Exhibit 10.21


 


Sonus
Networks, Inc.


7 Technology Park Drive, Westford, MA 01886


 


October 2,
2008


 


Wayne
Pastore


[Address]


[Address]


 


Re:  Executive Severance and Arbitration
Agreement


 


Dear
Wayne:


 


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


 


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


 


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


 


3.             Restricted Stock Grant.  On November 15, 2008 (the “Grant Date”), the Company will grant you 26,667 shares of
the Company’s common stock $0.001 par value per share (“Restricted
Shares”), under the Company’s 2007 Stock Plan, subject to the terms
of the Company’s 2007 Stock Plan and the Company’s restricted stock agreement
which shall reflect the terms of this Agreement.  Provided that you continue in employment with
the Company, the Restricted Shares shall vest as follows: (a) 25% of the
Restricted Shares (6,667 Restricted Shares) shall vest on September 15,
2009, (b) an additional 25% of the Restricted Shares (6,667 Restricted
Shares) shall vest on September 15, 2010, and the final 50% of the
Restricted Shares (13,333 Restricted Shares) shall vest on September 15,
2011.


 


4.             Performance Stock Grant.  In addition to the grant of Restricted
Shares, you will be entitled to a grant of 13,333 shares of common stock upon
the Company’s achieving, during your employment, certain performance metrics
for the three fiscal years ended December 31, 2010, 2011 and 2012, as
determined by the Compensation Committee of the Board of Directors.  You shall be eligible to be granted 1/3 of
such performance shares during each of such fiscal years.  Subject to the achievement of such performance
metrics for each of such fiscal years, a specified number of shares would be
granted to you within thirty (30) days of the Company’s reporting of its
financial results for such years.  Any
shares issued shall be fully vested on the date of grant.


 

















 


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


 


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


 


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


 


(b)                                 continuation of payment of
the Company’s share of medical, dental and vision insurance premiums for you
and your dependents for the twelve (12) month period following the termination
of your employment; provided, that if immediately prior to the termination of
your employment you were required to contribute towards the cost of such
premiums as a condition of receiving such insurance, you may be required to
continue contributing towards the cost of such premiums under the same terms
and conditions as applied to you and your dependents immediately prior to the
termination of your employment in order to receive such continued insurance
coverage;


 


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


 


(d)                                 any stock options granted to
you by the Company to purchase the Company’s common stock that are unvested as
of the termination date and would vest during the twelve (12) months following
your termination will accelerate and immediately vest and become exercisable
upon termination, and your stock options that are or become vested will remain
outstanding and exercisable for the shorter of three (3) years following
your termination date or the original remaining life of the options; and


 


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


 


The
Company’s provision of the benefits described in Section 6(a), (b), (d) and
(e) above shall be contingent upon your execution of a release of all
claims of any kind or nature in favor of the Company in a form to be provided
by the Company (the “Release Agreement”). 
The lump sum payment described in Section 6(a) above shall be
made after the Company’s receipt of the executed Release Agreement and the
expiration of any revocation period described in the Release Agreement.  The Company shall have no further obligation
to you in the event your employment with the Company terminates at any time,
other than those obligations specifically set forth in this Section 6.


 

















 


The
Company may terminate your employment at any time with or without Cause by
written notice to you specifying the date of termination.  You may terminate your employment with or
without Good Reason by providing written notice to the Company at least thirty
(30) days prior to the date of termination. 
If you seek to terminate your employment for Good Reason, the Company
shall have ten (10) business days following its receipt of written notice
of termination to cure the circumstance giving rise to Good Reason.


 


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


 


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


 


(b)                                 “Good Reason” as used in this Agreement means the occurrence
of any of the following without your consent: (A) a reduction in your
annual base salary; (B) the assignment to you of a lower position in the
organization in terms of your title, responsibility, authority or status unless
agreed to in writing by you, or (C) the relocation of the Company to a
location that is more than fifty (50) miles from the Company’s current
headquarters location in Westford, MA.


 


(c)                                  “Cause” as used in this Agreement means the occurrence of any
of the following: (i) your indictment for, formal admission to (including
a plea of guilty or nolo contendere
to), or conviction of a felony, a crime of moral turpitude, dishonesty, breach
of trust or unethical business conduct, or any crime involving the Company, (ii) gross
negligence or willful misconduct by you in the performance of your duties that
is likely to have an adverse affect on the Company or its reputation; (iii) your
commission of an act of fraud or dishonesty in the performance of your duties; (iv) repeated
failure by you to perform your duties which are reasonably and in good faith
requested in writing by the Chief Executive Officer of the Company or the Board
of Directors of the Company; (v) material breach of this Agreement by you,
which you do not cure within ten (10) days following receipt by you of
such written notice notifying you of such breach, or material breach by you of
any confidentiality agreement with the Company.


 


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


 


(a)                                  It is intended
that each installment of the payments and benefits provided under Section 6
shall be treated as a separate “payment” for purposes of Section 409A.  Neither the Company nor you shall have the
right to accelerate or defer the delivery of any such payments or benefits
except to the extent specifically permitted or required by Section 409A.


 


(b)                                 If, as of the
date of your “separation from service” with the Company, you are not a “specified
employee” (each within the meaning of Section 409A), then each installment
of the payments and benefits shall be made on the dates and terms set forth in Section 6;
and


 

















 


(c)                                  If, as of the
date of your “separation from service” with the Company, you are a “specified
employee” (each, for purposes of this Agreement, within the meaning of Section 409A),
then:


 


(i)                                     Each
installment of the payments and benefits due under Section 6 that, in
accordance with the dates and terms set forth herein, will in all
circumstances, regardless of when the separation from service occurs, be paid
within the Short-Term Deferral Period (as hereinafter defined) shall be treated
as a short-term deferral within the meaning of Treasury Regulation Section 1.409A-1(b)(4) to
the maximum extent permissible under Section 409A.  For purposes of this Agreement, the “Short-Term
Deferral Period” means the period ending on the later of the 15th day of the
third month following the end of the tax year in which your separation from
service occurs and the 15th day of the third month following the end of the
Company’s tax year in which your separation from service occurs; and


 


(ii)                                  Each
installment of the payments and benefits due under Section 6 that is not
paid within the Short-Term Deferral Period or otherwise cannot be treated as a
short-term deferral within the meaning of Treasury Regulation Section 1.409A-1(b)(4) and
that would, absent this subsection, be paid within the six-month period following your “separation from service” with the
Company shall not be paid until the date that is six months and one day after
such separation from service (or, if earlier, your death), with any such installments
that are required to be delayed being accumulated during the six-month period
and paid in a lump sum on the date that is six months and one day following your
separation from service and any subsequent installments, if any, being paid in
accordance with the dates and terms set forth herein; provided, however, that
the preceding provisions of this sentence shall not apply to any installment of
payments if and to the maximum extent that that such installment is deemed to
be paid under a separation pay plan that does not provide for a deferral of
compensation by reason of the application of Treasury Regulation 1.409A-1(b)(9)(iii) (relating
to separation pay upon an involuntary separation from service).  Any installments that qualify for the
exception under Treasury Regulation Section 1.409A-1(b)(9)(iii) must
be paid no later than the last day of the second taxable year of following the
taxable year of in which your separation from service occurs.


 


9.             Section 409A
of the Code.   This Agreement is
intended to comply with the provisions of Section 409A and the Agreement
shall, to the extent practicable, be construed in accordance therewith.  Terms defined in the Agreement shall have the
meanings given such terms under Section 409A if and to the extent required
in order to comply with Section 409A. 
Notwithstanding the foregoing, to the extent that the Agreement or any
payment or benefit hereunder shall be deemed not to comply with Section 409A,
then neither the Company, the Board of Directors nor its or their designees or
agents shall be liable to you or any other person for any actions, decisions or
determinations made in good faith.


 


10.           Section 83(b) Election
and Withholding Taxes.  You may elect
under Section 83(b) of the Internal Revenue Code of 1986, as amended,
to be taxed at the time the Restricted Shares 
are acquired on the Grant Date (“Section 83(b) Election”).  A Section 83(b) Election, if made,
must 


 

















 


be
filed with the Internal Revenue Service within thirty (30) days of the Grant
Date.  You are obligated to pay to the
Company the amount of any federal, state, local or other taxes of any kind
required by law to be withheld with respect to the granting (if a Section 83(b) Election
is made) or vesting (if a Section 83(b) Election is not made) of the
shares.  If you do not make a Section 83(b) Election,
you shall satisfy such tax withholding obligations by delivery to the Company,
on each date on which shares vest, such number of shares that vest on such date
as have a fair market value (calculated using the last reported sale price of
the common stock of the Company on the NASDAQ Global Select Market on the
trading date immediately prior to such vesting date) equal to the amount of the
Company’s withholding obligation; provided, however, that the total tax
withholding cannot exceed the Company’s minimum statutory withholding
obligations (based on minimum statutory withholding rates for federal and state
tax purposes, including payroll taxes, that are applicable to such supplemental
taxable income).  Such delivery of shares
to the Company shall be deemed to happen automatically, without any action
required on your part, and the Company is hereby authorized to take such
actions as are necessary to effect such delivery of shares to the Company.


 


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


 


12.          General.


 


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


 


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


 


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


 


(d)                                 Arbitration.


 


(i)                                     Any
controversy, dispute or claim arising out of or relating to this Agreement or
the breach hereof which cannot be settled by mutual agreement will be finally
settled by binding arbitration in Massachusetts under the jurisdiction of the
American Arbitration Association, before a single arbitrator appointed in
accordance with the arbitration rules of the American Arbitration
Association, modified only as herein expressly 


 

















 


provided.  The arbitrator may enter a default decision
against any party who fails to participate in the arbitration proceedings.


 


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


 


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


 


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


 


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


 


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


 


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


 


****


 

















 


You must confirm your acceptance of this Agreement
in writing.  Please sign and return a
copy of this letter to me at the Company’s address above, or via e-mail at
rnottenburg@sonusnet.com to evidence your agreement with the terms and
conditions set forth herein.


 




	
  Very
  truly yours,

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/
  Richard N. Nottenburg

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Richard
  N. Nottenburg

  	
   

  	
   

  
	
  President
  and Chief Executive Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Accepted
  by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Wayne Pastore

  	
   

  	
  10/2/08

  
	
  Name:

  	
   

  	
  Date

  






 

















 


Annex A


 


A “Change in
Control” as used in the Agreement of which this Annex is a part shall mean the
first to occur of any of the following:


 


(a) any “person,” as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) (other than the Company or its Affiliates), is or becomes the “beneficial
owner” (as defined in Rule 1 3d-3 under the Exchange Act), directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such person any securities acquired directly from the
Company or you) representing fifty percent (50%) or more of the combined voting
power of the Company’s then outstanding securities; or


 


(b) in the event that the individuals who as of the date hereof
constitute the Board of Directors, and any new director whose election by the
Board or nomination for election by the Company’s stockholders was approved by
a vote of at least a majority of the Board then still in office who either were
members of the Board as of the date hereof or whose election or nomination for
election was previously so approved, cease for any reason to constitute at
least a majority thereof; or


 


(c) the
consummation of a merger or consolidation of the Company with or the sale of
the Company to any other entity and, in connection with such merger,
consolidation or sale; individuals who constitute the Board immediately prior
to the time any agreement to effect such merger or consolidation is entered
into fail for any reason to constitute at least a majority of the board of
directors of the surviving or acquiring corporation following the consummation
of such merger, consolidation or sale;


 


(d) the
stockholders of the Company approve a plan of complete liquidation of the
Company; or


 


(e) the
consummation of the sale or disposition by the Company of all or substantially
all of the Company’s assets to an entity not controlled by the Company.