LLC, which is the sole member of OEP Holdings LLC,which is the sole member of JPMC Heritage, which is the general partner of OEP GeneralPartner III L.P., which is the general partner of Heritage III. As such, each of OEP HoldingLLC, JPMC Heritage and OEP General Partner III L.P. may be deemed to have or sharebeneficial ownership of the common stock held directly by Heritage III. OEP II PartnersCo-Invest is subject to certain contractual agreements and statutory obligations to acquire andvote shares side-by-side with Heritage III. By virtue of these agreements and obligations,JPMorgan Chase may be deemed to have or share beneficial ownership over the shares helddirectly by OEP II Partners Co-Invest. Notwithstanding the above, JPMorgan Chase does notdirectly or indirectly own any interest in OEP II Partners Co-Invest. The business address ofOEP II Partners Co-Invest is 510 Madison Ave., 19th Floor, New York, NY 10022. Thebusiness address of each of the other JPMorgan Reporting Persons is as follows: JPMorganChase, 383 Madison Avenue, New York, New York 10179, and each of JPMC Heritage andHeritage III, 277 Park Avenue, New York, New York 10172.(10)Based solely on a Schedule 13D filed with the SEC on March 13, 2020, reporting thebeneficial ownership of 25,796,395 shares of our common stock, each of Equiom(Guernsey) Ltd. and ECI Holding (Hungary) Kft. (Swarth), reported shared voting anddispositive powers with respect to all 25,796,395 shares, and sole voting and sole dispositivepowers with respect to none of the shares. Of the 25,796,395 shares of our common stock,1,454,545 shares are held in escrow and are subject to forfeiture during a period of up to fiveyears following the ECI Merger to satisfy certain potential liabilities under the mergeragreement. As described elsewhere in this Proxy Statement, Swarth has granted an irrevocableproxy to Ribbon to vote the shares of Ribbon common stock held by Swarth that representmore than 9.99% of the consolidated voting power of all issued and outstanding Ribboncommon stock pro rata in accordance with how the other holders of Ribbon common stockvote their shares, and such proxy will remain in place until CFIUS approval is obtained. Theprincipal business address and principal office address of Equiom (Guernsey) Ltd. isP.O. Box 175, Frances House, Sir William Place, St. Peter Port, Guernsey, GY1 4HQ. Theprincipal business address and principal office address of ECI Holding (Hungary) Kft. isDohany utca 12, Budapest, H-1074 Hungary.55TRANSACTIONS WITH RELATED PERSONSThe Board adopted a written related person transaction policy, which sets forth our policiesand procedures for the review, approval or ratification of any transaction required to be reported inour filings with the SEC. Under the policy, any potential related person transactions must be reportedto our general counsel, who is responsible for determining whether such transactions constitute relatedperson transactions subject to the policy. Our general counsel is required to present to the AuditCommittee each proposed related person transaction. The Audit Committee may approve or ratify thetransaction only if the Audit Committee determines that, under all of the circumstances, the transactionis in the best interests of the Company and its stockholders, as the Audit Committee determines ingood faith. The Audit Committee may, in its sole discretion, impose such conditions as it deemsappropriate on the Company or the related person in connection with approval of the related persontransaction. If the Audit Committee does not approve or ratify a related person transaction, suchtransaction will not be entered into or will be terminated, as the Audit Committee directs.The following are certain transactions, arrangements and relationships with our directors,executive officers and stockholders owning 5% or more of our outstanding common stock sinceJanuary 1, 2019.Stockholders AgreementOn March 3, 2020, the Company entered into the Stockholders Agreement with the JPMStockholders and Swarth. The Stockholders Agreement provides the JPM Stockholders and Swarth withcertain Board and Board committee designation rights as described above under ‘‘CorporateGovernance—Board Composition and Stockholders Agreement’’ and ‘‘Corporate Governance—BoardCommittees,’’ and contains certain voting commitments as described in ‘‘Proposal 1—Election ofDirectors’’.Standstill RestrictionsThe Stockholders Agreement contains certain standstill provisions restricting the JPMStockholders and Swarth from acquiring (or seeking or making any proposal or offer with respect toacquiring) additional shares of Ribbon common stock or any security convertible into Ribbon commonstock or any assets, indebtedness or businesses of Ribbon common stock or any of its subsidiaries.Certain customary exclusions apply, and acquisition of shares of Ribbon common stock by a Ribbonstockholder will be permitted so long as such acquisition would not result in such stockholder and itsaffiliates beneficially owning a number of Ribbon common stock that is greater than 120% of thenumber of voting shares of Ribbon common stock held by the JPM Stockholders or Swarth, asapplicable, at the closing of the ECI Merger (or such lower number as specified in the StockholdersAgreement).The standstill restrictions apply from the date of the Stockholders Agreement until the earlierof (i) the entry by Ribbon into a definitive agreement constituting a change of control transaction asdiscussed in further detail below and (ii) such date as the JPM Stockholders or Swarth, as applicable,no longer has a right to designate any members of the Board.Change of ControlWithout the approval of a majority of the disinterested directors serving on the Board, neitherthe JPM Stockholders nor Swarth may enter into or affirmatively support any transaction resulting in a56change of control of Ribbon in which any such stockholder receives per share consideration as a holderof Ribbon common stock in excess of that to be received by other holders of Ribbon common stock.Transfer RestrictionsWithout the approval of a majority of the disinterested directors serving on the Board:(cid:129)For 180 days following the ECI Closing Date (the ‘‘Initial Lock-Up Period’’), neither theJPM Stockholders nor Swarth may transfer any shares of the Company common stock thatit beneficially owns (except to a permitted transferee that agrees to hold shares subject tothe terms of the Stockholders Agreement). Thereafter, until three years following the ECIClosing Date, no JPM Stockholder nor Swarth may transfer any shares of Ribbon commonstock that it beneficially owns if such transfer involves more than 15% of the outstandingshares of Ribbon common stock or if the transferee would own 15% or more of theoutstanding shares of Ribbon common stock following such transfer, other than to apermitted transferee that agrees to be subject to the Stockholders Agreement or pursuantto a regulatory requirement;(cid:129)For 180 days following the Initial Lock-Up Period, neither the JPM Stockholders norSwarth may transfer voting shares of Ribbon common stock representing more than 50% ofthe shares of Ribbon common stock that such stockholder in the aggregate beneficiallyowns as of the ECI Closing Date other than (A) pursuant to a Marketed UnderwrittenPublic Offering (as defined in the Registration Rights Agreement), (B) to a permittedtransferee that agrees to hold shares subject to the terms of the Stockholders Agreement or(C) pursuant to a regulatory requirement.TerminationThe Stockholders Agreement will terminate by mutual consent of Ribbon, a majority in interestof the JPM Stockholders and Swarth (including the approval by a majority of Independent Directors)or with respect to either the JPM Stockholders or Swarth, on the date that such stockholder ceases tobeneficially own 2% or more of the issued and outstanding Ribbon common stock.Registration Rights AgreementOn March 3, 2020, the Company entered into a First Amended and Restated RegistrationRights Agreement (the ‘‘Registration Rights Agreement’’) with the JPM Stockholders and Swarth.Under the Registration Rights Agreement, certain holders of Ribbon common stock weregranted certain registration rights beginning on the 180th day following the ECI Closing Date, including(i) the right to request that Ribbon file an automatic shelf registration statement and effect unlimitedunderwritten offerings pursuant to such shelf registration statement; (ii) unlimited demand registrations;and (iii) unlimited piggyback registration rights that allow holders of registrable shares to require thatshares of Ribbon common stock owned by such holders be included in certain registration statementsfiled by Ribbon, in each case subject to the transfer restrictions contained in the StockholdersAgreement. In connection with these registration rights, Ribbon has agreed to effect certain proceduralactions, including taking certain actions to properly effect any registration statement or offering and tokeep the participating Ribbon stockholders reasonably informed with adequate opportunity to commentand review, as well as customary indemnification and contribution agreements.57Promissory NoteIn connection with the GENBAND Merger, on October 27, 2017, the Company issued apromissory note for $22.5 million to certain former equity holders of GENBAND, including certainaffiliates of the JPM Stockholders (the ‘‘Promissory Note’’). The Promissory Note did not amortize andthe principal thereon is payable in full on the third anniversary of its execution. Interest on thePromissory Note was payable quarterly in arrears and accrues at a rate of 7.5% per year for the first sixmonths after issuance, and thereafter at a rate of 10% per year. The failure to make any paymentunder the Promissory Note when due and, with respect to payment of any interest, the continuation ofsuch failure for a period of thirty days thereafter, constituted an event of default under the PromissoryNote. If an event of default occurred under the Promissory Note, the payees may declare the entirebalance of the Promissory Note due and payable (including principal and accrued and unpaid interest)within five business days of the payees’ notification to the Company of such acceleration. AtDecember 31, 2018, the Promissory Note balance was $24.1 million, comprised of $22.5 million ofprincipal plus $1.6 million of interest converted to principal. On April 29, 2019, concurrently with theclosing of the Company’s credit facility, the Company repaid in full all outstanding amounts under thePromissory Note, totaling $25 million and comprised of $23 million of principal plus $2 million ofinterest converted to principal. The Company did not incur any early termination penalties inconnection with this repayment.58COMPENSATION COMMITTEE REPORTThe information contained in this report shall not be deemed to be ‘‘soliciting material’’ or ‘‘filed’’or incorporated by reference in future filings with the U.S. Securities and Exchange Commission, or subjectto the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent thatwe specifically request that it be treated as soliciting material or specifically incorporate it by reference into adocument filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, asamended.The Compensation Committee consists of Bruns H. Grayson and Beatriz V. Infante. TheCompensation Committee has reviewed and discussed the Compensation Discussion and Analysisrequired by Item 402(b) of Regulation S-K with our management. Based on this review and discussion,the Compensation Committee recommended to our Board of Directors that the CompensationDiscussion and Analysis be included in this Proxy Statement.Submitted by,COMPENSATION COMMITTEE:Bruns H. GraysonBeatriz V. Infante59COMPENSATION DISCUSSION AND ANALYSISThe following discussion and analysis contain statements regarding performance targets and goalsof the Company. These targets and goals are discussed in the limited context of our compensation programsand should not be understood to be statements of management’s expectations or estimates of results or otherguidance. Investors should not apply these statements to other contexts.OverviewThis section explains our compensation philosophy, describes the material components of ourexecutive compensation program for our named executive officers (‘‘NEOs’’), whose compensation isset forth in the 2019 Summary Compensation table and other compensation tables contained in thisProxy Statement, and provides an overview of our executive compensation philosophy and program.2019 Named Executive Officers(cid:129)Franklin (Fritz) W. Hobbs, former President and Chief Executive Officer(cid:129)Steven Bruny, Executive Vice President, Sales, Americas Region and former InterimCo-President and Chief Executive Officer(cid:129)Kevin Riley, Executive Vice President, Chief Technical Officer and former Interim Co-Presidentand Chief Executive Officer(cid:129)Daryl E. Raiford, Executive Vice President, Chief Financial Officer(cid:129)Justin K. Ferguson, Executive Vice President, General Counsel(cid:129)John McCready, Executive Vice President, Chief Transformation Officer(cid:129)Anthony Scarfo, Executive Vice President and General Manager, Cloud and Edge Business(cid:129)Michael Swade, former Executive Vice President, Global Sales(cid:129)David Walsh, former Founder and President, KandySuccessful Leadership TransitionDuring fiscal 2019 through March 2020, we completed various management transitionsconsistent with an orderly approach to long-term succession planning.Effective January 14, 2019, Mr. Swade stepped down from his position as the Company’sExecutive Vice President, Global Sales. Mr. Swade remained employed through March 31, 2019 toprovide transition assistance to the Company’s sales organizations. The fiscal 2019 compensationdescribed in this Proxy Statement relates to his service in his previous role with us through March 31,2019 and the severance terms to which he was entitled under his letter agreement with us.In addition, Mr. Walsh stepped down as Founder and President, Kandy for the Company,effective February 1, 2019. Mr. Walsh continued to provide business advisory consulting services to usthrough October 21, 2019. The fiscal 2019 compensation described in this Proxy Statement relates tohis service in his previous role as Founder and President, Kandy through February 1, 2019 and as a6028APR202010161417consultant from February 2, 2019 through October 21, 2019, and the severance terms to which he wasentitled under his letter agreement with us.As of November 13, 2019, Mr. Hobbs no longer served as our President and Chief ExecutiveOfficer. On November 13, 2019, our Board appointed Steven Bruny, our then-Executive Vice President,Global Sales and Services, and Kevin Riley, our then-Executive Vice President, Advanced Research andDevelopment and Chief Technology Officer, to the additional role of Interim Co-Presidents and ChiefExecutive Officers, to assume the duties of our President and Chief Executive Officer while our Boardsearched for a permanent successor to Mr. Hobbs.On February 17, 2020, our Board appointed Mr. McClelland as President and Chief ExecutiveOfficer and elected him as our director on March 1, 2020. Upon Mr. McClelland’s appointment,Mr. Bruny and Mr. Riley resigned as Interim Co-Presidents and Chief Executive Officers of theCompany. After their transition from their interim roles, Mr. Bruny now serves as our Executive VicePresident, Sales, Americas Region and Mr. Riley now serves as Executive Vice President, ChiefTechnical Officer.Executive Summary of 2019 Executive Compensation DecisionsWe believe that our executive compensation program supports our business strategies andtalent management objectives and is consistent with sound governance practices that are intended tobest serve our stockholders’ long-term interests. In making its compensation decisions for 2019, theCompensation Committee considered, among other things, our financial and operational results for theyear, the result of the say-on-pay vote at our 2019 annual meeting of stockholders, and the achievementof the compensation objectives set by the Compensation Committee. The components of the NEOs’2019 compensation and the key decisions underlying such components are described below:2019 Target Compensation Components of CEO and Other Named Executive Officers(as a Percentage of Total Direct Compensation)Basesalary,9%Targetbonus, 9%Restrictedstockunits,38%Performanceunits, 44%2019 CEOCompensation MixBasesalary,28%Targetbonus,23%Restrictedstockunits,23%Performanceunits, 27%Other Current NEOs(average)Our senior executives are responsible for achieving both short- and long-term performancegoals critical to our long-term success. Accordingly, compensation is weighted more heavily towardsrewarding variable compensation as an individual rises within the organization as evidenced by the factthat at least 62% of the total direct compensation of each NEO and 91% of the CEO, was comprisedof target bonus and equity awards.6128APR202010161286Executive Compensation HighlightsIn 2018, the Compensation Committee reviewed and updated its pay practices to align with thecombined goals and objectives of the post-GENBAND Merger business and adopt good pay practicesfrom both Sonus and GENBAND, where appropriate, to support the Company’s strong governance andpay for performance compensation philosophy. The Compensation Committee continued to implementsubstantially the same pay practice structure in 2019.Our compensation philosophy and practices are an important part of our business strategy. Wehave a rigorous performance and compensation management system and we believe our compensationprocesses and programs are aligned to provide strong incentive for success while appropriatelybalancing risk. In setting policies and practices regarding compensation, our guiding philosophy is thatour compensation programs should:Help achieve our corporate growth and business strategy Compensate our executives based on both company performance and individual performance Enable Ribbon to hire, retain and motivate talented executives with proven experience in an increasingly competitive market Tie executive compensation to short- and long-term incentive programs because as leaders of key business units or functions, our executives have the ability to directly influence overall company performance We seek to accomplish these objectives by providing independent Compensation Committeeoversight; avoiding overly rigid, formulaic or short-term oriented goals; encouraging and rewardingoutstanding initiative, achievement, teamwork and a shared success environment; and reinforcingcritical measures of performance derived from our business strategy and key success factors. Theseobjectives, and our general compensation philosophy, are reviewed on an annual basis and updated asappropriate.Some of the highlights of our compensation programs and practices are as follows:(cid:129)Increased emphasis on key elements of the business through linkage to performance-basedlong-term incentives.For 2019, the Company continued its long-term incentive program,which was redesigned in 2018, to grant PSUs for our CEO and his direct reports. Theredesigned program places greater emphasis on the use of performance-based incentives inthe long-term incentive program while maintaining a retentive effect of a three-year vestingperiod. For 2019, the equity compensation mix for our CEO was weighted more heavilytoward performance-based compensation, with PSUs representing approximately 50% ofhis total equity compensation and RSUs representing approximately 50% of his total equitycompensation. For 2019, the average compensation mix for the remaining NEOs was alsoweighted more heavily toward performance-based compensation, with PSUs representingapproximately 24% of their total direct compensation, RSUs representing approximately24% of their total direct compensation, target bonus representing approximately 23% of62Our Guiding Compensation Philosophytheir total direct compensation and base salaries, representing approximately 29% of theirtotal direct compensation.(cid:129)Redesigned PSU component for 2019 and granted to all executive officers.For 2019, we grantedPSUs to our executive officers, including our CEO, with vesting based upon (i) attainmentof a Company growth objective (annual pre-bonus adjusted EBITDA) and results of ourstock performance (the Company’s total shareholder return (‘‘TSR’’) relative to the TSR ofcertain companies included in the Russell 2500 Telecommunications Sub Sector Index atthe time of grant for a three-year period) and (ii) continued employment for three yearsafter the grant date of the PSUs.(cid:129)Adopted key compensation practices.In 2019, we adopted amended and restated shareownership guidelines and an amended and restated insider trading policy, which our Boardbelieved were consistent with good governance practices. Our amended and restated shareownership guidelines apply to our CEO, our other Section 16 reporting officers, and ournon-employee directors. These guidelines generally require the holding of shares with a fairmarket value equal to six times the annual base salary for our CEO within six years ofbecoming our CEO, two times the annual base salary of our Section 16 reporting officerswithin five years of becoming a Section 16 reporting officer, and the retention of all sharesuntil retirement for our non-employee directors. Our amended and restated insider tradingpolicy contains stringent restrictions on transactions in Company common stock bydirectors and officers and was amended and restated in 2019 to prohibit all executiveofficers and directors from engaging in transactions involving hedging, monetization,margin accounts, pledges, puts, calls and other derivative securities.Consideration of Stockholder Say-on-Pay VoteThe Compensation Committee has historically considered the outcome of the Company’sannual say-on-pay vote when making decisions regarding the Company’s executive compensationprogram, including engaging in shareholder outreach, and in 2019, we considered the outcome of theadvisory vote when determining the terms and conditions of 2019 compensation. In 2019, we engagedwith our largest stockholder, through Mr. Smith, our non-employee director, to discuss matters relatingto the compensation of our executive officers, generally. Additionally, in 2019, we met with investorsregularly to discuss matters of interests to such stockholders.Moreover, in each of 2018, 2019 and 2020, we engaged with our compensation consultants toreview and update our executive compensation program in a manner that we believe reflects the goalsof our current business, and certain of the material aspects of the updated compensation program aredescribed in this Compensation Discussion and Analysis section. While we believe our updated programprovides the appropriate incentives and pay-for-performance culture for our NEOs, the CompensationCommittee intends to continue to review our compensation practices in the future based on the resultsof say-on-pay votes and to engage stockholders for input into the Company’s pay practices, whereappropriate.Overview of the Company’s Compensation ProgramThe Company’s executive compensation programs are administered by the CompensationCommittee. In addition to attracting and retaining high caliber executives, the components of theexecutive compensation program are designed to reward both annual and long-term businessperformance. Additionally, other factors are critical, such as the successful execution of corporatestrategies and fostering and driving continuous improvement and a high-performance culture.63Who Oversees the Company’s Compensation Program?The Compensation Committee.The Compensation Committee, which is comprised entirely ofindependent directors as defined by the independence standards of the Nasdaq Stock Market Rules, isprimarily responsible for overseeing the Company’s executive compensation program, after consideringadvice from an independent compensation consultant regarding competitive market pay practices. OurBoard sets the overall corporate performance objectives for each year, while the CompensationCommittee determines and approves the compensation level for the CEO; reviews and setscompensation levels of other key executive officers; evaluates the performance of these executives; andevaluates and approves all grants of equity-based compensation to the CEO and the other executiveofficers. All decisions regarding the CEO’s compensation are made by the Compensation Committee inexecutive session without the CEO present. After the end of the fiscal year, the CompensationCommittee reviews the actual corporate performance to determine the appropriate bonus amount, ifany, to be paid to each eligible executive officer.Role of the Compensation Consultant.The duties of the compensation consultant we engageare generally to evaluate executive compensation, perform an analysis on realized pay alignment withfinancial and stock performance, discuss general compensation trends, provide competitive marketpractice data and benchmarking, participate in the design and implementation of certain elements ofthe executive compensation program, and assist our CEO in developing compensationrecommendations to present to the Compensation Committee for the other executive officers. Thecompensation consultant provides the Compensation Committee with advice, consultation and marketinformation on a regular basis, as requested, throughout the year. The Compensation Committee mayaccept, reject or modify any recommendations by compensation consultants or other outside advisors.Since December 2017, FW Cook has served as the compensation consultant of theCompensation Committee and has advised the Compensation Committee regarding its compensationdecisions. The Compensation Committee assessed FW Cook’s independence relative to standardsprescribed by the SEC and determined that no conflicts existed.Roles of the Chief Executive Officer and the Senior Vice President of Human Resources.TheCEO, in consultation with the Compensation Committee’s compensation consultant, developscompensation recommendations for the Compensation Committee to consider for Company’sexecutives, excluding the CEO. The CEO considers various factors when making individualcompensation recommendations, including the relative importance of the executive’s position within theorganization, the individual tenure and experience of the executive, and the executive’s individualperformance and contributions to the Company’s results.The Senior Vice President of Human Resources works with the CEO to monitor existingcompensation plans and programs applicable to the NEOs and other executives, to recommendfinancial and other targets to be achieved under those plans and programs, to prepare analyses offinancial data, peer comparisons and other briefing materials for the Compensation Committee to aidin making its decisions and, ultimately, to implement the decisions of the Compensation Committee.The Compensation Committee considers, but is not bound by, recommendations made byCompany management regarding the compensation of the Company’s executives, excluding the CEO.The Compensation Committee determines the CEO’s compensation in its sole discretion.64Competitive BenchmarkingAs part of the ongoing assessment of our executive compensation program, the CompensationCommittee, with the assistance of its compensation consultant, reviews market compensation data,including the compensation practices of selected similar companies. Accordingly, the CompensationCommittee updates the peer group from time to time in order to ensure that the Company’s executivecompensation program remains competitive and in line with market compensation data. The peergroup generally consists of publicly-traded information technology companies that are in thecommunications equipment and related sub-industries with market capitalization and revenue in asimilar range to that of the Company. The compensation consultant reviews the business descriptions ofpotential peer companies to identify businesses generally in the telecommunications and/or networkingindustries. Then, the Compensation Committee considers factors, such as executive talent andbusiness-line competitors, global scope and complexity, research and development expenses, and marketcapitalization-to-revenue multiples, when selecting peers.For executive compensation relating to 2019, at the recommendation of FW Cook, theCompensation Committee approved changes to the Company’s peer group in September 2018 toremove BroadSoft, Inc. and ShoreTel, Inc. because they were acquired by Cisco Systems, Inc. and MitelNetworks Corporation, respectively. Further, the Compensation Committee identified two replacementcompanies as new peers: CalAmp Corp. and Sierra Wireless, Inc. In identifying new peer companies,the Compensation Committee reviewed companies based on the following characteristics: (1) size andscale—approximately the Company’s size between one-third times and three times revenue and marketcapitalization; (2) industry focus—information technology sector; and (3) competition—companies withwhich Ribbon competes in its industry.In October 2019, the Compensation Committee confirmed that such peer group as determinedin September 2018 would remain the same for purposes of the Company’s 2020 compensationcomparisons; however, Mitel Networks Corporation and Oclaro, Inc. are no longer peer companies as aresult of being acquired by other companies. We believe that the remaining peer group companiescontinue to represent a reasonable size match to Ribbon in terms of revenue, market capitalization,and number of employees, and the group as a whole continues to represent a reasonable match toRibbon in business content. Additionally, in determining that the peer group would remain the samefor 2020 as was determined in September 2018 (with the exception of Mitel Networks Corporation andOclaro, Inc.), the Compensation Committee considered the impact of the potential acquisition of ECI.FW Cook compiled compensation information from the peer group based on the publicly-fileddocuments of each member of the peer group.Ribbon Fiscal 2019 Executive Compensation Peer Group CompaniesAppliedADTRAN, Inc.Optoelectronics, Inc.CalAmp Corp.Calix, Inc.ComtechCSG SystemsExtreme Networks, Inc.F5 Networks, Inc.TelecommunicationsInternational, Inc.Corp.Finisar CorporationHarmonic Inc.Infinera CorporationMitel NetworksCorporation (1)NETGEAR, Inc.Oclaro, Inc. (1)Sierra Wireless, Inc.Viavi Solutions Inc.(1)No longer represents peer group companies with respect to 2020 compensation.65Compensation ComponentsThe Compensation Committee annually reviews fixed and variable compensation received byour NEOs, including base salary, annual and long-term incentives, equity awards, and total equity in theCompany. Our executive compensation program has four major components that support theCompany’s compensation objectives, each of which is discussed in detail below. Such major componentsreflect the compensation provided to our NEOs in 2019. The Compensation Committee reviews theexecutive compensation program on an annual basis and, in connection with its review of theCompany’s 2019 performance period, the compensation of all of our current executive officers has beenstreamlined into a structure similar to the below.Compensation Mix.A significant portion of our executive officers’ total direct compensation(which includes base salary, cash bonus and equity-based incentives) opportunity is attributable tovariable compensation—that is, the amount our executives earn is dependent upon Companyperformance. With the exception of Mr. Walsh, who did not receive any equity awards in 2019, andMr. Swade, who solely received 14,085 shares in respect of 2018 performance as a result of his 2018stock-for-cash bonus election, the 2019 equity-based component of our NEO’s total compensationconsisted primarily of RSUs and PSUs, each of which vest over time (and, in the case of the PSUs,company performance), if at all, and the value of which is tied to the value of the Company’s commonstock. These variable elements were intended to align the executives’ performance and interests withCompany performance and long-term stockholder value.The table below generally summarizes the elements of our compensation program for ourNEOs in 2019:Link to CompanyElementForm of CompensationPurposePerformanceBase SalariesCashProvide competitive, fixedLowcompensation to attract and retainexceptional executive talentAnnual Cash IncentivesCashProvide a direct incentive to achieveHighstrong annual operating resultsLong-Term EquityRSUs and PSUsEncourage executive officers to buildHighIncentivesand maintain a long-term equityownership position in Ribbon so thattheir interests are aligned with thoseof our stockholdersHealth, Retirement andEligibility to participate in benefitBenefit plans are part of a broad-LowOther Benefitsplans generally available to ourbased employee benefits programemployees, including 401(k) plan,Except in limited circumstances aspremiums paid on long-term disabilitydiscussed in the footnotes of ourand life insuranceSummary Compensation Table, ourexecutives do not generally receiveany material nonqualified deferredcompensation plans or perquisites.How Target Levels of Compensation are Determined.In determining the amount ofcompensation to pay our NEOs, the Compensation Committee considers factors such as the executiveofficer’s role within the Company and the level of responsibility, skills and experiences required by theposition, the executive officer’s qualifications, our ability to replace such individual and the overallcompetitive environment for executive talent. The Compensation Committee also considers theCompany’s performance, the executive’s performance, the Compensation Committee’s view of internalequity and consistency and other considerations it deems relevant. In analyzing these factors, theCompensation Committee reviews competitive compensation data gathered in comparative surveys66(benchmarking and peer group data). The Compensation Committee does not have a policy forallocating target compensation among the various elements in any particular ratio, but generallyattempts to provide an allocation similar to that used by other companies with whom the Companycompetes for executive talent using the peer data provided by our outside compensation consultant. Ofthe elements of total direct compensation, only base salary is fixed compensation, while cash bonusesand equity-based awards are both variable compensation and contingent on Company or stockperformance.2019 Compensation PayoutsThe established targets for individual components and overall executive compensation aredesigned to be competitive in order to attract, motivate and retain the executives necessary to drive andachieve the Company’s objectives. In some cases, individual components may be over or under market(in order to emphasize a particular element or if individual circumstances dictate), but we believe thatthe total compensation package is market competitive for executives with the necessary backgroundsand skill sets. The Compensation Committee believes that the overall compensation program serves tobalance the mix of cash and equity compensation with the mix of short- and long-term compensationfor our NEOs.Base Salary.Base salaries are designed to reflect the scope of responsibilities, performanceand competencies of the individual executives, and the relation of that position to other positions in theCompany and the external benchmark data for similar positions at peer companies. Each NEO’s salaryand performance are reviewed annually as well as at the time of a promotion or other change inresponsibilities.In 2019, no changes were made to any NEO’s base salary in connection with the annualcompensation review, appointment to interim CEO position (as applicable), or otherwise.Annual Cash Bonuses.Annual cash incentives provide NEOs with the opportunity to earnadditional cash compensation beyond base salary. The eligibility for an annual cash bonus creates anincentive to achieve desired near-term corporate goals that are in furtherance of the Company’slong-term objectives. The compensation program establishes target bonuses for each NEO. Cashbonuses are expected to represent a substantial part of total compensation for our NEOs, if earned.Senior Management Cash Incentive Plan.For 2019, the Company sponsored one cash incentiveplan—the Senior Management Cash Incentive Plan (the ‘‘SMCIP’’)—that covered all of the NEOs. The2019 annual cash incentive plan for each NEO was calculated pursuant to a fixed formula based solelyon the achievement of two metrics—75% weighted to the Company’s pre-bonus adjusted earningsbefore interest, taxes, depreciation and amortization (‘‘pre-bonus Adjusted EBITDA’’) and 25%weighted to an individual performance metrics as determined by the Compensation Committee.Following completion of the year, the Compensation Committee determined the 2019 cash bonuspayout for each NEO. Such payout was calculated by multiplying the aggregate percentage achievementof the two metrics by the bonus at target for each such NEO, subject to any adjustments determinedappropriate by the Compensation Committee.67The performance targets relating to the Company’s pre-bonus Adjusted EBITDA under theSMCIP for each of the NEOs as well as the actual results of these financial measurements for 2019were as follows:Target SMCIP Bonus MetricsActual 2019Performance LevelsMinimumTargetMaximumResultsPre-Bonus Adjusted EBITDA Metric$100.0$123.80$133.78$107.34(in millions)*Company Performance Payout (as a0%100%200%30.5%percentage of the portion of the cashbonus related to the Company performancemeasure)*In July 2019, the Compensation Committee used its discretion to revise the metrics relating tothe pre-bonus Adjusted EBITDA as a result of the revision to the Company’s calculation ofnon-GAAP Adjusted EBITDA for SEC reporting purposes and alignment to the Company’sguidance. Accordingly, the Company calculated the pre-bonus Adjusted EBITDA component ofthe SMCIP as net income (loss) of the Company for the applicable annual performance period,excluding the following items: interest income (expense), net; income tax benefit (provision);depreciation and amortization; impairment of intangible assets; adjustments to revenue andcost of revenue related to revenue reductions resulting from purchase accounting; adjustmentsfor the amount of written-off deferred revenue related to the adoption of AccountingStandards Codification 606; stock-based compensation expense; settlement expense; certainlitigation costs; acquisition- and integration-related expense; acquisition-related facilitiesadjustments; restructuring expense; and other income, net, and any other adjustments to theCompany’s net income (loss) used to calculate the Company’s public disclosure of the term‘‘Adjusted EBITDA.’’ ‘‘Adjusted EBITDA’’ was calculated consistently with the Company’sexisting public disclosure of adjusted EBITDA; provided, however, that notwithstandinganything to the contrary contained herein, ‘‘pre-bonus Adjusted EBITDA’’ was calculated byadjusting the publicly disclosed Adjusted EBITDA for cash bonus expense. The 2019 ‘‘Target’’and ‘‘Maximum’’ performance levels were adjusted to reflect the updated bonus pool as of theend of 2019, taking into account bonus pool increases or decreases, as applicable, throughoutthe year due to employee attrition, terminations, hiring as well as compensation changes.The Company’s achievement of its 2019 pre-bonus Adjusted EBITDA performance goal wasmeasured on a straight-line interpolation between the ‘‘Minimum’’ and ‘‘Target’’ performanceand bonus payout levels, if applicable, and the ‘‘Target’’ and ‘‘Maximum’’ performance andbonus payout levels, if applicable.The individual performance metrics for each of the remaining NEOs are described below:(cid:129)Mr. Hobbs’ individual performance metrics were as follows: ensure the Company meets orexceeds its Adjusted EBITDA target; continue to explore strategic business combinationopportunities; develop and promote a high performing culture; create platforms for furthergrowth and consolidation; and improve coverage and performance in the stock market.(cid:129)Mr. Bruny’s individual performance metrics were as follows: meet or exceed the 2019revenue target; manage key sales strategies; continue to optimize the global services team;and retain critical resources.68(cid:129)Mr. Riley’s individual performance metrics were as follows: drive analytics product growth;shift architecture focus; optimize corporate technology strategy and innovation; and partnerwith executive team to meet or exceed EBITDA target.(cid:129)Mr. Raiford’s individual performance metrics were as follows: improve forecast cycletimeline; ensure accurate and timely close process and statutory financials; restructureproduct hierarchy and support revenue reporting; simplify commissions forecasting andaccounting; finalize international integration and legal entity merge and retain criticalresources.(cid:129)Mr. Scarfo’s individual performance metrics were as follows: meet all product deliverablesand roadmap schedules; exceed product and maintenance revenue targets; obtain Federalcertification on specified products; complete consolidation of manufacturing operations;focus on process improvement and retain critical resources.(cid:129)Mr. Ferguson’s individual performance metrics were as follows: support integration of theCompany’s acquisitions; successfully manage litigation activities; negotiate and closebusiness combination targets of the Company; retain critical legal department resourcesand ensure timely SEC filings.(cid:129)Mr. McCready’s individual performance metrics were as follows: drive businesscombination strategy; support investor relations activities; maintain active acquisitionpipeline and successfully integrate acquisitions to ensure business performance andachievement of synergies.The individual performance component for each participating NEO was equal to 25% of suchNEO’s total cash bonus eligibility. As a result, the following amounts were eligible to be earned underthe individual performance component at target: $87,500 for each of Messrs. Bruny, Riley and Scarfo;$93,750 for Mr. Raiford; $43,750 for Mr. Ferguson; and $37,500 for Mr. McCready.Taking into account performance against the above-referenced metrics for each participatingNEO, each such NEO would have achieved 100% of his target individual performance. However, theCompensation Committee retained discretion to reduce overall bonuses under the SMCIP and, afterconsideration of the Company performance metric, used such discretion to reduce the portion of eachNEO’s bonus related to individual performance to 30.5% of his target individual performance level.69The amounts paid under the SMCIP for 2019 were as follows:Amounts Earned Under SMCIPTotal AmountTotalFull YearCompanyIndividualEarnedReceivedCash BonusPerformancePerformanceUnderUnderNEO and Principal Position++EligibilityComponentComponent*SMCIP**SMCIP***Franklin W. Hobbs+$500,000$114,375$125,000$239,375$152,462Steven Bruny$350,000$80,062.50$87,500$167,593$106,723Kevin Riley$300,000$68,625.00$87,500$143,625$91,477Daryl E. Raiford$375,000$85,781.25$93,750$179,531$114,347Anthony Scarfo$350,000$80,062.50$87,500$167,563$106,723Justin K. Ferguson$175,000$40,031.25$43,750$83,781$53,362John McCready$150,000$34,312.50$37,500$71,813$45,739*Taking into account performance against the above-referenced metrics for each participatingNEO, each such NEO would have achieved 100% of his target individual performance and thiscolumn reflects the amounts earned based on such achievement. However, the CompensationCommittee retained discretion to reduce overall bonuses under the SMCIP and, afterconsideration of the Company performance metric, used such discretion to reduce the portionof each NEO’s bonus related to individual performance to 30.5% of his target individualperformance level.**Amounts represent the bonuses that would have been received based upon the fixed formulaunder the SMCIP, assuming a 30.5% level of achievement for the pre-bonus Adjusted EBITDAmetric and 100% level of achievement for the individual performance metric. Such amountswere, however, reduced by the Compensation Committee in its discretion as described above.***Amounts represent the bonuses actually received by the NEOs, taking into account theCompensation Committee’s use of negative discretion to adjust the individual performancecomponent payout to 30.5% achievement, equivalent to the level of achievement of the metricrelating to the Company’s pre-bonus Adjusted EBITDA in 2019.+While Mr. Hobbs was not employed as of December 31, 2019, he still received his cash bonuspursuant to the terms of his severance agreement with us. For more details, please see‘‘Severance and Change of Control Benefits—Franklin Hobbs’’ below.++Effective January 14, 2019, Mr. Swade stepped down from his position as our Executive VicePresident, Global Sales. Effective February 1, 2019, Mr. Walsh stepped down as Founder andPresident, Kandy. As a result of their departures in 2019, neither Mr. Swade nor Mr. Walshwas eligible to receive any cash bonus for the 2019 fiscal year.Equity-Based Incentives.Equity-based incentives are provided to executives whose decisionsand actions have a direct impact upon our long-term performance and success. RSUs and PSUs weregranted to our executive officers in 2019 to link their compensation directly to our long-term success,which aligns with the Compensation Committee’s philosophy a significant portion of each NEO’s targettotal direct compensation should be made in the form of equity compensation due to its stronglong-term alignment with stockholder interests. In determining the size of the RSU and PSU awardsgranted to each executive officer in 2019, the Compensation Committee considered the executiveofficer’s role, past performance, anticipated contribution to our long-term goals and market data forexecutive officers in similar roles at peer companies. Equity granted in prior years and existing levels ofstock ownership were also taken into consideration. While the Compensation Committee considers the70compensation of our peer group companies’ senior executives, it does not benchmark a particularpercentile for the total compensation of our NEOs or for any component thereof. The size of theawards is not determined by application of any formula, but rather reflects the CompensationCommittee’s subjective desire to encourage and reward high levels of performance.2019 Equity Awards.In 2019, we made annual equity grants to our NEOs as shown below. Adescription of such equity awards that were granted in 2019 to our NEOs follows:Performance-based stockNamed Executive Officer*Restricted stock units (#)Restricted shares (#)units (#)Franklin W. Hobbs483,203—383,143Steven Bruny102,296—71,840Kevin Riley51,742—38,315Daryl E. Raiford92,358—67,050Anthony Scarfo95,254—71,840Justin Ferguson77,390—62,262John McCready53,855—38,315Michael Swade———*Effective February 1, 2019, Mr. Walsh stepped down as Founder and President, Kandy.Mr. Walsh did not receive any equity grants during the 2019 fiscal year.2019 RSUs.With the exception of Messrs. Swade and Walsh, in June 2019, each NEOreceived 50% of the 2019 equity grant in the form of RSUs that vest over three years, with one-third ofthe units vesting on the first anniversary of the grant date and thereafter, one-sixth of the remainingRSUs vesting every six months, in each case, subject to the NEO’s continued employment with theCompany.2019 PSUs.With the exception of Messrs. Swade and Walsh, in March 2019, each NEOreceived 50% of the 2019 equity grant in the form of PSUs, which had both performance and serviceconditions (the ‘‘2019 PSUs’’). Such 2019 PSUs would vest based on the achievement of two separatemetrics related to the Company’s financial performance:1.Pre-bonus Adjusted EBITDA (60%) performance goals are determined by theCompensation Committee on an annual basis and measured at the end of each of theone-year periods from fiscal year 2019 through fiscal year 2021. Accordingly, the 2019PSUs subject to these performance goals (the ‘‘Performance PSUs’’) are based onthree one-year performance periods, such that the 2019 PSUs will vest on the thirdanniversary of the grant date, or March 15, 2022, to the extent of achievement, asmeasured by the Compensation Committee at the end of the 2019, 2020 and 2021fiscal years, respectively.2.Relative Total Shareholder Return (‘‘Relative TSR’’) (40%) performance goals arebased on Company TSR relative to the TSR of each of the companies in the Russell2500 Telecommunications Sub Sector Index (the ‘‘Index’’) as comprised at the time ofgrant for the full three-year period measured by the Compensation Committeepursuant to the terms set forth below and in accordance with the percentile targetsnoted in the table below. The PSUs subject to the TSR performance goal (the ‘‘TSRPSUs’’) will vest on the third anniversary of the grant date to the extent the applicable71Relative TSR is achieved as measured at the end of the three-year performance periodfrom fiscal year 2019 to fiscal year 2021.The Company’s achievement of the performance goal for 2019 (and the satisfaction of theperformance-based vesting condition of the Performance PSUs as a result thereof) were measured on alinear sliding scale in relation to minimum, target and maximum performance goals. The number ofPSUs that were eligible to vest relating to the 2019 pre-bonus Adjusted EBITDA metric would in noevent exceed 200% of the Performance PSUs. In February 2020, the Compensation Committeedetermined that the performance metrics for the Performance PSUs had been achieved at the 30.5%achievement level. The performance period for the TSR PSUs has not yet been completed. The detailsrelating to the vesting of the Performance PSUs as well as the actual results of these financialmeasurements for 2019 (as determined in March 2020) were as follows:TARGET 2019 PSU MetricsPSU Payout for2019 Pre-BonusAdjusted EBITDAPre-Bonus Adjusted EBITDAPSU Payout for Relative TSRRelative TSR AchievementMetric(60% weighting)Achievement Metric(40% weighting)0%$100,000,00050%25th percentile100%$123,800,000100%50th percentile200%$133,780,000200%75th percentileACTUAL Results for 2019 (in millions, except percentages and shares underlying PSUs)Bonus PayoutPre-Bonus Adjusted EBITDARelative TSR*Actual Achievement$107,336,000N/APercentile30.5%N/A% Weighting60%40%Individual Metric % Achievement18.2954%N/A*Even though all of the conditions underlying the TSR PSUs have not yet been met, for purposes ofdetermining the achievement of the TSR PSUs in connection with the terms of Mr. Hobb’s separationagreement with the Company, the Compensation Committee determined in February 2020 that for thecompanies included in the Index in 2019, a TSR of approximately (21.79)% would place a company at the25th percentile, a TSR of approximately (11.64)% would place a company at the 50th percentile, and aTSR of approximately 45.70% would place a company at the 75th percentile. As a result, in February2020, the Compensation Committee determined that the Company’s TSR in 2019 placed Ribbon at the7.8th percentile and, accordingly, assuming the performance period ended on December 31, 2019, theperformance metrics for the TSR PSUs were not achieved and, therefore, no shares underling the TSRPSUs were issued to Mr. Hobbs.72The following chart provides a summary of the Performance PSUs eligible for vesting as theyrelate to the 2019 performance period:AggregatePre-BonusNumber ofAggregateAdjustedPerformanceNumber ofEBTIDA MetricAggregatePSUs to Vest onPerformanceAchievementNumber ofMarch 15, 2022PSUs ForfeitedLevel for 2019Performancerelating to 2019relating to 2019Named ExecutivePSUPerformancePSUs EligiblePerformancePerformanceOfficer*Grant DatePeriodfor Vesting**Period**Period**Franklin W. HobbsMarch 15, 201930.5%76,62923,36653,263Steven BrunyMarch 15, 201930.5%14,3684,3819,987Kevin RileyMarch 15, 201930.5%7,6632,3375,326Daryl RaifordMarch 15, 201930.5%13,4104,0899,321Anthony ScarfoMarch 15, 201930.5%14,3684,3819,987Justin FergusonMarch 15, 201930.5%12,4523,7978,655John McCreadyMarch 15, 201930.5%7,6632,3375,326Total153,25846,733106,525*Effective January 14, 2019, Mr. Swade stepped down from his position as our Executive Vice President,Global Sales. Effective February 1, 2019, Mr. Walsh stepped down as Founder and President, Kandy. As aresult of their departures in 2019, neither Mr. Swade nor Mr. Walsh received any PSU grants for the 2019fiscal year.**The eligible vesting date for the PSUs granted on March 15, 2019 relating to the 2019 performanceperiod is March 15, 2022.Stock Ownership RequirementsThe Board believes that it is important to link the interests of our NEOs, among others, tothose of our stockholders. Our stock ownership policy requires our Chief Executive Officer and otherSection 16 reporting officers to accumulate and hold a minimum number of shares of Companycommon stock within a certain number of years of joining the Company. Any Section 16 reportingofficer who is subject to our amended and restated stock ownership guidelines must satisfy theseownership guidelines within five years from the date he or she is appointed as a Section 16 reportingofficer; provided, however, that the Chief Executive Officer must satisfy the ownership guidelines withinsix years from the date he or she is appointed as the Chief Executive Officer. Further, ournon-employee directors must maintain the amount of common stock granted to them throughout theirtenure as non-employee directors. As of the record date, each of our non-employee directors, ChiefExecutive Officer and the other Section 16 reporting officers of the Company has either satisfied theseownership guidelines or had time remaining to do so. The specific stock ownership requirements forour directors, Chief Executive Officer and other Section 16 reporting officers:TitleMultiple of Annual Base Salary/Annual RetainerChief Executive Officer6 times annual base salarySection 16 Reporting Officers2 times annual base salaryNon-Employee DirectorsRetain equity holdings for their tenure asnon-employee directors73Except as set forth above, each individual who is subject to this policy must maintain theapplicable minimum amount of stock ownership throughout his or her employment or tenure as adirector of the Company. The value of each such individual’s stock ownership will be measuredannually by the Compensation Committee.Benefits and Other CompensationWe have various broad-based employee benefit plans. We do not typically offer perquisites oremployee benefits to executive officers that are not also made available to employees on a broad basis.However, pursuant to the terms of their respective employment agreements with the Company, in 2019,we provided Mr. Raiford with a monthly housing allowance aggregating $19,786 and $5,276 to use forfinancial planning services, and we provided Mr. Scarfo with a $25,000 annual cost-of-living adjustmentallowance. Our executive officers generally are eligible for the same benefits that are available to allemployees, which include group health, dental and vision insurance, life and disability insurance,discretionary 401(k) matching contributions and paid holidays. We offer a 401(k) plan, which allows ouremployees to invest in a wide array of funds. We also continued to sponsor our ESPP for employees incertain countries in 2019. Except for certain post-termination benefits in connection with severance, wedo not provide pension arrangements or post-retirement health coverage for our NEOs. We haveentered into indemnification agreements with our executive officers and directors.Severance and Separation ArrangementsWe are party to agreements with each of our NEOs (other than Messrs. Hobbs, Swade andWalsh), which generally provide that, upon a termination of the NEO’s employment by the Companywithout Cause (as defined in the applicable NEO’s employment agreement), due to a resignation bythe NEO for Good Reason (as defined in the applicable NEO’s employment agreement) or due todeath or disability of the NEO (other than Messrs. Raiford, Bruny and Scarfo), the NEO is entitled tocertain severance payments and benefits. We believe the entry into such severance arrangements byRibbon (or our predecessors) is generally consistent with market practice and allows our executives toremain focused on the Company’s objectives in times of potential uncertainty. Separately, we haveentered into certain letter agreements with Messrs. Hobbs, Swade and Walsh in connection with theirtransitions and terminations of employment with the Company and its affiliates.For further discussion regarding the severance and separation agreements and arrangements(including those with Messrs. Hobbs, Swade and Walsh), see ‘‘Severance and Change in Control Benefits’’below.Clawback PolicyAll awards granted under our equity plans are subject to clawback pursuant to the Company’sClawback Policy and any other clawback policy that the Company may adopt in the future.Transactions Involving Hedging, Monetization, Margin Accounts, Pledges, Puts, Calls and OtherDerivative SecuritiesThe Company’s amended and restated insider trading policy contains stringent restrictions ontransactions in Company common stock by directors and officers. All trades by directors and officersmust be pre-approved by the Chief Financial Officer or the General Counsel. Our current insidertrading policy was amended and restated in 2019 to prohibit all executive officers and directors fromengaging in transactions involving hedging, monetization, margin accounts, pledges, puts, calls andother derivative securities.74Tax and Accounting ConsiderationsAccounting for Stock-Based Compensation.We account for stock-based compensation inaccordance with ASC 718.Policy on Deductibility of Executive Compensation.Section 162(m) of the Code generallydisallows a tax deduction for annual compensation in excess of $1.0 million paid to certain executiveofficers of the Company. The Tax Cuts and Jobs Act, signed into law on December 22, 2017, repealedthe ‘‘performance-based compensation’’ exception to such deduction limitation and expanded the scopeof the executive officers who are covered by Section 162(m) of the Code. As a result, for tax yearsbeginning after December 31, 2017, compensation previously intended to be ‘‘performance-based’’ andnot subject to Section 162(m) may not be deductible unless it qualifies for limited transition reliefapplicable to certain remuneration payable pursuant to a written binding contract which was in effecton November 2, 2017. The Compensation Committee reviews the potential effect of Section 162(m) ofthe Code on the Company’s compensation practices periodically. However, the CompensationCommittee has no obligation to limit compensation to that which is deductible under Section 162(m) ofthe Code and may use its judgment to authorize compensation programs and payments (or themodification of existing compensation programs or payments) that may not be deductible when itbelieves such programs and payments are appropriate and in the Company’s and our stockholders’ bestinterests. Further, due to uncertainties in the applications of Section 162(m) of the Code, there is noguarantee that deductions claimed under Section 162(m) of the Code will not be challenged ordisallowed by the Internal Revenue Service and our ability to deduct compensation underSection 162(m) of the Code may be restricted.Risk Management and Our Executive Compensation ProgramThe Compensation Committee monitors and manages our executive compensation program tohelp ensure that it does not encourage excessive risk taking. The Compensation Committee reviewed,analyzed and considered whether the Company’s compensation policies and practices create risks thatare reasonably likely to have a material adverse effect on us, and concluded that no such material risksexist.Post-2019 Executive Compensation MattersNew President and Chief Executive OfficerOn February 17, 2020, the Board appointed Bruce McClelland as President and ChiefExecutive Officer of the Company and elected him as a director of the Company, effective as ofMarch 1, 2020. Mr. Bruny and Mr. Riley resigned as Interim Co-Presidents and Chief ExecutiveOfficers of the Company concurrent with Mr. McClelland’s appointment. Mr. Bruny now serves as theCompany’s Executive Vice President, Sales, Americas Region, and Mr. Riley continues to serve as theCompany’s Executive Vice President, Chief Technical Officer.In connection with Mr. McClelland’s appointment as President and Chief Executive Officer,Mr. McClelland entered into an employment agreement (the ‘‘McClelland Employment Agreement’’)and a severance agreement (the ‘‘McClelland Severance Agreement’’) with the Company. Pursuant tothe McClelland Employment Agreement, the Mr. McClelland will receive an annual base salary of$750,000, and will be eligible to participate in the Company’s annual cash incentive program, with atarget bonus opportunity equal to 100% of his then-applicable annual base salary and a maximumbonus opportunity equal to 200% of his then-applicable annual base salary. In addition, as aninducement for Mr. McClelland’s employment, the Company awarded Mr. McClelland sign-on equity75grants consisting of a time-based vesting grant of 462,963 restricted share units (the ‘‘Sign On RSUs’’)and a performance-based vesting grant of 4,750,000 restricted share units (the ‘‘Sign On PSUs’’).Subject to Mr. McClelland’s continued employment, the Sign On RSUs are eligible to vest onMarch 16, 2021 and, upon vesting, will be settled in shares of our common stock. Subject toMr. McClelland’s continued employment, the Sign On PSUs are eligible to vest and be settled in up to4,750,000 shares of our common stock based on the achievement of specified share price thresholds onor prior to September 1, 2024.Pursuant to the McClelland Severance Agreement, Mr. McClelland is entitled to severancepayments and benefits upon certain terminations of employment. Upon a termination ofMr. McClelland’s employment by the Company without Cause or by Mr. McClelland for Good Reason(each as defined in the McClelland Severance Agreement), Mr. McClelland is entitled to (a) severancepayments equal to (i) 100% of his annual base salary, payable over twelve (12) months followingtermination, (ii) his target annual bonus, payable at the same time as such bonus would have been paidabsent termination, and (iii) in the event such termination occurs more than six (6) months followingthe commencement of the fiscal year, Mr. McClelland shall be entitled to receive a prorated portion ofthe annual bonus for the fiscal year of termination based on actual Company performance and targetindividual performance (such proration based on the number of days actually employed in such fiscalyear) (the ‘‘Pro Rata Bonus’’), and (b) a lump sum payment of an amount equal to the sum of thecompany’s share of health plan premium payments for a period of twelve (12) months followingtermination. In addition, upon such a termination, (A) Mr. McClelland’s equity awards (other than theSign On RSUs) that are subject to vesting based solely upon Mr. McClelland’s continued service withthe Company and would have vested during the twelve (12) month period following the date ofMr. McClelland’s termination of employment shall vest, and (B) (i) all awards that are subject tovesting in whole or in part based on the achievement of performance objective(s) (other than the SignOn PSUs) (collectively, ‘‘Performance-Based Equity Awards’’) with respect to any performance periodsending on or prior to the date of termination shall remain eligible to vest based on actual performancethrough the end of the applicable performance period and (ii) a pro-rated portion of Performance-Based Equity Awards with respect to any performance periods in which the date of termination occursshall remain eligible to vest based on performance through the end of the fiscal year in which the dateof termination occurs based on actual performance through the end of such fiscal year (such prorationbased on the number of days actually employed during such performance period).Notwithstanding the foregoing, to the extent a termination by the Company without Cause orby Mr. McClelland for Good Reason occurs within twelve (12) months following a Change in Control(as defined in the McClelland Severance Agreement), Mr. McClelland is entitled to receive a cashlump sum payment equal to (a) 200% of (X) his annual base salary, and (Y) his target annual bonus,(b) in the event such termination occurs more than six (6) months following the commencement of thefiscal year, the Pro Rata Bonus, and (c) a lump sum payment of an amount equal to the sum of thecompany’s share of health plan premium payments for a period of twenty-four (24) months followingtermination. In addition, upon such a termination, the vesting of all of Mr. McClelland’s outstandingequity awards (other than the Sign On RSUs and the Sign On PSUs) will accelerate, with Performance-Based Equity Awards vesting as if target performance had been achieved, pursuant to the SeveranceAgreement. Further, the Sign On RSUs and Sign On PSUs will be eligible to vest on or following aChange in Control (as defined in the McClelland Severance Agreement) in accordance with the termsof the underlying award agreements.New Severance AgreementsOn January 29, 2020, we entered into a severance agreement with each of Mr. Bruny (the‘‘Bruny Severance Agreement’’), Anthony Scarfo (the ‘‘Scarfo Severance Agreement’’) and John76McCready (the ‘‘McCready Severance Agreement’’ and collectively with the Bruny SeveranceAgreement and the Scarfo Severance Agreement, the ‘‘Severance Agreements’’).Each of the Severance Agreements is subject to a three-year term, with automatic one-yearrenewals thereafter unless six months’ prior written notice of non-renewal is given before the termautomatically renews. In no event will either of the Severance Agreements end before the firstanniversary of the date of the closing of a Change of Control (as such term is defined in the respectiveSeverance Agreements) of the Company.Under each of the Severance Agreements, if the Company terminates the employment of anyof Mr. Bruny, Mr. Scarfo or Mr. McCready without Cause (as such term is defined in the respectiveSeverance Agreements of Messrs. Bruny, Scarfo or McCready) (other than due to death or Disability(as such term is defined in the respective Severance Agreements of Messrs. Bruny, Scarfo orMcCready)) or if either executive officer terminates his employment with Good Reason (as such termis defined in the respective Severance Agreements of Messrs. Bruny, Scarfo or McCready) outside of aChange of Control Protection Period (such term is defined as the period beginning on the date of theclosing of a Change in Control and ending on the first anniversary of such Change in Control), each ofMessrs. Bruny, Scarfo and McCready will be entitled, less applicable withholdings, to receive:(i) continued payment of his then-current base salary for a period of twelve months following thetermination date; (ii) a one-time lump sum cash amount equal to his pro-rated annual bonus, payableat the same time annual bonuses are paid, if at all, to other executive officers of the Company;provided that such termination occurs more than six months into a calendar year; (iii) a one-time lumpsum cash amount equal to the aggregate sum of the Company’s share of medical, dental and visioninsurance premiums for such executive officer and his dependents for the twelve-month periodfollowing the termination date; (iv) accelerated vesting of the executive officer’s unvested time-basedequity awards that are scheduled to vest within twelve months following his termination date; and(v) continued eligibility to pro-rata vest unvested performance-based equity awards subject to theCompany’s actual achievement of applicable performance conditions for the portion of the performanceperiod through the executive officer’s termination date.If the Company terminates the employment of any of Mr. Bruny, Mr. Scarfo or Mr. McCreadywithout Cause (other than as a result of his death or Disability) or if either executive officer terminateshis employment with Good Reason during a Change in Control Protection Period, then such executiveofficer will be entitled to receive: (i) a one-time lump sum cash amount equal to twelve months of histhen-current base salary; (ii) a one-time lump sum cash amount equal to his then-target annual bonus;(iii) a one-time lump sum cash amount equal to his pro-rated annual bonus, payable at the same timeannual bonuses are paid, if at all, to other executive officers of the Company; provided that suchtermination occurs more than six months into a calendar year; (iv) a one-time lump sum cash amountequal to the aggregate sum of the Company’s share of medical, dental and vision insurance premiumsfor such executive officer and his dependents for the twelve-month period following the terminationdate; (v) full accelerated vesting of the executive officer’s unvested time-based equity awards; and(vi) full accelerated vesting of the executive officer’s unvested performance-based equity awards at atarget level of achievement for each applicable performance condition.77EXECUTIVE COMPENSATION TABLESThe following table sets forth, for the year ended December 31, 2019 and for the two yearsprior thereto, the compensation earned by our former Chief Executive Officer, two former InterimChief Executive Officers, Chief Financial Officer, three most highly compensated current executiveofficers serving as executive officers at December 31, 2019, and two most highly compensated formerexecutive officers who served as executive officers in 2019 but have since separated from the Companyduring 2019.2019 SUMMARY COMPENSATION TABLENon-EquityIncentiveStockOptionPlanAll OtherSalaryBonusAwardsAwardsCompensationCompensationTotalName and Principal PositionYear($)($)($)(1)($)($)(2)($)(3)($)Franklin Hobbs(4)2019$500,000$—$4,572,165$—$—$2,885,164$7,957,329Former President and Chief2018$500,000$325,000$2,967,000$—$500,000$1,909$4,293,909Executive Officer2017$30,094$—$—$—$—$—$30,094Steven Bruny(5)2019$350,000$—$918,335$—$106,723$28,913$1,403,971Former Interim Co-President2018$341,667$425,000$264,000$—$350,000$23,028$1,403,695and Chief Executive Officer;and Executive Vice President,Americas SalesKevin Riley(6)2019$350,000$—$475,081$—$91,477$28,961$945,519Former Interim Co-President2018$345,833$100,000$264,000$—$210,000$20,908$940,741and Chief Executive Officer;2017$325,000$200,000$880,625$—$277,950$15,074$1,698,649and Executive Vice President,Chief Technical OfficerDaryl Raiford(7)2019$500,000$—$840,831$—$114,347$49,197$1,504,375Executive Vice President and2018$500,000$100,000$132,000$—$275,000$42,374$1,049,374Chief Financial Officer2017$123,077$—$672,028$—$—$6,891$801,996Anthony Scarfo(8)2019$350,000$—$881,576$—$106,723$45,873$1,384,172Executive Vice President and2018$331,154$225,000$627,000$—$350,000$44,164$1,577,318General Manager, Cloud andEdge Business UnitJustin Ferguson(9)2019$325,000$—$737,083$—$53,362$28,859$1,144,304Executive Vice President,General CounselJohn McCready(10)2019$350,000$—$486,111$—$45,739$31,735$913,585Executive Vice President,Chief Transformation OfficerMichael Swade(11)2019$92,308$—$73,524$—$—$1,106,931$1,272,763Former Executive Vice2018$375,000$—$330,000$—$350,000$24,744$1,079,744President, Global Sales2017$375,000$200,000$880,625$—$320,650$20,283$1,796,558David Walsh(12)2019$46,154$—$—$—$—$1,825,000$1,871,154Former Executive Vice2018$559,807$—$—$—$—$2,051$561,858President, Founder, Kandy2017$350,000$100,000$704,500$—$57,800$1,207,957$2,420,257(1)The amounts shown in this column do not reflect compensation actually received by the NEO. Instead, the amounts primarilyreflect the grant date fair value of each stock award granted to each NEO. The grant date fair values of stock awards werecalculated in accordance with ASC 718. The methodology for calculating the grant date fair value of stock awards is discussedin Note 16 to our Annual Report on Form 10 K for the year ended December 31, 2019. The grant date fair value of restrictedstock awards and restricted stock units is equal to the closing price of our common stock on the date of grant. In 2019, wegranted PSUs with both performance and service conditions to Messrs. Hobbs, Bruny, Riley, Raiford, Scarfo, Ferguson andMcCready. In 2018, we granted PSUs with both performance and service conditions to Mr. Hobbs. The grant date fair value ofsuch PSUs is equal to the closing price of our common stock on the date of grant. In 2017, we granted PSUs with both marketand service conditions to Mr. Swade. In 2019, we granted PSUs with both market and service conditions to Messrs. Hobbs,Bruny, Riley, Raiford, Scarfo, Ferguson and McCready. The inclusion of a market condition requires the use of a Monte Carlo78simulation approach to model future stock price movements based upon the risk-free rate of return, the volatility of eachrelevant entity included in the applicable market index generally over a three-year period and the pair-wise covariance betweeneach such entity.(2)The amounts shown in this column represent the of amounts earned under our SMCIP. For 2019, while the CompensationCommittee determined that each NEO achieved 100% of his individual performance measure for 2019, the CompensationCommittee used its negative discretion to adjust the performance payout to the level of 30.5% achievement, in light of (andconsistent with) the achievement of the Company performance metric relating to pre-bonus Adjusted EBITDA in 2019.For 2018, each of Messrs. Hobbs, Raiford, Scarfo, Bruny, Ferguson and Swade was given the choice to receive a portion,ranging from 10% to 50% of their 2018 annual bonus, if any were earned, in shares of our common stock (the ‘‘2018 BonusShares’’) under our Stock Bonus Election Program. Each such NEO could also elect not to participate in this program and toearn his 2018 annual bonus, if any, in the form of cash. Under the Stock Bonus Election Program, the number of sharesearned by each of the NEOs was calculated by dividing the applicable bonus amount (for each NEO, calculated as his electedpercentage times his 2018 annual bonus) by $4.97, the closing price of our common stock on March 8, 2019, the date of thecompany-wide cash bonus payments. The Company granted the 2018 Bonus Shares on March 15, 2019, in accordance with ourpractice of granting shares on the 15th of each month, or the next immediate business day if the 15th falls on a weekend orholiday. The amount of each NEO’s 2018 Bonus attributable to the 2018 Bonus Shares included in the amount above was asfollows: Mr. Hobbs: $250,000; Mr. Raiford: $82,500; Mr. Scarfo: $70,000; Mr. Bruny: $105,000; Mr. Ferguson: $35,000 andMr. Swade: $70,000. The closing price of our common stock on March 15, 2019 was $5.22, and such closing price is the grantdate fair value of each 2018 Bonus Share. Accordingly, the grant date fair value of each NEO’s 2018 Bonus Shares was asfollows: Mr. Hobbs: $262,577; Mr. Raiford: $86,652; Mr. Scarfo: $73,524; Mr. Bruny: $110,283; Mr. Ferguson: $36,764; andMr. Swade: $73,524. The 2018 Bonus Shares were fully vested on the grant date; however, each such NEO was contractuallyrestricted from trading the 2018 Bonus Shares for five months after the date of grant.For 2017, the Compensation Committee elected to implement two half-year bonus periods such that 20% of the full year targetpayout was attributable to the first half of 2017 and 80% of the full year target payout was attributable to the second half of2017. The Compensation Committee determined the financial metrics upon which such bonus payments would be made on thesame half-year basis. Accordingly, Mr. Swade received his 2017 bonus payments in August 2017 (20% of the target based onachievement of the financial metrics for the first half of 2017) and in March 2018 (80% of target based on achievement of thefinancial metrics for the second half of 2017). In July 2017, our Compensation Committee determined that the achievementlevel under the SMCIP for the first half of 2017 was at 126%, and in February 2018, determined that the achievement levelunder the SMCIP for the second half of 2017 was at 131%. The Compensation Committee determined, however, to reduce theNEO’s bonuses in respect of the first half and second half of 2017 on a discretionary basis, with the first half payout equal to110% of target and the second half payout equal to 115% of target. The overall financial performance, after considering theCompensation Committee’s discretionary reductions, resulted in an aggregate cash bonus payout to Mr. Swade of 114%.(3)The Company portions of health, disability and life insurance premiums and 401(k) matching contributions included in thiscolumn are also provided to all members of the Company, with the amounts dependent upon the level of health insurancecoverage selected by each individual. Accordingly, the Company portion of premiums paid and 401(k) matching contributionsare not considered perquisites but are reported as income earned for each NEO, if applicable.(4)Mr. Hobbs’ 2019 ‘‘All Other Compensation’’ of $2,732,702 is comprised of $1,730,739 related to the acceleration of certainunvested RSUs and PSUs in accordance with his employment and related agreements with the Company, $1,152,462 ofseverance in accordance with his employment and related agreements with the Company (which includes $152,462, the amountof his 2019 bonus had he remained employed) and $1,909 for the Company’s portion of his life, disability and excess liabilityinsurance. Mr. Hobbs’ 2018 ‘‘All Other Compensation’’ of $1,909 represents the Company’s portion of his life, disability andexcess liability insurance.Mr. Hobbs served as a non-employee member of the Board from October 27, 2017 through December 13, 2017, the date hewas appointed as the Company’s President and Chief Executive Officer. As a result, the only compensation earned byMr. Hobbs with respect to 2017 was non-employee director fees through December 13, 2017, equal to $8,940, and base salarythrough December 31, 2017, equal to $21,154.(5)Mr. Bruny’s 2019 ‘‘All Other Compensation’’ of $28,912 is comprised of $21,558 for the Company’s portion of his medicalinsurance, $5,600 for the Company’s matching contribution to his 401(k) account and $1,755 for the Company’s portion of hislife, disability and excess liability insurance. Mr. Bruny’s 2018 ‘‘All Other Compensation’’ of $23,028 is comprised of $15,773 forthe Company’s portion of his health insurance, $5,500 for the Company’s matching contribution to his 401(k) account and$1,755 for the Company’s portion of his life, disability and excess liability insurance. Throughout 2018 and through January 14,2019, Mr. Bruny served as the Company’s Executive Vice President, Global Services. Effective January 14, 2019, Mr. Brunyassumed Mr. Swade’s responsibilities and was named Executive Vice President, Global Sales and Services.(6)Mr. Riley’s 2019 ‘‘All Other Compensation’’ of $28,961 is comprised of $15,032 for the Company’s portion of his medicalinsurance, $6,574 related to patents held by the Company and for which the granting of such patents is partially attributable toMr. Riley, $5,600 for the Company’s matching contribution to his 401(k) account and $1,755 for the Company’s portion of hislife, disability and excess liability insurance. Mr. Riley’s 2018 ‘‘All Other Compensation’’ of $20,908 is comprised of $11,871 forthe Company’s portion of his medical insurance, $2,486 related to patents held by the Company and for which the granting of79such patents is partially attributable to Mr. Riley, $5,500 for the Company’s matching contribution to his 401(k) account and$1,050 for the Company’s portion of his life, disability and excess liability insurance. Mr. Riley’s 2017 ‘‘All OtherCompensation’’ of $15,074 is comprised of $13,074 for the Company’s portion of his health insurance and $2,000 for theCompany’s matching contribution to his 401(k) account.(7)Mr. Raiford’s 2019 ‘‘All Other Compensation’’ of $49,197 is comprised of $19,786 for his housing allowance, $21,558 for theCompany’s portion of his medical insurance, $5,276 for financial planning service costs, $1,808 for the Company’s portion of hislife, disability and excess liability insurance, and $769 for the Company’s contribution to this 401(k) account. Mr. Raiford’s2018 ‘‘All Other Compensation’’ of $42,374 is comprised of $19,786 for his housing allowance, $15,773 for the Company’sportion of his medical insurance, $4,237 for financial planning service costs, $1,809 for the Company portion of his life,disability and excess liability insurance, and $769 for the Company’s contribution to his 401(k) account. In addition,Mr. Raiford received a true-up to the Company’s 2018 matching contribution to his 401(k) account in 2019, totaling $4,731.Mr. Raiford will receive a true-up of the Company match to his 2019401(k) contributions in 2020 upon completion ofCompany compliance testing. The amount of such true-up is not currently determinable; however, the total maximum amountof the Company’s contribution to Mr. Raiford’s 401(k) account for 2019, including the true-up, will not exceed $5,600.Mr. Raiford’s 2017 ‘‘All Other Compensation’’ of $6,891 is comprised of $3,446 for the Company’s portion of his healthinsurance and $3,445 for his housing allowance for the period from the date of the GENBAND Merger (or October 27, 2017)through December 31, 2017.(8)Mr. Scarfo’s 2019 ‘‘All Other Compensation’’ of $45,872 is comprised of his $25,000 annual cost-of-living adjustment allowance,$14,648 for the Company’s portion of his medical insurance, $4,470 for the Company’s matching contribution to his 401(k)account and $1,755 for the Company’s portion of his life, disability and excess liability insurance. Mr. Scarfo’s 2018 ‘‘All OtherCompensation’’ of $44,164 is comprised of his $25,000 annual cost-of-living adjustment allowance, $11,909 for the Company’sportion of his medical insurance, $5,500 for the Company’s matching contribution to his 401(k) account and $1,755 for theCompany’s portion of his life, disability and excess liability insurance. Mr. Scarfo joined the Company as our Executive VicePresident, Products and Research and Development on January 22, 2018. Effective January 13, 2019, he was named ExecutiveVice President, Products, Research and Development, Support and Supply Chain.(9)Mr. Ferguson’s 2019 ‘‘All Other Compensation’’ of $28,859 is comprised of $21,557 for the Company’s portion of his medicalinsurance, $5,600 for the Company’s matching contribution to his 401(k) account and $1,702 for the Company’s portion of hislife, disability and excess liability insurance.(10)Mr. McCready’s 2019 ‘‘All Other Compensation’’ of $31,735 is comprised of $22,180 for the Company’s portion of his medicalinsurance, $5,600 for the Company’s matching contribution to his 401(k) account and $3,955 for the Company’s portion of hislife, disability and excess liability insurance.(11)Mr. Swade’s 2019 ‘‘All Other Compensation’’ of $1,106,931 is comprised of $1,087,500 of severance payments and $19,430.84for extended health insurance in connection with his separation from the Company. Mr. Swade’s 2018 ‘‘All OtherCompensation’’ of $24,744 is comprised of $18,140 for the Company’s portion of his health insurance, $5,500 for theCompany’s matching contribution to his 401(k) account and $1,103 for the Company’s portion of his life and disabilityinsurance. Mr. Swade’s 2017 ‘‘All Other Compensation’’ of $20,283 is comprised of $18,283 for the Company’s portion of hishealth insurance and $2,000 for the Company’s matching contribution to his 401(k) account. Effective January 14, 2019,Mr. Swade stepped down from his position of Executive Vice President, Global Sales. Mr. Swade remained with the Companythrough March 31, 2019 to assist with the transition of his responsibilities to Mr. Bruny.(12)Mr. Walsh’s 2019 ‘‘All Other Compensation’’ of $1,825,000 represents $1,600,000 of his severance payments in connection withhis separation from the Company (which includes $350,000, the amount of his 2018 bonus had he remained employed) and$225,000 of consulting fees for services rendered after termination of his employment. Mr. Walsh’s 2018 ‘‘All OtherCompensation’’ of $2,051 represents the Company’s portion of his excess liability insurance. Mr. Walsh’s 2017 ‘‘All OtherCompensation’’ of $2,138 represents the Company’s portion of his health insurance from the date of the GENBAND Merger(or October 27, 2017) through December 31, 2017.80Grants of Plan-Based Awards in 2019The following table sets forth information about incentive plan awards made to the NEOsduring the year ended December 31, 2019:2019 GRANTS OF PLAN-BASED AWARDSAwards:Awards:ExerciseGrant DateEstimated Future PayoutsEstimated Future PayoutsNumber ofNumber ofor BaseFair ValueDate ofUnder Non-Equity IncentiveUnder Equity IncentiveShares ofSecuritiesPrice ofof StockCompensationPlan Awards(2)Plan Awards(3)Stock orUnderlyingOptionand OptionGrantCommitteeThresholdTargetMaximumThresholdTargetMaximumUnitsOptionsAwardsAwardsNameDateAction(1)($)($)($)(#)(#)(#)(#)(4)(#)($/Sh)($)(5)Franklin Hobbs15-Mar-1914-Mar-19—332,150664,300$2,309,58617-Jun-1914-Mar-19432,901$2,000,0036-Feb-19$—$500,000Steven Bruny15-Mar-1914-Mar-19—71,840143,680$433,05117-Jun-1914-Mar-1981,169$375,0016-Feb-19$—$350,000Kevin Riley15-Mar-1914-Mar-19—38,31576,630$230,96317-Jun-1914-Mar-1943,291$200,0046-Feb-19$—$299,985Daryl Raiford15-Mar-1914-Mar-19—67,050134,100$404,17717-Jun-1914-Mar-1975,758$350,0026-Feb-19$—$375,000Anthony Scarfo15-Mar-1914-Mar-19—71,840143,680$433,05117-Jun-1914-Mar-1981,169$375,0016-Feb-19$—$350,000Justin Ferguson15-Mar-1914-Mar-19—62,262124,524$375,31617-Jun-1914-Mar-1970,347$325,0036-Feb-19$—$175,013John McCready15-Mar-1914-Mar-19—38,31576,630$227,96317-Jun-1914-Mar-1943,291$200,0046-Feb-19$—$150,010Michael Swade6-Feb-19$—$349,988David Walsh22-Feb-18$—$500,000(1)Represents the date on which the Compensation Committee took action to approve the equity-based award or the performance metrics for achievement of such award, as applicable.(2)‘‘Target’’ amount represent the potential bonus payment under the SMCIP at target level ofachievement. Overachievement Fund payments, if any, upon achievement of performance abovetarget under the SMCIP are discretionary and are not included herein.(3)In March 2019, we granted Messrs. Hobbs, Bruny, Riley, Raiford, Scarfo, Ferguson andMcCready Performance PSUs, subject to performance and service conditions, and TSR PSUs,subject to market and service conditions. Each NEO’s Performance PSU grant is comprised ofthree consecutive fiscal year performance periods from 2019 through 2021 (each, a ‘‘Fiscal YearPerformance Period’’), with one-third of the Performance PSUs attributable to each Fiscal YearPerformance Period. The number of shares that will vest for each Fiscal Year PerformancePeriod will be based on the achievement of certain metrics related to the Company’s financialperformance for the applicable year on a standalone basis (each, a ‘‘Fiscal Year PerformanceCondition’’). In the third quarter of 2019, the Company adjusted the 2019 Performance PSUgoals to reflect the changes to the Company’s calculation of certain metrics. The Company’sachievement of the 2019 Fiscal Year Performance Conditions (and the number of shares ofCompany common stock to vest as a result thereof) will be measured on a linear sliding scalein relation to specific threshold, target and stretch performance conditions. The CompensationCommittee will determine the number of shares earned, if any, after the Company’s financialresults for each Fiscal Year Performance Period are finalized. Upon the determination by theCompensation Committee of the number of shares that will be received upon vesting of thePerformance PSUs, such number of shares will become fixed and the unamortized expense will81be recorded through the remainder of the service period that ends on March 15, 2022, at whichtime the total Performance PSUs earned, if any, will vest, pending each executive’s continuedemployment with the Company through that date. The number of shares of common stock tobe achieved upon vesting of the Performance PSUs will in no event exceed 200% of thePerformance PSUs. Shares subject to the Performance PSUs that fail to be earned will beforfeited. In March 2020, the Compensation Committee determined that the performancemetrics for the 2019 Performance PSUs had been achieved at the 30.5% level, with suchachievement equal to the right to receive shares of stock on March 15, 2022 provided the NEOwas still an employee of the Company at that date: Mr. Hobbs: 23,366 shares; Mr. Bruny: 4,381shares; Mr. Riley: 2,337 shares; Mr. Raiford: 4,089 shares; Mr. Scarfo: 4,381 shares;Mr. Ferguson: 3,797 shares; and Mr. McCready: 2,337 shares. In connection with his separationfrom the Company, the vesting of Mr. Hobbs’ 23,366 shares was accelerated and the shareswere released on January 30, 2020.The TSR PSUs have a single three-year performance period, which will end on December 31,2021 (the ‘‘Market Performance Period’’). The number of shares subject to the TSR PSUs thatwill vest, if any, on March 15, 2022, will be dependent upon the Company’s TSR comparedwith the TSR of the companies included in the Nasdaq Telecommunications Index for the sameMarket Performance Period, measured by the Compensation Committee after the MarketPerformance Period ends. The shares determined to be earned will vest on March 15, 2022,pending each executive’s continued employment with the Company through that date. Thenumber of shares of common stock to be achieved upon vesting of the TSR PSUs will in noevent exceed 200% of the TSR PSUs. Shares subject to the TSR PSUs that fail to be earnedwill be forfeited. In connection with his separation from the Company, Mr. Hobbs becauseeligible to receive up to one-third of the shares underlying his TSR PSUs (the ‘‘Hobbs TSRPSUs’’) based upon the Company’s TSR compared with the TSR of the companies included inthe Nasdaq Telecommunications Index for the year ended December 31, 2019. Uponcompletion of such measurement, the Compensation Committee determined that none ofHobbs TSR PSUs had been earned and were forfeited.(4)For 2018, each of Messrs. Hobbs, Bruny, Riley, Raiford, Scarfo, Ferguson, McCready andSwade was given the choice to receive a portion, ranging from 10% to 50% of their 2018annual bonus, if any were earned, in 2018 Bonus Shares under our Stock Bonus ElectionProgram. Each such NEO could also elect not to participate in this program and to earn his2018 annual bonus, if any, in the form of cash. Pursuant to the Stock Bonus Election Program,each of Messrs. Hobbs and McCready elected to receive 50% of his 2018 annual bonus in theform of 2018 Bonus Shares; each of Messrs. Bruny and Raiford elected to receive 30% of his2018 annual bonus in the form of 2018 Bonus Shares; and each of Messrs. Riley, Scarfo,McCready and Swade each elected to receive 20% of his 2018 annual bonus in the form of2018 Bonus Shares. The number of shares earned by each of the NEOs was calculated bydividing the applicable bonus amount (for each NEO, calculated as his elected percentagetimes his 2018 annual bonus) by $4.97, the closing price of our common stock on March 8,2019, the date of the company-wide cash bonus payments. The 2018 Bonus Shares weregranted on March 15, 2019. Mr. Hobbs was granted 50,302 2018 Bonus Shares, Mr. Bruny wasgranted 21,127 2018 Bonus Shares; Mr. Riley was granted 8,451 2018 Bonus Shares;Mr. Raiford was granted 16,600 2018 Bonus Shares; Mr. Scarfo was granted 14,085 2018 BonusShares; Mr. Ferguson was granted 7,043 2018 Bonus Shares; Mr. McCready was granted 10,5642018 Bonus Shares; and Mr. Swade was granted 14,085 2018 Bonus Shares. The values of these2018 Bonus Shares were previously included in the ‘‘Estimated Future Payouts underNon-Equity Incentive Plan Awards’’ in the Company’s proxy statement for our 2019 annualmeeting of stockholders and, accordingly, are excluded from the table above.82(5)Amounts reflect the grant date fair values of the RSUs and PSUs estimated in accordance withASC 718 as of the respective grant dates. The methodology for calculating the grant date fairvalue of stock awards is discussed in Note 16 to our 2019 Annual Report.Outstanding Equity Awards at Fiscal Year EndThe following table sets forth information concerning stock options and unvested stock awardsheld by the NEOs as of December 31, 2019:OUTSTANDING EQUITY AWARDS AT 2019 FISCAL YEAR-END*Option AwardsStock AwardsEquityIncentiveEquityPlanEquityIncentiveAwards:IncentivePlan Awards:Market orPlan Awards:MarketNumber ofPayout ValueNumber ofNumber ofValue ofUnearnedof UnearnedNumber ofNumber ofSecuritiesShares orShares orShares,Shares,SecuritiesSecuritiesUnderlyingUnits ofUnits ofUnits orUnits orUnderlyingUnderlyingUnexercisedOptionStock AwardsStock ThatOther RightsOther RightsUnexercisedUnexercisedUnearnedExerciseOptionThat HaveHave NotThat HaveThat HaveOptions (#)Options (#)OptionsPriceExpirationNot VestedVestedNot VestedNot VestedNameExercisableUnexercisable(#)($)Date(#)($)(1)(#)($)(1)Franklin Hobbs957,096(2)$2,966,998Steven Bruny81,169(3)$251,62419,999(3)$61,99725,277(3)$78,3594,381(4)$13,58128,736(4)$89,08228,736(5)$89,082Kevin Riley43,291(6)$134,20219,999(6)$61,9972,337(7)$7,24515,326(7)$47,51115,326(8)$47,511Daryl Raiford32,277(9)$100,05975,758(9)$234,85010,000(9)$31,0004,089(10)$12,67626,820(10)$83,14226,820(11)$83,142Anthony Scarfo7,499(12)$23,24781,169(12)$251,62437,499(12)$116,2474,381(13)$13,58128,736(13)$89,08228,736(14)$89,082Justin Ferguson70,347(15)$218,07637,499(15)$116,2473,797(16)$11,77124,905(16)$77,20624,905(17)$77,206John McCready25,277(18)$78,35912,499(18)$38,74743,291(18)$134,2022,337(19)$7,24515,326(19)$47,51115,326(20)$47,511*This table does not include Messrs. Swade and Walsh because they did not have anyoutstanding equity awards at 2019 fiscal year end.(1)In accordance with SEC rules, the market value of unvested shares of restricted stock wasdetermined by multiplying the number of such shares by $3.10, the closing market price of ourcommon stock on December 31, 2019.(2)Mr. Hobbs’ 957,096 unvested stock units represent 281,453 RSUs and 315,866 PSUs that wereaccelerated in connection with his separation from the Company, but which were not releaseduntil fiscal 2020 per the terms of his separation agreement, and 359,777 PSUs that wereoutstanding as of December 31, 2019, but were subsequently forfeited.83(3)Of Mr. Bruny’s 81,169 unvested RSUs, 27,057 will vest on June 17, 2020, 13,528 will vest oneach of December 17, 2020, June 17, 2021, December 17, 2021 June 17, 2022. Of Mr. Bruny’s19,999 unvested RSUs, 6,666 will vest on June 15, 2020, 6,667 will vest on December 15, 2020and 6,666 will vest on June 15, 2021. Of Mr. Bruny’s 25,277 unvested restricted shares, 12,638will vest on May 15, 2020 and 12,639 will vest on November 15, 2020.(4)The 4,381 unvested restricted shares represent the number of shares underlying Mr. Bruny’sunvested Performance PSUs based on actual 2019 performance; these shares will vest onMarch 15, 2022. Mr. Bruny’s 28,736 unearned shares represent shares underlying PerformancePSUs upon achievement of target performance with future performance periods. Sharesearned, if any, will vest on March 15, 2022.(5)The 28,736 unearned shares represent shares underlying Mr. Bruny’s TSR PSUs, which have athree-year performance period, upon achievement of target performance. Shares earned, if any,will vest on March 15, 2022.(6)Of Mr. Riley’s 43,291 unvested RSUs, 14,431 will vest on June 17, 2020 and 7,215 will vest oneach of December 17, 2020, June 17, 2021, December 17, 2021 and June 17, 2022. OfMr. Riley’s 19,999 unvested RSUs, 6,666 will vest on June 15, 2020, 6,667 will vest onDecember 15, 2020 and 6,666 will vest on June 15, 2021.(7)The 2,337 unvested restricted shares represent the number of shares underlying Mr. Riley’sunvested Performance PSUs based on actual 2019 performance; these shares will vest onMarch 15, 2022. Mr. Riley’s 15,326 unearned shares represent shares underlying PerformancePSUs upon achievement of target performance with future performance periods. Sharesearned, if any, will vest on March 15, 2022.(8)The 15,326 unearned shares represent shares underlying Mr. Riley’s TSR PSUs, which have athree-year performance period, upon achievement of target performance. Shares earned, if any,will vest on March 15, 2022.(9)Of Mr. Raiford’s 32,277 unvested restricted shares, 16,138 will vest on May 15, 2020 and 16,139will vest on November 15, 2020. Of Mr. Raiford’s 75,758 unvested RSUs, 25,254 will vest onJune 17, 2020 and 12,626 will vest on each of December 17, 2020, June 17, 2021, December 17,2021 and June 17, 2022. Of Mr. Raiford’s 10,000 RSUs, 3,334 will vest on June 15, 2020 and3,333 will vest on each of December 15, 2020 and June 15, 2021.(10)The 4,089 unvested restricted shares represent the number of shares underlying Mr. Raiford’sunvested Performance PSUs based on actual 2019 performance; these shares will vest onMarch 15, 2022. Mr. Raiford’s 26,820 unearned shares represent shares underlying PerformancePSUs upon achievement of target performance with future performance periods. Sharesearned, if any, will vest on March 15, 2022.(11)The 26,820 unearned shares represent shares underlying Mr. Raiford’s TSR PSUs, which havea three-year performance period, upon achievement of target performance. Shares earned, ifany, will vest on March 15, 2022.(12)Of Mr. Scarfo’s 7,499 unvested RSUs, 2,500 will vest on June 15, 2020, 2,499 will vest onDecember 15, 2020 and 2,500 will vest on June 15, 2021. Of Mr. Scarfo’s 81,169 unvestedRSUs, 27,057 will vest on June 17, 2020 and 13,528 will vest on each of December 17, 2020,June 17, 2021, December 17, 2021 and June 17, 2022. Of Mr. Scarfo’s 37,499 unvestedrestricted shares, 12,500 vested on February 15, 2020, 12,499 will vest on August 15, 2020 and12,500 will vest on February 15, 2021.(13)The 4,381 unvested restricted shares represent the number of shares underlying Mr. Scarfo’sunvested Performance PSUs based on actual 2019 performance; these shares will vest on84March 15, 2022. Mr. Scarfo’s 28,736 unearned shares represent shares underlying PerformancePSUs upon achievement of target performance with future performance periods. Sharesearned, if any, will vest on March 15, 2022.(14)The 28,736 unearned shares represent shares underlying Mr. Scarfo’s TSR PSUs, which have athree-year performance period, upon achievement of target performance. Shares earned, if any,will vest on March 15, 2022.(15)Of Mr. Ferguson’s 70,347 unvested RSUs, 23,450 will vest on June 17, 2020, 11,724 will vest onDecember 17, 2020, 11,275 will vest on June 17, 2021 and 11,724 will vest on each ofDecember 17, 2021 and June 17, 2022. Of Mr. Ferguson’s 37,499 unvested restricted shares,12,500 will vest on April 16, 2020, 12,499 will vest on October 16, 2020 and 12,500 will vest onApril 16, 2021.(16)The 3,797 unvested restricted shares represent the number of shares underlying Mr. Ferguson’sunvested Performance PSUs based on actual 2019 performance; these shares will vest onMarch 15, 2022. Mr. Ferguson’s 24,905 unearned shares represent shares underlyingPerformance PSUs upon achievement of target performance with future performance periods.Shares earned, if any, will vest on March 15, 2022.(17)The 24,905 unearned shares represent shares underlying Mr. Ferguson’s TSR PSUs, which havea three-year performance period, upon achievement of target performance. Shares earned, ifany, will vest on March 15, 2022.(18)Of Mr. McCready’s 25,277 unvested restricted shares, 12,638 will vest on May 15, 2020 and12,639 will vest on November 15, 20. Of Mr. McCready’s 12,499 unvested RSUs, 4,166 will veston June 15, 2020, 4,167 will vest on December 15, 2020 and 4,166 will vest on June 15, 2021.Of Mr. McCready’s 43,291 unvested RSUs, 14,431 will vest on June 17, 2020 and 7,215 will veston each of December 17, 2020, June 17, 2021, December 17, 2021 and June 17, 2022.(19)The 2,337 unvested restricted shares represent the number of shares underlyingMr. McCready’s unvested Performance PSUs based on actual 2019 performance; these shareswill vest on March 15, 2022. Mr. McCready’s 15,326 unearned shares represent sharesunderlying Performance PSUs upon achievement of target performance with futureperformance periods. Shares earned, if any, will vest on March 15, 2022.(20)The 15,326 unearned shares represent shares underlying Mr. McCready’s TSR PSUs, whichhave a three-year performance period, upon achievement of target performance. Shares earned,if any, will vest on March 15, 2022.Option Exercises and Stock VestedThe following table summarizes for the NEOs in 2019 the number of shares acquired upon theexercise or vesting, as applicable, of stock options and stock awards and the value realized, beforepayout of any applicable withholding tax. None of our NEOs exercised stock options during 2019.852019 OPTION EXERCISES AND STOCK VESTEDOption AwardsStock AwardsNumber ofNumber ofShares AcquiredValue RealizedShares AcquiredValue Realizedon Exerciseon Exerciseon Vestingon VestingName(#)($)(#)(1)($)(2)Franklin Hobbs——115,302462,776Steven Bruny——66,406291,588Kevin Riley——31,650141,788Daryl Raiford——58,878255,074Anthony Scarfo——59,087311,484Justin Ferguson——44,544234,832John McCready——48,343205,999Michael Swade——67,283349,493David Walsh——171,888885,223(1)Of Mr. Hobbs’ 115,302 shares that vested in 2019, 51,680 shares were returned to us to satisfythe tax withholding obligation associated with the vesting of the shares.Of Mr. Bruny’s 66,406 shares that vested in 2019, 6,122 shares were returned to us to satisfythe tax withholding obligation associated with the vesting of the shares.Of Mr. Riley’s 31,650 shares that vested in 2019, 5,171 shares were returned to us to satisfy thetax withholding obligation associated with the vesting of the shares.Of Mr. Raiford’s 58,878 shares that vested in 2019, 4,042 shares were returned to us to satisfythe tax withholding obligation associated with the vesting of the shares.Of Mr. Scarfo’s 59,087 shares that vested in 2019, 18,386 shares were returned to us to satisfythe tax withholding obligation associated with the vesting of the shares.Of Mr. Ferguson’s 44,544 shares that vested in 2019, 1,714 shares were returned to us to satisfythe tax withholding obligation associated with the vesting of the shares.Of Mr. McCready’s 48,343 shares that vested in 2019, 4,690 shares were returned to us tosatisfy the tax withholding obligation associated with the vesting of the shares.Of Mr. Swade’s 67,283 shares that vested in 2019, 19,710 shares were returned to us to satisfythe tax withholding obligation associated with the vesting of the shares.Of Mr. Walsh’s 171,888 shares that vested in 2019, 64,834 shares were returned to us to satisfythe tax withholding obligation associated with the vesting of the shares.(2)In accordance with SEC rules, the aggregate dollar amount realized upon vesting of shares ofrestricted stock was determined by multiplying the number of shares by the closing marketprice of our common stock on the day before vesting.CEO Pay RatioAs of November 1, 2019, the Company had a worldwide population of 2,229 employees(including full-time, part-time, seasonal and temporary employees). To determine the median annualcompensation for all employees other than the CEO, a median employee was identified from theworldwide population of employees on November 1, 2019, excluding its 102 employees from thefollowing jurisdictions: Mexico (79 employees) and Malaysia (23 employees), which in the aggregate86represent 5% or less of the Company’s total employee population. No employees were excluded fromthe employee population due to data privacy issues.To determine the median employee, we utilized the ‘‘regular earnings’’ of the applicableemployees for 2019, which represents cash compensation excluding bonus, commissions and othersimilar incentive compensation. The Company did not utilize any cost of living or other materialadjustments. In connection with our analysis, we utilized the foreign currency exchange rate used forour internal financial accounting purposes, as of November 1, 2019. Based on the foregoing, themedian employee was determined to be a Product Engineering Technical Specialist working on afull-time basis in the United States.For 2019, the annual total compensation for the median employee was $93,889 and the annualtotal compensation for our CEO was $7,957,329, which reflects the total compensation paid toMr. Hobbs, the Chief Executive Officer as of November 1, 2019, for 2019, and which includes paymentsto Mr. Hobbs in connection with his separation from the Company on December 31, 2019. Based onthe calculation of the annual total compensation for both the CEO and the median employee (asdescribed above), the ratio of CEO pay to the median employee pay is approximately 85:1. The payratio provided is a reasonable estimate. Because the SEC rules for identifying the median employeeand calculating the pay ratio allow companies to use different methodologies, exemptions, estimatesand assumptions, our pay ratio may not be comparable to the pay ratio reported by other companies orour pay ratio in any future year.Severance and Change of Control BenefitsTo attract and retain key executive officers, the Company has entered into executiveagreements that include severance and change of control benefits. In the event or threat of a change ofcontrol transaction, we believe that these agreements reduce uncertainty and provide compensation forthe significant levels of executive engagement and support required during an ownership transition thatmay result in the termination of their employment. Except Mr. Hobbs, the severance arrangements forthe NEOs generally provide that, upon termination of the NEO’s employment by the Company withoutcause, by the NEO for good reason or due to death or disability of the NEO (except Messrs. Raiford,Bruny and Scarfo), the NEO is entitled to certain severance payments and benefits as described below.Mr. Hobbs entered into a separation agreement in connection with the termination of his employmentwith the Company as of December 31, 2019. Additionally, Mr. McClelland, our President and ChiefExecutive Officer as of March 1, 2020, is also entitled to certain severance and change in controlbenefits. For a general description of such benefits, see ‘‘Post-2019 Executive Compensation Matters’’above.Franklin HobbsEffective as of November 13, 2019, Mr. Hobbs no longer served as our President and ChiefExecutive Officer. Mr. Hobbs entered into a letter agreement, dated December 27, 2019 (the ‘‘HobbsAgreement’’), concerning his transition and termination of employment from the Company and itsaffiliates as of the close of business on December 31, 2019 (the ‘‘Termination Date’’). Pursuant to theHobbs Agreement, Mr. Hobbs is entitled to severance payments equal to 100% of his base salary, aone-time lump sum cash payment equal to $500,000, a one-time lump sum cash payment equal toMr. Hobbs annual bonus for fiscal year 2019, based on actual achievement of applicable performanceobjectives, and continued health plan premium payments for up to 12 months.87Pursuant to the Hobbs Agreement, Mr. Hobbs is also entitled to accelerated vesting of certainof his outstanding equity awards, including an additional year of vesting with respect to his unvestedrestricted stock units subject to only time-based vesting. In addition, all unvested restricted stock unitsheld by Mr. Hobbs subject to EBITDA-based vesting for the fiscal year ending December 31, 2019remained outstanding and eligible to vest in accordance with their terms as of the Termination Date,and one-third of any unvested restricted stock units held by Mr. Hobbs subject to TSR-based vestingfor the three-year period ending December 31, 2021, remained outstanding and eligible to vest inaccordance with their terms based on actual performance for the portion of the performance periodthrough December 31, 2019 as if performance ended on such date. Following the Termination Date, theCompany determined that the outstanding RSUs held by Mr. Hobbs subject to TSR-based vesting didnot achieve their performance thresholds and were forfeited.The severance payments (other than the one-time cash payments described above) forMr. Hobbs will be made in accordance with the Company’s normal payroll practices for a period of12 months following the Termination Date.Kevin RileyIf the Company terminates Mr. Riley’s employment (other than for Cause (as defined in hisemployment agreement) or as a result of his death or disability), or upon a resignation by Mr. Riley forGood Reason (as defined his employment agreement), he will be entitled to the followingcompensation and benefits: a one-time lump sum cash payment equal to (a) twelve months of histhen-current base salary and (b) 100% of his target annual bonus, continued health plan premiumpayments for up to 12 months and accelerated vesting of Mr. Riley’s unvested equity awards that arescheduled to vest within twelve months following his termination date. If Mr. Riley’s termination occurswithin 12 months of an Acquisition (as defined in his employment agreement), he will be entitled tothe following compensation and benefits: a one-time lump sum cash payment equal to (a) eighteenmonths of his then-current base salary and (b) 150% of his target annual bonus, continued health planpremium payments for up to 18 months and accelerated vesting of all of his outstanding equity. Allcompensation payments to which Mr. Riley will be entitled will be made in 12-monthly installments,except for the amount of his annual base salary and target annual bonus, which will be paid in a lumpsum.Daryl RaifordIf the Company terminates Mr. Raiford’s employment (other than for Cause (as defined in hisamended and restated employment agreement, as amended) or as a result of his death or disability), orupon a resignation by Mr. Raiford for Good Reason (as defined in his amended and restatedemployment agreement, as amended), he will be entitled to the following compensation and benefits: aone-time lump sum payment of 100% of his base salary and a pro-rata amount of his target annualbonus, 100% of his target annual bonus, payable in 12 monthly installments, and continued health planpremium payments for up to 12 months. If Mr. Raiford’s termination occurs within 12 months of aChange in Control (as defined in his amended and restated employment agreement, as amended), hewill be entitled to the following compensation and benefits: 200% of his base salary, a pro-rata amountof his target annual bonus, 200% of his target annual bonus, continued health plan premium paymentsfor up to 12 months, an accelerated vesting of all of his outstanding equity. Upon a Change in Controlof the Company, Mr. Raiford would receive an accelerated vesting of 50% of his outstanding equity.All compensation payments to which Mr. Raiford will be entitled will be made in 12-monthlyinstallments, except for the pro-rata amount of his target annual bonus, which will be paid in a lumpsum.88Upon a ‘‘material transaction’’ (as defined in his retention bonus agreement, which generallyrelates to a change in control of the Company), Mr. Raiford will be entitled to a change in controlbonus equal to $1,060,000, subject to his continued employment through such material transaction.Steven BrunyPrior to January 29, 2020, upon a termination of Mr. Bruny’s employment by the Company,other than (i) For Cause (as defined in his then-applicable severance agreement) or (ii) as a result ofhis death or Disability (as defined in his then-applicable severance agreement), or upon his resignationfor Good Reason (as defined in his severance agreement), and within six months following theoccurrence of a Change in Control (as defined in his then-applicable severance agreement), Mr. Brunywas entitled to severance payments equal to 50% of his base salary and continued health plan premiumpayments for up to 6 months. Such severance payments for Mr. Bruny would have been made inaccordance with the Company’s normal payroll practices for a period of 6 months following a qualifyingtermination of employment. Such payments are outlined in the table set forth in ‘‘Potential PaymentsUpon Termination or Upon Change in Control’’ below.On January 29, 2020, we entered into a new severance agreement with Mr. Bruny, whichmodified the severance payments and benefits that Mr. Bruny would be entitled to on a going-forwardbasis. For a discussion of such agreement, see ‘‘Post-2019 Executive Compensation Matters’’ above.Anthony ScarfoOn January 19, 2018, we entered into an employment agreement with Mr. Scarfo. Pursuant tosuch agreement, upon a termination of Mr. Scarfo’s employment by the Company without Cause (asdefined in such agreement), or upon a resignation by Mr. Scarfo for Good Reason (as defined in suchagreement), Mr. Scarfo was entitled to severance payments equal to 12 months of his base salary andcontinued health plan premium payments for up to 12 months. Additionally, the Company may elect topay Mr. Scarfo a pro-rated portion of his then applicable target bonus, less applicable state and federalwithholdings, calculated upon reference to his termination date. Such severance payments (other thantarget annual bonus) for Mr. Scarfo would have been made in accordance with the Company’s normalpayroll practices for a period of 12 months following a qualifying termination of employment. Suchpayments are outlined in the table set forth in ‘‘Potential Payments Upon Termination or Upon Change inControl’’ below.On January 29, 2020, we entered into a severance agreement with Mr. Scarfo, which modifiedthe severance payments and benefits that Mr. Scarfo would be entitled to on a going-forward basis. Fora discussion of such agreement, see ‘‘Post-2019 Executive Compensation Matters’’ above.John McCreadyPrior to January 29, 2020, upon a termination of Mr. McCready’s employment by theCompany, other than (i) For Cause(as defined in his then-applicable severance agreement) or (ii) as aresult of his death or Disability (as defined in his then-applicable severance agreement), or upon hisresignation for Good Reason (as defined in his severance agreement), and within six months followingthe occurrence of a Change in Control (as defined in his then-applicable severance agreement),Mr. McCready was entitled to severance payments equal to 50% of his base salary and continuedhealth plan premium payments for up to 6 months. Such severance payments for Mr. McCready wouldhave been made in accordance with the Company’s normal payroll practices for a period of 6 monthsfollowing a qualifying termination of employment. Such payments are outlined in the table set forth in‘‘Potential Payments Upon Termination or Upon Change in Control’’ below.89On January 29, 2020, we entered into a new severance agreement with Mr. McCready, whichmodified the severance payments and benefits that Mr. McCready would be entitled to on a going-forward basis. For a discussion of such agreement, see ‘‘Post-2019 Executive Compensation Matters’’above.Justin K. FergusonOn January 26, 2018, we entered into a severance agreement with Mr. Ferguson (the‘‘Ferguson Severance Agreement’’).If the Company terminates Mr. Ferguson’s employment without Cause (as such term is definedin the Ferguson Severance Agreement) or as a result of his death or Disability (as such term is definedin the Ferguson Severance Agreement), or if he terminates his employment with Good Reason (as suchterm is defined in the Ferguson Severance Agreement), Mr. Ferguson would be entitled to receive(i) continued payment of his then-current base salary for a period of twelve months following thetermination date; (ii) a one-time lump sum cash amount equal to his pro-rated annual bonus, subject tothe terms of the applicable bonus plan; (iii) continued eligibility to have the Company pay its share ofthe medical, dental and vision insurance premiums for Mr. Ferguson and his dependents for the twelve-month period following the termination date; and (iv) accelerated vesting of his unvested options andunvested restricted shares awards that are scheduled to vest within twelve months following histermination date; provided that if Mr. Ferguson’s termination occurs within twelve months following aChange of Control (as such term is defined in the Ferguson Severance Agreement), Mr. Fergusonwould also be entitled to receive a lump sum payment equal to 100% of his then-current target variablecompensation and accelerated vesting of all his unvested options and all his unvested restricted shares.Michael SwadeEffective January 14, 2019, Mr. Swade stepped down from his position as the Company’sExecutive Vice President, Global Sales. Mr. Swade entered into a letter agreement, dated January 13,2019 (the ‘‘Swade Agreement’’), concerning his separation from the Company and its affiliates. Pursuantto the Swade Agreement, Mr. Swade remained employed to provide transition assistance to theCompany’s sales organization through March 31, 2019. Mr. Swade’s employment was terminated by theCompany without Cause (as such term is defined in his employment agreement), effective onMarch 31, 2019, and consistent with his employment agreement, Mr. Swade became entitled toseverance payments equal to 150% of his base salary and target cash bonus, continued health planpremium payments for up to 18 months, and accelerated vesting of all unvested restricted stock. Thecash severance payment for Mr. Swade was made in a lump sum.David WalshEffective as of February 1, 2019, David Walsh stepped down as Founder and President, Kandyfor the Company. Mr. Walsh entered into a letter agreement, dated January 13, 2019 (the ‘‘WalshAgreement’’), concerning his separation from the Company and its affiliates. Pursuant to the WalshAgreement, Mr. Walsh’s employment terminated by the Company without Cause (as such term isdefined in his employment agreement) on February 1, 2019 and he became entitled to, subject to anydelays required by applicable law: (i) a severance payment equal to $1,250,000, less applicabledeductions, payable in 12 monthly installments; (ii) up to 18 months of group health plan coverageunder COBRA; (iii) $350,000, less applicable deductions, in lieu of any 2018 bonus to which he mayhave been entitled under the 2018 bonus program under the Company’s Senior Management CashIncentive Plan; and (iv) full vesting of all of his unvested restricted shares and/or restricted stock unitson February 1, 2019.90In connection with his separation, Mr. Walsh also entered into a consulting agreement, wherebyhe agreed to provide business advisory services to us from February 2, 2019 to January 31, 2020.During the consulting term, Mr. Walsh was paid $25,000 per month, prorated for any partial month, inconsideration for such services.None of our severance arrangements provide for tax gross ups in connection with severancebenefits following a change in control or otherwise (except for Mr. Raiford, who may receive a taxgross up in connection with his continued health plan premium payments). All severance payments aresubject to the execution of a release of claims by the applicable NEO in favor of the Company andcontinued compliance with applicable restrictive covenants, which generally provide for post-terminationnon-competition and non-solicitation restrictions for 12 months.Equity Award AccelerationIn addition to the severance benefits and payments described above, in the event of a Changein Control (as defined in the 2019 Plan and referred to herein as a ‘‘change in control’’), our forms ofequity agreements under the 2019 Plan provide for certain accelerated vesting of awards thereunder.Except as otherwise noted in the severance arrangements above, effective immediately prior to theoccurrence of a change in control, (a) for equity grants prior to June 2016: an additional 25% of thenumber of shares covered by the restricted stock award will become vested and the remaining unvestedshares subject to the restricted stock award continuing to vest pursuant to the vesting schedule set forthin the award, except that the vesting schedule will be shortened by 12 months, and (b) for equity grantssince June 2016, an additional one-third of the number of shares covered by the restricted stock awardwill become vested and the remaining unvested shares subject to the restricted stock award continuingto vest pursuant to the vesting schedule set forth in the award, except that the vesting schedule will beshortened by 12 months.POTENTIAL PAYMENTS UPON TERMINATION OR UPON CHANGE IN CONTROLThe table below shows potential payments to the NEOs (other than Messrs. Hobbs, Swade andWalsh, whose payments upon termination of employment are described below) with severance orchange in control arrangements upon termination or upon a change in control of our Company. Theamounts shown assume that termination and/or change in control was effective as of December 31,2019, the last day of our fiscal year, and are estimates of the amounts that would have been paid to orrealized by the NEOs upon such a termination or change in control on such date. The actual amountsto be paid or realized can only be determined at the time of an NEO’s termination or following achange in control. Further, Messrs. Bruny, Scarfo and McCready entered into the severance agreementson January 29, 2020, which provide eligibility for certain severance payments and benefits to suchNEOs that differ from the below. See ‘‘Post-2019 Executive Compensation Matters’’ above for adiscussion of their rights under the Severance Agreements.91Terminationwithout Cause orTerminationfor Good Reasonwithout Cause orTermination uponfollowing Changefor Good Reason (1)Death or DisabilityChange in Controlin ControlSteven BrunyCash Severance...........$—$—$—$175,000Stock Awards (2).........——309,355437,249Health Benefits...........———10,779$—$—$309,355$623,028Kevin RileyCash Severance...........$649,985$—$—$974,978Stock Awards (2).........108,435—149,232298,465Health Benefits...........15,032——22,548$773,452$—$149,232$1,295,991Daryl E. RaifordChange of Control Bonus (3).$—$—$1,060,000$1,060,000Cash Severance (2)........1,250,000——2,500,000Stock Awards............——272,434544,868Health Benefits...........21,558——21,558$1,271,558$—$1,332,434$4,126,426Anthony ScarfoCash Severance...........$700,000$—$—$700,000Stock Awards (2).........——314,679582,862Health Benefits...........14,648——21,972$714,648$—$314,679$1,304,834Justin FergusonCash Severance...........$378,379$378,379$—$500,013Stock Awards (2).........140,365140,365195,703306,547Health Benefits...........21,55821,558—21,558$540,302$540,302$195,703$828,118John McCreadyCash Severance...........$—$—$—$175,000Stock Awards (2).........——171,294171,294Health Benefits...........———11,090$—$—$171,294$357,384(1)Represents the severance benefits that the NEO would be eligible to receive absent a changein control.(2)These amounts represent the gains that would be realized on the acceleration of unvestedrestricted shares and performance-based stock units in accordance with the NEOs’ respectiveemployment and/or grant agreements. The gains were calculated by multiplying our closingstock price of $3.10 on December 31, 2019 by the number of shares (or shares underlyingPSUs) that would accelerate.(3)Mr. Raiford is not entitled to a change in control bonus unless a material transaction isconsummated. If he becomes entitled to severance at any time prior to such a materialtransaction, he will not receive this change in control bonus. If he becomes entitled toseverance at any time after payment of the change in control bonus in connection with such amaterial transaction, he will not receive any additional change in control bonus upontermination.92INFORMATION ABOUT THE ANNUAL MEETINGOur Board of Directors is soliciting proxies for the 2020 Annual Meeting to be held onTuesday, June 2, 2020, and at any adjournments, continuations or postponements thereof. This ProxyStatement contains important information for you to consider when deciding how to vote on thematters brought before the meeting. Please read it carefully.Important Notice Regarding Availability of Proxy Materials for the Stockholder Meeting to be held onJune 2, 2020: This Proxy Statement and the 2019 Annual Report to Stockholders are available forviewing, printing and downloading at www.proxyvote.com.Why am I receiving these materials?You have received these proxy materials because our Board is soliciting your vote at the 2020Annual Meeting. This Proxy Statement includes information that we are required to provide to youunder the rules of the U.S. Securities and Exchange Commission and that is designed to assist you invoting your shares. Our Board has made these proxy materials available to you over the Internet, orhas delivered printed versions of these materials to you by mail, in connection with the Board’ssolicitation of proxies for use at the 2020 Annual Meeting.When and where is the meeting?The 2020 Annual Meeting will be held on Tuesday, June 2, 2020 at 10:00 a.m., Eastern time.The Annual Meeting will be a completely virtual meeting, which will be conducted via live webcast.You will be able to attend the Annual Meeting online and submit your questions during the meeting byvisiting http://viewproxy.com/RBBN/2020/vm and entering your event passcode that was provided afteryour registration process, as described under ‘‘How can I attend the 2020 Annual Meeting’’ below. Thissolicitation is for proxies for use at the 2020 Annual Meeting or at any reconvened meeting after anadjournment or postponement of the 2020 Annual Meeting.Who may vote at the meeting?Stockholders of record at the close of business on April 6, 2020, the record date, or holders ofa valid proxy, may attend and vote electronically at the meeting. Each stockholder is entitled to onevote for each share of common stock held on all matters to be voted. As of the close of business onApril 6, 2020, an aggregate of 144,744,861 shares of our common stock were outstanding, including393,557 unvested shares of restricted stock. In connection with the ECI Merger, Swarth granted anirrevocable proxy to the Company to vote the shares of the Company’s common stock held by Swarththat represent more than 9.99% of the consolidated voting power of all issued and outstandingCompany common stock pro rata in accordance with how the other holders of Company common stockvote their shares, and such proxy will remain in place until CFIUS approval is obtained.How many shares must be present to hold the meeting?A majority of the 144,744,861 shares of our common stock that were outstanding as of therecord date must be present at the meeting in order to hold the meeting and conduct business. This iscalled a quorum. For purposes of determining whether a quorum exists, we count as present any sharesthat are properly represented electronically at the meeting or that are represented by a valid proxyproperly submitted over the Internet, by telephone or by mail. Further, for purposes of establishing aquorum, we count as present shares that a stockholder holds and that are represented by their proxyeven if the stockholder does not vote on one or more of the matters to be voted upon. If a quorum is93not present at the scheduled time of the 2020 Annual Meeting, the chairperson of the meeting isauthorized by our by-laws to adjourn the meeting, without the vote of stockholders.What proposals will be voted on at the meeting?Four proposals will be voted on at the 2020 Annual Meeting:(cid:129)The election of the nine nominees for director named in this Proxy Statement to holdoffice until the 2021 Annual Meeting (Proposal 1);(cid:129)The approval of the Ribbon Communications Inc. Amended and Restated 2019 IncentiveAward Plan (Proposal 2);(cid:129)The ratification of the appointment of Deloitte & Touche LLP to serve as the Company’sindependent registered public accounting firm for the fiscal year ending December 31, 2020(Proposal 3); and(cid:129)The approval, on a non-binding, advisory basis, of the compensation of our namedexecutive officers (Proposal 4).How does the Board of Directors recommend that I vote?Our Board recommends that you vote your shares:(cid:129)‘‘For’’ the election of each of the nominees to our Board named in this Proxy Statement(Proposal 1);(cid:129)‘‘For’’ the approval of the Ribbon Communications Inc. Amended and Restated 2019Incentive Award Plan (Proposal 2);(cid:129)‘‘For’’ the ratification of the appointment of Deloitte & Touche LLP to serve as ourindependent registered public accounting firm for the fiscal year ending December 31, 2020(Proposal 3); and(cid:129)‘‘For’’ the approval, on a non-binding, advisory basis, of the compensation of our namedexecutive officers (Proposal 4).What vote is required to approve each matter and how are votes counted?Election of Directors (Proposal 1).In an uncontested election, such as the election of directorsat the 2020 Annual Meeting, to be elected, each of the nominees for director must receive more votes‘‘For’’ such nominee’s election than ‘‘Against’’ such election (with abstentions and broker non-votes notcounted as a vote for or against). With respect to each nominee, you may vote ‘‘For,’’ ‘‘Against,’’ or‘‘Abstain.’’ Abstaining will have no effect on the outcome of the election.Approval of the Our Amended and Restated 2019 Incentive Award Plan (Proposal 2).Theaffirmative vote of a majority of the shares of common stock present or represented at the 2020Annual Meeting and entitled to vote on this proposal will be required to approve this proposal. Youmay vote ‘‘For,’’ ‘‘Against’’, or ‘‘Abstain’’ from voting on this proposal. Abstaining from voting on thisproposal will have the effect of a vote against the approval of this proposal.94Ratification of the Appointment of Deloitte & Touche LLP to Serve as the Company’s IndependentRegistered Public Accounting Firm for the Fiscal Year Ending December 31, 2020 (Proposal 3). Theaffirmative vote of a majority of the shares of common stock present or represented at the 2020Annual Meeting and entitled to vote on this proposal will be required to approve this proposal. Youmay vote ‘‘For’’, ‘‘Against’’, or ‘‘Abstain’’ from voting on this proposal. Abstaining from voting on thisproposal will have the effect of a vote against this proposal.Approval, on a Non-Binding, Advisory Basis, of the Compensation of Our Named ExecutiveOfficers (Proposal 4).The vote on the compensation of the named executive officers is non-binding, asprovided by law. However, our Board and its Compensation Committee will review and consider theoutcome of this vote when making future compensation decisions for our named executive officers. Theaffirmative vote of a majority of the shares of common stock present or represented at the 2020Annual Meeting and entitled to vote on this proposal will be required to approve this proposal. Youmay vote ‘‘For’’, ‘‘Against’’, or ‘‘Abstain’’ from voting on this proposal. Abstaining from voting on thisproposal will have the effect of a vote against this proposal.For the proposals relating to the election of directors (Proposal 1), the approval of ouramended and restated 2019 Incentive Award Plan (Proposal 2), and the approval, on a non-binding,advisory basis, of the compensation of our named executive officers (Proposal 4), please note that ifyou are a beneficial owner of our common stock and your stock is held through a broker, bank orother nominee (in ‘‘street name’’), under stock exchange rules a broker, bank or other nominee subjectto those rules is not permitted to vote your shares on these three proposals without your instruction.Therefore, if a beneficial owner of our common stock fails to instruct such a broker, bank or othernominee how to vote on Proposals 1, 2, and 4, that beneficial owner’s shares cannot be voted on thesematters—in other words, your broker, bank or other nominee’s proxy will be treated as a ‘‘brokernon-vote,’’ which is explained in the following question and explanation.What are broker non-votes and what is the effect of broker non-votes?Brokers, banks and other nominees have the discretion to vote shares held in ‘‘street name’’—aterm that means the shares are held in the name of the broker, bank or other nominee on behalf of itscustomer, the beneficial owner—on routine matters, such as the ratification of the appointment of ourindependent registered public accounting firm, but not on non-routine matters. Generally, brokernon-votes occur when shares held by a broker, bank or other nominee for a beneficial owner are notvoted with respect to a non-routine matter because the broker, bank or other nominee has not receivedvoting instructions from the beneficial owner and the broker, bank or other nominee lacks discretionaryauthority to vote the shares because of the non-routine nature of the matter. The election of directors(Proposals 1), the approval of our amended and restated 2019 Incentive Award Plan (Proposal 2), andthe approval, on a non-binding, advisory basis, of the compensation of our named executive officers(Proposal 4) are ‘‘non-routine’’ matters for which brokers, banks and other nominees, under applicablestock exchange rules, may not exercise discretionary voting power without instructions from thebeneficial owner, and therefore broker non-votes will not affect the outcome of the vote on theseproposals. The ratification of the appointment of our independent registered public accounting firm(Proposal 3) is a ‘‘routine’’ matter for which brokers have discretionary authority to vote. Therefore, wedo not expect any broker non-votes in connection with this proposal. Broker non-votes are counted asshares present for purposes of determining the presence of a quorum. Your vote is very important,whether you hold directly or through a broker, bank or other nominee. We encourage you to read thisProxy Statement and the 2019 Annual Report carefully and if you are a beneficial owner, please besure to give voting instructions to your broker, bank or other nominee.95What happens if an incumbent director nominee fails to receive more ‘‘For’’ votes than‘‘Against’’ votes?Our Corporate Governance Guidelines require that as a condition to being nominated by theBoard for re-election as a director, each incumbent director must deliver to the Board an irrevocableresignation from the Board that will become effective if, and only if, both (i) in the case of anuncontested election, such nominee does not receive more votes ‘‘For’’ his or her election than votes‘‘Against’’ such election, and (ii) the Board accepts such resignation. The Board will decide (based onthe recommendation of a committee of the Board) whether to accept the director’s resignation within90 days after the election results are certified.An incumbent director who does not receive the required vote in an uncontested election willcontinue to serve as a director while the Nominating and Corporate Governance Committee and theBoard decide whether to accept or reject such director’s resignation. If the Board accepts suchresignation, the Board may fill the remaining vacancy or may decrease the size of the Board inaccordance with our by-laws. Our Corporate Governance Guidelines are posted on our website atwww.ribboncommunications.com.How can I attend the 2020 Annual Meeting?In light of the ongoing COVID-19 pandemic, as part of our effort to maintain a safe andhealthy environment for our directors, members of management and stockholders, the 2020 AnnualMeeting will be held entirely online. Stockholders may participate in the 2020 Annual Meeting byvisiting the following website: http://viewproxy.com/RBBN/2020/vm. In order to participate in the 2020Annual Meeting via live webcast, you must register at http://viewproxy.com/RBBN/2020. Please registerin advance by 11:59 p.m. Eastern time on May 31, 2020.If you are a registered holder, you will need to provide your name, address and phone numberin order to register. You will also be able to use the control number included in your proxy materials toregister. If you hold your shares in ‘‘street name’’ through a broker, bank or other nominee, you willneed to provide your name, phone number and e-mail on the registration website and upload a copy ofa legal proxy that you have obtained from your broker, bank or other nominee. Alternatively, you cane-mail a copy of the legal proxy to VirtualMeeting@viewproxy.com. If you are unable to obtain a legalproxy to vote your shares, you will still be able to attend the 2020 Annual Meeting (but will not be ableto vote your shares) so long as you demonstrate other proof of stock ownership and register to attendthe meeting (other than providing a legal proxy). Appropriate proof of stock ownership to attend the2020 Annual Meeting (but without being able to vote) includes a copy of the stockholder’s bank orbroker statement, the notice of the 2020 Annual Meeting or voting instruction form.Instructions on how to connect and participate online, including how to demonstrate proof ofstock ownership, will be posted at http://viewproxy.com/RBBN/2020.Once you have registered, you will receive an e-mail after your registration has been confirmedalong with a meeting password and, if you hold your shares in ‘‘street name,’’ you will receive a virtualcontrol number. Please be sure to download the software used for the virtual meeting prior to the startof the 2020 Annual Meeting. On the day of the 2020 Annual Meeting, you may enter the meeting athttp://viewproxy.com/RBBN/2020/vm using the meeting password you received.To avoid any delays in the registration process, we encourage you to register in advance by11:59 p.m. Eastern Time on May 31, 2020. We also encourage you to access the meeting prior to the96start time. The online portal will open approximately 30 minutes before the start of the 2020 AnnualMeeting.How can I vote during the 2020 Annual Meeting?Please visit www.fcrvote.com/RBBN in order to vote your shares during the 2020 AnnualMeeting until the polls are closed. You will need your virtual control number in order to vote yourshares. Whether you are a stockholder of record or a holder of our shares in ‘‘street name,’’ yourvirtual control number will be assigned to you in the confirmation e-mail you will receive after youhave registered to attend the 2020 Annual Meeting and your registration has been confirmed. Foradditional information regarding how to register for and attend the 2020 Annual Meeting, see ‘‘Howcan I attend the 2020 Annual Meeting?’’ above.How can I vote my shares without attending the meeting?If you are a stockholder of record, you may vote by proxy in any of the following ways:(cid:129)Submit your proxy by mail.You may complete, date and sign the proxy card and mail it inthe postage-prepaid envelope that you received. The persons named in the proxy card willvote the shares you own in accordance with your instructions on the proxy card you return.If you return the proxy card but do not give any instructions on a particular matterdescribed in this Proxy Statement, the persons named in the proxy card will vote the sharesyou own in accordance with the recommendations of our Board.(cid:129)Submit your proxy over the Internet.If you have Internet access, you may vote over theInternet at www.proxyvote.com by following the instructions set forth on your proxy card. Ifyou submit your proxy over the Internet, it is not necessary to return your proxy card.(cid:129)Submit your proxy by telephone.If you are located in the United States or Canada, you mayvote by telephone by calling 1-800-690-6903 and following the instructions set forth on yourproxy card. If you submit your proxy by telephone, it is not necessary to return your proxycard.The ability to vote by telephone or over the Internet for stockholders of record will beavailable until 11:59 p.m., Eastern Daylight Time on June 1, 2020. In light of possible disruptions inmail service related to the COVID-19 pandemic, we encourage stockholders to submit their proxy viatelephone or online.If your shares are held in the name of a broker, bank or other nominee, please follow thevoting instructions on the forms you received from such broker, bank or other nominee. The availabilityof submitting your voting instructions by telephone or over the Internet will depend upon their votingprocedures.Who is serving as the Company’s inspector of elections?Broadridge Financial Solutions, Inc. has been engaged as our independent inspector ofelections to tabulate stockholder votes for the 2020 Annual Meeting.97How can I change my vote?You may revoke your proxy and change your vote at any time before the polls close at themeeting. You may do this by signing and submitting a new proxy card with a later date, submitting aproxy by telephone or submitting a proxy over the Internet (your latest telephone or Internet proxy iscounted), by giving written notice of revocation to our Secretary prior to the 2020 Annual Meeting orby attending the meeting and voting electronically. If your shares are held in street name, you maychange or revoke your voting instructions by following the specific directions provided to you by yourbank or broker. Attending the meeting by itself, however, will not revoke your proxy.Why are you holding a virtual meeting?Due to the public heath impact of the COVID-19 pandemic and as part of our effort tosupport the health and well-being of our directors, members of management and stockholders who wishto attend the 2020 Annual Meeting, we believe that hosting a virtual meeting this year is in the bestinterest of the Company and its stockholders. We have designed our virtual format to enhance, ratherthan constrain, stockholder access, participation and communication. For example, the virtual formatallows stockholders to communicate with us in advance of, and during, the 2020 Annual Meeting sothey can ask questions of our Board and/or management. You will be able to attend the 2020 AnnualMeeting online and submit your questions by visiting http://viewproxy.com/RBBN/2020/vm. You also willbe able to vote your shares electronically at the 2020 Annual Meeting by following the instructionsabove.What if during the check-in time or during the Annual Meeting I have technical difficulties ortrouble accessing the virtual meeting website?Please be sure that you have registered to attend and download the required software prior tothe start of the 2020 Annual Meeting. If you should have any difficulty accessing the meeting or havetechnical difficulties during the meeting, please contact VirtualMeeting@viewproxy.com.Will there be a question and answer session during the Annual Meeting?As part of the 2020 Annual Meeting, we will hold a live question and answer session, duringwhich we intend to answer appropriate questions submitted during and in advance of the meeting thatare pertinent to the Company and the meeting matters, as time permits.STOCKHOLDER PROPOSALS FOR INCLUSION IN 2021 PROXY STATEMENTTo be considered for inclusion in the proxy statement relating to our annual meeting ofstockholders to be held in 2021, stockholder proposals must be received at our principal executiveoffices no later than December 30, 2020, which is 120 calendar days before the date our proxystatement was released to our stockholders in connection with the 2020 Annual Meeting, and mustotherwise comply with the rules promulgated by the SEC. If the date of next year’s annual meeting ischanged by more than 30 days from the anniversary date of this year’s annual meeting on June 2, 2020,then the deadline is a reasonable time before we begin to print and mail proxy materials.STOCKHOLDER NOMINATIONS AND PROPOSALS FOR PRESENTATIONAT 2021 ANNUAL MEETINGAccording to our by-laws, we must receive proposals of stockholders and director nominationsintended to be presented at the 2021 Annual Meeting but not included in the proxy statement by the98close of business on March 4, 2021, but not before February 2, 2021, which is not later than theninetieth (90th) day nor earlier than the one hundred twentieth (120th) day prior to the first anniversaryof the date of the 2020 Annual Meeting. Such proposals must be delivered to the Secretary of theCompany at our principal executive office. However, in the event the 2021 Annual Meeting isscheduled to be held on a date before May 3, 2021, or after August 11, 2021, which are dates 30 daysbefore or 70 days after the first anniversary of our 2020 Annual Meeting, then your notice must bereceived by us at our principal executive office not earlier than the close of business on the 120th dayprior to such annual meeting and not later than the close of business on the later of the 90th day beforethe scheduled date of such annual meeting or the 10th day after the day on which we first make apublic announcement of the date of such annual meeting. Any proposals that are not made inaccordance with the above standards may not be presented at the 2021 Annual Meeting.STOCKHOLDERS SHARING THE SAME ADDRESSWe have adopted a procedure called ‘‘householding.’’ Under this procedure, we are deliveringonly one copy of the 2019 Annual Report and Proxy Statement to multiple stockholders who share thesame address, unless we have received contrary instructions from an affected stockholder. Stockholderswho participate in householding will continue to receive separate proxy cards.We will deliver promptly upon written or oral request a separate copy of the 2019 AnnualReport and the Proxy Statement to any stockholder at a shared address to which a single copy of eitherof those documents was delivered. To receive a separate copy of the 2019 Annual Report or ProxyStatement, please submit your request to Broadridge Financial Solutions by calling 1-800-579-1639 or inwriting addressed to Ribbon Communications Inc., 4 Technology Park Drive, Westford, MA 01886 Attn:Investor Relations.If you are a holder of record and would like to revoke your householding consent and receivea separate copy of an annual report or Proxy Statement in the future, please contact BroadridgeHouseholding Department, 51 Mercedes Way, Edgewood, NY 11717 or by calling 1-800-542-1061. Youwill be removed from the householding program within 30 days of receipt of the revocation of yourconsent.Any stockholders of record who share the same address and currently receive multiple copiesof our annual report and Proxy Statement who wish to receive only one copy of these materials perhousehold in the future should contact Broadridge Householding Department at the contactinformation listed above to participate in the householding program.A number of brokerage firms have instituted householding. If you hold your shares in ‘‘streetname,’’ please contact your bank, broker or other holder of record to request information abouthouseholding.FORM 10-KOur Annual Report on Form 10-K for the year ended December 31, 2019, which was filed withthe SEC on February 28, 2020, is being delivered to stockholders in connection with this proxysolicitation. With the payment of an appropriate processing fee, we will provide copies of the exhibitsto our Annual Report on Form 10-K. Please address all such requests to the Investor Relationsdepartment at our principal executive offices at 4 Technology Park Drive, Westford, MA 01886.9926APR201818531418OTHER MATTERSOur Board knows of no other matters to be submitted at the meeting and the deadline underour by-laws for submission of matters by stockholders has passed. If any other matters properly comebefore the meeting, it is the intention of the persons named in the enclosed form of proxy to vote theshares they represent in their discretion.The accompanying proxy is solicited by and on behalf of our Board. We will pay the costs ofsoliciting proxies from stockholders. In addition to soliciting proxies by mail, by telephone and via theInternet, our directors, executive officers and other employees may solicit proxies, either personally orby other electronic means, on our behalf, without special compensation. We will also request brokeragehouses, custodians, nominees and fiduciaries to forward copies of the proxy materials to those personsfor whom they hold shares and request instructions for voting the proxies. We will reimburse suchbrokerage houses and other persons for their reasonable expenses in connection with this distribution.By Order of the Board of Directors,Westford, MassachusettsJustin K. FergusonApril 29, 2020Executive Vice President, General Counsel andCorporate Secretary100APPENDIX ARIBBON COMMUNICATIONS INC.Discussion of Non-GAAP Financial MeasuresRibbon Communications’ management uses several different financial measures, both GAAPand non-GAAP, in analyzing and assessing the overall performance of the business, making operatingdecisions, planning and forecasting future periods, and determining payments under compensationprograms. Our annual financial plan is prepared both on a GAAP and non-GAAP basis, and thenon-GAAP annual financial plan is approved by our board of directors. Budgeting and forecasting forrevenue and expenses are conducted on a non-GAAP basis and actual results on a non-GAAP basis areassessed against the annual financial plan. We consider the use of non-GAAP financial measureshelpful in assessing the core performance of our continuing operations and when planning andforecasting future periods. By continuing operations, we mean the ongoing results of the businessadjusted for certain expenses and credits, including, but not limited to, stock-based compensation;amortization of intangible assets; acquisition-related facilities adjustments; certain litigation costs;impairment of goodwill; settlement expense; cancelled debt offering costs; acquisition- and integration-related expense; restructuring and related expense; the gain on the settlement of litigation; the gain onthe reduction to deferred purchase consideration; the tax effect of these adjustments; and the incometax benefit arising from purchase accounting. Effective for the first quarter of 2019 and for subsequentreporting periods, we no longer adjust for the impact of the adoption of the new revenue standard in2018. While our management uses non-GAAP financial measures as a tool to enhance theirunderstanding of certain aspects of our financial performance, our management does not consider thesemeasures to be a substitute for, or superior to, GAAP measures. In addition, our presentations of thesemeasures may not be comparable to similarly titled measures used by other companies. Thesenon-GAAP financial measures should not be considered alternatives for, or in isolation from, thefinancial information prepared and presented in accordance with GAAP.Investors are cautioned that there are material limitations associated with the use ofnon-GAAP financial measures as an analytical tool. In particular, many of the adjustments to ourfinancial measures reflect the exclusion of items that are recurring and will be reflected in our financialresults for the foreseeable future.Impact of New Revenue StandardFor periods prior to the first quarter of 2019, we adjusted our non-GAAP financial measuresfor eliminated revenue resulting from our adoption of the new revenue recognition standard in 2018and related cost of revenue. Effective for the first quarter of 2019 and for subsequent reportingperiods, we no longer adjust our non-GAAP financial measures for the 2018 revenue standardadoption.Stock-Based CompensationStock-based compensation expense is different from other forms of compensation, as it is anon-cash expense. For example, a cash salary generally has a fixed and unvarying cash cost. In contrast,the expense associated with an equity-based award is generally unrelated to the amount of cashultimately received by an employee, and the cost to us is based on a stock-based compensationvaluation methodology, subjective assumptions and the variety of award types, all of which may varyover time. We evaluate performance without these measures because stock-based compensation expenseis influenced by the Company’s stock price and other factors, such as volatility and interest rates thatare beyond our control. The expense related to stock-based awards is generally not controllable in theA-1short-term and can vary significantly based on the timing, size and nature of awards granted. As such,we do not include such charges in our operating plans, and we believe that presenting non-GAAPoperating results that exclude stock-based compensation provides investors with visibility and insightinto our management’s method of analysis and the Company’s core operating performance. It isreasonable to expect that stock-based compensation will continue in future periods.Amortization of Intangible AssetsWe exclude the amortization of acquired intangible assets from non-GAAP expense andincome measures. These amortization amounts are inconsistent in frequency and amount and aresignificantly impacted by the timing and size of acquisitions. Although we exclude amortization ofacquired intangible assets from our non-GAAP expenses, we believe that it is important for investors tounderstand that intangible assets contribute to revenue generation. We believe that excluding non-cashamortization of intangible assets facilitates the comparison of our financial results to our historicaloperating results and to other companies in our industry as if the acquired intangible assets had beendeveloped internally rather than acquired. Amortization of intangible assets that relate to pastacquisitions will recur in future periods until such intangible assets have been fully amortized.Acquisition-Related Facilities AdjustmentsGAAP accounting requires that the deferred rent liability of an acquired company be writtenoff as part of purchase accounting and that a combined company’s rent expense on a straight-line basisbegin as of the acquisition date. As a result, we recorded more rent expense than would have beenrecognized but for the purchase accounting treatment of GENBAND’s assumed deferred rent liability.We included this adjustment, which related to the acquisition of GENBAND, through the fourthquarter of 2018, to allow for more complete comparisons to the financial results of our historicaloperations and the financial results of peer companies.Litigation CostsWe were involved in litigation with a certain competitor with whom we reached a settlement inthe second quarter of 2019, under which the competitor agreed to pay us an aggregate amount of$63.0 million (see also ‘‘Gain on Litigation Settlement’’ below). In connection with this litigation, weincurred litigation costs beginning in the fourth quarter of 2017. These costs are included as acomponent of general and administrative expense. In the third quarter of 2019, we received$1.5 million of insurance proceeds in connection with this litigation, which reduced the expensereported in both the third quarter of and fiscal year 2019. In addition, we are currently the plaintiff inlitigation with a former business partner of GENBAND regarding amounts loaned to this formerbusiness partner that were never repaid. During the fourth quarter of 2019, we incurred $1.7 million oflegal costs in connection with this litigation. We believe that such costs are not part of our corebusiness or ongoing operations. Accordingly, we believe that excluding the litigation costs related tothese specific legal matters facilitates the comparison of our financial results to our historical operatingresults and to other companies in our industry.Annual Goodwill EvaluationWe performed our annual testing for impairment of goodwill in the fourth quarter of 2019. Weoperate as a single operating segment with one reporting unit and consequently we evaluate goodwillfor impairment based on an evaluation of the fair value of the Company as a whole. Upon completionof the goodwill impairment test, we determined that it was necessary to reduce our goodwill carryingamount and recorded a non-cash impairment charge in the fourth quarter of 2019. We believe thatsuch non-cash costs are not part of our core business or ongoing operations. Accordingly, we believeA-2that excluding the goodwill impairment charge facilitates the comparison of our financial results to ourhistorical operating results and to other companies in our industry.Settlement ExpenseIn the first quarter of 2018, we recorded $1.7 million of expense related to settlements,comprised of $1.4 million for the settlement of litigation in connection with our acquisition ofTaqua LLC and $0.3 million of patent litigation settlement expense. These amounts are included ascomponents of general and administrative expense. We believe that such settlement costs are not partof our core business or ongoing operations, are unplanned and generally not within our control.Accordingly, we believe that excluding these costs facilitates the comparison of our financial results toour historical operating results and other companies in our industry.Cancelled Debt Offering CostsIn the fourth quarter of 2018, we announced that we intended to offer, subject to marketconditions and other factors, $150 million aggregate principal amount of convertible senior notes due2023 in a private offering to qualified institutional buyers. Subsequent to the announcement, wedetermined the then-current market conditions were not conducive for an offering on terms that wouldbe in the best interests of our stockholders. In connection with this offering, we incurred $1.0 million ofexpense. We do not consider these debt offering costs to be related to the continuing operations of theCompany. We believe that excluding these cancelled debt offering costs facilitates the comparison ofour financial results to our historical operating results and to other companies in our industry.Acquisition- and Integration-Related ExpenseWe consider certain acquisition- and integration-related costs to be unrelated to the organiccontinuing operations of our acquired businesses and the Company, and such costs are generally notrelevant to assessing or estimating the long-term performance of the acquired assets. In addition, thesize, complexity and/or volume of an acquisition, which often drive the magnitude of acquisition- andintegration-related costs, may not be indicative of future acquisition- and integration-related costs. Byexcluding these acquisition- and integration-related costs from our non-GAAP measures, we believethat our management is better able to evaluate our ability to utilize our existing assets and estimate thelong-term value that the acquired assets will generate for us. We exclude certain acquisition- andintegration-related costs to allow more accurate comparisons of our financial results to our historicaloperations and the financial results of less acquisitive peer companies. In addition, we believe thatproviding supplemental non-GAAP measures that exclude these items allows management and investorsto consider the ongoing operations of the business both with and without such expenses.Restructuring and Related ExpenseWe have recorded restructuring and related expense to streamline operations and reduceoperating costs by closing and consolidating certain facilities and reducing our worldwide workforce. Wereview our restructuring accruals and facilities requirements regularly and record adjustments to theseestimates as required. We believe that excluding restructuring and related expense facilitates thecomparison of our financial results to our historical operating results and to other companies in ourindustry, as there are no future revenue streams or other benefits associated with these costs.Gain on Litigation SettlementWe were involved in litigation with a certain competitor with whom we reached a settlement inthe second quarter of 2019, under which such competitor agreed to pay us an aggregate amount of$63.0 million (see ‘‘Litigation Costs’’ above). This gain is included as a component of other incomeA-3(expense), net. We believe that such gains are not part of our core business or ongoing operations.Accordingly, we believe that excluding the gain on litigation settlement related to this specific legalmatter facilitates the comparison of our financial results to our historical results and to othercompanies in our industry.Reduction to Deferred Purchase ConsiderationWe recorded $8.1 million in other income (expense), net, in the first quarter of 2019 related tothe reduction of cash deferred purchase consideration for Edgewater. We believe that such reductionsto cash deferred purchase consideration are not part of our core business or ongoing operations, asthey relate to specific acquisitive transactions. Accordingly, we believe that excluding such reductionsrelated to acquisition transactions facilitates the comparison of our financial results to our historicalresults and to other companies in our industry.Tax Effect of Non-GAAP AdjustmentsBeginning with the second quarter of 2019, non-GAAP income tax expense is presented basedon an estimated tax rate applied against forecasted annual non-GAAP income. The non-GAAP incometax expense assumes no available net operating losses or any valuation allowances as a result ofreporting significant cumulative non-GAAP income over the past several years. Due to themethodology applied to our estimated annual tax rate, our estimated tax rate on non-GAAP incomewill differ from our GAAP tax rate and from our actual tax liabilities.Tax Benefit Arising from Purchase AccountingIn 2018, we assessed our ability to use our tax benefits and determined that it was more likelythan not that some of these benefits will be recognized. As a result, we reduced our deferred tax assetvaluation allowance, resulting in an income tax benefit of $0.7 million and a reduction to our incometax provision in 2018. We believe that such a benefit is not part of our core business or ongoingoperations, as it was the result of an acquisition and was unrelated to our revenue-producing activities.Accordingly, we believe that excluding the benefit arising from this adjustment to our income taxprovision facilitates the comparison of our financial results to our historical results and to othercompanies in our industry.Adjusted EBITDAWe use Adjusted EBITDA as a supplemental measure to review and assess our performance.We calculate Adjusted EBITDA by excluding from net income (loss): interest income (expense), net;income tax provision; depreciation; and amortization of intangible assets. In addition, we exclude fromnet income (loss): historical adjustments to revenue and cost of revenue related to our adoption of thenew revenue standard (for periods prior to the first quarter of 2019); stock-based compensationexpense; acquisition-related facilities adjustments; certain litigation costs; impairment of goodwill;settlement expense; cancelled debt offering costs; acquisition- and integration-related expense;restructuring and related expense; and other income (expense), net. In general, we add back theexpenses that we consider to be non-cash and/or not part of our ongoing operations. Adjusted EBITDAis a non-GAAP financial measure that is used by our investing community for comparative andvaluation purposes. We disclose this metric to support and facilitate our dialogue with research analystsand investors. Other companies may calculate Adjusted EBITDA differently than we do, limiting itsusefulness as a comparative measure.We believe that providing non-GAAP information to investors, in addition to the GAAPpresentation, will allow investors to view the financial results in the way our management views them.We further believe that providing this information helps investors to better understand our corefinancial and operating performance and evaluate the efficacy of the methodology and informationused by our management to evaluate and measure such performance.A-4RIBBON COMMUNICATIONS INC.Reconciliation of Non-GAAP and GAAP Financial Measures (continued)(in thousands, except per share amounts)(unaudited)Year endedDecember 31,December 31,20192018GAAP Net loss.............................................$(130,075)$(76,810)Adjustment to revenue for new revenue standard....................—10,045Adjustment to cost of revenue for new revenue standard...............—(110)Stock-based compensation.....................................12,60111,072Amortization of intangible assets................................49,22549,723Acquisition-related facilities adjustment...........................—966Litigation costs.............................................7,7347,682Impairment of goodwill.......................................164,300—Settlement expense..........................................—1,730Cancelled debt offering costs...................................—1,003Acquisition- and integration-related expense........................12,95316,951Restructuring and related expense...............................16,39917,015Gain on litigation settlement...................................(63,000)—Reduction to deferred purchase consideration.......................(8,124)—Tax effect of non-GAAP adjustments.............................(10,560)—Tax benefit arising from purchase accounting.......................—(718)Non-GAAP net income.......................................$51,453$38,549Earnings (loss) per shareGAAP Loss per share........................................$(1.19)$(0.74)Adjustment to revenue for new revenue standard....................—0.10Adjustment to cost of revenue for new revenue standard...............—*Stock-based compensation.....................................0.110.11Amortization of intangible assets................................0.460.48Acquisition-related facilities adjustment...........................—0.01Litigation costs.............................................0.070.07Impairment of goodwill.......................................1.49—Settlement expense..........................................—0.02Cancelled debt offering costs...................................—0.01Acquisition- and integration-related expense........................0.120.16Restructuring and related expense...............................0.150.16Gain on litigation settlement...................................(0.57)—Reduction to deferred purchase consideration.......................(0.07)—Tax effect of non-GAAP adjustments.............................(0.10)—Tax benefit arising from purchase accounting.......................—(0.01)Non-GAAP Diluted earnings per share............................$0.47$0.37Shares used to compute diluted earnings per share or (loss) per shareGAAP Shares used to compute loss per share.....................109,734103,916Non-GAAP Shares used to compute diluted earnings per share.........110,271104,438*Less than $0.01 impact on earnings (loss) per share.A-5RIBBON COMMUNICATIONS INC.Reconciliation of Non-GAAP and GAAP Financial Measures (continued)(in thousands, except per share amounts)(unaudited)Year endedDecember 31,December 31,20192018Adjusted EBITDAGAAP Net loss.............................................$(130,075)$(76,810)Interest expense, net.........................................3,8774,230Income tax provision.........................................7,1823,400Depreciation...............................................11,94911,200Amortization of intangible assets................................49,22549,723Adjustment to revenue for new revenue standard....................—10,045Adjustment to cost of revenue for new revenue standard...............—(110)Stock-based compensation.....................................12,60111,072Acquisition-related facilities adjustment...........................—966Litigation costs.............................................7,7347,682Impairment of goodwill.......................................164,300—Settlement expense..........................................—1,730Cancelled debt offering costs...................................—1,003Acquisition- and integration-related expense........................12,95316,951Restructuring and related expense...............................16,39917,015Other (income) expense, net...................................(70,444)3,772Non-GAAP Adjusted EBITDA..................................$85,701$61,869Adjusted EBITDA as a percentage of revenue (‘‘Adjusted EBITDA margin’’)GAAP Net income (loss) as a percentage of revenue..................(cid:2)93.3%(cid:2)1.1%Interest expense (income), net..................................0.3%0.9%Income tax provision (benefit)..................................0.8%0.5%Depreciation...............................................1.9%1.7%Amortization of intangible assets................................7.7%7.0%Adjustment to revenue for new revenue standard....................0.0%1.2%Stock-based compensation.....................................2.8%2.2%Acquisition-related facilities adjustment...........................0.0%0.1%Litigation costs.............................................1.1%1.2%Impairment of goodwill.......................................101.9%0.0%Cancelled debt offering costs...................................0.0%0.6%Acquisition- and integration-related expense........................3.8%1.6%Restructuring and related expense...............................*1.1%Other (income) expense, net...................................(cid:2)0.2%0.4%Non-GAAP Adjusted EBITDA margin.............................26.8%17.4%*Less than 0.1% impact on Adjusted EBITDA as a percentage of revenue.A-6APPENDIX BRIBBON COMMUNICATIONS INC.AMENDED AND RESTATED 2019 INCENTIVE AWARD PLAN1.Purpose.The purpose of this Ribbon Communications Inc. Amended and Restated 2019 IncentiveAward Plan (as may be further amended from time to time, the ‘‘Plan’’) is to advance the interests ofthe stockholders of Ribbon Communications Inc., a Delaware corporation (the ‘‘Company’’), byenhancing the Company’s ability to attract, retain and motivate persons who are expected to makeimportant contributions to the Company and by providing such persons with equity ownershipopportunities and performance-based incentives that are intended to align their interests with those ofthe Company’s stockholders. Except where the context otherwise requires, the term ‘‘Company’’ shallinclude any of the Company’s present or future parent or subsidiary corporations as defined inSections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulationspromulgated thereunder (the ‘‘Code’’) (and any other parent or subsidiary of the Company as definedand interpreted for purposes of Form S-8 under the Securities Act of 1933, as amended (the ‘‘SecuritiesAct’’) or any successor form). Prior to this amendment and restatement, the predecessor to this Plan,the Ribbon CommunicationsInc. 2019 Incentive Award Plan (the ‘‘Original Plan’’) became effective asof June5, 2019 (the ‘‘Original Effective Date’’). This amendment and restatement of the Original Planshall be effective as of the date of approval by the Company’s stockholders at its 2020 annual meetingof stockholders (the ‘‘Restatement Effective Date’’). No awards may be granted under the Company’sAmended and Restated Stock Incentive Plan, the Company’s 2008 Stock Incentive Plan or theCompany’s 2012 Amended Performance Technologies, Incorporated Omnibus Incentive Plan(collectively, the ‘‘Prior Plans’’) on or after the Original Effective Date. To the extent the Plan is notapproved by the Company’s stockholders at its 2020 annual meeting of stockholders, the Plan shall notbecome effective, the Original Plan, as approved by the Company’s stockholders on the OriginalEffective Date, will remain in effect in accordance with its terms, and awards may be granted under theOriginal Plan, as so approved, on and after the date of the 2020 annual meeting of stockholderswithout regard for the terms herein.2.Eligibility.All of the Company’s employees, officers, and non-employee directors (each, a ‘‘Director’’), aswell as consultants and advisors to the Company (as the terms consultants and advisors are defined andinterpreted for purposes of Form S-8 under the Securities Act or any successor form) (each, an‘‘Eligible Individual’’) are eligible to receive options, stock appreciation rights (‘‘SARs’’), restrictedstock, restricted stock units (including, without limitation, performance stock units), and other stock- orcash-based awards (each, an ‘‘Award’’) under the Plan. Each Eligible Individual who receives an Awardunder the Plan is deemed a ‘‘Participant’’.3.Administration and Delegation.(a)Administration.Subject to any delegation pursuant to Sections 3(b) and (c), the Plan willbe administered by the Board. The Board shall have authority to grant Awards and to adopt, amendand repeal such administrative rules, guidelines and practices relating to the Plan as it shall deemadvisable. The Board may construe and interpret the terms of the Plan and any Award agreementsentered into under the Plan. The Board may correct any defect, supply any omission or reconcile anyinconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient tocarry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions byB-1the Board shall be made in the Board’s sole discretion and shall be final and binding on all personshaving or claiming any interest in the Plan or in any Award. No director or person acting pursuant tothe authority delegated by the Board shall be liable for any action or determination relating to orunder the Plan or any Award, to the extent such action or determination is made in good faith.(b)Appointment of Committees.To the extent permitted by applicable law, the Board maydelegate any or all of its powers under the Plan to one or more committees or subcommittees of theBoard (each, a ‘‘Committee’’). All references in the Plan to the ‘‘Board’’ shall mean the Board or aCommittee or the officers referred to in Section 3(c) to the extent that the Board’s powers or authorityunder the Plan have been delegated to such Committee or officers.(c)Delegation to Officers.Subject to any requirements of applicable law (including asapplicable Sections 152 and 157(c) of the General Corporation Law of the State of Delaware), theBoard may delegate to one or more officers of the Company the power to grant Awards (subject to anylimitations under the Plan) to Eligible Individuals and to exercise such other powers under the Plan asthe Board may determine, provided that the Board shall fix the maximum number of shares subject toAwards that the officers may grant, and the time period in which the Awards may be granted; andprovided further, that no officer shall be authorized to grant Awards to any ‘‘executive officer’’ of theCompany (as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the‘‘Exchange Act’’)) or to any ‘‘officer’’ of the Company (as defined by Rule 16a-1(f) under the ExchangeAct).4.Stock Available for Awards.(a)Number of Shares.Subject to Section 4(b) and adjustment under Section 10, theaggregate number of shares of common stock, $0.0001 par value per share, of the Company (the‘‘Common Stock’’) reserved for Awards under the Plan is equal to 15,551,611 shares of Common Stock,consisting of (i)14,500,000 shares of Common Stock that were previously approved by stockholders onthe Original Effective Date (7,000,000 shares of Common Stock that were approved under the OriginalPlan, plus 7,500,000 shares of Common Stock that were approved by stockholders on the RestatementEffective Date), plus (ii)1,051,611 shares of Common Stock previously reserved for issuance under theAmended and Restated Stock Incentive Plan that remained available for grant as of the OriginalEffective Date. Notwithstanding anything to the contrary herein, no more than 15,551,611 shares ofCommon Stock may be issued as Incentive Stock Options (as defined below) under the Plan. Sharesissued under the Plan may consist in whole or in part of authorized but unissued shares or treasuryshares (if any).(b)Share Count.Shares issued pursuant to Awards will count against the shares of CommonStock available for issuance under the Plan as one (1) share for every one (1) share issued inconnection with the Award. If any Award (or award under a Prior Plan) expires or is terminated,surrendered or canceled without having been fully exercised, is cash-settled, is forfeited in whole or inpart (including as the result of shares of Common Stock subject to such Award (or award under a PriorPlan) being repurchased by the Company at the original issuance price pursuant to a contractualrepurchase right), then shares of Common Stock covered by such Award (or award under a Prior Plan)shall, to the extent of such termination, surrender, cancellation, cash-settlement or forfeiture, againbecome available for the grant of Awards under the Plan. Notwithstanding the foregoing, (i) sharestendered by the Participant or withheld by the Company in payment of the exercise price of an Option,(ii) shares tendered by the Participant or withheld by the Company to satisfy any tax withholdingobligation with respect to an Award, (iii) shares subject to a SAR that are not issued in connectionwith its share settlement on exercise thereof, and (iv) shares of Common Stock repurchased by theCompany on the open market using the proceeds from the exercise of an Award, shall not increase thenumber of shares of Common Stock available for the future grant of Awards. In the case of IncentiveB-2Stock Options, the foregoing provisions shall be subject to any limitations under the Code.Additionally, in the event that a company acquired by the Company or any subsidiary thereof or withwhich the Company or any subsidiary thereof combines has shares available under a pre-existing planapproved by its stockholders and not adopted in contemplation of such acquisition or combination, theshares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extentappropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in suchacquisition or combination to determine the consideration payable to the holders of common stock ofthe entities party to such acquisition or combination) may be used for Awards under the Plan and shallnot reduce the shares of Common Stock authorized for grant under the Plan (and shares of CommonStock subject to such Awards shall not be added to the shares available for Awards under the Plan asprovided in Section 4(a) above); provided that Awards using such available shares of Common Stockshall not be made after the date awards or grants could have been made under the terms of thepre-existing plan, absent the acquisition or combination, and shall only be made to individuals whowere not employed by or providing services to the Company or its subsidiaries immediately prior tosuch acquisition or combination.(c)Limit on Awards to Directors.Notwithstanding any provision to the contrary in the Plan,during any calendar year, the sum of the grant date fair value (determined in accordance with FinancialAccounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) ofAwards and the amount of any cash fees granted or paid to a Director, in respect of such Director’sservices as a non-employee director for such year, shall not exceed $650,000. The Board may makeexceptions to this limit for individual Directors in extraordinary circumstances, as the Board maydetermine in its discretion, provided that the Director receiving such additional compensation may notparticipate in the decision to award such compensation or in other contemporaneous compensationdecisions involving Directors.(d)Substitute Awards.In connection with a corporate transaction with another entity, suchas a merger or consolidation of an entity with the Company or the acquisition by the Company ofproperty or stock of an entity, the Board may grant Awards in substitution for any options or otherstock or stock-based awards granted by such entity or an affiliate thereof. Substitute Awards may begranted on such terms as the Board deems appropriate in the circumstances, notwithstanding anylimitations on Awards contained in the Plan (subject to compliance with the applicable requirements ofSection 424 of the Code and Section 409A of the Code (together with the Department of Treasuryregulations and other interpretive guidance issued thereunder, ‘‘Section 409A’’)). Substitute Awardsshall not count against the overall share limit set forth in Section 4(a), except as may be required byreason of Section 422 and related provisions of the Code.5.Stock Options.(a)General.The Board may grant options to purchase Common Stock (each, an ‘‘Option’’)and determine the number of shares of Common Stock to be covered by each Option, the exerciseprice of each Option and the conditions and limitations applicable to the exercise of each Option,including conditions relating to applicable federal or state securities laws, as it considers necessary oradvisable. An Option that is not an Incentive Stock Option shall be designated a ‘‘Nonstatutory StockOption.’’(b)Incentive Stock Options.An Option that the Board intends to be an ‘‘incentive stockoption’’ as defined in Section 422 of the Code (an ‘‘Incentive Stock Option’’) shall only be granted toemployees of the Company, any of its present or future parent or subsidiary corporations as defined inSections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receiveIncentive Stock Options under the Code, and shall be subject to and shall be construed consistentlywith the requirements of Section 422 of the Code. The Company shall have no liability to a Participant,B-3or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Optionis not an Incentive Stock Option or for any action taken by the Board, including without limitation theconversion of an Incentive Stock Option to a Nonstatutory Stock Option.(c)Exercise Price.The Board shall establish the exercise price of each Option and specifysuch exercise price in the applicable option agreement. Subject to Section 4(d), the exercise price shallbe not less than 100% of the fair market value (as defined below) on the date the Option is granted.(d)Duration of Options.Each Option shall be exercisable at such times and subject to suchterms and conditions as the Board may specify in the applicable option agreement; provided that,notwithstanding the foregoing and unless determined otherwise by the Company, in the event that onthe last business day of the term of an Option (other than an Incentive Stock Option) (i) the exerciseof the Option is prohibited by applicable law, as determined by the Company, or (ii) shares ofCommon Stock may not be purchased or sold by the applicable Participant due to any Company insidertrading policy (including blackout periods) or a ‘‘lock-up’’ agreement undertaken in connection with anissuance of securities by the Company, the term of the Option shall be extended until the date that isthirty (30) days after the end of the legal prohibition, black-out period or lock-up agreement, asdetermined by the Company; provided, however, in no event shall the extension last beyond the termof the applicable Option (which, in no event will exceed ten (10) years from the date of grant).(e)Exercise of Option.Options may be exercised by delivery to the Company of a writtennotice of exercise signed by the proper person or by any other form of notice (including electronicnotice) approved by the Company, together with payment in full as specified in Section 5(f) for thenumber of shares for which the Option is exercised and any other documentation required by theBoard. The form of such notice of exercise shall be determined by the Company in its sole discretion.Shares of Common Stock subject to the Option will be delivered by the Company as soon as reasonablypracticable following exercise.(f)Payment Upon Exercise.Common Stock purchased upon the exercise of an Optiongranted under the Plan shall be paid for as follows:(i)in cash or by check, payable to the order of the Company (or, to the extentdetermined appropriate by the Company in lieu of cash or check, through electronic paymentthrough a stock plan administrator or other third party);(ii)except as may otherwise be provided in the applicable option agreement, by(A) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliverpromptly to the Company sufficient funds to pay the exercise price and any required taxwithholding and (B) delivery by the Participant to the Company of a copy of irrevocable andunconditional instructions to a creditworthy broker to deliver promptly to the Company cash or acheck sufficient to pay the exercise price and any required tax withholding;(iii)to the extent provided for in the applicable option agreement or approved by theBoard, in its sole discretion, (A) by the withholding of shares of Common Stock otherwise issuableunder an Award or (B) by delivery (either by actual delivery or attestation) of shares of CommonStock owned by the Participant valued in the manner determined by (or in a manner approved by)the Board, provided (x) such method of payment is then permitted under applicable law, (y) suchCommon Stock, if acquired directly from the Company, was owned by the Participant for suchminimum period of time, if any, as may be established by the Board in its sole discretion, and(z) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or othersimilar requirements;B-4(iv)to the extent permitted by applicable law and provided for in the applicable optionagreement or approved by the Board, in its sole discretion, by payment of such other lawfulconsideration as the Board may determine; or(v)by any combination of the above permitted forms of payment.(g)Fair Market Value.Fair market value of a share of Common Stock for purposes ofestablishing the exercise price of each Option under Section 5(c) and the exercise price of each SARunder Section 6(c) will be determined as follows:(i)if the Common Stock trades on a national securities exchange, the closing sale price(for the primary trading session) on the date of grant;(ii)if the Common Stock does not trade on any such exchange, the average of the closingbid and ask prices for the date of grant as reported by the principal market on which the CommonStock is then traded, or if there are no such closing bid and ask prices, the average of the bid andask prices as reported by any other commercial service for the date of grant; or(iii)if the Common Stock does not trade on any such exchange and there are no bid andasked prices available for determination under Section 5(g)(ii), the fair market value as determinedby the Board in its discretion.For any date that is not a trading day, the fair market value of a share of Common Stock forsuch date will be determined by using the closing sale price or average of the bid and asked prices, asappropriate, for the immediately following trading day and with the timing in the formulas aboveadjusted accordingly. The Board can substitute a particular time of day or other measure of ‘‘closingsale price’’ or ‘‘bid and asked prices’’ if appropriate because of exchange or market procedures or can,in its sole discretion, use weighted averages either on a daily basis or such longer period as complieswith Section 409A.(h)Limitation on Repricing.Other than pursuant to Section 10, the Board shall not withoutthe approval of the Company’s stockholders: (i) lower the exercise price of an Option, (ii) cancel anOption when the exercise price per share exceeds the fair market value of one share in exchange forcash or another Award (other than in connection with a Change in Control), or (iii) take any otheraction with respect to an Option that would be treated as a repricing under the rules and regulations ofthe principal U.S. national securities exchange on which the shares of Common Stock are listed.(i)No Reload Options.No Option granted under the Plan shall contain any provisionentitling the Participant to the automatic grant of additional Options in connection with the exercise ofthe original Option.(j)No Dividend Equivalents.No Option shall provide for the payment or accrual of dividendequivalents.6.Stock Appreciation Rights.(a)General.The Board may grant Awards consisting of a SAR entitling the holder, uponexercise, to receive an amount in Common Stock or cash or a combination thereof (such form to bedetermined by the Board) determined in whole or in part by reference to appreciation, from and afterthe date of grant, in the fair market value of a share of Common Stock over the exercise priceestablished pursuant to Section 6(c). The date as of which such appreciation or other measure isdetermined shall be the exercise date.B-5(b)Grants.SARs may be granted in tandem with, or independently of, Options grantedunder the Plan.(1)Tandem Awards.When SARs are expressly granted in tandem with Options, (i) theSAR will be exercisable only at such time or times, and to the extent, that the related Option isexercisable (except to the extent designated by the Board in connection with a ReorganizationEvent (as defined below)) and will be exercisable in accordance with the procedure required forexercise of the related Option; (ii) the SAR will terminate and no longer be exercisable upon thetermination or exercise of the related Option, except to the extent designated by the Board inconnection with a Reorganization Event and except that a SAR granted with respect to less thanthe full number of shares covered by an Option will not be reduced until the number of shares asto which the related Option has been exercised or has terminated exceeds the number of sharesnot covered by the SAR; (iii) the Option will terminate and no longer be exercisable upon theexercise of the related SAR; and (iv) the SAR will be transferable only with the related Option.(2)Independent SARs.A SAR not expressly granted in tandem with an Option willbecome exercisable at such time or times, and on such conditions, as the Board may specify in theSAR Award.(c)Exercise Price.The Board shall establish the exercise price of each SAR and specify it inthe applicable SAR agreement. Subject to Section 4(d) and Section 6(i), the exercise price shall not beless than 100% of the fair market value on the date the SAR is granted; provided that if the Boardapproves the grant of a SAR with an exercise price to be determined on a future date, the exerciseprice shall be not less than 100% of the fair market value on such future date.(d)Term.Each SAR shall be exercisable at such times and subject to such terms andconditions as the Board may specify in the applicable SAR agreement; provided that, notwithstandingthe foregoing and unless determined otherwise by the Company, in the event that on the last businessday of the term of a SAR (i) the exercise of the SAR is prohibited by applicable law, as determined bythe Company or (ii) shares of Common Stock may not be purchased or sold by the applicableParticipant due to any Company insider trading policy (including blackout periods) or a ‘‘lock-up’’agreement undertaken in connection with an issuance of securities by the Company, the term of theSAR shall be extended until the date that is thirty (30) days after the end of the legal prohibition,black-out period or lock-up agreement, as determined by the Company; provided, however, in no eventshall the extension last beyond the term of the applicable SAR (which, in no event will exceed ten(10) years from the date of grant).(e)Exercise.SARs may be exercised by delivery to the Company of a written notice ofexercise signed by the proper person or by any other form of notice (including electronic notice)approved by the Company, together with any other documents required by the Board. The form ofsuch notice of exercise shall be determined by the Company in its sole discretion.(f)Limitation on Repricing.Other than pursuant to Section 10, the Board shall not withoutthe approval of the Company’s stockholders: (i) lower the exercise price of a SAR, (ii) cancel a SARwhen the exercise price per share exceeds the fair market value of one share in exchange for cash oranother Award (other than in connection with a Change in Control), or (iii) take any other action withrespect to a SAR that would be treated as a repricing under the rules and regulations of the principalU.S. national securities exchange on which the shares of Common Stock are listed.(g)No Reload Rights.No SAR granted under the Plan shall contain any provision entitlingthe grantee to the automatic grant of additional SARs in connection with the exercise of the originalSAR.B-6(h)No Dividend Equivalents.No SAR shall provide for the payment or accrual of dividendequivalents.(i)Substitution of SARs.The Board may provide in the applicable option agreementevidencing the grant of an Option that the Board, in its sole discretion, shall have the right tosubstitute a SAR for such Option at any time prior to or upon exercise of such Option; provided, thatsuch SAR shall be exercisable with respect to the same number of shares of Common Stock for whichsuch substituted Option would have been exercisable, and shall also have the same exercise price andremaining term as the substituted Option.7.Restricted Stock; Restricted Stock Units.(a)General.The Board may grant Awards entitling Participants to acquire shares ofCommon Stock (‘‘Restricted Stock’’), subject to the right of the Company to repurchase all or part ofsuch shares at their issue price or other stated or formula price (or to require forfeiture of such sharesif issued at no cost) from the Participant in the event that conditions specified by the Board in theapplicable Award are not satisfied prior to the end of the applicable restriction period or periodsestablished by the Board for such Award. Instead of granting Awards for Restricted Stock, the Boardmay grant Awards entitling the recipient to receive shares of Common Stock or cash to be delivered atthe time of (or following) the vesting of such Award (‘‘Restricted Stock Units’’) (Restricted Stock andRestricted Stock Units are each referred to herein as a ‘‘Restricted Stock Award’’).(b)Terms and Conditions for all Restricted Stock Awards.The Board shall determine theterms and conditions of a Restricted Stock Award, including the conditions for vesting, settlement andrepurchase (or forfeiture) and the issue price, if any.(c)Additional Provisions Relating to Restricted Stock.(1)Dividends.Any dividends (whether paid in cash, stock or property) declared andpaid by the Company with respect to shares of Restricted Stock (‘‘Unvested Dividends’’) shall bepaid to the Participant only if and when such shares become free from the restrictions ontransferability and forfeitability that apply to such shares. Each payment of Unvested Dividendswill be made no later than the end of the calendar year in which the dividends are paid tostockholders of that class of stock or, if later, the 15th day of the third month following the lapsingof the restrictions on transferability and the forfeitability provisions applicable to the underlyingshares of Restricted Stock. No interest will be paid on Unvested Dividends.(2)Stock Certificates.The Company may require that any stock certificates issued inrespect of shares of Restricted Stock, as well as dividends or distributions paid on such RestrictedStock, shall be deposited in escrow by the Participant, together with a stock power endorsed inblank, with the Company (or its designee). At the expiration of the applicable restriction periods,the Company (or such designee) shall deliver the certificates no longer subject to such restrictionsto the Participant or if the Participant has died, to the beneficiary designated, in a mannerdetermined by the Board, by a Participant to receive amounts due or exercise rights of theParticipant in the event of the Participant’s death (the ‘‘Designated Beneficiary’’). In the absenceof an effective designation by a Participant, ‘‘Designated Beneficiary’’ shall mean the Participant’sestate.(d)Additional Provisions Relating to Restricted Stock Units.(1)Settlement.Upon the vesting of and/or lapsing of any other restrictions with respectto each Restricted Stock Unit, the Participant shall be entitled to receive from the Company inB-7settlement of such Restricted Stock Unit such number of shares of Common Stock or an amountof cash equal to the value determined by (or in a manner approved by) the Board of such numberof shares of Common Stock, as provided in the applicable Award agreement. Subject toSection 409A, the Board may, in its sole discretion, provide that settlement of Restricted StockUnits shall be deferred, on a mandatory basis or at the election of the Participant.(2)Voting Rights.A Participant shall have no voting rights with respect to anyRestricted Stock Units.(3)Dividend Equivalents.The Award agreement for Restricted Stock Units may provideParticipants with the right to receive an amount, in cash and/or shares of Common Stock, equal toany dividends or other distributions declared and paid on an equal number of outstanding sharesof Common Stock (‘‘Dividend Equivalents’’); except that any such Dividend Equivalents shall besubject to the same vesting conditions and restrictions on transfer and forfeitability applicable tothe underlying Restricted Stock Unit with respect to which they are paid. No interest will be paidon Dividend Equivalents.8.Other Stock- or Cash-Based Awards.Other Awards of shares of Common Stock, and other Awards that are valued in whole or inpart by reference to, or are otherwise based on, shares of Common Stock or other property (‘‘OtherStock-Based Awards’’), which may include, without limitation, deferred shares or deferred stock units,as well as cash payments and other cash bonus awards (‘‘Cash-Based Awards’’), may be grantedhereunder to Participants, including, without limitation, Dividend Equivalents and Awards entitlingrecipients to receive shares of Common Stock or cash to be delivered in the future. Such Other Stock-Based Awards and Cash-Based Awards shall also be available as a form of payment in the settlementof other Awards granted under the Plan or as payment in lieu of compensation to which a Participantis otherwise entitled (including, without limitation, annual or other cash bonuses). Subject to theprovisions of the Plan, the Board shall determine the terms and conditions of each Other Stock-BasedAward and Cash-Based Award, including, without limitation, any exercise or purchase price,performance goals, transfer restrictions, or vesting and forfeiture conditions applicable thereto.Any dividends or distributions (whether paid in cash, stock or property) declared and paid bythe Company with respect to shares of Common Stock granted under an Other Stock-Based Awardshall be paid to the Participant only if and when such shares become free from the restrictions ontransferability and forfeitability that apply to such shares and will be paid no later than the end of thecalendar year in which the dividends are paid to stockholders of that class of stock or, if later, the15th day of the third month following the lapsing of the restrictions on transferability and theforfeitability provisions applicable to the underlying Other Stock-Based Award. Any DividendEquivalent provided in an Award agreement with respect to an Other Stock-Based Award shall besubject to the same vesting conditions and restrictions on transfer and forfeitability applicable to theOther Stock-Based Award with respect to which paid. No interest will be paid on any such dividends orDividend Equivalents.9.Performance Awards.(a)Performance-Based Grants.Any Award may be made subject to the achievement ofperformance goals consistent with this Section 9 (‘‘Performance Awards’’).(b)Performance Measures.For any Performance Award, the Board may specify that thedegree of vesting, settlement and/or payout (or other term or condition of the PerformanceAward) shall be subject to the achievement of one or more performance measures established byB-8the Board, which may include, without limitation, the relative or absolute attainment of specifiedlevels of one or any combination of the following: (i) bookings, (ii) backlog, (iii) revenue, (iv) grossmargin ($), (v) gross profit (%), (vi) operating expenses, (vii) operating income (loss), (viii) netincome (loss), (ix) earnings (loss) per share, (x) earnings before interest, taxes, depreciation and/oramortization (‘‘EBITDA’’), (xi) adjusted EBITDA, (xii) earnings before interest and/or taxes(‘‘EBIT’’), (xiii) adjusted EBIT, (xiv) cost reduction or savings, (xv) productivity ratios or othersimilar metrics, (xvi) performance against budget, (xvii) cash flow from operations, (xviii) stockprice, (xix) financial ratings, (xx) financial metrics and ratios, (xxi) exit rate operating metrics,(xxii) total stockholder return (whether in the absolute or measured against or in relationship toother companies comparably, similarly or otherwise situated), (xxiii) regulatory achievements orcompliance (including, without limitation, regulatory body approval for commercialization of aproduct), (xxiv) implementation or completion of critical projects, (xxv) economic value oreconomic value added, (xxvi) customer satisfaction, (xxvii) working capital targets,(xxviii) organization/transformation metrics, (xxix) return measures (including but not limited to,return on assets, capital, invested capital, equity, sales or revenue), (xxx) market share, and(xxxi) any other objective or subjective measure determined by the Board.The Board may specify that such performance measures shall be adjusted to take into account anyevents or circumstances determined appropriate by the Board, including, without limitation, anyone or more of the following: (A) extraordinary, nonrecurring or unusual items, (B) gains or losseson acquisitions or dispositions of assets or operations, (C) the cumulative effects of changes in taxlaws or accounting principles, (D) the write-down of any asset, and (E) charges for restructuringand rationalization programs. Such performance measures may vary by Participant and may bedifferent for different Awards and may be particular to a Participant or the department, branch,line of business, subsidiary or other unit in which the Participant works and may cover such periodas may be specified by the Board. Such performance measures may be calculated on generallyaccepted accounting principles (‘‘GAAP’’) or non-GAAP basis or otherwise in accordance withapplicable accounting principles or such other methodology as determined appropriate by theBoard.(c)Adjustments.Notwithstanding any provision of the Plan, with respect to any PerformanceAward, the Board may adjust downwards or upwards, the cash or number of Shares payable pursuantto such Performance Award in its discretion, and the Board may waive the achievement of theapplicable performance measures. The Board shall have the power to impose such other restrictions onPerformance Awards as it may deem necessary or appropriate.10.Adjustments for Changes in Common Stock and Certain Other Events.(a)Changes in Capitalization.In the event of any stock split, reverse stock split, stockdividend, recapitalization, combination or exchange of shares, consolidation, reclassification of shares,spin-off or other similar change in capitalization or event, or any dividend or distribution to holders ofCommon Stock other than an ordinary cash dividend or any other change affecting the shares ofCommon Stock or the share price of the Common Stock (other than an Equity Restructuring), theBoard may make equitable adjustments to reflect such change with respect to: (i) the number and classof securities available under the Plan, (ii) the number and class of securities and exercise price pershare of each outstanding Option and SAR, (iii) the number of shares subject to and the repurchaseprice per share subject to each outstanding Restricted Stock Award, (iv) the number of shares subjectto and the share- and per-share-related provisions and the purchase price, if any, of each outstandingOther Stock-Based Award, and (v) any other applicable the terms and conditions of outstandingAwards (including, without limitation, any applicable performance targets and criteria). Notwithstandingthe foregoing, in the event of an Equity Restructuring, the Company shall equitably adjust in themanner determined by the Board the number and class of security subject to each outstanding AwardB-9and the exercise or purchase price thereof, if applicable (and such adjustments shall benondiscretionary and final and binding on the affected Participants and the Company) and/or theaggregate number and class of security that may be issued under the Plan (including, without limitation,any share counting provisions related thereto). ‘‘Equity Restructuring’’ shall mean a nonreciprocaltransaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off,rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the numberor kind of shares of Common Stock (or other securities of the Company) or the share price ofCommon Stock (or other securities) and causes a change in the per-share value of the Common Stockunderlying outstanding Awards.(b)Reorganization Events.(1)Definition.A ‘‘Reorganization Event’’ shall mean: (a) any merger or consolidation ofthe Company with or into another entity as a result of which all of the Common Stock of theCompany is converted into or exchanged for the right to receive cash, securities or other propertyor is cancelled, (b) any exchange of all of the Common Stock of the Company for cash, securitiesor other property pursuant to a share exchange transaction, (c) any liquidation or dissolution ofthe Company, or (d) any event described in Section 10(a) or any other unusual or nonrecurringtransaction or event affecting the Company or any of its subsidiaries (or their respective financialstatements).(2)Consequences of a Reorganization Event on Awards.In connection with aReorganization Event, the Board may take any one or more of the following actions as to all orany (or any portion of) outstanding Awards on such terms as the Board determines: (i) providethat Awards shall be assumed, or substantially equivalent awards shall be substituted, by theacquiring or succeeding corporation (or an affiliate thereof), (ii) upon written notice to aParticipant, provide that the Participant’s unexercised Awards will terminate immediately prior tothe consummation of such Reorganization Event unless exercised by the Participant within aspecified period following the date of such notice, (iii) provide that outstanding Awards shallbecome exercisable, realizable, or deliverable, or restrictions applicable to an Award shall lapse, inwhole or in part prior to or upon such Reorganization Event, (iv) in the event of a ReorganizationEvent under the terms of which holders of Common Stock will receive upon consummationthereof a payment of cash and/or property for each share surrendered in the Reorganization Event(the value of such payment, the ‘‘Acquisition Price’’), make or provide for a payment of cashand/or property to a Participant with a value equal to the excess, if any, of (A) the AcquisitionPrice times the number of shares of Common Stock subject to the Participant’s Awards (to theextent the exercise price does not exceed the Acquisition Price) over (B) the aggregate exerciseprice of all such outstanding Awards and any applicable tax withholdings, in exchange for thetermination of such Awards (and, if as of the Reorganization Event, the Board determines in goodfaith that there is no such excess with respect to an Award, then such Award may be terminated bythe Company without payment), (v) provide that Awards will be replaced with other rights orproperty selected by the Board (including, in connection with a liquidation or dissolution of theCompany, conversion into the right to receive liquidation proceeds (if applicable, net of theexercise price thereof and any applicable tax withholdings)), (vi) provide that Awards cannot vest,be exercised or become payable after the Reorganization Event, and (vii) any combination of theforegoing. In taking any of the actions permitted under this Section 10(b), the Board shall not beobligated by the Plan to treat all Awards, all Awards held by a Participant, or all Awards of thesame type, identically.For purposes of clause (i) above, an Option shall be considered assumed if, followingconsummation of the Reorganization Event, the Option confers the right to purchase, for eachshare of Common Stock subject to the Option immediately prior to the consummation of theB-10Reorganization Event, the consideration (whether cash, securities or other property) receivedas a result of the Reorganization Event by holders of Common Stock for each share ofCommon Stock held immediately prior to the consummation of the Reorganization Event(and if holders were offered a choice of consideration, the type of consideration chosen by theholders of a majority of the outstanding shares of Common Stock); provided, however, that ifthe consideration received as a result of the Reorganization Event is not solely common stockof the acquiring or succeeding corporation (or an affiliate thereof), the Company may, withthe consent of the acquiring or succeeding corporation, provide for the consideration to bereceived upon the exercise of Options to consist solely of common stock of the acquiring orsucceeding corporation (or an affiliate thereof) equivalent in value (as determined by theBoard) to the per share consideration received by holders of outstanding shares of CommonStock as a result of the Reorganization Event.(c)Change in Control. A ‘‘Change in Control’’ shall mean any of the following:(i)a transaction or series of transactions (other than an offering of Common Stock to thegeneral public through a registration statement filed with the Securities and ExchangeCommission) whereby any ‘‘person’’ or related ‘‘group’’ of ‘‘persons’’ (as such terms areused in Sections 13(d) and 14(d)(2) of the Exchange Act) directly or indirectly acquiresbeneficial ownership (within the meaning of Rules 13d-3 and 13d-5 under the ExchangeAct) of securities of the Company possessing more than 50% of the total combined votingpower of the Company’s securities outstanding immediately after such acquisition;provided, however, that the following acquisitions shall not constitute a Change inControl under this subsection (i): (A) any acquisition by the Company; (B) anyacquisition by an employee benefit plan maintained by the Company; (C) any acquisitionwhich is not a Change in Control under Section 10(c)(iii) as a result of compliance withsubsections (A), (B), and (C) of Section 10(c)(iii); or (D) in respect of an Award held bya particular Participant, any acquisition by the Participant or any group of personsincluding the Participant (or any entity controlled by the Participant or any group ofpersons including the Participant);(ii)the Incumbent Directors cease for any reason to constitute a majority of the Board;(iii)the consummation by the Company (whether directly involving the Company or indirectlyinvolving the Company through one or more intermediaries) of (x) a merger,consolidation, reorganization, or business combination, (y) a sale or other disposition ofall or substantially all of the Company’s assets in any single transaction or series ofrelated transactions, or (z) the acquisition of assets or stock of another entity, in eachcase other than a transaction:(A)which results in the Company’s voting securities outstanding immediately before thetransaction continuing to represent (either by remaining outstanding or by beingconverted into voting securities of the Company or the person that, as a result of thetransaction, controls, directly or indirectly, the Company or owns, directly orindirectly, all or substantially all of the Company’s assets or otherwise succeeds to thebusiness of the Company (the Company or such person, the ‘‘Successor Entity’’))directly or indirectly, at least a majority of the combined voting power of theSuccessor Entity’s outstanding voting securities,(B)after which no person or group beneficially owns voting securities representing 50%or more of the combined voting power of the Successor Entity; provided, however,that no person or group shall be treated for purposes of this subsection (B) asB-11beneficially owning 50% or more of the combined voting power of the SuccessorEntity solely as a result of the voting power held in the Company prior to theconsummation of the transaction; and(C)immediately after which at least a majority of the members of the board of directors(or the analogous governing body) of the Successor Entity were Board members atthe time of the Board’s approval of the execution of the initial agreement providingfor such transaction; or(iv)the effective date of a liquidation or dissolution of the Company.For purposes of the foregoing, ‘‘Incumbent Directors’’ shall mean for any period of 12consecutive months, individuals who, at the beginning of such period, constitute the Boardtogether with any new Director(s) (other than a Director designated by a person who shallhave entered into an agreement with the Company to effect a transaction described inSection 10(c)(i) or 10(c)(iii)) whose election or nomination for election to the Board wasapproved by a vote of at least a majority (either by a specific vote or by approval of the proxystatement of the Company in which such person is named as a nominee for Director withoutobjection to such nomination) of the Directors then still in office who either were Directors atthe beginning of the 12-month period or whose election or nomination for election waspreviously so approved. No individual initially elected or nominated as a director of theCompany as a result of an actual or threatened election contest with respect to Directors or asa result of any other actual or threatened solicitation of proxies by or on behalf of any personother than the Board shall be an Incumbent Director.Notwithstanding the foregoing, if a Change in Control constitutes a payment event withrespect to any Award (or any portion of an Award) that provides for the deferral ofcompensation that is subject to Section 409A, to the extent required to avoid the impositionof additional taxes under Section 409A, the transaction or event described in subsection (i),(ii), (iii), or (iv) with respect to such Award (or portion thereof) shall only constitute aChange in Control for purposes of the payment timing of such Award if such transaction alsoconstitutes a ‘‘change in control event,’’ as defined in Treasury RegulationSection 1.409A-3(i)(5).The Board shall have full and final authority, which shall be exercised in its sole discretion, todetermine conclusively whether a Change in Control has occurred pursuant to the abovedefinition, the date of the occurrence of such Change in Control and any incidental mattersrelating thereto; provided that any exercise of authority in conjunction with a determination ofwhether a Change in Control is a ‘‘change in control event’’ as defined in Treasury RegulationSection 1.409A-3(i)(5) shall be consistent with such regulation.11.General Provisions Applicable to Awards.(a)Transferability of Awards.Awards (other than vested shares of Restricted Stock) shall notbe sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they aregranted, either voluntarily or by operation of law, except by will or the laws of descent and distributionor, other than in the case of an Incentive Stock Option, pursuant to a qualified domestic relationsorder, and, during the life of the Participant, shall be exercisable only by the Participant; provided,however, that the Board may permit or provide in an Award for the gratuitous transfer of the Awardby the Participant to or for the benefit of any immediate family member, family trust or other entityestablished for the benefit of the Participant and/or an immediate family member thereof if, withrespect to such proposed transferee, the Company would be eligible to use a Form S-8 for theB-12registration of the sale of the Common Stock subject to such Award under the Securities Act; provided,further, that the Company shall not be required to recognize any such transfer until such time as theParticipant and such permitted transferee shall, as a condition to such transfer, deliver to the Companya written instrument in form and substance satisfactory to the Company confirming that such transfereeshall be bound by all of the terms and conditions of the Award. References to a Participant, to theextent relevant in the context, shall include references to authorized transferees. For the avoidance ofdoubt, nothing contained in this Section 11(a) shall be deemed to restrict a transfer to the Company.(b)Documentation.Each Award shall be evidenced in such form (written, electronic, orotherwise) as the Board shall determine. Each Award may contain terms and conditions in addition tothose set forth in the Plan.(c)Board Discretion.Except as otherwise provided by the Plan, each Award may be madealone or in addition or in relation to any other Award. The terms of each Award need not be identical,and the Board need not treat Participants uniformly.(d)Termination of Status.The Board shall determine the effect on an Award of thedisability, death, termination of employment, authorized leave of absence or other change in theemployment or other status of a Participant and the extent to which, and the period during which, theParticipant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary,may exercise rights under the Award.(e)Withholding.The Participant must satisfy all applicable federal, state, and local or otherincome and employment tax withholding obligations before the Company will deliver stock certificatesor otherwise recognize ownership of Common Stock under an Award. The Company may decide tosatisfy the withholding obligations through additional withholding on salary or wages. If the Companyelects not to or cannot withhold from other compensation, the Participant must pay the Company thefull amount, if any, required for withholding or have a broker tender to the Company cash equal to thewithholding obligations. Payment of withholding obligations is due before the Company will issue anyshares on exercise or release from forfeiture of an Award or, if the Company so requires, at the sametime as is payment of the exercise price unless the Company determines otherwise. If provided for inan Award or approved by the Board in its sole discretion, a Participant may satisfy such tax obligationsin whole or in part by delivery of shares of Common Stock, including shares retained from the Awardcreating the tax obligation, valued in the manner determined by (or in a manner approved by) theBoard; provided, however, except as otherwise provided by the Board, that the shares retained tosatisfy such tax obligations cannot exceed the aggregate amount of such tax obligation based on themaximum statutory withholding rates in the Participant’s applicable jurisdiction for federal, state, localand foreign tax purposes, including payroll taxes, that are applicable to such taxable income. Sharessurrendered to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture,unfulfilled vesting or other similar requirements.(f)Amendment of Award.Subject to Sections 5(h) and 6(f), the Board may amend, modifyor terminate any outstanding Award, including but not limited to, substituting therefor another Awardof the same or a different type, changing the date of exercise or realization, and converting anIncentive Stock Option to a Nonstatutory Stock Option, provided either (i) that the Participant’sconsent to such action shall be required unless the Board determines that the action, taking intoaccount any related action, would not materially and adversely affect the Participant or (ii) that thechange is permitted under Section 10 hereof.(g)Conditions on Delivery of Stock.The Company will not be obligated to deliver any sharesof Common Stock pursuant to the Plan or to remove restrictions from shares previously deliveredunder the Plan until (i) all conditions of the Award have been met or removed to the satisfaction ofB-13the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection withthe issuance and delivery of such shares have been satisfied, including any applicable securities lawsand any applicable stock exchange or stock market rules and regulations, and (iii) the Participant hasexecuted and delivered to the Company such representations or agreements as the Company mayconsider appropriate to satisfy the requirements of any applicable laws, rules or regulations.(h)Acceleration.The Board may, at any time, provide in an Award agreement or otherwisethat any Award shall become immediately exercisable in full or in part, free from some or all of therestrictions or conditions applicable to such Award or otherwise realizable in full or in part, as the casemay be, including, without limitation, (A) upon the death or disability of the Participant, (B) inconnection with retirement, termination of employment or other separation from service, or (C) inconnection with a Change in Control.(i)Limitations on Vesting.Notwithstanding anything to the contrary in the Plan, no Award(other than Cash-Based Awards) or any portion thereof shall vest earlier than the first anniversary ofits date of grant; provided, however, that notwithstanding the foregoing, such minimum vestingrequirement shall not apply to (i) any substitute award described in Section 4(d), (ii) shares ofCommon Stock delivered in lieu of full-vested Cash-Based Award (or other cash awards or payments),(iii) Awards to non-employee directors of the Company that vest on the earlier of the one-yearanniversary of the date of grant and the next annual meeting of stockholders which is at least 50 weeksafter the immediately preceding year’s annual meeting, and (iv) any additional Awards the Board maygrant, up to a maximum of five percent (5%) of the available share reserve authorized for issuanceunder the Plan, as of the Restatement Effective Date, pursuant to Section 4 (subject to adjustmentunder Section 10); and, provided, further, that the foregoing restriction does not apply to the Board’sdiscretion to provide for accelerated exercisability or vesting of any Awards pursuant to Section 11(h).(j)Treatment of Dividends and Dividend Equivalents on Unvested Awards.Notwithstandingany other provision of the Plan to the contrary, with respect to any Award that provides for or includesa right to dividends or dividend equivalents, if dividends are declared during the period that an equityAward is outstanding, such dividends (or dividend equivalents) shall either (i) not be paid or creditedwith respect to such Award or (ii) be accumulated but remain subject to vesting requirement(s) to thesame extent as the applicable Award and shall only be paid at the time or times such vestingrequirement(s) are satisfied.12.Miscellaneous.(a)No Right To Employment or Other Status.No person shall have any claim or right to begranted an Award by virtue of adoption or amendment of the Plan, and the grant of an Award shallnot be construed as giving a Participant the right to continued employment or any other relationshipwith the Company. The Company expressly reserves the right at any time to dismiss or otherwiseterminate its relationship with a Participant free from any liability or claim under the Plan, except asexpressly provided in the applicable Award.(b)No Rights As Stockholder; Clawback.Subject to the provisions of the applicable Award,no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to anyshares of Common Stock to be issued with respect to an Award until becoming the record holder ofsuch shares. In accepting an Award under the Plan, the Participant agrees to be bound by any clawbackpolicy that the Company has in effect or may adopt in the future.(c)Effective Date and Term of Plan.The Plan shall become effective on the RestatementEffective Date, subject to the approval by the Company’s stockholders. No Awards shall be grantedB-14under the Plan after the tenth anniversary of the Original Effective Date, but Awards previouslygranted may extend beyond that date.(d)Amendment of Plan.The Board may amend, suspend or terminate the Plan or anyportion thereof at any time provided that (i) no amendment that would require stockholder approvalunder the rules of The NASDAQ Stock Market (‘‘NASDAQ’’) (or other applicable exchange on whichthe Common Stock is traded) may be made effective unless and until such amendment shall have beenapproved by the Company’s stockholders and (ii) if the NASDAQ (or other applicable exchange onwhich the Common Stock is traded) amends its corporate governance rules so that such rules no longerrequire stockholder approval of ‘‘material amendments’’ to equity compensation plans, then, from andafter the effective date of such amendment, no amendment to the Plan (A) materially increasing thenumber of shares authorized under the Plan (other than pursuant to Section 10), (B) expanding thetypes of Awards that may be granted under the Plan, or (C) materially expanding the class ofparticipants eligible to participate in the Plan shall be effective unless stockholder approval is obtained.In addition, if at any time the approval of the Company’s stockholders is required as to any othermodification or amendment under Section 422 of the Code or any successor provision with respect toIncentive Stock Options, the Board may not effect such modification or amendment without suchapproval. Unless otherwise specified in the amendment, any amendment to the Plan adopted inaccordance with this Section 12(d) shall apply to, and be binding on the holders of, all Awardsoutstanding under the Plan at the time the amendment is adopted, provided the Board determines thatsuch amendment does not materially and adversely affect the rights of Participants under the Plan.(e)Provisions for Foreign Participants.The Board may modify Awards or Options granted toParticipants who are foreign nationals or employed outside the United States or establish subplans orprocedures under the Plan to recognize differences in laws, rules, regulations or customs of suchforeign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.(f)Compliance With Code Section 409A.To the extent applicable, the Plan and all Awardsshall be interpreted in accordance with Section 409A. Except as provided in individual Awardagreements initially or by amendment, if and to the extent (i) any portion of any payment,compensation or other benefit provided to a Participant pursuant to the Plan in connection with his orher employment termination constitutes ‘‘nonqualified deferred compensation’’ within the meaning ofSection 409A and (ii) the Participant is a specified employee as defined in Section 409A(a)(2)(B)(i) ofthe Code, in each case as determined by the Company in accordance with its procedures, by whichdeterminations the Participant (through accepting the Award) agrees that he or she is bound, suchportion of the payment, compensation or other benefit shall not be paid before the day that is six(6) months plus one (1) day after the date of ‘‘separation from service’’ (as determined underSection 409A) (the ‘‘New Payment Date’’), except as Section 409A may then permit. The aggregate ofany payments that otherwise would have been paid to the Participant during the period between thedate of separation from service and the New Payment Date shall be paid to the Participant in a lumpsum on such New Payment Date, and any remaining payments will be paid on their original schedule.The Company and its employees, agents and representatives make no representations orwarranty and shall have no liability to the Participant or any other person if any provisions of orpayments, compensation or other benefits under the Plan are determined to constitute nonqualifieddeferred compensation subject to Section 409A but do not satisfy the conditions of that section.Notwithstanding any provision of the Plan to the contrary, in the event that following the OriginalEffective Date the Board determines that any Award may be subject to Section 409A, the Board may(but is not obligated to), without a Participant’s consent, adopt such amendments to the Plan and theapplicable Award or adopt other policies and procedures (including amendments, policies andprocedures with retroactive effect), or take any other actions, that the Board determines are necessaryor appropriate to (A) exempt the Award from Section 409A and/or preserve the intended tax treatmentB-15of the benefits provided with respect to the Award or (B) comply with the requirements ofSection 409A and thereby avoid the application of any penalty taxes under Section 409A.(g)Compliance with the Exchange Act.Notwithstanding any other provision of the Plan tothe contrary, no Participant who is a Director or an ‘‘executive officer’’ of the Company within themeaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to anyAwards granted under the Plan, or continue any extension of credit with respect to such payment, witha loan from the Company or a loan arranged by the Company in violation of Section 13(k) of theExchange Act.(h)Data Privacy.As a condition of receipt of any Award, each Participant explicitly andunambiguously consents to the collection, use and transfer, in electronic or other form, of personal dataas described in this Section 12(h) by and among, as applicable, the Company and its subsidiaries for theexclusive purpose of implementing, administering and managing the Participant’s participation in thePlan. The Company and its subsidiaries may hold certain personal information about a Participant,including but not limited to, the Participant’s name, home address and telephone number, date of birth,social security or insurance number or other identification number, salary, nationality, job title(s), anyshares of stock held in the Company or any of its subsidiaries, details of all Awards, in each case, forthe purpose of implementing, managing and administering the Plan and Awards (the ‘‘Data’’). TheCompany and its subsidiaries may transfer the Data amongst themselves as necessary for the purposeof implementation, administration and management of a Participant’s participation in the Plan, and theCompany and its subsidiaries may each further transfer the Data to any third parties assisting theCompany and its subsidiaries in the implementation, administration and management of the Plan.These recipients may be located in the Participant’s country, or elsewhere, and the Participant’s countrymay have different data privacy laws and protections than the recipients’ country. Through acceptanceof an Award, each Participant authorizes such recipients to receive, possess, use, retain and transfer theData, in electronic or other form, for the purposes of implementing, administering and managing theParticipant’s participation in the Plan, including any requisite transfer of such Data as may be requiredto a broker or other third party with whom the Company or any of its subsidiaries or the Participantmay elect to deposit any shares of Common Stock. The Data related to a Participant will be held onlyas long as is necessary to implement, administer, and manage the Participant’s participation in the Plan.A Participant may, at any time, view the Data held by the Company with respect to such Participant,request additional information about the storage and processing of the Data with respect to suchParticipant, recommend any necessary corrections to the Data with respect to the Participant or refuseor withdraw the consents herein in writing, in any case without cost, by contacting his or her localhuman resources representative. The Company may cancel the Participant’s ability to participate in thePlan and, in the Board’s discretion, the Participant may forfeit any outstanding Awards if theParticipant refuses or withdraws his or her consents as described herein. For more information on theconsequences of refusal to consent or withdrawal of consent, Participants may contact their localhuman resources representative.(i)Governing Law.The provisions of the Plan and all Awards made hereunder shall begoverned by and interpreted in accordance with the laws of the State of Delaware, excludingchoice-of-law principles of the law of such state that would require the application of the laws of ajurisdiction other than such state.B-16UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-KxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934For the fiscal year ended December 31, 2019oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period from toCommission File Number 001-38267RIBBON COMMUNICATIONS INC.(Exact name of Registrant as specified in its charter)DELAWARE82-1669692(State or other jurisdiction ofincorporation or organization)(I.R.S. Employer Identification No.)4 Technology Park Drive, Westford, Massachusetts 01886(Address of principal executive offices)(Zip Code)(978) 614-8100(Registrant's telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock, par value $0.0001RBBNThe Nasdaq Global Select MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct. Yes o No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of theAct. Yes o No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required tofile such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No oIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to besubmitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for suchshorter period that the registrant was required to submit such files). Yes x No oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer,""smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.:Large accelerated filer oAccelerated filer xNon-accelerated filer oSmaller reporting company oEmerging growth company oIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transitionperiod for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of theExchange Act. o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct). Yes o No xThe aggregate market value of the common stock held by non-affiliates of Ribbon Communications Inc. wasapproximately $286,412,000 based on the closing price for its common stock on The Nasdaq Global Select Market on June 28,2019. As of February 20, 2020, the Registrant had 111,306,494 shares of common stock, $0.0001 par value, outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the definitive Proxy Statement to be delivered to stockholders in connection with the Registrant's 2020Annual Meeting of Stockholders are incorporated by reference into Part III of this report. RIBBON COMMUNICATIONS INC.FORM 10-KYEAR ENDED DECEMBER 31, 2019TABLE OF CONTENTSItemPageCautionary Note Regarding Forward-Looking Statements3Presentation of Information3Glossary of Certain Industry Terms4Part I1.Business71A.Risk Factors181B.Unresolved Staff Comments392.Properties393.Legal Proceedings404.Mine Safety Disclosures40Part II5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities416.Selected Financial Data437.Management's Discussion and Analysis of Financial Condition and Results of Operations467A.Quantitative and Qualitative Disclosures About Market Risk638.Financial Statements and Supplementary Data649.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure1229A.Controls and Procedures1229B.Other Information124Part III10.Directors, Executive Officers and Corporate Governance12411.Executive Compensation12412.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters12413.Certain Relationships and Related Transactions, and Director Independence12414.Principal Accounting Fees and Services124Part IV15.Exhibits, Financial Statement Schedules12516.Form 10-K Summary125Exhibit Index126Signatures130 Cautionary Note Regarding Forward-Looking StatementsThis Annual Report on Form 10-K contains "forward-looking statements" within the meaning of the U.S. PrivateSecurities Litigation Reform Act of 1995, which are subject to a number of risks and uncertainties. All statements other thanstatements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our future resultsof operations and financial position, our pending merger with ECI Telecom Group Ltd., anticipated restructuring andintegration-related expenses, business strategy, plans and objectives of management for future operations and plans for futureproduct development and manufacturing are forward-looking statements. Without limiting the foregoing, the words"anticipates", "believes", "could", "estimates", "expects", "intends", "may", "plans", "seeks" and other similar language,whether in the negative or affirmative, are intended to identify forward-looking statements, although not all forward lookingstatements contain these identifying words. Forward-looking statements are based on our current expectations and assumptionsregarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, theyare subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. These statements involveknown and unknown risks, uncertainties and other important factors that may cause our actual results, performance orachievements to be materially different from any future results, performance or achievements expressed or implied by theforward-looking statements. We therefore caution you against relying on any of these forward-looking statements. Importantfactors that could cause actual results to differ materially from those in these forward-looking statements are discussed inItem 1A., "Risk Factors" of Part I and Items 7 and 7A., "Management's Discussion and Analysis of Financial Condition andResults of Operations" and "Quantitative and Qualitative Disclosures About Market Risk," respectively, of Part II of thisAnnual Report on Form 10-K. Also, any forward-looking statement made by us in this Annual Report on Form 10-K speaksonly as of the date on which this Annual Report on Form 10-K was first filed. Factors or events that could cause our actualresults to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligationto publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise,except as may be required by law.Presentation of InformationEffective October 27, 2017, we completed the merger (the "Merger") of Sonus Networks, Inc. ("Sonus"), GENBANDHoldings Company, GENBAND, Inc. and GENBAND II, Inc. (collectively, "GENBAND").Unless the context otherwise requires, references in this Annual Report on Form 10-K to "Ribbon," "RibbonCommunications," "Company," "we," "us" and "our" and "the Company" refer to (i) Sonus Networks, Inc. and its subsidiariesprior to the Merger and (ii) Ribbon Communications Inc. and its subsidiaries upon completion of the Merger, as applicable.3GLOSSARY OF CERTAIN INDUSTRY TERMSThe industry terms defined below are used throughout this Annual Report on Form 10-K for the year ended December 31, 2019(this “10-K”).API (application programming interface): A set of subroutine definitions, protocols, and tools for building applicationsoftware. In general terms, it is a set of clearly defined methods of communication between various software components.Big Data: The use of data analytics and/or predictive analytics to extract value from large data sets. Analysis of large datasets may expose new correlations regarding business trends, infrastructure weaknesses and other related information.CPaaS (Communications Platform as a Service): A cloud-based delivery model that allows organizations to add real-timecommunication capabilities such as voice, video and messaging to business applications by deploying application programinterfaces.CPU (central processing unit): The electronic circuitry within a computer that carries out the instructions of a computerprogram by performing the basic arithmetic, logical, control and input/output operations specified by the instructions.Diameter: A next generation industry-standard protocol used to exchange authentication, authorization and accountinginformation in LTE and IMS networks.DSC (diameter signaling controller): A device that helps communications service providers overcome Diameter signalingperformance, scalability and interoperability challenges in LTE and IMS networks.DSP (digital signal processing): The use of digital processing, such as by computers or more specialized digital signalprocessors, to perform a wide variety of signal processing operations. The signals processed in this manner are a sequenceof numbers that represent samples of a continuous variable in a domain such as time, space, or frequency.Edge: Appliances and/or software implemented on business customer premises that provide communications security andother capabilities for voice and data packet functions.Edge Routing: Appliances and/or software implemented on business customer premises that provides routing of datapacket functions.GPU (graphical processing unit): An advanced electronic circuit designed to rapidly manipulate and alter memory toaccelerate the creation of images in a frame buffer intended for output to a display device.IMS (IP multimedia [sub]system): An architectural framework for delivering IP multimedia services.IP (Internet Protocol): A set of rules governing the format of data sent over the Internet or other network.IP-PBX: SIP-based PBX.ISP: Internet service provider.LTE (long term evolution): A standard for high-speed wireless communication for mobile devices and data terminals forsmooth and efficient transition toward more advanced leading-edge technologies to increase the capacity and speed ofwireless data networks. Often used to refer to wireless broadband or mobile network technologies.MPLS (multiprotocol label switching): A data or packet routing technique in telecommunications networks that directsdata from one node to the next based on short path labels rather than long network addresses, thereby avoiding complexlookups in a routing table and speeding traffic flows. MPLS can encapsulate packets of various network protocols, whichis the rationale for the "multiprotocol" reference on its name.MSO (multi-system operator): An operator of multiple cable or direct-broadcast satellite television systems.NFV (network function virtualization): A network architecture concept that uses the technologies of IT virtualization tovirtualize entire classes of network node functions into building blocks that may connect, or chain together, to createcommunication services.4OTT (Over-the-Top): A media distribution practice that allows a streaming content provider to sell audio, video, and othermedia services directly to the consumer over the internet via streaming media as a standalone product, bypassingtelecommunications, cable or broadcast television service providers that traditionally act as a controller or distributor ofsuch content.PBX (private branch exchange): A telephone system within an enterprise that switches calls between enterprise users onlocal lines while allowing all users to share a certain number of external phone lines.PLMN (public land mobile network): A network that is established and operated by an administration or by a recognizedoperating agency for the specific purpose of providing land mobile telecommunications services to the public.PSTN (public switched telephone network): The aggregate of the world's circuit-switched telephone networks that areoperated by national, regional, or local telephony operators, providing infrastructure and services for publictelecommunication.RTC (real-time communications): A term used to refer to live telecommunications that occur without transmission delays.RTC is nearly instant with minimal latency, data and messages are not stored between transmission and reception and isgenerally a peer-to-peer interconnectivity, rather than broadcasting or multicasting, transmission.SBC (session border controller): A device regularly deployed in VoIP networks to exert control over the signaling and themedia streams involved in setting up, conducting, and tearing down telephone calls or other interactive mediacommunications.SDK: Software development kit.SDN (software-defined networking): Technology that enables directly programmable network control for applications andnetwork services, decoupling network control and forwarding functions from physical hardware such as routers andswitches to create a more manageable and dynamic network infrastructure.SD-WAN (software-defined - wide area network): SD-WAN is a specific application of software-defined networking(SDN) technology applied to WAN connections such as broadband internet, 4G, LTE or MPLS. It connects enterprisenetworks including branch offices and data centers over large geographic distances.Service Provider: A provider of telecommunications services to enterprises and consumers. Service Providers typicallyown and operate complex telecommunications networks.SIP (session initiation protocol): A communications protocol for signaling and controlling multimedia communicationsessions in applications of Internet telephony for voice and video calls, in private IP telephone systems, as well as in instantmessaging over IP networks.SMB: Small-medium business.SMS (short message service): A text messaging service component of most telephone, World Wide Web, and mobiledevice systems, using standardized communication protocols to enable mobile devices to exchange short text messages.SOHO: Small office and home office.STaaS (SIP Trunking as a Service): A VoIP technology and streaming media service based on SIP by which Internettelephony service providers deliver telephone services and UC to customers equipped with IP-PBX and UC facilities.TDM (time-division multiplexing): A method of putting multiple data streams in a single signal by separating the signalinto many segments, each having a very short duration. Each individual data stream is reassembled at the receiving endbased on the timing.UC (unified communications): A business term describing the integration of enterprise communication services such asinstant messaging (chat), presence information, voice (including IP telephony), mobility features (including extensionmobility and single number reach), audio, web & video conferencing, fixed-mobile convergence, desktop sharing, data5sharing (including web connected electronic interactive whiteboards), call control and speech recognition with non-real-time communication services such as unified messaging (integrated voicemail, e-mail, SMS and fax).UCaaS (unified communications as a service): The provision of business communications and phone system (PBX)services along with collaboration tools such as screen sharing and conferencing via a cloud-based pricing and deliverymodel.VAR (value added reseller): A company that adds features or services to an existing product, then resells it (usually to end-users) as an integrated product or complete turn-key solution.VNF (virtual network function): Responsible for handling specific network functions that run in one or more virtualmachines on top of the appliance networking infrastructure, which can include routers, switches, servers, cloud computingsystems and more.VoIP (Voice over Internet Protocol): A methodology and group of technologies for the delivery of voice communicationsand multimedia sessions over IP networks, such as the Internet.VoLTE (Voice over LTE): A standard for high-speed wireless communication for mobile phones and data terminals over a4G LTE access network, rather than 2G or 3G connections.Web-Scale: Historically, the term was associated with the massive cloud architectures developed by Facebook, Google andAmazon. The term has since evolved to reflect a company's adoption of private, efficient and scalable cloud environmentsthat support flexibility, resiliency and on-demand infrastructure.6PART I7Item 1. BusinessOverviewWe are a leading provider of next generation ("NextGen") software solutions to telecommunications, wireless and cable serviceproviders and enterprises across industry verticals. With over 1,000 customers around the globe, including some of the largesttelecommunications service providers and enterprises in the world, we enable service providers and enterprises to modernizetheir communications networks through software and provide secure RTC solutions to their customers and employees. Bysecuring and enabling reliable and scalable IP networks, we help service providers and enterprises adopt the next generation ofsoftware-based virtualized and cloud communications technologies for service providers to drive new, incremental revenue,while protecting their existing revenue streams. Our software solutions provide a secure way for our customers to connect andleverage multivendor, multiprotocol communications systems and applications across their networks and the cloud, around theworld and in a rapidly changing ecosystem of IP-enabled devices, such as smartphones and tablets. In addition, our softwaresolutions secure cloud-based delivery of UC solutions - both for service providers transforming to a cloud-based network andfor enterprises using cloud-based UC. We sell our software solutions through both direct sales and indirect channels globally,leveraging the assistance of resellers, and we provide ongoing support to our customers through a global services team withexperience in design, deployment and maintenance of some of the world's largest software IP networks.We completed our acquisition of the business and technology assets of Anova Data, Inc. ("Anova"), a private companyheadquartered in Westford, Massachusetts, that provides advanced analytics solutions, in February 2019 (the "AnovaAcquisition"). We believe that the Anova Acquisition reinforces and extends our strategy to expand into network optimization,security and data monetization via big data analytics and machine learning.We completed our acquisition of Edgewater Networks, Inc. ("Edgewater"), a market leader in Network Edge Orchestration forthe distributed enterprise and UC market, in August 2018 (the "Edgewater Acquisition"), making us a software market leader inenterprise Session Border Controllers and allowing us to extend Edgewater software solutions internationally while expandingour cloud offerings and entering the SD-WAN market.We completed our Merger with GENBAND, a global leader in NextGen software-enabled real-time communications solutions,in October 2017. Because of the Merger, we believe we improved our position to enable network transformations to IP and tocloud-based networks for service providers and enterprise customers worldwide, with a broader and deeper sales footprint,increased ability to invest in growth, more efficient and effective research and development, and a comprehensive RTC productoffering.Industry BackgroundTraditional TDM-based voice and data solutions are being supplanted by alternative NextGen IP-based networks and RTCsoftware applications are being offered from the cloud in conjunction with the network and enterprise edge. Given this shift,today’s telecommunications service providers and enterprises are faced with two separate but related challenges: how toupgrade their aging and costly communications infrastructure, and how to implement new and innovative NextGen software, IPand cloud-based communications capabilities. Service providers in particular must address these challenges while at the sametime responding to competition in the form of new web-scale communication providers, such as Microsoft Corp., Google LLCand Amazon.com, Inc.To address these challenges, service providers and enterprises are modernizing their communications networks, networkfunctions and communications applications from legacy environments to new environments using NextGen IP software, NFV,the cloud and the edge to take advantage of the many benefits that these technologies offer with an end goal of providing betterand more productive communications experiences for their customers and employees.Telecommunications Service Providers: Network ModernizationOne of the most significant capital costs for telecommunications service providers has been and continues to be theirinfrastructure. In order to leverage past capital investments and deliver existing and new services, service providers mustconsolidate their infrastructure from costly, legacy infrastructures, such as the PSTN and the PLMN, into more efficient andflexible IP- and software-based network models, which are capable of driving revenue growth. Migrating from the PSTN to IPreduces real estate, power and operating costs. IP software networks allow the consolidation of voice, video and data within asingle IP-based networking infrastructure over broadband and wireless access and enables new communications services, suchas SIP Trunking and Hosted UCs. Similarly, modernizing mobile networks to the IMS-based 4G LTE and VoLTE networksenables mobile service providers to offer better and more efficient mobile communications experiences to end users. Asconsumers and businesses continue to demand more engaging and productive communications, we believe networkmodernization is and will continue to be essential to service providers’ ability to compete effectively in the market fortelecommunications services. As such, key market drivers include:Modernization of Networks to IPCommunication trends have been shifting for the past several years. What was once an industry built on voice communicationsfrom central office switches and PBXs on the enterprise premise is now being replaced by the use of social networks, OTTservice providers, mobile applications, and hosted service providers. Consumers are increasingly turning to OTT applications(i.e., WhatsApp, Apple’s Facetime and iMessaging, or Amazon’s Alexa). This shift has created an enhanced experience forconsumers, heightened expectations for future products and services, and expanded related addressable markets.Network modernization to IP NextGen software-based systems enables service providers to add modern communicationsservice offerings that blend traditional voice messaging capabilities with contemporary features, such as video messaging,visual voicemail, mobile messaging and e-mail integration, and an accelerated time-to-market for differentiated messagingservices. Network infrastructures are also undergoing a transformation to IP and the cloud, migrating from hardware-centricappliances to software solutions for voice interconnect and wide area networking.Enterprises, large and small, are re-architecting business processes and undergoing a digital transformation, building their ownvirtualized software solutions in the cloud or moving their IT applications entirely to public cloud applications, and addingRTC and collaboration to their customer service solutions. These new offerings improve customer service and create an e-commerce experience that blends online applications with the in-store environment, creating a seamless experience forcustomers.As a result of these evolving communications environments, the complexity of network operations is also increasingsignificantly, requiring sophisticated NextGen software solutions based on machine learning and analytics to provide reliablenetwork operations.Secure Real-time CommunicationsThe evolution by telecommunications service providers to IP NextGen software-based RTC exposes them to new securitythreats, as the “walled” protection offered by their voice network infrastructures no longer exists with SIP and data-basednetworks. With SIP-based systems, RTC applications such as voice, video and messaging become data applications, andwithout appropriate security measures in place, these networks are left open to security breaches and hacks. Additionally, themove to SIP has seen an increase in fraud in service provider networks in the form of robo-dialing and toll fraud schemes.Given these threats, there is a need for sophisticated software security solutions to protect IP-based communications networks.Service providers have relied upon the software capabilities of SBCs, which are deployed within their networks and aredesigned to provide robust security as well as simplify interoperability, routing and other functions as a protection measure. Byits nature, the SBC controlling software is application-aware and therefore can provide sophisticated data to software-basedanalytics platforms to detect and thwart security breaches. In conjunction with SBCs, big data analytics and machine learningsolutions can enforce a network-wide security perimeter. We believe securing networks against threats is most effective whensecure software solutions are deployed within networks into existing RTC investments and combined with network-wideapproaches for secure RTC.Edge OrchestrationAs service providers deliver hosted and cloud UC services to enterprises, they need to be able to provide those services to theenterprise via the internet and IP infrastructure and must do so with service assurance, security and reliability in a cost-effectivemanner. Hybrid cloud and edge orchestration software offerings enable service providers to manage enterprise edge devicesremotely from their cloud or network and provide the service in a cost-effective and reliable manner. Such solutions minimizeservice downtime and expensive visits to enterprise customer sites via truck rolls to work on the edge devices on the enterprisecustomer premise.8Network Function VirtualizationIn addition to shifting from traditional TDM-based voice and data networks to secure IP NextGen software networks,telecommunications service providers are increasingly moving toward NFV in order to offer new services quickly to theircustomers, reduce costs and compete with Web-Scale companies. NFV provides a new way to design, deploy and managenetworking services by decoupling network software functions from proprietary appliances so they may run in software. Thistransformation enables better use of network infrastructure, creates agility, delivers rapid and elastic scaling, and enables fastertime to market. Software-enabled VNFs can be deployed on generic computing platforms, hosted in private and public clouds,located in data centers, within other network elements or on computer platforms on end user premises.Cloud and “as a Service” ModelsAs software communications applications are deployed in the cloud, telecommunications service providers gain the ability tooffer a new class of business models commonly referred to “as a Service” solutions, including CPaaS, UCaaS and STaaS, all ofwhich have the capability to disrupt traditional Service Provider models.Enterprises: Network Modernization and Digital TransformationToday’s enterprises, including multi-national corporations, SMBs and government institutions, are undergoing not only anetwork modernization but also a digital business transformation. The focus is shifting from person-to-person communicationsto contextual collaboration and omni-channel customer experiences. Within this context, enterprises need a secure, scalableand innovative NextGen software alternative to proprietary PBX and UC products. As part of their digital transformation,enterprises have adopted the cloud, open interfaces, mobile, Big Data, and analytics. Seeing the advantages and cost savingsfrom the cloud, enterprises are migrating their communications solutions to this same environment, thereby enablingconnections between business processes, communications, and collaboration.Network ModernizationEnterprises undergoing network modernization are focused on moving from TDM-based PBXs to SIP trunking and NextGenUC software and collaboration systems while ensuring interoperability during the transformation process. In addition,enterprises in certain industries will often be subject to specific requirements or standards before a network transformation iscompleted. For example, governments may require Joint Interoperability Test Command ("JITC") certification for securedeployments, and healthcare providers may need to achieve Health Insurance Portability and Accountability Act ("HIPAA")certification.When modernizing a network with software, the ability to interwork modern applications, such as Microsoft’s Skype forBusiness and Teams, with legacy analog endpoints on premises becomes essential. Additionally, software capabilities of SBCsare vital in providing interworking and survivability options. SBCs play a crucial role in securing the modern network and forNextGen UC software, which is a top priority for any enterprise. Edge SBC software devices can also play an important role inproviding SD-WAN and Edge Routing capabilities for small and distributed enterprises. Due to the growing open nature ofcommunications environments in the enterprise, the complexity of network operations is also increasing significantly, requiringsophisticated software solutions based on machine learning and analytics to provide reliable network operations.Digital TransformationSuccessful enterprises today are focused on innovating their core product offerings and building a strategic advantage to reachand empower their customers. As technologies evolve and new mobile applications and connected devices proliferate,enterprises must adapt and innovate their communications solutions to create a “connected” experience anywhere, anytime, onany device. As part of this process, businesses are increasingly deploying “as a Service” offerings from the cloud (from either aservice provider or a web-scale provider). UCaaS and CPaaS create a single software communications platform that changesthe way enterprises deliver services and interact with customers. CPaaS software enables enterprises to quickly buildapplications that tie real time communications and their social channels to their business processes while UCaaS softwaredelivers the underlying UC capabilities to ensure end users have the features and functionality required to enable reliable andscalable end-to-end communications.9Our Solutions, Products and ServicesRibbon SolutionsRibbon provides secure NextGen RTC software-enabled appliances and cloud solutions for service providers and enterprises.Ribbon's software communications solutions are widely deployed at over 1,000 customers globally; provide high scale,reliability and performance; and are deployable from the public, private and hybrid cloud, in-network or on the enterprisepremise and edge. As of December 31, 2019, our software solutions, which are a combination of our software products andservices, for service providers and enterprises included the following:Ribbon service provider software solutions enable fixed and wireless service providers, cable providers (or MSOs), ISPs andinterconnect service providers to modernize their networks, quickly capitalize on growing market segments and introducedifferentiating products, applications and services for their business and consumer customers. Ribbon's service providersoftware solutions include fixed network transformation, wireless network evolution (mobility), secure network interconnects,managed intelligent edge services, cloud communications as a service, and communications analytics and security solutions,enabling secure and innovative business and consumer communications services offerings. Ribbon software solutions helpservice providers connect people to each other wherever they happen to be, addressing the growing demands of today’sbusinesses and consumers for secure RTC.Ribbon's enterprise software solutions allow enterprises to securely connect to SIP trunks and modernize their unified andcloud communications networks. Modernization solutions range from Intelligent Edge, legacy Nortel PBX evolution, securingUC and contact centers, migrating to Microsoft Skype for Business and Teams with Direct Routing, and providing sessionmanagement, security and cloud communications software solutions to enable highly productive communications experiencesfor employees and customers using the web, mobile and fixed endpoints. Ribbon provides secure communications softwaresolutions for the federal government vertical and has JITC certified solutions. Ribbon also provides RTC software solutions toother industry verticals, including higher education, finance and healthcare. Ribbon has significant experience and expertise insecuring SIP communications with a portfolio of SBC software solutions and has deployed thousands of SBC softwareinstallations across different industry verticals. Our Intelligent Edge software solutions secure and simplify UC deploymentsand enable SD-WAN and Edge Routing for small and distributed enterprises. Our Microsoft Skype for Business and Teamssoftware solutions secure those communications environments and assist in the migration of enterprise customers to thoseenvironments. Our analytics solutions provide better network visibility, security and customer behavior insights.Ribbon ProductsRibbon software products enable service providers to take new services to market quickly and with scale and carrier classreliability, allowing such providers to compete effectively in the marketplace, and enable enterprises to make their employeeand customer engagement experiences richer and more productive.Ribbon’s software product lines enabling network transformation, mobile network evolution and interconnect solutions include10Ribbon's call session controllers, media gateways, signaling, policy and routing software and a market leading portfolio ofSBCs intelligent edge software products, all of which are mechanisms through which operators and enterprises deploy oursecure RTC software solutions. Ribbon’s NextGen UC software solutions are enabled by the Ribbon Application Server, Clientand Intelligent Messaging products, and are a software platform for business and residential multimedia communications acrossfixed, mobile, cable, and enterprise markets. Our software product portfolio facilitates the securing of SIP-based UC sessionsin the enterprise core and edge networks, and the migration of legacy PBX-based enterprise communications networks (such asthe Nortel PBX installed base) across different market verticals. Our software product portfolio includes element managementand network management software to enable customers to configure, monitor and manage the solutions they purchase from us.The software product portfolio also includes native mobile client products that allow service providers to enable Wi-Fi and LTEcalling services for their subscribers without the considerable cost of investing in, implementing and maintaining, a full VoLTEIMS network.The Ribbon Analytics portfolio consists of Operations, Security and Monetization applications for services assurance, securityand subscriber growth. With our big data Protect analytics platform and pre-packaged features, we provide detailed insightsinto network, service traffic and customer behavior.The Company's Cloud Communications “as a Service” portfolio, which includes CPaaS, UCaaS and STaaS offerings, is basedon Kandy Cloud, which is a cloud-based RTC software platform that enables service providers, independent software vendors,systems integrators and enterprises to rapidly create and deploy high value embedded communications services for theircustomers. Utilizing Ribbon's communications technology, which is offered as a part of a white-label solution service, serviceproviders may connect their networks to Kandy Cloud CPaaS via SIP trunks and APIs. The Kandy Cloud software platformprovides APIs and SDKs for developers to build embedded communications applications. Kandy Cloud helps service providersgrow revenue with quick to deploy, pre-packaged applications called Kandy Wrappers. Kandy Wrappers are fully functionalsoftware applications that can be delivered standalone or inserted into an enterprise website or into an enterprise application toendow it with embedded RTC capabilities. Kandy Cloud also delivers a suite of UCaaS solutions, such as Cloud PBX, CloudContact Center and Cloud Collaboration.Ribbon Global ServicesOur global services organization is responsible for all aspects of implementation and support of our solutions and products.Key portfolio components include solution and business consulting, system integration, deployment, and managed careservices. Our technical support group provides constant support to keep customers' software operating at peak performance.Support services include managing software updates, appliance maintenance, appliance spare services and managed sparesprograms, and emergency assistance during disaster recovery.With a local presence in over twenty countries on five continents, Ribbon Global Services provides both a U.S. presence and aglobal presence with complete coverage to help drive our customers’ success.The Ribbon Global Services team provides our customers with the following:A full-service portfolio including deployment and integration, testing and verification, migration, operational support,monitoring and managed services;End-to-end project management and accountability via highly experienced program managers who follow a consistent,disciplined methodology;Knowledgeable and experienced technical resources with in-depth skills and expertise on IP communications softwaresolutions and network modernization;Consistent execution in the design, deployment and support of the world's largest and most advanced software networks;andAward winning, around-the-clock technical support services with dedicated technical support centers around the globe,including the United States, Canada, Mexico, United Kingdom, Spain, Germany, Czech Republic, Australia, Japan, Malaysia,Taiwan, China (Hong Kong) and India.11Our StrategyRibbon is a leader in enabling network modernization through NextGen software and we plan to continue to invest in oursoftware solutions platform approach to increase our global reach and scale. We aim to enable service providers andenterprises to significantly expand their software-enabled RTC environments to provide better, more agile end customerexperiences that contain their operational and capital expenditure costs. By doing so, we believe we will sustain our industry-leading position and succeed in our market. Our customers are key to the success of our business and our business model isfocused on aligning with our customers through direct engagement, service and support as well as through our channelpartners. This model allows us to target our sales and research and software development efforts based on the needs of ourcustomers and we believe it is critical to our success.Key elements of Ribbon’s strategy include:Selectively Invest in our Core Software Products and Solutions. In order to service our customers and support their keypriorities and growth, we must strategically invest in research and development. We are committed to balancing our researchand software development investments between existing software products and solutions and new growth-oriented productinitiatives. During 2019, we continued to shift our investment efforts, resulting in greater than 95% of our research anddevelopment investment directed at software. In addition, we are focused on investing in products and solutions that will beprofitable. We intend to continue to sunset certain less significant product offerings that are not aligned with our strategicdirection and are not meaningful contributors to our profitability. We believe this will allow us to more effectively andefficiently deploy capital to our growth areas. Through targeted research and software development investments in coresoftware products and solutions that will align with our strategy for growth, we are committed to helping our customers migratetheir networks to software and virtualized and private or public cloud environments.Build on Growing our Customer Footprint and Global Reach. Ribbon has over 1,000 customers globally, in all of themajor regions with many of the largest telecommunications service providers and enterprises in the world. This footprintallows us to sell additional software products and services from the Ribbon portfolio to that deployed base of existingcustomers and provides us with the opportunity to sell new software products and services to that customer base. We alsocontinue to look for opportunities to expand our portfolio footprint and global reach to further diversify our customer base.Disciplined Expansion into New Markets and New Solutions for Growth. We believe that a disciplined approach totargeting new markets is critical to growing our business. As such, we have taken actions to expand our software portfolio andofferings to our customers. We have expanded our investments in the enterprise market and have increased our revenue fromenterprise customers. We are investing in growth initiatives focused on cloud communications and RTC security both forservice providers and enterprises. Similarly, given our significant experience with securing IP network borders in the core andthe edge with our SBC software, and the increasing importance of security in today’s networks and communications, we areworking on expanding our role in securing RTC with new software portfolio offerings.Selectively Pursue Strategic Relationships, Alliances and Acquisitions. The ecosystem in which we operate is continuallyevolving and expanding. Accordingly, we continue to pursue strategic relationships, alliances and acquisitions that align our12business with our customers’ strategic goals and objectives as well as our own strategic goals for further extending ourfootprint, reach, scale and growth in the business.Competitive DifferentiationIn addition to our scale and global presence, we believe there are several factors that set us apart and allow us to competeeffectively with comparable peers in terms of scope, size and scale. Installed Base. Ribbon has a large, global deployed base from our Nortel-, Sonus- and GENBAND-heritage-branded softwareproducts, including softswitches and media gateways in global service provider and enterprise networks supporting over 30million switched access lines. These products are highly integrated into our customers’ network environments and requirespecialized tools and intellectual property from Ribbon to consolidate and modernize those environments to newer IP software-based services with optimal capital expenditure investments. Similarly, our large, global deployed base of SBCs at serviceproviders' networks and in enterprises offers Ribbon a unique platform for upgrading and cross-selling software products intothat installed base.Strong Technology in Virtualization. Ribbon has extensive network virtualization software products and technology as partof our overall portfolio and has deployed these pure software products to help our customers in the modernization of theirnetworks to software-based virtualization, enabling the use of the private or public cloud. We believe we are the clear marketleader in SBC virtualized software products, and a significant portion of our overall portfolio has software and virtualizedofferings that can co-exist with appliance-based software products.Security Experience and Technology. Our SBC and edge software, deployments and expertise are market leading. Ribbonhas been in the SBC software market for over fifteen years, yielding us a strong advantage from which to launch additionalsecurity offerings into the market. We believe our SBC software products are unmatched in the market on reliability,performance and functionality at scale.Media Processing, Transcoding and Signaling Technology Expertise. We have extensive experience in deploying mobileVoLTE and fixed network software solutions. Our voice media transcoding software technology that is supported by CPU,GPU or DSP options is industry leading. Our mobile network evolution software solutions are deployed in large-scale 4GVoLTE networks supporting over 350 million subscribers in total.Intellectual PropertyIntellectual property is fundamental to our business and our success, and we depend upon our ability to develop, maintain andprotect our technology. We have defended, and intend to vigorously defend when necessary, our intellectual property frominfringement. Therefore, we seek to safeguard our investments in technology and rely on a combination of United States andforeign patent, trademark, trade secret and copyright law and contractual restrictions to protect the proprietary aspects of ourtechnology and to defend us against claims from others. Our general policy has been to seek to patent those patentableinventions that we plan to incorporate in our products or that we expect will be valuable otherwise. We have a program to fileapplications for and obtain patents, copyrights and trademarks in the United States and in specific foreign countries where webelieve filing for such protection is appropriate.As of December 31, 2019, we held patents and had pending patent applications both in the United States and abroad as follows:in the name of Ribbon Communications Operating Company, Inc., 248 United States patents with expiration dates rangingfrom February 2020 through December 2037, 31 patent applications pending in the United States, 50 foreign patents withexpiration dates ranging from May 2020 through April 2030, and eight patent applications pending abroad; in the name ofGENBAND US LLC, 325 United States patents with expiration dates ranging from February 2020 through October 2037, 59patent applications pending in the United States, 229 foreign patents with expiration dates ranging from January 2020 throughJuly 2035 and 50 patent applications pending abroad; in the name of Ribbon Communications Securities Corp., 27 UnitedStates patents with expiration dates ranging from November 2028 through March 2034, two patent applications pending in theUnited States and two foreign patent applications pending abroad; and in the name of Edgewater Networks, Inc., six UnitedStates patents with expiration dates ranging from October 2022 through March 2035 and six patent applications pending in theUnited States.Furthermore, as of December 31, 2019, we had 41 registered trademarks in the United States, as follows: 15 in the name ofGENBAND US LLC, including GENBAND, GENBAND with design, G9, G9 with design, KANDY and BUSINESSCALL;16 in the name of Ribbon Communications Operating Company, Inc., including SONUS, the SONUS logo, RIBBON, theRibbon logo, RIBBON PROTECT and NETSCORE; one in the name of Network Equipment Technologies, Inc., for13PROMINA; four in the name of Quintum Technologies, LLC, including TENOR; four in the name of Ribbon CommunicationsSecurities Corp.; and five in the name of Edgewater Networks, Inc., including Edgewater and Edgeview. We also had onepending trademark application in the United States in the name of Ribbon Communications Operating Company, Inc., forRIBBON PROTECT, as of December 31, 2019.In December 2019, Ribbon Communications Securities Corp. changed its name to GENBAND Inc., GENBAND US LLCmerged with and into Ribbon Communications Operating Company, Inc., and Quintum Technologies, LLC was dissolved. Weeither plan to or are in the process of recording (i) the name change from Ribbon Communications Securities Corp. toGENBAND Inc.; (ii) the assignment of patents and copyrights from GENBAND US LLC to Ribbon CommunicationsOperating Company, Inc.; and (iii) the assignment of patents and copyrights from Quintum Technologies, LLC to RibbonCommunications Operating Company, Inc.In addition to the protections described above, we seek to safeguard our intellectual property by:Employing measures to safeguard against the unauthorized use or disclosure of the source and object code for oursoftware, documentation and other written materials, and seeking protection of such materials under copyright and trade secretlaws;Licensing our software pursuant to signed license agreements, which impose restrictions on others' ability to use oursoftware; andSeeking to limit disclosure of our intellectual property by requiring employees and consultants with access to ourproprietary information to execute confidentiality agreements.We have incorporated third-party licensed technology into certain of our current products. From time to time, we may berequired to license additional technology from third parties to develop new products or to enhance existing products. Based onexperience and standard industry practice, we believe that licenses to use third-party technology generally can be obtained oncommercially reasonable terms. Nonetheless, there can be no assurance that necessary third-party licenses will be available orcontinue to be available to us on commercially reasonable terms. As a result, the inability to maintain, license or re-license anythird-party licenses required in our current products, or to obtain any new third-party licenses to develop new products andenhance existing products could require us to obtain substitute technology of lower quality or performance standards or atgreater cost. This could delay or prevent us from making these products or enhancements, any of which could seriously harmour business, financial condition and operating results.Please see generally the risks that are discussed in Item 1A. “Risk Factors” for risks related to our intellectual property.Our CustomersWe have over 1,000 customers globally. Our customers are located around the world in over 50 countries and include many ofthe leading global telecommunications service providers and enterprises. We have continually served many of our largestcustomers for well over 30 years. Service providers use our products to provide secure software-enabled RTC for the serviceproviders (in the case of interconnects), enterprises and consumers they serve. Enterprises use our products to providesoftware-enabled RTC for their employees (including remote workers) as well as provide secure communications networks fortheir customer-facing components, such as contact centers.Our global service provider customers include fixed-line, wireless, cable, internet and interconnect service providers. Ourenterprise customers include businesses of all sizes, ranging from SOHO, SMB, and large and distributed enterprises acrossvarious industry verticals with a concentration in the federal government, healthcare and education sectors. We sell tocustomers via a direct sales team as well as through indirect channels that include VARs, system integrators and serviceproviders. Independent software vendors also partner with Ribbon to source our software solutions and market them throughtheir sales channels.In the year ended December 31, 2019, Verizon Communications Inc. ("Verizon") and AT&T Inc. ("AT&T") accounted forapproximately 17% and 12% of our revenue, respectively. In both the years ended December 31, 2018 and 2017,approximately 17% of our revenue was derived from sales to Verizon. Both Verizon and AT&T are service providers that offerinterconnect, fixed line and mobile communications services. For both Verizon and AT&T, our software solutions are soldacross their respective business divisions supporting their large enterprises, SMB and consumer telecommunications and cable-related offerings. Our top five customers represented approximately 40% of our revenue in the year ended December 31, 2019,1438% of our revenue in the year ended December 31, 2018 and approximately 41% of our revenue in the year ended December31, 2017.Competitive ConditionsCompetition in the telecommunications market remains fierce. The market is shifting from a market dominated by a few largetelecommunications legacy hardware equipment companies, such as Ericsson LM Telephone Company, Huawei TechnologiesCo. Ltd., and Nokia Corporation, to a market that is characterized by software, including network virtualization, migration tothe cloud, and open interfaces. We believe this shift creates opportunities for us as well as our direct competitors intelecommunications and networking, including:Network transformation: Mid-size vendors of networking and telecommunications equipment and specialty vendors,including AudioCodes Ltd., Mavenir Systems, Inc., Metaswitch Networks Corporation, Oracle Corporation (Session BorderController) and ADTRAN, Inc.;Enterprise and cloud solutions: Microsoft, 8x8, Inc., Avaya Inc., Bandwidth Inc., Cisco Inc. (with Broadsoft, Inc.), MitelNetworks Corporation (with ShoreTel, Inc.), Plivo Inc., RingCentral, Inc., Twilio Inc., Telestax Inc., Fuze, Inc., Genesys andVonage Holdings Corp. (with Nexmo, Inc. and Tokbox Inc.); andSecurity and analytics: SecureLogix Corporation, RedShift Networks Corporation, Empirix Inc. and Oracle Corporation.Other smaller private and public companies are also focusing on similar market opportunities. Mergers among any of theabove companies or other competitors, as well as additional competitors with significant financial resources entering ourmarkets, could further intensify competition. Mergers between service providers may also increase competition, as thesereduce the number of customers and channels for products and solutions. To compete effectively, we must deliver innovative software solutions that provide extremely high reliability and quality;deploy and scale easily and efficiently; interoperate with existing network infrastructures and multivendor solutions; provideeffective network management; are accompanied by comprehensive customer support and professional services; provide a cost-effective and space-efficient solution for enterprises and service providers; meet price competition from low cost equipmentproviders; and offer solutions that are timely for the market and support where the industry is heading.Although we believe we compete favorably because our software solutions are widely deployed, highly scalable and cost-effective for our customers, some of our competitors include products in their portfolios that we do not provide and may be ableto devote greater resources to the development, promotion, sale and support of their products. In addition, some of ourcompetitors have more extensive customer bases and broader customer relationships than we have, including relationships withour potential customers and established relationships with distribution partners.Please see generally the risks that are discussed in Item 1A, "Risk Factors" for risks related to our customers and thecompetitive landscape in which we operate.Sales and MarketingWe sell our software products, solutions and services to our customers with a direct internal sales force and also indirectly viachannels and partnerships globally, leveraging the assistance of service provider channels and VARs such as VerizonCommunications Inc. and distributors such as Westcon Group Inc., Ingram Micro Inc., BlackBox Corporation and Arrow S3.Our channel partner programs are designed to serve particular markets and provide our customers with opportunities topurchase our products in combination with related services and products. For example, Ribbon is a Microsoft GoldCommunications Partner and helps enterprises optimize Skype for Business and Teams deployments by securing thosecommunications.As a primary supplier of software solutions to Tier 1 service providers (a service provider that can reach every other network onthe Internet without purchasing IP transit), we require a strong worldwide presence. We have an established sales presencethroughout North America, Europe, Asia/Pacific, the Middle East, Africa and Central/South America. We also have a dedicateddirect sales team focused on the enterprise, industry verticals and federal government sector in the United States.Our marketing team is focused on promoting company brand awareness, increasing our software solutions, product, technologyand services differentiation and awareness via webinars, company web sites, advertising and digital outreach, as well asgenerating qualified sales leads. We promote thought leadership on technology and our solutions within the industry by15participating in and speaking at industry events and conferences and via social network campaigns and blogs. Our marketingteam also provides briefings to industry analysts on a regular basis and at major industry events, communicates with the mediain connection with noteworthy public announcements.Please see generally the risks that are discussed in Item 1A. "Risk Factors" for risks related to our sales strategy.ManufacturingA number of our software products are deployed on appliances. Where our products contain an appliance element, we utilizecontract manufacturers to source and assemble these components. Our contract manufacturers provide comprehensivemanufacturing services, including assembly and testing of our products and procurement of component materials on our behalf.We believe that outsourcing the manufacturing of any necessary appliance enables us to preserve working capital, allows forgreater flexibility in meeting changes in demand and enables us to be more responsive in delivering diverse product offerings toour customers. As of December 31, 2019, we outsourced the manufacturing of our appliance products to four manufacturers,two upon which we primarily rely. We and our contract manufacturers purchase several key components of our applianceproducts, including commercial digital signal processors, from single or limited sources. We purchase these components on apurchase order basis.Our purchases of direct materials and components for manufacture were approximately $70 million in 2019 and $75 million in2018. Going forward, we expect our overall trend of a reduction in direct material purchases to continue as the softwarerichness within our products increases while the remaining appliance content declines.Please see generally the risks that are discussed in Item 1A. “Risk Factors” for risks related to our manufacturing operationsand use of contract manufacturers.Research and DevelopmentWe believe that strong software product development capabilities are essential to our strategy of enhancing our coretechnology, developing additional security and network modernization features and maintaining comprehensive software andservice offerings. Our research and development process leverages innovative technology in response to market data andcustomer feedback. As part of this process, we regularly review research and software development investments in ourproducts and balance them against market demand.We have assembled a team of highly skilled engineers with significant transcoding, UC application and networking industryexperience. Our engineers have deep experience in software design and development. Our engineering effort is focused onEdge, NextGen UC, NFV, security and cloud-based architecture software product development.As of December 31, 2019, we maintained research and development offices in the United States, Canada, India and the UnitedKingdom.SeasonalityWe have experienced quarterly fluctuations in customer activity due to seasonal considerations. We typically experienceincreases in order volume in the fourth quarter due to greater spending on operating and capital expenditures by our serviceprovider customers. We typically experience reductions in order volume toward the beginning of the calendar year, when ourservice provider customers are finalizing their annual budgets, which may result in lower revenue in the first quarter. Thesetypical seasonal effects may vary. Accordingly, they should not be considered a reliable indicator of our future operatingresults.BacklogWe sell products and services pursuant to purchase orders issued under master agreements that provide standard terms andconditions that govern the general commercial terms and conditions of the sale. These agreements typically do not obligatecustomers to purchase any minimum or guaranteed quantities, nor do they generally require upfront cash deposits. At any giventime, we have orders for products that have not yet been shipped and for services (including our customer support obligations)that have not yet been performed. We also have orders relating to products that have been delivered and services that have beenperformed but have not yet been accepted by the customer under the applicable purchase terms. We include both of thesesituations in our calculation of backlog.16A backlogged order may not result in revenue in the quarter in which it was booked, and the actual revenue recognized in aquarter may not equal the total amount of related backlog. In addition, although we believe that the backlog orders are firm,purchase orders may be canceled by the customer prior to shipment without significant penalty. Therefore, we do not believethat our backlog, as of any particular date, is necessarily indicative of actual revenue for any future period.We have begun to derive, and expect to continue to derive, a greater percentage of our revenue from the enterprise market andthrough sales channels where speed of fulfillment is essential to winning business. Consequently, we expect to earn a lowerrelative percentage of our total business from large service provider orders that are delivered over multiple quarters and yearsand that our backlog going forward will diminish both as a comparable metric to prior periods and as a relative percentage oftotal revenue (both service provider and enterprise). Our backlog was approximately $323 million at December 31, 2019 andapproximately $340 million at December 31, 2018.Our EmployeesAt December 31, 2019, we had a total of 2,209 employees, comprised of 1,289 employees located in the Americas, 234employees located in the Middle East, Africa and Europe and 686 employees located in the Asia Pacific region. Certain of ouremployees are represented by collective bargaining agreements, primarily in Europe. We believe our relationships with ouremployees are good.Segment InformationWe operate in a single segment. Operating segments are identified as components of an enterprise about which separatediscrete financial information is available for evaluation by the chief operating decision maker in making decisions regardingresource allocation and assessing performance. To date, our chief operating decision maker has made such decisions andassessed performance at the company level, as one segment. Our current chief operating decision makers are our Interim Co-Presidents and Chief Executive Officers.Pending MergerOn November 14, 2019, we entered into an Agreement and Plan Merger (the "ECI Merger Agreement") with EclipseCommunications Ltd., an indirect wholly-owned subsidiary of the Company ("Merger Sub"), Ribbon Communications IsraelLtd., ECI Telecom Group Ltd. ("ECI") and ECI Holding (Hungary) kft, pursuant to which Merger Sub will merge with and intoECI, with ECI surviving such merger as a wholly-owned subsidiary of the Company (the "ECI Merger").Our Board of Directors (the "Board") unanimously approved the ECI Merger Agreement and the transactions contemplatedthereby. We held a stockholder meeting on January 27, 2020 (the “Special Meeting”), at which stockholders approved anissuance of 32.5 million shares of our common stock (the “ECI Stock Consideration”) as partial consideration in the ECIMerger.As provided in the ECI Merger Agreement, at the time of the closing, all equity securities of ECI issued and outstandingimmediately prior to the closing will be converted into the right to receive consideration consisting of $324 million in cash (the"ECI Cash Consideration") and the ECI Stock Consideration, less the amount of indebtedness of ECI. ECI equityholders willalso receive approximately $31 million from ECI's sale of real estate assets. We intend to fund the ECI Cash Considerationwith proceeds from a new $500 million credit facility that we expect to enter into with Citizens Bank, N.A. and SantanderBank, N.A., as joint lead arrangers and bookrunners, in connection with the closing of the ECI Merger (the “2020 CreditFacility”). The 2020 Credit Facility consists of a $400 million term loan, which will be used in part to fund the merger, and a$100 million revolver that is projected to be undrawn at closing. The 2020 Credit Facility will retire our existing credit facility.Immediately following the closing, it is expected that the former holders of ECI will own approximately 23% of ouroutstanding common shares. The ECI Merger is expected to close in the first quarter of 2020, subject to regulatory approvalsand customary closing conditions.Our Company HistoryWe were organized as a Delaware corporation on May 19, 2017, initially under the name Solstice Sapphire Investments, Inc.,for the purpose of effecting the merger of Sonus and GENBAND. The Merger occurred on October 27, 2017. Uponcompletion of the Merger, Sonus and GENBAND became wholly-owned subsidiaries of Solstice Sapphire Investments, Inc.,which concurrently changed its name to Sonus Networks, Inc. On November 28, 2017, Sonus Networks, Inc. changed its nameto Ribbon Communications Inc. Ribbon succeeded to and continues to operate, directly or indirectly, the then existingbusinesses of Sonus and GENBAND.17Additional InformationOur annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to thosereports filed with or furnished to the United States Securities and Exchange Commission (the “SEC”), are available free ofcharge through the SEC's Internet site (http://www.sec.gov) or our Internet site (http://www.ribboncommunications.com) as soonas reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Information contained on, orthat can be accessed through, our website does not constitute a part of this annual report and is not incorporated by referenceherein.18Item 1A. Risk FactorsOur business faces significant risks and uncertainties. Certain important factors may have a material adverse effect on ourbusiness prospects, financial condition and results of operations, and they should be carefully considered. Accordingly, inevaluating our business, we encourage you to consider the following discussion of risk factors in its entirety in addition toother information contained in or incorporated by reference into this Annual Report on Form 10-K and our other public filingswith the Securities and Exchange Commission (“SEC”). Other events that we do not currently anticipate or that we currentlydeem immaterial may also affect our business, prospects, financial condition and results of operations.Risks Related to the Proposed ECI Telecom Group Ltd. Merger Completion of the pending ECI Merger is subject to conditions and may not be consummated on the terms or timelinecurrently contemplated, if at all. On November 14, 2019, we entered into the ECI Merger Agreement with ECI and ECI Holding (Hungary) kft, among others,pursuant to which Merger Sub will merge with and into ECI, with ECI surviving such merger as a wholly-owned subsidiary ofRibbon. Our obligations to complete the ECI Merger are subject to the satisfaction or waiver of certain conditions, including(i) the approval of the ECI Merger by ECI’s shareholders and the approval of the issuance of our common stock as partialconsideration in the ECI Merger by our stockholders, (ii) the receipt of all required antitrust and foreign investment approvalsand clearances, and (iii) the absence of any injunctions being entered into or law being adopted that would make the ECIMerger illegal.The failure to satisfy all of the required conditions could delay the completion of the ECI Merger by a significant period of timeor prevent the ECI Merger from occurring. Any delay in completing the ECI Merger could cause us to not realize some or allof the benefits that we expect to achieve if the ECI Merger is successfully completed within the expected time frame, cause usto incur unexpected costs, and adversely impact our business. We have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transactioncosts in connection with the proposed ECI Merger, and these fees and costs are payable by us regardless of whether the ECIMerger is consummated. Management has also spent significant time and resources working on the ECI Merger. If the ECIMerger Agreement is terminated under certain circumstances specified in the ECI Merger Agreement, we may be required topay ECI a termination fee of $19,500,000 if all conditions to the ECI Merger are satisfied and the Company fails toconsummate the ECI Merger due to a failure to obtain debt financing to support payment of the cash portion of the ECI Mergerconsideration. Additionally, we may be required to pay ECI a termination fee of $13,625,000 and expense reimbursement up to$2,275,000 if ECI terminates the ECI Merger Agreement due to a change in the recommendation of, or failure to affirm therecommendation by, our Board of Directors or following the termination of the ECI Merger Agreement in certain circumstancesif we enter into a definitive agreement in respect of another acquisition proposal (or consummate such a transaction).Although our stockholders have approved the Share Issuance, the equityholders of ECI have approved the ECI Merger and theU.S. Federal Trade Commission granted early termination of the applicable waiting period under the Hart-Scott-RodinoAntitrust Improvements Act of 1976, as amended, there can be no assurance that the other conditions to closing the ECI Mergerwill be satisfied or waived, including one outstanding regulatory approval. For these and other reasons, the ECI Merger maynot be completed on the terms or timeline contemplated, if at all.Combining Ribbon and ECI may be more difficult, costly or time-consuming than expected and the anticipated benefits andcost savings of the pending ECI Merger may not be realized.We are operating and, until the completion of the ECI Merger, will continue to operate independently of ECI. The success ofthe ECI Merger, including anticipated benefits and cost savings, will depend, in part, on our ability to successfully combine andintegrate the businesses. It is possible that the pendency of the ECI Merger and/or the integration process could result in theloss of key employees, higher than expected costs, diversion of management attention, the disruption of our ongoing businessesor inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability tomaintain relationships with customers, vendors and employees or to achieve the anticipated benefits and cost savings of theECI Merger.We have incurred and will incur additional transaction fees, including legal, regulatory and other costs associated with closingthe transaction, as well as expenses relating to formulating and implementing integration plans, including facilities and systemsconsolidation costs and employment-related costs. We continue to assess the magnitude of these costs, and additionalunanticipated costs may be incurred in the ECI Merger and the integration of the two companies’ businesses. While we expectthat the elimination of duplicative costs as well as the realization of other efficiencies related to the integration of the businessesshould allow us to offset integration-related costs over time, this net benefit may not be achieved in the near term or at all. Aspart of the integration process, we may also attempt to divest certain assets of the combined company, which may not bepossible on favorable terms, or at all, or if successful, may change the profile of the combined company. If we experiencedifficulties with the integration process, the anticipated benefits of the ECI Merger may not be realized fully or at all, or maytake longer to realize than anticipated. The actual cost savings of the ECI Merger could be less than expected.The announcement and pendency of the ECI Merger may adversely affect our business, financial condition and results ofoperations.Uncertainty about the effect of the pending ECI Merger on our employees, clients, and other parties may have an adverse effecton our business, financial condition and results of operation regardless of whether the ECI Merger is completed. These risks toour business include the following, all of which may be exacerbated by a delay in the completion of the ECI Merger: (i) theimpairment of our ability to attract, retain, and motivate our employees, including key personnel; (ii) the diversion ofsignificant management time and resources from day-to-day operations towards the completion of the pending ECI Merger;(iii) difficulties maintaining relationships with clients, suppliers, and other business partners; (iv) delays or deferments ofcertain business decisions by our clients, suppliers, and other business partners; (v) the inability to pursue alternative businessopportunities, engage in certain financing transactions or make appropriate changes to our business; (vi) litigation relating tothe pending ECI Merger and the costs related thereto; and (vii) the incurrence of significant costs, expenses, and fees forprofessional services and other transaction costs in connection with the pending ECI Merger.Risks Related to our Business and IndustryOur quarterly revenue and operating results are unpredictable and may fluctuate significantly from quarter to quarter,which could adversely affect our business, results of operations and the trading price of our common stock.Our revenue and operating results may vary significantly from quarter to quarter due to a number of factors, many of which areoutside of our control and any of which may cause our stock price to fluctuate. The primary factors that may affect our revenueand operating results include, but are not limited to, the following:•consolidation within the telecommunications industry, including acquisitions of or by our customers;•general economic conditions in our markets, both domestic and international, as well as the level of discretionary ITspending;•competitive conditions in our markets, including the effects of new entrants, consolidation, technological innovationand substantial price discounting;•fluctuation in demand for our products and services, and the timing and size of customer orders;•fluctuations in foreign exchange rates;•cancellation or deferral of existing customer orders or the renegotiation of existing contractual commitments;•mix of product configurations sold;•length and variability of the sales cycle for our products;•application of complex revenue recognition accounting rules to our customer arrangements;•timing of revenue recognition;•changes in our pricing policies, the pricing policies of our competitors and the prices of the components of ourproducts;•market acceptance of new products, product enhancements and services that we offer;•the quality and level of our execution of our business strategy and operating plan, and the effectiveness of our salesand marketing programs;19•new product announcements, introductions and enhancements by us or our competitors, which could result in deferralsof customer orders;•our ability to develop, introduce, ship and successfully deliver new products and product enhancements that meetcustomer requirements in a timely manner;•our reliance on contract manufacturers for the production and shipment of our appliance products;•our or our contract manufacturers' ability to obtain sufficient supplies of sole or limited source components ormaterials;•our ability to attain and maintain production volumes and quality levels for our products;•variability and unpredictability in the rate of growth in the markets in which we compete;•costs related to mergers, acquisitions and divestitures; and•corporate restructurings.Equipment purchases by communications service providers and enterprises continue to be unpredictable. As with othertelecommunications product suppliers, we typically recognize a portion of our revenue in a given quarter from sales bookedand shipped in the last weeks of that quarter. As a result, delays in customer orders may result in delays in shipments andrecognition of revenue beyond the end of a given quarter. Additionally, we rely on the revenue provided by certain largecustomers. It can be difficult for us to predict the timing of receipt of major customer orders, and we are unable to control theirtiming decisions. In the past, we have experienced significant variability in the spending patterns and purchasing practices ofour large customers on a quarterly and annual basis, and we expect that this variability will continue. Consequently, ourquarterly operating results are difficult to predict, even in the short term, and a delay in an anticipated sale past the end of aparticular quarter may negatively impact our results of operations for that quarter, or in some cases, that year. Therefore, webelieve that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. If ourrevenue or operating results fall below the expectations of investors or securities analysts or below any guidance we mayprovide to the market, the price of our common stock could decline substantially. Such a stock price decline could also occureven if we meet our publicly stated revenue and/or earnings guidance.A significant portion of our operating expenses is fixed in the short term. If revenue for a particular quarter is belowexpectations, we may not be able to reduce costs and expenses proportionally for that quarter. Any such revenue shortfallwould, therefore, have a significant effect on our operating results for that quarter.We have incurred net losses and may incur additional net losses.We incurred net losses in fiscal years 2019, 2018 and 2017. We may incur additional net losses in future quarters and years.Our revenue may not grow, and we may never generate sufficient revenue to sustain profitability. Any failure by us to achieve,sustain or increase profitability on a consistent basis could cause the value of our common stock to decline.If we fail to compete successfully against telecommunications equipment and networking companies, our ability to increaseour revenue and achieve profitability will be impaired.Competition in the telecommunications market is intense. The market is shifting from a market dominated by a few largeincumbent telecommunications equipment companies, such as Ericsson LM Telephone Company, Huawei Technologies Co.Ltd. and Nokia Corporation, to a market with competitors that are characterized by network virtualization, migration to thecloud, and open interfaces. We believe this shift creates opportunities for us, as well as our direct competitors intelecommunications and networking, including:•Within the network transformation space, mid-size vendors of networking and telecommunications equipment andspecialty vendors, including AudioCodes Ltd., Dialogic Inc., Mavenir Systems, Inc., Metaswitch Networks Ltd.,Oracle Corporation (Session Border Controller), and ADTRAN, Inc.;•Within the enterprise and cloud solutions space, 8x8, Inc., Avaya Inc., Bandwidth Inc., Cisco Inc. (with Broadsoft,Inc.), Mitel Networks Corporation (with ShoreTel, Inc.), Plivo Inc., RingCentral, Inc., Twilio Inc., Telestax Inc., Fuze,Inc., Genesys and Vonage Holdings Corp. (with Nexmo, Inc. and Tokbox Inc.); and•Within the audio and video security and analytics space, SecureLogix Corporation, RedShift Networks Corporation,Empirix Inc. and Oracle Corporation.Mergers among any of these or other competitors could strengthen their ability to compete against us, and additionalcompetitors with significant financial resources entering our markets could further intensify competition.Many of our current and potential competitors have significantly greater selling and marketing, technical, manufacturing,financial and other resources than we have. Further, some of our competitors sell significant amounts of other products to our20current and prospective customers and have the ability to offer lower prices to win business. Our competitors' broad productportfolios, coupled with already existing relationships, may cause our customers to buy our competitors' products or harm ourability to attract new customers.To compete effectively, we must deliver innovative products that:•provide extremely high reliability and quality;•deploy and scale easily and efficiently;•interoperate with existing network infrastructures and multivendor solutions;•provide effective network management;•are accompanied by comprehensive customer support and professional services;•provide a cost-effective and space-efficient solution for enterprises and service providers;•meet price competition from low cost equipment providers; and•offer solutions that are timely for the market and support where the industry is heading.If we are unable to compete successfully against our current and future competitors, we could experience price reductions,order cancellations and loss of customers and revenue, and our operating results could be adversely affected.We will not be successful if we do not grow our customer base or if we are unable to generate recurring business from ourexisting customers.We rely on certain key customers, and our future success will depend on our ability to generate recurring business from ourexisting customers and to attract additional customers beyond our current customer base. One customer, VerizonCommunications Inc., contributed approximately 17% of our revenue in each of the years ended December 31, 2019, 2018 and2017. In addition, AT&T Inc., contributed 12% of our revenue in 2019. Our top five customers contributed approximately40% of our revenue in 2019, approximately 38% of our revenue in 2018 and approximately 41% of our revenue in 2017.Factors that may affect our ability to grow our customer base include but are not limited to the following:•economic conditions that discourage potential new customers from making the capital investments required to adoptnew technologies;•deterioration in the general financial condition of service providers and enterprises, or their ability to raise capital oraccess lending sources;•new product introductions by our competitors; and•the success of our channel partner program.Due to the nature of certain of our product offerings, the per-order revenue from orders placed by the majority of our newcustomers is generally lower than the per-order revenue generated from our historical customer orders. If we are unable toexpand our customer base, we will be forced to rely on generating recurring revenue from existing customers, which may notbe successful. We expect that, for the foreseeable future, the majority of our revenue will continue to depend on sales of ourproducts to a limited number of existing customers or sales to customers with lower per-order revenue than those generatedfrom our historical sales. Factors that may affect our ability to generate recurring revenue from our existing customers includebut are not limited to the following:•customer willingness to implement our products;•pricing pressures due to the commoditization of our products;•the timing of industry transitions to new network technologies;•acquisitions of or by our customers;•delays or difficulties that we may incur in completing the development and introduction of our planned products orproduct enhancements;•failure of our products to perform as expected; and•difficulties we may incur in meeting customers' delivery requirements or with software development, appliancedesign, manufacturing or marketing of our products and/or services.The loss of any significant customer, or any substantial reduction in purchase orders or deferral of purchasing decisions fromthese customers, could materially adversely affect our results of operations and financial condition.Third parties may terminate or alter existing contracts or relationships with us.21Third parties, including customers, suppliers, vendors, landlords, licensors and other business partners, with whom we haverelationships, may terminate or otherwise reduce the scope of their relationship with us. Any such disruptions could cause us tosuffer a loss of potential future revenue and/or lose rights that are material to our business.Consolidation in the telecommunications industry could harm our business. The telecommunications industry, including many of our customers, has experienced consolidation, including, in the carrierspace:•the pending merger between T-Mobile US, Inc. and Sprint Corporation (anticipated to close in early 2020);•the acquisition of Blue Face Ltd. by Comcast Corporation in January 2020;•the active network sharing partnership between Vodafone Group Plc and Telecom Italia Group in July 2019;•the acquisition of Hawaiian Telecom, Inc. by Cincinnati Bell Inc. in July 2018;•the acquisition of Level 3 Communications Inc. by CenturyLink Inc. in November 2017; and•the acquisition of XO Communications, LLC by Verizon Communications Inc. in February 2017.Further, consolidation has occurred in the vendor space, including:•the closing of a strategic partnership between RingCentral, Inc. and Avaya Holdings Corp. in October 2019;•the acquisition of Spoken Communications Inc. by Avaya Holdings Corp. in March 2018;•the acquisition of Broadsoft, Inc. by Cisco Systems, Inc. in February 2018; and•the acquisition of ShoreTel Inc. by Mitel Networks Corporation in September 2017.We expect this trend to continue. Consolidation among our customers may cause delays or reductions in capital expenditureplans by such customers and/or increased competitive pricing pressures as the number of available customers declines and therelative bargaining power of customers increases in relation to suppliers. Any of these factors could materially adversely affectour business.Restructuring activities could adversely affect our ability to execute our business strategy.We recorded net restructuring expense of $42.8 million in the aggregate in 2019, 2018 and 2017, comprised of $35.3 millionfor severance and related costs and $7.5 million related to facilities, including $3.7 million for accelerated amortization of leaseassets. We expect to record nominal, if any, additional restructuring expense in 2020 in connection with our current initiatives.However, we may record additional restructuring expense in the future in connection with new restructuring initiatives, if any.Our current restructuring and any future restructuring, should it become necessary for us to continue to restructure our businessdue to worldwide market conditions or other factors that reduce the demand for our products and services, could adverselyaffect our ability to execute our business strategy in a number of ways, including through:•loss of key employees;•diversion of management's attention from normal daily operations of the business;•diminished ability to respond to customer requirements related to both products and services;•decrease in cash and profits related to severance payments and facility termination costs;•disruption of our engineering and manufacturing processes, which could adversely affect our ability to introduce newproducts and to deliver products both on a timely basis and in accordance with the highest quality standards; and/or•reduced ability to execute effectively internal administrative processes, including the implementation of keyinformation technology programs.There can be no assurance that any restructuring actions we have taken in the past, or may take in the future, will improve ourfinancial condition or results of operations.We are exposed to the credit risk of some of our customers and to credit exposures in fragile financial markets, which couldresult in material losses.Due to our reliance on significant customers, we are dependent on the continued financial strength of our customers. If one ormore of our significant customers experience financial difficulties, it could result in uncollectable accounts receivable and ourloss of significant customers and anticipated revenue.Most of our sales are on an open credit basis, with typical payment terms of 30 to 90 days. We evaluate and monitor individualcustomer payment capability in granting such open credit arrangements, seeking to limit such open credit to amounts we22believe our customers can pay and maintain reserves that we believe are adequate to cover exposure to doubtful accounts.However, there can be no assurance that our open credit customers will pay the amounts they owe to us or that the reserves wemaintain will be adequate to cover such credit exposure. Our sales derived through our distributors, in particular, representsources of increased credit risk as distributors tend to have more limited financial resources than other resellers and end-usercustomers.Our customers' failure to pay and/or our failure to maintain sufficient reserves could have a material adverse effect on ourresults of operations and financial condition. Additionally, in the event that turmoil in the credit markets makes it more difficultfor some customers to obtain financing, those customers' ability to pay could be adversely impacted, which in turn could have amaterial adverse impact on our business, results of operations and financial condition.Disruptions to, or our failure to effectively develop relationships with and manage, distributors, resellers, system integratorsand other channel partners, and the processes and procedures that support them, could adversely affect our ability togenerate revenue from the sale of our products and services.We continue to enhance our sales strategy, which we expect will include more partner sales engagements to resell our productsand services through authorized distributors, VARs, system integrators and other channel partners. Our future success isdependent upon establishing and maintaining successful relationships with a variety of distributors, VARs, system integratorsand other channel partners. We may also need to pursue strategic partnerships with vendors that have broader technology orproduct offerings in order to compete with end-to-end solution providers. In addition, many of the enterprise markets we arepursuing require a broad network of resale partners in order to achieve effective distribution.Many of our distribution and channel partners sell competitive products and services, and the loss of, or reduction in sales by,these partners could materially reduce our revenue. Our sales through channel partners typically involve the use of ourproducts as components of a larger solution being implemented by systems integrators. In these instances, the purchase andsale of our products are dependent on the channel partners, who typically control the timing, prioritization and implementationof projects. Project delays, changes in priority or solution re-design decisions by the systems integrator can adversely affectour product sales. If we fail to maintain relationships with our distribution, VAR and systems integration partners, fail todevelop new relationships with other partners in new markets, fail to manage, train or provide incentives to our existingpartners effectively, or if these partners are not successful in their sales efforts, sales of our products and services may decreaseand our operating results could suffer. Moreover, if we do not have adequate personnel, experience and resources to managethe relationships with our partners and to fulfill our responsibilities under such arrangements, any such shortcomings couldhave a material adverse impact on our business and results of operations.In addition, we recognize some of our revenue based on a drop-ship model using information provided by our partners. If thosepartners provide us with inaccurate or untimely information, the amount or timing of our revenue could be adversely affected.We may also be impacted by financial failure of our partners, which could result in our inability to collect accounts receivablein full, and thereby materially adversely affect our results of operations and financial condition.If our strategic plan, including our research and development of innovative new products and the improvement of existingproducts, is not aligned with our customers’ investments in the evolution of their networks, or if our products and servicesdo not meet customers’ demands, customers may not buy our products or use our services.Success in our industry requires large investments in technology and creates exposure to rapid technological and marketchanges. We spend a significant amount of time, money and resources both developing new technology, products and solutionsand acquiring new businesses or business assets. Our strategic plan includes a significant shift in our investments from maturetechnologies that previously generated significant revenue for us toward certain next-generation technologies, as well asworking with channel partners to sell our products. Our choices of specific technologies to pursue, and those to de-emphasize,may prove to be inconsistent with our customers' investment spending. Moreover, if we invest in the development oftechnologies, products and solutions that do not function as expected, are not adopted by the industry, are not ready in time, arenot accepted by our customers as quickly as anticipated or at all, mature more quickly than we anticipated or are not successfulin the marketplace, our sales and earnings may suffer and, as a result, our stock price could decline.In order for us to be successful, our technologies, products and solutions must be accepted by relevant standardization bodiesand by the industry as a whole. To achieve market acceptance for our products, we must effectively anticipate, and adapt in atimely manner to, customer requirements and offer products and services that meet changing customer demands. Prospectivecustomers may require product features and capabilities that our current products do not have. The introduction of new orenhanced products also requires that we carefully manage the transition from older products in order to minimize disruption incustomer ordering patterns and ensure that adequate supplies of new products can be delivered to meet anticipated customer23demand. If we fail to develop products and offer services that satisfy customer requirements or if we fail to effectively managethe transition from older products, our ability to create or increase demand for our products and services could be seriouslyharmed, we may lose current and prospective customers and our results of operations and financial condition could bematerially adversely affected.If our products do not interoperate with our customers' existing networks, we may not retain current customers or attractnew customers.Many of our customers will require that our products be designed to interface with their existing networks, each of which mayhave different specifications. Issues caused by an unanticipated lack of interoperability may result in significant warranty,support and repair costs, divert the attention of our engineering personnel from our appliance and software development effortsand cause significant customer relations problems. If our products do not interoperate with those of our customers' networks,installations could be delayed or orders for our products could be canceled, which would seriously harm our gross margins andresult in loss of revenue or customers.We believe the telecommunications industry is in the early stages of a major architectural shift to the virtualization ofnetworks. If the architectural shift does not occur, if it does not occur at the pace we predict, or if the products and serviceswe have developed are not attractive to our customers after such shift takes place, our revenue could decline.We believe the telecommunications industry is in the early stages of transitioning to the virtualization of networks, and we aredeveloping products and services that we believe will be attractive to our customers and potential customers who make thatshift. While we anticipate that the industry shift to a software-centric cloud-based architecture is likely to happen, fundamentalchanges like this often take time to accelerate. In addition, our customers may adapt to such changes at varying rates. As ourcustomers take time to determine their future network architectures, we may encounter delayed timing of orders, deferredpurchasing decisions and reduced expenditures by our customers. These longer decision cycles and reduced expenditures maynegatively impact our revenue or make it difficult for us to accurately predict our revenue, either of which could materiallyadversely affect our results of operations and cause our stock price to decline.Virtualization of our product portfolio could slow our revenue growth.Virtualization of our product portfolio could slow our revenue growth as we move away from appliance products andincreasingly focus on software-based products. Historically, we have produced highly complex products that incorporateappliances with embedded software components. As we virtualize our product portfolio, we expect our margins to improve dueto decreased costs tied to production and sales of our appliance products, including costs related to our reliance on third-partycontract manufacturers, interruptions or delays in the supply of appliance components from such third-party sources, andexisting appliance support services. While we expect our margins to improve as a result of such reductions in cost, our revenuemay decline as a result of the decreases in sales of appliance products, many of which have generated higher revenue on a per-unit basis than certain of our software products.The market for some of our products depends on the availability and demand for other vendors' products.Some of our products, particularly those addressing the Unified Communications market, are designed to function with othervendors' products. In these cases, demand for our products is dependent upon the availability, demand for, and sales of theother vendors' products, as well as the degree to which our products successfully interoperate with the other vendors' productsand add value to the solution being provided to the customer. If the other vendors change the design of their products, delay theissuance of new releases, fail to adequately market their products, or are otherwise unsuccessful in building a market for theirproducts, the demand for our products will be adversely affected, which could adversely affect our business, results ofoperations and financial condition.Failure by our strategic partners or by us in integrating products provided by our strategic partners could harm ourbusiness.Our solutions include the integration of products supplied by strategic partners, who offer complementary products andservices. We rely on these strategic partners in the timely and successful deployment of our solutions to our customers. If theproducts provided by these partners have defects or do not operate as expected, if the services provided by these partners arenot completed in a timely manner, if our partners have organizational or supply issues, or if we do not effectively integrate andsupport products supplied by these strategic partners, then we may have difficulty with the deployment of our solutions thatmay result in:24•loss of, or delay in, revenue;•increased service, support and warranty costs and a diversion of development resources; and•network performance penalties.In addition to cooperating with our strategic partners on specific customer projects, we also may compete in some areas withthese same partners. If these strategic partners fail to perform or choose not to cooperate with us on certain projects, in additionto the effects described above, we could experience:•loss of customers and market share; and•failure to attract new customers or achieve market acceptance for our products.Our large customers have substantial negotiating leverage, and they may require that we agree to terms and conditions thatmay have an adverse effect on our business.Large communications service providers have substantial purchasing power and leverage in negotiating contractualarrangements with us. These customers may, among other things, require us to develop additional features, require penaltiesfor failure to deliver such features, require us to partner with a certain reseller before purchasing our products and/or seekdiscounted product and/or service pricing. As we sell more products to this class of customer, we may be required to agree toterms and conditions that are less favorable to us, which may affect the timing of revenue recognition, amount of deferredrevenue or product and service margins and may adversely affect our financial position and cash flows in certain reportingperiods.We depend upon contract manufacturers. If our contract manufacturers fail to perform, or if we change or consolidatemanufacturers, we may fail to meet the demands of our customers and damage our customer relationships, which couldmaterially adversely affect our business.We rely upon two large global contract manufacturers to assemble our products according to our specifications and to fulfillorders on a timely basis. Reliance on a third-party manufacturer involves a number of risks, including a lack of control overthe manufacturing process, inventory management and the potential absence or unavailability of adequate capacity. As we donot have the internal manufacturing capabilities to meet our customers' demands, any difficulties or failures to perform by ourcontract manufacturers could cause delays in customer product shipments, which could negatively affect our relationships withcustomers and result in delayed revenue.In addition, any future changes to or consolidations of our current contract manufacturers could lead to material shortages ordelays in the supply of our products. Qualifying a new contract manufacturer to commence commercial scale production orconsolidating to a reduced number of contract manufacturers are expensive and time-consuming activities and could result in asignificant delay in the supply of our products, which could negatively affect our relationships with customers and result indelayed revenue.We and our contract manufacturers rely on single or limited sources for supply of some components of our products and ifwe fail to adequately predict our manufacturing requirements or if our supply of any of these components is disrupted, wewill be unable to ship our products in a timely manner, or at all.We and our contract manufacturers currently purchase several key components of our products, including commercial digitalsignal processors, from single or limited sources. Depending upon the component, there may or may not be alternative sourcesof substitutes. We purchase these components on a purchase order basis. If we overestimate our component and finished goodsrequirements, we could have excess inventory, which would increase our costs. If we underestimate our requirements, we maynot have an adequate supply, which could interrupt manufacturing of our products and result in delays in shipments andrevenue. Additionally, if any of our contract manufacturers underestimates our requirements, it may not have an adequatesupply, which could interrupt manufacturing of our products and result in delays in shipments and revenue. If any of our soleor limited source suppliers experiences capacity constraints, work stoppages or other reductions or disruptions in output, it maynot be able to meet, or may choose not to meet, our delivery schedules. Moreover, we have agreed to compensate our contractmanufacturers in the event of termination or cancellation of orders, discontinuance of product or excess material.We currently do not have long-term supply contracts with our component suppliers and they are not required to supply us withcomponents for any specified periods, in any specified quantities or at any set price, except as may be specified in a particularpurchase order. In the event of a disruption or delay in supply or our inability to obtain components, we may not be able todevelop an alternate source in a timely manner or at favorable prices, or at all. While we regularly monitor our inventory of25supplies, a failure to find acceptable alternative sources could hurt our ability to deliver high-quality products to our customersand negatively affect our operating margins.Reliance on our suppliers exposes us to potential supplier production difficulties, quality variations and unforeseen priceincreases. Our customers rely upon our ability to meet committed delivery dates, and any disruption in the supply of keycomponents would seriously adversely affect our ability to meet these dates and could result in loss of customers, harm to ourability to attract new customers, or legal action by our customers. Defense-expedite rated orders from the U.S. federalgovernment, which by law receive priority, can also interrupt scheduled shipments to our other customers. Additionally, anyunforeseen increases in the prices of components could reduce our profitability or force us to increase our prices, which couldresult in a loss of customers or harm our ability to attract new customers and could have a material adverse effect on our resultsof operations.Our customer contracts also generally allow customers to reschedule delivery dates or cancel orders within certain time framesbefore shipment without penalty and outside those times frames with a penalty. Because of these and other factors, there arerisks of excess or inadequate inventory that could negatively affect our expenses and results of operations.If we are unable to obtain necessary licenses or on-going maintenance and support of third-party technology at acceptableprices, on acceptable terms, or at all, it could harm our operating results or business.We have incorporated third-party licensed technology, including open source software, into our current products. From time totime, we may be required to license additional technology from third parties to develop new products or product enhancements.Third-party licenses and on-going maintenance and support may not be available or continue to be available to us oncommercially reasonable terms or may be available to us but only at significantly escalated pricing. Additionally, we may notbe able to replace the functionality provided by third-party software currently offered with our products if that softwarebecomes obsolete, defective or incompatible with future versions of our products or is not adequately maintained or updated. Ifwe are unable to maintain or re-license any third-party licenses required in our current products or obtain any new third-partylicenses to develop new products and product enhancements, or in the case of any defects in these third-party softwareproducts, we could be required to obtain substitute technology of lower quality or performance standards or at greater cost, andwe may be delayed or prevented from making these products or enhancements, any of which could seriously harm our salesand the competitiveness of our products unless and until we can secure an alternative source. Such alternate sources may notprovide us with the same functionality as that currently provided to us.The appliance products that we purchase from our third-party vendors have life cycles, and some of those products havereached the end of their life cycles. If we are unable to correctly estimate future requirements for these products, it couldharm our operating results or business.Some of the appliance products that we purchase from our third-party vendors have reached the end of their life cycles. It maybe difficult for us to maintain appropriate levels of the discontinued appliances to adequately ensure that we do not have ashortage or surplus of inventory of these products. If we do not correctly forecast the demand for such appliances, we couldhave excess inventory and may need to write off the costs related to such purchases. The write-off of surplus inventory couldmaterially adversely affect our operating results. However, if we underestimate our forecast and our customers place orders topurchase more products than are available, we may not have sufficient inventory to support their needs. If we are unable toprovide our customers with enough of these products, it could make it difficult to retain certain customers, which could have amaterial and adverse effect on our business.Because our larger scale products are sophisticated and designed to be deployed in complex networks around the world,they may have errors or defects that we find only after full deployment. These defects, and any failure to establish a supportinfrastructure and maintain required support levels, could seriously harm our business.Our larger scale products are sophisticated and are designed to be deployed in large and complex networks around the world.Because of the nature of our products, they can only be fully tested when substantially deployed in these networks. Some ofour customers may discover errors or defects in the software or appliances, or the products may not operate as expected onlyafter full deployment. As we continue to expand our distribution channel through distributors and resellers, we will need torely on and support their service and support organizations. If we are unable to fix errors or other performance problems thatmay be identified after full deployment of our products, we could experience:•loss of, or delay in, revenue or increased expense;•loss of customers and market share;•failure to attract new customers or achieve market acceptance for our products;26•increased service, support and warranty costs and a diversion of development resources; and/or•costly and time-consuming legal actions by our customers.Our customers expect us to establish a support infrastructure and maintain demanding support standards to ensure that theirnetworks maintain high levels of availability and performance. To continue to support our customers with these larger scaleproducts, our support organization will need to provide service and support at a high level throughout the world. If we areunable to provide the expected level of support and service to our customers, we could experience:•loss of customers and market share;•failure to attract new customers in new markets and geographies;•increased service, support and warranty costs and a diversion of development resources; and/or•network performance penalties.Any errors or defects in our products, and any failure to establish a support infrastructure and maintain required support levels,could materially adversely affect our business and results of operations.Disruptions to, or our failure to effectively develop, manage and maintain our government customer relationships couldadversely affect our ability to generate revenue from the sales of our products to these customers. Further, suchgovernment sales are subject to potential delays and cutbacks, may require specific testing efforts, or impose significantcompliance obligations.A portion of our total revenue from product sales comes from contracts with U.S. federal government agencies, none of whichcurrently contemplates long-term purchase commitments. Disruptions to or our failure to effectively develop, manage andmaintain our government customer relationships could adversely affect our ability to generate revenue from the sales to suchcustomers. Governments routinely investigate and audit government contractors’ administrative processes, and anyunfavorable audit could result in the government refusing to continue buying our products and services, a reduction of revenueor fines or civil or criminal liability if the audit uncovers improper or illegal activities, which could materially adversely impactour operating results.Furthermore, a majority of our government sales involve products that have or will soon reach the end of their life cycles, andsuch government sales for these older products have declined substantially in recent periods. Sales of our newer products togovernmental agencies for broad deployment may not develop quickly, if at all, or be sufficient to offset future declines in salesof these legacy products. Additionally, spending by government customers fluctuates based on budget allocations and thetimely passage of the annual federal budget.Among the factors that could impact federal government spending and which would reduce our federal government contractingand subcontracting business are a significant decline in, or reapportioning of, spending by the federal government, changes as aresult of the current presidential administration, changes, delays or cancellations of federal government programs orrequirements, the adoption of new laws or regulations that affect companies that provide services to the federal government,federal government shutdowns or other delays in the government appropriations process, changes in the political climate,including with regard to the funding for products we provide, delays in the payment of our invoices by government paymentoffices, and general economic conditions. The loss or significant curtailment of any government contracts or subcontracts,whether due to our performance or due to interruptions or changes in governmental funding for such contracts or subcontracts,could have a material adverse effect on our business, results of operations and financial condition.Further, sales to government customers may require specific testing efforts or impose significant compliance or certificationobligations. For example, the Department of Defense ("DOD") has issued specific requirements for IP networking products forfeatures and interoperability. In order for a vendor's product to be used to connect to the DOD network, that product must passa series of significant tests and be certified by the Joint Interoperability Test Command (“JITC”). Certain of our products arealready certified by JITC. However, if we are unable to obtain JITC certification as needed, our DOD sales, and hence ourrevenue and results of operations, may suffer.If we fail to realize the anticipated benefits from any recent acquisitions, such as our acquisition of Edgewater Networks,Inc. ("Edgewater") in August 2018 (the "Edgewater Acquisition") and Anova Data, Inc. (“Anova”) in February 2019 (the“Anova Acquisition”), on a timely basis, or at all, our business and financial condition may be adversely affected.We may fail to realize the anticipated benefits from any recent acquisitions, including the Edgewater Acquisition and the AnovaAcquisition, on a timely basis, or at all, for a variety of reasons, including but not limited to the following:27•problems or delays in assimilating or transitioning to us the acquired assets, operations, systems, processes, controls,technologies, products or personnel;•loss of acquired customer accounts;•unanticipated costs associated with the acquisitions;•failure to identify in the due diligence process or assess the magnitude of certain liabilities we assumed in theacquisitions, which could result in unexpected litigation or regulatory exposure, unfavorable accounting treatment,unexpected increases in taxes due, significant issues with product quality or development or other adverse effects onour business or results of operations;•multiple or overlapping product lines as a result of the acquisitions that are offered, priced and supported differently,which could cause customer confusion and delays;•higher than anticipated costs in continuing support and development of acquired products and services;•diversion of management’s attention from our core business and the challenges of managing larger and morewidespread operations from the acquisitions;•adverse effects on existing business relationships of any of the acquired businesses with their respective suppliers,licensors, contract manufacturers, customers, distributors, resellers and industry experts;•significant impairment, exit and/or restructuring charges if the products or technologies acquired in the acquisitions donot meet our sales expectations or are unsuccessful;•insufficient revenue to offset increased expenses associated with the acquisitions;•risks associated with entering markets in which we have no or limited prior experience;•potential loss of the employees we acquired in the acquisitions or our own employees; and/or•failure to properly integrate internal controls and financial systems of the combined companies.If we are unable to successfully manage these issues, the anticipated benefits and efficiencies of our recent acquisitions may notbe realized fully or at all, or may take longer to realize than expected, and our ability to compete and our results of operationsmay be adversely affected.Any future investments, mergers or acquisitions we make or enter into, as applicable, could be difficult to integrate, disruptour business, dilute shareholder value and seriously harm our financial condition.Other than with respect to the ECI Merger, we are not currently a party to any material pending merger or acquisitionagreements. However, we may merge with or acquire additional businesses, products or technologies in the future. Noassurance can be given that any future merger or acquisition will be successful or will not materially adversely affect ourbusiness, operating results or financial condition. We continue to review opportunities to merge with or acquire otherbusinesses or technologies that would add to our existing product line, complement and enhance our current products, expandthe breadth of our product and service offerings, enhance our technical capabilities or otherwise offer growth opportunities. Ifwe enter into a merger or make acquisitions in the future, we could, among other things:•issue stock that would dilute existing stockholders' percentage ownership;•incur debt or assume liabilities;•significantly reduce our cash;•incur significant impairment charges related to the write-off of goodwill and intangible assets;•incur significant amortization expenses related to intangible assets; and/or•incur large and immediate write-offs for in-process research and development and stock-based compensation.Mergers and acquisitions are inherently risky and subject to many factors outside of our control. Therefore, we cannot becertain that we would be successful in overcoming problems in connection with our past or future acquisitions. Our inability todo so could significantly harm our business, revenue, and results of operations.Failure to hire and retain key personnel, or the loss of any of our executive officers, could negatively impact our ability tomeet our business objectives and impair our future growth.Our business depends upon highly skilled technical, managerial, engineering, sales, marketing and customer support personnel.Competition for these personnel is intense, especially during times of economic recovery or growth. Any failure to hire,assimilate in a timely manner and retain key qualified personnel, particularly engineering and sales personnel, could impair ourgrowth and make it difficult to meet key objectives, such as timely and effective product introductions. The challenge ofretaining key employees could be increasingly difficult due to strong industry competition. In addition, our ability to attractand retain key employees could be adversely impacted if we do not have a sufficient number of shares available under theAmended and Restated Stock Incentive Plan to issue to our employees, or if our stockholders do not approve requested share28increases or a new equity incentive plan. We may not be able to locate suitable employees for any key employee who leaves oroffer employment to potential replacements on reasonable terms.Our future success also depends upon the continued services of our executive officers who have critical industry experience andrelationships that we rely on to implement our business plan. None of our officers or key employees is bound by anemployment agreement for any specific term. The loss of the services of any of our executive officers or key employees coulddelay the development and introduction of, and negatively impact our ability to sell, our products and achieve our businessobjectives.The terms of our credit agreement could adversely affect our operating flexibility and pose risks of default or springingmaturity, which would negatively impact our liquidity and operations.The terms of our credit agreement could adversely affect our operating flexibility and pose risks of default or springingmaturity, which would negatively impact our liquidity and operations. In addition, we may not be able to refinance our debt orobtain additional financing on favorable terms, or at all.Our credit facility with Silicon Valley Bank includes $100 million of commitments, the full amount of which is available forrevolving loans plus a $50 million term loan, a $15 million sublimit that is available for letters of credit and a $15 millionsublimit that is available for swingline loans. The senior secured credit facility is scheduled to mature in April 2024. Thecredit agreement includes procedures for additional financial institutions to become lenders, or for any existing lender toincrease its commitment under the facility, subject to an available increase of $75 million for all incremental commitmentsunder the credit agreement, without amendment. Provisions in the credit agreement impose limitations on our ability to, amongother things, incur additional indebtedness, create liens, make acquisitions or engage in mergers, enter into transactions withaffiliates, dispose of assets, make certain investments and amend or repay certain junior debt.In addition, we are required to meet certain financial covenants customary for financings of this type. Our failure to complywith these covenants may result in the declaration of an event of default, which could cause us to be unable to borrow under thecredit facility or result in the acceleration of the maturity of indebtedness outstanding under the credit facility at such time. Ifthe maturity of our indebtedness is accelerated, we may not have sufficient funds available for repayment or we may not havethe ability to borrow or obtain sufficient funds to replace the accelerated indebtedness on terms acceptable to us, or at all.The United Kingdom's Financial Conduct Authority, which regulates the London Inter-bank Offered Rate ("LIBOR"), hasannounced that it intends to stop encouraging or requiring banks to submit LIBOR rates after 2021, and it is unclear if LIBORwill cease to exist or if new methods of calculating LIBOR will evolve. We have the option under our current credit facilityand expect to have the option under our new credit facility to determine our interest rate that includes either the LIBOR rate orthe base rate. If LIBOR ceases to exist or the methods of calculating LIBOR change from their current form, we may no longerhave the ability to elect the LIBOR rate option under our current credit facility, and our current or future indebtedness may beadversely affected. This could impact our interest costs and our ability to borrow additional funds under our current creditfacility or our new credit facility.We had $56.8 million of borrowings outstanding at a weighted average interest rate of 3.30% under the credit facility as ofDecember 31, 2019. In addition, we had $5.4 million of letters of credit outstanding at an interest rate of 1.50% under thecredit facility as of December 31, 2019. If we are prevented from borrowing or if we are unable to extend, renew or replace thecredit facility by the maturity date of April 2024, on favorable terms, or at all, this could have a material adverse effect on ourliquidity and cause our business, operations and financial condition to suffer. If the credit facility is subjected to the earlyspringing maturity, we may not have sufficient funds available for repayment or we may not have the ability to borrow orobtain sufficient funds to replace the indebtedness on terms acceptable to us, or at all.We intend to fund the cash consideration relating to the proposed ECI Merger with proceeds received from a new credit facilitythat we expect to enter into with Citizens Bank, N.A. and Santander Bank, N.A., as joint arrangers and bookrunners, inconnection with the closing of the ECI Merger (the "2020 Credit Facility"). Such cash consideration is expected to be financedthrough cash on hand and committed debt financing consisting of the new $400 million term loan facility portion of the 2020Credit Facility. The 2020 Credit Facility is expected to retire our existing credit facility.In addition, we cannot be sure that our current cash and available borrowings under our existing credit facility or our 2020Credit Facility, as applicable, will be sufficient to meet our future needs. If we are unable to generate sufficient cash flows inthe future, and if availability under our current facility is not sufficient to support our operations, we may need to refinance our29debt or obtain additional financing. We may not be able to refinance our debt or obtain additional financing on favorable termsor at all.Litigation and government investigations could result in significant legal expenses and settlement payments, fines ordamage awards.From time to time, we are subject to litigation regarding intellectual property rights or other claims. We have also been namedas a defendant in securities class action and stockholder derivative lawsuits. We are generally obliged, to the extent permittedby law, to indemnify our current and former directors and officers who are named as defendants in these lawsuits. Defendingagainst litigation may require significant attention and resources of management. Regardless of the outcome, such litigationcould result in significant legal expenses. At this time, it is not possible to predict the outcome of the ongoing lawsuits,including whether or not any proceedings will continue, and when or how these matters will be resolved or whether we willultimately receive, and in what sum, amounts previously awarded as a result of these proceedings. Regardless of whether weare ultimately successful in these lawsuits, we will likely elect to continue to incur substantial legal fees in connection withthese matters.We have also been subject to employment claims in connection with employee terminations and may be subject to additionalclaims in the future. In addition, companies in our industry whose employees accept positions with us may claim that we haveengaged in unfair hiring practices. These claims may result in material litigation. We could incur substantial costs defendingourselves or our employees against these claims, regardless of their merits. Further, defending ourselves from these types ofclaims could divert our management's attention from our operations. The quantity and cost of employment claims may rise as aresult of our increasing international expansion and the proposed ECI Merger.In addition, we are from time to time subject to investigations by the government. For example, we fully cooperated with anSEC inquiry regarding the development and issuance of Sonus' first quarter 2015 revenue and earnings guidance. We reachedan agreement with the SEC in principle to resolve this matter and on August 7, 2018, the SEC's Division of Enforcement issueda Cease and Desist Order (the "Order"). As part of the Order, the findings of which we neither admitted nor denied, we agreedto pay a $1.9 million civil penalty and agreed not to violate the securities laws in the future. There is no assurance that we willnot be subject to similar investigations by the SEC or other government agencies in the future.If the defenses we claim in our material litigation matters are ultimately unsuccessful, or if we are unable to achieve a favorablesettlement with an adverse party or a government agency, we could be liable for large settlement payments, damage awards orfines that could have a material adverse effect on our business and results of operations.A breach of the security of our information systems or those of our third-party providers could adversely affect ouroperating results.We rely upon our information systems and, in certain circumstances, those of our third-party providers, such as vendors,consultants and contract manufacturers, to protect our sensitive or proprietary information and information of or about ourcustomers, to develop and provide our products and services to customers, and to otherwise operate our business. Ourinformation systems and those of our third-party providers are vulnerable to threats such as computer hacking, cyber-terrorismor other unauthorized activity that may result in third party access to or modification, corruption or deletion of our or ourcustomers' sensitive or proprietary information or other disruptions to our business. Such cyberattacks and other cyberincidents are occurring more frequently, are constantly evolving, are becoming more sophisticated and can take many forms.While we believe that we leverage best-in-class detection and prevention systems and services and that we focus on continuousimprovement based upon the latest attack vectors in the industry, we cannot guarantee that there will never be any informationtechnology system failures, including a breach of our or our third-party providers' data security measures through a cyberattack,other cyber incident or otherwise, or the theft or loss of laptops, other mobile devices or electronic records used to back up oursystems or our third-party providers' systems, which could result in a disclosure of customer, employee, or our information orotherwise disrupt our ability to function in the normal course of business by potentially causing, among other things, delays inthe fulfillment or cancellation of customer orders or disruptions in the manufacture or shipment of products or delivery ofservices, any of which could have a material adverse effect on our operating results.Additionally, the compromise of our information systems or the information systems of our third party providers and ourcustomers could be compromised, which could lead to unauthorized tampering with our products. Unauthorized tamperingmay result in, among other things, the disruption of our customers' businesses, errors or defects occurring in the software due tosuch unauthorized tampering, and our products not operating as expected after such unauthorized tampering. These types ofsecurity breaches could also create exposure to lawsuits, regulatory investigations, and increased legal liability. As a providerof secure RTC solutions, the reputational harm of any actual or perceived breach, compromise, defect or error relating to the30security of our information systems and the products and services we provide may result in substantial harm to our reputation,even if the legal or regulatory impact is minimal. In addition, the costs to remediate any cyberattack could be significant. Suchconsequences could be exacerbated if we or our third-party providers are unable to adequately recover critical systems in atimely manner following a systems failure. Our insurance coverage may be insufficient to cover all losses related tocyberattacks.Risks associated with data privacy issues, including evolving laws, regulations and associated compliance efforts, mayadversely impact our business and financial results.Legislation in various countries around the world with regard to cybersecurity, privacy and data protection is rapidly expandingand creating a complex compliance environment. We are subject to many privacy and data protection laws and regulations inthe U.S. and around the world, some of which place restrictions on our ability to process personal data across our business. Inparticular, the General Data Protection Regulation (the “GDPR”), which became effective in May 2018, has caused morestringent data protection requirements in the European Union. The GDPR imposes onerous accountability obligations requiringdata controllers and processors to maintain a record of their data processing and implement policies as part of its mandatedprivacy governance framework. It also requires data controllers to be transparent and disclose to data subjects how theirpersonal information is to be used; imposes limitations on retention of personal data; introduces mandatory data breachnotification requirements; and sets higher standards for data controllers to demonstrate that they have obtained valid consent forcertain data processing activities. We are subject to the supervision of local data protection authorities in those E.U.jurisdictions where we are established or otherwise subject to the GDPR. Certain breaches of the GDPR requirements couldresult in substantial fines, which can be up to four percent of worldwide revenue or 20 million Euros, whichever is greater. Inaddition to the foregoing, a breach of the GDPR could result in regulatory investigations, reputational damage, orders to cease/change our use of data, enforcement notices, as well potential civil claims including class action type litigation whereindividuals suffered harm. Similarly, California has enacted the California Consumer Privacy Act, or CCPA, which took effecton January 1, 2020. The CCPA creates individual privacy rights for California consumers and increases the privacy andsecurity obligations of entities handling certain personal data. The CCPA provides for civil penalties for violations, as well as aprivate right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase ourcompliance costs and potential liability. Many similar laws have been proposed at the federal level and in other states. Anyliability from our failure to comply with the requirements of these laws could adversely affect our financial condition.We have invested, and continue to invest, human and technology resources in our GDPR compliance efforts and our dataprivacy compliance efforts in general. These compliance efforts may be time-intensive and costly. Despite those efforts, thereis a risk that we may be subject to fines and penalties, litigation and reputational harm if we fail to protect the privacy of thirdparty data or comply with the GDPR or other applicable regimes.Worldwide efforts to contain capital spending and global economic conditions and uncertainties in the geopoliticalenvironment have been and may continue to be materially adverse to our business.One factor that significantly affects our operating results is the impact of economic conditions on the willingness of our currentand potential customers to make capital investments. Given the general uncertainty regarding global economic conditions anduncertainties in the geopolitical environment, we believe that customers have tried to maintain or improve profitability throughcost control and constrained capital spending, which places additional pressure on IT departments to demonstrate acceptablereturn on investment. Some of our customers have canceled or delayed, and current and prospective customers may continue tocancel and delay, spending on the development or roll-out of capital and technology projects with us due to economicuncertainty and, consequently, our results of operations have been, and may continue to be, adversely affected. In addition,current uncertain worldwide economic and political environments make it increasingly difficult for us, our customers and oursuppliers to accurately forecast future product demand, which could result in an inability to satisfy demand for our products anda loss of market share. Our revenue is likely to decline in such circumstances, which may result in erosion of our profitmargins and significant losses.Moreover, economic conditions worldwide may contribute to slowdowns in the communications and networking industries, aswell as to specific segments and markets in which we operate, particularly the wireline sector, resulting in, among other things:•reduced demand for our products and services as a result of our customers choosing to refrain from building capitalintensive networks;•increased price competition for our products, not only from our competitors, but also as a consequence of customersdisposing of unutilized products;•risk of excess and obsolete inventories;•excess facilities and manufacturing capacity; and/or31•higher overhead costs as a percentage of revenue and higher interest expense.Continuing turmoil in the geopolitical environment in many parts of the world, as well as changes implemented by the currentU.S. presidential administration, may continue to put pressure on global economic conditions which, in turn, could materiallyadversely affect our operating results.If there is increased spending by service providers to invest in the rollout of 5G networks and services, such investmentcould negatively impact decisions by service providers to invest in markets in which Ribbon offers its products and solutions. As service providers continue to invest in 5G networks and services, such increased expenditures in the 5G networks andservices could negatively impact their investment on other non-5G related offerings and services in which Ribbon participates.Accordingly, our operating results could suffer. Man-made problems, such as terrorism, and natural catastrophic events may disrupt our operations and harm ouroperating results.The continued threat of terrorism and heightened security and military action in response to this threat, or any future acts ofterrorism, may cause disruptions to the economies of the United States and other countries. Events such as work stoppages orwidespread blackouts could have similar negative impacts. Such disruptions or uncertainties could result in delays orcancellations of customer orders or the manufacture or shipment of our products and have a material adverse effect on ourbusiness and results of operations.Natural catastrophic events, such as earthquakes, fires, floods, tornadoes, or pandemics (such as the coronavirus outbreak) mayalso affect our or our customers' operations. For example, we have offices located in the San Jose area of Northern California;Mexico City, Mexico; and Tokyo, Japan, regions known for seismic activity. A significant natural disaster, such as wildfires,earthquakes or floods, could have a material adverse effect on our business in these locations.If we fail to maintain appropriate internal controls in the future, we may not be able to report our financial resultsaccurately, which may adversely affect our stock price and our business.Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations require our management to report on, and ourindependent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting. Wehave committed and will be required to continue to commit significant financial and managerial resources in order to complywith these requirements.Further, we are required to integrate Edgewater, Anova and other acquired businesses into our system of disclosure controls andprocedures and internal control over financial reporting. As may be the case with other companies we acquire, prior to theEdgewater and Anova Acquisitions, neither Edgewater nor Anova was required to implement or maintain the disclosurecontrols and procedures or internal control over financial reporting that are required of public companies. We cannot provideassurance as to the effectiveness of those integrations.Internal control over financial reporting has inherent limitations, including human error, the possibility that controls could becircumvented or become inadequate because of changed conditions, and fraud. If we are unable to maintain effective internalcontrols, we may not have adequate, accurate or timely financial information, and we may be unable to meet our reportingobligations as a publicly traded company or comply with the requirements of the SEC or the Sarbanes-Oxley Act of 2002. Thiscould result in a restatement of our financial statements, the imposition of sanctions, or investigation by regulatory authorities,and could cause investors to lose confidence in our reported financial information. Any such consequence or other negativeeffect of our inability to meet our reporting requirements or comply with legal and regulatory requirements, as well as anydisclosure of an accounting, reporting or control issue, could adversely affect the trading price of our common stock and ourbusiness.Changes to existing accounting pronouncements or taxation rules or practices may cause adverse fluctuations in ourreported results of operations or affect how we conduct our business.A change in accounting pronouncements or taxation rules or practices can have a significant effect on our reported results andmay affect our reporting of transactions completed before the change is effective. New accounting pronouncements, taxationrules and varying interpretations of accounting pronouncements or taxation rules have occurred in the past and may occur in thefuture. For example, we were required to adopt the new revenue recognition standard in 2018 and have adopted the new leaseaccounting standard effective January 1, 2019. Any change to existing or any adoption of new accounting pronouncements or32taxation rules, or the need for us to modify a current tax position may adversely affect our reported financial results or the waywe conduct our business.If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.Under generally accepted accounting principles, we review our intangible assets for impairment when events or changes incircumstances indicate the carrying value may not be recoverable. Our intangible assets increased by approximately $11million as a result of the Anova Acquisition in 2019, by approximately $57 million in 2018 as a result of the EdgewaterAcquisition and by approximately $237 million in 2017 as a result of the Merger. Goodwill, which increased by approximately$6 million as a result of the Anova Acquisition in 2019, by approximately $48 million in 2018 as a result of the EdgewaterAcquisition and by approximately $286 million in 2017 as a result of the Merger, is tested for impairment at least annually.Based on the results of our 2019 annual impairment test, we determined that our carrying value exceeded our fair value andaccordingly, we recorded a goodwill impairment charge of $164.3 million, which had a material impact on both our net lossand loss per share for the year ended December 31, 2019. Factors that may be considered a change in circumstances indicatingthat the carrying value of our goodwill or intangible assets may not be recoverable include significant underperformancerelative to plan or long-term projections, strategic changes in business strategy, significant negative industry or economictrends, significant change in circumstances relative to a large customer, significant decline in our stock price for a sustainedperiod and decline in our market capitalization to below net book value. Any additional material impairment of goodwill orintangible assets could adversely affect our results of operations.Risks Relating to our Intellectual PropertyOur business could be jeopardized if we are unable to protect our intellectual property. Additionally, in some jurisdictions,our rights may not be as strong as we currently enjoy in the United States.We rely on a combination of security countermeasures within our deployed products, as well as patent, copyright, trademarkand trade secret laws and contractual restrictions on disclosure to protect our intellectual property rights. Despite our efforts toprotect our proprietary rights, unauthorized parties may attempt to copy or otherwise misappropriate our products ortechnology. Monitoring unauthorized use of our products is difficult and we cannot be certain that the steps we have taken willprevent unauthorized use of our technology, particularly in foreign countries where the laws may not protect our proprietaryrights as fully as in the United States. The legal systems of many foreign countries do not protect or honor intellectual propertyrights to the same extent as the legal system of the United States. It may be very difficult, time-consuming and costly for us toattempt to enforce our intellectual property rights, especially in these foreign jurisdictions. If competitors are able to use ourtechnology, our ability to compete effectively could be harmed, which could have a material adverse effect on our business.Claims that our current or future products infringe or misappropriate the proprietary rights of others could adversely affectour ability to sell those products and cause us to incur additional costs.Substantial litigation over intellectual property rights exists in the telecommunications industry. We expect that we could beincreasingly subject to third-party infringement claims as our revenue increases, the number of competitors grows and/or thefunctionality of products and technology in different industry segments overlaps. Third parties may currently have, or mayeventually be issued, patents on which our current or future products or technologies may allegedly infringe. For example, weand our customers have received inquiries from intellectual property owners and may become subject to claims that we or ourcustomers allegedly infringe the intellectual property rights of third parties. If a third party asserts that our products infringeupon their proprietary rights, we may be forced either to defend ourselves, our customers or contract manufacturers in litigationor to license their patents or other intellectual property for substantial royalty payments. These claims and any resultinglicensing arrangement or lawsuit could subject us to significant royalty payments or liability for damages and invalidation ofour proprietary rights. Any potential intellectual property litigation also could force us to do one or more of the following:•delay shipments of, or stop selling, incorporating or using our products that use the challenged intellectual property;•obtain from the owner of the infringed intellectual property right a license to sell or use the relevant technology, whichlicense may not be available at acceptable prices, on acceptable terms, or at all; or•redesign those products that use any allegedly infringing technology, if feasible.Patent litigation, regardless of its outcome, will likely result in the expenditure of significant financial resources and thediversion of management’s time and resources. In addition, patent litigation may cause negative publicity and adversely impactour ability to gain prospective customers. If a third party's claim of infringement against us in a particular patent litigation issuccessful, and we could not develop non-infringing technology or license the infringed or similar technology on a timely andcost-effective basis, our revenue may decrease substantially, and we could be exposed to significant liability. A court could33enter orders that temporarily, preliminarily or permanently enjoin us or our customers from making, using, selling, offering tosell or importing our current or future products, or could enter an order mandating that we undertake certain remedial activities.In addition, costs relating to indemnification provisions in our product agreements may be significant. At this time, it is notpossible to predict the outcome of our ongoing lawsuits over intellectual property rights, including whether or not anyproceedings will continue and when or how these matters will be resolved.Risks Relating to our International OperationsWe may face risks associated with our international expansion that could impair our ability to grow our internationalrevenue. If we fail to manage the operational and financial risks associated with our international operations, it could havea material adverse effect on our business and results of operations.We have expanded, and expect to continue to expand, our operations in international and emerging markets. Internationaloperations are a significant part of our business, and such operations will continue to require significant management attentionand financial resources to successfully develop direct and indirect international sales and support channels. In addition, ourinternational operations are subject to other inherent risks, including:•reliance on channel partners;•greater difficulty collecting accounts receivable and longer collection cycles;•difficulties and costs of staffing and managing international operations;•impacts of differing technical standards outside the United States;•compliance with international trade, customs and export control regulations;•reduced protection for intellectual property rights in some countries;•foreign government regulations limiting or prohibiting potential sales or increasing the cost of doing business in suchmarkets, including adverse tax policies, tariffs, customs regulations, trade protection measures, export quotas andqualifications to transact business;•differing regulatory requirements, including tax laws, data privacy laws and labor regulations;•challenging pricing environments in highly competitive new markets;•foreign currency exchange controls, restrictions on repatriation of cash and changes in currency exchange rates;•management communication and integration problems related to entering new markets with different languages,cultures and political systems;•potential exposure to liability or damage of reputation resulting from a higher incidence of corruption or unethicalbusiness practices in some countries;•greater risk of a failure of employees to comply with both U.S. and foreign laws, including antitrust regulations, theU.S. Foreign Corrupt Practices Act (“FCPA”) and any trade regulations ensuring fair trade practices;•higher or more variable network service provider fees outside of the United States; •any need to adapt and localize our products for specific countries;•our ability to effectively price our products in competitive international markets; •potentially adverse tax consequences; and•political, social and economic instability, including as a result of the fragility of global financial markets, healthpandemics or epidemics and/or acts of war or terrorism.Our international revenue, both as a percentage of total revenue and absolute dollars, may vary from one period to the next, andaccordingly, current data may not be indicative of future periods. If we are unable to support our business operations ininternational and emerging markets, or their further expansion, while balancing the higher operational and financial risksassociated with these markets, our business and results of operations could be harmed.In addition, we may not be able to develop international market demand for our products, which could impair our ability togrow our revenue. In many international markets, long-standing relationships between potential customers and their localsuppliers and protective regulations, including local content requirements and approvals, create barriers to entry. We havelimited experience marketing, distributing and supporting our products in certain international locations and, to do so, weexpect that we will need to develop versions of our products that comply with local standards. Moreover, difficulties in foreignfinancial markets and economies and of foreign financial institutions, particularly in emerging markets, could adversely affectdemand from customers in the affected countries.Increases in tariffs, trade restrictions or taxes on our products, as well as other risks of international operations, could havean adverse impact on our operations.34We manufacture certain of our appliance products and purchase a portion of our raw materials and components from suppliersin Mexico, China and other foreign countries. The commerce we conduct in the international marketplace makes us subject totariffs, trade restrictions and other taxes when the raw materials or components we purchase, and the products we ship, crossinternational borders. Import tariffs and/or other mandates imposed by the current presidential administration have and couldin the future lead to retaliatory actions by affected countries, resulting in “trade wars,” and could significantly increase theprices on raw materials, the manufacturing of our equipment, and/or increased costs for goods imported into the United States,all of which are critical to our business. Any such tariffs could reduce customer demand for our products if our customers haveto pay increased prices for our products as a result of such tariffs. In addition, tariff increases may have a similar impact onother suppliers and certain other customers, which could increase the negative impact on our operating results or future cashflows.Although we have not experienced a significant resulting increase in our manufacturing costs, if we were to do so, thiseventually could make our products less competitive than those of our competitors whose imports are not subject to thesetariffs. In addition, the U.S. administration has threatened to impose tariffs on all products imported from both Mexico andChina. If this were to occur, we may not be able to mitigate the impacts of these tariffs and our business, results of operationsand financial position could be materially adversely affected. Products we sell into certain foreign markets could also becomesubject to similar retaliatory tariffs, making the products we sell uncompetitive to similar products not subject to such importtariffs. Further changes in U.S. trade policies, tariffs, taxes, export restrictions or other trade barriers, or restrictions on rawmaterials or components, may limit our ability to manufacture products, increase our manufacturing costs, decrease our profitmargins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase raw materials orcomponents, which could have a material adverse effect on our business, results of operations and financial condition.We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.Because a portion of our business is conducted outside the United States, we face exposure to adverse movements in foreigncurrency exchange rates. These exposures may change over time as business practices evolve, and they could have a materialadverse impact on our financial results and cash flows. An increase in the value of the U.S. dollar could increase the real costto our customers of our products in those markets outside the United States where we often sell in dollars, and a weakened U.S.dollar could increase the cost of local operating expenses and procurement of raw materials from sources outside the UnitedStates. Therefore, changes in the value of the U.S. dollar against other currencies will affect our revenue, income fromoperations, net income and the value of balance sheet items originally denominated in other currencies. There is no guaranteethat our financial results will not be adversely affected by currency exchange rate fluctuations.Our business and operations in the United Kingdom are exposed to potential disruptions and uncertainty relating to Brexit.Following a national referendum and enactment of legislation by the government of the United Kingdom, the United Kingdomwithdrew from the European Union ("Brexit") on January 31, 2020 and entered into a transition period during which it willcontinue its ongoing and complex negotiations with the European Union relating to the future trading relationship between theparties. Significant political and economic uncertainty remains about whether the terms of the relationship will differmaterially from the terms before withdrawal, as well as about the possibility that a so-called "no deal" separation will occur ifnegotiations are not completed by the end of the transition period. These developments in turn may inhibit our sales, mobilityof our personnel, and our access to capital. If the United Kingdom and the European Union are unable to negotiate acceptableterms or if other Member States pursue withdrawal, barrier-free access between the United Kingdom and other Member Statesor among the European economic area overall could be diminished or eliminated. Additionally, political instability in theEuropean Union as a result of Brexit may result in a material negative effect on credit markets and foreign direct investments inthe European Union and United Kingdom.Our use and reliance upon research and development resources in global locations may expose us to unanticipated costsand/or liabilities.We have research and development offices in various global locations. Our development efforts and other operations in theselocations could involve significant risks, including:•difficulty hiring and retaining appropriate engineering and management resources due to intense competition for suchresources and resulting wage inflation;•knowledge transfer related to our technology and resulting exposure to misappropriation of intellectual property orinformation that is proprietary to us, our customers and other third parties;•heightened exposure to changes in economic, security and global political conditions; and•fluctuations in currency exchange rates and tax compliance.35Difficulties resulting from the factors noted above and other risks related to our global operations could increase our expenses,impair our development efforts, harm our competitive position and damage our reputation.Risks Relating to Legislation and Government RegulationFailure to comply with the Foreign Corrupt Practices Act or the U.K. Bribery Act could subject us to significant civil orcriminal penalties.We earn a significant portion of our total revenue from international sales generated through our foreign direct and indirectoperations. As a result, we are subject to the FCPA, and the U.K. Bribery Act of 2010 (the "UKBA"), which prohibit bribery inthe conduct of business. The FCPA generally prohibits U.S. companies and their intermediaries from making corrupt paymentsto foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment and requirescompanies to maintain adequate record-keeping and internal accounting practices to accurately reflect the transactions of thecompany. The FCPA applies to companies, individual directors, officers, employees and agents. The UKBA is much broaderand prohibits all bribery, in both the public and private sectors. Although the UKBA does not contain a separate financialrecords provision, such a requirement is captured under other U.K. legislation. Under the FCPA and the UKBA, U.S.companies, their subsidiaries, employees, senior officers and/or directors may be held liable for actions taken by strategic orlocal partners or representatives. In addition, the U.S. government or the U.K. government, as applicable, may seek to hold usliable for successor liability violations committed by companies we have acquired or may in the future acquire. If we or ourintermediaries fail to comply with the requirements of the FCPA and the UKBA, governmental authorities in the United Statesand the United Kingdom, as applicable, could seek to impose civil and/or criminal penalties, which could have a materialadverse effect on our reputation, results of operations and the trading price of our common stock.We are subject to governmental export and import controls that could subject us to liability, require a license from the U.S.government or impair our ability to compete in international markets.Certain of our products incorporating encryption technology are subject to export controls and may be exported only with therequired level of export license or through an export license exception. Under these laws and regulations, we are responsiblefor obtaining all necessary licenses or other approvals, if required, for exports of appliances, software and technology, as wellas the provision of service. If we were to fail to comply with export licensing, customs regulations, economic sanctions andother laws, we could be subject to substantial civil and criminal penalties, including fines for the Company and incarcerationfor responsible employees and managers, and the possible loss of export or import privileges. Similarly, various countriesregulate the import of certain encryption technology and have enacted laws that could limit our ability to distribute our productsor our customers' ability to implement our products in those countries.In addition, if our distributors fail to obtain appropriate import, export or re-export licenses or permits, we may also beadversely affected through reputational harm and penalties. Obtaining export licenses can be difficult and time-consuming, andin some cases a license may not be available on a timely basis or at all.Furthermore, export control laws and economic sanctions prohibit the shipment of certain products to embargoed or sanctionedcountries, governments and persons. We cannot assure that a violation of these regulations will not occur, whether knowinglyor inadvertently. Any such shipment could have negative consequences including government investigations, penalties, fines,civil and criminal sanctions, and reputational harm.Additionally, any change in our products or in export or import regulations, economic sanctions or related legislation, shift inapproach to the enforcement or scope of existing regulations or change in the countries, persons or technologies targeted bysuch regulations, could result in delays in the introduction of our products in international markets, decreased use of ourproducts by, or in our decreased ability to export or sell our products to, existing or potential customers with internationaloperations. Any decreased use of our products or limitation on our ability to export or sell our products would likely have amaterial adverse effect on our business and results of operations.Regulation of the telecommunications industry, or changes in governmental regulation, interpretation or legislative reformcould harm our operating results and future prospects.The telecommunications industry is highly regulated and our business and financial condition could be adversely affected bychanges in the regulations relating to the telecommunications industry. Currently, there are few laws or regulations that applydirectly to access to or delivery of voice services on IP networks. We could be adversely affected by regulation of IP networksand commerce in any country where we operate, including the United States. Such regulations could include matters such as36voice over the Internet or using Internet protocol, encryption technology, and access charges for service providers. Theadoption of such regulations could decrease demand for our products, and at the same time increase the cost of selling ourproducts, which could have a material adverse effect on our business and results of operations.Other laws and regulations, including in the areas of advertising, consumer affairs, data protection, finance, marketing, privacy,publishing and taxation requirements, are subject to change and differing interpretations. Changes in the political climate or inexisting laws or regulations, or their interpretations, or the enactment of new laws or the issuance of new regulations or changesin enforcement priorities or activity could adversely affect our business by, among other things, increasing our administrative,compliance and other costs; forcing us to undergo a corporate restructuring; limiting our ability to engage in inter-companytransactions with its affiliates and subsidiaries; increasing our tax obligations, including unfavorable outcomes from auditsperformed by various tax authorities; affecting our ability to continue to serve our customers and to attract new customers;affecting cash management practices and repatriation efforts; forcing us to alter or restructure our relationships with vendorsand contractors; increasing compliance efforts or costs; limiting our use of or access to personal information; restricting ourability to market our products; and/or requiring us to implement additional or different programs and systems.Compliance with regulations is costly and time-consuming, and we may encounter difficulties, delays or significant expenses inconnection with compliance, and we may be exposed to significant penalties, liabilities, reputational harm and loss of businessin the event that we fail to comply. While it is not possible to predict when or whether fundamental policy or interpretivechanges would occur, these or other changes could fundamentally change the dynamics of our industry or the costs associatedwith our operations. Changes in public policy or enforcement priorities could materially affect our profitability, our ability toretain or grow business, or in the event of extreme circumstances, our financial condition.Risks Related to our Common StockOur stock price has been and may continue to be volatile.The market for technology stocks has been, and will likely continue to be, volatile. The following factors, among others, couldcause the market price of our common stock to fluctuate significantly:•addition or loss of any major customer;•continued significant declines in customer spending in the media gateway trunking business;•decreased spending by customers in the SBC and/or DSC security businesses;•consolidation among our customers and/or our competitors in the telecommunications industry;•changes in the financial condition or anticipated capital expenditures of any existing or potential major customer;•economic conditions for the telecommunications, networking and related industries;•quarterly variations in our bookings, revenue and operating results;•failure to meet our earnings guidance or securities analysts’ estimates;•changes in financial estimates by securities analysts;•speculation in the press or investment community, and shorting of our stock by investors;•announcements by us or our competitors of significant contracts, new products or acquisitions, distributionpartnerships, joint ventures, mergers or capital commitments;•activism by any single large stockholder or combination of stockholders;•sales of common stock or other securities by us or by our stockholders, including the OEP Stockholders, in the future;•securities and other litigation;•developments with respect to intellectual property rights, including any related litigation;•repurchases under our stock buyback program;•departure of key personnel or other major changes in our board of directors or management;•changes in governmental regulations;•our ability to develop and market new and enhanced products on a timely basis;•announcement of a stock split, reverse stock split, stock dividend or similar event; and/or•emergence or adoption of new technologies or industry standards.Furthermore, brokerage firms often do not permit stocks trading below $5.00 per share to be sold short, but often permit short-selling of shares which are traded at higher prices. As a result, to the extent our per-share trading price is consistently above$5.00, investors may short our stock. This may increase the volatility of our stock price.We entered into a stockholders’ agreement with certain GENBAND stockholders in connection with the consummation ofthe Sonus and GENBAND merger, which provided such stockholders with certain rights that may differ from the rights of37our other stockholders. Such GENBAND stockholders may decide to sell their shares in bulk or from time to time, whichtiming we cannot control.Effective October 27, 2017, we completed the merger (the “Merger”) of Sonus Networks, Inc. (“Sonus”), GENBAND HoldingsCompany, GENBAND, Inc., and GENBAND II, Inc. (collectively, “GENBAND”).On October 27, 2017, in connection with the consummation of the Merger, we entered into a principal stockholders’ agreement(the “Stockholders Agreement”) with Heritage PE (OEP) II, L.P. and Heritage PE (OEP) III, L.P. (collectively with anysuccessor entities, the “OEP Stockholders”), principal stockholders of GENBAND prior to the Merger. The StockholdersAgreement sets forth certain arrangements and contains various provisions relating to board representation, standstillrestrictions and transfer restrictions as further described therein, including the right of the OEP Stockholders to designate up tofive directors for nomination to our nine-member board of directors, subject to the OEP Stockholders maintaining certain levelsof beneficial ownership of our common stock. Therefore, the OEP Stockholders will be able to exert significant influence overmatters requiring board approval, and our stockholders other than the OEP Stockholders will have limited or no ability toinfluence the outcome of certain key transactions. The interests of the parties to the Stockholders Agreement may differ fromthose of other holders of our common stock.The ECI Merger Agreement provides that, at the time of the closing of the ECI Merger (the "Effective Time"), we and certainsignificant stockholders will enter into an amended and restated stockholders agreement (the "Restated StockholdersAgreement"). The Restated Stockholders Agreement will contain voting obligations, transfer restrictions, standstill provisionsand preemptive rights that are substantially similar to the obligations that exist in the current Stockholders Agreement currentlyin effect between the Company and the OEP Stockholders.Additionally, the ECI Merger Agreement provides that, at the Effective Time, the Company, the OEP Stockholders and ECIHolding (Hungary) kft or one of its affiliates will enter into an amended and restated registration rights agreement that issubstantially similar to the current registration rights agreement currently in effect between the Company and the OEPStockholders.The OEP Stockholders own approximately 47% of our common stock as of January 31, 2020, and may decide to sell theirshares in bulk or from time to time, except as provided under the Restated Stockholders Agreement, which timing we cannotcontrol. The sale of their shares may increase the volatility of our stock price, and our stock price could decline as a result.Delaware law and our charter documents contain provisions that could discourage or prevent a potential takeover, even ifsuch a transaction would be beneficial to our stockholders.Some provisions in our amended and restated certificate of incorporation, our amended and restated by-laws, as well asprovisions of Delaware law, may discourage, delay or prevent a merger or acquisition that may be deemed undesirable by ourBoard of Directors but that a stockholder may consider favorable. These include provisions:•authorizing the Board of Directors to issue shares of preferred stock;•limiting the persons who may call special meetings of stockholders;•prohibiting stockholder actions by written consent;•permitting the Board of Directors to increase the size of the Board and to fill vacancies;•providing indemnification to our directors and officers;•controlling the procedures for conduct and scheduling of Board and stockholder meetings;•requiring a super-majority vote of our stockholders to amend our amended and restated by-laws and certain provisionsof our amended and restated certificate of incorporation; and•establishing advance notice requirements for nominations for election to the Board of Directors or for proposingmatters that can be acted on by stockholders at stockholder meetings.These provisions, alone or together, could delay hostile takeovers or changes in control of us or our management.As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware GeneralCorporation law, which prevents some stockholders holding more than 15% of our outstanding common stock from engagingin certain business combinations without approval of the holders of substantially all of our outstanding common stock.Any provision of our amended and restated certificate of incorporation, our amended and restated by-laws or Delaware law thathas the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premiumfor their shares of our common stock and could also affect the price that some investors are willing to pay for our common38stock. Although we believe that our amended and restated certificate of incorporation, our amended and restated bylaws andprovisions of Delaware law provide an opportunity for the Board of Directors to assure that our stockholders realize full valuefor their investment, they could have the effect of delaying or preventing a change of control that some stockholders mayconsider beneficial.39Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesDuring 2019, we initiated a plan to consolidate and reduce the number of facilities worldwide. This includes plans toprovide a new customer experience center for product demonstration and training, relocate and consolidate our laboratories,server farms and Cloud service infrastructure and condense research and development, sales, marketing, business operationsand administrative functions into our North Dallas campus that is in close proximity locations of our Tier 1 U.S. customers. Weexpect to substantially complete our relocation and other site closure activities in the first half of 2020.We also lease smaller (under 20,000 square feet) office space in various countries around the world for sales, marketing,engineering, development, and customer services and support staff, as well as for warehouse purposes. We are exiting certainof these facilities. We believe our remaining facilities will be adequate for our current needs and that suitable additional spacewill be available as needed.As of December 31, 2019, we maintained the following principal facilities:LocationPrincipal useLease expirationNorth Dallas, Texas (a)Sales, marketing, engineering/development, customer supportand general and administrativeSeptember 2032Plano, Texas (b)Engineering/development, customer support, general andadministrative and salesFebruary 2022Ottawa, Canada (c)Engineering/development, customer support and general andadministrativeDecember 2029Westford, MassachusettsCorporate headquarters, engineering/development, customersupport, general and administrative and salesAugust 2028Research Triangle Park, NorthCarolinaEngineering/development, customer support, general andadministrative and salesApril 2027Bangalore, IndiaEngineering/development, customer support and general andadministrativeOctober 2024Durham, North Carolina (d)WarehouseAugust 2021Bangalore, IndiaEngineering/development, customer support and general andadministrativeDecember 2023San Jose, CaliforniaEngineering/development, customer support and salesNovember 2023Richardson, Texas (e)Customer testingJanuary 2020Prague, Czech Republic (c)Customer supportOctober 2025Maidenhead, United Kingdom (c)Engineering/development, customer support and salesJuly 2020__________(a) This facility is currently being fitted for occupancy. Upon completion, operations will be relocated from the Plano, Texassite. (b) This facility will be vacated as part of our restructuring initiative to consolidate our North Texas operations and we willmove into our new facility upon completion of the site.(c) A portion of this facility was not in use at December 31, 2019 and is currently being subleased as part of a restructuringinitiative.(d) This facility was not in use at December 31, 2019 as part of a restructuring initiative and is currently being subleased.(e) This facility will be vacated at the lease expiration date and relocated as part of our plans to consolidate our North Texassites.40Item 3. Legal ProceedingsOn November 8, 2018, Ron Miller, a purported stockholder of ours, filed a Class Action Complaint (the "MillerComplaint") in the United States District Court for the District of Massachusetts (the "Massachusetts District Court") against usand three of our former officers, Raymond P. Dolan, Mark T. Greenquist and Michael Swade (collectively, the "Defendants"),claiming to represent a class of purchasers of Sonus common stock during the period from January 8, 2015 through March 24,2015 and alleging violations of the federal securities laws. Similar to a previous complaint entitled Sousa et al. vs. SonusNetworks, Inc. et al., which was dismissed with prejudice by an order dated June 6, 2017, the Miller Complaint claims that theDefendants made misleading forward-looking statements concerning Sonus' expected fiscal first quarter of 2015 financialperformance, which statements were also the subject of an August 7, 2018 Securities and Exchange Commission Cease andDesist Order, whose findings we neither admitted nor denied. The Miller plaintiffs are seeking monetary damages.After the Miller Complaint was filed, several parties filed and briefed motions seeking to be selected by theMassachusetts District Court to serve as a Lead Plaintiff in the action. On June 21, 2019, the Massachusetts District Courtappointed a group as Lead Plaintiffs and the Lead Plaintiffs filed an amended complaint on July 19, 2019. On August 30, 2019,the Defendants filed a motion to dismiss the Miller Complaint and, on October 4, 2019, the Lead Plaintiffs filed an oppositionto the motion to dismiss. The Defendants filed a reply to such opposition on November 1, 2019. There was an oral argumenton the motion to dismiss on February 12, 2020.In addition, we are often a party to disputes and legal proceedings that we consider routine and incidental to our business.Management does not expect the results of any of these actions to have a material effect on our business or consolidatedfinancial statements.Item 4. Mine Safety DisclosuresNot applicable.PART II41Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecuritiesMarket InformationEffective November 29, 2017, our common stock was quoted on The Nasdaq Global Select Market under the symbol"RBBN." Our common stock began publicly trading on The Nasdaq Global Select Market on October 30, 2017 under thesymbol "SONS," following the Merger. HoldersAt February 20, 2020, there were approximately 426 holders of record of our common stock.Recent Sales of Unregistered SecuritiesNone.Purchases of Equity Securities by the Issuer and Affiliated PurchasersThe following table summarizes repurchases of our common stock during the fourth quarter of 2019:PeriodTotal Numberof SharesPurchased (1)AveragePrice Paidper ShareTotal Number ofShares Purchasedas Part ofPubliclyAnnounced Plansor Programs (2)Approximate DollarValue of Shares thatMayYet be PurchasedUnderthe Plans orPrograms (3)October 1, 2019 to October 31, 2019—$——$70,463,973November 1, 2019 to November 30, 20192,053$3.00—$70,463,973December 1, 2019 to December 31, 201934,593$3.08—$70,463,973Total36,646$3.08—$70,463,973(1) Upon vesting of restricted stock awards, certain of our employees may return to us a portion of the newly vested shares tosatisfy the tax withholding obligations that arise in connection with such vesting. During the fourth quarter of 2019, 36,646shares of restricted stock were returned to us by employees to satisfy tax withholding obligations arising in connection withvesting of restricted stock, which shares are included in this column.(2) On May 2, 2019, we announced a stock repurchase program, under which our Board of Directors has authorized therepurchase of up to $75 million of our common stock from time to time on the open market or in privately negotiatedtransactions prior to April 18, 2021 (the "Repurchase Program"). We did not repurchase any shares of our common stock underthe Repurchase Program during the fourth quarter of 2019. At December 31, 2019, we had $70.5 million remaining under theRepurchase Program for future repurchases. The timing and amount of any shares repurchased will be determined by ourmanagement based on its evaluation of market conditions and other factors. We may elect to implement a 10b5-1 repurchaseprogram, which would permit shares to be repurchased when we might otherwise be precluded from doing so under insidertrading laws. The Repurchase Program may be suspended or discontinued at any time. The Repurchase Program is beingfunded using our working capital.(3) Represents amounts available for repurchases under the Repurchase Program.Performance GraphThe following performance graph compares the cumulative total return to stockholders for our common stock for theperiod from October 30, 2017 (the date Ribbon's common stock began trading on Nasdaq) through December 31, 2019 with thecumulative total return over the same period on the Nasdaq Composite Index, the Nasdaq Telecommunications Index and theRussell 2000. The comparison assumes an investment of $100 on October 30, 2017 in our common stock and in each of theindices and, in each case, assumes reinvestment of all dividends, if any. The performance shown is not necessarily indicative offuture performance.This graph is not deemed to be "filed" with the SEC or subject to the liabilities of Section 18 of the Securities ExchangeAct of 1934, as amended (the "Exchange Act"), and should not be deemed to be incorporated by reference into any of our prioror subsequent filings under the Securities Act of 1933, as amended, or the Exchange Act.42October 30, 2017December 31, 2017December 31, 2018December 31, 2019Ribbon Communications Inc.$100.00$92.13$57.45$36.95Nasdaq Composite$100.00$102.83$99.91$136.58Russell 2000$100.00$102.47$91.18$114.45Nasdaq Telecommunications$100.00$109.50$109.10$122.3543Item 6. Selected Financial DataOn October 27, 2017, (the "Merger Date"), Sonus and GENBAND completed the Merger. The following table presentsselected consolidated financial data of Sonus prior to the Merger Date and selected consolidated financial data of Ribbon, onand after the Merger Date. The selected consolidated financial data set forth below as of December 31, 2019 and 2018 and foreach of the years ended December 31, 2019, 2018 and 2017 have been derived from the audited consolidated financialstatements included elsewhere herein. The selected consolidated financial data set forth below as of December 31, 2017, 2016and 2015 and for each of the years ended December 31, 2016 and 2015 have been derived from audited consolidated financialstatements not included elsewhere herein. The following selected consolidated financial data should be read in conjunctionwith "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financialstatements and notes thereto included elsewhere in this Annual Report on Form 10-K.Consolidated Statement of Operations DataYear ended December 31,(In thousands, except per share amounts)2019 (1)2018 (2)2017 (3)2016 (4)2015 (5)Revenue:Product$262,030$279,014$181,119$146,381$141,913Service301,081298,891148,823106,210107,121Total revenue563,111577,905329,942252,591249,034Cost of revenue:Product133,347142,18570,25047,36750,460Service112,680127,38858,19637,61336,917Total cost of revenue246,027269,573128,44684,98087,377Gross profit317,084308,332201,496167,611161,657Operating expenses:Research and development141,060145,462101,48172,84177,908Sales and marketing117,962128,27683,40368,53972,841General and administrative53,87066,03647,64235,94839,846Impairment of goodwill164,300————Acquisition- and integration-related expense12,95316,95114,7631,152131Restructuring and related expense16,39917,0159,4362,7402,148Total operating expenses506,544373,740256,725181,220192,874Loss from operations(189,460)(65,408)(55,229)(13,609)(31,217)Interest and other income (expense), net66,567(8,002)1,5372,1931,329Loss before income taxes(122,893)(73,410)(53,692)(11,416)(29,888)Income tax (provision) benefit(7,182)(3,400)18,440(2,516)(2,007)Loss from continuing operations(130,075)(76,810)(35,252)(13,932)(31,895)Net loss$(130,075)$(76,810)$(35,252)$(13,932)$(31,895)Loss per share:BasicContinuing operations$(1.19)$(0.74)$(0.60)$(0.28)$(0.64)$(1.19)$(0.74)$(0.60)$(0.28)$(0.64)DilutedContinuing operations$(1.19)$(0.74)$(0.60)$(0.28)$(0.64)$(1.19)$(0.74)$(0.60)$(0.28)$(0.64)Shares used to compute loss per share:Basic109,734103,91658,82249,38549,560Diluted109,734103,91658,82249,38549,560______________________________(1) Includes the results of operations of Anova Data, Inc. for the period subsequent to its acquisition by the Company onFebruary 28, 2019. The technology of Anova has been integrated into Ribbon's existing products and accordingly, theresults of operations are neither recorded nor disclosed separately.(2) Includes $21.5 million of revenue and $4.3 million of net loss attributable to Edgewater for the period subsequent to itsacquisition by the Company on August 3, 2018.(3) Includes $69.1 million of revenue and $12.5 million of net loss attributable to GENBAND for the period subsequent to theMerger on October 27, 2017.(4) Includes $1.9 million of revenue and $4.7 million of net loss attributable to Taqua, LLC for the period subsequent to itsacquisition by the Company on September 26, 2016.(5) Includes the results of operations of the SDN Business of Treq Labs, Inc. for the period subsequent to its acquisition by theCompany on January 2, 2015. The Company has not disclosed the revenue and earnings of the SDN Business for theperiods since January 2, 2015, as these amounts are not significant to the Company's consolidated financial statements.44December 31,Consolidated Balance Sheet Data(In thousands)20192018201720162015Cash and cash equivalents$44,643$43,694$57,073$31,923$50,111Marketable securities$—$7,284$17,224$61,836$58,533Investments$—$—$9,031$32,371$33,605Working capital$72,558$(11,219)$39,417$100,845$117,692Total assets$814,908$957,159$910,883$308,059$312,891Current portion of long-term debt$2,500$—$—$—$—Revolving credit facility$8,000$55,000$20,000$—$—Long-term debt, net of current$45,995$—$—$—$—Long-term debt, related party$—$24,100$22,500$—$—Long-term deferred revenue$20,482$17,572$14,184$7,188$7,374Other long-term obligations$16,589$30,797$13,189$1,633$2,760Total stockholders' equity$483,255$590,298$615,421$219,122$223,02645Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations46OverviewWe are a leading provider of next generation ("NextGen") software solutions to telecommunications, wireless and cableservice providers and enterprises across industry verticals. With over 1,000 customers around the globe, including some of thelargest telecommunications service providers and enterprises in the world, we enable service providers and enterprises tomodernize their communications networks through software and provide secure RTC solutions to their customers andemployees. By securing and enabling reliable and scalable IP networks, we help service providers and enterprises adopt thenext generation of software-based virtualized and cloud communications technologies for service providers to drive new,incremental revenue while protecting their existing revenue streams. Our software solutions provide a secure way for ourcustomers to connect and leverage multivendor, multiprotocol communications systems and applications across their networksand the cloud, around the world and in a rapidly changing ecosystem of IP-enabled devices, such as smartphones and tablets.In addition, our software solutions secure cloud-based delivery of UC solutions - both for service providers transforming to acloud-based network and for enterprises using cloud-based UC. We sell our software solutions through both direct sales andindirect channels globally, leveraging the assistance of resellers, and we provide ongoing support to our customers through aglobal services team with experience in design, deployment and maintenance of some of the world's largest software IPnetworks.PresentationUnless otherwise noted, all financial amounts, excluding tabular information, in this Management's Discussion andAnalysis of Financial Condition and Results of Operations ("MD&A") are rounded to the nearest thousand dollar amount, andall percentages, excluding tabular information, are rounded to the nearest percentage point.Unless otherwise noted, all forward-looking statements in this MD&A exclude the pending ECI Merger.Business AcquisitionsPending MergerOn November 14, 2019, we entered into an Agreement and Plan of Merger (the "ECI Merger Agreement") with EclipseCommunications Ltd., an indirect wholly-owned subsidiary of the Company ("Merger Sub"), Ribbon Communications IsraelLtd., ECI Telecom Group Ltd. ("ECI") and ECI Holding (Hungary) kft, pursuant to which Merger Sub will merge with and intoECI, with ECI surviving such merger as a wholly-owned subsidiary of the Company (the "ECI Merger").Our Board of Directors (the "Board") unanimously approved the ECI Merger Agreement and the transactionscontemplated thereby. Our stockholders approved the issuance of 32.5 million shares of our common stock (the "ECI StockConsideration") as partial consideration in the ECI Merger.As provided in the ECI Merger Agreement, at the time of the closing, all equity securities of ECI issued and outstandingimmediately prior to the closing will be converted into the right to receive consideration consisting of $324 million in cash (the"ECI Cash Consideration") and the ECI Stock Consideration, less the amount of indebtedness of ECI. ECI equityholders willalso receive approximately $31 million from ECI's sale of real estate assets. We intend to fund the ECI Cash Considerationwith proceeds from a new $500 million credit facility that we expect to enter into with Citizens Bank, N.A. and SantanderBank, N.A., as joint lead arrangers and bookrunners, in connection with the closing of the ECI Merger (the “2020 CreditFacility”). The 2020 Credit Facility consists of a $400 million term loan, which will be used in part to fund the merger, and a$100 million revolver that is projected to be undrawn at closing. The 2020 Credit Facility will retire our existing credit facility.Immediately following the closing, it is expected that the former holders of ECI will own approximately 23% of ouroutstanding common shares. The ECI Merger is expected to close in the first quarter of 2020, subject to regulatory approvalsand customary closing conditions.Anova Data, Inc.On February 28, 2019 (the "Anova Acquisition Date"), we acquired the business and technology assets of Anova Data,Inc. ("Anova"), a private company headquartered in Westford, Massachusetts (the "Anova Acquisition"). Anova is a providerof advanced analytics solutions and its NextGen products provide a cloud-native, streaming analytics platform for network andsubscriber optimization and monetization. The Company believes that the Anova Acquisition is reinforcing and extendingRibbon's strategy to expand into network optimization, security and data monetization via big data analytics and machinelearning.As consideration for the Anova Acquisition, we issued 2.9 million shares of our common stock with a fair value of $15.2million to Anova's sellers and equity holders on the Anova Acquisition Date and held back an additional 0.3 million shares ofour common stock with a fair value of $1.7 million, some or all of which could be issued subject to post-closing adjustments(the "Anova Deferred Consideration"). The Anova Deferred Consideration is included as a component of Accrued expensesand other current liabilities in our consolidated balance sheet at December 31, 2019.The Anova Acquisition has been accounted for as a business combination and the financial results of Anova have beenincluded in our consolidated financial statements for the period subsequent to the Anova Acquisition Date.Edgewater Networks, Inc.On August 3, 2018 (the "Edgewater Acquisition Date"), we completed our acquisition of Edgewater Networks, Inc.("Edgewater"), a private company headquartered in San Jose, California (the "Edgewater Acquisition"). Edgewater is a marketleader in Network Edge Orchestration for the small and medium enterprise and UC market. We believe that the acquisition ofEdgewater allows us to offer our global customer base a complete core-to-edge product portfolio, end-to-end service assuranceand analytics solutions, and a fully integrated SD-WAN service.As consideration for the Edgewater Acquisition, we paid, in the aggregate, approximately $46 million of cash, net of cashacquired, and issued 4.2 million shares of Ribbon common stock to Edgewater's selling shareholders and holders of vested in-the-money options and warrants to acquire common stock of Edgewater (the "Edgewater Selling Stakeholders") on theEdgewater Acquisition Date. The cash payment was funded through our then-current credit facility. We had previously agreedto pay the Edgewater Selling Stakeholders an additional $30 million of cash, $15 million of which was to be paid six monthsfrom the Edgewater Acquisition Date and the other $15 million of which was to be paid as early as nine months from theEdgewater Acquisition Date and no later than 18 months from the Edgewater Acquisition Date (the exact timing of whichwould depend on the amount of revenue generated from the sales of Edgewater products in 2018) (the "Edgewater DeferredConsideration").On February 15, 2019, we and the Edgewater Selling Stakeholders agreed to reduce the amount of Edgewater DeferredConsideration from $30 million to $21.9 million and agreed that all such deferred consideration would be payable on March 8,2019. We paid the Edgewater Selling Stakeholders $21.9 million on March 8, 2019 and recorded the reduction to theEdgewater Deferred Consideration of $8.1 million in Other income, net, in our consolidated statement of operations for the yearended December 31, 2019.The Edgewater Acquisition has been accounted for as a business combination and the financial results of Edgewater havebeen included in our consolidated financial statements for the period subsequent to the Edgewater Acquisition Date.GENBANDOn October 27, 2017 (the "Merger Date"), Sonus Networks, Inc. ("Sonus") consummated an acquisition as specified in anAgreement and Plan of Merger (the “Merger Agreement”) with Solstice Sapphire Investments, Inc. ("NewCo") and certain ofits wholly-owned subsidiaries, GENBAND Holdings Company, GENBAND Inc. and GENBAND II, INC. (collectively,"GENBAND") such that, following a series of mergers (collectively, the "Merger"), Sonus and GENBAND each became awholly-owned subsidiary of NewCo.As a result of the Merger, we believe we are better positioned to enable network transformations to IP and to cloud-basednetworks for service providers and enterprise customers worldwide, with a broader and deeper sales footprint, increased abilityto invest in growth, more efficient and effective research and development, and a comprehensive RTC product offering.Pursuant to the Merger Agreement, NewCo issued 50.9 million shares to the GENBAND equity holders, with the numberof shares issued in the aggregate to the GENBAND equity holders equal to the number of shares of Sonus common stockoutstanding immediately prior to the closing date of the Merger, such that former stockholders of Sonus would own 50%, andformer shareholders of GENBAND and the two related holding companies would own 50% of the shares of NewCo commonstock issued and outstanding immediately following the consummation of the Merger.47The Merger has been accounted for as a business combination and the financial results of GENBAND have been includedin our consolidated financial statements beginning on the Merger Date. On November 28, 2017, the Company changed itsname from "Sonus Networks, Inc." to "Ribbon Communications Inc."Litigation SettlementOn April 22, 2019, we and Metaswitch Networks Ltd., Metaswitch Networks Corp and Metaswitch Inc. (collectively,"Metaswitch") agreed to a binding mediator's proposal that resolves the six previously disclosed lawsuits between the Companyand Metaswitch (the "Lawsuits"). We and Metaswitch signed a Settlement and Cross-License Agreement on May 29, 2019 (the"Royalty Agreement"). Pursuant to the terms of the Royalty Agreement, Metaswitch agreed to pay us an aggregate amount of$63.0 million, which included cash payments of $37.5 million during the second quarter of 2019 and $25.5 million payable inthree installments annually, beginning June 26, 2020, with such installment payments accruing interest at a rate of 4% per year.As part of the Royalty Agreement, we and Metaswitch have (i) released the other from all claims and liabilities; (ii) licensedeach party's existing patent portfolio to the other party; and (iii) requested the applicable courts to dismiss the Lawsuits. Wereceived $37.5 million of aggregate payments from Metaswitch in the second quarter of 2019 and recorded notes receivable forfuture payments of $25.5 million, comprised of $8.5 million in Other current assets and $17.0 million in Other assets in ourconsolidated balance sheet at December 31, 2019. We recorded the $63.0 million gain in Other income, net, in our consolidatedstatement of operations for the year ended December 31, 2019.Financial OverviewFor a discussion of our results of operations for the year ended December 31, 2017, including a year-to-year comparisonbetween 2018 and 2017, and a discussion of our liquidity and capital resources for the year ended December 31, 2017, refer toPart II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our AnnualReport on Form 10-K/A for the year ended December 31, 2018.Financial ResultsWe reported losses from operations of $189 million for 2019 and $65 million for 2018. We reported net losses of $130million for 2019 and $77 million for 2018.Our revenue was $563 million in 2019 and $578 million in 2018. Our gross profit was $317 million in 2019 and $308million in 2018. Our gross profit as a percentage of revenue ("total gross margin") was 56% in 2019 and 53% in 2018.Our operating expenses were $507 million in 2019 and $374 million in 2018. Our 2019 operating expenses included$164 million for the impairment of goodwill, $13 million of acquisition- and integration-related expenses, primarily related tothe pending ECI Merger, and $16 million of restructuring expense, primarily related to severance and related costs. Our 2018operating expenses included $17 million of acquisition- and integration-related expenses, primarily related to the Merger and,to a lesser extent, to the Edgewater Acquisition, and $17 million of restructuring expense, primarily related to severance andrelated costs.We recorded stock-based compensation expense of $13 million in 2019 and $11 million in 2018. The expense recordedin 2019 includes $2 million of incremental expense related to the accelerated vesting of RSUs and PSUs held by our formerpresident and chief executive officer, Franklin Hobbs, in connection with his separation from the Company effective December31, 2019.See "Results of Operations" in this MD&A for additional discussion of our results of operations for the years endedDecember 31, 2019 and 2018.Restructuring and Cost Reduction InitiativesIn June 2019, we implemented a restructuring plan to further streamline our global footprint, improve our operations andenhance our customer delivery (the "2019 Restructuring Initiative"). The 2019 Restructuring Initiative includes facilityconsolidations, refinement of our research and development activities, and a reduction in workforce. In connection with thisinitiative, we expect to reduce our focus on hardware and appliance-based development over time and to increase ourdevelopment focus on software virtualization, functional simplicity and important customer requirements. The facilityconsolidations under the 2019 Restructuring Initiative (the "Facilities Initiative") include a consolidation of our North Texassites into a single campus, housing engineering, customer training and support, and administrative functions, as well as areduction or elimination of certain excess and duplicative facilities worldwide. In addition, we intend to substantially48consolidate our global software laboratories and server farms into two lower cost North American sites. We continue toevaluate our properties included in the Facilities Initiative for accelerated amortization and/or right-of-use asset impairment.We expect that the actions under the Facilities Initiative will be completed by the end of 2020.In connection with the 2019 Restructuring Initiative, we recorded restructuring and related expense of $11 million in theyear ended December 31, 2019, comprised of $6 million for severance and related costs for approximately 120 employees, $1million for variable and other facilities-related costs and $4 million for accelerated amortization of lease assets. We expect thatnearly all of the amount accrued for severance and related costs will be paid by the end of the first half of 2020. We estimatethat we will record nominal, if any, additional restructuring and related expense related to severance and related costs under the2019 Restructuring Initiative.In connection with the Merger, we implemented a restructuring plan in the fourth quarter of 2017 to eliminate certainredundant positions and facilities within the combined companies (the "Merger Restructuring Initiative"). In connection withthe Merger Restructuring Initiative, we recorded $5 million of restructuring and related expense in 2019, virtually all of whichwas for severance and related costs for approximately 40 employees. We recorded $16 million of restructuring expense relatedto the Merger Restructuring Initiative in 2018, comprised of $15 million for severance and related expenses for approximately275 employees and $1 million in connection with redundant facilities located in the Czech Republic, Canada and the U.S. Werecorded $9 million of restructuring expense in connection with the Merger Restructuring Initiative in 2017 for severance andrelated expenses for approximately 120 employees. The Merger Restructuring Initiative is substantially complete, and weanticipate that we will record nominal future expense, if any, in connection with this initiative. In connection with the adoptionof Accounting Standards Codification ("ASC") 842, Leases ("ASC 842"), effective January 1, 2019, we wrote off the remainingrestructuring accrual related to facilities. We expect that the amount accrued at December 31, 2019 for severance and relatedexpenses will be paid by the end of the first half of 2020.We assumed GENBAND's restructuring liability aggregating $4 million at the Merger Date (the "GENBANDRestructuring Initiative"), primarily related to headcount reductions. In 2018, we recorded $1 million of restructuring expensefor changes in estimated costs for previously recorded initiatives, primarily changes in negotiated severance to employees incertain international locations and changes in estimated sublease income for restructured facilities. In connection with theadoption of ASC 842 effective January 1, 2019, we wrote off the remaining restructuring accrual related to facilities. TheGENBAND Restructuring Initiative is complete, and we do not expect to record future expense in connection with thisinitiative.On July 25, 2016, we announced a program (the "2016 Restructuring Initiative") to further accelerate our investment innew technologies as the communications industry migrates to a cloud-based architecture and to pursue new strategic initiatives,such as new products and an expanded go-to-market footprint in selected geographies and discrete vertical markets. We haverecorded an aggregate of $2 million of restructuring expense in connection with this initiative, primarily for severance andrelated costs. The actions under the 2016 Restructuring Initiative were completed in 2019 and accordingly, no additionalexpense will be recorded in connection with this initiative.In connection with the acquisition of Taqua, we implemented a restructuring plan in the third quarter of 2016 to eliminatecertain redundant positions within the combined companies. On October 24, 2016, the Audit Committee of our Board (the"Audit Committee") approved a broader Taqua restructuring plan related to headcount and redundant facilities (collectively, the"Taqua Restructuring Initiative"). In connection with this initiative, we have recorded $2 million of restructuring expense forseverance and related costs and estimated costs related to the elimination of redundant facilities. The actions under the TaquaRestructuring Initiative have been completed and accordingly, no additional expense will be recorded in connection with thisinitiative. In connection with the adoption of ASC 842 effective January 1, 2019, we wrote off the remaining restructuringaccrual related to redundant facilities.Critical Accounting Policies and EstimatesManagement's discussion and analysis of the financial condition and results of operations is based upon our consolidatedfinancial statements, which have been prepared in accordance with accounting principles generally accepted in the UnitedStates of America. The preparation of these financial statements requires us to make estimates and judgments that affect thereported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We baseour estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in thefuture given available information. We consider the following accounting policies to be both those most important to theportrayal of our financial condition and those that require the most subjective judgment. If actual results differ significantlyfrom management's estimates and projections, there could be a material effect on our consolidated financial statements. Thesignificant accounting policies that we believe are the most critical include revenue recognition, the valuation of inventory, loss49contingencies and reserves, stock-based compensation, business combinations, goodwill and intangible assets, accounting forleases and accounting for income taxes.Revenue Recognition. We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers("ASC 606"), which we adopted on January 1, 2018 using the modified retrospective method.We derive revenue from two primary sources: products (software and non-software products) and services. Software andnon-software product revenue is generated from sales of our software with proprietary appliances that function together todeliver the products' essential functionality. Software and appliances are also sold on a standalone basis. Services includecustomer support (software updates and technical support), consulting, design services, installation services and training. Atypical contract includes both product and services. Generally, contracts with customers contain multiple performanceobligations. For these contracts, we account for individual performance obligations separately if they are distinct. Thetransaction price is allocated to the separate performance obligations on a relative standalone selling price basis. SSPs aretypically estimated based on observable transactions when these services are sold on a standalone basis.The software licenses typically provide a perpetual right to use our software. We also sell term-based software licensesthat expire and Software-as-as-Service ("SaaS")-based software, which are referred to as subscription arrangements. We do notcustomize our software nor are installation services required, as the customer has a right to utilize internal resources or a third-party service company. The software and appliances are delivered before related services are provided and are functionalwithout professional services or customer support. We have concluded that our software licenses are functional intellectualproperty that are distinct, as the user can benefit from the software on its own. The product revenue is typically recognizedupon transfer of control or when the software is made available for download, as this is the point that the user of the softwarecan direct the use of, and obtain substantially all of the remaining benefits from, the functional intellectual property. We do notrecognize software revenue related to the renewal of subscription software licenses earlier than the beginning of thesubscription period. Appliance products are generally sold with software to provide the customer solution.Service revenue includes revenue from customer support and other professional services. We offer warranties on ourproducts. Certain of our warranties are considered to be assurance-type in nature and do not cover anything beyond ensuringthat the product is functioning as intended. Based on the guidance in ASC 606, assurance-type warranties do not representseparate performance obligations. We also sell separately-priced maintenance service contracts which qualify as service-typewarranties and represent separate performance obligations. We do not allow and have no history of accepting product returns.Customer support includes software updates on a when-and-if-available basis, telephone support, integrated web-basedsupport and bug fixes or patches. We sell our customer support contracts at a percentage of list or net product price related tothe support. Customer support revenue is recognized ratably over the term of the customer support agreement, which istypically one year.Our professional services include consulting, technical support, resident engineer services, design services and installationservices. Because control transfers over time, revenue is recognized based on progress toward completion of the performanceobligation. The method to measure progress toward completion requires judgment and is based on the nature of the products orservices to be provided. We generally use the input method to measure progress for our contracts because we believe it bestdepicts the transfer of assets to the customer which occurs as we incur costs for the contracts. Under the cost-to-cost measureof progress, the progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costsat completion of the performance obligation. When the measure of progress is based upon expended labor, progress towardcompletion is measured as the ratio of labor time expended to date versus the total estimated labor time required to completethe performance obligation. Revenue is recorded proportionally as costs are incurred or as labor is expended. Costs to fulfillthese obligations include internal labor as well as subcontractor costs.We offer customer training courses, for which the related revenue is typically recognized as the training services areperformed.Our contracts with customers often include promises to transfer multiple products and services to the customer.Determining whether products and services are considered distinct performance obligations that should be accounted forseparately versus together may require significant judgment.Judgment is required to determine the SSP for each distinct performance obligation. In instances where SSP is not directlyobservable, such as when we do not sell the product or service separately, we determine the SSP using information that mayinclude market conditions and other observable inputs. We typically have more than one SSP for individual products and50services due to the stratification of those products and services by customers and circumstances. In these instances, theCompany may use information such as the size of the customer and geographic region in determining the SSP.Valuation of Inventory. We review inventory for both potential obsolescence and potential loss of value periodically. Inthis review, we make assumptions about the future demand for and market value of the inventory and, based on theseassumptions, estimate the amount of any excess, obsolete or slow-moving inventory.We write down our inventories if they are considered to be obsolete or at levels in excess of forecasted demand. In thesecases, inventory is written down to estimated realizable value based on historical usage and expected demand. Inherent in ourestimates of market value in determining inventory valuation are estimates related to economic trends, future demand for ourproducts and technical obsolescence of our products. If future demand or market conditions are less favorable than ourprojections, additional inventory write-downs could be required and would be reflected in the cost of revenue in the period therevision is made. To date, we have not been required to revise any of our assumptions or estimates used in determining ourinventory valuations.We write down our evaluation equipment at the time of shipment to our customers, as it is not probable that the inventoryvalue will be realizable.Loss Contingencies and Reserves. We are subject to ongoing business risks arising in the ordinary course of businessthat affect the estimation process of the carrying value of assets, the recording of liabilities and the possibility of various losscontingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset hasbeen impaired and the amount of loss can be reasonably estimated. We regularly evaluate current information available todetermine whether such amounts should be adjusted and record changes in estimates in the period they become known. We aresubject to various legal claims. We reserve for legal contingencies and legal fees when the amounts are probable and reasonablyestimable.Stock-Based Compensation. Our stock-based compensation cost is measured at the grant date based on the fair value ofthe award and is recognized as expense over the requisite service period, which is generally the vesting period.We use the Black-Scholes valuation model for estimating the fair value on the date of grant of employee stock options.Determining the fair value of stock option awards at the grant date requires judgment regarding certain valuation assumptions,including the volatility of our stock price, expected term of the option, risk-free interest rate and expected dividends. Changesin such assumptions and estimates could result in different fair values and could therefore impact our earnings. Such changes,however, would not impact our cash flows. The fair value of restricted stock awards, restricted stock units and performance-based awards is based upon our stock price on the grant date.We grant performance-based stock units, some of which include a market condition, to certain of our executives. We usea Monte Carlo simulation approach to model future stock price movements based upon the risk-free rate of return, the volatilityof each entity, and the pair-wise covariance between each entity. These results are then used to calculate the grant date fairvalues of the performance-based stock units.The amount of stock-based compensation expense recorded in any period for unvested awards requires estimates of theamount of stock-based awards that are expected to be forfeited prior to vesting, as well as assumptions regarding the probabilitythat performance-based stock awards without market conditions will be earned.Business Combinations. We allocate the purchase price of acquired companies to identifiable assets acquired andliabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess ofconsideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed andrepresents the expected future economic benefits arising from other assets acquired in the business combination that are notindividually identified and separately recognized. Significant management judgments and assumptions are required indetermining the fair value of assets acquired and liabilities assumed, particularly acquired intangible assets which areprincipally based upon estimates of the future performance and cash flows expected from the acquired business and applieddiscount rates. While we use our best estimates and assumptions as part of the purchase price allocation process to accuratelyvalue assets acquired and liabilities assumed at a business combination date, our estimates and assumptions are inherentlyuncertain and subject to refinement. If different assumptions are used, it could materially impact the purchase price allocationand our financial position and results of operations. Any adjustments to assets acquired or liabilities assumed subsequent to thepurchase price allocation period are included in operating results in the period in which the adjustments are determined.Intangible assets typically are comprised of in-process research and development, developed technology, customerrelationships, trade names and internal use software.51Goodwill and Intangible Assets. Goodwill is not amortized, but instead is tested for impairment annually, or morefrequently if indicators of potential impairment exist. Intangible assets with estimated lives and other long-lived assets arereviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not berecoverable. Recoverability of intangible assets with estimated lives and other long-lived assets is measured by comparing thecarrying amount of the asset to future net undiscounted pretax cash flows expected to be generated by the asset. If thesecomparisons indicate that an asset is not recoverable, we will recognize an impairment loss for the amount by which thecarrying value of the asset exceeds the related estimated fair value.Judgment is required in determining whether an event has occurred that may impair the value of goodwill or identifiableintangible or other long-lived assets. Factors that could indicate an impairment may exist include significant underperformancerelative to plan or long-term projections, strategic changes in business strategy, significant negative industry or economictrends, a significant change in circumstances relative to a large customer, a significant decline in our stock price for a sustainedperiod and a decline in our market capitalization to below net book value. We must make assumptions about future controlpremiums, market comparables, cash flows, operating plans, discount rates and other factors to determine recoverability.Our annual testing for impairment of goodwill is completed as of November 30. We operate as a single operatingsegment with one reporting unit and consequently we evaluate goodwill for impairment based on an evaluation of the fair valueof the Company as a whole. Based on the results of our 2019 annual impairment test, we determined that our carrying valueexceeded our fair value. We performed a fair value analysis using both an Income and Market approach, which encompasses adiscounted cash flow analysis and a guideline public company analysis using selected multiples. We determined that theamount of the impairment was $164 million and recorded an impairment charge in the fourth quarter of 2019. The impairmentcharge is reported separately in our consolidated statement of operations for the year ended December 31, 2019.We performed our assessments for the years ended December 31, 2018 and 2017 and determined that in each such year,our fair value was in excess of our carrying value and accordingly, there was no impairment of goodwill.At certain times during both 2019 and 2018, including at our annual testing date of November 30, 2018, our marketcapitalization was below our book value. While we concluded that our fair value exceeded carrying value at November 30,2018, we regularly monitored for changes in circumstances, including changes to our projections regarding performance of thebusiness, that could result in impairment of goodwill.Leases. Effective January 1, 2019, we adopted Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842)Section A - Leases: Amendments to the FASB Accounting Standards Codification ("ASU 2016-02"), the new standard onaccounting for leases. ASU 2016-02 introduces a lessee model that brings most leases onto the balance sheet and eliminates thecurrent GAAP requirement for an entity to use bright-line tests in determining lease classification. We must determine if anarrangement is a lease at inception. A contract is determined to contain a lease component if the arrangement provides us witha right to control the use of an identified asset. Lease agreements may include lease and non-lease components. In suchinstances for all classes of underlying assets, we do not separate lease and non-lease components but instead account for theentire arrangement under leasing guidance. Leases with an initial term of 12 months or less are not recorded on the balancesheet and lease expense for these leases is recognized on a straight-line basis over the lease term.Right-of-use assets and lease liabilities are initially measured based on the present value of the future minimum fixedlease payments (i.e., fixed payments in the lease contract) over the lease term at the commencement date. As our existingleases do not have a readily determinable implicit rate, we use our incremental borrowing rate based on the informationavailable at the commencement date in determining the present value of future minimum fixed lease payments. We calculateour incremental borrowing rate to reflect the interest rate that we would have to pay to borrow on a collateralized basis anamount equal to the lease payments in a similar economic environment over a similar term and consider our historicalborrowing activities and market data from entities with comparable credit ratings in this determination. The measurement ofthe right-of-use asset also includes any lease payments made prior to the commencement date (excluding any lease incentives)and initial direct costs incurred. We assessed our right-of-use assets for impairment as of December 31, 2019 and determinedno impairment has occurred.Lease terms may include options to extend or terminate the lease and we incorporate such options in the lease term whenwe have the unilateral right to make such an election and it is reasonably certain that we will exercise that option. In makingthis determination, we consider our prior renewal, termination history and planned usage of the assets under lease,incorporating expected market conditions.For restructuring events that involve lease assets and liabilities, we apply lease reassessment and modification guidance52and evaluate the right-of-use assets for potential impairment. If we plan to exit all or distinct portions of a facility and do nothave the ability or intent to sublease, we will accelerate the amortization of each of these lease components through the vacatedate. The accelerated amortization is recorded as a component of Restructuring and related expense in our consolidatedstatements of operations. Related variable lease expenses will continue to be expensed as incurred through the vacate date, atwhich time we will reassess the liability balance to ensure it appropriately reflects the remaining liability associated with thepremises and record a liability for the estimated future variable lease costs.Accounting for Income Taxes. Our provision for income taxes is comprised of a current and a deferred portion. Thecurrent income tax provision is calculated as the estimated taxes payable or refundable on tax returns for 2019. We provide fordeferred income taxes resulting from temporary differences between financial and taxable income. Such differences ariseprimarily from tax net operating loss ("NOL") and credit carryforwards, depreciation, deferred revenue, stock-basedcompensation expense, accruals and reserves.We assess the recoverability of any tax assets recorded on the balance sheet and provide any necessary valuationallowances as required. In evaluating our ability to recover our deferred tax assets, we consider all available positive andnegative evidence, including our past operating results, the existence of cumulative income in the most recent years, changes inthe business in which we operate and our forecast of future taxable income. In determining future taxable income, we areresponsible for assumptions utilized, including the amount of state, federal and international pre-tax operating income, thereversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptionsrequire significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we areusing to manage our underlying businesses. Such assessment is completed on a jurisdiction by jurisdiction basis.At December 31, 2019, we had valuation allowances of $71 million to offset net domestic deferred tax assets of $72million. In addition, we had valuation allowances to offset Canada federal credits carryovers of $11 million, Ireland netdeferred tax assets of $9 million and Brazil net deferred tax assets of $3 million. In the event we determine it is more likelythan not that we will be able to use a deferred tax asset in the future in excess of its net carrying value, the valuation allowancewould be reduced, thereby increasing net earnings and increasing equity in the period such determination is made. We haverecorded net deferred tax assets in some of our other international subsidiaries. These amounts could change in future periodsbased upon our operating results and changes in tax law.We provide for income taxes during interim periods based on the estimated effective tax rate for the full year. We recorda cumulative adjustment to the tax provision in an interim period in which a change in the estimated annual effective tax rate isdetermined.We have provided for income taxes on the undistributed earnings of our non-U.S. subsidiaries as of December 31, 2019,with the exception of the Company's Irish subsidiary, as we do not plan to permanently reinvest these amounts outside the U.S.The repatriation of the undistributed earnings would result in withholding taxes imposed on the repatriation. Consequently, wehave recorded a tax liability of $5 million, consisting of potential withholding and distribution taxes related to undistributedearnings from these subsidiaries as of December 31, 2019. Had the earnings of the Irish subsidiary been determined to not bepermanently reinvested outside the U.S., no additional deferred tax liability would be required due to no withholding taxes orincome tax expense being imposed on such repatriation.We assess all material positions taken in any income tax return, including all significant uncertain positions, in all taxyears that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position beginswith the initial determination of the position's sustainability and is measured at the largest amount of benefit that has a greaterthan 50% likelihood of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain taxpositions must be reassessed, and we will determine whether (i) the factors underlying the sustainability assertion have changedand (ii) the amount of recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requiresignificant judgment. Judgments concerning the recognition and measurement of a tax benefit might change as newinformation becomes available.On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the TaxCuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U.S. tax code, including, but notlimited to: reducing the U.S. federal corporate tax rate from 35% to 21%; requiring companies to pay a one-time transition taxon certain unrepatriated earnings of foreign subsidiaries; generally eliminating U.S. federal income taxes on dividends fromforeign subsidiaries; requiring a current inclusion in U.S. federal taxable income of certain earnings (Global Intangible Low-taxed Income) ("GILTI") of controlled foreign corporations; eliminating the corporate alternative minimum tax ("AMT") andchanging how existing AMT credits can be realized; creating the base erosion anti-abuse tax; creating a new limitation ondeductible interest expense; changing rules related to uses and limitations of net operating loss carryforwards created in tax53years beginning after December 31, 2017; providing a tax deduction for foreign-derived intangible income; and changing rulesrelated to deductibility of compensation for certain officers.We completed our accounting for the effects of the Tax Act in the fourth quarter of 2018 and the effects of the Tax Actwere reflected in in our 2018 tax provision. We considered the impact of the Base Erosion and Anti-Abuse Tax ("BEAT"), theGILTI, the deduction for foreign derived intangible income and other provisions of the Tax Act when preparing our 2018 taxprovision. Based on this analysis, we recorded BEAT tax expense of $0.4 million in 2018 and recorded an adjustment to theprovisional amounts previously recorded related to the Tax Act that decreased our deferred tax assets by $0.2 million. Whenthe 2018 Federal tax return was filed, there was no BEAT tax expense. The related true-up was recorded as a provision toreturn adjustment in the 2019 tax provision.54Results of OperationsYears Ended December 31, 2019 and 2018Revenue. Revenue for the years ended December 31, 2019 and 2018 was as follows (in millions, except percentages):Year endedDecember 31,Increase (decrease)from prior year20192018$%Product$262.0$279.0$(17.0)(6.1)%Service301.1298.92.20.7%Total revenue$563.1$577.9$(14.8)(2.6)%Our product revenue is generated from sales of software with attached appliances, software licenses and softwaresubscription fees. Certain of our products may be included in more than one of our solutions (session control solutions,network transformation solutions, and applications and security solutions), depending upon the configuration of the individualcustomer solutions sold. Our software with attached appliances and software license revenues are primarily comprised of ourmedia gateway, call controller, signaling, virtual mobile core, security and management products. Our software subscriptionfees revenue is primarily comprised of sales of our UC-related (i.e., application server, media server, etc.) and Kandy Cloudproducts. Each of our solutions portfolios addresses both the service provider and enterprise markets and are sold throughboth our direct sales program and from indirect sales through our channel partner program.The decrease in our product revenue in 2019 compared to 2018 was primarily the result of $39 million of lower sales ofsoftware with attached appliances, partially offset by $22 million of higher sales of our software licenses and subscriptions.In 2019, 27% of our product revenue was attributable to sales to enterprise customers, compared to 21% in 2018. Thesesales were made through both our direct sales team and indirect sales channel partners.In 2019, 36% of our product revenue was from indirect sales through our channel partner program, compared to 25% in2018.The timing of the completion of customer projects and revenue recognition criteria satisfaction may cause our productrevenue to fluctuate from one period to the next.Service revenue is primarily comprised of appliance and software maintenance and support (“maintenance revenue”) andnetwork design, installation and other professional services (“professional services revenue”).Service revenue for the years ended December 31, 2019 and 2018 was comprised of the following (in millions, exceptpercentages):Year endedDecember 31,Increasefrom prior year20192018$%Maintenance$234.2$234.0$0.20.1%Professional services66.964.92.03.0% Total service revenue$301.1$298.9$2.20.7%Our maintenance revenue was essentially unchanged in 2019 compared to 2018, as expected industry consolidation andthe resulting pricing pressure were offset by the sale of new software products under maintenance support. The increase inprofessional services revenue was primarily due to the timing and related revenue recognition of certain projects in 2019compared to 2018.The following customers contributed 10% or more of our revenue in the years ended December 31, 2019 and 2018:Year endedDecember 31,20192018Verizon Communications Inc.17%17%AT&T Inc.12%** Less than 10% of total revenue.Revenue earned from customers domiciled outside the United States was 39% of revenue in 2019 and 42% of revenue in2018. Due to the timing of project completions, we expect that the domestic and international components as a percentage ofour revenue may fluctuate from quarter to quarter and year to year. Our total revenue for the years ended December 31, 2019and 2018 was disaggregated geographically as follows:Year ended December 31, 2019ProductrevenueServicerevenue(maintenance)Servicerevenue(professionalservices)Total revenueUnited States$170,937$133,271$37,085$341,293Europe, Middle East and Africa42,26243,18612,27997,727Japan13,06511,6925,84230,599Other Asia Pacific17,55216,1064,87938,537Other18,21429,9736,76854,955$262,030$234,228$66,853$563,111Year ended December 31, 2018ProductrevenueServicerevenue(maintenance)Servicerevenue(professionalservices)Total revenueUnited States$169,510$132,282$35,832$337,624Europe, Middle East and Africa37,83346,85611,79496,483Japan23,10811,2345,06939,411Other Asia Pacific30,57512,3214,35847,254Other17,98831,2737,87257,133$279,014$233,966$64,925$577,905Our deferred product revenue was $5 million at December 31, 2019 and $14 million at December 31, 2018. Our deferredservice revenue was $116 million at December 31, 2019 and $108 million at December 31, 2018. Our deferred revenuebalance may fluctuate as a result of the timing of revenue recognition, customer payments, maintenance contract renewals,contractual billing rights and maintenance revenue deferrals included in multiple element arrangements.We expect that our total revenue in 2020 will increase slightly compared with our 2019 total revenue.Cost of Revenue/Gross Margin. Our cost of revenue consists primarily of amounts paid to third-party manufacturers forpurchased materials and services, royalties, and manufacturing and services personnel and related costs. Our cost of revenueand gross margins for the years ended December 31, 2019 and 2018 were as follows (in millions, except percentages):55Year endedDecember 31,Decreasefrom prior year20192018$%Cost of revenueProduct$133.3$142.2$(8.9)(6.2)%Service112.7127.4(14.7)(11.5)%Total cost of revenue$246.0$269.6$(23.6)(8.7)%Gross marginProduct49.1%49.0%Service62.6%57.4%Total gross margin56.3%53.4%Our product gross margin in 2019 was essentially unchanged compared with 2018. The gross margin benefit ofincreasing sales of higher gross margin software products was offset by the inclusion of a full year of Edgewater product salesin 2019, as Edgewater products include attached appliances as part of a sales order. Our purchases of materials andcomponents were $70 million in 2019, compared with $75 million in 2018. The reduction in 2019 reflects the higher softwarecontent of our 2019 sales as a percentage of total product revenue compared with 2018, offset by the inclusion of a full year ofEdgewater attached appliance purchases. We expect that our future purchases of materials and components will decrease as aresult of the increasing software content of our products, both in absolute terms and as a percentage of revenue.The increase in service gross margin in 2019 compared to 2018 was primarily due to efficiency measures undertaken inour professional sales organization.We believe that our total gross margin will increase in 2020 compared to 2019, primarily due to the expected highersoftware content as a percentage of our total revenue, coupled with the impact of our restructuring and integration costreduction initiatives.Research and Development Expenses. Research and development expenses consist primarily of salaries and relatedpersonnel expenses and prototype costs for the design, development, testing and enhancement of our products. Research anddevelopment expenses for the years ended December 31, 2019 and 2018 were as follows (in millions, except percentages):Year endedDecember 31,Decreasefrom prior year20192018$%$141.1$145.5$(4.4)(3.0)%The decrease in research and development expenses in 2019 compared with 2018 was primarily attributable to $6 millionof lower employee-related expenses, partially offset by $1 million of higher product development expense (i.e., third-partydevelopment, prototype and test equipment costs) and $1 million of higher infrastructure-related expenses. The decrease inemployee-related expenses was primarily attributable to lower salary and related expenses, reflecting the impact of ourrestructuring and cost savings initiatives.Some aspects of our research and development efforts require significant short-term expenditures, the timing of whichmay cause significant variability in our expenses. We believe that rapid technological innovation is critical to our long-termsuccess, and we are tailoring our investments to meet the requirements of our customers and market. We believe that ourresearch and development expenses in 2020 will benefit from our ongoing restructuring and cost savings initiatives, partiallyoffset by our increased investment in our software solutions.Sales and Marketing Expenses. Sales and marketing expenses consist primarily of salaries and related personnel costs,commissions, travel and entertainment expenses, promotions, customer trial and evaluations inventory and other marketingand sales support expenses. Sales and marketing expenses for the years ended December 31, 2019 and 2018 were as follows(in millions, except percentages):Year endedDecember 31,Decreasefrom prior year20192018$%$118.0$128.3$(10.3)(8.0)%The decrease in sales and marketing expenses in 2019 compared with 2018 was primarily attributable to $12 million oflower employee-related expenses, partially offset by $1 million of higher amortization of acquired intangible assets and $156million of net increases in other sales and marketing expenses. The decrease in employee-related expenses was primarilyattributable to lower salary and related expenses, reflecting the impact of our restructuring and cost savings initiatives.We believe that our sales and marketing expenses will increase in 2020 compared with 2019, primarily due to higheramortization of intangible assets arising from prior acquisitions, coupled with slightly higher employee-related expenses.General and Administrative Expenses. General and administrative expenses consist primarily of salaries and relatedpersonnel costs for executive and administrative personnel, and audit, legal and other professional fees. General andadministrative expenses for the years ended December 31, 2019 and 2018 were as follows (in millions, except percentages):Year endedDecember 31,Decreasefrom prior year20192018$%$53.9$66.0$(12.1)(18.4)%The decrease in 2019 general and administrative expenses compared with 2018 was primarily attributable to $5 million oflower employee-related expenses, $4 million of lower legal fees and $3 million of lower consulting fees. The decrease inemployee-related expenses was primarily attributable to lower salary and related expenses, reflecting the impact of ourrestructuring and cost savings initiatives.We believe that our general and administrative expenses will decrease in 2020 compared with 2019, primarily due tosavings from our restructuring and integration cost savings initiatives.Impairment of Goodwill. Our annual testing for impairment of goodwill is completed as of November 30. We operate asa single operating segment with one reporting unit and consequently evaluate goodwill for impairment based on an evaluationof the fair value of the Company as a whole. Based on the results of our 2019 annual impairment test, we determined that ourcarrying value exceeded our fair value and accordingly, we recorded an impairment charge of $164 million in 2019.Impairment of goodwill is reported separately in the consolidated statements of operations.Acquisition- and Integration-Related Expenses. Acquisition- and integration-related expenses include those expensesrelated to acquisitions that we would otherwise not have incurred. Acquisition-related expenses include professional andservices fees, such as legal, audit, consulting, paying agent and other fees, and expenses related to cash payments to certainformer executives of the acquired businesses in connection with their employment agreements. Integration-related expensesrepresent incremental costs related to combining the Company's systems and processes with those of acquired businesses,such as third-party consulting and other third-party services.We recorded $13 million of acquisition- and integration-related expenses in 2019, comprised of $9 million of acquisition-related expenses and $4 million of integration-related expenses. The acquisition-related expense primarily related to thepending ECI Merger and, to a lesser extent, the Anova Acquisition and other acquisition-related activities. The integration-related expenses related to our ongoing integration activities, primarily related to the Merger.We recorded $17 million of acquisition- and integration-related expenses in 2018, comprised of $10 million ofacquisition-related expenses and $7 million of integration-related expenses. The acquisition-related expense primarily relatedto the Merger, with nominal amounts related to the acquisition of Edgewater and other acquisition-related activities.Acquisition- and integration-related expenses are reported separately in the consolidated statements of operations.Restructuring and Related Expense. We have been committed to streamlining operations and reducing operating costsby closing and consolidating certain facilities and reducing our worldwide workforce. Please see the additional discussion ofour restructuring initiatives in the "Restructuring and Cost Reduction Initiatives" section of the Overview of thisManagement's Discussion and Analysis of Financial Condition and Results of Operations.We recorded restructuring and related expense of $16 million in 2019, comprised of $11 million for severance and relatedcosts, $1 million for variable and other facilities-related costs and $4 million for accelerated amortization of lease assets. Werecorded $17 million of restructuring and related expense in 2018, comprised of $16 million in connection with our MergerRestructuring Initiative and $1 million for changes in estimated costs in connection with our assumption of GENBAND'srestructuring liability at the time of Merger.57Although we have eliminated positions as part of our restructuring initiatives, we continue to hire in certain areas that webelieve are important to our future growth. Restructuring and related expense is reported separately in the consolidatedstatements of operations.Interest (Expense) Income, net. Interest expense and interest income for the years ended December 31, 2019 and 2018were as follows (in millions, except percentages):Year endedDecember 31,Increase (decrease)from prior year20192018$%Interest income$0.6$0.3$0.3100.0%Interest expense(4.5)(4.5)——%Interest (expense) income, net$(3.9)$(4.2)$(0.3)(7.1)%Interest income in 2019 was primarily earned from an outstanding $25.5 million three-year note receivable bearinginterest at 4%. Interest expense in 2019 primarily related to revolver and term borrowings and the promissory note issued tocertain of GENBAND's equityholders in connection with the Merger.Interest expense in 2018 was primarily comprised of interest on the promissory note issued to certain of GENBAND'sequityholders in connection with the Merger, the outstanding revolving credit facility balance and the amortization of debtissuance costs in connection with our revolving credit facilities. Interest income consisted of interest earned on our cashequivalents, marketable securities and investments.Other Income (Expense), Net. We recorded a gain of $63 million from the settlement of litigation with Metaswitch in2019 and a gain of $8 million from the reduction of deferred purchase consideration in connection with the EdgewaterAcquisition. These gains were the primary components of our other income (expense), net, in 2019 and were partially offsetprimarily by expense related to foreign currency translation. Our other expense, net, in 2018 was $4 million, and wasprimarily comprised of expense related to foreign currency translation.Income Taxes. We recorded income tax provisions of $7 million in 2019 and $3 million in 2018. The provision recordedin 2019 was primarily the result of foreign operations and valuation allowances established. The provision recorded in 2018was primarily the result of foreign operations.During 2019 and 2018, we performed an analysis to determine if, based on all available evidence, we considered it morelikely than not that some portion or all of the recorded deferred tax assets will not be realized in a future period. As a result ofour evaluations, we concluded that there was insufficient positive evidence to overcome the more objective negative evidencerelated to our cumulative losses and other factors. Accordingly, we maintained a valuation against our domestic deferred taxasset. A similar analysis and conclusion was made with regard to the valuation allowance on the deferred tax assets of ourforeign subsidiaries, mainly the Irish and Brazilian subsidiaries. In analyzing the deferred tax assets related to our Canadiansubsidiaries, we concluded that it was more likely than not that the Canadian federal credits would not be realized in a futureperiod.Off-Balance Sheet ArrangementsWe have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effecton our financial position, changes in financial position, revenue or expenses, results of operations, liquidity, capitalexpenditures or capital resources.58Liquidity and Capital ResourcesOur consolidated statements of cash flows are summarized as follows (in millions):Year ended December 31, 2019 compared to year ended December 31, 2018Year endedDecember 31,20192018ChangeNet loss$(130.1)$(76.8)$(53.3)Adjustments to reconcile net loss to cash flows provided by (used in) operatingactivities236.477.1159.3Changes in operating assets and liabilities(50.6)(9.9)(40.7)Net cash provided by (used in) operating activities$55.7$(9.6)$65.3Net cash used in investing activities$(3.5)$(35.4)$31.9Net cash (used in) provided by financing activities$(51.3)$31.8$(83.1)We had $45 million of cash at December 31, 2019. Our cash, cash equivalents and marketable securities totaled $51million at December 31, 2018. We had cash held by our non-U.S. subsidiaries aggregating $12 million at December 31, 2019and $11 million at December 31, 2018. If we elect to repatriate all of the funds held by our non-U.S. subsidiaries as ofDecember 31, 2019, we do not believe that the amounts of potential withholding taxes that would arise from the repatriationwould have a material effect on our liquidity.On December 21, 2017, we entered into a Senior Secured Credit Agreement (the “2017 Credit Facility”) with SiliconValley Bank ("SVB"), which refinanced the prior credit agreement with SVB that the Company had assumed in connectionwith the Merger. On June 24, 2018, we amended the 2017 Credit Facility to, among other things, permit the EdgewaterAcquisition and related transactions (the "2018 Credit Facility"). At December 31, 2018, we had an outstanding debt balanceof $55 million at an average interest rate of 5.96% and $3 million of outstanding letters of credit at an average interest rate of1.75% under the 2018 Credit Facility. We were in compliance with all covenants of the 2018 Credit Facility at December 31,2018.On April 29, 2019, we, as guarantor, and Ribbon Communications Operating Company, Inc., as borrower, entered into asyndicated, amended and restated credit facility (the "2019 Credit Facility") with SVB, as lead agent. The 2019 Credit Facilityprovides for a $50 million term loan facility that was advanced in full on April 29, 2019, and a $100 million revolving line ofcredit. The 2019 Credit Facility also includes procedures for additional financial institutions to become syndicate lenders, orfor any existing lender to increase its commitment under either the term loan facility or the revolving loan facility, subject to anaggregate increase of $75 million for all incremental commitments under the 2019 Credit Facility. The 2019 Credit Facility isscheduled to mature in 2024. At December 31, 2019, we had an outstanding term loan debt balance of $49 million and anoutstanding revolving line of credit balance of $8 million with a combined average interest rate of 3.30%, and $5 million ofoutstanding letters of credit at an interest rate of 1.50%.The indebtedness and other obligations under the 2019 Credit Facility are unconditionally guaranteed on a senior securedbasis by us and each of our other material U.S. domestic subsidiaries (collectively, the "Guarantors"). The 2019 Credit Facilityis secured by first-priority liens on substantially all of our assets.The 2019 Credit Facility requires periodic interest payments on outstanding borrowings under the facility until maturity.We may prepay all revolving loans under the 2019 Credit Facility at any time without premium or penalty (other thancustomary LIBOR breakage costs), subject to certain notice requirements.Revolving loans under the 2019 Credit Facility bear interest at our option at either the Eurodollar (LIBOR) rate plus amargin ranging from 1.50% to 3.00% per year or the base rate (the highest of the Federal Funds rate plus 0.50%, or the primerate announced from time to time in The Wall Street Journal) plus a margin ranging from 0.50% to 2.00% per year (suchmargins being referred to as the “Applicable Margin”). The Applicable Margin varies depending on our consolidated leverageratio (as defined in the 2019 Credit Facility). The base rate and the LIBOR rate are each subject to a zero percent floor.The 2019 Credit Facility requires compliance with certain financial covenants, including a minimum consolidated quickratio, minimum consolidated fixed cover charge coverage ratio and maximum consolidated leverage ratio, all of which aredefined in the 2019 Credit Facility and tested on a quarterly basis. We were in compliance with all covenants of the 2019Credit Facility at December 31, 2019.59In addition, the 2019 Credit Facility contains various covenants that, among other restrictions, limit our and oursubsidiaries’ ability to enter into certain types of transactions, including, but not limited to: incurring or assuming indebtedness;granting or assuming liens; making acquisitions or engaging in mergers; making dividend and certain other restricted payments;making investments; selling or otherwise transferring assets; engaging in transactions with affiliates; entering into sale andleaseback transactions; entering into burdensome agreements; changing the nature of our business; modifying ourorganizational documents; and amending or making prepayments on certain junior debt.The 2019 Credit Facility contains events of default that are customary for a secured credit facility. If an event of defaultrelating to bankruptcy or other insolvency events with respect to a borrower occurs, all obligations under the 2019 CreditFacility will immediately become due and payable. If any other event of default exists under the 2019 Credit Facility, thelenders may accelerate the maturity of the obligations outstanding under the 2019 Credit Facility and exercise other rights andremedies, including charging a default rate of interest equal to 2.00% per year above the rate that would otherwise beapplicable. In addition, if any event of default exists under the 2019 Credit Facility, the lenders may commence foreclosure orother actions against the collateral.If any default exists under the 2019 Credit Facility, or if the Borrower is unable to make any of the representations andwarranties as stated in the 2019 Credit Facility at the applicable time, the Borrower will be unable to borrow funds or haveletters of credit issued under the 2019 Credit Facility, which, depending on the circumstances prevailing at that time, could havea material adverse effect on the Borrower’s liquidity and working capital.We intend to fund the cash consideration relating to the proposed ECI Merger with proceeds received from a new creditfacility that we expect to enter into with Citizens Bank, N.A. and Santander Bank, N.A., as lead arrangers, in connection withthe closing of the ECI Merger. Such cash consideration is expected to be financed through cash on hand and committed debtfinancing consisting of a new $400 term loan facility and new $100 million revolving credit facility (together, the "2020 CreditFacility"), which is projected to be undrawn at close. The 2020 Credit Facility is expected to retire our 2019 Credit Facility.In connection with the Merger, on October 27, 2017, we issued a promissory note for $23 million to certain ofGENBAND's equity holders (the "Promissory Note"). The Promissory Note did not amortize and the principal thereon waspayable in full on the third anniversary of its execution. Interest on the promissory note was payable quarterly in arrears andaccrued at a rate of 7.5% per year for the first six months after issuance, and thereafter at a rate of 10% per year. At December31, 2018, the Promissory Note balance was $24 million, comprised of $22 million of principal plus $2 million of interestconverted to principal. On April 29, 2019, concurrently with the closing of the 2019 Credit Facility as discussed above, werepaid in full all outstanding amounts under the Promissory Note, totaling $25 million and comprised of $23 million ofprincipal plus $2 million of interest converted to principal. We did not incur any early termination penalties in connection withthis repayment.In the second quarter of 2019, our Board approved a stock repurchase program pursuant to which we may repurchase up to$75 million of the Company's common stock prior to April 18, 2021. Repurchases under the program may be made in the openmarket, in privately negotiated transactions or otherwise, with the amount and timing of repurchases depending on the marketconditions and corporate discretion. This program does not obligate us to acquire any particular amount of common stock andthe program may be extended, modified, suspended or discontinued at any time at the Board's discretion. During the yearended December 31, 2019, we repurchased and retired 1 million shares of our common stock for a total purchase price of $5million, including transaction fees.Our operating activities provided $56 million of cash in 2019 and used $10 million of cash in 2018.In 2019, our cash flow from operating activities was generated from $106 million from our 2019 results, net of non-cashitems comprising goodwill impairment, depreciation and amortization, stock-based compensation and other amounts, and $8million from increased efficiency of inventory, partially offset by cash used for higher other operating assets and accountsreceivable aggregating $21 million and lower liabilities of $37 million. The decrease in our liabilities was primarily related tolower accounts payable and accrued expenses and other long-term liabilities. The decrease in accounts payable relates to thetiming and amounts of purchases of both services and tangible goods and their related payment arrangements. The decrease inaccrued expenses and other long-term liabilities primarily relates to lower accruals for employee-related expenses.Cash used in operating activities in 2018 was primarily the result of lower accrued expenses and other long-term liabilitiesand accounts payable, coupled with higher accounts receivable and other operating assets. These were partially offset byhigher deferred revenue, lower inventory, and the net impact of non-cash items against our net loss. The decrease in accruedexpenses and other long-term liabilities is primarily related to lower accruals for taxes and professional fees. The decrease inaccounts payable relates to the timing and amounts of purchases of both services and tangible goods and their related payment60arrangements. The increase in accounts receivable primarily relates to the Edgewater Acquisition. Our net loss, adjusted fornon-cash items such as depreciation, amortization, stock-based compensation, deferred income taxes and other non-cash items,including foreign currency exchange losses, was virtually break-even.Our investing activities used $4 million and $35 million of cash in 2019 and 2018, respectively. In 2019, we used $11million to purchase property and equipment, partially offset by $7 million of maturities of marketable securities. In 2018, weused $46 million to pay the cash consideration for the Edgewater Acquisition and $8 million to purchase property andequipment, partially offset by $19 million of sales/maturities of marketable securities.Our financing activities used $51 million of cash in 2019 and provided $32 million of cash in 2018.In 2019, we repaid outstanding borrowings of $165 million under our credit facilities, comprised of $164 million forborrowings under the revolving line of credit and $1 million for borrowings under the term loan. We also repaid $25 million onthe note to certain of the former GENBAND equityholders and the deferred purchase consideration of $22 million to the sellingEdgewater shareholders. We spent $5 million to repurchase and retire shares of our common stock on the open market andused $1 million to pay withholding obligations related to the net share settlement of restricted stock awards upon vesting. Wealso spent $1 million for principal payments on our finance lease obligations and $1 million for debt issuance costs. Ourborrowings totaled $167 million, comprised of $117 million of borrowings under the revolving line of credit and $50 million ofterm loan debt under the 2019 Credit Facility. Cash proceeds from the sale of our common stock under our ESPP and fromoption exercises totaled approximately $1 million.Cash provided by financing activities in 2018 was primarily comprised of $35 million of net borrowings against our 2018Credit Facility, partially offset by $2 million used to pay withholding obligations related to the net share settlement of restrictedand performance-based stock grants upon vesting and $1 million in the aggregate used to make principal payments on ourfinance lease obligations and debt issuance costs related to our 2018 Credit Facility.Contractual ObligationsOur contractual obligations at December 31, 2019 consisted of the following (in millions):Payments due by periodTotalLess than1 year1-3 years3-5 yearsMore than5 yearsFinance lease obligations$3.4$1.6$1.8$—$—Operating lease obligations55.510.317.112.415.7Purchase obligations54.452.32.1——Restructuring severance obligations2.52.5———Debt obligations - principal *56.82.55.049.3—Debt obligations - interest6.31.62.91.8—Employee postretirement defined benefit plans10.00.10.10.39.5Uncertain tax positions **3.63.6———$192.5$74.5$29.0$63.8$25.2__________________________________*Debt obligations - principal represents the outstanding balance on our 2019 Credit Facility of $56.8 million at December31, 2019, comprised of $8.0 million outstanding under the revolving credit facility and $48.8 million outstanding termloan principal. We periodically make payments and borrow on the revolving credit facility, and accordingly, we haveincluded it in current liabilities in our consolidated balance sheet. However, we have reported the outstanding balancepayment due in the table above in the "3-5 years" column based solely on the expiration date of the 2019 Credit Facility.**This liability is not subject to fixed payment terms and the amount and timing of payments, if any, that we will makerelated to this liability are not known. See Note 20 to our consolidated financial statements appearing in this AnnualReport on Form 10-K for additional information.Based on our current expectations, we believe our current cash and available borrowings under the 2019 Credit Facility orthe 2020 Credit Facility, as applicable, will be sufficient to meet our anticipated cash needs for working capital, the pendingECI Merger and capital expenditures for at least twelve months. However, the rate at which we consume cash is dependent onthe cash needs of our future operations. We anticipate devoting substantial capital resources to continue our research anddevelopment efforts, to maintain our sales, support and marketing, to complete merger-related integration activities and for61other general corporate activities. However, it is difficult to predict future liquidity requirements with certainty, and our cashand available borrowings under the 2019 Credit Facility or the 2020 Credit Facility, as applicable, may not be sufficient to meetour future needs, which would require us to refinance our debt and/or obtain additional financing. We may not be able torefinance our debt or obtain additional financing on favorable terms or at all.62Recent Accounting PronouncementsEffective January 1, 2019, we adopted the Financial Accounting Standard Board's ("FASB") new standard on accountingfor leases, ASC 842. ASC 842 replaced existing lease accounting rules with a comprehensive lease measurement andrecognition standard and expanded disclosure requirements. ASC 842 requires lessees to recognize most leases on theirbalance sheets and eliminates the current GAAP requirement for an entity to use bright-line tests in determining leaseclassification. We elected to use the alternative transition method, which allows entities to initially apply ASC 842 at the adoption datewith no subsequent adjustments to prior period lease costs for comparability. We elected the package of practical expedientspermitted under the transition guidance, which provided that a company need not reassess whether expired or existing contractscontained a lease, the lease classification of expired or existing leases, and the amount of initial direct costs for existing leases.In connection with the adoption of ASC 842, we recorded additional lease assets of approximately $44 million andadditional lease liabilities of approximately $48 million as of January 1, 2019. The difference between the additional leaseassets and lease liabilities, net of the deferred tax impact, was due to the absorption of related balances into the right-of-useassets, such as deferred rent. The adoption of this standard had no impact on our consolidated statements of operations or ofcash flows.The FASB has issued the following accounting pronouncements, all of which became effective for the Company onJanuary 1, 2019 and none of which had a material impact on the Company's consolidated financial statements:In July 2018, the FASB issued ASU 2018-09, Codification Improvements (“ASU 2018-09”), which contains amendmentsto clarify, correct errors in or make minor improvements to the FASB codification. ASU 2018-09 makes improvements tomultiple topics, including but not limited to comprehensive income, debt, income taxes related to both stock-basedcompensation and business combinations, fair value measurement and defined contribution benefit plans.In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements toNonemployee Share-Based Payment Accounting, which expands the scope of Accounting Standards Codification ("ASC") 718,Compensation - Stock Compensation ("ASC 718"), to include all share-based payment arrangements related to the acquisitionof goods and services from both nonemployees and employees. As a result, most of the guidance in ASC 718 associated withemployee share-based payments, including most of its requirements related to classification and measurement, applies tononemployee share-based payment arrangements.In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220):Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02"), which amends ASC220, Income Statement - Reporting Comprehensive Income, to allow a reclassification from accumulated other comprehensiveincome to retained earnings for stranded tax effects resulting from the Tax Act and requires entities to provide certaindisclosures regarding stranded tax effects. We did not elect to reclassify the income tax effects of the Tax Act fromaccumulated other comprehensive income to accumulated deficit.In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other ThanInventory, which removes the prohibition in ASC 740, Income Taxes, against the immediate recognition of the current anddeferred income tax effects of intra-entity transfers of assets other than inventory.In addition, the FASB has issued the following accounting pronouncements, none of which we believe will have a materialimpact on our consolidated financial statements:In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a ServiceContract (“ASU 2018-15”), which provides guidance on implementation costs incurred in a cloud computing arrangement(“CCA”) that is a service contract. ASU 2018-15 amends ASC 350, Intangibles - Goodwill and Other (“ASC 350”) to includein its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply the guidance inASC 350-40 to determine which implementation costs should be capitalized in such a CCA. ASU 2018-15 was effective for usbeginning January 1, 2020.In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General(Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU2018-14”), which amends ASC 715, Compensation - Retirement Benefits, to add, remove and clarify disclosure requirementsrelated to defined benefit pension and other postretirement plans. ASU 2018-14 was effective for us beginning January 1,2020.In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changesto the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which changes the fair value measurementrequirements of ASC 820, Fair Value Measurement. ASU 2018-13 was effective for us beginning January 1, 2020 for bothinterim and annual reporting.In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of CreditLosses on Financial Instruments ("ASU 2016-13"), which adds an impairment model that is based on expected losses ratherthan incurred losses. Under ASU 2016-13, an entity recognizes as an allowance its estimate of expected credit losses, whichthe FASB believes will result in more timely recognition of such losses. In April and May 2019, the FASB issued ASU2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging,and Topic 825, Financial Instruments ("ASU 2019-04") and ASU 2019-05 Financial Instruments - Credit Losses (Topic 326):Targeted Transition Relief ("ASU 2019-05"), respectively. ASU 2019-04 provides transition relief for entities adopting ASU2016-13 and ASU 2019-05 clarifies certain aspects of the accounting for credit losses, hedging activities and financialinstruments in connection with the adoption of ASU 2016-13. ASU 2019-04 and ASU 2019-05 are effective with the adoptionof ASU 2016-13, which was effective for us beginning January 1, 2020 for both interim and annual reporting periods.63Item 7A. Quantitative and Qualitative Disclosures About Market RiskWe are exposed to a variety of market risks, including changes in interest rates affecting the return on our investments andforeign currency fluctuations.At December 31, 2019, we had outstanding debt totaling approximately $57 million. A hypothetical movement of plus orminus 100 basis points in the interest rate of our outstanding debt would have changed our interest expense by $0.8 million forthe year ended December 31, 2019.Based on a hypothetical 10% adverse movement in all foreign currency exchange rates, our revenue for the year endedDecember 31, 2019 would have been adversely affected by approximately $8 million and our net loss for the year endedDecember 31, 2019 would have been adversely affected by approximately $4 million, although the actual effects may differmaterially from this hypothetical analysis.Item 8. Financial Statements and Supplementary DataReport of Independent Registered Public Accounting Firm65Consolidated Balance Sheets as of December 31, 2019 and 201866Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 201767Consolidated Statements of Comprehensive Loss for the years ended December 31, 2019, 2018 and201768Consolidated Statements of Stockholders' Equity for the years ended December 31, 2019, 2018 and201769Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 201770Notes to Consolidated Financial Statements7264REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and the Board of Directors of Ribbon Communications Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Ribbon Communications Inc. and subsidiaries (the"Company") as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive loss,stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all materialrespects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cashflows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generallyaccepted in the United States of America.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)(PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established inInternal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission and our report dated February 28 2020, expressed an unqualified opinion on the Company's internal control overfinancial reporting. Change in Accounting PrincipleAs discussed in Note 2 to the financial statements, the Company adopted Accounting Standards Codification (ASC) Topic 606,“Revenue from Contracts with Customers,” using the modified retrospective adoption method on January 1, 2018 and adoptedASC Topic 842, “Leases,” using the alternative transition approach on January 1, 2019.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion onthe Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicablerules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due toerror or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures includedexamining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Deloitte & Touche LLPDallas, TexasFebruary 28, 2020We have served as the Company's auditor since 2005.65RIBBON COMMUNICATIONS INC.Consolidated Balance Sheets(in thousands, except share and per share data)December 31, 2019December 31, 2018AssetsCurrent assets:Cash and cash equivalents$44,643$43,694Marketable securities—7,284Accounts receivable, net192,706187,853Inventory14,80022,602Other current assets27,14617,002Total current assets279,295278,435Property and equipment, net28,97627,042Intangible assets, net213,366251,391Goodwill224,896383,655Deferred income taxes4,9599,152Operating lease right-of-use assets36,654—Other assets26,7627,484$814,908$957,159Liabilities and Stockholders' EquityCurrent liabilities:Current portion of long-term debt$2,500$—Revolving credit facility8,00055,000Accounts payable31,41245,304Accrued expenses and other56,70084,263Operating lease liabilities7,719—Deferred revenue100,406105,087Total current liabilities206,737289,654Long-term debt, net of current45,995—Long-term debt, related party—24,100Operating lease liabilities, net of current37,202—Deferred revenue, net of current20,48217,572Deferred income taxes4,6484,738Other long-term liabilities16,58930,797Total liabilities331,653366,861Commitments and contingencies (Note 23)Stockholders' equity:Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued and outstanding——Common stock, 240,000,000 shares authorized, $0.0001 par value, 110,471,995 shares issuedand outstanding at December 31, 2019; 106,815,636 shares issued and outstanding at December31, 20181111Additional paid-in capital1,747,7841,723,576Accumulated deficit(1,267,067)(1,136,992)Accumulated other comprehensive income2,5273,703Total stockholders' equity483,255590,298$814,908$957,159See notes to the consolidated financial statements.66RIBBON COMMUNICATIONS INC.Consolidated Statements of Operations(in thousands, except per share data)Year ended December 31,201920182017Revenue:Product$262,030$279,014$181,119Service301,081298,891148,823Total revenue563,111577,905329,942Cost of revenue:Product133,347142,18570,250Service112,680127,38858,196Total cost of revenue246,027269,573128,446Gross profit317,084308,332201,496Operating expenses:Research and development141,060145,462101,481Sales and marketing117,962128,27683,403General and administrative53,87066,03647,642Impairment of goodwill164,300——Acquisition- and integration-related12,95316,95114,763Restructuring and related16,39917,0159,436Total operating expenses506,544373,740256,725Loss from operations(189,460)(65,408)(55,229)Interest (expense) income, net(3,877)(4,230)263Other income (expense), net70,444(3,772)1,274Loss before income taxes(122,893)(73,410)(53,692)Income tax (provision) benefit(7,182)(3,400)18,440Net loss$(130,075)$(76,810)$(35,252)Loss per share:Basic$(1.19)$(0.74)$(0.60)Diluted$(1.19)$(0.74)$(0.60)Shares used to compute loss per share:Basic109,734103,91658,822Diluted109,734103,91658,822See notes to the consolidated financial statements.67RIBBON COMMUNICATIONS INC.Consolidated Statements of Comprehensive Loss(in thousands)Year ended December 31,201920182017Net loss$(130,075)$(76,810)$(35,252)Other comprehensive income (loss), net of tax:Foreign currency translation adjustments194220(1,940)Unrealized gain on available-for-sale marketable securities, net of reclassificationadjustments for realized amounts59045146Employee retirement benefits(1,960)369(578)Other comprehensive (loss) income, net of tax(1,176)634(2,372)Comprehensive loss, net of tax$(131,251)$(76,176)$(37,624)See notes to the consolidated financial statements.68RIBBON COMMUNICATIONS INC.Consolidated Statements of Stockholders' Equity(in thousands, except share data)Common stockSharesAmountAdditionalpaid-incapitalAccumulateddeficitAccumulatedothercomprehensiveincome (loss)Totalstockholders'equityBalances, January 1, 201749,041,881$49$1,250,744$(1,037,174)$5,503$219,122Issuance of common stock in connection with employee stockpurchase plan249,6211,2521,252Exercise of stock options105,688617617Vesting of restricted stock awards and units2,160,553—Vesting of performance-based stock awards and units145,357—Shares of restricted stock returned to the Company under netshare settlements to satisfy tax withholding obligations(807,952)(7,523)(7,523)Shares issued as consideration in connection with acquisition ofGENBAND50,857,7085413,977413,982Stock-based compensation expense25,65725,657Reclassification between Common stock and Additional paid-incapital to record change in par value of common stock(44)44—Other comprehensive loss(2,434)(2,434)Net loss(35,252)(35,252)Balances, December 31, 2017101,752,856101,684,768(1,072,426)3,069615,421Adoption of Accounting Standards Codification 606, Revenuefrom Contracts with Customers12,24412,244Exercise of stock options15,9357373Vesting of restricted stock awards and units1,278,062—Vesting of performance-based stock units57,768—Shares of restricted stock returned to the Company under netshare settlements to satisfy tax withholding obligations(524,516)(2,024)(2,024)Shares issued as consideration in connection with acquisition ofEdgewater Networks, Inc.4,235,531129,99930,000Assumption of equity awards in connection with acquisition ofEdgewater Networks, Inc.747747Stock-based compensation expense10,01310,013Other comprehensive income634634Net loss(76,810)(76,810)Balances, December 31, 2018106,815,636111,723,576(1,136,992)3,703590,298Issuance of common stock in connection with employee stockpurchase plan282,646863863Exercise of stock options127,334235235Vesting of restricted stock awards and units1,504,707—Vesting of performance-based stock units9,466—Shares of restricted stock returned to the Company under netshare settlements to satisfy tax withholding obligations(240,673)(1,193)(1,193)Shares issued as consideration in connection with the acquisitionof Anova Data, Inc.2,948,79315,18615,186Repurchase and retirement of common stock(975,914)(4,536)(4,536)Reclassification of liability to equity for bonuses converted tostock awards1,0521,052Stock-based compensation expense12,60112,601Other comprehensive loss(1,176)(1,176)Net loss(130,075)(130,075)Balances, December 31, 2019110,471,995$11$1,747,784$(1,267,067)$2,527$483,255See notes to the consolidated financial statements.69Year ended December 31,201920182017Cash flows from operating activities:Net loss$(130,075)$(76,810)$(35,252)Adjustments to reconcile net loss to cash flows provided by (used in) operatingactivities:Depreciation and amortization of property and equipment11,94911,2008,486Amortization of intangible assets49,22549,72317,112Stock-based compensation12,60111,07225,657Impairment of intangible assets and goodwill164,300—5,471Deferred income taxes5,299513(20,361)Reduction in deferred purchase consideration(8,124)——Foreign currency exchange losses (gains)1,0904,611(783)Other——(557)Changes in operating assets and liabilities:Accounts receivable(3,936)(13,017)(30,759)Inventory7,7769935,786Other operating assets(17,489)5,036269Accounts payable(16,282)(6,057)13,415Accrued expenses and other long-term liabilities(18,538)(13,422)(4,263)Deferred revenue(2,111)16,56323,859Net cash provided by (used in) operating activities55,685(9,595)8,080Cash flows from investing activities: Purchases of property and equipment (10,824)(7,907)(3,999) Business acquisitions, net of cash acquired—(46,389)(42,951) Purchases of marketable securities——(28,731) Sales/maturities of marketable securities7,29518,91996,112 Proceeds from the sale of intangible assets——576Net cash (used in) provided by investing activities(3,529)(35,377)21,007Cash flows from financing activities: Borrowings under revolving line of credit117,000197,50015,500 Principal payments on revolving line of credit(164,000)(162,500)(13,500) Proceeds from issuance of long-term debt50,000—— Principal payment of debt, related party(24,716)—— Principal payments of long-term debt(1,250)—— Payment of deferred purchase consideration(21,876)—— Principal payments of finance leases(913)(652)(99) Payment of debt issuance costs(891)(624)(731) Proceeds from the sale of common stock in connection with employee stockpurchase plan863—1,252 Proceeds from the exercise of stock options23573617 Payment of tax withholding obligations related to net share settlements ofrestricted stock awards(1,193)(2,024)(7,523) Repurchase of common stock(4,536)——Net cash (used in) provided by financing activities(51,277)31,773(4,484)RIBBON COMMUNICATIONS INC.Consolidated Statements of Cash Flows(in thousands)70See notes to the consolidated financial statements.Year ended December 31,201920182017Effect of exchange rate changes on cash and cash equivalents70(180)547Net increase (decrease) in cash and cash equivalents949(13,379)25,150Cash and cash equivalents, beginning of year43,69457,07331,923Cash and cash equivalents, end of year$44,643$43,694$57,073Supplemental disclosure of cash flow information:Interest paid$4,072$2,367$317Income taxes paid$4,665$5,505$2,290Income tax refunds received$1,757$537$274Supplemental disclosure of non-cash investing activities:Capital expenditures incurred, but not yet paid$2,566$1,127$1,043Property and equipment acquired under finance leases$1,442$2,178$—Business acquisition purchase consideration - common stock issued$15,186$30,000$413,982Business acquisition purchase consideration - deferred payments$1,700$30,000$—Business acquisition purchase consideration - assumed equity awards$—$747$—Business acquisition purchase consideration - note issued to selling equityholders$—$—$22,500Supplemental disclosure of non-cash financing activities:Total fair value of restricted stock awards, restricted stock units, performance-based stock awards and performance-based stock units on date vested$7,422$8,312$20,515RIBBON COMMUNICATIONS INC.Consolidated Statements of Cash Flows (continued)(in thousands)71RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements72(1) NATURE OF THE BUSINESSRibbon is a leading provider of next generation ("NextGen") software solutions to telecommunications, wireless andcable service providers and enterprises of all sizes across industry verticals. With over 1,000 customers around the globe,including some of the largest telecommunications service providers and enterprises in the world, Ribbon enables serviceproviders and enterprises to modernize their communications networks through software and provide secure RTC solutions totheir customers and employees. By securing and enabling reliable and scalable IP networks, Ribbon helps service providersand enterprises adopt the next generation of software-based virtualized and cloud communications technologies to drive new,incremental revenue, while protecting their existing revenue streams. Ribbon's software solutions provide a secure way for itscustomers to connect and leverage multivendor, multiprotocol communications systems and applications across their networksand the cloud, around the world and in a rapidly changing ecosystem of IP-enabled devices, such as smartphones and tablets.In addition, Ribbon's software solutions secure cloud-based delivery of UC solutions - both for service providers transformingto a cloud-based network and for enterprises using cloud-based UC. Ribbon sells its software solutions through both directsales and indirect channels globally, leveraging the assistance of resellers, and provides ongoing support to its customersthrough a global services team with experience in design, deployment and maintenance of some of the world's largest softwareIP networks.(2) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of PresentationThe consolidated financial statements have been prepared in United States dollars, in accordance with accountingprinciples generally accepted in the United States ("GAAP").On February 28, 2019 (the "Anova Acquisition Date"), the Company acquired the business and technology assets ofAnova Data, Inc. ("Anova"). The financial results of Anova are included in the Company's consolidated financial statementsfor the period subsequent to the Anova Acquisition Date.On August 3, 2018 (the "Edgewater Acquisition Date"), the Company completed the acquisition of EdgewaterNetworks, Inc. ("Edgewater" and such acquisition, the "Edgewater Acquisition"). The financial results of Edgewater areincluded in the Company's consolidated financial statements for the period subsequent to the Edgewater Acquisition Date.On October 27, 2017 (the "Merger Date"), Sonus Networks, Inc. ("Sonus") consummated an acquisition as specified inan Agreement and Plan of Merger (the “Merger Agreement”) with Solstice Sapphire Investments, Inc. ("NewCo") and certainof its wholly-owned subsidiaries, GENBAND Holdings Company, GENBAND Inc. and GENBAND II, Inc. (collectively,"GENBAND") pursuant to which, following a series of merger transactions (collectively, the "Merger"), Sonus andGENBAND each became a wholly-owned subsidiary of NewCo, with Sonus deemed the acquirer in the transaction foraccounting purposes. Subsequently, on November 28, 2017, the Company changed its name from "Sonus Networks, Inc." to"Ribbon Communications Inc."The consolidated financial statements of the Company represent the consolidated financial statements of Sonus, prior tothe Merger Date, and the consolidated financial statements of Ribbon, on and after the Merger Date. The financial results ofGENBAND are included in Ribbon's consolidated financial statements beginning on the Merger Date.Significant Accounting PoliciesPrinciples of ConsolidationThe accompanying consolidated financial statements include the accounts of Ribbon and its wholly-owned subsidiaries.All intercompany transactions and balances have been eliminated in consolidation.Use of Estimates and JudgmentsThe preparation of financial statements in conformity with GAAP requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significantestimates and judgments relied upon in preparing these consolidated financial statements include accounting for businesscombinations, revenue recognition for multiple element arrangements, inventory valuations, assumptions used to determinethe fair value of stock-based compensation, intangible assets and goodwill valuations, legal contingencies and recoverabilityof Ribbon's net deferred tax assets and the related valuation allowances. Ribbon regularly assesses these estimates andrecords changes in estimates in the period in which they become known. Ribbon bases its estimates on historical experienceand various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ fromthose estimates.ReclassificationsCertain reclassifications, net affecting previously reported net loss, have been made to the previously issued financialstatements to conform to the current period presentation.Business CombinationsThe Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date fair values.Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition datefair values of the assets acquired and the liabilities assumed and represents the expected future economic benefits arisingfrom other assets acquired in the business combination that are not individually identified and separately recognized. Whilethe Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately valueassets acquired and liabilities assumed at the acquisition date, its estimates are inherently uncertain and subject to refinement.As a result, during the measurement period, which may be up to one year from the acquisition date, the Company recordsadjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill to the extent that itidentifies adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or finaldetermination of the values of assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments arerecorded to the consolidated statements of operations.Revenue RecognitionEffective January 1, 2018, the Company adopted Accounting Standards Codification ("ASC") 606, Revenue fromContracts with Customers ("ASC 606" or the "New Revenue Standard") using the modified retrospective approach. As aresult, the Company changed its accounting policy for revenue recognition, which is described below and in Note 14.The Company derives revenue from two primary sources: products and services. Product revenue includes theCompany's appliances and software that function together to deliver the products' essential functionality. Software andappliances are also sold on a standalone basis. Services include customer support (software updates, upgrades and technicalsupport), consulting, design services, installation services and training. Generally, contracts with customers contain multipleperformance obligations, consisting of products and services. For these contracts, the Company accounts for individualperformance obligations separately if they are considered distinct.When an arrangement contains more than one performance obligation, the Company will allocate the transaction price toeach performance obligation on a relative standalone selling price basis. The Company utilizes the observable price of goodsand services when they are sold separately to similar customers in order to estimate standalone selling price.The Company's software licenses typically provide a perpetual right to use the Company's software. The Company alsosells term-based software licenses that expire and Software-as-a-Service ("SaaS")-based software which are referred to assubscription arrangements. The Company does not customize its software nor are installation services required, as thecustomer has a right to utilize internal resources or a third-party service company. The software and appliances are deliveredbefore related services are provided and are functional without professional services or customer support. The Company hasconcluded that its software licenses are functional intellectual property that are distinct, as the user can benefit from thesoftware on its own. The product revenue is typically recognized upon transfer of control or when the software is madeavailable for download, as this is the point that the user of the software can direct the use of, and obtain substantially all ofthe remaining benefits from, the functional intellectual property. The Company does not recognize software revenue relatedRIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)73to the renewal of subscription software licenses earlier than the beginning of the subscription period. Appliance products aregenerally sold with software to provide the customer solution.The Company offers warranties on its products. Certain of the Company's warranties are considered to be assurance-type in nature and do not cover anything beyond ensuring that the product is functioning as intended. Based on the guidancein ASC 606, assurance-type warranties do not represent separate performance obligations. The Company also sellsseparately-priced maintenance service contracts which qualify as service-type warranties and represent separate performanceobligations. The Company does not allow and has no history of accepting product returns.Services revenue includes revenue from customer support and other professional services. Customer support includessoftware updates on a when-and-if-available basis, telephone support, integrated web-based support and bug fixes or patches.The Company sells its customer support contracts at a percentage of list or net product price related to the support. Customersupport revenue is recognized ratably over the term of the customer support agreement, which is typically one year.The Company's professional services include consulting, technical support, resident engineer services, design servicesand installation services. Because control transfers over time, revenue is recognized based on progress toward completion ofthe performance obligation. The method to measure progress toward completion requires judgment and is based on thenature of the products or services to be provided. The Company generally uses the input method to measure progress for itscontracts because it believes such method best depicts the transfer of assets to the customer, which occurs as the Companyincurs costs for the contracts. Under the cost-to-cost measure of progress, the progress toward completion is measured basedon the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. When themeasure of progress is based upon expended labor, progress toward completion is measured as the ratio of labor timeexpended to date versus the total estimated labor time required to complete the performance obligation. Revenue is recordedproportionally as costs are incurred or as labor is expended. Costs to fulfill these obligations include internal labor as well assubcontractor costs.Customer training includes courses offered by the Company. The related revenue is typically recognized as the trainingservices are performed.Financial InstrumentsThe carrying amounts of Ribbon's financial instruments approximate their fair values and include cash equivalents,investments, accounts receivable, borrowings under a revolving credit facility, accounts payable and long-term debt.All investments in marketable securities are classified as available-for-sale and are reported at fair value, withunrealized gains and losses excluded from earnings and reported, net of tax, in Accumulated other comprehensive income(loss), which is a component of stockholders' equity. Unrealized losses that are determined to be other-than-temporary, basedon current and expected market conditions, are recognized in earnings. Declines in fair value determined to be credit-relatedare charged to earnings. The cost of marketable securities sold is determined by the specific identification method.Financial instruments with remaining maturities or that are due within one year from the balance sheet date areclassified as current. Financial instruments with maturities or that are payable more than one year from the balance sheet dateare classified as noncurrent.Cash and Cash EquivalentsCash equivalents are stated at fair value. Cash equivalents are liquid securities that have remaining maturities of threemonths or less at the date of purchase.Foreign Currency TranslationFor foreign subsidiaries where the functional currency is the local currency, assets and liabilities are translated into U.S.dollars at the current exchange rate on the balance sheet date. Revenue and expenses are translated at average rates ofexchange prevailing during each period. Translation adjustments for these subsidiaries are included in Accumulated othercomprehensive income.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)74For foreign subsidiaries where the functional currency is the U.S. dollar, monetary assets and liabilities are translatedinto U.S. dollars at the current exchange rate on the balance sheet date. Nonmonetary assets and liabilities are remeasuredinto U.S. dollars at historical exchange rates. Revenue and expense items are translated at average rates of exchangeprevailing during each period. Translation adjustments for these subsidiaries are included in Other income (expense), net.Realized and unrealized foreign currency exchange gains and losses arising from transactions denominated incurrencies other than the subsidiary's functional currency are reflected in earnings.Effective on the Merger Date, the Company began to record its foreign currency gains (losses) as a component of Otherincome (expense), net. The Company did not reclassify amounts previously recorded within General and administrativeexpenses as the amounts were not material to the consolidated results of the Company. The Company recognized net foreigncurrency losses of $1.1 million for the year ended December 31, 2019, $4.6 million for the year ended December 31, 2018and $0.7 million for the year ended December 31, 2017.InventoryInventory is recorded at the lower of cost or market value using the first-in, first-out convention. The Company reducesthe carrying value of inventory for those items that are potentially excess, obsolete or slow-moving based on changes incustomer demand, technology developments or other economic factors.Ribbon writes down evaluation equipment at the time of shipment to its customers, as it is probable that the inventoryvalue will not be realized.Deferred product costs represent deferred cost of revenue for product shipments to customers prior to satisfaction ofRibbon's revenue recognition criteria. The Company classifies inventory that is not expected to be consumed within one yearfrom the balance sheet date as noncurrent and includes such inventory as a component of Other assets.Property and EquipmentProperty and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairsare charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful livesof the related assets, which range from two to five years. Leasehold improvements are amortized over the lesser of the leaseterm or five years. When an asset is sold or retired, the cost and related accumulated depreciation or amortization areeliminated, and the resulting gain or loss, if any, is recognized in income (loss) from operations in the consolidated statementof operations. The Company reviews property and equipment for impairment in the same manner as intangible assetsdiscussed below.Software development costs associated with internal use software are incurred in three stages of development: thepreliminary project stage, the application development stage and the post-implementation stage. Costs incurred during thepreliminary project and post-implementation stages are expensed as incurred. Certain qualifying costs incurred during theapplication development stage are capitalized as property and equipment. Internal use software is amortized on a straight-line basis over its estimated useful life of three years, beginning when the software is ready for its intended use.Intangible Assets and GoodwillIntangible assets are primarily comprised of certain intangible assets arising from the Merger and the EdgewaterAcquisition. These intangible assets include a combination of in-process research and development, developed technology,customer relationships, trade names, and internal use software. Intangible assets are reviewed for impairment when events orchanges in circumstances indicate that their carrying amounts may not be recoverable based upon the estimated undiscountedcash flows. Recoverability of intangible assets with estimated lives and other long-lived assets is measured by a comparisonof the carrying amount of an asset or asset group to future net undiscounted cash flows expected to be generated by the assetor asset group. If these comparisons indicate that an asset is not recoverable, the Company will recognize an impairment lossfor the amount by which the carrying value of the asset or asset group exceeds the related estimated fair value. Estimated fairvalue is based on either discounted future operating cash flows or appraised values, depending on the nature of the asset. TheRIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)75Company amortizes its intangible assets over their respective useful lives, with the exception of in-process research anddevelopment, which has an indefinite life until the product is generally available, at which time such asset is typicallyreclassified to developed technology, and the Company begins to amortize this asset. See Note 9 for additional informationregarding the Company's intangible assets.Goodwill is recorded when the consideration for an acquisition exceeds the fair value of net tangible and identifiableintangible assets acquired. Goodwill is not amortized, but instead is tested for impairment at least annually, or morefrequently if indicators of potential impairment exist, by comparing the fair value of the Company's reporting unit to itscarrying value.The Company's annual testing for impairment of goodwill is completed as of November 30. The Company operates asa single operating segment with one reporting unit and consequently evaluates goodwill for impairment based on anevaluation of the fair value of the Company as a whole. Based on the results of the Company's 2019 annual impairment test,the Company determined that its carrying value exceeded its fair value. The Company performed a fair value analysis usingboth an Income and Market approach which encompasses a discounted cash flow analysis and a guideline public companyanalysis using selected multiples. The Company recorded an impairment charge in the fourth quarter of 2019 of $164.3million. The impairment charge is reported separately in the Company's consolidated statement of operations for the yearended December 31, 2019.The Company performed its assessments for each of the years ended December 31, 2018 and 2017 and determined ineach of those years that its fair value was in excess of its carrying value and accordingly, there was no impairment ofgoodwill. At certain times during the years ended December 31, 2019 and 2018, including at the Company's annual testingdate of November 30, 2018, the Company's market capitalization was below its book value. While the Company hadconcluded that its fair value exceeded its carrying value at that date, the Company regularly monitored for changes incircumstances, including changes to the Company's performance, that could result in impairment of goodwill.Stock-Based CompensationThe Company's stock-based compensation cost is measured at the grant date based on the fair value of the award and isrecognized as expense over the requisite service period, which generally represents the vesting period, and includes anestimate of the awards that will be forfeited.The Company uses the Black-Scholes valuation model for estimating the fair value on the date of grant of stockoptions. The fair value of stock option awards is affected by the Company's stock price as well as valuation assumptions,including the volatility of Ribbon's stock price, expected term of the option, risk-free interest rate and expected dividends.The Company may grant performance-based stock units ("PSUs") that include a market condition to certain of itsexecutives. The Company uses a Monte Carlo simulation approach to model future stock price movements based upon therisk-free rate of return, the volatility of each entity and the pair-wise covariance between each entity. These results are thenused to calculate the grant date fair values of the PSUs.Concentrations of Credit RiskThe financial instruments that potentially subject Ribbon to concentrations of credit risk are cash, cash equivalents,investments and accounts receivable. The Company's cash equivalents and investments were managed by one financialinstitution at December 31, 2018. Historically, the Company has not experienced significant losses due to such bankdepository concentration.Certain components and software licenses from third parties used in Ribbon's products are procured from singlesources of supply. The failure of a supplier, including a subcontractor, to deliver on schedule could delay or interruptRibbon's delivery of products and thereby materially adversely affect Ribbon's revenue and operating results.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)76Advertising CostsAdvertising costs are expensed as incurred and included as a component of Sales and marketing expense in theCompany's consolidated statements of operations. Advertising expenses were $0.5 million for the year ended December 31,2019, $0.5 million for the year ended December 31, 2018 and $0.3 million for the year ended December 31, 2017.Operating SegmentsThe Company operates in a single segment, as the chief operating decision maker makes decisions and assessesperformance at the company level. Operating segments are identified as components of an enterprise about which separatediscrete financial information is utilized for evaluation by the chief operating decision maker in making decisions regardingresource allocation and assessing performance. To date, the chief operating decision maker has made such decisions andassessed performance at the company level, as one segment. The Company's chief operating decision makers are its InterimCo-Presidents and Chief Executive Officers.Loss Contingencies and ReservesRibbon is subject to ongoing business risks arising in the ordinary course of business, including legal claims, that affectthe estimation process of the carrying value of assets, the recording of liabilities and the possibility of various losscontingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset hasbeen impaired and the amount of loss can be reasonably estimated. Ribbon regularly evaluates current information availableto determine whether such amounts should be adjusted and records changes in estimates in the period they become known.An allowance for doubtful accounts is estimated based on the Company's assessment of the collectability of specificcustomer accounts.Ribbon accrues for royalties for technology that it licenses from vendors based on established royalty rates and usage.Ribbon is periodically contacted by third parties who claim that Ribbon's products infringe on certain intellectual property ofa third party. Ribbon evaluates these claims and accrues amounts when it is probable that the obligation has been incurredand the amounts are reasonably estimable.Accounting for LeasesEffective January 1, 2019, the Company adopted the new standard on accounting for leases, ASC 842, Leases ("ASC842"). ASC 842 replaced existing lease accounting rules with a comprehensive lease measurement and recognition standardand expanded disclosure requirements (see Note 17). ASC 842 requires lessees to recognize most leases on their balancesheets and eliminates the current GAAP requirement for an entity to use bright-line tests in determining lease classification.The Company elected to use the alternative transition method, which allowed entities to initially apply ASC 842 at theadoption date with no subsequent adjustments to prior period lease costs for comparability. The Company elected thepackage of practical expedients permitted under the transition guidance, which provided that a company need not reassesswhether expired or existing contracts contained a lease, the lease classification of expired or existing leases, and the amountof initial direct costs for existing leases.In connection with the adoption of ASC 842, the Company recorded additional lease assets of $43.9 million andadditional lease liabilities of $47.8 million as of January 1, 2019. The difference between the additional lease assets and leaseliabilities, net of the deferred tax impact, was due to the absorption of related balances into the right-of-use assets, such asdeferred rent. The adoption of this standard had no impact on the Company's consolidated statements of operations or cashflows.Accounting for Income TaxesDeferred tax assets and liabilities are recognized for the expected future consequences of events that have beenreflected in the consolidated financial statements. Deferred tax assets and liabilities are determined based on the differencesbetween the financial reporting and tax basis of assets and liabilities and operating loss carryforwards, using tax ratesRIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)77expected to be in effect for the years in which the differences are expected to reverse. The Company records valuationallowances to reduce deferred income tax assets to the amount that is more likely than not to be realized.The Company has provided for income taxes on the undistributed earnings of its non-U.S. subsidiaries as of December31, 2019, with the exception of the Company's Irish subsidiary, as the Company does not plan to permanently reinvest theseamounts outside the United States. The repatriation of the undistributed earnings would result in withholding taxes imposedon the repatriation. Consequently, the Company has recorded a tax liability of $4.8 million, primarily consisting ofwithholding and distribution taxes, relating to undistributed earnings from these subsidiaries as of December 31, 2019. Hadthe earnings of the Irish subsidiary been determined to not be permanently reinvested outside the U.S., no additional deferredtax liability would be required due to no withholding taxes or income tax expense being imposed on such repatriation.The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If itis not more likely than not that a position will be sustained, no amount of the benefit attributable to the position is recognized.The tax benefit to be recognized of any tax position that meets the more likely than not recognition threshold is calculated asthe largest amount that is more than 50% likely of being realized upon resolution of the contingency. The Company accountsfor interest and penalties related to uncertain tax positions as part of its provision for income taxes.Defined Benefit PlansThe Company has defined benefit plans for some of its employees at various international locations. The Companyrecognizes retirement benefit assets or liabilities in the consolidated balance sheets reflecting the funded status of pension andother retirement benefit plans. Retirement benefit assets and liabilities are adjusted for the difference between the benefitobligations and the plan assets at fair value (measured at year-end), with the offset recorded directly to stockholders' equitythrough accumulated other comprehensive income (loss), net of tax. The amount recorded in stockholders' equity representsthe after-tax unamortized actuarial gains or losses, unamortized transition obligations and unamortized prior service costs.Recent Accounting PronouncementsThe Financial Accounting Standards Board ("FASB") has issued the following accounting pronouncements, all of whichbecame effective for the Company on January 1, 2019 and none of which had a material impact on the Company'sconsolidated financial statements:In July 2018, the FASB issued Accounting Standards Update ("ASU") 2018-09, Codification Improvements (“ASU2018-09”), which contains amendments to clarify, correct errors in or make minor improvements to the FASB codification.ASU 2018-09 makes improvements to multiple topics, including but not limited to comprehensive income, debt, incometaxes related to both stock-based compensation and business combinations, fair value measurement and defined contributionbenefit plans.In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements toNonemployee Share-Based Payment Accounting, which expands the scope of ASC 718, Compensation - Stock Compensation("ASC 718"), to include all share-based payment arrangements related to the acquisition of goods and services from bothnonemployees and employees. As a result, most of the guidance in ASC 718 associated with employee share-basedpayments, including most of its requirements related to classification and measurement, applies to nonemployee share-basedpayment arrangements.In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220):Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which amends ASC 220, IncomeStatement - Reporting Comprehensive Income, to allow a reclassification from accumulated other comprehensive income toretained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the "Tax Act") and requires entities toprovide certain disclosures regarding stranded tax effects. The Company did not elect to reclassify the income tax effects ofthe Tax Act from accumulated other comprehensive income to accumulated deficit.In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other ThanInventory, which removes the prohibition in ASC 740, Income Taxes, against the immediate recognition of the current anddeferred income tax effects of intra-entity transfers of assets other than inventory.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)78In addition, the FASB has issued the following accounting pronouncements, none of which the Company believes willhave a material impact on its consolidated financial statements:In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a ServiceContract (“ASU 2018-15”), which provides guidance on implementation costs incurred in a cloud computing arrangement(“CCA”) that is a service contract. ASU 2018-15 amends ASC 350, Intangibles - Goodwill and Other (“ASC 350”) toinclude in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply theguidance in ASC 350-40 to determine which implementation costs should be capitalized in such a CCA. ASU 2018-15 waseffective for the Company beginning January 1, 2020.In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General(Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU2018-14”), which amends ASC 715, Compensation - Retirement Benefits, to add, remove and clarify disclosure requirementsrelated to defined benefit pension and other postretirement plans. ASU 2018-14 was effective for the Company beginningJanuary 1, 2020.In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changesto the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which changes the fair value measurementrequirements of ASC 820, Fair Value Measurement. ASU 2018-13 was effective for the Company beginning January 1, 2020for both interim and annual reporting.In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of CreditLosses on Financial Instruments ("ASU 2016-13"), which adds an impairment model that is based on expected losses ratherthan incurred losses. Under ASU 2016-13, an entity recognizes as an allowance its estimate of expected credit losses, whichthe FASB believes will result in more timely recognition of such losses. In April and May 2019, the FASB issued ASU2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives andHedging, and Topic 825, Financial Instruments ("ASU 2019-04") and ASU 2019-05 Financial Instruments - Credit Losses(Topic 326): Targeted Transition Relief ("ASU 2019-05"), respectively. ASU 2019-04 provides transition relief for entitiesadopting ASU 2016-13 and ASU 2019-05 clarifies certain aspects of the accounting for credit losses, hedging activities andfinancial instruments in connection with the adoption of ASU 2016-13. ASU 2019-04 and ASU 2019-05 are effective withthe adoption of ASU 2016-13, which was effective for the Company beginning January 1, 2020 for both interim and annualreporting periods.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)79(3) BUSINESS ACQUISITIONSPending MergerOn November 14, 2019, Ribbon entered into an Agreement and Plan of Merger (the "ECI Merger Agreement") withEclipse Communications Ltd., an indirect wholly-owned subsidiary of the Company ("Merger Sub"), Ribbon CommunicationsIsrael Ltd., ECI Telecom Group Ltd. ("ECI") and ECI Holding (Hungary) kft, pursuant to which Merger Sub will merge withand into ECI, with ECI surviving such merger as a wholly-owned subsidiary of Ribbon (the "ECI Merger").The Board unanimously approved the ECI Merger Agreement and the transactions contemplated thereby. Ribbon'sstockholders approved the issuance of 32.5 million shares of the Company's common stock (the "ECI Stock Consideration") aspartial consideration in the ECI Merger.As provided in the ECI Merger Agreement, at the time of the closing of the ECI Merger (the "Effective Time"), all equitysecurities of ECI issued and outstanding immediately prior to the Effective Time will be converted into the right to receiveconsideration consisting of $324 million in cash (the "ECI Cash Consideration") and ECI Stock Consideration, less the amountof indebtedness of ECI as of the Effective Time. ECI equityholders will also receive approximately $31 million from ECI's saleof real estate assets.Anova Data, Inc.On the Anova Acquisition Date, the Company acquired the business and technology assets of Anova, a private companyheadquartered in Westford, Massachusetts that provides advanced analytics solutions (the "Anova Acquisition"). The AnovaAcquisition was completed in accordance with the terms and conditions of an asset purchase agreement, dated as of January 31,2019 (the "Anova Asset Purchase Agreement"). The Company believes that the Anova Acquisition is reinforcing and extendingRibbon's strategy to expand into network optimization, security and data monetization via big data analytics and machinelearning.As consideration for the Anova Acquisition, Ribbon issued 2.9 million shares of Ribbon common stock with a fair valueof $15.2 million to Anova's sellers and equity holders on the Anova Acquisition Date and held back an additional 0.3 millionshares with a fair value of $1.7 million, some or all of which could be issued subject to post-closing adjustments (the "AnovaDeferred Consideration"). The Anova Deferred Consideration is included as a component of Accrued expenses and othercurrent liabilities in the Company's consolidated balance sheet at December 31, 2019.The Anova Acquisition has been accounted for as a business combination and the financial results of Anova have beenincluded in the Company's consolidated financial statements for the period subsequent to the Anova Acquisition Date. Theresults for the year ended December 31, 2019 are not significant to the Company's consolidated financial statements. TheCompany has not provided pro forma financial information, as the historical amounts are not significant to the Company'sconsolidated financial statements.As of December 31, 2019, the valuation of acquired assets, identifiable intangible assets and certain assumed liabilitieswas final. The finalization of this valuation resulted in a refinement of the allocation of purchase price between the identifiableintangible assets arising from the transaction, resulting in a $2.0 million reduction to the customer relationships intangible assetand an increase of $2.0 million to the developed technology intangible asset. The purchase consideration aggregating $16.9million has been allocated to $11.2 million of identifiable intangible assets, comprised of $5.2 million of customer relationshipsand $6.0 million of developed technology, and working capital items aggregating $0.2 million of net assets acquired. Theremaining unallocated amount of $5.5 million has been recorded as goodwill.The valuation of the acquired intangible assets is inherently subjective and relies on significant unobservable inputs. TheCompany used an income approach to value the acquired intangible assets relating to developed technology and customerrelationships. The valuation for each of these intangible assets was based on estimated projections of expected cash flows to begenerated by the assets, discounted to the present value at discount rates commensurate with perceived risk. The valuationassumptions take into consideration the Company's estimates of customer attrition, technology obsolescence and revenuegrowth projections. The Company is amortizing the identifiable intangible assets in relation to the expected cash flows fromthe individual intangible assets over their respective useful lives, which have a weighted average life of 6.25 years (see Note 9).The excess of purchase consideration over net tangible and identifiable intangible assets acquired was recorded asgoodwill. The goodwill is deductible for tax purposes.Edgewater Networks, Inc.On the Edgewater Acquisition Date, the Company completed its acquisition of Edgewater, a private companyheadquartered in San Jose, California. The Edgewater Acquisition was completed in accordance with the terms and conditionsof the Agreement and Plan of Merger, dated as of June 24, 2018, by and among Ribbon, Merger Sub, Edgewater andShareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the initial holderrepresentative (the "Edgewater Merger Agreement”).Edgewater is a market leader in Network Edge Orchestration for the small and medium enterprise and UC market. TheCompany believes that the acquisition of Edgewater will allow it to offer its global customer base a complete core-to-edgeproduct portfolio, end-to-end service assurance and analytics solutions, and a fully integrated software-defined SD-WANservice.As consideration for the Edgewater Acquisition, Ribbon paid, in the aggregate, $46.4 million of cash, net of cashacquired, and issued 4.2 million shares of Ribbon common stock to Edgewater's selling shareholders and holders of vested in-RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)80the-money options and warrants to acquire common stock of Edgewater (the "Edgewater Selling Stakeholders") on theEdgewater Acquisition Date. Pursuant to the Edgewater Merger Agreement and subject to the terms and conditions containedtherein, Ribbon agreed to pay the Edgewater Selling Stakeholders an additional $30 million of cash, $15 million of which wasto be paid 6 months from the closing date and the other $15 million of which was to be paid as early as 9 months from theclosing date and no later than 18 months from the closing date (the exact timing of which would depend on the amount ofrevenue generated from the sales of Edgewater products in 2018) ("Edgewater Deferred Consideration"). The current portionof this deferred purchase consideration was included as a component of Accrued expenses and other, and the noncurrent portionwas included as a component of Other long-term liabilities in the Company's consolidated balance sheet as of December 31,2018.On February 15, 2019, the Company and the Edgewater Selling Stakeholders agreed to reduce the amount of EdgewaterDeferred Consideration from $30 million to $21.9 million and agreed that all such deferred consideration would be payable onMarch 8, 2019. The Company paid the Edgewater Selling Stakeholders $21.9 million on March 8, 2019 and recorded thereduction to the Edgewater Deferred Consideration of $8.1 million in Other income (expense), net, in the Company'sconsolidated statement of operations and as a non-cash adjustment to reconcile net income to cash flows provided by operatingactivities in the Company's consolidated statement of cash flows for the year ended December 31, 2019.The Edgewater Acquisition has been accounted for as a business combination and the financial results of Edgewater havebeen included in the Company's consolidated financial statements for the period subsequent to its acquisition.As of December 31, 2019, the valuation of acquired assets, identifiable intangible assets and certain assumed liabilities wasfinal, as the Company finalized the valuation of the assets acquired and liabilities assumed in the second quarter of 2019. Asummary of the allocation of the purchase consideration for Edgewater is as follows (in thousands):Fair value of consideration transferred: Cash consideration: Cash paid to Edgewater Selling Stakeholders$51,162 Less cash acquired(4,773) Net cash consideration46,389 Unpaid cash consideration30,000 Fair value of Ribbon stock issued30,000 Fair value of equity awards assumed (see Note 16)747 Fair value of total consideration$107,136Fair value of assets acquired and liabilities assumed: Current assets, net of cash acquired$16,098 Property and equipment245 Intangible assets: Developed technology29,500 Customer relationships26,100 Trade names1,100 Goodwill48,053 Other noncurrent assets103 Deferred revenue(2,749) Other current liabilities(9,926) Deferred revenue, net of current(669) Other long-term liabilities(719)$107,136The valuation of the acquired intangible assets is inherently subjective and relies on significant unobservable inputs. TheCompany used an income approach to value the acquired developed technology, customer relationships and trade nameintangible assets. The valuation for each of these intangible assets was based on estimated projections of expected cash flowsto be generated by the assets, discounted to the present value at discount rates commensurate with perceived risk. The valuationRIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)81assumptions take into consideration the Company's estimates of customer attrition, technology obsolescence and revenuegrowth projections. The Company is amortizing the identifiable intangible assets arising from the Edgewater Acquisition inrelation to the expected cash flows from the individual intangible assets over their respective useful lives, which have aweighted average life of 8.38 years(see Note 9). Goodwill resulting from the transaction is primarily due to expected synergiesbetween the combined companies and is not deductible for tax purposes.The Company's revenue for the year ended December 31, 2018 included $21.5 million of revenue and $4.3 million of netloss attributable to Edgewater since the Edgewater Acquisition Date. The Company has not provided pro forma financialinformation, as the historical amounts are not significant to the Company's consolidated financial statements.GENBAND MergerOn October 27, 2017, Sonus consummated an acquisition as specified in the Merger Agreement with NewCo andGENBAND such that, following the Merger, each of Sonus and GENBAND became a wholly-owned subsidiary of NewCo,with Sonus deemed the acquirer in the transaction for accounting purposes. On November 28, 2017, the Company changed itsname from "Sonus Networks, Inc." to "Ribbon Communications Inc."Prior to the Merger, GENBAND was a Cayman Islands exempted company limited by shares that was formed on April 7,2010. Through its wholly owned operating subsidiaries, GENBAND created rapid communications and applications for serviceproviders, enterprises, independent software vendors, system integrators and developers globally. A majority of GENBAND'sshares were held by JPMorgan Chase & Co. and managed by One Equity Partners ("OEP"). GENBAND shares were not listedon an exchange or quoted on any automated services, and there was no established trading market for GENBAND shares.The Company believes that Sonus' and GENBAND's complementary products, solutions and strategies have positionedthe combined company to deliver comprehensive solutions to service providers and enterprises migrating to a virtualized all-IPenvironment in an expanded customer and global footprint.Pursuant to the Merger Agreement, NewCo issued 50.9 million shares of Sonus common stock to the GENBAND equityholders, with the number of shares issued in the aggregate to the GENBAND equity holders equal to the number of shares ofSonus common stock outstanding immediately prior to the closing date of the Merger, such that former stockholders of Sonuswould own approximately 50%, and former shareholders of GENBAND would own approximately 50%, of the shares ofNewCo common stock issued and outstanding immediately following the consummation of the Merger.In addition, NewCo repaid GENBAND’s long-term debt, including both principal and unpaid interest, to a related party ofGENBAND totaling $48.0 million and repaid GENBAND’s management fees due to an affiliate of OEP totaling $10.3 million.NewCo also issued a promissory note for $22.5 million to certain GENBAND equity holders (the "Promissory Note").NewCo assumed the liability under GENBAND's Senior Secured Credit Agreement (the "GENBAND Credit Agreement")with Silicon Valley Bank ("SVB"), which had outstanding borrowings and letters of credit totaling $17.9 million and $2.9million, respectively, at October 27, 2017. At October 27, 2017, the outstanding borrowings had an average interest rate of4.67%.The Merger has been accounted for as a business combination and the financial results of GENBAND have been includedin the Company's consolidated financial statements for the period subsequent to its acquisition.As of December 31, 2018, the valuation of acquired assets, identifiable intangible assets and certain assumed liabilities wasfinal, as the Company finalized the valuation of the assets acquired and liabilities assumed in the third quarter of 2018. Asummary of the final allocation of the purchase consideration for GENBAND is as follows (in thousands):RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)82Fair value of consideration transferred: Cash consideration: Repayment of GENBAND long-term debt and accrued interest, related party$47,973 Payment of GENBAND management fees due to majority shareholder10,302 Less cash acquired(15,324) Net cash consideration42,951 Fair value of Sonus stock issued413,982 Promissory note issued to GENBAND equity holders22,500 Fair value of total consideration$479,433Fair value of assets acquired and liabilities assumed: Current assets, net of cash acquired$99,126 Property and equipment16,770 Intangible assets: In-process research and development5,600 Developed technology129,000 Customer relationships101,300 Trade names900 Goodwill285,825 Other noncurrent assets6,732 Revolving credit facility(17,930) Deferred revenue(32,390) Other current liabilities(80,023) Deferred revenue, net of current(6,804) Other long-term liabilities(28,673)$479,433The valuation of acquired intangible assets is inherently subjective and relies on significant unobservable inputs. TheCompany used an income approach to value the acquired developed technology, customer relationships and trade nameintangible assets. The valuation for each of these intangible assets was based on estimated projections of expected cash flowsto be generated by the assets, discounted to the present value at discount rates commensurate with perceived risk. The valuationassumptions took into consideration the Company's estimates of customer attrition, technology obsolescence and revenuegrowth projections. The Company will reclassify the in-process research and development intangible asset to a developedtechnology intangible asset in the period that the related product becomes generally available and will begin to recordamortization expense for the developed technology intangible asset at that time. The Company is amortizing the identifiableintangible assets arising from the Merger in relation to the expected cash flows from the individual intangible assets over theirrespective useful lives, which have a weighted average life of 8.3 years (see Note 9). Goodwill resulting from the transaction isprimarily due to expected synergies between the combined companies and is not deductible for tax purposes.Pro Forma ResultsThe following unaudited pro forma information presents the condensed combined results of operations of Sonus andGENBAND for the year ended December 31, 2017 as if the Merger had been completed on January 1, 2016, with adjustmentsto give effect to pro forma events that are directly attributable to the Merger. These pro forma adjustments include a reductionof historical GENBAND revenue for the fair value adjustment related to acquired deferred revenue, an increase in amortizationexpense for the acquired identifiable intangible assets, a decrease in historical GENBAND interest expense reflecting theextinguishment of certain of GENBAND's debt as a result of the Merger, net of the interest expense recorded in connectionwith the promissory note issued to certain GENBAND equity holders as part of the purchase consideration and the eliminationof revenue and costs related to sales transactions between Sonus and GENBAND. Pro forma adjustments also include theelimination of acquisition- and integration-related costs directly attributable to the acquisition and incremental stock-basedcompensation expense directly attributable to the acquisition from the year ended December 31, 2017.The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings that may result from theconsolidation of the operations of Sonus and GENBAND. Accordingly, these unaudited pro forma results are presented forRIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)83illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combinedcompany that would have been achieved had the Merger occurred at the beginning of the periods presented, nor are theyintended to represent or be indicative of future results of operations (in thousands, except per share amounts):Year endedDecember 31,2017(unaudited)Revenue$615,286Net loss$(69,741)Loss per share$(0.69)Acquisition- and Integration-Related ExpensesAcquisition- and integration-related expenses include those expenses related to acquisitions that would otherwise not havebeen incurred by the Company, including professional and services fees, such as legal, audit, consulting, paying agent and otherfees, and expenses related to cash payments to certain former executives of the acquired businesses in connection with theiremployment agreements. Integration-related expenses represent incremental costs related to combining the Company and itsbusiness acquisitions, such as third-party consulting and other third-party services related to merging the previously separatecompanies' systems and processes.The acquisition-related professional and services fees recorded in the year ended December 31, 2019 primarily related tothe pending ECI Merger and, to a lesser extent, to the Anova Acquisition and other acquisition-related activities. Theacquisition-related professional and services fees recorded in the year ended December 31, 2018 primarily related to theMerger, with nominal amounts related to the acquisition of Edgewater and other acquisition-related activities. The amountsrecorded in the year ended December 31, 2017 primarily related to the Merger, with a nominal amount related to the acquisitionof Taqua.The components of acquisition- and integration-related costs incurred in the years ended December 31, 2019, 2018 and2017 were as follows (in thousands):Year ended December 31,201920182017Professional and services fees (acquisition-related)$8,657$7,627$11,916Management bonuses (acquisition-related)—1,972931Integration-related expenses4,2967,3521,916$12,953$16,951$14,763RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)84(4) EARNINGS (LOSS) PER SHAREBasic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of sharesoutstanding during the period. For periods in which the Company reports net income, diluted net income per share isdetermined by using the weighted average number of common and dilutive common equivalent shares outstanding during theperiod unless the effect is antidilutive.The calculations of shares used to compute basic and diluted loss per share are as follows (in thousands):Year ended December 31,201920182017Weighted average shares outstanding—basic109,734103,91658,822Potential dilutive common shares———Weighted average shares outstanding—diluted109,734103,91658,822Options to purchase the Company's common stock, unvested shares of restricted stock and unvested shares underlyingperformance-based stock grants aggregating 4.6 million shares for the year ended December 31, 2019 have not been included inthe computation of diluted loss per share because their effect would have been antidilutive. Options to purchase the Company'scommon stock, unvested shares of restricted stock, unvested shares underlying performance-based stock grants and shares inconnection with future purchases under the Company's Amended and Restated 2000 Employee Stock Purchase Plan, asamended (the "ESPP"), aggregating 3.1 million shares for the year ended December 31, 2018 have not been included in thecomputation of diluted loss per share because their effect would have been antidilutive. Options to purchase the Company'scommon stock, unvested shares of restricted stock and unvested shares underlying performance-based stock grants aggregating2.5 million shares for the year ended December 31, 2017 have not been included in the computation of diluted loss per sharebecause their effect would have been antidilutive.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)85(5) CASH EQUIVALENTS AND INVESTMENTSThe Company invests in debt instruments, primarily U.S. government-backed, municipal and corporate obligations,which management believes to be high quality (investment grade) credit instruments.The Company did not hold any marketable securities at December 31, 2019, as its remaining available-for-salemarketable securities matured during the second quarter of 2019. In addition, the Company did not hold any cash equivalentsat December 31, 2019. As a result of the Company no longer holding any marketable securities or investments at December 31,2019, the remaining tax effect on the unrealized gain on available-for-sale marketable securities was realized in the secondquarter of 2019 and is included in the income tax provision in the Company's consolidated statement of operations for the yearended December 31, 2019 as a reclassification from Unrealized gain on available-for-sale marketable securities in theCompany's consolidated statement of comprehensive loss. The Company had not sold any of its marketable securities in 2019prior to their full maturity.During the year ended December 31, 2018, the Company sold $12.5 million of its available-for-sale securities, which itused for acquisition-related payments in connection with the Edgewater Acquisition and to support integration-related andrestructuring activities in connection with the Merger. During the year ended December 31, 2017, the Company sold $51.6million of its available-for-sale securities, primarily to provide the cash consideration and other acquisition-related payments inconnection with the Merger.During the years ended December 31, 2019 and 2018, the Company recognized nominal gross gains and losses on thesales/maturities of its marketable securities.On a quarterly basis, the Company reviews its investments, if any, to determine if there have been any events that couldcreate a credit impairment.The amortized cost, gross unrealized gains and losses and fair value of the Company's cash equivalents and marketablesecurities at December 31, 2018 were comprised of the following (in thousands):December 31, 2018AmortizedcostUnrealizedgainsUnrealizedlossesFairvalueCash equivalents$310$—$—$310Marketable securitiesU.S. government agency notes$3,998$—$(9)$3,989Corporate debt securities3,301—(6)3,295$7,299$—$(15)$7,284Fair Value HierarchyFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transactionbetween market participants. As such, fair value is a market-based measurement that should be determined based onassumptions that market participants would use in pricing an asset or a liability. The three-tier fair value hierarchy is based onthe level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument'scategorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair valuemeasurement. The fair value hierarchy is as follows:Level 1. Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assetsor liabilities.Level 2. Level 2 applies to assets or liabilities for which there are inputs that are directly or indirectly observable inthe marketplace, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets orliabilities in markets with insufficient volume or infrequent transactions (less active markets).Level 3. Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodologythat are significant to the measurement of the fair value of the assets or liabilities.The following table shows the fair value of the Company's financial assets at December 31, 2018. These financial assetsare comprised of the Company's available-for-sale debt securities and reported under the captions Cash and cash equivalentsand Marketable securities in the consolidated balance sheets (in thousands):Fair value measurements atDecember 31, 2018 using:Total carryingvalue atDecember 31,2018Quoted pricesin activemarkets(Level 1)Significantotherobservableinputs(Level 2)Significantunobservableinputs(Level 3)Cash equivalents$310$310$—$—Marketable securitiesU.S. government agency notes$3,989$—$3,989$—Corporate debt securities3,295—3,295—$7,284$—$7,284$—The Company's marketable securities were valued with the assistance of valuations provided by third-party pricingservices, as derived from such services' pricing models. Inputs to the models may include, but are not limited to, reportedtrades, executable bid and asked prices, broker/dealer quotations, prices or yields of securities with similar characteristics,benchmark curves or information pertaining to the issuer, as well as industry and economic events. The pricing services mayuse a matrix approach, which considers information regarding securities with similar characteristics to determine the valuationfor a security. The Company is ultimately responsible for the consolidated financial statements and underlying estimates.Accordingly, the Company assesses the reasonableness of the valuations provided by the third-party pricing services byreviewing actual trade data, broker/dealer quotes and other similar data, which are obtained from quoted market prices or othersources.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)86(6) ACCOUNTS RECEIVABLE, NETAccounts receivable, net, consisted of the following (in thousands):December 31,20192018Accounts receivable$193,619$188,522Allowance for doubtful accounts(913)(669) Accounts receivable, net$192,706$187,853The Company's allowance for doubtful accounts activity was as follows (in thousands):Year ended December 31,Balance atbeginningof yearChargesto expenseCharges(credits) tootheraccounts(deferredrevenue)Write-offsBalance atend ofyear2019$669$738$68$(562)$9132018$73$351$620$(375)$6692017$10$154$(56)$(35)$73RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)87(7) INVENTORYInventory consisted of the following (in thousands):December 31,20192018On-hand final assemblies and finished goods inventories$13,283$19,879Deferred cost of goods sold2,4413,79815,72423,677Less noncurrent portion (included in Other assets)(924)(1,075)Current portion$14,800$22,602(8) PROPERTY AND EQUIPMENTProperty and equipment consisted of the following (in thousands):December 31,Useful Life20192018Equipment2-5 years$82,737$76,423Software2-5 years27,93924,707Furniture and fixtures3-5 years1,2831,490Leasehold improvementsShorter of the life of the lease orestimated useful life (1-5 years)23,97521,220135,934123,840Less accumulated depreciation and amortization(106,958)(96,798)Property and equipment, net$28,976$27,042The Company recorded depreciation and amortization expense related to property and equipment of $11.9 million for theyear ended December 31, 2019, $11.2 million for the year ended December 31, 2018 and $8.5 million for the year endedDecember 31, 2017. During each of the years ended December 31, 2019, 2018 and 2017, the Company disposed of certainproperty and equipment that was fully depreciated at the time of disposal, which resulted in reductions in both Cost andAccumulated depreciation.Property and equipment under finance leases included in the amounts above were as follows (in thousands):December 31,20192018Cost$4,401$2,979Less accumulated depreciation(1,981)(875)Property and equipment under finance leases, net$2,420$2,104The net book values of the Company's property and equipment by geographic area were as follows (in thousands):December 31,20192018United States$17,584$17,862Canada4,7684,076Asia/Pacific5,1463,841Europe1,2241,100Other254163$28,976$27,042RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)88(9) INTANGIBLE ASSETS AND GOODWILLThe Company's intangible assets at December 31, 2019 and 2018 consisted of the following (in thousands):December 31, 2019Weightedaverageamortizationperiod(years)CostAccumulatedamortizationNetcarryingvalueIn-process research and development*$5,600$—$5,600Developed technology6.79188,880100,76088,120Customer relationships9.46152,14033,350118,790Trade names5.202,0001,144856Internal use software3.00730730—7.82$349,350$135,984$213,366December 31, 2018Weightedaverageamortizationperiod(years)CostAccumulatedamortizationNetcarryingvalueIn-process research and development*$5,600$—$5,600Developed technology6.91182,88063,187119,693Customer relationships9.44146,94022,218124,722Trade names5.202,0006241,376Internal use software3.00730730—7.88$338,150$86,759$251,391* An in-process research and development intangible asset has an indefinite life until the product is generally available, atwhich time such asset is typically reclassified to developed technology.Amortization expense for intangible assets for the years ended December 31, 2019, 2018 and 2017 was as follows (inthousands):Year ended December 31,Statement of operations classification201920182017Developed technology$37,573$38,976$18,358Cost of revenue - productCustomer relationships11,13210,2034,145Sales and marketingTrade names52054480Sales and marketing$49,225$49,723$22,583In connection with the preparation of its financial statements for the fourth quarter of 2017, the Company reviewed itsintangible assets and other long-lived assets for impairment indicators. The Company determined that a triggering event hadoccurred relative to one of its developed technology intangible assets that had been previously acquired. During 2017, theCompany discontinued its ongoing development of this technology and determined that there were no alternative uses of thetechnology within either its existing or future product lines. As a result, the Company recorded an impairment charge of $5.5million to write down the carrying value of the asset to zero. This expense is included as a component of Cost of revenue -product in the table above and in the Company's consolidated statement of operations for the year ended December 31, 2017.Estimated future amortization expense for the Company's intangible assets at December 31, 2019 was as follows (inthousands):Years ending December 31,2020$48,952202143,495202235,092202327,271202420,201Thereafter38,355$213,366Goodwill is recorded when the consideration for an acquisition exceeds the fair value of net tangible and identifiableintangible assets acquired. The Company's annual testing for impairment of goodwill is completed as of November 30. TheCompany operates as a single operating segment with one reporting unit and consequently evaluates goodwill for impairmentbased on an evaluation of the fair value of the Company as a whole. Based on the results of the Company's 2019 annualimpairment test, the Company determined that its carrying value exceeded its fair value and accordingly, the Company recordedan impairment charge of $164.3 million.The changes in the carrying value of the Company's goodwill in the years ended December 31, 2019 and 2018 were asfollows (in thousands):Year ended December 31,20192018Balance at January 1 Goodwill$386,761$338,822 Accumulated impairment losses(3,106)(3,106)383,655335,716Acquisition of Anova5,541—Acquisition of Edgewater—48,053Write-off of goodwill attributable to dissolved subsidiary—(114)Impairment of goodwill(164,300)—Balance at December 31$224,896$383,655The components of goodwill at December 31, 2019 and 2018 were as follows (in thousands):December 31,20192018Goodwill$392,302$386,761Accumulated impairment losses(167,406)(3,106)$224,896$383,655RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)89(10) ACCRUED EXPENSES AND OTHERAccrued expenses and other consisted of the following (in thousands):December 31,20192018Employee compensation and related costs$27,166$42,852Professional fees13,3317,994Deferred purchase consideration - business acquisitions1,70015,000Other14,50318,417$56,700$84,263RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)90(11) RESTRUCTURING AND FACILITIES CONSOLIDATION INITIATIVESThe Company recorded restructuring and related expense aggregating $16.4 million in the year ended December 31, 2019,$17.0 million in the year ended December 31, 2018 and $9.4 million in the year ended December 31, 2017. Restructuring andrelated expense includes restructuring expense (primarily severance and related costs), estimated future variable lease costs forvacated properties with no intent or ability of sublease, and accelerated rent amortization expense.For restructuring events that involve lease assets and liabilities, the Company applies lease reassessment and modificationguidance and evaluates the right-of-use assets for potential impairment. If the Company plans to exit all or distinct portions ofa facility and does not have the ability or intent to sublease, the Company will accelerate the amortization of each of those leasecomponents through the vacate date. The accelerated amortization is recorded as a component of Restructuring and relatedexpense in the Company's consolidated statements of operations. Related variable lease expenses will continue to be expensedas incurred through the vacate date, at which time the Company will reassess the liability balance to ensure it appropriatelyreflects the remaining liability associated with the premises and record a liability for the estimated future variable lease costs.The components of restructuring and related expense for the year ended December 31, 2019 were as follows (inthousands):Severance and related costs$11,179Variable and other facilities-related costs1,528Accelerated amortization of lease assets due to cease-use3,692$16,399Prior to the adoption of ASC 842, the Company recorded restructuring accruals for future lease obligations related tovacated facilities at the time that it ceased usage of the respective facility. The components of Restructuring and relatedexpense recorded in the years ended December 31, 2018 and 2017 were as follows (in thousands):Year ended December 31,20182017Severance and related costs15,2178,925Facilities1,798511$17,015$9,4362019 Restructuring and Facilities Consolidation InitiativeIn June 2019, the Company implemented a restructuring plan to further streamline the Company's global footprint,improve its operations and enhance its customer delivery (the "2019 Restructuring Initiative"). The 2019 RestructuringInitiative includes facility consolidations, refinement of the Company's research and development activities, and a reduction inworkforce. In connection with this initiative, the Company expects to reduce its focus on hardware and appliance-baseddevelopment over time and to increase its development focus on software virtualization, functional simplicity and importantcustomer requirements. The facility consolidations under the 2019 Restructuring Initiative (the "Facilities Initiative") include aconsolidation of the Company's North Texas sites into a single campus, housing engineering, customer training and support,and administrative functions, as well as a reduction or elimination of certain excess and duplicative facilities worldwide. Inaddition, the Company intends to substantially consolidate its global software laboratories and server farms into two lower costNorth American sites. The Company continues to evaluate its properties included in the Facilities Initiative for acceleratedamortization and/or right-of-use asset impairment. The Company expects that the actions under the Facilities Initiative will becompleted by the end of 2020.In connection with the 2019 Restructuring Initiative, the Company recorded restructuring and related expense of $11.2million in the year ended December 31, 2019, comprised of $6.1 million for severance and related costs for approximately 120employees, $1.4 million for variable and other facilities-related costs and $3.7 million for accelerated amortization of leaseassets. The Company expects that all of the amount accrued for severance and related costs will be paid in 2020. TheCompany estimates that it will record nominal, if any, additional restructuring and related expense related to severance andrelated costs under the 2019 Restructuring Initiative.Accelerated amortization of lease assets is recognized from the date that the Company commences the plan to fully orpartially vacate a facility, for which there is no intent or ability to enter into a sublease, through the final vacate date. The $3.7million of accelerated rent amortization recorded in 2019 that is included as a component of restructuring and related expense isnot included in the table below, as the liability for the total lease payments for each respective facility is included as acomponent of Operating lease liabilities in the Company's consolidated balance sheet at December 31, 2019, both current andnoncurrent (see Note 16). The Company may incur additional future expense if it is unable to sublease other locations includedin the Facilities Initiative.A summary of the 2019 Restructuring Initiative accrual activity, excluding the accelerated amortization of lease assets, forthe year ended December 31, 2019 is as follows (in thousands):Balance atJanuary 1,2019Initiativescharged toexpenseCashpaymentsBalance atDecember 31,2019Severance$—$6,103$(3,993)2,110Facilities—1,372(381)991$—$7,475$(4,374)$3,101Merger Restructuring InitiativeIn connection with the Merger, the Company's management approved a restructuring plan in the fourth quarter of 2017 toeliminate certain redundant positions and facilities within the combined companies (the "Merger Restructuring Initiative"). Inconnection with this initiative, the Company recorded $5.2 million of restructuring and related expense in 2019, virtually all ofwhich was for severance and related costs for approximately 40 employees. The Company recorded $16.1 million ofrestructuring and related expense in 2018 in connection with this initiative, comprised of $14.7 million for severance forapproximately 275 additional employees and $1.4 million for redundant facilities in the Czech Republic, Canada and the U.S.,and $8.5 million of restructuring and related expense in 2017 for severance and related costs for approximately 120 employees.The Merger Restructuring Initiative is substantially complete, and the Company anticipates it will record nominal futureexpense, if any, in connection with this initiative. In connection with the adoption of ASC 842, which was effective on January1, 2019, the Company wrote off the remaining restructuring accrual related to facilities. The Company expects that the amountaccrued at December 31, 2019 for severance will be paid by the end of the first half of 2020.Summaries of the Merger Restructuring Initiative accrual activity for the years ended December 31, 2019 and 2018 are asfollows (in thousands):RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)91Year ended December 31, 2019Balance atJanuary 1,2019Initiativescharged toexpenseAdjustmentfor the impactof ASC 842adoptionCashpaymentsBalance atDecember 31,2019Severance$1,910$5,076$—$(6,577)$409Facilities771156(771)(156)—$2,681$5,232$(771)$(6,733)$409Year ended December 31, 2018Balance atJanuary 1,2018Initiativescharged toexpenseAdjustmentsfor changes inestimateCashpaymentsBalance atDecember 31,2018Severance$7,595$14,735$(5)$(20,415)$1,910Facilities—1,399—(628)771$7,595$16,134$(5)$(21,043)$2,681Assumed Restructuring InitiativeThe Company assumed GENBAND's previously recorded restructuring liability, totaling $4.1 million, on the Merger Date(the "GENBAND Restructuring Initiative"). Of this amount, $3.7 million related to severance and related costs and $0.4million related to facilities. Subsequent to the Merger, the Company recorded $0.6 million in the aggregate in connection withthe GENBAND Restructuring Initiative, comprised of $0.9 million of restructuring and related expense in 2018 and a credit of$0.3 million to restructuring and related expense in 2017 for changes in estimated costs for this previously recorded andassumed restructuring initiative, primarily changes in negotiated severance to employees in certain international locations andchanges in estimated sublease income for restructured facilities. The GENBAND Restructuring Initiative is complete, and theCompany does not expect to record future expense in connection with this initiative. In connection with the adoption of ASC842, which was effective on January 1, 2019, the Company wrote off the remaining restructuring accrual related to facilities.Summaries of the GENBAND Restructuring Initiative accrual activity for the years ended December 31, 2019 and 2018are as follows (in thousands):Year ended December 31, 2019Balance atJanuary 1,2019Adjustmentfor the impactof ASC 842adoptionBalance atDecember 31,2019Facilities$117$(117)$—Year ended December 31, 2018Balance atJanuary 1,2018Adjustmentsfor changes inestimateCashpaymentsBalance atDecember 31,2018Severance$1,916$487$(2,403)$—Facilities205399(487)117$2,121$886$(2,890)$1172016 Restructuring InitiativeIn July 2016, the Company announced a program (the "2016 Restructuring Initiative") to further accelerate its investmentin new technologies to address the communications industry's migration to a cloud-based architecture and to support theCompany's strategic initiatives, such as new products and an expanded go-to-market footprint in selected geographies anddiscrete vertical markets. The Company recorded $2.0 million of restructuring and related expense in the aggregate inconnection with this initiative, comprised of $1.9 million for severance and related costs and $0.1 million to abandon its facilityin Rochester, New York (the "Rochester Facility"). The actions under the 2016 Restructuring Initiative were completed in2019, and accordingly, no additional expense will be recorded in connection with this initiative.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)92In connection with the 2016 Restructuring Initiative, the Company recorded $0.5 million of restructuring expense in theyear ended December 31, 2017, including adjustments for changes in estimated costs, comprised of $0.4 million for severanceand related costs and $0.1 million related to the Company's Rochester Facility.Summaries of the 2016 Restructuring Initiative accrual activity for the years ended December 31, 2019 and 2018 are asfollows (in thousands):Year ended December 31, 2019Balance atJanuary 1,2019CashpaymentsBalance atDecember 31,2019Facilities$58$(58)$—Year ended December 31, 2018Balance atJanuary 1,2018CashpaymentsBalance atDecember 31,2018Facilities$95$(37)$58Taqua Restructuring InitiativeIn connection with the acquisition of Taqua, the Company's management approved a restructuring plan in the thirdquarter of 2016 to eliminate certain redundant positions within the combined companies. On October 24, 2016, the AuditCommittee of the Board of Directors of the Company approved a broader Taqua restructuring plan related to headcount andredundant facilities (both restructuring plans, the "Taqua Restructuring Initiative"). The Company recorded $1.8 million ofrestructuring and related expense in the aggregate in connection with this initiative, comprised of $1.2 million for severance andrelated costs and $0.6 million related to the elimination of redundant facilities, including adjustments recorded for changes incost estimates for the planned restructuring activities. Of this amount, $0.7 million was recorded in 2017, comprised of $0.2million for severance and related costs and $0.5 million related to redundant facilities. The actions under the TaquaRestructuring Initiative have been completed and accordingly, no additional expense will be recorded in connection with thisinitiative. In connection with the adoption of ASC 842, which was effective on January 1, 2019, the Company wrote off theremaining restructuring accrual related to facilities.Summaries of the Taqua Restructuring Initiative accrual activity for the years ended December 31, 2019 and 2018 are asfollows (in thousands):Year ended December 31, 2019Balance atJanuary 1,2019Adjustmentfor the impactof ASC 842adoptionBalance atDecember 31,2019Facilities$33$(33)$—Year ended December 31, 2018Balance atJanuary 1,2018CashpaymentsBalance atDecember 31,2018Facilities$365$(332)$33Balance Sheet ClassificationThe current portions of accrued restructuring are included as a component of Accrued expenses in the consolidatedbalance sheets. The long-term portions of accrued restructuring are included as a component of Other long-term liabilities inthe consolidated balance sheets. The long-term portions of accrued restructuring were $0.9 million at December 31, 2019 and$0.5 million at December 31, 2018. The amount recorded as long-term at December 31, 2018 represented future leasepayments on restructured facilities.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)93RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)94(12) DEBTAssumed Senior Secured Credit AgreementOn the Merger Date and in connection with the Merger, the Company assumed the GENBAND Credit Agreement withSVB, which had outstanding borrowings and letters of credit totaling $17.9 million and $2.9 million, respectively, and anaverage interest rate of 4.67%. GENBAND had entered into the GENBAND Credit Agreement with SVB effective July 1,2016, with two of its operating subsidiaries as borrowers and GENBAND as the guarantor. The GENBAND Credit Agreementhad a maturity date of July 1, 2019 and provided for revolving loans, including letters of credit and swingline loans, not toexceed $50 million in total, with potential further increases of $75 million available for a total revolving line of credit of up to$125 million. The GENBAND Credit Agreement was superseded by a Senior Secured Credit Facilities Credit Agreement (the"2017 Credit Facility"), which was entered into on December 21, 2017 and is discussed below.Senior Secured Credit FacilityOn December 21, 2017, the Company entered into the 2017 Credit Facility by and among the Company, as a guarantor,Sonus Networks, Inc., as the borrower (“Borrower”), SVB, as administrative agent (in such capacity, the “AdministrativeAgent”), issuing lender, swingline lender and lead arranger and the lenders party thereto (each referred to individually as a“Lender”, and collectively, the “Lenders”), which refinanced the GENBAND Credit Agreement. The 2017 Credit Facilityincluded $100 million of commitments, the full amount of which was available for revolving loans, a $15 million sublimit thatwas available for letters of credit and a $15 million sublimit that was available for swingline loans. The 2017 Credit Facilitycontained procedures for additional financial institutions to become lenders or for any existing lender to increase itscommitment under the facility, subject to an available increase of $50 million for all incremental commitments under the 2017Credit Facility. On June 24, 2018, the Company amended the 2017 Credit Facility (the "2018 Credit Facility") to, among otherthings, permit the Edgewater Acquisition and related transactions.The indebtedness and other obligations under the 2018 Credit Facility were unconditionally guaranteed on a senior securedbasis by the Company and each other material U.S. domestic subsidiary of the Company (collectively, the "Guarantors"). The2018 Credit Facility was secured by first-priority liens on substantially all of the assets of the Borrower and the Guarantors,including the Company.The 2018 Credit Facility required periodic interest payments on outstanding borrowings until maturity. The Borrowercould prepay all revolving loans under the 2018 Credit Facility at any time without premium or penalty (other than customaryLIBOR breakage costs), subject to certain notice requirements.Revolving loans under the 2018 Credit Facility bore interest at the Borrower’s option at either the Eurodollar (LIBOR) rateplus a margin ranging from 2.50% to 3.00% per year or the base rate (the highest of the Federal Funds rate plus 0.50%, or theprime rate announced from time to time in The Wall Street Journal) plus a margin ranging from 1.50% to 2.00% per year (suchmargins being referred to as the “Applicable Margin”). The Applicable Margin varied depending on the Company’sconsolidated leverage ratio (as defined in the 2018 Credit Facility). The base rate and the LIBOR rate were each subject to azero percent floor.The Borrower was charged a commitment fee ranging from 0.25% to 0.40% per year on the daily amount of the unusedportions of the commitments under the 2018 Credit Facility. Additionally, with respect to all letters of credit outstanding underthe 2018 Credit Facility, the Borrower was charged a fronting fee of 0.125% per year and an outstanding letter of credit feeequal to the Applicable Margin for base rate loans ranging from 1.50% to 2.00% times the amount of the outstanding letters ofcredit.The 2018 Credit Facility required compliance with certain financial covenants, including a minimum consolidated quickratio, minimum consolidated interest coverage ratio and maximum consolidated leverage ratio, all of which were defined in the2018 Credit Facility and tested on a quarterly basis. In addition, the 2018 Credit Facility contained various covenants that,among other restrictions, limited the Company’s and its subsidiaries’ ability to enter into certain types of transactions,including, but not limited to: incurring or assuming indebtedness, making acquisitions or engaging in mergers, makinginvestments, repurchasing equity and paying dividends, selling or otherwise transferring assets, changing the nature of itsbusiness and amending or making prepayments on certain junior debt. The Company was in compliance with all covenants ofthe 2018 Credit Facility as of December 31, 2018.The 2018 Credit Facility contained events of default that are customary for a secured credit facility. If an event of defaultrelating to bankruptcy or other insolvency events with respect to a borrower occurred, all obligations under the 2018 CreditFacility would immediately become due and payable. If any other event of default existed under the 2018 Credit Facility, thelenders could accelerate the maturity of the obligations outstanding under the 2018 Credit Facility and exercise other rights andremedies, including charging a default rate of interest equal to 2.00% per year above the rate that would otherwise beapplicable. In addition, if any event of default existed under the 2018 Credit Facility, the lenders could commence foreclosureor other actions against the collateral.If any default existed under the 2018 Credit Facility, or if the Borrower was unable to make any of the representations andwarranties as stated in the 2018 Credit Facility at the applicable time, the Borrower would be unable to borrow funds or haveletters of credit issued under the 2018 Credit Facility, which, depending on the circumstances prevailing at that time, could havea material adverse effect on the Borrower’s liquidity and working capital.At December 31, 2018, the Company had an outstanding debt balance of $55.0 million at a weighted average interest rateof 5.96% and $2.7 million of outstanding letters of credit at an interest rate of 1.75% under the 2018 Credit Facility. The 2018Credit Facility was superseded by a Senior Secured Credit Facilities Credit Agreement (the "2019 Credit Facility") which wasentered into on April 29, 2019 and which is discussed below.2019 Credit FacilityOn April 29, 2019, the Company, as guarantor, and Ribbon Communications Operating Company, Inc., as borrower,entered into the 2019 Credit Facility, which provides for a $50 million term loan facility that was advanced in full on April 29,2019 and a $100 million revolving line of credit. The 2019 Credit Facility also includes procedures for additional financialinstitutions to become syndicate lenders, or for any existing lender to increase its commitment under either the term loanfacility or the revolving loan facility, subject to an aggregate increase of $75 million for incremental commitments under the2019 Credit Facility. The 2019 Credit Facility is scheduled to mature in April 2024. At December 31, 2019, the Company hadan outstanding term loan debt balance of $48.8 million at an interest rate and an outstanding revolving line of credit balance of$8.0 million with a combined average interest rate of 3.30%, and $5.4 million of outstanding letters of credit at an interest rateof 1.50%.The indebtedness and other obligations under the 2019 Credit Facility are unconditionally guaranteed on a senior securedbasis by the Company and each other material U.S. domestic subsidiary of the Company (collectively, the “Guarantors”). The2019 Credit Facility is secured by first-priority liens on substantially all of the assets of the Borrower and the Guarantors,including the Company.The 2019 Credit Facility requires periodic interest payments on any outstanding borrowings under the facility. TheBorrower may prepay all revolving loans under the 2019 Credit Facility at any time without premium or penalty (other thancustomary LIBOR breakage costs), subject to certain notice requirements.Revolving loans under the 2019 Credit Facility bear interest at the Borrower’s option at either the Eurodollar (LIBOR) rateplus a margin ranging from 1.50% to 3.00% per year or the base rate (the highest of the Federal Funds rate plus 0.50%, or theprime rate announced from time to time in The Wall Street Journal) plus a margin ranging from 0.50% to 2.00% per year (suchmargins being referred to as the “Applicable Margin”). The Applicable Margin varies depending on the Company’sconsolidated leverage ratio (as defined in the 2019 Credit Facility). The base rate and the LIBOR rate are each subject to a zeropercent floor.The 2019 Credit Facility requires compliance with certain financial covenants, including a minimum consolidated quickratio, minimum consolidated fixed charge coverage ratio and maximum consolidated leverage ratio, all of which are defined inthe 2019 Credit Facility and tested on a quarterly basis. The Company was in compliance with all covenants of the 2019 CreditFacility at December 31, 2019.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)95In addition, the 2019 Credit Facility contains various covenants that, among other restrictions, limit the Company’s and itssubsidiaries’ ability to enter into certain types of transactions, including, but not limited to: incurring or assuming indebtedness;granting or assuming liens; making acquisitions or engaging in mergers; making dividend and certain other restricted payments;making investments; selling or otherwise transferring assets; engaging in transactions with affiliates; entering into sale andleaseback transactions; entering into burdensome agreements; changing the nature of its business; modifying its organizationaldocuments; and amending or making prepayments on certain junior debt.The 2019 Credit Facility contains events of default that are customary for a secured credit facility. If an event of defaultrelating to bankruptcy or other insolvency events with respect to a borrower occurs, all obligations under the 2019 CreditFacility will immediately become due and payable. If any other event of default exists under the 2019 Credit Facility, thelenders may accelerate the maturity of the obligations outstanding under the 2019 Credit Facility and exercise other rights andremedies, including charging a default rate of interest equal to 2.00% per year above the rate that would otherwise beapplicable. In addition, if any event of default exists under the 2019 Credit Facility, the lenders may commence foreclosure orother actions against the collateral.If any default exists under the 2019 Credit Facility, or if the Borrower is unable to make any of the representations andwarranties as stated in the 2019 Credit Facility at the applicable time, the Borrower will be unable to borrow funds or haveletters of credit issued under the 2019 Credit Facility, which, depending on the circumstances prevailing at that time, could havea material adverse effect on the Borrower’s liquidity and working capital.Promissory NoteIn connection with the Merger, on October 27, 2017, the Company issued a promissory note for $22.5 million to certain ofGENBAND's equityholders (the "Promissory Note"). The Promissory Note did not amortize and the principal thereon waspayable in full on the third anniversary of its execution. Interest on the Promissory Note was payable quarterly in arrears andaccrued at a rate of 7.5% per year for the first six months after issuance, and thereafter at a rate of 10% per year. The failure tomake any payment under the Promissory Note when due and, with respect to payment of any interest, the continuation of suchfailure for a period of thirty days thereafter, constituted an event of default under the Promissory Note. If an event of defaultoccurred under the Promissory Note, the payees could declare the entire balance of the Promissory Note due and payable(including principal and accrued and unpaid interest) within five business days of the payees' notification to the Company ofsuch acceleration. Interest that was not paid on the interest payment date would increase the principal amount of thePromissory Note. At December 31, 2018, the Promissory Note balance was $24.1 million, comprised of $22.5 million ofprincipal, plus $1.6 million of interest converted to principal.On April 29, 2019, concurrently with the closing of the 2019 Credit Facility as discussed above, the Company repaid in fullall outstanding amounts under the Promissory Note, aggregating $24.7 million. The Company did not incur any earlytermination penalties in connection with this repayment.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)96(13) LONG-TERM LIABILITIESLong-term liabilities consisted of the following (in thousands):December 31,20192018Finance lease obligations$3,149$2,363Deferred rent—3,039Restructuring3,510979Pension obligations9,9547,006Taxes payable1,9911,818Deferred purchase consideration—30,000Other1,6832,42520,28747,630Current portion(3,698)(16,833)Long-term liabilities, net of current portion$16,589$30,797The current portions of long-term liabilities are included as components of Accrued expenses and other in the Company'sconsolidated balance sheets.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)97(14) REVENUE RECOGNITIONEffective January 1, 2018, the Company adopted the New Revenue Standard using the modified retrospective option andidentified the necessary changes to its policies, processes, systems and controls. Under the modified retrospective method, theCompany is applying the New Revenue Standard to all contracts not yet completed as of January 1, 2018, recognizing inbeginning Accumulated deficit an adjustment for the cumulative effect of the change and providing additional disclosurescomparing results to those as if the Company was still following the previous accounting standards. Under ASC 605, RevenueRecognition ("ASC 605"), the Company concluded it did not have vendor-specific objective evidence of selling price ("VSOE")for certain elements in software bundled arrangements, which resulted in revenue being recognized ratably over the longestperformance period. Additionally, under ASC 606 for arrangements with certain customers that include acceptance criteria,revenue is recognized when the customer obtains control, as the Company believes acceptance is perfunctory. Under ASC 605,revenue was deferred until acceptance was received. The Company is also capitalizing incremental commission fees as a resultof obtaining contracts and will amortize the asset based on the transfer of services to which the asset relates, which isapproximately five years. The cumulative effect of capitalizing commission fees was not material at January 1, 2018. Inconnection with the adoption of ASC 606, as of January 1, 2018, the Company recorded an adjustment to decreaseAccumulated deficit by $12.2 million (net of tax, which was $0 due to the full valuation allowance).The Company's typical performance obligations include the following:Performance ObligationWhen Performance Obligation isTypically SatisfiedWhen Payment is Typically DueSoftware and Product RevenueSoftware licenses (perpetual or term)Upon transfer of control; typically,when made available for download(point in time)Generally, within 30 days of invoicingexcept for term licenses, which may bepaid for over timeSoftware licenses (subscription)Upon activation of hosted site (overtime)Generally, within 30 days of invoicingAppliancesWhen control of the appliance passesto the customer; typically, upondelivery (point in time)Generally, within 30 days of invoicingSoftware upgradesUpon transfer of control; typically,when made available for download(point in time)Generally, within 30 days of invoicingCustomer Support RevenueCustomer supportRatably over the course of the supportcontract (over time)Generally, within 30 days of invoicingProfessional ServicesOther professional services (excludingtraining services)As work is performed (over time)Generally, within 30 days of invoicing(upon completion of services)TrainingWhen the class is taught (point intime)Generally, within 30 days of servicesbeing performedSignificant JudgmentsThe Company's contracts with customers often include promises to transfer multiple products and services to the customer.Determining whether products and services are considered distinct performance obligations that should be accounted forseparately versus together may require significant judgment.Judgment is required to determine the standalone selling price for each distinct performance obligation. The Companytypically has more than one standalone selling price ("SSP") for individual products and services due to the stratification ofthose products and services by customers and circumstances. In these instances, the Company may use information such as thesize of the customer and geographic region in determining the SSP.Deferred RevenueDeferred revenue is a contract liability representing amounts collected from or invoiced to customers in excess of revenuerecognized. This results primarily from the billing of annual customer support agreements where the revenue is recognizedover the term of the agreement. The value of deferred revenue will increase or decrease based on the timing of invoices andrecognition of revenue.Disaggregation of RevenueThe Company disaggregates its revenue from contracts with customers based on the nature of the products and services andthe geographic regions in which each customer is domiciled.The Company's total revenue for the years ended December 31, 2019, 2018 and 2017 was disaggregated geographically asfollows:Year ended December 31, 2019ProductrevenueServicerevenue(maintenance)Servicerevenue(professionalservices)Total revenueUnited States$170,937$133,271$37,085$341,293Europe, Middle East and Africa42,26243,18612,27997,727Japan13,06511,6925,84230,599Other Asia Pacific17,55216,1064,87938,537Other18,21429,9736,76854,955$262,030$234,228$66,853$563,111Year ended December 31, 2018ProductrevenueServicerevenue(maintenance)Servicerevenue(professionalservices)Total revenueUnited States$169,510$132,282$35,832$337,624Europe, Middle East and Africa37,83346,85611,79496,483Japan23,10811,2345,06939,411Other Asia Pacific30,57512,3214,35847,254Other17,98831,2737,87257,133$279,014$233,966$64,925$577,905RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)98Year ended December 31, 2017ProductrevenueServicerevenue(maintenance)Servicerevenue(professionalservices)Total revenueUnited States$121,121$75,040$22,896$219,057Europe, Middle East and Africa23,35217,4713,74244,565Japan10,25210,2823,85524,389Other Asia Pacific14,6935,9011,95222,546Other11,7016,0411,64319,385$181,119$114,735$34,088$329,942The Company's product revenue from its direct sales program and from indirect sales through its channel partner programfor the years ended December 31, 2019, 2018 and 2017 was as follows (in thousands):Year ended December 31,201920182017Indirect sales through channel program$94,639$69,232$43,138Direct sales167,391209,782137,981$262,030$279,014$181,119The Company's product revenue from sales to enterprise customers and from sales to service provider customers for theyears ended December 31, 2019, 2018 and 2017 was as follows (in thousands):Year ended December 31,201920182017Sales to enterprise customers$70,548$57,534$35,592Sales to service provider customers191,482221,480145,527$262,030$279,014$181,119Revenue Contract BalancesThe timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables,which are contract assets, and customer advances and deposits, which are contract liabilities, in the Company's consolidatedbalance sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodicintervals or upon achievement of contractual milestones. Completion of services and billing may occur subsequent to revenuerecognition, resulting in contract assets. The Company may receive advances or deposits from its customers before revenue isrecognized, resulting in contract liabilities which are classified as deferred revenue. These assets and liabilities are reported inthe Company's consolidated balance sheets on a contract-by-contract basis as of the end of each reporting period. Changes inthe contract asset and liability balances during the years ended December 31, 2019 and 2018 were not materially impacted byany factors other than billing and revenue recognition. Nearly all of the Company's deferred revenue balance is related toservices revenue, primarily customer support contracts. Unbilled receivables stem primarily from engagements where serviceshave been performed; however, billing cannot occur until services are completed.In some arrangements, the Company allows customers to pay for term-based software licenses and products over the termof the software license. The Company also sells SaaS-based software under subscription arrangements, with payment termsover the term of the SaaS agreement. Amounts recognized as revenue in excess of amounts billed are recorded as unbilledreceivables. Unbilled receivables that are anticipated to be invoiced in the next twelve months are included in Accountsreceivable on the Company's consolidated balance sheets. The changes in the Company's accounts receivable, unbilledreceivables and deferred revenue balances for the years ended December 31, 2019 and 2018 were as follows (in thousands):RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)99AccountsreceivableUnbilledaccountsreceivableDeferredrevenue(current)Deferredrevenue(long-term)Balance at January 1, 2019$174,310$13,543$105,087$17,572Increase (decrease), net(5,808)10,661(4,681)2,910Balance at December 31, 2019$168,502$24,204$100,406$20,482AccountsreceivableUnbilledaccountsreceivableDeferredrevenue(current)Deferredrevenue(long-term)Balance at January 1, 2018$149,122$16,034$100,571$14,184Increase (decrease), net25,188(2,491)4,5163,388Balance at December 31, 2018$174,310$13,543$105,087$17,572The Company recognized approximately $94 million of revenue in the year ended December 31, 2019 that was recorded asdeferred revenue at December 31, 2018 and approximately $84 million of revenue in the year ended December 31, 2018 thatwas recorded as deferred revenue at December 31, 2017. Of the Company's deferred revenue reported as long-term in itsconsolidated balance sheet at December 31, 2019, the Company expects that approximately $13 million will be recognized asrevenue in 2021, approximately $4 million will be recognized as revenue in 2022 and approximately $3 million will berecognized as revenue in 2023 and beyond.All freight-related customer invoicing is recorded as revenue, while the shipping and handling costs that occur after controlof the promised goods or services transfer to the customer are reported as fulfillment costs, a component of Cost of revenue -product in the Company's consolidated statements of operations.Deferred Commissions CostSales commissions earned by the Company's employees are considered incremental and recoverable costs of obtaining acontract with a customer. Under ASC 605, the costs associated with obtaining a customer contract were expensed in the periodthe revenue was earned. Under ASC 606, these payments have been deferred on our consolidated balance sheet and are beingamortized over the expected life of the customer contract, which is five years. At December 31, 2019 and 2018, the Companyhad $3.6 million and $2.7 million, respectively, of deferred sales commissions capitalized.Adoption of ASC 606Under the modified retrospective method, the Company applied ASC 606 to those contracts that were not completed as ofJanuary 1, 2018. Results for reporting periods beginning January 1, 2018 are presented under ASC 606, and prior periodamounts have not been adjusted and are reported in accordance with the Company's historical accounting treatment under ASC605.The Company recorded a net reduction to Accumulated deficit of $12.2 million (net of tax, which was $0 due to the fullvaluation allowance) at January 1, 2018 due to the cumulative impact of adopting ASC 606. Had the Company continued torecognize revenue under ASC 605, the Company would have recognized approximately $16 million less revenue in the yearended December 31, 2018. Incremental costs that would have been recognized had the Company continued to recognizerevenue under ASC 605 would not have been material to the Company's consolidated results of operations.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)100(15) COMMON STOCK REPURCHASESIn the second quarter of 2019, the Company's Board of Directors (the "Board") approved a stock repurchase program (the"Repurchase Program") pursuant to which the Company may repurchase up to $75 million of its common stock prior to April18, 2021. Repurchases under the Repurchase Program may be made in the open market, in privately negotiated transactions orotherwise, with the amount and timing of repurchases depending on market conditions and corporate discretion. TheRepurchase Program does not obligate the Company to acquire any particular amount of common stock and may be extended,modified, suspended or discontinued at any time at the Board's discretion. The stock repurchases are being funded using theCompany's working capital. During the year ended December 31, 2019, the Company spent $4.5 million, including transactionfees, to repurchase and retire 1.0 million shares of its common stock under the Repurchase Program. At December 31, 2019,the Company had $70.5 million remaining under the Repurchase Program for future repurchases.The Company had previously implemented a stock repurchase program (the "Sonus Repurchase Program"), which Ribbondid not assume in connection with the Merger. The Company did not repurchase any shares under the Sonus RepurchaseProgram during the year ended December 31, 2017.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)101(16) STOCK-BASED COMPENSATION PLANS2019 Stock Incentive PlanAt the Company's annual meeting of stockholders held on June 5, 2019, the Company's stockholders approved the RibbonCommunications Inc. Incentive Award Plan (the "2019 Plan"). The 2019 Plan had previously been approved by the Board,subject to stockholder approval. Under the 2019 Plan, the Company may grant awards up to 7.0 million shares of commonstock (subject to adjustment in the event of stock splits and other similar events), plus 5.1 million shares of common stock thatremained available for issuance under the Company's Amended and Restated Stock Incentive Plan (the "2007 Plan") on June 5,2019, plus any shares covered by awards under the 2007 Plan (or the Company's other prior equity compensation plans) thatagain become available for grant pursuant to the provisions of the 2007 Plan. The 2019 Plan provides for the grant of optionsto purchase the Company's common stock ("stock options"), stock appreciation rights ("SARs"), restricted stock awards("RSAs"), performance-based stock awards ("PSAs"), restricted stock units ("RSUs"), performance-based stock units ("PSUs")and other stock- or cash-based awards. Awards can be granted under the 2019 Plan to the Company's employees, officers andnon-employee directors, as well as consultants and advisors of the Company and its subsidiaries. At December 31, 2019, therewere 7.1 million shares available for future issuance under the 2019 Plan.2007 PlanThe Company's 2007 Plan provides for the award of stock options, SARs, RSAs, RSUs, PSAs, PSUs and other stock-based awards to employees, officers, non-employee directors, consultants and advisors of the Company and its subsidiaries. Onand following June 5, 2019, with the exception of shares underlying awards outstanding as of that date, no additional sharesmay be granted under the 2007 Plan.2002 Stock Option PlanIn connection with the Edgewater Acquisition, the Company assumed Edgewater's Amended and Restated 2002 StockOption Plan (the "Edgewater Plan") for all outstanding options as of the Edgewater Acquisition Date (the "EdgewaterOptions"). The Edgewater Options were converted to Ribbon stock options (the "Ribbon Replacement Options") using aconversion factor of 0.17, which was calculated based on the acquisition consideration of $1.20 per share of Edgewatercommon stock divided by the weighted average of the closing price of Ribbon common stock for the ten consecutive daysending with the trading day that preceded the Edgewater Acquisition Date. This conversion factor was also used to convert theexercise prices of the Edgewater Options to Ribbon Replacement Option exercise prices. The Ribbon Replacement Options arevesting under the same schedules as the respective Edgewater Options.The fair values of the Edgewater Options assumed were estimated using a Black-Scholes option pricing model. TheCompany recorded $0.7 million as additional purchase consideration for the fair value of the Edgewater Options. The fairvalue of the Ribbon Replacement Options attributable to future service totaled $1.0 million, which is being recognized over aweighted average period of approximately two years.2012 Stock Incentive PlanIn connection with the acquisition of Performance Technologies, Inc. ("PT"), the Company assumed PT's 2012 AmendedPerformance Technologies, Incorporated Omnibus Incentive Plan, and subsequently renamed it the 2012 Stock Incentive Plan(the "2012 Plan"). In December 2014, all of the unissued shares under the 2012 Plan were transferred to the 2007 Plan. Anyoutstanding awards under the 2012 Plan that in the future expire, terminate, are canceled, surrendered or forfeited, or arerepurchased by the Company will be returned to the 2019 Plan. Accordingly, at December 31, 2019 there were no sharesavailable for future issuance under the 2012 Plan.2008 Stock Incentive PlanIn connection with the acquisition of Network Equipment Technologies, Inc. ("NET"), the Company assumed NET's 2008Equity Incentive Plan and subsequently renamed it the 2008 Stock Incentive Plan (the "2008 Plan"). In December 2014, all ofthe unissued shares under the 2008 Plan were transferred to the 2007 Plan. Any outstanding awards under the 2008 Plan that inthe future expire, terminate, are canceled, surrendered or forfeited, or are repurchased by the Company will be returned to the2019 Plan. Accordingly, at December 31, 2019 there were no shares available for future issuance under the 2008 Plan.Treatment of Equity Awards in Connection with the MergerIn connection with the Merger, the Company accelerated the vesting of all then-outstanding stock options and certainthen-outstanding full value awards on the Merger Date. In addition, the vesting schedules of certain remaining unvested fullvalue awards were adjusted. Such vesting and adjustments are described below:Stock options - each stock option outstanding as of five business days prior to the Merger Date became vested in full as ofthat date (to the extent not previously vested), and the holders of such stock options were permitted to exercise their stockoptions from October 20, 2017 through October 24, 2017, after which date all remaining stock options, with certain exceptions,were canceled. The Company accelerated the vesting of 0.3 million stock options and subsequently canceled 4.5 million vestedunexercised stock options in connection with this transaction. Any stock options granted under the 2008 Plan and 2012 Planwere not canceled, as these plans do not permit such cancellations. These stock options continue to be outstanding until theyare either exercised or expire.RSAs and RSUs - as prescribed by the Company's 2007 Plan, any unvested RSAs and RSUs that were scheduled to vestwithin one year from the Merger Date vested in full as of the Merger Date. The vesting schedules of the remaining unvestedRSAs and RSUs were then accelerated by one year. Certain executives had specific terms and conditions related to their RSAsdetailed in their employment agreements or amendments thereto (the "employment terms"). The accelerated vesting of andfuture vesting schedule adjustments to the RSAs held by these individuals were completed in accordance with their individualemployment terms. In accordance with the terms of their RSA grants, unvested RSAs held by the then-current members of theBoard were accelerated on a pro rata basis based on the amount of time the unvested RSAs were outstanding compared to theoriginally scheduled vesting date. Unvested PSUs granted to the Company's then-current President and Chief ExecutiveOfficer, who separated from the Company effective December 13, 2017 (the "Former CEO"), were converted to RSAs inaccordance with his employment terms; certain of those converted grants were accelerated, and the remaining RSAs continuedto vest according to their terms, but with the elimination of any required satisfaction of the performance metrics associated withthe awards when they were originally granted as PSUs. In total, the Company accelerated the vesting of and released 1.1million RSAs and approximately 36,000 RSUs in connection with the Merger.PSUs - any unvested PSUs were accelerated in accordance with the employment agreement of each individual PSUholder. The remaining unvested units would continue to vest according to their terms, with the exception of the PSU grantsheld by the Former CEO, as discussed above. The Company accelerated the vesting of and released approximately 98,000PSUs in connection with the Merger.Executive Equity ArrangementsStock-for-Cash Bonus ElectionIn connection with the Company’s annual incentive program, certain executives of the Company were given the choiceto receive a portion, ranging from 10% to 50% (the "Elected Percentage") of their fiscal year 2018 bonuses (the “2018 Bonus”),if any were earned, in the form of shares of the Company’s common stock (the “2018 Bonus Shares” and such program, the“Stock Bonus Election Program”). Each executive could also elect not to participate in this program and to earn his or her 2018Bonus, if any, in the form of cash. Any executive who elected to receive a portion of his or her 2018 Bonus in stock would alsoRIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)102receive an uplift of 20% of the value of the 2018 Bonus Shares in additional shares of the Company’s common stock (the“Uplift Shares”) with the exception of the Company’s Chief Executive Officer and his senior leadership team. Under the StockBonus Election Program, the amount of the 2018 Bonus, if any, for each executive was determined by the CompensationCommittee of the Board (the "Compensation Committee").The number of shares earned by each of the 23 participants in the Stock Bonus Election Program was calculated bymultiplying each participant's 2018 Bonus by the applicable Elected Percentage (plus the amount attributable to Uplift Shares,if applicable) and dividing the resulting amount by $4.97, the closing price of the Company’s common stock on March 8, 2019,the date of the company-wide cash bonus payments. The Company granted 198,949 shares in the aggregate in connection withthe 2018 Bonus Shares on March 15, 2019, and such shares were fully vested on the date of grant. However, notwithstandingthat each such share of common stock was fully vested, each participant in the Stock Bonus Election Program was contractuallyrestricted from trading the 2018 Bonus Shares for five months after the date of grant. Both the grant and vesting of the 2018Bonus Shares are included in the RSU table below.The Company determined that the grant date criteria for the 2018 Bonus Shares and Uplift Shares had not been met as ofDecember 31, 2018, as the number of shares to be granted to each executive had not been determined. The Company recordedstock-based compensation expense totaling $1.1 million in connection with the Stock Bonus Program in 2018 and recorded aliability in connection with the future issuance of the 2018 Bonus Shares and Uplift Shares. This liability was reclassified toequity at the time the shares were granted.Performance-Based Stock GrantsIn addition to granting RSAs and RSUs to its executives and certain of its employees, the Company also grants PSUs tocertain of its executives.2019 PSU Grants. In March and April 2019, the Company granted certain of its executives an aggregate of 872,073PSUs, of which 523,244 PSUs had both performance and service conditions (the "Performance PSUs") and 348,829 PSUs hadboth market and service conditions (the "Market PSUs").Each executive's Performance PSU grant is comprised of three consecutive fiscal year performance periods from 2019through 2021 (each, a "Fiscal Year Performance Period"), with one-third of the Performance PSUs attributable to each FiscalYear Performance Period. The number of shares that will vest for each Fiscal Year Performance Period will be based on theachievement of certain metrics related to the Company's financial performance for the applicable year on a standalone basis(each, a "Fiscal Year Performance Condition"). In the third quarter of 2019, the Company adjusted the 2019 Performance PSUgoals to reflect the changes to the Company's calculation of certain metrics. There was no incremental expense in connectionwith this modification. The Company's achievement of the 2019 Fiscal Year Performance Conditions (and the number of sharesof Company common stock to vest as a result thereof) will be measured on a linear sliding scale in relation to specificthreshold, target and stretch performance conditions. The Company is recording stock-based compensation expense for thePerformance PSUs based on its assessment of the probability that each performance condition will be achieved and the level, ifany, of such achievement. As of December 31, 2019, the Company determined that the grant date criteria for the 2020 and2021 Fiscal Year Performance Periods had not been met, as the 2020 and 2021 Fiscal Year Performance Conditions had notbeen established by the Company. Accordingly, the stock-based compensation expense recorded in the year ended December31, 2019 in connection with the Performance PSUs is related only to those PSUs with 2019 Fiscal Year PerformanceConditions. The Compensation Committee will determine the number of shares earned, if any, after the Company's financialresults for each Fiscal Year Performance Period are finalized. Upon the determination by the Compensation Committee of thenumber of shares that will be received upon vesting of the Performance PSUs, such number of shares will become fixed and theunamortized expense will be recorded through the remainder of the service period that ends on March 15, 2022, at which timethe total Performance PSUs earned, if any, will vest, pending each executive's continued employment with the Companythrough that date. The number of shares of common stock to be achieved upon vesting of the Performance PSUs will in noevent exceed 200% of the Performance PSUs. Shares subject to the Performance PSUs that fail to be earned will be forfeited.The Market PSUs have one three-year performance period, which will end on December 31, 2021 (the "MarketPerformance Period"). The number of shares subject to the Market PSUs that will vest, if any, on March 15, 2022, will bedependent upon the Company's total shareholder return ("TSR") compared with the TSR of the companies included in theNasdaq Telecommunications Index for the same Market Performance Period, measured by the Compensation Committee afterRIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)103the Market Performance Period ends. The shares determined to be earned will vest on March 15, 2022, pending eachexecutive's continued employment with the Company through that date. The number of shares of common stock to be achievedupon vesting of the Market PSUs will in no event exceed 200% of the Market PSUs. Shares subject to the Market PSUs thatfail to be earned will be forfeited.2018 PSU Grant. In May 2018, the Company granted its then-current President and Chief Executive Officer, Mr. Hobbs,195,000 PSUs with both performance and service conditions (the “2018 PSUs”). Of the 195,000 2018 PSUs, one-half eachwould vest based on the achievement of two separate metrics related to the Company’s 2018 financial performance (the “2018Performance Conditions”). The Company’s achievement of the 2018 Performance Conditions (and the shares of Companycommon stock to vest as a result thereof) were measured on a linear sliding scale in relation to specific threshold, target andstretch performance conditions. The number of shares of common stock to be received upon vesting of the 2018 PSUs wouldin no event exceed 150% of the 2018 PSUs. In the year ended December 31, 2018, the Company recorded stock-basedcompensation expense for the 2018 PSUs based on its assessment of the probability that each performance condition would beachieved and the level, if any, of such achievement. The Company recorded $0.3 million of stock-based compensation expensein the year ended December 31, 2018 in connection with the 2018 PSUs. In February 2019, the Compensation Committeedetermined that the performance metrics for one-half of the 2018 PSUs had been achieved at the 106.49% achievement leveland one-half of the 2018 PSUs had been achieved at the 150% level, for a total of 250,075 shares earned. However, in April2019, the Compensation Committee subsequently determined that the performance metrics for the entire 2018 PSUs had beenachieved at the 150% level, for a total of 292,500 shares eligible to be issued (the "2018 Shares Earned"), pending Mr. Hobbs'continued employment with the Company through December 31, 2020. In connection with Mr. Hobbs' separation from theCompany effective December 31, 2019, the vesting schedule for the 2018 Shares Earned was accelerated and the shares werereleased on January 30, 2020 (see "Accelerated Vesting of Unvested Stock Units Held by Mr. Hobbs" below).2017 PSU Grants. On March 31, 2017, the Company granted an aggregate of 165,000 PSUs with both market andservice conditions to five of its executives (the "2017 PSUs"). The terms of each PSU grant were such that up to one-third ofthe shares subject to the respective PSU grant would vest, if at all, on each of the respective first, second and third anniversariesof the date of grant, depending on the Company's TSR compared with the TSR of the companies included in the NasdaqTelecommunications Index for the same fiscal year, measured by the Compensation Committee after each of the fiscal years asdefined by each grant (each, a "Performance Period"). The shares determined to be earned would vest on the anniversary of thegrant date following each Performance Period. Shares subject to the PSUs that failed to be earned would be forfeited. InMarch 2018, the Compensation Committee determined that the performance metrics for the 2017 PSUs for the 2017Performance Period had been achieved at the 130% level and accordingly, 33,584 shares in the aggregate were released to thethree remaining executives holding such outstanding grants, comprised of 25,834 shares, representing the 100% achievement oftarget, granted on March 31, 2017, and 7,750 shares, representing the 30% achievement over target, granted on March 31, 2018.In February 2019, the Compensation Committee determined that the performance metrics for the 2017 PSUs for the 2018Performance Period had been achieved at the 61.4% level and accordingly, 9,464 shares were released to the three remainingexecutives holding such outstanding grants on March 31, 2019. The shares that failed to be earned for the 2018 PerformancePeriod, aggregating 5,950 shares, were forfeited. Accordingly, at December 31, 2019, there were no remaining unvested 2017PSUs outstanding. The release and forfeiture of the shares related to the 2018 Performance Period are included in the PSUtable below.PSUs that include a market condition require the use of a Monte Carlo simulation approach to model future stock pricemovements based upon the risk-free rate of return, the volatility of each entity and the pair-wise covariance between eachentity. These results are then used to calculate the grant date fair values of the respective PSUs. The Company is required torecord expense for the PSUs with market conditions through their respective final vesting dates regardless of the number ofshares that are ultimately earned.Accelerated Vesting of Unvested Stock Units Held by Mr. Hobbs. On November 13, 2019, the Company announcedthat, effective that date, Mr. Hobbs was no longer serving as the President and Chief Executive Officer of Ribbon, and, also onand effective November 13, 2019, the Board appointed Steven Bruny, the Company's Executive Vice President, Global Sales &Services, and Kevin Riley, the Company's Executive Vice President, Advanced R&D and Chief Technology Officer, as InterimCo-Presidents and Chief Executive Officers, to assume the duties of the Company's President and Chief Executive Officerwhile the Board searched for a permanent successor to Mr. Hobbs. Mr. Hobbs resigned his position as a member of the Boardeffective December 27, 2019 and separated from the Company effective December 31, 2019. In connection with his separationfrom the Company and in accordance with the terms of his employment agreement with the Company, the vesting of certain ofRIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)104Mr. Hobbs' RSUs and PSUs were accelerated, some of which were released on January 30, 2020, with certain other PSUs, ifany are earned, scheduled for release no later than December 15, 2020.Stock OptionsStock options granted under the 2019 Plan expire ten years from the date of grant. Outstanding stock options grantedunder the Edgewater Plan expire ten years from the date of grant. Outstanding stock options granted under the 2008 Planexpire either seven or ten years from the date of grant. Outstanding stock options granted under the 2012 Plan expire ten yearsfrom the date of grant. There were no stock options outstanding under either the 2019 Plan or the 2007 Plan at December 31,2019. The grant date fair value of stock options, adjusted for estimated forfeitures, is recognized as expense on a straight-linebasis over the requisite service period, which is generally the vesting period. Forfeitures are estimated based on historicalexperience.The activity related to the Company's outstanding stock options during the year ended December 31, 2019 was asfollows:Number ofSharesWeightedAverageExercise PriceWeightedAverageRemainingContractualTerm(years)AggregateIntrinsicValue(in thousands)Outstanding at January 1, 2019582,061$9.01Granted—$—Exercised(127,334)$1.85Forfeited(38,666)$2.55Expired(118,937)$12.43Outstanding at December 31, 2019297,124$11.554.95$122Vested or expected to vest at December 31, 2019293,782$11.654.92$119Exercisable at December 31, 2019260,152$12.894.59$85The Company did not grant stock options during the years ended December 31, 2019 and 2018. The grant date fairvalues of stock options granted in the year ended December 31, 2017 were estimated using the Black-Scholes valuation modelwith the following assumptions:Risk-free interest rate1.22% - 1.95%Expected dividends—Weighted average volatility51.1%Expected life (years)5.0The risk-free interest rate used is the average U.S. Treasury Constant Maturities Rate for the expected life of the award.The expected dividend yield of zero is based on the fact that the Company has never paid dividends and has no presentintention to pay cash dividends. The expected life for stock options is based on a combination of the Company's historicaloption patterns and expectations of future employee actions.The weighted average grant-date fair value of options granted for the year ended December 31, 2017 was $3.05.The total intrinsic values of options exercised were $0.5 million for the year ended December 31, 2019, approximately$39,000 for the year ended December 31, 2018 and $0.2 million for the year ended December 31, 2017.The Company received cash from option exercises of $0.2 million in the year ended December 31, 2019, $0.1 million inthe year ended December 31, 2018 and $0.6 million in the year ended December 31, 2017.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)105Restricted Stock Grants - Restricted Stock Awards and Restricted Stock UnitsThe Company's outstanding restricted stock grants consist of both RSAs and RSUs. Holders of unvested RSAs havevoting rights and rights to receive dividends, if declared; however, these rights are forfeited if the underlying unvested RSAshares are forfeited. Holders of unvested RSUs do not have such voting and dividend rights. The grant date fair value ofrestricted stock grants, adjusted for estimated forfeitures, is recognized as expense on a straight-line basis over the requisiteservice period. The fair value of restricted stock grants is determined based on the market value of the Company's shares on thedate of grant.The activity related to the Company's RSAs for the year ended December 31, 2019 was as follows:SharesWeightedAverageGrant DateFair ValueUnvested balance at January 1, 20191,508,011$6.90Granted—$—Vested(967,291)$6.90Forfeited(52,744)$7.04Unvested balance at December 31, 2019487,976$6.87The activity related to the Company's RSUs for the year ended December 31, 2019 was as follows:SharesWeightedAverageGrant DateFair ValueUnvested balance at January 1, 2019636,300$6.52Granted2,828,832$4.98Vested(537,416)$6.04Forfeited(137,656)$5.35Unvested balance at December 31, 20192,790,060$5.11The total grant date fair value of vested restricted stock grant shares was $9.9 million in the year ended December 31,2019, $9.7 million in the year ended December 31, 2018 and $19.1 million in the year ended December 31, 2017.Performance-Based Stock UnitsHolders of unvested PSUs do not have voting and dividend rights. The Company recognizes stock-based compensationexpense for PSUs without market conditions on a straight-line basis, with the amount recorded based upon the expected level ofachievement as of each period-end, recording cumulative adjustments in the period when the expected level of achievementchanges. The Company recognizes the grant date fair value of PSUs on a graded attribution basis through the vest date of therespective awards so long as it remains probable that the related service conditions will be satisfied.The activity related to the Company's PSUs for the year ended December 31, 2019 was as follows:SharesWeightedAverageGrant DateFair ValueUnvested balance at January 1, 2019210,416$5.77Granted872,073$6.03Vested(9,466)$8.55Forfeited(5,950)$8.55Unvested balance at December 31, 20191,067,073$5.94RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)106The total grant date fair value of vested performance-based stock grant shares was $0.1 million in the year endedDecember 31, 2019, $0.6 million in the year ended December 31, 2018 and $1.4 million in the year ended December 31, 2017.ESPPThe ESPP is designed to provide eligible employees of the Company and its participating subsidiaries an opportunity topurchase common stock of the Company through accumulated payroll deductions.The ESPP provides for six-month consecutive offering periods, with the purchase price of the stock equal to 85% of thelesser of the market price on the first or last day of the offering period. The maximum number of shares of common stock anemployee may purchase during each offering period is 500, subject to certain adjustments pursuant to the ESPP.In May 2017, the Compensation Committee determined to suspend all offering periods under the ESPP, effectiveSeptember 1, 2017, until such time after the Merger Date as the Compensation Committee determined was best in its solediscretion. The Company's Board voted to re-implement the ESPP effective December 1, 2018 for employees in certaingeographic regions, with the first purchase date of the re-implemented ESPP completed on May 31, 2019.At December 31, 2019, 5.0 million shares, the maximum number of shares that may be issued under the ESPP, wereauthorized and 1.1 million shares were available under the ESPP for future issuance. The ESPP will expire on May 20, 2020.Stock-Based CompensationThe consolidated statements of operations included stock-based compensation for the years ended December 31, 2019,2018 and 2017 as follows (in thousands):Year ended December 31,201920182017Product cost of revenue$76$114$514Service cost of revenue4783451,448Research and development1,8981,7977,337Sales and marketing3,0282,9354,885General and administrative7,1215,88111,473$12,601$11,072$25,657There was no income tax benefit for employee stock-based compensation expense for the years ended December 31,2019, 2018 and 2017 due to the valuation allowance recorded.Stock-based compensation expense recorded for the year ended December 31, 2019 included $1.6 million of incrementalexpense related to the accelerated vesting of RSUs and PSUs held by the former President and Chief Executive Officer inconnection with his separation from the Company effective December 31, 2019. Stock-based compensation expense recordedfor the year ended December 31, 2017 included $8.6 million of incremental expense related to the acceleration of stock optionsand full value awards and subsequent adjustments to the vesting schedules of the remaining unvested full value awards inconnection with the Merger. In addition, the Company recorded $1.6 million of incremental expense related to the acceleratedvesting of RSAs held by a former President and Chief Executive Officer in connection with his separation from the Companyeffective December 13, 2017.At December 31, 2019, there was $11.3 million, net of expected forfeitures, of unrecognized stock-based compensationexpense related to unvested stock options, RSAs, RSUs and PSUs. This expense is expected to be recognized over a weightedaverage period of approximately two years.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)107Common Stock ReservedCommon stock reserved for future issuance at December 31, 2019 consists of the following:2019 Plan7,051,559ESPP1,148,8678,200,426The Company's policy is to issue authorized but unissued shares upon the exercise of stock options, to grant restrictedcommon stock, to settle restricted stock units and performance-based stock units, and to authorize the purchase of shares of theCompany's common stock under the ESPP.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)108(17) LEASESThe Company has operating and finance leases for corporate offices, research and development facilities, and certainequipment. Operating leases are reported separately in the Company's consolidated balance sheet at December 31, 2019.Assets acquired under finance leases are included in Property and equipment, net, in the consolidated balance sheets atDecember 31, 2019 and 2018.The Company determines if an arrangement is a lease at inception. A contract is determined to contain a lease componentif the arrangement provides the Company with a right to control the use of an identified asset. Lease agreements may includelease and non-lease components. In such instances for all classes of underlying assets, the Company does not separate leaseand non-lease components but rather, accounts for the entire arrangement under leasing guidance. Leases with an initial termof 12 months or less are not recorded on the balance sheet and lease expense for these leases is recognized on a straight-linebasis over the lease term.Right-of-use assets and lease liabilities are initially measured based on the present value of the future minimum fixed leasepayments (i.e., fixed payments in the lease contract) over the lease term at the commencement date. As the Company's existingleases do not have a readily determinable implicit rate, the Company uses its incremental borrowing rate based on theinformation available at the commencement date in determining the present value of future minimum fixed lease payments.The Company calculates its incremental borrowing rate to reflect the interest rate that it would have to pay to borrow on acollateralized basis an amount equal to the lease payments in a similar economic environment over a similar term and considersits historical borrowing activities and market data from entities with comparable credit ratings in this determination. Themeasurement of the right-of-use asset also includes any lease payments made prior to the commencement date (excluding anylease incentives) and initial direct costs incurred. The Company assessed its right-of-use assets for impairment as of December31, 2019 and determined no impairment has occurred.Lease terms may include options to extend or terminate the lease and the Company incorporates such options in the leaseterm when it has the unilateral right to make such an election and it is reasonably certain that the Company will exercise thatoption. In making this determination, the Company considers its prior renewal and termination history and planned usage ofthe assets under lease, incorporating expected market conditions.For operating leases, lease expense for minimum fixed lease payments is recognized on a straight-line basis over the leaseterm. The expense for finance leases includes both interest and amortization expense components, with the interest componentcalculated based on the effective interest method and the amortization component calculated based on straight-line amortizationof the right-of-use asset over the lease term. Lease contracts may contain variable lease costs, such as common areamaintenance, utilities and tax reimbursements that vary over the term of the contract. Variable lease costs are not included inminimum fixed lease payments and as a result, are excluded from the measurement of the right-of-use assets and leaseliabilities. The Company expenses all variable lease costs as incurred.In connection with the 2019 Restructuring Initiative, certain lease assets related to facilities will be partially or fullyvacated as the Company consolidates its facilities. The Company has no plans to enter into sublease agreements for certainfacilities. The Company ceased use of these facilities in the third quarter of 2019. Accordingly, the Company accelerated theamortization of the associated lease assets through the planned cease-use date of each facility, resulting in additionalamortization expense of $3.7 million in the year ended December 31, 2019. The Company also recorded a liability of $0.9million in 2019 for all future anticipated variable lease costs related to these facilities. This incremental acceleratedamortization and estimated future variable lease costs are included in Restructuring and related expense in the Company'sconsolidated statements of operations for the year ended December 31, 2019. The Company may incur additional futureexpense if it is unable to sublease other locations included in the Facilities Initiative.The Company leases its corporate offices and other facilities under operating leases, which expire at various times through2029. The Company's corporate headquarters is located in a leased facility in Westford, Massachusetts under a lease thatexpires in August 2028. The Company's finance leases primarily consist of equipment.At December 31, 2019, the Company had 107,800 square feet of building space in North Dallas, Texas under constructionas part of its 2019 Restructuring and Facilities Consolidation Initiative. The Company's leased Plano, Texas facility will bevacated upon completion of the construction of the North Dallas, Texas site. At that time, employees will relocate to the newsite as part of the 2019 Restructuring Initiative. The construction of the new North Dallas, Texas site is expected to becompleted in 2020.The Company's right-of-use lease assets and lease liabilities at December 31, 2019 and December 31, 2018 were as follows(in thousands):December 31, 2019December 31, 2018Assets Operating lease assets$36,654$— Finance lease assets*2,4202,104 Total leased assets$39,074$2,104Liabilities Current Operating$7,719$— Finance1,0051,039 Noncurrent Operating37,202— Finance2,1441,324 Total lease liabilities$48,070$2,363* Finance lease assets were recorded net of accumulated depreciation of $2.0 million and $0.9 million at December 31, 2019and December 31, 2018, respectively, and were reported as capital lease assets prior to the Company's adoption of ASC 842.The components of lease expense for the year ended December 31, 2019 were as follows (in thousands):Operating lease cost*$13,865Finance lease cost Amortization of leased assets1,106 Interest on lease liabilities265Short-term lease cost19,460Variable lease costs (costs excluded from minimum fixed lease payments)**3,264Sublease income(374) Net lease cost$37,586* Operating lease cost for the year ended December 31, 2019 includes $3.7 million of accelerated amortization for certainassets partially or fully vacated in 2019 with no intent or ability to sublease.** Variable lease costs for the year ended December 31, 2019 include a $0.9 million accrual for all future estimated variableexpenses related to certain assets partially or fully vacated in 2019 with no intent or ability to sublease.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)109The Company elected to use the alternative transition method, which allows entities to initially apply ASC 842 at theadoption date with no subsequent adjustments to prior period lease costs for comparability. As a result, operating leases inperiods prior to the Company's adoption of ASC 842 were not recorded on the consolidated balance sheet. Prior to the adoptionof ASC 842, rent expense (including any escalation clauses, free rent and other lease concessions) on operating leases wasrecognized on a straight-line basis over the minimum lease term, and this remains consistent with the Company's application ofASC 842. Rent expense was $11.9 million and $5.9 million for the years ended December 31, 2018 and 2017, respectively.Interest expense for finance leases was approximately $52,000 and $14,000 for the years ended December 31, 2018 and 2017,respectively. Amortization expense for finance leases was $0.6 million and $0.1 million for the years ended December 31,2018 and 2017, respectively.Other information related to the Company's leases as of and for the year ended December 31, 2019 was as follows (inthousands, except lease terms and percentages):Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases$10,559 Operating cash flows from finance leases$265 Financing cash flows from finance leases$913Weighted average remaining lease term (years): Operating leases6.73 Finance leases2.35Weighted average discount rate: Operating leases6.50% Finance leases7.54%Future minimum fixed lease payments under noncancelable leases at December 31, 2019 were as follows (in thousands):OperatingFinanceleasesleases2020$10,290$1,64420219,4681,15920227,66558120237,067—20245,303—2025 and beyond15,738— Total lease payments55,5313,384 Less: interest(10,610)(235) Present value of lease liabilities$44,921$3,149Future minimum fixed lease payments under noncancelable leases at December 31, 2018 were as follows (in thousands):OperatingFinanceleases*leases2019$10,705$1,38620208,3841,01020217,45528820225,691—20235,430—2024 and beyond19,818— Total lease payments$57,4832,684 Less: interest(321) Present value of lease liabilities**$2,363* The amounts in this column include restructuring payments aggregating approximately $1 million, of which approximately50% was due in less than one year and the remainder was due in one to three years. These amounts exclude currentestimated sublease income aggregating approximately $125,000 over the remaining lease terms for restructured facilities.** Prior to the Company's adoption of ASC 842 on January 1, 2019, operating leases were not recorded on the consolidatedRIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)110balance sheet and no interest component was calculated.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)111(18) EMPLOYEE DEFINED CONTRIBUTION PLANSThe Company offers 401(k) savings plans to eligible employees. The Company assumed GENBAND's 401(k) savingsplan in connection with the Merger. Effective January 1, 2019, the previously separate former Sonus and former GENBAND401(k) savings plans were combined into one plan.Effective January 1, 2018, the Company began to match 50% of each employee's contributions to the 401(k) program upto 4% of the employee's eligible earnings, for a maximum match of 2% of eligible earnings.The Company recorded expense related to its employee defined contribution plans aggregating $4.0 million in the yearended December 31, 2019, $3.2 million in the year ended December 31, 2018 and $1.4 million in the year ended December 31,2017.(19) NON-U.S. EMPLOYEE DEFINED BENEFIT PLANSIn connection with the Merger, the Company assumed GENBAND's defined benefit retirement plans that cover certainemployees at various international locations. The Company adopted GENBAND's policy to contribute amounts at leastsufficient to satisfy the minimum amount required by applicable law and regulations or to directly pay benefits whereappropriate. Benefits under the defined benefit plans are typically based either on years of service and the employee'scompensation (generally during a fixed number of years immediately before retirement) or on annual credits. The range ofassumptions that are used for the non-U.S. defined benefit plans reflect the different economic environments within the variouscountries.During the year ended December 31, 2019, in conjunction with the 2019 Restructuring Initiative, there were reductions inforce that significantly reduced benefits that can be earned under the plan in one of our international locations that resulted in animmaterial curtailment loss. Settlement accounting was triggered in the year ended December 31, 2019 related to a reduction inforce in one of our locations in 2018, resulting in an immaterial settlement gain.During the year ended December 31, 2018, in conjunction connection with the Merger Restructuring Initiative, there werereductions in force that significantly reduced benefits that can be earned under the defined benefit plans in several internationallocations that resulted in curtailment accounting. A curtailment gain of $0.5 million was recognized in 2018 and included as acomponent of Other (expense) income, net, in the Company's consolidated statement of operations. In the year endedDecember 31, 2018, settlement accounting was triggered in only one of these locations, resulting in an immaterial settlementcharge.A reconciliation of the changes in the benefit obligations and fair value of the assets of the defined benefit plans for theyears ended December 31, 2019 and 2018, the funded status of the plans, and the amounts recognized in the consolidatedbalance sheets as of December 31, 2019 and 2018 were as follows (in thousands):Year endedDecember 31,2019Year endedDecember 31,2018Changes in projected benefit obligations: Projected benefit obligation, beginning of year$10,848$11,484 Service cost335449 Interest cost140150 Participant contributions245 Benefits and expenses paid(44)(23) Net actuarial loss (gain) on obligation1,059(414) Curtailment82(553) Settlement(660)(250) Projected benefit obligation, end of year$11,784$10,848Changes in plan assets: Fair value of plan assets, beginning of year$3,842$3,893 Actual return on plan assets(1,471)(53) Employer contributions139292 Participant contributions245 Administrative expenses(21)(22) Benefits paid(683)(273) Fair value of plan assets, end of year$1,830$3,842Funded status at end of year$(9,954)$(7,006)Amounts recognized in accumulated other comprehensive loss consist of: Net actuarial loss$2,743$222Amounts recognized in the consolidated balance sheets consist of: Accrued expenses and other (current pension liability) $(74)$(75) Other long-term liabilities (non-current pension liability)(9,880)(6,931) Net amount recognized$(9,954)$(7,006)The increase in the underfunded status of the Company's defined benefit plans at December 31, 2019 compared toDecember 31, 2018 was the result of asset losses and a general decrease in discount rates which resulted in an increase in theprojected benefit obligation.Plans with underfunded or non-funded accumulated benefit obligations at December 31, 2019 and 2018 were as follows(in thousands):December 31,2019December 31,2018Aggregate projected benefit obligation$11,784$10,848Aggregate accumulated benefit obligation$7,759$7,152Aggregate fair value of plan assets$1,830$3,842Net periodic benefit costs for the years ended December 31, 2019 and 2018 and the period from the Merger Date toDecember 31, 2017 were as follows (in thousands):RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)112Year endedDecember 31,2019Year endedDecember 31,2018October 27,2017 toDecember 31,2017Service cost$335$449$68Interest cost14015025Expected return on plan assets(14)(45)(8)Plan asset expenses21224Curtailment charge (credit)13(510)—Settlement charge1153— Net periodic benefit costs$610$69$89The Company made benefit payments of $683,000 and $273,000 in the years ended December 31, 2019 and 2018,respectively. These benefit payments included $660,000 and $250,000 of one-time lump sum payments to participants in 2019and 2018, respectively. The Company made benefit payments of $3,000 in the period from the Merger Date to December 31,2017. Expected benefit payments for the next ten years are as follows (in thousands):Years ending December 31,2020$7420219420224520232232024572025 to 20291,661$2,154The changes in plan assets and benefit obligations recognized in other comprehensive income (loss) before tax for theyears ended December 31, 2019 and 2018 and the period from the Merger Date to December 31, 2017 were as follows (inthousands):Year endedDecember 31,2019Year endedDecember 31,2018October 27,2017 toDecember 31,2017Net loss (gain)$2,526$(356)$578The Company defers all actuarial gains and losses resulting from variances between actual results and economic estimatesor actuarial assumptions. The unrecognized actuarial gains and losses are recorded as unrealized pension actuarial gains(losses) in the Company's consolidated balance sheets as a component of Accumulated other comprehensive income. Theseunrecognized gains and losses are amortized as a component of net periodic benefit cost when the net gains and losses exceed10% of the greater of the market value of plan assets or the projected benefit obligation at the beginning of the year.Amortization of the amount included in Accumulated other comprehensive income into net periodic benefit cost is expected tototal approximately $176,000 for the year ended December 31, 2020.The principal weighted average assumptions used to determine the benefit obligation at December 31, 2019 and 2018were as follows:December 31,2019December 31,2018Discount rate0.68%1.30%Rate of compensation increase2.88%2.83%RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)113The principal weighted average assumptions used to determine net period benefit cost for the years ended December 31,2019 and 2018 and the period from the Merger Date to December 31, 2017 were as follows:Year endedDecember 31,2019Year endedDecember 31,2018October 27,2017 toDecember 31,2017Discount rate1.30%1.50%1.49%Expected long-term return on plan assets1.12%1.34%1.23%Rate of compensation increase2.83%3.38%3.38%Assumed discount rates are used in the measurement of the projected and accumulated benefit obligations, as well as theservice and interest cost components of net periodic pension cost. Estimated discount rates reflect the rates at which thepension benefits could be effectively settled. For each defined benefit plan, the Company chooses an estimated discount ratefrom a readily available market index rate, based upon high-quality fixed income investments, specific to the country oreconomic zone in which the benefits are paid and taking into account the duration of the plan and the number of participants.The plans in the Netherlands and Switzerland are funded through insurance contracts, which provide guaranteed interestcredit. The fair value of the contract is derived from the insurance company's assessment of the minimum value of the benefitsprovided by the insurance contract. The methodology used to value the plan assets assumes that the value of the plan assetsequals the guaranteed insured benefits. For consistency, the same discount rate used in the valuation of the benefit obligationsis used to place a value on the plan assets. The assets are assumed to grow each year in line with the discount rate, andtherefore, the expected return on the assets is set equal to the discount rate. The fair value of the combined plan assets was $1.8million at December 31, 2019 and $3.8 million at December 31, 2018. The Company classifies the fair value of these planassets as Level 2 in the fair value hierarchy as discussed in Note 5.During the years ended December 31, 2019 and 2018, employees in the Netherlands and Switzerland made contributionsto the respective pension plans aggregating $24,000 and $5,000, respectively. During the period from the Merger Date toDecember 31, 2017, employees in the Netherlands and Switzerland made contributions to the respective plans aggregating$5,000. Employee contributions to these plans are based on a fixed 5% of the relevant pensionable earnings. The Companyfunds these plans by contributing at least the minimum amount required by applicable regulations and as recommended by anindependent actuary. During the years ended December 31, 2019 and 2018, the Company contributed $139,000 and $292,000,respectively, to its pension plans. During the period from the Merger Date to December 31, 2017, the Company contributed$22,000 to its pension plans. The Company expects to contribute $0.2 million to its pension plans in 2020.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)114(20) INCOME TAXESThe components of loss from continuing operations before income taxes consisted of the following (in thousands):Year ended December 31,201920182017Income (loss) before income taxes:United States$(132,887)$(52,569)$(55,932)Foreign9,994(20,841)2,240$(122,893)$(73,410)$(53,692)The provision (benefit) for income taxes from continuing operations consisted of the following (in thousands):Year ended December 31,201920182017Provision (benefit) for income taxes:Current:Federal$11$561$(200)State128128115Foreign1,7442,1981,960Total current1,8832,8871,875Deferred:Federal9,790(8,481)49,570State1,630(1,414)(4,833)Foreign383(1,477)(816)Change in valuation allowance(6,504)11,885(64,236)Total deferred5,299513(20,315)Total$7,182$3,400$(18,440)A reconciliation of the Company's effective tax rate for continuing operations to the statutory federal rate is as follows:Year ended December 31,201920182017U.S. statutory income tax rate21.0%21.0%35.0%State income taxes, net of federal benefit(0.2)(0.1)1.2Foreign income taxes(1.0)(5.7)(0.5)Acquisition costs(0.5)(0.3)(6.0)Foreign deemed dividends(0.4)(3.4)(3.8)Stock-based compensation(0.7)(0.3)26.8Tax credits2.80.6(33.3)Uncertain tax positions(0.2)1.3(1.2)NOL and credit limitations——(18.9)Valuation allowance(0.7)(16.1)29.0Goodwill amortization0.40.3(1.7)Meals and entertainment(0.3)(0.4)(0.5)Tax reform(0.1)—8.8Goodwill impairment(25.4)——Other, net(0.5)(1.5)(0.6)Effective income tax rate(5.8)%(4.6)%34.3%RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)115The following is a summary of the significant components of deferred income tax assets and liabilities (in thousands):December 31,20192018Assets: Net operating loss carryforwards$61,057$76,278 Research and development tax credits32,87928,664 Deferred revenue7,8685,755 Accrued expenses5,6879,601 Inventory4,6184,906 Stock-based compensation2,8801,536 Fixed assets5,4617,716 Other temporary differences2,1381,943122,588136,399 Valuation allowance(94,980)(101,484) Total deferred tax assets27,60834,915Liabilities: Purchased intangible assets(22,470)(26,014) Unremitted foreign income(4,827)(4,487) Total deferred tax liabilities(27,297)(30,501) Total net deferred tax assets$311$4,414The deferred tax assets and liabilities based on tax jurisdictions are presented in the Company'sconsolidated balance sheets as follows: Deferred income taxes - noncurrent assets$4,959$9,152 Deferred income taxes - noncurrent liabilities(4,648)(4,738)$311$4,414At December 31, 2019, the Company had cumulative federal and state net operating losses ("NOLs") of $224.8 million.The federal NOL carryforwards expire at various dates from 2020 through 2037. The state NOL carryforwards expire atvarious dates from 2020 through 2038.The Company also has available federal, state and foreign income tax credit carryforwards of $32.9 million that expire atvarious dates from 2020 through 2038.Under the provisions of the Internal Revenue Code, the net operating losses and tax credit carryforwards are subject toreview and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating losses and tax creditcarryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership ofsignificant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the InternalRevenue Code, as well as a similar state provision. As a result of the Edgewater Acquisition in 2018, the Company acquiredapproximately $34 million of net operating loss carryforwards and approximately $6 million of tax credit carryforwards.Edgewater incurred an ownership change as a result of its acquisition by the Company; however, the Company does not expectthat any of the net operating losses or tax credits related to Edgewater will expire unused.In connection with the Company's adoption of ASC 606, the Company recorded an adjustment to decrease its deferred taxassets by $2.2 million in 2018. There was no impact to the Company's consolidated financial statements for this adjustment dueto the Company's full valuation allowance against these assets.On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act.The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to: reducing the U.S. federalcorporate tax rate from 35% to 21%; requiring companies to pay a one-time transition tax on certain unrepatriated earnings offoreign subsidiaries; generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; requiring a currentinclusion in U.S. federal taxable income of certain earnings (the Global Intangible Low-taxed Income ("GILTI")) of controlledforeign corporations; eliminating the corporate alternative minimum tax ("AMT") and changing how existing AMT credits canRIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)116be realized; creating the base erosion anti-abuse tax ("BEAT"); creating a new limitation on deductible interest expense;changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December31, 2017; providing a tax deduction for foreign derived intangible income ("FDII"); and changing rules related to deductibilityof compensation for certain officers. The consequences of the Tax Act were reflected in the Company's U.S. tax provision forthe year ended December 31, 2018 and the Company has completed its accounting for the effects of the Tax Act within themeasurement period. The Company did not have any FDII or GILTI adjustments, but recorded a BEAT tax expense of $0.4million and recorded an adjustment to the provisional amounts recorded at December 31, 2017 related to the Tax Act thatdecreased the Company's deferred tax assets by $0.2 million. These adjustments were recorded in the year ended December 31,2018. When the 2018 Federal tax return was filed, there was no BEAT tax expense. The related true-up was recorded as aprovision to return adjustment in the 2019 tax provision.During 2019 and 2018, the Company performed an analysis to determine if, based on all available evidence, it consideredit more likely than not that some portion or all of the recorded deferred tax assets will not be realized in a future period. As aresult of the Company's evaluation, the Company concluded that there was insufficient positive evidence to overcome the moreobjective negative evidence related to its cumulative losses and other factors. Accordingly, the Company has maintained avaluation allowance against its domestic deferred tax asset amounting to $71.4 million at December 31, 2019 and $82.4 millionat December 31, 2018. A similar analysis and conclusion were made with regard to the valuation allowance on the deferred taxassets of the Company's Ireland subsidiary, acquired as part of the acquisition of GENBAND, resulting in a valuation allowanceof $9.2 million at December 31, 2019 and $9.5 million at December 31, 2018. In analyzing the deferred tax assets related to theCompany's Canada subsidiaries at such time, the Company concluded that it was more likely than not that the Canadian federalcredits would not be realized in a future period. This resulted in a valuation allowance of $11.0 million. In addition, because ofcontinued losses, a valuation allowance of $2.7 million was established for the Company's Brazil subsidiary. The deferred taxassets recognized with no valuation allowance at December 31, 2019 and 2018 relate to foreign subsidiaries whererecoverability is concluded to be more likely than not based on the Company's cost plus compensation policy as well as a statecredit in the U.S.A reconciliation of the Company's unrecognized tax benefits is as follows (in thousands):201920182017Unrecognized tax benefits at January 1$3,461$4,528$8,969Increases related to current year tax positions29274139Increases related to prior period tax positions—122430Increases related to business acquisitions——2,012Decreases related to prior period tax positions(821)(1,263)(7,022)Settlements———Unrecognized tax benefits at December 31$2,932$3,461$4,528The Company recorded liabilities for potential penalties and interest of $0.1 million for the year ended December 31,2019, $0.1 million for the year ended December 31, 2018 and $0.2 million for the year ended December 31, 2017. TheCompany had cumulative deferred tax liabilities recorded related to interest and penalties of $0.7 million for the year endedDecember 31, 2019, $0.6 million for the year ended December 31, 2018 and $0.6 million for the year ended December 31,2017. Some of the unrecognized tax benefit items are expected to reverse in 2020 due to statute of limitation lapses.The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as various state andforeign jurisdictions. Generally, the tax years 2016 through 2019 remain open to examination by the major taxing jurisdictionsto which the Company is subject. The Company's federal NOLs generated prior to 2016 could be adjusted on examination eventhough the year in which the loss was generated is otherwise closed by the statute of limitations.As of December 31, 2019, the Company had ongoing income tax audits in certain foreign countries. Managementbelieves that an adequate provision has been recorded for any adjustments that may result from tax examinations.The Anova Acquisition was accounted for as a business combination and the financial results of Anova have beenincluded in the Company's consolidated financial statements for the period subsequent to the Anova Acquisition Date. Thetransaction is considered an asset acquisition for tax purposes. Accordingly, Ribbon recorded a stepped up basis in the assets.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)117The Edgewater Acquisition was accounted for as a non-taxable business combination. Edgewater had previously been asingle corporate filer for U.S. tax purposes. Consequently, U.S. federal and state deferred taxes were recorded as part of thebusiness combination based on the differences between the tax basis of the acquired assets and assumed liabilities and theirreported amounts for financial reporting purposes. The Company concluded that there was insufficient positive evidence toovercome the more objective negative evidence related to cumulative losses and other factors. The Company recordedidentifiable intangible assets as part of the purchase accounting for the acquisition. For U.S. tax purposes, the futureamortization of these intangibles will be non-deductible, thereby creating income. Since the Company files a consolidated U.S.tax return, the benefit from these identifiable intangible assets will be utilizable. The Company is required to determine itsability to use the tax benefit against the valuation allowance previously established. The Company has determined that it ismore likely than not that these benefits will be recognized. As a result, the valuation allowance has been reduced for theassumed net deferred tax liabilities, resulting in an income tax benefit of $0.7 million. This benefit was included as acomponent of the Company's tax provision for the year ended December 31, 2018. In 2019, an adjustment of $0.2 million wasrecorded, reducing the income tax benefit from the Edgewater Acquisition to $0.5 million.The 2017 acquisition of GENBAND was accounted for as a non-taxable business combination. GENBAND hadpreviously been treated as a partnership for U.S. tax purposes. Consequently, U.S. federal and state deferred taxes wererecorded as part of the business combination based on the differences between the tax basis of the acquired assets and assumedliabilities and their reported amounts for financial reporting purposes. The Company concluded that there was insufficientpositive evidence to overcome the more objective negative evidence related to cumulated losses and other factors. TheCompany recorded a valuation allowance against the acquired deferred tax assets. The Company recorded identifiableintangible assets as part of the purchase accounting for the acquisition. For U.S. tax purposes, the future amortization of theseintangibles will be non-deductible, thereby creating income. Since the Company files a consolidated U.S. tax return, the benefitfrom these identifiable intangible assets will be utilizable. The Company is required to determine its ability to use the taxbenefit against the valuation allowance previously established. The Company has determined that it is more likely than not thatthese benefits will be recognized. As a result, the valuation allowance has been reduced for the assumed net deferred taxliabilities, resulting in an income tax benefit of $16.4 million. This benefit was included as a component of the Company'sprovision for income taxes for the year ended December 31, 2017.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)118(21) MAJOR CUSTOMERSThe following customers contributed 10% or more of the Company's revenue in at least one of the years endedDecember 31, 2019, 2018 and 2017:Year ended December 31,201920182017Verizon Communications Inc.17%17%17%AT&T Inc.12%*** Less than 10% of total revenue.At December 31, 2019, one customer accounted for 10% or more of the Company's accounts receivable balance,representing approximately 22% of total accounts receivable. At December 31, 2018, two customers accounted for 10% ormore of the Company's accounts receivable balance, representing approximately 32% in the aggregate of total accountsreceivable. The Company performs ongoing credit evaluations of its customers and generally does not require collateral onaccounts receivable. The Company maintains an allowance for doubtful accounts and such losses have been withinmanagement's expectations.(22) RELATED PARTIESAs a portion of the consideration for the Merger, on October 27, 2017, the Company issued a promissory note for $22.5million to certain of GENBAND's equity holders who, following the Merger, owned greater than five percent of the Company'soutstanding shares. As described in Note 12 above, the promissory note did not amortize and the principal thereon was payablein full on the third anniversary of its execution. Interest on the promissory note was payable quarterly in arrears and accrued ata rate of 7.5% per year for the first six months after issuance, and thereafter at a rate of 10% per year. The failure to make anypayment under the promissory note when due and, with respect to payment of any interest, the continuation of such failure for aperiod of thirty days thereafter, constituted an event of default under the promissory note. If an event of default occurs underthe promissory note, the payees could have declared the entire balance of the promissory note due and payable (includingprincipal and accrued and unpaid interest) within five business days of the payees' notification to the Company of suchacceleration. At December 31, 2018, the Promissory Note balance was $24.1 million, comprised of $22.5 million of principal,plus $1.6 million of interest converted to principal.On April 29, 2019, the Company repaid in full all outstanding amounts under the Promissory Note, aggregating $24.7million. The Company did not incur any early termination penalties in connection with this repayment.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)119(23) COMMITMENTS AND CONTINGENCIESLitigationAs previously disclosed, the Company was involved in six lawsuits (together, the "Lawsuits") with Metaswitch NetworksLtd., Metaswitch Networks Corp. and Metaswitch Inc. (collectively, "Metaswitch"). In five of the Lawsuits, the Company wasthe plaintiff and, in three of those five lawsuits, the Company was also a counterclaim defendant. In the sixth case, theCompany was the defendant.On April 22, 2019, the Company and Metaswitch agreed to a binding mediator's proposal that resolved the six Lawsuitsbetween the Company and Metaswitch (the "Lawsuits"). The Company and Metaswitch signed a Settlement and Cross-LicenseAgreement on May 29, 2019 (the "Royalty Agreement"). Pursuant to the terms of the Royalty Agreement, Metaswitch hasagreed to pay the Company an aggregate amount of $63.0 million, which includes cash payments of $37.5 million during thesecond quarter of 2019 and $25.5 million payable in three installments annually, beginning June 26, 2020, with such installmentpayments accruing interest at a rate of 4% per year. As part of the Royalty Agreement, the Company and Metaswitch (i) havereleased the other from all claims and liabilities; (ii) have licensed each party's existing patent portfolio to the other party; and(iii) have requested the applicable courts to dismiss the Lawsuits.The Company received $37.5 million of aggregate payments from Metaswitch in the second quarter of 2019 and recordednotes receivable for future payments of $25.5 million, comprised of $8.5 million in Other current assets and $17.0 million inOther assets in the consolidated balance sheet at December 31, 2019. This activity is included in cash flows from operatingactivities in the consolidated statement of cash flows for the year ended December 31, 2019. The gain from the settlement of$63.0 million is included in Other income (expense), net, in the Company's consolidated statement of operations for the yearended December 31, 2019.ContingenciesOn November 8, 2018, Ron Miller, a purported stockholder of the Company, filed a Class Action Complaint (the "MillerComplaint") in the United States District Court for the District of Massachusetts (the "Massachusetts District Court") againstthe Company and three of its former officers (collectively, the "Defendants"), claiming to represent a class of purchasers ofSonus common stock during the period from January 8, 2015 through March 24, 2015 and alleging violations of the federalsecurities laws. Similar to a previous complaint entitled Sousa et al. vs. Sonus Networks, Inc. et al., which was dismissed withprejudice by an order dated June 6, 2017, the Miller Complaint claims that the Defendants made misleading forward-lookingstatements concerning Sonus' expected fiscal first quarter of 2015 financial performance, which statements were also thesubject of an August 7, 2018 Securities and Exchange Commission Cease and Desist Order, whose findings the Companyneither admitted nor denied. The Miller plaintiffs are seeking monetary damages.After the Miller Complaint was filed, several parties filed and briefed motions seeking to be selected by the MassachusettsDistrict Court to serve as a Lead Plaintiff in the action. On June 21, 2019, the Massachusetts District Court appointed a groupas Lead Plaintiffs and the Lead Plaintiffs filed an amended complaint on July 19, 2019. On August 30, 2019, the Defendantsfiled a motion to dismiss the Miller Complaint and, on October 4, 2019, the Lead Plaintiffs filed an opposition to the motion todismiss. The Defendants filed a reply to such opposition on November 1, 2019. There was an oral argument on the motion todismiss on February 12, 2020.In addition, the Company is often a party to disputes and legal proceedings that it considers routine and incidental to itsbusiness. Management does not expect the results of any of these actions to have a material effect on the Company's businessor consolidated financial statements.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)120(24) QUARTERLY RESULTS (UNAUDITED)The following tables present the Company's quarterly operating results for the years ended December 31, 2019 and 2018.The information for each of these quarters is unaudited and has been prepared on the same basis as the audited consolidatedfinancial statements. In the opinion of management, all necessary adjustments, consisting only of normal recurringadjustments, have been included to present fairly the unaudited consolidated quarterly results when read in conjunction with theCompany's audited consolidated financial statements and related notes.FirstQuarter (1)SecondQuarterThirdQuarterFourthQuarter(In thousands, except per share data)Fiscal 2019Revenue$118,928$145,421$137,653$161,109Cost of revenue62,33964,74858,77660,164Gross profit$56,589$80,673$78,877$100,945(Loss) income from operations$(36,228)$(7,096)$2,686$(148,822)Net (loss) income$(30,832)$49,470$1,650$(150,363)(Loss) earnings per share (3):Basic$(0.29)$0.45$0.01$(1.36)Diluted$(0.29)$0.45$0.01$(1.36)Shares used in computing (loss) earnings per share:Basic108,167110,394110,080110,269Diluted108,167110,698110,756110,269FirstQuarterSecondQuarterThirdQuarter (2)FourthQuarter(In thousands, except per share data)Fiscal 2018Revenue$121,180$137,361$152,468$166,896Cost of revenue65,90762,25070,23471,182Gross profit$55,273$75,111$82,234$95,714Loss (income) from operations$(42,383)$(16,636)$(7,566)$1,177Net loss$(44,904)$(19,922)$(10,158)$(1,826)Loss per share (3):Basic$(0.44)$(0.20)$(0.10)$(0.02)Diluted$(0.44)$(0.20)$(0.10)$(0.02)Shares used in computing loss per share:Basic101,917102,160104,918106,607Diluted101,917102,160104,918106,607__________________________________(1)Includes the results of Anova for the period subsequent to February 28, 2019.(2)Includes the results of Edgewater for the period subsequent to August 3, 2018.(3)(Loss) earnings per share is calculated independently for each of the quarters presented; accordingly, the sum of thequarterly (loss) earnings per share amounts may not equal the total calculated for the year.RIBBON COMMUNICATIONS INC.Notes to Consolidated Financial Statements (Continued)121Item 9. Changes in and Disagreements With Accountants on Accounting and Financial DisclosureNone.122Item 9A. Controls and ProceduresDisclosure Controls and ProceduresOur management, with the participation of our principal executive officers and principal financial officer, evaluated theeffectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the SecuritiesExchange Act of 1934, as amended (the "Exchange Act")), as of the end of the period covered by this Annual Report onForm 10-K. Based on this evaluation, our principal executive officers and principal financial officer concluded that ourdisclosure controls and procedures were effective as of December 31, 2019.Management's Annual Report on Internal Control over Financial ReportingOur management, with the participation of our principal executive officers and principal financial officer, is responsiblefor establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)under the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management andBoard of Directors regarding the preparation and fair presentation of published financial statements.Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. Inmaking its assessment of internal control over financial reporting, our management used the criteria set forth by the Committeeof Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). Based on thisassessment, management concluded that, as of December 31, 2019, our internal control over financial reporting was effective.Deloitte & Touche LLP, an independent registered public accounting firm that audited our financial statements includedin this Annual Report on Form 10-K, has issued an attestation report on management's internal control over financial reporting,which is included in this Item 9A under the caption "Report of Independent Registered Public Accounting Firm."Changes in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2019that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and the Board of Directors of Ribbon Communications Inc. Opinion on Internal Control over Financial ReportingWe have audited the internal control over financial reporting of Ribbon Communications Inc. and subsidiaries (the “Company”)as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in allmaterial respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established inInternal Control - Integrated Framework (2013) issued by COSO.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2019, of the Company and ourreport dated February 28, 2020, expressed an unqualified opinion on those financial statements and included an explanatoryparagraph relating to the adoption of Accounting Standards Codification (ASC) Topic 606, “Revenue from Contracts withCustomers,” on January 1, 2018 and ASC Topic 842, “Leases,” on January 1, 2019. Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for itsassessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Reporton Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal controlover financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to beindependent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the riskthat a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on theassessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our auditprovides a reasonable basis for our opinion.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company’s internal control over financial reporting includes those policies and proceduresthat (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance with authorizations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, ordisposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate./s/ Deloitte & Touche LLPDallas, TexasFebruary 28, 2020123Item 9B. Other InformationNone.124PART IIIItem 10. Directors, Executive Officers and Corporate GovernanceOur board of directors has adopted a Code of Conduct applicable to all officers, directors and employees, including ourprincipal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similarfunctions. A copy of the code is available at the Investor Relations section of our website, located atinvestors.ribboncommunications.com, under "Corporate Governance - Governance Highlights." We intend to make anydisclosure required by law or Nasdaq Stock Market rules regarding any amendments to, or waivers from, any provisions of thecode at the same location of our website.The information required by this Item 10 is included in our definitive Proxy Statement with respect to our 2020 AnnualMeeting of Stockholders to be filed with the SEC not later than 120 days after the end of the fiscal year ended December 31,2019 and is incorporated herein by reference.Item 11. Executive CompensationThe information required by this Item 11 is included in our definitive Proxy Statement with respect to our 2020 AnnualMeeting of Stockholders to be filed with the SEC not later than 120 days after the end of the fiscal year ended December 31,2019 and is incorporated herein by reference.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item 12 is included in our definitive Proxy Statement with respect to our 2020 AnnualMeeting of Stockholders to be filed with the SEC not later than 120 days after the end of the fiscal year ended December 31,2019 and is incorporated herein by reference.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this Item 13 is included in our definitive Proxy Statement with respect to our 2020 AnnualMeeting of Stockholders to be filed with the SEC not later than 120 days after the end of the fiscal year ended December 31,2019 and is incorporated herein by reference.Item 14. Principal Accounting Fees and ServicesThe information required by this Item 14 will be included in our definitive Proxy Statement with respect to our 2020Annual Meeting of Stockholders to be filed with the SEC not later than 120 days after the end of the fiscal year endedDecember 31, 2019 and is incorporated herein by reference.PART IV125Item 15. Exhibits, Financial Statement Schedules1) Financial StatementsThe consolidated financial statements of the Company are listed in the index under Part II, Item 8, of this Annual Reporton Form 10-K.2) Financial Statement SchedulesNone. All schedules are omitted because they are not applicable, not required under the instructions or the information iscontained in the consolidated financial statements, or notes thereto, included herein.3) List of ExhibitsThe Exhibits filed as part of this Annual Report on Form 10-K are listed in the Exhibit Index immediately preceding thesignature page of this Annual Report, which Exhibit Index is incorporated herein by reference.Item 16. Form 10-K SummaryNone.EXHIBIT INDEXExhibit No.Description2.1**Agreement and Plan of Merger, dated as of May 23, 2017, by and among the registrant, Sonus, Inc.,Solstice Sapphire, Inc., Green Sapphire Investments LLC, Green Sapphire LLC, GENBAND HoldingsCompany, GENBAND Inc., and GENBAND II, Inc. (incorporated by reference to Exhibit 2.1 to Sonus,Inc.’s Current Report on Form 8-K, filed May 23, 2017 with the SEC).2.2**Agreement and Plan of Merger, dated June 24, 2018, by and among the Registrant, Kansas Merger Sub,Inc., Edgewater Networks, Inc. and Shareholder Representative Services LLC (incorporated by reference toExhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q, filed August 1, 2018 with the SEC).2.3**Agreement and Plan of Merger, dated as of November 14, 2019, by and among the Registrant, RibbonCommunications Israel Ltd., Eclipse Communications Ltd., ECI Telecom Group Ltd. and ECI Holding(Hungary) Korlátolt Felelősségű Társaság (incorporated by reference to Exhibit 2.1 to the Registrant'sCurrent Report on Form 8-K, filed November 14, 2019 with the SEC).3.1Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 to theRegistrant's Current Report on Form 8-K12B, filed October 30, 2017 with the SEC).3.2Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant (incorporated byreference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K, filed November 28, 2017 with theSEC).3.3Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.3 to theRegistrant's Annual Report on Form 10-K, filed March 8, 2018 with the SEC).4.1*Description of Capital Stock.10.1Principal Stockholders Agreement, dated October 27, 2017, by and among the Registrant, Heritage PE(OEP) II, L.P. and Heritage PE (OEP) III, L.P. (incorporated by reference to Exhibit 99.1 to the Registrant'sCurrent Report on Form 8-K12B, filed October 30, 2017 with the SEC).10.2Registration Rights Agreement, dated as of October 27, 2017, by and among the Registrant, Heritage PE(OEP) II, L.P. and Heritage PE (OEP) III, L.P. (incorporated by reference to Exhibit 99.2 to the Registrant'sCurrent Report on Form 8-K12B, filed October 30, 2017 with the SEC).10.3+Form of Indemnity Agreement for Officers and Directors (incorporated by reference to Exhibit 10.5 to theregistrant's Annual Report on Form 10-K, filed March 8, 2018 with the SEC).10.4+Amended and Restated 2000 Employee Stock Purchase Plan, (incorporated by reference to Exhibit 10.1 tothe Registrant's Quarterly Report on Form 10-Q, filed October 31, 2018 with the SEC).10.5+Senior Management Cash Incentive Plan, dated October 27, 2017 (incorporated by reference to Exhibit10.7 to the Registrant's Annual Report on Form 10-K, filed March 8, 2018 with the SEC).10.6Lease, dated August 11, 2010, between Michelson Farm-Westford Technology Park IV Limited Partnershipand the Registrant with respect to the property located at 4 Technology Park Drive, Westford,Massachusetts (incorporated by reference to Exhibit 10.1 to Sonus, Inc.'s Quarterly Report on Form 10-Q,filed November 2, 2010 with the SEC).10.7First Amendment to Lease, dated October 27, 2010, between Michelson Farm-Westford Technology ParkIV Limited Partnership and the Registrant with respect to the property located at 4 Technology Park Drive,Westford, Massachusetts (incorporated by reference to Exhibit 10.2 to Sonus, Inc.'s Quarterly Report onForm 10-Q, filed November 2, 2010 with the SEC).10.8Second Amendment to Lease, dated as of June 16, 2017, by and between Michelson Farm-WestfordTechnology Park IV Limited Partnership and the Registrant with respect to the property located at 4Technology Park Drive, Westford, Massachusetts (incorporated by reference to Exhibit 10.1 to Sonus,Inc.’s Current Report on Form 8-K, filed June 21, 2017 with the SEC).10.9Third Amendment to Lease between Michelson Farm-Westford Technology Park IV Limited Partnershipand Sonus Networks, Inc., dated March 12, 2018 (incorporated by reference to Exhibit 10.1 to theRegistrant's Quarterly Report on Form 10-Q, filed April 30, 2018 with the SEC).10.10+2008 Stock Incentive Plan of the Registrant (incorporated by reference to Exhibit 99.1 to the Registrant'sRegistration Statement on Form S-8, filed October 31, 2017 with the SEC).10.11+Form of Nonstatutory Stock Option Award Agreement Granted under the 2008 Stock Incentive Plan(incorporated by reference to Exhibit 10.29 to Sonus, Inc.'s Annual Report on Form 10-K, filed March 6,2013 with the SEC).10.12+2012 Amended Performance Technologies Incorporated Omnibus Incentive Plan (incorporated byreference to Exhibit 99.2 to the Registrant's Registration Statement on Form S-8, filed with the SECeffective October 31, 2017).12610.13+Form of Non-Qualified Stock Option Award Agreement Granted under the 2012 Amended PerformanceTechnologies, Incorporated Omnibus Incentive Plan (incorporated by reference to Exhibit 10.7 to Sonus,Inc.'s Quarterly Report on Form 10-Q, filed April 29, 2014 with the SEC).10.14+Employment Agreement between the Registrant and Kevin Riley, dated July 30, 2014 (incorporated byreference to Exhibit 10.1 to Sonus, Inc.'s Quarterly Report on Form 10-Q, filed April 29, 2016 with theSEC).10.15+Employment Agreement between the Registrant and Michael Swade, accepted September 29, 2014(incorporated by reference to Exhibit 10.2 to Sonus, Inc.'s Quarterly Report on Form 10-Q, filed April 29,2016 with the SEC).10.16+Letter Agreement between the Registrant and Michael Swade, accepted January 13, 2019 (incorporated byreference to Exhibit 10.23 to the Registrant's Annual Report on Form 10-K/A, filed March 5, 2019 withthe SEC).10.17+Employment Agreement between the Registrant and Susan Villare, accepted on February 3, 2012(incorporated by reference to Exhibit 10.1 to Sonus, Inc.'s Amendment No. 1 to Current Report on Form 8-K/A, filed July 8, 2016 with the SEC).10.18+Letter Agreement between the Registrant and Susan Villare, accepted on July 7, 2016 (incorporated byreference to Exhibit 10.2 to Sonus, Inc.'s Amendment No. 1 to Current Report on Form 8-K/A, filed July 8,2016 with the SEC).10.19+Amended and Restated Stock Incentive Plan of the Registrant (incorporated by reference to Exhibit 99.3 tothe Registrant's Registration Statement on Form S-8, filed with the SEC on October 31, 2017).10.20+Form of Nonstatutory Stock Option Award Agreement Granted under the Amended and Restated StockIncentive Plan (incorporated by reference to Exhibit 10.2 to Sonus, Inc.'s Quarterly Report on Form 10-Qfiled July 29, 2016 with the SEC).10.21+Form of Restricted Stock Award Agreement Granted under the Amended and Restated Stock Incentive Plan(incorporated by reference to Exhibit 10.3 to Sonus, Inc.'s Quarterly Report on Form 10-Q, filed July 29,2016 with the SEC).10.22+Form of Restricted Stock Unit Award Agreement (Performance-Based Vesting) for Awards Granted underthe Amended and Restated Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Sonus, Inc.'sQuarterly Report on Form 10-Q, filed July 29, 2016 with the SEC).10.23+Form of Restricted Stock Unit Award Agreement (Time-Based Vesting) for Awards Granted under theAmended and Restated Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant'sQuarterly Report on Form 10-Q, filed August 1, 2018 with the SEC).10.24+Employment Agreement, entered into as of April 20, 2018 between the Registrant, Sonus Networks, Inc.and Franklin W. Hobbs (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report onForm 8-K/A, filed April 26, 2018 with the SEC).10.25+Severance Agreement, entered into as of April 20, 2018, between the Registrant, Sonus Networks, Inc. andFranklin W. Hobbs (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form8-K/A, filed April 26, 2018 with the SEC).10.26+Amended and Restated Employment Agreement between the Registrant and Daryl Raiford, effective as ofDecember 24, 2010, as amended on December 13, 2016 (incorporated by reference to Exhibit 10.30 to theRegistrant's Annual Report on Form 10-K, filed March 8, 2018 with the SEC).10.27+Retention Bonus Agreement between the Registrant and Daryl Raiford, dated as of December 12, 2016(incorporated by reference to Exhibit 10.31 to the Registrant's Annual Report on Form 10-K, filed March 8,2018 with the SEC).10.28+Employment Agreement, dated August 12, 2013, between the Registrant and David Walsh (incorporated byreference to Exhibit 10.36 to the Registrant's Annual Report on Form 10-K/A, filed March 5, 2019 with theSEC).10.29+Amendment No. 1 to Employment Agreement, effective October 23, 2017, between the Registrant andDavid Walsh (incorporated by reference to Exhibit 10.37 to the Registrant's Annual Report on Form 10-K/A, filed March 5, 2019 with the SEC).10.30+Letter Agreement between the Registrant and David Walsh, accepted January 13, 2019 (incorporated byreference to Exhibit 10.38 to the Registrant's Annual Report on Form 10-K/A, filed March 5, 2019 with theSEC).10.31+Independent Consultancy Agreement, effective February 2, 2019, between the Registrant and David Walsh(incorporated by reference to Exhibit 10.39 to the Registrant's Annual Report on Form 10-K/A, filed March5, 2019 with the SEC).12710.32+Edgewater Networks, Inc. Amended and Restated 2002 Stock Option Plan, effective as of April 8, 2010(incorporated by reference to Exhibit 99.1 to the Registrant's Registration Statement on Form S-8, filedAugust 6, 2018 with the SEC).10.33+Amendment to the Edgewater Networks, Inc. Amended and Restated 2002 Stock Option Plan, datedDecember 7, 2016 (incorporated by reference to Exhibit 99.2 to the Registrant's Registration Statement onForm S-8, filed August 6, 2018 with the SEC).10.34Senior Secured Credit Facilities Amended and Restated Credit Agreement by and among the Registrant, asa guarantor, Ribbon Communications Operating Company, Inc., as the borrower, Silicon Valley Bank, asadministrative agent, issuing lender, swingline lender and joint lead arranger, Citizens Bank, N.A., aslender and joint lead arranger, SunTrust Bank, as lender and documentation agent, and the other lendersparty thereto, dated April 29, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant's CurrentReport on Form 8-K, filed May 2, 2019 with the SEC).10.35+Employment Agreement by and between the Registrant and Anthony Scarfo, dated January 18, 2019(incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q, filed May 2,2019 with the SEC).10.36+Employment Agreement by and between GENBAND and Steven Bruny, dated February 7, 2015(incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q, filed May 2,2019 with the SEC).10.37+Severance Agreement, dated as of January 29, 2020, among Ribbon Communications Inc., RibbonCommunications Operating Company, Inc. and Steven Bruny (incorporated by reference to Exhibit 10.1 ofthe Registrant's Current Report on Form 8-K, filed January 30, 2020 with the SEC).10.38+Severance Agreement, dated as of January 29, 2020, among Ribbon Communications Inc., RibbonCommunications Operating Company, Inc. and Anthony Scarfo (incorporated by reference to Exhibit 10.2of the Registrant's Current Report on Form 8-K, filed January 30, 2020 with the SEC).10.39+Ribbon Communications Inc. 2019 Incentive Award Plan (incorporated by reference to Exhibit 10.1 of theRegistrant's Current Report on Form 8-K, filed June 11, 2019 with the SEC).10.40+Form of Non-Statutory Stock Option Award Agreement under the 2019 Incentive Award Plan (incorporatedby reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q, filed October 31, 2019with the SEC).10.41+Form of Restricted Stock Award Agreement under the 2019 Incentive Award Plan (incorporated byreference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q, filed October 31, 2019 withthe SEC).10.42+Form of Restricted Stock Unit Award Agreement (Time-Based Vesting) under the 2019 Incentive AwardPlan (incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q, filedOctober 31, 2019 with the SEC).10.43+Form of Restricted Stock Unit Award Agreement (Performance-Based Vesting) under the 2019 IncentiveAward Plan (incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q,filed October 31, 2019 with the SEC).10.44+Letter Agreement, dated as of December 27, 2019, among the Registrant, Ribbon CommunicationsOperating Company, Inc. and Franklin W. Hobbs (incorporated by reference to Exhibit 10.1 to theRegistrant's Current Report on Form 8-K, filed January 2, 2020 with the SEC).10.45+Letter Agreement, dated as of February 18, 200, among Ribbon Communications Inc., Sonus Networks,Inc. d/b/a Ribbon Communications Operating Company, Inc. and Bruce McClelland (incorporated byreference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed February 19, 2020 with theSEC.10.46+Severance Agreement, dated February 18, 2020, among Ribbon Communications Inc., Sonus Networks,Inc. d/b/a Ribbon Communications Operating Company, Inc. and Bruce McClelland (incorporated byreference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K, filed February 19, 2020 with theSEC).10.47+Form of Restricted Stock Unit Award Agreement (Performance-Based Vesting) between RibbonCommunications Inc. and Bruce McClelland (incorporated by reference to Exhibit 10.3 to the Registrant'sCurrent Report on Form 8-K, filed February 19, 2020 with the SEC).21.1*Subsidiaries of the Registrant.23.1*Consent of Independent Registered Public Accounting Firm, Deloitte & Touche LLP31.1*Certification of Ribbon Communications Inc. Interim Co-Chief Executive Officer Pursuant to Section 302of the Sarbanes-Oxley Act of 2002.128_______________________________________*Filed herewith.#Furnished herewith.+Management contract or compensatory plan or arrangement filed in response to Item 15(a)(3) of the Instructions to theAnnual Report on Form 10-K.**Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant herebyundertakes to furnish copies of any of the omitted schedules and exhibits upon request by the U.S. Securities andExchange Commission.31.2*Certification of Ribbon Communications Inc. Interim Co-Chief Executive Officer Pursuant to Section 302of the Sarbanes-Oxley Act of 2002.31.3*Certification of Ribbon Communications Inc. Chief Financial Officer Pursuant to Section 302 of theSarbanes-Oxley Act of 2002.32.1#Certification of Ribbon Communications Inc. Interim Co-Chief Executive Officer Pursuant to Section 906of the Sarbanes-Oxley Act of 2002.32.2#Certification of Ribbon Communications Inc. Interim Co-Chief Executive Officer Pursuant to Section 906of the Sarbanes-Oxley Act of 2002.32.3#Certification of Ribbon Communications Inc. Chief Financial Officer Pursuant to Section 906 of theSarbanes-Oxley Act of 2002.101.INSXBRL Instance Document101.SCHXBRL Taxonomy Extension Schema101.CALXBRL Taxonomy Extension Calculation Linkbase101.DEFXBRL Taxonomy Extension Definition Linkbase101.LABXBRL Taxonomy Extension Label Linkbase101.PREXBRL Taxonomy Extension Presentation Linkbase129130SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly causedthis report to be signed on its behalf by the undersigned, thereunto duly authorized.RIBBON COMMUNICATIONS INC.By:/s/ Steven BrunyFebruary 28, 2020Steven BrunyInterim Co-President and Chief Executive OfficerBy:/s/ Kevin RileyFebruary 28, 2020Kevin RileyInterim Co-President and Chief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the dates indicated:SignatureTitleDate/s/ Steven BrunyInterim Co-President and ChiefExecutive Officer (Interim Co-Principal Executive Officer)February 28, 2020Steven Bruny/s/ Kevin RileyInterim Co-President and ChiefExecutive Officer (Interim Co-Principal Executive Officer)February 28, 2020Kevin Riley/s/ Daryl E. RaifordExecutive Vice President and ChiefFinancial Officer (PrincipalFinancial Officer)February 28, 2020Daryl E. Raiford/s/ Eric MarmurekSenior Vice President, Finance(Principal Accounting Officer)February 28, 2020Eric Marmurek/s/ Richard J. LynchChairmanFebruary 28, 2020Richard J. Lynch/s/ Kim S. FennebresqueDirectorFebruary 28, 2020Kim S. Fennebresque/s/ Bruns H. GraysonDirectorFebruary 28, 2020Bruns H. Grayson/s/ Beatriz V. InfanteDirectorFebruary 28, 2020Beatriz V. Infante/s/ Kent J. MathyDirectorFebruary 28, 2020Kent J. Mathy/s/ Scott E. SchubertDirectorFebruary 28, 2020Scott E. Schubert/s/ Rick W. SmithDirectorFebruary 28, 2020Rick W. SmithImportant Information Regarding Forward-Looking Statements This Annual Report and Proxy Statement contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which are subject to a number of risks and uncertainties. All statements other than statements of historical fact contained in this Annual Report and Proxy Statement are forward-looking statements. Without limiting the foregoing, the words “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “seeks”, “projects”, “will” and other similar language, whether in the negative or affirmative, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. The forward-looking statements in this Annual Report and Proxy Statement include statements regarding the impact of the COVID-19 pandemic on our business, financial results and financial conditions, the success of the merger with ECI, management's goals, plans and intentions, product offerings and our position in the market, are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Although we believe that our current expectations and assumptions are reasonable, readers are cautioned that these forward-looking statements are only predictions and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict, and our actual results may differ materially from those contemplated by the forward-looking statements as a result of various factors, including risks related to the COVID-19 pandemic and those discussed in the “Managementʼs Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the copy of our Form 10-K included as part of this Annual Report. Any forward-looking statement represents our views only as of the date such statement was made and should not be relied upon as representing our views as of any subsequent date. While we may elect to update forward-looking statements in the future, we specifically disclaim any obligation to do so.

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