EXHIBIT 10.1


 


	
  Sonus
  Networks, Inc.

  	
   

  
	
   

  	
   

  
	
   

  	
  7 Technology Park Drive, Westford, MA 01886

  



 


December 11, 2008


Mr. Gurudutt Pai


 


Dear Guru:


 


I am pleased to provide you in this letter
(the “Agreement”) with the terms and conditions of our offer of employment to you
by Sonus Networks, Inc. (the “Company”).


 


1.                                       Position.  The Company agrees to employ
you as Senior Vice President, reporting to the President and Chief Executive
Officer.  As the Company’s organization
evolves, in addition to performing duties and responsibilities associated with
the position of Senior Vice President, you may be assigned other Executive
duties and responsibilities as the Company may determine.


 


As a full-time employee of the Company, you will be
expected to devote your full business time and energies to the business and
affairs of the Company.


 


1.                                       Commencement Date/Nature of Relationship.  Your
employment shall commence no later than December 15, 2008 (the “Commencement
Date”).  Subject to the severance and
other provisions of Section 11 below, your employment shall not be 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, subject to the provisions of Section 11 below.


 


2.                                       Base Compensation.  Your
initial base salary (“Base Salary”) will be at the annualized rate of $275,000,
less applicable state and federal withholdings, paid twice monthly in
accordance with the Company’s normal payroll practices.  The Company will review your Base Salary on
an annual basis and such base salary may be adjusted at the discretion of the
Compensation Committee of the Board of Directors; provided that you may elect
to terminate your employment for Good Reason under Section 12(b)(A) below
if the Compensation Committee reduces your Base Salary.


 


3.                                       Target Bonus.  You
will be eligible to participate in the Officer Bonus Program during each year
you are employed by the Company with a target bonus of at least 50% of your
then-current annual base salary (“Target Bonus”).  For 2008, your Target Bonus will be $6,404.11
and your pro rata Target Bonus for 2008 is guaranteed and payable by March 15,
2009.  Specific objectives for your
Target Bonus for 2009 will be agreed upon with the Compensation Committee of
the Board of Directors within the first sixty (60) days of your employment for
2009 and on or about January 1 of each subsequent calendar year with
respect to an award for such year.  Your
annual bonus shall be paid as soon as practicable following the Company’s
public disclosure of its financial results for the applicable bonus year.


 


4.                                       Stock Option Grants.  You
will be granted non-qualified options to purchase 300,000 shares of common
stock under the Company’s 2007 Stock Plan, subject to the terms of the Plan and
the terms of the Company’s stock option agreement which shall reflect the terms
of this Agreement.  The grant date will
be on the earliest 15th day of a month that next follows your Commencement Date
or the first 


 


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business day thereafter if that day is not a
business day.  The per share exercise
price will be the per share closing price of the Company’s common stock on the
grant date (“2008 Option Exercise Price”). 
Subject to the provisions of this Agreement, the option shall vest and
become exercisable as follows: (A) 25% of the shares (75,000 shares) shall
vest on the first anniversary of the Commencement Date and, (B) the
remaining 75% of the shares (225,000 shares) shall vest in equal monthly
increments of 2.0833% of the shares (6,250 shares per month) thereafter through
the fourth anniversary of the Commencement Date.


 


5.                                       Restricted Stock Grants.  You
will be granted Restricted Shares of the Company’s common stock, $0.001 par
value per share (“Restricted Shares”) as follows:


 


(a)                                  You will be granted 300,000 shares of the
Company’s common stock under the Company’s 2007 Stock Plan, subject to the
terms of the Plan and the Company’s restricted stock agreement, which shall
reflect the terms of this Agreement.  The
grant date will be on the earliest 15th day of a month that next follows your
Commencement Date or the first business day thereafter if that day is not a
business day.  The Restricted Shares
shall vest as follows: (A) 25% of the Restricted Shares (75,000 Restricted
Shares) shall vest on the first anniversary of the Commencement Date and, (B) 75%
of the Restricted Shares (225,000 Restricted Shares) shall vest in six equal
increments of 12.5% of the Restricted Shares (37,500 Restricted Shares)
semi-annually thereafter through the fourth anniversary of the Commencement
Date;


 


(b)                                 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.


 


(c)                                  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.                                       Employment Eligibility.  In
compliance with the Immigration Reform and Control Act of 1986, you are
required to establish your identity and employment eligibility.  Therefore, on your first day of 


 


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employment you will be required to fill out an
Employment Verification Form and present documents in accordance with this
form.


 


7.                                       Benefits.  You will be entitled as an
employee of the Company to receive such benefits as are generally provided its
employees in accordance with Company policy as in effect from time to
time.  Company benefits include group
health, life and dental insurance, and liberal holidays, vacation and 401K
programs.  All employees begin accruing
three (3) weeks of vacation upon date of hire.  The Company is committed to providing a
healthy work environment for every employee. 
Therefore, we provide a smoke free environment and require all employees
to comply.  The Company retains the right
to change, add or cease any particular benefit.


 


8.                                       Confidentiality.  The
Company considers the protection of its confidential information, proprietary
materials and goodwill to be very important. 
Therefore, as a condition of your employment and the stock option and
restricted stock grants described above, you and the Company will become
parties to a Noncompetition and Confidentiality Agreement.  Two copies of this agreement are sent with
this offer letter.  Both copies must be
signed and returned to the Company prior to the Commencement Date.


 


9.                                       Indemnity.  As an executive of the
Company, you will enter into an Indemnity Agreement with the Company.  Two copies of this agreement are sent with
this offer letter.  Both copies must be
signed and returned to the Company upon your employment.


 


10.                                 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 


 


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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 11(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”), which Release Agreement must be delivered to the Company within
fifty-two (52) days following the termination of your employment.  The lump sum payment described in Section 11(a) above
shall be made on the sixtieth (60) day following the termination of your
employment, 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 11.


 


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.


 


11.                                 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 set forth above; (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.


 


12.                                 Tax Implications of Termination Payments. 
Subject to this Section 13, any payments or benefits required to be
provided under Section 11 shall be provided only after the date of your “separation
from service” with the Company as defined under Section 409A of the U.S.
Internal Revenue Code of 1986, as amended, and the guidance issued thereunder (“Section 409A”).
The following rules shall apply with respect to distribution of the
payments and benefits, if any, to be provided to you under Section 11:


 


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(a)                                  It is intended that each installment of the
payments and benefits provided under Section 11 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 11; 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 11 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 defined for
the purposes of Section 409A) 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; and


 


(ii)                                  Each installment of the payments and benefits
due under Section 11 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, upon
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 following the
taxable year in which your separation from service occurs.


 


13.                                 Section 409A of the Code.  This
Agreement is intended to comply with the provisions of Section 409A and
this Agreement shall, to the extent practicable, be construed in accordance
therewith.  Terms used in this 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 this 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.


 


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14.                                 Other Agreements.  You
represent and warrant to the Company that you are not bound by any agreement
with a previous employer or other party which you would in any way violate by
accepting employment with the Company or performing your duties as an employee
of the Company.  You further represent
and warrant that, in the performance of your duties with the Company, you will
not utilize or disclose any confidential information in breach of an agreement
with a previous employer or any other party.


 


15.                                 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.


 


16.                                 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.  For the avoidance of doubt, the
parties agree that the Consulting Services Agreement dated November, 2008
between you and the Company shall hereinafter be cancelled and shall have no
further force or effect, except with respect to the confidentiality provisions
therein.  No modification of this
Agreement shall be valid unless made in writing and signed by the parties
hereto.


 


(b)                                 Severable Provisions.  The
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 this Agreement shall nevertheless be binding
and enforceable.  Notwithstanding the
foregoing, if there are any conflicts between the terms of this Agreement and
the terms of any Plan document referred to in this Agreement, then the terms of
this Agreement shall govern and control. 
Except as modified hereby, this Agreement shall remain unmodified and in
full force and effect.


 


(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 the
commonwealth of Massachusetts, under the jurisdiction of the American
Arbitration Association or other mutually agreeable alternative arbitration
dispute resolution service, before a single arbitrator appointed in accordance
with the arbitration rules of the American Arbitration Association or
other selected service, modified only as herein expressly provided.  The arbitrator may enter a default decision
against any party who fails to participate in the arbitration proceedings.


 


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(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 17(d) has
been included to resolve any disputes between them with respect to this
Agreement, and that this Section 17(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 or the rules and
regulations of the Securities and Exchange Commission, 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:  General Counsel,
Sonus Networks, Inc., 7 Technology Park Drive, Westford, MA 01886, and to
you at the following address: 101 Sherwood Drive, North Andover, MA 01845.  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 may accept this offer of employment and
the terms and conditions thereof by confirming your acceptance in writing by December 11,
2008.  Please send your signed letter to
the company, or via e-mail to kharris@sonusnet.com which execution will
evidence your agreement with the terms and conditions set forth herein and
therein.  We are enthusiastic about your
joining us, and believe that our technical and business goals will provide
every opportunity for you to achieve your personal and professional objectives.


 


****


 


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I am looking forward to your joining the team
to help us take Sonus to the next level.


 


Very truly yours,


 


	
  Very
  truly yours,

  	
   

  
	
   

  	
   

  
	
  /s/
  Richard Nottenburg

  	
   

  
	
  Dr. Richard
  Nottenburg

  	
   

  
	
  President
  and CEO

  	
   

  



 


 


Accepted
by:


 


 


	
  /s/
  Gurudutt Pai

  	
   

  	
  December 11,
  2008

  
	
  Gurudutt
  Pai

  	
   

  	
  Date

  



 


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Annex
A


 


A
“Change in Control” as used in this 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.


 


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