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** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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**FORM 10-K/A**

 

**Amendment No. 1**

** **
| **x**                                                | **ANNUAL REPORT PURSUANT TO SECTION 13  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
|                                                 | ** **                                                                                               |
| **For the fiscal year ended December 31, 2008** |
| ** **                                           |
| **o**                                                | **TRANSITION REPORT PURSUANT TO SECTION 13  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |

 

**Commission File Number 000-30229**

 

**SONUS NETWORKS, INC.**

(Exact name of Registrant asspecified in its charter)

 

| **DELAWARE**(State or other jurisdiction of  incorporation or organization) | ** ** | **04-3387074**(I.R.S. Employer Identification No.) |
|-----------------------------------------------------------------------------|------------|----------------------------------------------------|

 

**7 Technology Park Drive, Westford, Massachusetts 01886**

(Address of principalexecutive offices, including zip code)

 

**(978) 614-8100**

(Registrant’s telephonenumber, including area code)

 

Securities registeredpursuant to Section 12(b) of the Act:

 

| **Title of each class** | ** ** | **Name of each exchange on which registered** |
|----------------------------------------|------------|-----------------------------------------------------------------------------|
| Common Stock, par value  $0.001        |       | The NASDAQ Global Select  Market                                            |

 

Securities registeredpursuant to Section 12(g) of the Act: **None**

 

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.Yes o  No x

 

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act.Yes o  No x

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the Registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes x   No o

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§229.405 of this chapter) is not contained herein, andwill not be contained, to the best of the registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment to this Form 10-K. o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer or a smaller reporting company. See definition of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act. (Check one):

 
| Large accelerated filer x |   | Accelerated filer o |   | Non-accelerated filer o(Do not check if a smaller reporting company) |   | Smaller reporting company o |
|------------------------------------------|--------|-------------------------------|--------|--------------------------------------------------------------------------------|--------|--------------------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).Yes o  No x

 

The aggregate market valueof the common stock held by non-affiliates of the Registrant was approximately$899,837,000 based on the closing price for the Common Stock on the NASDAQGlobal Select Market on June 30, 2008. As of February 19, 2009, therewere 272,997,400 shares of common stock, $0.001 par value, outstanding.

 

 

 

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**SONUS NETWORKS, INC.**

**FORM 10-K/A**

**Amendment No. 1**

**YEAR ENDED DECEMBER 31, 2008**

**TABLE OF CONTENTS**

 
| **Item**          | ** **                                                                                       | **Page** |
|-------------------|--------------------------------------------------------------------------------------------------|----------|
| ** **        | **Explanatory Note**                                                                             | 1        |
| **Part III** |                                                                                             |
| 10.               | Directors,  Executive Officers and Corporate Governance                                          | 2        |
| 11.               | Executive  Compensation                                                                          | 14       |
| 12.               | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters | 32       |
| 13.               | Certain  Relationships and Related Transactions, and Director Independence                       | 35       |
| 14.               | Principal  Accounting Fees and Services                                                          | 36       |
| **Part IV**  |                                                                                             |
| 15.               | Exhibits,  Financial Statement Schedules                                                         | 38       |
|              | Signatures                                                                                       | 39       |
|              | Exhibit Index                                                                               | 40       |

 

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**ExplanatoryNote**

 

This Amendment No. 1 (this “Amendment”) on Form 10-K/Ato the Annual Report on Form 10-K (the “Initial Filing”) of Sonus Networks, Inc.,a Delaware corporation (the “Company”), for the year ended December 31,2008, which was filed with the Securities and Exchange Commission, or the SEC,on February 26, 2009, is being filed solely for the limited purpose ofamending Items 10 through 14 to reflect the inclusion of the informationrequired by the Form 10-K and Part IV, Item 15. The Initial Filingcontemplated the incorporation of such information from a Proxy Statement to befiled by the Company within 120 days following the end of the Company’s yearended December 31, 2008. The Company does not believe that such ProxyStatement will be filed within the requisite 120-day time period and,accordingly, is including the information required by Items 10 through 14 ofthe Form 10-K through this Amendment as contemplated by instruction G(3) tothe Form 10-K.

 

Except as contained herein, this Amendment does not modifyor update disclosures contained in the Initial Filing. This Amendment should beread in conjunction with the Company’s other filings made with the SECsubsequent to the date of the Initial Filing, including any amendments to thosefilings, as well as any Current Reports filed on Form 8-K subsequent tothe date of the Initial Filing, if any. In addition, in accordance withapplicable rules and regulations promulgated by the SEC, this Amendmentincludes updated certificates from our Chief Executive Officer and ChiefFinancial Officer as Exhibits 31.1, 31.2, 32.1 and 32.2.

 

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**PART III**

 

**Item 10. Directors, Executive Officers and Corporate Governance**

 

**BOARD OF DIRECTORS**

 

Our Board is presently composedof seven members, six of whom are independent within our director independencestandards, which are consistent with the director independence standards of theNASDAQ Stock Market Marketplace Rules. At the 2009 Annual Meeting ofStockholders, or the 2009 Annual Meeting, two directors will be up forelection.

 

Biographical informationregarding each director of the Company is set forth below.

 

***Directors Whose Terms Will Expire in 2009***

 

*Richard N.Nottenburg*,Ph. D., 55, has been our President, Chief Executive Officer and a directorsince June 2008, and is responsible for the strategic direction andmanagement of our Company. From 2004 until 2008, Dr. Nottenburg was anofficer with Motorola, Inc., ultimately serving as its Executive VicePresident, Chief Strategy Officer and Chief Technology Officer. While atMotorola, Dr. Nottenburg was responsible for shaping Motorola’s overallcorporate strategy. Prior to joining Motorola as an officer in July 2004, Dr. Nottenburgwas a strategic consultant to the company from January 2004 to July 2004.Prior to that, Dr. Nottenburg was Vice President and General Manager ofVitesse Semiconductor Corporation after its merger with Multilink TechnologyCorporation in 2003. From 1995 to 2003, Dr. Nottenburg served as Presidentand Chief Executive Officer of Multilink leading the company from inception toa successful initial public offering in 2001. He holds a Doctor of ScienceDegree in Electrical Engineering from the Ecole Polytechnique Federale deLausanne in Lausanne, Switzerland, a Master of Science Degree in ElectricalEngineering from Colorado State University and a Bachelor of Science Degree inElectrical Engineering from Polytechnic Institute of New York.

 

*Scott E.Schubert*, 54,has been a director since February 2009. From 2005 until June 2008, Mr. Schubertserved as Chief Financial Officer of TransUnion LLC. From 2003 to 2005, Mr. Schubertserved as Chief Financial Officer and, prior to that, Executive Vice Presidentof Corporate Development of NTL, Inc. (now Virgin Media, Inc.). From1999 to 2003, Mr. Schubert held the position of Chief Financial Officer ofWilliams Communications Group, Inc., a high technology company, whichemerged from bankruptcy in October 2002 as WilTel Communications Group, Inc.Mr. Schubert also served as head of BP Amoco’s Global Financial Services,leading the initial integration of BP and Amoco’s worldwide financialoperations following the merger of the two companies. Mr. Schubert is agraduate of the Krannert School of Business at Purdue University where hecompleted his MBA degree in Finance and Economics in 1976. He also earned hisBachelor of Science degree at Purdue in 1975, with dual majors in Engineeringand Accounting.

 

***Directors Whose Terms Will Expire in 2010***

 

*Howard E.Janzen*, 55,has been a director since January 2006 and the Chairman of the Board sinceDecember 2008. Mr. Janzen has been Chief Executive Officer of OneCommunications, a supplier of integrated advanced telecommunications solutionsto businesses, since March 2007 and has served on the Board of Directorsof One Communications since June 2007. He served as President of SprintBusiness Solutions, the business unit serving Sprint’s business customer basewith almost 10,000 employees and $12 billion in annual revenue, from January 2004to September 2005. From May 2003 to January 2004, he wasPresident of Sprint’s Global Markets Group, responsible for Sprint’s longdistance service for both consumer and business customers. From October 2002to May 2003, Mr. Janzen was President and Chief Executive Officer ofJanzen Ventures, Inc., a private investment business venture. From 1994until October 2002, Mr. Janzen served as President and ChiefExecutive Officer, and Chairman from 2001, of Williams Communications Group, Inc.,a high technology company, which emerged from bankruptcy in October 2002as WilTel Communications Group, Inc. Mr. Janzen currently serves as amember of the Boards of Directors of Global Telecom & Technology, Inc.and Macrosolve, Inc. He also serves on the Governor’s Science andTechnology Council for the State of Oklahoma and is a Commissioner and Chairmanfor the Global Information Infrastructure Commission (GIIC). Mr. Janzenreceived his B.S and M.S. degrees in Metallurgical Engineering from theColorado School of Mines. He also has completed the Harvard Business SchoolProgram for Management Development.

 

*H. BrianThompson*, 70,has been a director since October 2003. Mr. Thompson has beenExecutive Chairman of Global Telecom and Technology (GTT), a leading globalnetwork integrator, since October 2006 and continues to head his ownprivate equity investment and advisory firm, Universal Telecommunications, Inc.From December 2002 to June 2007, Mr. Thompson was Chairman ofComsat International, an independent telecommunications operator serving all ofLatin America. He currently 

 

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serves as a member of the Boards ofDirectors of Axcelis Technologies, Inc., ICO Global Communications(Holdings) Limited and Penske Automotive Group, Inc. He received hisM.B.A. from Harvard University’s Graduate School of Business, and received anundergraduate degree in chemical engineering from the University ofMassachusetts.

 

***Directors Whose Terms Will Expire in 2011***

 

*John P.Cunningham*, 71,has been a director since September 2004. In June 2002, Mr. Cunninghamretired from Citrix Systems, Inc., a global leader in virtual workplacesoftware and services. From May 2001 to June 2002, Mr. Cunninghamwas Senior Vice President, Finance and Operations of Citrix. He joined Citrixin November 1999 as Senior Vice President, Finance and Administration andserved in that capacity until May 2001. From 1998 to June 1999, Mr. Cunninghamserved as Executive Vice President and Chief Financial Officer of Wang Global,a worldwide provider of network services. Prior to joining Wang, he served asChief Financial Officer of Whirlpool Corporation from 1996 to 1998 and ChiefFinancial Officer of Maytag Corporation from 1994 to 1996, both diversifiedmanufacturers. Mr. Cunningham has also held various management positionsat International Business Machines. He currently serves as a member of theBoard of Directors of Smart Disk Corporation. Mr. Cunningham has an M.B.A.from New York University and a B.S. from Fordham University.

 

*John A.Schofield*, 60,has been a director since January 2009. From 1999 to 2005, Mr. Schofieldserved as President, CEO and Chairman of the Board of Advanced FibreCommunications, Inc., a leading supplier of next-generation edge accessequipment and multi-service broadband solutions for the telecommunicationsindustry. From 1992 to 1999, Mr. Schofield served as Senior VicePresident and then President of the Integrated Solutions Group of ADCTelecommunications, Inc., a world-wide supplier of network equipment,software solutions, and integration services for broadband and multiservicenetworks. Mr. Schofield currently serves as Chairman of the Board ofIntegrated Device Technology, Inc. Mr. Schofield has a BSEE from theNSW Institute of Technology, in Sydney Australia and is a graduate of Raytheon’sAdvanced Management Program.

 

*Paul J.Severino*, 62,has been a director since March 1999. Mr. Severino has been aninvestment advisor to emerging companies and venture funds since 1996. Hecurrently serves as a member of the Board of Directors of Analog Devices, Inc.Mr. Severino has a B.S. in engineering from Rensselaer PolytechnicInstitute.

 

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**CORPORATEGOVERNANCE AND BOARD MATTERS**

 

**CorporateGovernance Guidelines**

 

Our Board has established Corporate GovernanceGuidelines to assist in the fulfillment of its responsibilities. The governancepractices which are memorialized in the Corporate Governance Guidelines areintended to ensure that our Board has the necessary authority and processes toreview and evaluate our business operations as needed and to make independentdecisions consistent with the interests of our stockholders.

 

Our Board is responsible for overseeing our managementand financial results and is committed to diligently exercising its oversightresponsibilities consistent with the highest principles of business ethics, andto meeting the corporate governance requirements of both federal law and theNASDAQ Stock Market Marketplace Rules.

 

The Corporate Governance Guidelines, among otherthings, include information regarding the:

 

·                  various goals of the Board, as well as a descriptionof the roles and responsibilities of its members;

 

·                  composition of the Board, including the independenceof directors and an overview of the candidate selection process;

 

·                  process of meetings of the Board and the variouscommittees; and

 

·                  policies of the Company relating to directororientation and the proper access by directors to various members of managementand Company advisors.

 

In addition to its routine monitoring of bestpractices, during the last fiscal year our Board undertook a comprehensivereview of our current corporate governance practices, the corporate governanceenvironment and current trends, and, as a result, instituted a number ofimportant changes, including separating the roles of Chairman and ChiefExecutive Officer, forming an ad hoc Corporate Development and InvestmentCommittee to focus on uses of our cash, tax planning, strategic acquisitions,mergers and joint ventures, with the objective of enhancing stockholder valueand voting to declassify our Board, a change that will be discussed in greaterdetail under Proposal 2 of our Proxy Statement for the 2009 Annual Meeting, asit is subject to approval by the stockholders at the upcoming 2009 AnnualMeeting.

 

**CorporateCode of Conduct and Ethics**

 

Our Board has adopted a written Corporate Code ofConduct and Ethics, which qualifies as a “code of ethics” as defined byItem 406 of Regulation S-K of the Exchange Act. The Corporate Code ofConduct and Ethics was established to preserve Sonus’ reputation and toreaffirm its existing policy for integrity to its employees, officers anddirectors and to persons who deal with the Company. To ensure that that ourbusiness is conducted in a consistently legal and ethical manner, all of ourdirectors, officers and employees must act in accordance with our CorporateCode of Conduct and Ethics.

 

Among other matters, the Corporate Code of Conduct andEthics is designed to deter wrongdoing and to promote:

 

·                  honest and ethical conduct, including the ethicalhandling of actual and apparent conflicts of interest;

 

·                  proper use of Company resources;

 

·                  full, fair, accurate and timely disclosure in publiccommunications and SEC reports;

 

·                  prompt internal reporting of violations of internalpolicies; and

 

·                  accountability for adherence to the Corporate Code ofConduct and Ethics.

 

Our policies and procedures cover all areas ofprofessional conduct, including relations with vendors, conflicts of interest,financial integrity and the protection of corporate assets, as well asadherence to all laws and regulations applicable to the conduct of ourbusiness. Employees and directors are required to report any conduct that theybelieve in good faith to be an actual or apparent violation of the CorporateCode of Conduct and Ethics. In addition, our Audit Committee has establishedprocedures to receive, retain and treat complaints received regardingaccounting, internal accounting controls or auditing 

 

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matters and toallow for the confidential and anonymous submission by employees of concernsregarding questionable accounting or auditing matters.

 

**DirectorIndependence**

 

Under the NASDAQ Stock Market Marketplace Rules, adirector will only qualify as an “independent director” if, in the opinion ofour Board, that person does not have a relationship that would interfere withthe exercise of independent judgment in carrying out the responsibilities of adirector. Our Board has determined that each of John P. Cunningham, Howard E.Janzen, Paul J. Severino, John Schofield, Scott Schubert and H. Brian Thompsondoes not have a relationship that would interfere with the exercise ofindependent judgment in carrying out the responsibilities of a director andthat each of these directors is an “independent director” as defined under Rule 4200(a)(15)of the NASDAQ Stock Market Marketplace Rules.

 

In determining the independence of the directorslisted above, our Board considered each of the transactions specified in ourrelated person transaction policy. There are no family relationships among ourexecutive officers and directors.

 

**BoardMeetings**

 

Our Board held 24 meetings during 2008. Each directorwho served on our Board during 2008 attended at least 75% of all Board andapplicable Committee meetings during 2008. We do not have a policy regardingthe attendance of directors at our annual meetings of stockholders. Six of ourseven directors attended the 2008 annual meeting.

 

**BoardCommittees**

 

Our Board has three standing Committees: the AuditCommittee, the Compensation Committee and the Nominating and CorporateGovernance Committee. Each of these Committees is composed entirely ofindependent directors as defined under applicable rules.

 

*AuditCommittee*

 

Our Board has established an Audit Committeeconsisting of four members: Messrs. Cunningham (Chairman), Janzen,Schofield and Schubert. Each of the members of the Audit Committee is an “independentdirector” as defined under the rules of the NASDAQ Stock Market and theadditional independence requirements for members of audit committeescontemplated by Rule 10A-3 under the Securities Exchange Act of 1934. OurBoard has determined that Mr. Cunningham is an “audit committee financialexpert” as defined in Item 407(d)(5) of Regulation S-K. TheAudit Committee held 20 meetings during 2008.

 

The Audit Committee operates pursuant to a writtencharter adopted by the Board that reflects standards and requirements adoptedby the SEC and the NASDAQ Stock Market. Among other things, the purposes of theAudit Committee include:

 

·                  overseeing our accounting and financial reportingprocesses and the audits of our financial statements; and

 

·                  maintaining the integrity of our financial statements,the independence, qualifications and performance of our independent registeredpublic accounting firm, and our compliance with legal requirements.

 

The duties of the Audit Committee include, among otherthings:

 

·                  selecting, compensating, retaining, terminating andoverseeing the independent registered public accounting firm;

 

·                  considering the qualifications, independence andperformance, and approving the scope of the proposed audit to be conducted byour independent registered public accounting firm and reviewing the results ofthe audit;

 

·                  reviewing our financial reporting processes, includingthe accounting principles and practices followed and the financial information providedto stockholders and others;

 

·                  overseeing our internal control over financialreporting and disclosure controls and procedures; and

 

·                  serving as our Qualified Legal Compliance Committee.

 

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The duties of the Audit Committee do not includedetermining whether our financial statements are complete and accurate orwhether they are prepared in accordance with generally accepted accountingprinciples. Management of the Company is responsible for preparing ourfinancial statements and our independent auditors are responsible for auditingthose financial statements.

 

**AUDIT COMMITTEE REPORT**

 

*Theinformation contained in this report shall not be deemed to be “solicitingmaterial” or “filed” or incorporated by reference in future filings with theSEC, or subject to the liabilities of Section 18 of the SecuritiesExchange Act of 1934, except to the extent that we specifically request that itbe treated as soliciting material or specifically incorporate it by referenceinto a document filed under the Securities Act of 1933 or the Exchange Act.*

 

We reviewed Sonus’ auditedfinancial statements for the fiscal year ended December 31, 2008 anddiscussed these financial statements with Sonus’ management, including adiscussion of the quality, not just the acceptability, of the accountingprinciples, the reasonableness of significant judgments and the clarity ofdisclosures in the financial statements. Sonus’ management is responsible forSonus’ financial reporting process, including its system of internal controls,and for the preparation of consolidated financial statements in accordance withgenerally accepted accounting principles. Sonus’ independent registered publicaccounting firm, Deloitte & Touche LLP, or Deloitte, isresponsible for performing an independent audit of Sonus’ financial statementsin accordance with standards of the Public Company Accounting Oversight Board (UnitedStates) (“PCAOB”) and issuing a report on those financial statements andissuing a report on the effectiveness of Sonus’ internal control over financialreporting as of the end of the fiscal year. Our responsibility is to monitorand review these processes. We also reviewed and discussed with Deloitte theaudited financial statements and the matters required by SECRegulation S-X Rule 2-07 and Statement on Auditing Standards No. 61,*Communication with Audit Committees*,as amended (AICPA *Professional Standards*,Vol. 1. AU section 380), as adopted by the PCAOB.

 

Deloitte also provided uswith the written disclosures and the letter required by PCAOB Ethics andIndependence Rule 3526, *Communicationswith Audit Committees Concerning Independence*. This Standardrequires independent registered public accounting firms annually to disclose inwriting all relationships that in the independent registered public accountingfirm’s professional opinion may reasonably be thought to bear on independence,to confirm their independence and to engage in a discussion of independence. Wealso considered whether Deloitte’s provision of other, non-audit relatedservices to Sonus is compatible with maintaining Deloitte’s independence.

 

Based on its discussionswith management and Deloitte, and our review of information provided bymanagement and Deloitte, we recommended to the Sonus’ Board of Directors thatthe audited financial statements and management’s report on internal controlover financial reporting be included in Sonus’ Annual Report on Form 10-K,as amended, for the year ended December 31, 2008.

 
|     | Submitted by,                 |
|----------|-------------------------------|
| * * | *AUDIT COMMITTEE:*            |
|     | John P. Cunningham (Chairman) |
|     | Howard E. Janzen              |
|     | John A. Schofield             |
|     | Scott E. Schubert             |

 

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*Compensation Committee*

 

The Compensation Committee consists of two members: Messrs. Severino(Chairman) and Thompson. Each of the members of the Compensation Committee isan “independent director” as defined under the rules of the NASDAQ StockMarket. The Compensation Committee held 16 meetings during 2008.

 

The Compensation Committee operates pursuant to awritten charter adopted by the Board that reflects standards and requirementsadopted by the NASDAQ Stock Market.

 

Among other things, the responsibilities of theCompensation Committee include:

 

·                  the review and approval of the compensation, as wellas evaluation of the performance, of our executive officers, including ourChief Executive Officer;

 

·                  administering the Company’s equity-based compensationplans, including the stock plans and the structure of the bonus plans;

 

·                  periodically reviewing, with input from the fullBoard, issues related to succession planning for the Chief Executive Officerand other members of management;

 

·                  reviewing the Company’s various public disclosuresregarding compensation and preparing an annual executive compensation reportfor the stockholders of the Company in accordance with the rules andregulations of the SEC; and

 

·                  advising and assisting management in developing ouroverall compensation strategy to assure that it promotes stockholder interests,supports our strategic and tactical goals, and provides for appropriate rewardsand incentives for our management and employees.

 

In exercising its responsibilities, the CompensationCommittee establishes and monitors policies governing the compensation ofexecutive officers and determines the terms, conditions, restrictions and performancecriteria relating to incentive compensation.

 

*Nominatingand Corporate Governance Committee*

 

The Nominating and Corporate Governance Committeeconsists of two members: Messrs. Thompson (Chairman) and Janzen. Each ofthe members of the Nominating and Corporate Governance Committee is, and eachformer member while serving on the Nominating and Corporate GovernanceCommittee was, an “independent director” as defined under the current rules ofthe NASDAQ Stock Market. The Nominating and Corporate Governance Committee didnot meet during 2008.

 

The Nominating and Corporate Governance Committeeoperates under a written charter adopted by the Board that reflects standardsand requirements adopted by the NASDAQ Stock Market.

 

Among other things, the purposes of the Nominating andCorporate Governance Committee include:

 

·                  assisting the Board in identifying individualsqualified to serve as members of the Board;

 

·                  developing and recommending to the Board a set ofcorporate governance principles for the Company; and

 

·                  overseeing the evaluation of the Board and managementof the Company.

 

The duties of the Nominating and Corporate GovernanceCommittee include, among other things:

 

·                  developing criteria for the selection of new directorsand identifying candidates qualified to become members of the Board;

 

·                  recommending to the Board the director nominees (a) forelection by the stockholders at each meeting of stockholders at which directorswill be elected and (b) to fill any vacancies and newly created directorshipson the Board; and

 

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·                  developing and recommending to the Board a set of corporate governanceguidelines applicable to the Company and review and reassess the adequacy ofsuch guidelines.

 

The Nominating and Corporate Governance Committee encourages theselection of directors who will contribute to our overall corporate goals ofresponsibility to our stockholders, customers and employees. The Nominating andCorporate Governance Committee reviews from time to time the appropriate skillsand characteristics required of individual directors to contribute to oursuccess in today’s business environment. The Nominating and CorporateGovernance Committee has the authority to engage independent advisors to assistin the process of identifying and evaluating candidates, but has not engagedany such advisors to date.

 

**Director Nomination Process**

 

The process followed by the Nominating and Corporate GovernanceCommittee to identify and evaluate director candidates includes requests to ourBoard members and others for recommendations, meetings from time to time toevaluate biographical information and background material relating to potentialcandidates and interviews of selected candidates by members of the Nominatingand Corporate Governance Committee and our Board.

 

In considering whether to recommend any particular candidate forinclusion in our Board’s slate of recommended director nominees, the Nominatingand Corporate Governance Committee applies the criteria generally set forth inthe Nominating and Corporate Governance Committee charter. There are nospecific minimum qualifications for a recommended nominee to our Board,however, the Committee considers, among other skills and criteria, the followingcriteria for nomination as a director: demonstrated business acumen, knowledgeand experience and an ability to exercise sound judgment in matters that relateto our current and long-term goals; commitment to understanding us and ourindustry and to regularly attend and participate in meetings of our Board andits Committees; a reputation for integrity, honesty and adherence to highethical standards; the ability and experience to understand sometimesconflicting interests of our various constituencies; and the absence of anyconflict of interest that would impair the nominee’s ability to represent theinterests of all our stockholders and to fulfill the responsibilities of beinga director. The Committee does not assign specific weights to particularcriteria and no particular criterion is a prerequisite for each prospectivenominee. Our Board believes that the backgrounds and qualifications of itsdirectors, considered as a group, should provide a composite mix of experience,knowledge and abilities that will allow our Board to fulfill itsresponsibilities.

 

Stockholders may recommend individuals to the Nominating and CorporateGovernance Committee for consideration as potential director candidates bysubmitting their names, together with appropriate biographical information andbackground materials and a statement as to whether the stockholder or group ofstockholders making the recommendation has beneficially owned no more than 5%of our common stock for at least a year as of the date such recommendation ismade, to the Nominating and Corporate Governance Committee, c/o CorporateSecretary, Sonus Networks, Inc., 7 Technology Park Drive, Westford, MA01886. Assuming that appropriate biographical and background materials havebeen provided on a timely basis, the Committee will evaluatestockholder-recommended candidates by following substantially the same process,and applying substantially the same criteria, as it follows for candidatessubmitted by others.

 

**Non-Executive Chairman**

 

In December 2008, in furtherance of our desire to furtherstrengthen our corporate governance policies, our Board separated the positionsof Chairman and Chief Executive Officer. At that time, our Board appointedHoward E. Janzen as non-executive Chairman of the Board. The duties of thenon-executive Chairman of the Board are to:

 

·                  preside at board meetings;

 

·                  preside at executive sessions or other meetings of the independentdirectors in coordination with the lead independent director;

 

·                  consult with the lead independent director as to agenda items for boardand committee meetings;

 

·                  coordinate with committee chairs in the development and recommendationsrelative to board and committee meeting content and schedules; and

 

·                  provide the Chief Executive Officer’s annual performance evaluationcommunicating the feedback from the Compensation Committee and the Board.

 

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**Lead Independent Director**

 

Our independent directors have appointed Paul Severino as leadindependent director to strengthen the independence and the role of theindependent directors. The duties of the lead independent director are to:

 

·                  preside at board meetings in the absence of the Chairman of the Board,or upon designation by a majority of directors;

 

·                  preside at executive sessions or other meetings of the independentdirectors in the absence of the Chairman of the Board; and

 

·                  consult with the Chairman of the Board as to agenda items for board andcommittee meetings.

 

The independent directors appoint the lead independent directorannually to serve for a period of one year.

 

**Executive Sessions of the Board**

 

Under our Corporate Governance Guidelines, our independent directorsare required to meet regularly in executive session without management toreview the performance of management and our Company and any related matters.Generally, executive sessions will be held in conjunction with regularlyscheduled meetings of the board.

 

We expect our Board to have a least four executive sessions each year.

 

**Additional Governance Matters**

 

*PublicAvailability of Corporate Governance Documents*

 

Our key corporate governance documents, including our CorporateGovernance Guidelines, Corporate Code of Conduct and Ethics and the charters ofour Audit Committee, Compensation Committee and Nominating and CorporateGovernance Committee are:

 

·                  available on our corporate website at *http://www.sonusnet.com*(by including the foregoing Internet address link, we do not intend toincorporate by reference to this 10-K/A material not specifically referencedherein);

 

·                  available in print to any stockholder who requests them from ourcorporate secretary; and

 

·                  filed as exhibits to our securities filings with the SEC.

 

*StockholderCommunications with the Board of Directors*

 

Stockholders may communicate with our Board by writing, e-mailing orcalling our Investor Relations Department at Sonus Networks, Inc., 7Technology Park Drive, Westford, MA 01886, Attention: Investor Relations, tel:(978) 614-8100, *ir@sonusnet.com.*Our Investor Relations Department will review all such communications and willforward to the chairman of the Audit Committee of our Board all communicationsthat raise an issue appropriate for consideration by our Board. In general,communications relating to corporate governance and long-term corporatestrategy are more likely to be forwarded than communications relating toordinary business affairs, personal grievances and matters as to which we tendto receive repetitive or duplicative communications.

 

**Director Compensation**

 

Members of our Board who are employees or officers of Sonus receive nocompensation for their service as directors. Non-employee directors arecompensated for their service as directors as follows:

 
| **Description of Board and Committee Service** | ** ** | **Board Member  Annual Fee** | ** ** |
|-------------------------------------------------------------------------|------------|----------------------------------------|------------|
| Board service and no committee service                                  |       | $                                      | 20,000     |   |
| Board service and one committee other than Audit Committee              |       | $                                      | 23,750     |   |
| Board service and Audit Committee service                               |       | $                                      | 27,500     |   |
| Board service and two committees other than Audit Committee             |       | $                                      | 27,500     |   |
| Board service, Audit Committee service and one other committee          |       | $                                      | 31,250     |   |
| Board service and Audit Committee Chairperson                           |       | $                                      | 37,500     |   |

 

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Directors also are eligible to be reimbursed for reasonable out-ofpocket expenses incurred in connection with attendance at our Board orCommittee meetings.

 

Under our 2007 Plan, non-employee directors also are eligible toreceive stock option grants or restricted stock awards at the discretion of ourBoard or other administrator of the 2007 Plan. We currently compensatedirectors with option grants for 50,000 shares upon commencement of boardservice and also typically grant to non-employee directors an option for 20,000shares annually. No option grants were made to directors in 2008. An annualoption grant was made at the end of 2007 after the finalization of therestatement based on the stock option review which was performed by us. At thebeginning of 2009, our Board reviewed the fact that the 2008 annual directoroption grant was not made. At that time, our Board decided to postpone anydirector option grants until August 2009, to align us with our annualequity incentive grant schedule.

 

The following table contains information on compensation earned by eachnon-employee member of our Board during 2008.

 

**2008Director Compensation**

 
| **Name**           | ** ** | **Fees Earned or  Paid in Cash  ($)** | ** ** | **Option Awards  (1)(2)  ($)** | ** ** | **Total  ($)** | ** ** |
|--------------------|------------|-----------------------------------------------------------|------------|-------------------------------------|------------|----------------|------------|
| Edward Anderson(3) |       | $                                                         | 31,250     |                                | $          | 54,456         |       | $ | 85,706 |   |
| John P. Cunningham |       | $                                                         | 37,500     |                                | $          | 85,376         |       | $ | 122,876 |   |
| Howard E. Janzen   |       | $                                                         | 27,500     |                                | $          | 71,136         |       | $ | 98,636 |   |
| Paul J. Severino   |       | $                                                         | 23,750     |                                | $          | 56,257         |       | $ | 80,007 |   |
| H. Brian Thompson  |       | $                                                         | 27,500     |                                | $          | 59,700         |       | $ | 87,200 |   |

 

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(1)                                The amounts in this column do not reflectcompensation actually received by the director. Instead, the amounts in thiscolumn reflect the dollar amount recognized for financial statement reportingpurposes for the year ended December 31, 2008, in accordance withFinancial Accounting Standards Board Statement of Financial AccountingStandards No. 123 (revised 2004), *Share-BasedPayment* (“SFAS 123R”) with respect to options awarded prior to2008, as no option grants were made to directors in 2008. A discussion of theassumptions used in calculating the amount in this column may be found inNote 2 to our audited consolidated financial statements included in ourInitial Filing of the Annual Report on Form 10-K for the year ended December 31,2008.

 

(2)                                The following table shows the aggregatenumber of outstanding stock options held by each of our non-employee directorsas of December 31, 2008 and the fair value at the time of grant for eachstock option grant as determined in accordance with SFAS 123R:

 

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| **Non-employee Director** | ** ** | **Grant Date** | ** ** | **Number of  Shares** | ** ** | **Grant Date  Fair Value of  Option Awards** | ** ** |
|--------------------------------|------------|---------------------|------------|----------------------------|------------|------------------------------------------------------------------|------------|
| Edward T. Anderson             |       | 5/11/01             |       | 10,000                     |       | $                                                                | 265,700    |   |
|                           |       | 5/02/02             |       | 10,000                     |       | 21,940                                                           |       |
|                           |       | 5/07/03             |       | 10,000                     |       | 29,200                                                           |       |
|                           |       | 12/29/04            |       | 10,000                     |       | 46,800                                                           |       |
|                           |       | 10/12/05            |       | 20,000                     |       | 75,698                                                           |       |
|                           |       | 12/17/07            |       | 40,000                     |       | 118,336                                                          |       |
| Total                          |       |                |       | 100,000                    |       | $                                                                | 557,674    |   |
| John P. Cunningham             |       | 9/09/04             |       | 50,000                     |       | $                                                                | 230,000    |   |
|                           |       | 10/12/05            |       | 20,000                     |       | 75,698                                                           |       |
|                           |       | 12/17/07            |       | 40,000                     |       | 118,336                                                          |       |
| Total                          |       |                |       | 110,000                    |       | $                                                                | 424,034    |   |
| Howard E. Janzen               |       | 1/20/06             |       | 50,000                     |       | $                                                                | 159,000    |   |
|                           |       | 12/17/07            |       | 40,000                     |       | 118,336                                                          |       |
| Total                          |       |                |       | 90,000                     |       | $                                                                | 277,336    |   |
| Paul J. Severino               |       | 5/11/01             |       | 10,000                     |       | $                                                                | 265,700    |   |
|                           |       | 5/02/02             |       | 10,000                     |       | 21,940                                                           |       |
|                           |       | 5/07/03             |       | 10,000                     |       | 29,200                                                           |       |
|                           |       | 12/29/04            |       | 10,000                     |       | 46,800                                                           |       |
|                           |       | 10/12/05            |       | 20,000                     |       | 75,698                                                           |       |
|                           |       | 12/17/07            |       | 40,000                     |       | 118,336                                                          |       |
| Total                          |       |                |       | 100,000                    |       | $                                                                | 557,674    |   |
| H. Brian Thompson              |       | 10/24/03            |       | 50,000                     |       | $                                                                | 337,975    |   |
|                           |       | 12/29/04            |       | 10,000                     |       | 46,800                                                           |       |
|                           |       | 10/12/05            |       | 20,000                     |       | 75,698                                                           |       |
|                           |       | 12/17/07            |       | 45,000                     |       | 133,128                                                          |       |
| Total                          |       |                |       | 125,000                    |       | $                                                                | 593,601    |   |

 

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(3)           Mr. Anderson retired from ourBoard on December 22, 2008.

 

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**EXECUTIVEOFFICERS OF THE REGISTRANT**

 

The executive officers of the Company as of the date hereof are listedbelow.

 
| **Name**              | ** ** | **Age** | ** ** | **Position**                                      | ** ** |
|-----------------------|------------|---------|------------|---------------------------------------------------|------------|
| Richard N. Nottenburg |       | 55      |       | President and Chief  Executive Officer            |       |
| Richard J. Gaynor     |       | 49      |       | Chief Financial Officer                           |       |
| Gurudutt Pai          |       | 43      |       | Senior Vice President                             |       |
| Mohammed Shanableh    |       | 39      |       | Vice President, Worldwide  Sales                  |       |
| Matt Dillon           |       | 48      |       | Vice President, Global  Services                  |       |
| Gale England          |       | 59      |       | Vice President, Product  Operations               |       |
| Wayne M. Pastore      |       | 44      |       | Vice President, Finance  and Corporate Controller |       |

 

Biographical information regarding each executive officer other thanRichard N. Nottenburg is set forth below. Richard Nottenburg’s biographicalinformation is set forth above under “*Boardof Directors*.”

 

***Richard J. Gaynor*** has served as our Chief FinancialOfficer since October 2007. Prior to that, he served as Chief FinancialOfficer, Vice President of Finance and Administration, Treasurer and AssistantSecretary of Sycamore Networks, Inc., a provider of intelligent bandwidthmanagement solutions for fixed line and mobile network operators worldwide.From January 2001 to September 2004, Mr. Gaynor was VicePresident, Corporate Controller and Principal Accounting Officer ofManufacturers’ Services Ltd., a global provider of sub-contract electronicmanufacturing services. From January 2000 to January 2001, Mr. Gaynorwas Chief Financial Officer of Evans and Sutherland Computer Corporation, adeveloper and manufacturer of flight simulation hardware and software. From March 1994to December 1999, Mr. Gaynor was Vice President of Finance andOperations Controller at Cabletron Systems, Inc., a global provider ofenterprise networking products.

 

***Gurudutt Pai*** has been our Senior Vice President sinceDecember 2008. Mr. Pai joined Sonus from Veveo, Inc. a companythat provides solutions to simplify access to web video content fromInternet-connected devices, where he served as Vice President, Marketing andBusiness Development since June 2005. From June 2003 to June 2005,Mr. Pai served as Vice President of the Core Networks division forMotorola, a provider of a portfolio of technologies, solutions and services formobile communications.

 

***Mohammed Shanableh*** joined Sonus in September 2004. Hehas been our Vice President, Worldwide Sales, since August 2007. From October 2006to July 2007, he was Vice President, Sales Engineering, and was VicePresident, Network Technology Solutions, from September 2004 to October 2006.Mr. Shanableh was Director, Carrier Strategy at Telica, a developer ofintelligent multi-service broadband switching systems for next generationservice providers from January 2002 to September 2004. He co-foundedValiant Networks, where he was served as Vice President, Professional Services,from December 1999 to December 2001.

 

***Matt Dillon*** has been our Vice President, GlobalServices since 2001. Prior to joining Sonus, from 1987 to 2000, he was afounding member of Boston Technology (later purchased by Comverse), whichcreated the de-facto standard in scalable central office-based voicemailplatforms for Bell Atlantic. From 1984 to 1987, Mr. Dillon was VicePresident of Operations for Technology Enterprises.

 

***Gale England*** has been our Vice President, ProductOperations since May 2005. Prior to joining Sonus, Mr. England wasthe Chief Executive Officer and President of Numetrix Inc., a SanFrancisco based Software Applications Company. From 2000 to 2001, he wasGeneral Manager and VP of Engineering Development at VillaMontage Systems (a BroadbandAccess Solution funded by Convergence Partners). Prior to 2000, Mr. Englandhad also held senior management positions at Digital Equipment Corp., WellfleetCommunications, Inc., Bay Networks, and Nortel Networks, Inc.

 

***Wayne M. Pastore*** has been our Vice President, Finance andCorporate Controller since May 2008. He had previously been the Director,Business Process Improvement from February 2008 to May 2008. From September 2006to February 2008, Mr. Pastore was Director of Financial Planning andAnalysis of Sycamore Networks, Inc., an optical switching company. From December 2003to September 2006, he was Corporate Controller of Spotfire, Inc., abusiness analytics software company.

 

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**SECTION 16(a) BENEFICIALOWNERSHIP REPORTING COMPLIANCE**

 

Section 16(a) of the Securities Exchange Act of 1934 requiresour executive officers, directors and persons who own more than 10% of ourcommon stock to file reports of ownership and changes in ownership with theSEC. Based solely on a review of the copies of reports furnished to us, webelieve that during the year ended December 31, 2008, our directors,executive officers and greater than 10% stockholders complied with all Section 16(a) filingrequirements with the exception of the following: (1) Mr. Ahmed and Mr. Udokwueach filed amended Form 3s on January 31, 2008, because the original Form 3sfiled by each of them in 2007 were under-reported by 4,500 shares and (2) Mr. Pastorefiled a Form 3 reporting shares held four days in advance of his promotionto Chief Accounting Officer, but six days after his promotion was approved byour Board.

 

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**Item 11. Executive Compensation**

 

**EXECUTIVE COMPENSATION**

 

**Compensation Discussion and Analysis**

 

TheCompensation Committee oversees our executive compensation program and approvesall compensation decisions relating to our executive officers. The CompensationCommittee evaluates both performance and compensation to ensure that we areable to attract and retain the best possible employees in key positions andthat the compensation provided to key employees remains competitive with thecompensation provided to employees of our peer group comprised of companies ofcomparable revenue and market capitalization in the diversified high technologymarket.

 

***Philosophy and Objectives***

 

TheCompensation Committee believes that an effective executive compensationprogram should be tied to annual and long-term strategic goals for the businessand should align executives’ interests with those of the stockholders byrewarding performance that achieves those goals with the objective ofultimately increasing shareholder value. The Compensation Committee relies uponits experience and judgment and not upon rigid guidelines or formulas indetermining the amount and mix of compensation elements for each executiveofficer. As the Compensation Committee believes that executives should beincentivized to bring us to a higher level of performance as compared to ourpeer group, total direct compensation is intended to represent a strong competitiveposition (60th percentileopportunity if goals are achieved) as compared to our peer group.

 

Our executivecompensation program is designed to: (i) offer compensation opportunitiesthat attract highly talented executives; (ii) motivate individuals to performat their highest levels; (iii) reward outstanding initiative andachievement; (iv) reinforce critical measures of performance derived fromour business strategy and key success factors; and (v) retain thoseindividuals with the leadership abilities and skills necessary to buildlong-term shareholder value by supporting executive ownership and shareholderalignment.

 

In order toimplement our program, the Compensation Committee believes that the executivecompensation program must include competitive cash and stock incentive-basedcompensation components that reward performance and that executive compensationshould be heavily weighted towards such incentive-based compensation incomparison to base salaries as a percentage of total compensation. The executivecompensation program is structured with executive base salaries that are belowthe median of our peer group, but with annual cash incentives designed to makeus competitive with our peer group (total cash compensation at the 50th percentile if annualgoals are achieved) and long-term equity incentives that are highly competitivewith our peer group (75th percentile).Therefore, because our Company is at the low end of the annual revenue rangeand below the average annual revenue for our peer group, we provide basesalaries that are commensurate with our position within our peer group and ahigher level of incentive compensation in order to encourage performance at ahigher level than we previously have achieved and improvement of our positionwithin our peer group. Such incentives are necessary for us to attract highlytalented executives consistent with those of a company with strong growth andearnings potential.

 

As ourexecutive compensation program is focused primarily on providing competitive incentive-basedcompensation to our executives, actual executive compensation can vary greatly,and in fact, has fallen short of the target compensation amounts at whichexecutives would be compensated had the Company achieved its annual performancegoals and had our stock increased in value. The amount of incentive-based cashcompensation awarded is based on measures of profitability and revenue, and,therefore, executives are only awarded such compensation if they achieve theannual corporate performance goals as set by the Company’s Board of Directors.Over the last several years, although target annual cash incentives and targetlong-term equity incentives have been competitive and highly competitive,respectively, with our peer group, because we have not achieved our targetperformance goals, executives have been compensated well below target levels.That is, although our target levels provide the opportunity for compensatingour executives at higher levels compared to our peer group, analyses conductedby our consultants indicate that actual overall total direct compensation forour executives is below that of our peer group and survey market references.See “*Determining Executive Compensation.*”

 

Over the lastseveral years, it has become even more important to maintain targetincentive-based compensation at the higher level of the annual revenue rangewithin the peer group because executive retention and motivation have beenaffected by the challenging market environment and the price of our stock has notled to appreciation in the value of previously granted stock options. Executiveturnover has influenced executive compensation decision-making as we promotednew Vice Presidents in Sales and in Marketing, hired a new Chief FinancialOfficer in 2007, and hired a new President and Chief Executive Officer andSenior Vice President in 2008. With the need to attract these new hires, ourexecutive compensation became market-driven. We face competition for executivesfrom larger companies with significantly greater cash 

 

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compensation and from smallerprivate companies with greater equity growth potential through an initialpublic offering or acquisition and must, therefore, be competitive in our totalcompensation in order to attract and retain highly talented executives.

 

We have notestablished a policy for the specific allocation between cash and non-cashcompensation. Rather, the Compensation Committee annually reviews market dataand information to determine the appropriate level and combination of incentiveand non-incentive, cash and equity-based compensation, based upon competitivedata. The Compensation Committee believes that, as a growth-oriented company,we should continue to provide significant equity incentives as a component ofcompensation.

 

***CompensationComponents***

 

Our executivecompensation program has three major components: (i) base salary, (ii) cash-basedincentives and (iii) equity-based incentives. The Compensation Committeereviews the compensation program on an annual basis.

 

*Base Salary.* Aggregate base salaries are designed to reflect the scope ofresponsibilities, performance and competencies of the individual executives.The salary for each executive officer is reviewed on an annual basis, as wellas at the time of a promotion or other change in responsibilities. Increases insalary are based on an evaluation of the individual’s performance and level ofpay compared to benchmark data for similar positions at peer companies. For2008, Mr. Gaynor’s salary increased to $285,000 from $270,000 in 2007, Mr. Shanableh’ssalary increased to $241,960 from $230,000 in 2007, and Mr. Dillon’ssalary increased to 235,125 from 225,000 in 2007. Mr. England’s salaryincreased to $210,900 from 190,000 in 2007.

 

*Cash-based Incentives.*  A significant portion of each executiveofficer’s compensation is tied to the achievement of both corporate financialgoals and individual performance objectives. Accordingly, cash-based incentivesare expected to represent a substantial part of total compensation for ourexecutives and are based on measures that reflect annual financial andmanagement objectives.

 

Under the 2008Incentive Compensation Program, which covered all executive officers other thanthe Vice President of Worldwide Sales, the Compensation Committee set eachexecutive’s cash incentive as a percentage of his base salary. (The incentivecompensation for the Vice President of Worldwide Sales is based on a commissionplan more fully described under the Summary Compensation Table.) One hundredpercent of the cash incentive bonus for our former President and ChiefExecutive Officer, which was targeted at 100% of base salary, and for ourcurrent President and Chief Executive Officer, which was targeted at 80% ofbase salary, is based upon achievement of the corporate goals alone. For fiscalyear 2008, Dr. Nottenburg was guaranteed a bonus of 80% of his base salarypro rated for the days in 2008 he was employed by us pursuant to his EmploymentAgreement, more fully described under “*Employment, Severance andChange of Control Arrangements*,” below. Each of the other executiveswas allocated a target cash incentive as a percentage of base salary rangingfrom 30% to 60%, as determined by the Compensation Committee, and awarded 50%based upon achievement of corporate operating and financial goals and 50% basedupon achievement of individual performance objectives established for eachexecutive, subject to the discretion of the Compensation Committee. The targetbonus levels were chosen based upon competitive market and peer group data andanalysis as described in “*Determining ExecutiveCompensation*” below. The corporate goals were chosen based uponfinancial metrics which are generally used by investors and financial analystsin measuring our corporate performance. Individual objectives include productdevelopment and quality metrics, improvement of corporate processes, developmentof strategic partnerships, expansion of geographic infrastructure, growth ofcustomer base and supply chain improvement.

 

The corporategoals for the 2008 Incentive Compensation Program consisted of three measureswhich are calculated independently. Each has designated thresholds as indicatedbelow and a maximum payout at 150% of the measurement metric. In addition, eachmetric has an accelerator of two times the incremental portion of the awardwhich exceeds 100% of target:

 
| **Corporate Goal**       | ** ** | **% of Target** | ** ** | **Threshold  Performance Level** | ** ** |
|-------------------------------|------------|---------------------------|------------|---------------------------------------|------------|
| 1. Revenue                    |       | 25                        | %          | 85                                    | %          |
| 2. Full Year Operating Income |       | 15                        | %          | 60                                    | %          |
| 3. Bookings                   |       | 10                        | %          | 70                                    | %          |
|                          |       | 50                        | %          |                                  |       |

 

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Individualgoals do not have a threshold performance level and the potential payout can bebased on performance levels of between 0-100%. In addition, each participantmay earn an additional 10% of the calculated individual payout if achievementof 80% is attained.

 

The formulafor calculating the payment under the 2008 Incentive Compensation Program wasas follows: Corporate Revenue Goal Achievement % × 0.25 (targetincentive dollars) *plus* CorporateFull Year Operating Income Achievement % × 0.15 (target incentivedollars) *plus* Corporate BookingsAchievement % × 0.1 (target incentive dollars) *plus* individual Management BonusObjectives (“MBOs”) Achievement % × 0.5 (target incentive dollars) *plus* Accelerators if earned for corporategoals exceeding 100% or individual goals of 80% or more.

 

The corporategoals target for the 2008 Incentive Compensation Program was based uponachievement of corporate goals as follows:

 
| **Weight** | ** ** | **Objective**                     | ** ** | **Measurement  Metrics** | ** **  | **Leverage  Factor** | ** ** | **Accelerator**                | ** **                | **Achievement  Percentage**             | ** ** |
|------------|------------|-----------------------------------|------------|--------------------------|-------------|----------------------|------------|--------------------------------|---------------------------|-----------------------------------------|------------|
| 25%        |       | Revenue(1)(2)(3)                  |       | $                        | 389,294,000 |                 | 85-150%    |                           | 2x  (if metric over 100%) |                                    | 80.7%      |   |
| 15%        |       | Full Year  Operating Income(1)(3) |       | 15.4                     | %*          | 60-150%              |       | 2x  (if metric over 100%)      |                      | 1.9%                                    |       |
| 10%        |       | Bookings(3)                       |       | $                        | 438,000,000 |                 | 70-150%    |                           | 2x  (if metric over 100%) |                                    | 73.8%      |   |
| 50%        |       | Personal MBO                      |       |                     |        | 80% achievement      |       | 10% additional payout on  MBOs |                      | Varies based on individual  performance |       |
| 100%       |       |                              |       |                     |        |                 |       |                           |                      |                                    |       |

 

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(1)                                  Revenue,operating income and bookings targets do not include impact of potential oractual acquisitions.

 

(2)                                  Providedthat if this measure is not achieved, it will be deemed achieved if the sum of (i) theactual performance of this measure and (ii) the amount of any positivechange in deferred revenue for 2008 meets or exceeds the target performance forthis measure. Note, this impact of positive change in deferred revenue will notcount towards greater than 100% achievement for this measure.

 

(3)                                  Acceleratoronly applies if achieved metric is over 100%.

 

*                                         Targetexcludes impact of 123R and acquisitions/acquisitions costs and incrementalprofessional fees or other expenses related to stock option review andrestatement.

 

As an example,the bonus calculation for an executive who achieved 100% of his individualperformance objectives and whose target cash incentive is $150,000 is set forthbelow based on a range of performance levels of corporate goals:

 
| **Weight** | ** ** | **Objective**                | ** ** | **Accomplish  85% of  Corporate  Objectives  ($)** | ** ** | **Accomplish  100% of  Corporate  Objectives  ($)** | ** ** | **Accomplish  105% of  Corporate  Objectives  ($)** | ** ** | **Accomplish  150% of  Corporate  Objectives  ($)** | ** ** |
|------------|------------|------------------------------|------------|---------------------------------------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------------------|------------|
| 25%        |       | Revenue                      |       | $                                                       | 31,875     |                                                     | $          | 37,500                                                   |       | $                                                        | 37,500     |   | $ | 37,500 |   |
|       |       | Revenue Accelerator          |       | —                                                  |       | —                                                   |       | 3,750                                                    |       | 37,500                                                   |       |
| 15%        |       | Full Year  Operating Income  |       | 19,125                                                  |       | 22,500                                                   |       | 22,500                                                   |       | 22,500                                                   |       |
|       |       | Operating Income Accelerator |       | —                                                  |       | —                                                   |       | 2,250                                                    |       | 22,500                                                   |       |
| 10%        |       | Bookings                     |       | 12,750                                                  |       | 15,000                                                   |       | 15,000                                                   |       | 15,000                                                   |       |
|       |       | Bookings Accelerator         |       | —                                                  |       | —                                                   |       | 1,500                                                    |       | 15,000                                                   |       |
| 50%        |       | Personal MBO                 |       | 75,000                                                  |       | 75,000                                                   |       | 75,000                                                   |       | 75,000                                                   |       |
|       |       | Extra Credit MBO 10%         |       | 7,500                                                   |       | 7,500                                                    |       | 7,500                                                    |       | 7,500                                                    |       |
|       |       | Total                        |       | $                                                       | 146,250    |                                                     | $          | 157,500                                                  |       | $                                                        | 165,000    |   | $ | 232,500 |   |

 

TheCompensation Committee expects to establish a cash-based incentive plan for2009 based on the achievement of financial metrics consistent with our 2009operating plan and the financial objectives associated with that plan. Weconsider our corporate goals to be confidential and their disclosure wouldcause competitive harm for us, and, therefore, we do not disclose these goals.We achieved approximately 38.3% of the corporate goals for 2005, 100% of the corporategoals for 2006, 64% of the corporate goals for 2007, and approximately 14.8% ofthe corporate goals for 2008. Due to overachievement in the first-half offiscal year 2008, bonuses were locked in for that time, resulting in theachievement of approximately 71% of the corporate goals for 2008 for executivesonly. A high level of performance by management will be required to achieve the2009 corporate goals. The 2009 individual performance objectives will be basedupon achievement of financial, operating and strategic goals.

 

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*Equity-based Incentives.*  Equity based incentives are provided toexecutives whose decisions and actions have a direct impact upon ourperformance and success. Stock options and restricted stock are awarded to ourexecutive officers in order to tie compensation directly to our long-termsuccess and increase in shareholder value. In determining the size of the stockoption and/or restricted stock grants awarded to each executive officer, theCompensation Committee takes into account the executive officer’s position,past performance, anticipated contribution to our long-term goals, and industrypractices and norms. Long-term incentives granted in prior years and existinglevels of stock ownership are also taken into consideration. The CompensationCommittee believes that a combination of stock options and restricted stock ismost effective in meeting the key objectives of employee retention, motivation,and shareholder alignment, and is the most cost effective and efficient mannerof share usage, taking into account SFAS 123R expense and cash flow. Underthe 2007 Plan, a finite number of shares are available. The aggregate number ofshares under the Plan was based upon projected requirements in the normalcourse of business over a two year period, within recommended guidelines,assuming similar usage rates to prior years based upon our hiring and annualstock incentive programs, as well as the use of restricted stock in addition tostock options. The historical practice of allocating equity awards to topperformers and critical positions will be continued.

 

No equityincentive program awards were made by the Compensation Committee in 2008. Basedupon the recommendation of management, the Compensation Committee made thedecision to postpone the annual equity incentive grant to employees in 2008.The recommendation was based upon a consideration of the number of shares whichremained available for grant under the 2007 Plan and an estimate of the numberof shares which would be required to fulfill our employee hiring plans.

 

***DeterminingExecutive Compensation***

 

TheCompensation Committee evaluates and approves goals and objectives of the ChiefExecutive Officer and reviews and approves goals and objectives of otherexecutive officers; evaluates the performance of the executives in light ofthose goals and objectives; determines and approves the compensation level forthe Chief Executive Officer; reviews and sets compensation levels of other keyexecutive officers; evaluates and approves all grants of equity-basedcompensation to executive officers and recommends to our Board compensationpolicies for outside directors. The Compensation Committee may form anddelegate authority to one or more subcommittees as it deems appropriate fromtime to time.

 

At the outsetof the fiscal year, our Board sets the overall corporate performance goals forthe year, while the Compensation Committee establishes each executive’sindividual performance objectives and target bonus, except as otherwisepredetermined by an employment agreement. In determining the performance goals,the Committee may consider the impact of changes in accounting principles andextraordinary, unusual or infrequent events. After the end of the fiscal year,the Committee reviews the actual corporate and individual performance againstthe predetermined corporate performance goals and individual performanceobjectives to determine the appropriate bonus amount, as well as otherperformance considerations related to unforeseen events during the year. Foreach of the performance goals, a formula establishes a payout range based uponthe target bonus allocation. The formula also determines the percentage of thetarget bonus to be paid based on a percentage of goal achievement.

 

TheCompensation Committee has the authority to retain compensation consultants andother outside advisors to assist in the evaluation of executive officercompensation. The Compensation Committee reviews each component of theexecutive’s compensation against executive compensation surveys. The surveysused for comparison reflect compensation levels and practices for personsholding comparable positions at certain of our peer group companies. TheCompensation Committee also solicits appropriate input from our Chief ExecutiveOfficer, who works with our Vice President of Human Resources to recommendcompensation for those executives reporting directly to him. The CompensationCommittee considers, but is not bound by, recommendations made by companymanagement. Similarly, the Compensation Committee may accept, reject or modifyany recommendations by compensation consultants or other outside advisors. Alldecisions regarding the Chief Executive Officer’s compensation are made by theCompensation Committee in executive session, without the Chief ExecutiveOfficer present.

 

During thepast several years, the Compensation Committee retained compensationconsultants to provide an analysis of the total compensation practices for ourexecutive and senior management positions. The purpose of these studies was toprovide management and the Compensation Committee with current information onthe competitiveness of our total cash and long-term incentive compensation.These studies provided a significant amount of comparative information, usingpeer group and market data. The Compensation Committee determined the need toreview the current compensation strategy and the market reference peer groupbased on larger company metrics, considering our current and future growthpotential. A study was completed in 2008 using internal Company resources togather and analyze similar data.

 

For 2008, the methodology for the compensation review included aninternal compensation analysis and comparison

 

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on a job description level with peer companies based upon informationderived from the following sources:  (1) datafrom companies with a revenue size consistent with our compensation philosophyas included in a select peer group report issued by the Radford High TechnologySalary Survey; (2) data from companies reporting in the IPAS HighTechnology Salary Survey, and (3) information on select companies derivedfrom disclosed proxy data.

 

The custom peer group report from Radford was the primary data sourcefor determining competitive market targets. The Radford peer group consisted of the following companies:  3COM, Akamai Technologies, Ciena, CNet, CovadCommunications, Emulex, Equinox, F5 Networks, Harmonic, Novatel Wireless,Polycom, Progress Software, QLogic, Quest Software, Real Networks, SpirentCommunications, Syniverse Technologies, Tekelec, T-Systems and Vonage.  The peer group selection factors includedrevenue size (primarily companies in the $200 to $800 million annual revenuerange with average revenue of $560 million) and industry (including all hightechnology companies with a majority in the networking/telecom industry).  Where Radford peer group data for a positionwas of insufficient size, the broader Radford executive survey results wereconsidered using a cut of companies of equivalent revenue size.

 

Proxy data was reviewed from the following companies:  Acme Packet, Adtran, Ciena, Extreme Networks,Juniper, LEAP Wireless, Red Hat, Sycamore, UTStarcom and XOCommunications.  In most cases,equivalent or comparable positions were not found.  Where matches were identified, the data wasused only for validation of the Radford survey results.   Similarly, IPAS high technology salarysurvey data was also used to validate the market data from the primary datasource.

 

The analysisindicated that overall total direct compensation for our executives is belowthat of our peer group and survey market references. Our compensationphilosophy is that the overall compensation structure should be competitivewithin the industry in order to attract and retain talented executives andmotivate our executive officers to achieve our business goals. The CompensationCommittee adjusted salary and cash-based incentives in 2008 for some executiveofficers based upon this comparative compensation information.

 

In 2008, theCompensation Committee approved a severance and retention program and agreementfor executive officers, including our principal financial officer and othernamed executive officers. The Compensation Committee considered the value ofservices provided by the officers and their unique capabilities. TheCompensation Committee engaged an executive compensation consultant, the WilsonGroup, and the Compensation Committee negotiated a compensation package andterms for the officers. The Compensation Committee concluded it was in our bestinterests to provide a retention package with incentives based on performanceand appreciation of stock value. Our principal financial officer and othernamed officers each entered into an Executive Severance and ArbitrationAgreement with us on October 7, 2008, which is described below under “*Employment, Severance and Change of Control Arrangements*.”

 

***Benefits and OtherCompensation***

 

Executives areeligible for the same benefits that are available to all employees, whichinclude group health insurance, life and disability insurance, dentalinsurance, and paid holidays. All employees begin accruing three weeks vacationupon date of hire. We offer a 401(k) program and an Employee StockPurchase Plan.

 

We do nottypically offer perquisites or employee benefits to executive officers that arenot also made available to employees on a broad basis.

 

***Stock Option GrantPolicy***

 

*New Hire Grants*

 

TheCompensation Committee has delegated authority to our Chief Executive Officerto grant new hire options consistent with approved guidelines and restrictionsgoverning the delegation. These guidelines are as follows:

 

·                  Such options are granted pursuant tothe 2007 Plan;

 

·                  Such options are on the terms of ourstandard form of stock option agreement;

 

·                  The grant date is the 15th day of the month following theemployee’s start date and the exercise price of these options is equal to theclosing price of our common stock on that date, or the next business day in theevent that the 15th dayfalls on a day that the NASDAQ Global Select Market is closed;

 

·                  The Chief Executive Officer is notauthorized to grant options (a) to any of our executive officers, or (b) toany new employee for more than 100,000 shares of our common stock; and

 

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·                  The Chief Executive Officer shallmaintain a list of the options granted pursuant to the delegated authority andshall report to the Compensation Committee regarding the options granted, uponrequest.

 

TheCompensation Committee reviews all new hire grants issued under the delegationof authority. The Compensation Committee also reviews and, if appropriate,approves the grants to new hires in excess of 100,000 shares at a Committeemeeting. The actions taken at the meetings are documented in meeting minutessubsequently approved by the Compensation Committee. The list of proposedindividual grants is provided in advance of the meeting and is included in themeeting minutes.

 

*Annual Equity Incentive Grants*

 

TheCompensation Committee annually considers an equity incentive grant for ouremployees, including executives, in connection with its annual review ofemployee and executive compensation. At a Committee meeting, the CompensationCommittee reviews a proposed plan for the granting of equity awards toexecutives and employees in connection with the annual equity incentiveprogram. Typically, employee eligibility is based upon hire date with arequired minimum of one year of service. Among the eligible employees, awardsare allocated to employees based upon management’s evaluation of employeeperformance and other business criteria.

 

The proposedplan includes overall parameters of the plan, a pool of shares to be allocatedunder the plan and typically recommends specific grants for executives. TheCompensation Committee discusses the plan with management and then requeststhat management provide the Committee with a specific list of individual grantsfor employees consistent with the Compensation Committee’s guidance. TheCompensation Committee determines specific grants for executives. Managementthen prepares a list of individual grants for employees and executives andsubmits to the Compensation Committee the list of individual grants foremployees and executives. The Compensation Committee reviews and, ifappropriate, approves the list of individual grants at a Committee meeting. Theactions taken at the meetings are documented in meeting minutes subsequentlyapproved by the Compensation Committee. The list of individual grants isattached to the meeting minutes.

 

TheCompensation Committee has established the grant date for annual equityincentive grants to be August 15 of each year, or the next business dayfollowing August 15 if August 15 falls on a weekend or holiday. TheCompensation Committee retains the right to change this date based on businessevents that might warrant using another date for the annual equity incentivegrant date.

 

Based upon therecommendation of management, the Compensation Committee made the decision topostpone the annual equity incentive grant to employees in 2008. Therecommendation was based upon a consideration of the number of shares whichremained available for grant under the 2007 Plan and an estimate of the numberof shares which would be required to fulfill our employee hiring plans.

 

*Promotion and Achievement Grants*

 

From time totime, our management recommends to the Compensation Committee promotion orachievement grants to our employees or executives. Our management includes allrecommended individual stock option grants for approval by the CompensationCommittee in the meeting materials provided in advance of the meeting. Wedocument all Compensation Committee meetings with minutes reflecting any stockoption grants approved during the meeting. The Compensation Committee approvespromotion or achievement grants at Committee meetings. The actions taken at themeetings are documented in meeting minutes. Promotion and achievement grantshave a grant date of the 15th day of the month following theCompensation Committee’s approval of the grant.

 

*Vesting*

 

Provided thatthe employee continues his or her employment with us, on the applicable vestingdate, options will vest and become exercisable as follows: (i) New Hiregrants: 25% of the shares vest on the first anniversary of the date thatemployment with us commences, or the Employment Date, and the remaining 75% ofthe shares vest in equal increments of 2.0833% monthly thereafter through thefourth anniversary of the Employment Date; (ii) All other option grants:25% of the shares vest on the first anniversary of the grant date (as definedin the Notice of Grant of Stock Options and Option Agreement) and the remaining75% of the shares vest in equal increments of 2.0833% monthly thereafterthrough the fourth anniversary of the grant date; (iii) Restricted stockgrants: 25% of the shares vest on the first anniversary of the Employment Dateor the grant date and the remaining 75% vest in equal increments of 12.5%semi-annually through the fourth anniversary of the Employment Date or the dateof the grant.

 

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Grants to non-employee directors have the same vesting schedule asspecified above subject to continued service on our Board.

 

*Termination*

 

Optionstypically terminate on the tenth anniversary of the grant date (or the fifthanniversary of the grant date, if the optionee owns more than 10% of ourstock), provided that if an employee’s employment relationship with usterminates, the option termination date is determined based upon the reason foremployment termination as follows: (i) death or total and permanentdisability of optionee (as defined in Section 22(e)(3) of theInternal Revenue Code of 1986, as amended)—180 days thereafter; (ii) terminationfor any other reason—30 days thereafter under the 1997 Plan and90 days thereafter under the 2007 Plan, unless otherwise extended.

 

We haveentered into agreements with certain executives providing for extended termsfor stock option grants following the executive’s termination, as describedunder “*Employment, Severance and Change of ControlArrangements*” below.

 

*Acceleration*

 

In the eventof an acquisition of us as defined in our standard stock option and restrictedstock agreement(s) and the stock plan documents, or the Acquisition, inwhich an option is assumed or substituted, then the number of shares subject tothe option that are not then vested shall become accelerated in vesting by12 months upon the closing of the Acquisition. If an option is not assumedor substituted, then the number of shares subject to the option that are notthen vested shall accelerate in full and become immediately exercisable. Inaddition, 25% of the number of shares covered by a restricted stock award shallbecome vested.

 

We haveentered into agreements with certain executives providing for acceleration ofthe vesting of stock options and restricted stock upon a change of control asdescribed under “*Employment, Severance and Change of ControlArrangements*” below.

 

***Tax and AccountingConsiderations***

 

*Accounting for Stock-Based Compensation.*  We account for stock-based compensation inaccordance with SFAS 123(R), *Share-BasedPayment* (“SFAS 123R”).

 

*Incentive Stock Options.*  Options granted to employees are intended toqualify as “incentive stock options” under Section 422 of the InternalRevenue Code of 1986, as amended (the “Code”). However, we make norepresentation or warranty as to the tax treatment to the optionee upon receiptor exercise of the option or sale or other disposition of the shares covered bythe option. In addition, options will not be treated as incentive stock optionsfor tax purposes to the extent that options covering in excess of $100,000 ofstock (based upon fair market value of the stock as of the respective dates ofgrant of such options) become exercisable in any calendar year; and suchoptions will be subject to different tax treatment.

 

*Policy on Deductibility of Executive Compensation.*  The Internal Revenue Service, pursuant to Section 162(m) ofthe Code, generally disallows a tax deduction for compensation in excess of$1.0 million paid to our Chief Executive Officer and to each other officer(other than the Chief Executive Officer and Chief Financial Officer) whosecompensation is required to be reported to our stockholders pursuant to theExchange Act by reason of being among our three most highly paid executiveofficers. Certain compensation, including qualified performance-basedcompensation, will not be subject to the deduction limit if certainrequirements are met. The Compensation Committee reviews the potential effectof Section 162(m) periodically and uses its judgment to authorizecompensation payments that may be subject to the limit when the CompensationCommittee believes such payments are appropriate and in our best interests andour stockholders best interests, after taking into consideration changingbusiness conditions and the performance of our employees.

 

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**COMPENSATION COMMITTEE REPORT**

 

TheCompensation Committee consists of Paul J. Severino (Chairman) and H. BrianThompson. The Compensation Committee has reviewed and discussed theCompensation Discussion and Analysis required by Item 402(b) ofRegulation S-K with our management. Based on this review and discussion,the Compensation Committee recommended to our Board that the CompensationDiscussion and Analysis be included in this Amendment.

 
|   | Submitted by, *COMPENSATION COMMITTEE:*Paul J. Severino (Chairman)   H. Brian Thompson |
|--------|----------------------------------------------------------------------------------------|

 

**Executive Compensation Tables**

 

***Summary of ExecutiveCompensation***

 

The followingtable sets forth, for the year ended December 31, 2008 and for either ofthe two years prior thereto in which the individual was a Named ExecutiveOfficer, the compensation earned by our Chief Executive Officer, ChiefFinancial Officer, other three most highly compensated executive officersserving as executive officers at December 31, 2008, and our former ChiefExecutive Officer and the two other most highly compensated executive officerswho were no longer employees at December 31, 2008 (the “Named ExecutiveOfficers”).

 

**SUMMARY COMPENSATION TABLE**

 
| **Name and Principal  Position**                                    | ** ** | **Year** | ** ** | **Salary  ($)** | ** ** | **Bonus  ($)(1)** | ** ** | **Stock  Awards  ($)(2)** | ** ** | **Option  Awards  ($)(3)** | ** ** | **Non-Equity  Incentive Plan  Compensation  ($)(4)** | ** ** | **All Other  Compensation  ($)(5)** | ** ** | **Total  ($)** | ** ** |
|-------------------------------------------------------------------------------|------------|----------|------------|-----------------|------------|-------------------|------------|---------------------------|------------|----------------------------|------------|-----------------------------------------------------------|------------|------------------------------------------|------------|----------------|------------|
| Richard N.  Nottenburg  President and Chief Executive Officer                 |       | 2008     |       | $               | 272,756    | (6)               | $          | 216,667                   |       | $                          | 594,401    |                                                      | $          | 223,775                                  |       | $              | —     |   | $ | 673 |   | $ | 1,308,272 |   |
| Richard J. Gaynor                                                             |       | 2008     |       | $               | 285,000    |              | $          | —                    |       | $                          | 76,003     |                                                      | $          | 262,549                                  |       | $              | 154,796    |   | $ | 10,749 |   | $ | 789,097 |   |
| Chief Financial  Officer                                                      |       | 2007     |       | $               | 67,500     |              | $          | 40,500                    |       | $                          | 9,473      |                                                      | $          | 46,442                                   |       | $              | —     |   | $ | 99 |   | $ | 164,014 |   |
| Mohammed  Shanableh                                                           |       | 2008     |       | $               | 264,878    |              | $          | —                    |       | $                          | 123,818    |                                                      | $          | 263,258                                  |       | $              | 330,823    |   | $ | 15,634 |   | $ | 998,411 |   |
| Vice President,                                                               |       | 2007     |       | $               | 197,916    |              | $          | —                    |       | $                          | 59,110     |                                                      | $          | 68,773                                   |       | $              | 289,424    |   | $ | 8,245 |   | $ | 623,468 |   |
| Worldwide Sales                                                               |       |     |       |            |       |              |       |                      |       |                       |       |                                                      |       |                                     |       |           |       |
| Matthew Dillon                                                                |       | 2008     |       | $               | 235,925    |              | $          | —                    |       | $                          | 51,052     |                                                      | $          | 240,781                                  |       | $              | 119,942    |   | $ | 358 |   | $ | 648,058 |   |
| Vice President  Global                                                        |       | 2007     |       | $               | 225,000    |              | $          | —                    |       | $                          | 11,294     |                                                      | $          | 146,177                                  |       | $              | 86,400     |   | $ | 7,586 |   | $ | 476,457 |   |
| Services                                                                      |       |     |       |            |       |              |       |                      |       |                       |       |                                                      |       |                                     |       |           |       |
| Gale England  Vice President, Product Operations                              |       | 2008     |       | $               | 210,900    |              | $          | —                    |       | $                          | 23,964     |                                                      | $          | 161,298                                  |       | $              | 76,363     |   | $ | 826 |   | $ | 473,351 |   |
| Hassan M.  Ahmed(7)                                                           |       | 2008     |       | $               | 404,295    |              | $          | —                    |       | $                          | 4,822,047  |                                                      | $          | —                                   |       | $              | —     |   | $ | 1,334,555 |   | $ | 6,560,897 |   |
| Former Chairman  and                                                          |       | 2007     |       | $               | 425,000    |              | $          | —                    |       | $                          | 277,953    | (7)                                                       | $          | 2,216,500                                | (7)        | $              | 272,000    |   | $ | 9,517 |   | $ | 3,200,970 |   |
| Chief Executive  Officer                                                      |       | 2006     |       | $               | 375,000    |              | $          | —                    |       | $                          | —     |                                                      | $          | 7,930                                    |       | $              | 344,393    |   | $ | — |   | $ | 727,323 |   |
| Chuba Udokwu                                                                  |       | 2008     |       | $               | 198,333    |              | $          | —                    |       | $                          | 77,817     |                                                      | $          | 313,883                                  |       | $              | —     |   | $ | 203,280 |   | $ | 793,313 |   |
| Former Vice President  Worldwide Engineering(8)                          |       | 2007     |       | $               | 250,000    |              | $          | —                    |       | $                          | 59,110     |                                                      | $          | 336,240                                  |       | $              | 96,000     |   | $ | 7,825 |   | $ | 749,175 |   |
| Jocelyn Philbrook  Former Vice President, Marketing and Investor Relations(9) |       | 2008     |       | $               | 107,700    |              | $          | —                    |       | $                          | 402,123    |                                                      | $          | (10,440                                  | )          | $              | —     |   | $ | 409,684 |   | $ | 909,067 |   |

 

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(1)                                  Thisamount represents a guaranteed bonus for the year in which the Named ExecutiveOfficer joined us.

 

(2)                                  Theamount in this column does not reflect compensation actually received by theNamed Executive Officer. Instead, the amount reflects the stock-basedcompensation recognized for financial statement reporting purposes for theapplicable year, in accordance with SFAS 123R of restricted stock awardsgranted under the 1997 Plan and the 2007 Plan. A discussion of the assumptionsused in calculating the amounts in this column may be found in Note 10 toour audited consolidated financial statements included in the Initial Filing ofour Annual Report on Form 10-K for the year ended December 31, 2008.

 

(3)                                  Theamounts shown in this column do not reflect compensation actually received bythe Named Executive Officer. Instead, the amounts reflect the stock- basedcompensation recognized for financial statement reporting purposes for 

 

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the applicableyear in accordance with SFAS 123R of stock options granted under the 1997Plan. A discussion of the assumptions used in calculating the amounts in thiscolumn may be found in Note 10 to our audited consolidated financialstatements included in the Initial Filing of our Annual Report on Form 10-Kfor the year ended December 31, 2008.

 

(4)                                  See“*Compensation Discussion and Analysis—CompensationComponents—Cash-based Incentives*” for a description of incentivecompensation program. For 2008, for each current Named Executive Officer, otherthan for the Vice President of Worldwide Sales, target bonuses and actualpayments under the plan were as follows: (a) Dr. Nottenburg’s targetbonus was 80% of his base salary, prorated for 2008, or $216,667, and wasguaranteed pursuant to Dr. Nottenburg’s employment agreement; (b) Mr. Gaynor’starget bonus was 60% of his base salary; (c) as Vice President ofWorldwide Sales, Mr. Shanableh’s cash incentives were based upon theachievement of goals related to revenue and sales orders which supported thecorporate goals. Mr. Shanableh’s cash incentive was based upon commissionsas a percentage of sales orders and revenue quotas achieved and he was eligiblefor additional commissions based upon achievement of 80% of the sales order and90% of the revenue goals. Mr. Shanableh’s commission rates on sales ordersup to 80% of quotas was 0.01856% and his commission rates on revenues up to 90%was 0.02696%. The rates for achievement of sales orders and revenue in excessof quotas were 0.02696% and 0.13481%, respectively. Mr. Shanableh’scompensation plan provided an incentive bonus of $60,000 upon achievement of100% of sales order quota, and up to $35,000 upon achievement of 64% of grossmargin goals (measured and paid quarterly). No actual bonus has been paid for2008; (d) Mr. Dillon’s target bonus was 60% of his base salary; and (e) Mr. England’starget bonus was 40% of his base salary.

 

(5)                                  (a)           Dr. Nottenburg’s‘other’ compensation for 2008 of $673 is for group term life insurance.

 

(b)                                 Mr. Gaynor’s‘other’ compensation for 2008 of $10,749 is comprised of $6,827 related toattendance of Mr. Gaynor and family member(s) at our annual Chairman’sClub event, $3,500 for our 401(k) matching contribution and $422 for groupterm life insurance.

 

(c)                                  Mr. Shanableh’s‘other’ compensation for 2008 of $15,634 is comprised of $11,894 related toattendance of Mr. Shanableh and family member(s) at our annualChairman’s Club event, $3,500 for our 401(k) matching contribution and$240 for group term life insurance.

 

(d)                                 Mr. Dillon’s‘other’ compensation for 2008 of $358 is for group term life insurance.

 

(e)                                  Mr. England’s‘other’ compensation for 2008 of $826 is for group term life insurance.

 

(f)                                    Mr. Ahmed’s‘other’ compensation for 2008 of $1,334,555 is comprised of $1,275,000 for thelump sum payment related to severance benefits upon his separation from ourCompany, $1,261 for health benefits, $1,078 for group term life insurance and$57,215 for unused vacation at his employment termination.

 

(g)                                 Mr. Udokwu’s‘other’ compensation for 2008 of $203,280 is comprised of $185,000 for thepayments related to severance benefits upon his separation from our Company,$2,827 for health benefits, $7,225 related to attendance of Mr. Udokwu andfamily member(s) at our annual Chairman’s Club event, $603 for group termlife insurance and $7,626 for unused vacation at his employment termination.

 

(h)                                 Ms. Philbrook’s‘other’ compensation for 2008 of $409,684 is comprised of $383,700 for paymentsrelated to severance benefits upon her separation from our Company, $1,768 forhealth benefits, $7,743 related to attendance of Ms. Philbrook and familymember(s) at our annual Chairman’s Club event, $93 for group term lifeinsurance and $16,380 for unused vacation at her employment termination.

 

(6)           Dr. Nottenburgjoined us on June 13, 2008 and his initial annual salary was $500,000 peryear.

 

(7)           On November 14,2007, we entered into a Retention and Restricted Stock Agreement (the “Agreement”)with Mr. Ahmed as described under “*Employment, Severance andChange of Control Arrangements*” below. The $277,953 reported as “StockAwards” for 2007 reflects the expense related to the restricted stock award(s) underthe Agreement. The Agreement also modified Mr. Ahmed’s existing stockoptions to provide for the continued vesting of any unvested stock options andthe ability to exercise any vested stock options for 18 months from thedate of Mr. Ahmed’s separation from us under certain conditions. Werecorded $1,816,500 of expense related to the modification of Mr. Ahmed’sstock options related to the Agreement. In connection with our historical stockoption investigation and subsequent filing, on August 2, 2007, of theInitial Filing of our Annual Report on Form 10-K for the 

 

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year ended December 31,2006, we determined that the correct date of the June 15, 2003 grant to Mr. Ahmedwas June 18, 2003. Pursuant to the terms of Mr. Ahmed’s Consent (see “*Section 409A of the Internal Revenue Code*” below), theexercise price for the portion of that option vesting after December 31,2004 (representing 1,250,000 shares) was increased from $4.47 to $4.79 pershare, reflecting the closing price of our stock on June 18, 2003. Also,pursuant to the terms of the Consent, Mr. Ahmed became entitled to receivea cash payment of $400,000, which is the amount of the aggregate increase inthe exercise price of the 1,250,000 shares. This payment was made in January 2008.The option remains exercisable for 750,000 shares at the original exerciseprice of $4.47 per share. The total of $2,216,500 related to these matterscomprises the amount reported as ‘Option Awards’ for 2007. On May 16,2008, the vesting of 375,000 shares of the restricted stock awarded to Mr. Ahmedwas accelerated through September 13, 2008, the completion date of Mr. Ahmed’srequired transition assistance period related to Dr. Nottenburg’sappointment. Mr. Ahmed’s employment with us terminated on December 11,2008, and he retired from our Board effective the same date. Pursuant to Mr. Ahmed’sRetention and Restricted Stock Agreement, upon his termination, the remaining375,000 shares of restricted stock immediately vested. We recorded incrementalexpense totaling $2,459,670 related to the accelerated vesting in 2008 of Mr. Ahmed’sunvested restricted stock. Mr. Ahmed’s outstanding stock options, none ofwhich were unvested at the date of his termination, will remain outstanding andexercisable for the lesser of 18 months from the date of termination orthe life of the option.

 

(8)           Mr. Udokwu’semployment with us terminated on October 10, 2008.

 

(9)           Ms. Philbrook’semployment with us terminated on June 30, 2008. At the time oftermination, the Company accelerated the vesting of all unvested shares ofrestricted stock to June 30, 2008 and extended the exercise period for allvested stock options to one year from June 30, 2008, for which we recordedexpense in 2008 of $194,032 and $53,264, respectively. These amounts areincluded with the amounts reported as “Stock Awards” and “Option Awards” in2008 in the table above.

 

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***Plan-Based Awards***

 

The followingtable sets forth information about incentive plan awards made to the NamedExecutive Officers during the year ended December 31, 2008.

 

**2008 GRANTS OF PLAN-BASED AWARDS**

 
|                   |       |            |       |                 |       |                                                                      |       |                                                              |       |                                                              |       |                                                                        |       |                                              |       |                                                         |       |                   |       |             |       |               |       |               |       |   |    |   |      |   |
|------------------------|------------|-----------------|------------|----------------------|------------|---------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|---------------------------------------------------|------------|--------------------------------------------------------------|------------|------------------------|------------|------------------|------------|--------------------|------------|--------------------|------------|--------|---------|--------|-----------|--------|
| ** **             | ** ** | ** **      | ** ** | ** **           | ** ** | **Estimated  Future Payouts Under  Non-Equity Incentive Plan  Awards(1)** | ** ** | **Estimated  Future Payouts Under  Equity Incentive Plan Awards** | ** ** | **All  Other  Stock  Awards:  Number  of  Shares  of Stock** | ** ** | **All Other  Option  Awards:  Number of  Securities  Underlying** | ** ** | **Exercise  or Base  Price of  Option** | ** ** | **Grant**

**Date  Fair  Value  of Stock  And  Option** | ** ** |
| **Name**               | ** ** | **Grant  Date** | ** ** | **Action-  Date(2)** | ** ** | **Threshold  ($)**                                                        | ** ** | **Target  ($)**                                                   | ** ** | **Maximum  ($)**                                                  | ** ** | **Threshold  (#)**                                                          | ** ** | **Target  (#)(3)**                                | ** ** | **Maximum  (#)(3)**                                          | ** ** | **or Units  (#)** | ** ** | **Options  (#)** | ** ** | **Awards  ($/Sh)** | ** ** | **Awards  ($)(4)** | ** ** |
| Richard N.  Nottenburg |       | 6/16/08         |       | 5/9/08               |       | $                                                                         | 216,667    |                                                              | $          | 216,667                                                           |       | $                                                                           | 216,667    |                                              | —     |                                                         | 500,000    |                   | 500,000    |             | 500,000    |               | 500,000    |               | $          | 4.75   |    | $      | 3,822,800 |   |
| Richard J. Gaynor      |       | 11/15/08        |       | 10/3/08              |       | —                                                                    |       | $                                                                 | 179,156    |                                                              | $          | 264,469                                                                     |       | —                                            |       | 100,000                                                      |       | 100,000                |       | 200,000          |       | —             |       | —             |       | $      | 448,000 |   |
| Mohammed               |       | 6/16/08         |       | 6/5/08               |       | —                                                                    |       | $                                                                 | 279,153    | (5)                                                               | Unlimited  |                                                                        | —     |                                              | —     |                                                         | —     |                   | 25,000     |             | 125,000    |               | $          | 4.75               |       | $      | 464,038 |   |
| Shanableh              |       | 11/15/08        |       | 10/3/08              |       | —                                                                    |       | —                                                            |       | —                                                            |       | —                                                                      |       | 66,000                                            |       | 66,000                                                       |       | 133,000                |       | —           |       | —             |       | $                  | 297,920    |   |
| Matthew Dillon         |       | 11/15/08        |       | 10/3/08              |       | —                                                                    |       | $                                                                 | 148,129    |                                                              | $          | 218,666                                                                     |       | —                                            |       | 66,000                                                       |       | 66,000                 |       | 133,000          |       | —             |       | —             |       | $      | 297,920 |   |
| Gale England           |       | 11/15/08        |       | 10/3/08              |       | —                                                                    |       | $                                                                 | 88,212     |                                                              | $          | 130,218                                                                     |       | —                                            |       | 16,667                                                       |       | 16,667                 |       | 33,333           |       | —             |       | —             |       | $      | 74,666  |   |
| Hassan M. Ahmed        |       | —          |       | —               |       | —                                                                    |       | —                                                            |       | —                                                            |       | —                                                                      |       | —                                            |       | —                                                       |       | —                 |       | —           |       | —             |       | —             |       |
| Chuba Udokwu           |       | —          |       | —               |       | —                                                                    |       | —                                                            |       | —                                                            |       | —                                                                      |       | —                                            |       | —                                                       |       | —                 |       | —           |       | —             |       | —             |       |
| Jocelyn Philbrook      |       | —          |       | —               |       | —                                                                    |       | —                                                            |       | —                                                            |       | —                                                                      |       | —                                            |       | —                                                       |       | —                 |       | —           |       | —             |       | —             |       |
|                        |            |                 |            |                      |            |                                                                           |            |                                                                   |            |                                                                   |            |                                                                             |            |                                                   |            |                                                              |            |                        |            |                  |            |                    |            |                    |            |        |         |        |           |        |  |  |  |  |  |  |  |  |  |  |

 

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(1)           Amounts reflectpotential cash award amounts payable under our incentive compensation programfor 2008 described above in “*CompensationDiscussion and Analysis*.” Actual award amounts are set forth in the “*Non-Equity Incentive Plan Compensation*”column of the Summary Compensation Table.

 

(2)           Date on whichCompensation Committee took action to approve the award.

 

(3)           Reflects totalpotential awards contingent upon us achieving certain performance metrics: (a) Dr. Nottenburgwill be entitled to two performance stock awards of 250,000 shares each upon usachieving certain performance metrics between January 1, 2010 and December 31,2012; and (b) Mr. Gaynor, Mr. Shanableh, Mr. Dillon and Mr. Englandwill be entitled to three performance stock awards (each one third of the totaltarget in the table above) contingent upon us achieving certain performancemetrics for each of the three years ended December 31, 2010, 2011 and2012.

 

(4)           Amounts reflect thefair value of the restricted stock awards and stock option grants as of thegrant date. The terms of the grants are as follows: (a) Dr. Nottenburgwas granted an option to purchase 500,000 shares of our common stock at anexercise price equal to the closing price of our common stock on the NASDAQGlobal Select Market on the date of grant pursuant to his Employment Agreementdescribed under “*Employment, Severance andChange of Control Arrangements*” below; (b) Mr. Shanablehwas granted an award of 25,000 restricted shares on June 16, 2008 whichvest over four years with 25% of the shares vesting on the anniversary of thegrant date and in equal increments semi-annually thereafter; and an option topurchase 125,000 shares of our common stock at an exercise price of $4.75 pershare, the closing price on the grant date, with 25% of the shares vesting onthe first anniversary of the grant date and the remaining 75% vesting 2.0833%monthly; (c) Mr. Dillon, Mr. England, Mr. Gaynor and Mr. Shanablehwere granted awards of 133,000, 33,333, 200,000 and 133,000 restricted shares,respectively, under the 2007 Plan, subject to the terms of the 2007 Planpursuant to the severance and retention program and agreements described under “*Employment, Severance and Change of ControlArrangements*” below.

 

(5)           Target amount iscalculated using Mr. Shanableh’s commission targets for 2008.

 

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***Option Holdings***

 

The followingtable sets forth information concerning stock options and unvested stock awardsheld by the Named Executive Officers as of December 31, 2008.

 

**OUTSTANDING EQUITY AWARDS AT 2008 FISCALYEAR-END**

 
| ** **            | ** ** | ** **                                                                                | ** ** | ** **                                                                                  | ** ** | **Option  Awards**                                                                                                    | ** ** | ** **                       | ** ** | ** **                   | ** ** | **Stock  Awards**                                                                             | ** ** | **Equity  Incentive**                                                                                    | ** ** |
|-----------------------|------------|-------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|------------|
| **Name**              | ** ** | **Number of  Securities  Underlying  Unexercised  Options (#)  Exercisable(1)** | ** ** | **Number of  Securities  Underlying  Unexercised  Options (#)  Unexercisable(2)** | ** ** | **Equity  Incentive  Plan Awards:  Number of  Securities  Underlying  Unexercised  Unearned  Options  (#)** | ** ** | **Option  Exercise  Price  ($)** | ** ** | **Option  Expiration  Date** | ** ** | **Number  of  Shares or  Units of  Stock that  Have Not  Vested  (#)(3)** | ** ** | **Market  Value of  Shares or  Units of  Stock That  Have Not  Vested  ($)(4)** | ** ** | **Equity  Incentive  Plan Awards:  Number of  Unearned  Shares,  Units or  Other Rights  That Have  Not Vested  (#)** | ** ** | **Plan  Awards:  Market or  Payout Value  of Unearned  Shares,  Units or  Other Rights  That Have  Not Vested  ($)** | ** ** |
| Richard  Nottenburg   |       | —                                                                                    |       | 500,000                                                                                     |       | —                                                                                                                |       | $                                | 4.75       |                         | 6/16/2018  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       |                         |       | 500,000                                                                                       |       | $                                                                                                        | 790,000    |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       |                         |       | —                                                                                        |       | —                                                                                                   |       | 500,000 |   | $ | 790,000 |   |
| Richard J. Gaynor     |       | 102,083                                                                                   |       | 247,917                                                                                     |       | —                                                                                                                |       | $                                | 5.98       |                         | 10/15/2017 |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | 26,250                                                                                        |       | $                                                                                                        | 41,475     |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | 200,000                                                                                       |       | $                                                                                                        | 316,000    |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | —                                                                                        |       | —                                                                                                   |       | 100,000 |   | $ | 158,000 |   |
| Mohammed Shanableh    |       | 110,000                                                                                   |       | —                                                                                      |       | —                                                                                                                |       | $                                | 5.79       |                         | 9/20/2014  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 50,000                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | $                                | 4.91       |                         | 9/9/2015   |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 20,000                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | $                                | 5.37       |                         | 9/15/2015  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 83,333                                                                                    |       | 166,667                                                                                     |       | —                                                                                                                |       | $                                | 5.64       |                         | 8/15/2017  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | —                                                                                    |       | 125,000                                                                                     |       | —                                                                                                                |       | $                                | 4.75       |                         | 6/16/2018  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | 25,000                                                                                        |       | $                                                                                                        | 39,500     |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | 18,750                                                                                        |       | $                                                                                                        | 29,625     |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | 25,000                                                                                        |       | $                                                                                                        | 39,500     |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | 133,000                                                                                       |       | $                                                                                                        | 210,140    |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | —                                                                                        |       | —                                                                                                   |       | 66,000 |   | $ | 104,280 |   |
| Matthew Dillon        |       | 1,660                                                                                     |       | —                                                                                      |       | —                                                                                                                |       | $                                | 4.48       |                         | 5/27/2010  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 59,376                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | $                                | 4.47       |                         | 6/16/2013  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 90,624                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | $                                | 5.21       |                         | 6/16/2013  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 75,000                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | $                                | 5.19       |                         | 8/27/2014  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 100,000                                                                                   |       | —                                                                                      |       | —                                                                                                                |       | $                                | 4.87       |                         | 6/17/2015  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 150,000                                                                                   |       | —                                                                                      |       | —                                                                                                                |       | $                                | 4.91       |                         | 9/9/2015   |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 72,917                                                                                    |       | 27,083                                                                                      |       | —                                                                                                                |       | $                                | 4.91       |                         | 1/9/2016   |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 46,667                                                                                    |       | 93,333                                                                                      |       | —                                                                                                                |       | $                                | 5.64       |                         | 8/15/2017  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | 18,750                                                                                        |       | $                                                                                                        | 29,625     |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | 133,000                                                                                       |       | $                                                                                                        | 210,140    |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | —                                                                                        |       | —                                                                                                   |       | 66,000 |   | $ | 104,280 |   |
| Gale England          |       | 119,125                                                                                   |       | 9,375                                                                                       |       | —                                                                                                                |       | $                                | 3.44       |                         | 4/29/2015  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 23,333                                                                                    |       | 46,667                                                                                      |       | —                                                                                                                |       | $                                | 5.64       |                         | 8/15/2017  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | 11,250                                                                                        |       | $                                                                                                        | 17,775     |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | 33,333                                                                                        |       | $                                                                                                        | 52,666     |   | — |   | — |   |
|                  |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | —                                                                                        |       | —                                                                                                   |       | 16,667 |   | $ | 26,334 |   |
| Hassan Ahmed(7)       |       | 813,000                                                                                   |       | —                                                                                      |       | —                                                                                                                |       | $                                | 3.33       |                         | 3/15/2010  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 586,666                                                                                   |       | —                                                                                      | (5)        | —                                                                                                                |       | $                                | 13.88      |                         | 4/3/2011   |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 53,334                                                                                    |       | —                                                                                      | (5)        | —                                                                                                                |       | $                                | 24.50      |                         | 4/3/2011   |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 750,000                                                                                   |       | —                                                                                      | (6)        | —                                                                                                                |       | $                                | 4.47       |                         | 6/16/2013  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 1,250,000                                                                                 |       | —                                                                                      | (6)        | —                                                                                                                |       | $                                | 4.79       |                         | 6/16/2013  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 550,000                                                                                   |       | —                                                                                      |       | —                                                                                                                |       | $                                | 5.79       |                         | 9/20/2014  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
| Chuba Udokwu(8)       |       | —                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | —                           |       | —                       |       | —                                                                                        |       | —                                                                                                   |       | — |   | — |   |
| Jocelyn  Philbrook(9) |       | 5,051                                                                                     |       | —                                                                                      |       | —                                                                                                                |       | $                                | 4.08       |                         | 5/27/2010  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 7,043                                                                                     |       | —                                                                                      |       | —                                                                                                                |       | $                                | 4.48       |                         | 5/27/2010  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 1,365                                                                                     |       | —                                                                                      |       | —                                                                                                                |       | $                                | 4.08       |                         | 5/27/2013  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 749                                                                                       |       | —                                                                                      |       | —                                                                                                                |       | $                                | 4.48       |                         | 5/27/2013  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 9,896                                                                                     |       | —                                                                                      |       | —                                                                                                                |       | $                                | 4.47       |                         | 6/16/2013  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 15,104                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | $                                | 5.21       |                         | 6/16/2013  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 23,783                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | $                                | 5.19       |                         | 8/27/2014  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 25,000                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | $                                | 4.91       |                         | 9/9/2015   |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |
|                  |       | 15,000                                                                                    |       | —                                                                                      |       | —                                                                                                                |       | $                                | 5.37       |                         | 9/15/2015  |                                                                                          | —     |                                                                                                     | —     |   | — |   | — |   |

 

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(1)                                  OnDecember 21, 2005, upon the Compensation Committee’s recommendation, ourBoard approved the acceleration of vesting of unvested stock options having anexercise price per share of $4.00 or higher, granted under our stock optionplan that are held by our current employees, including executive officers. As aresult, unvested options for executive officers with an exercise price pershare of $4.00 or higher were accelerated. The aggregate number of optionsaccelerated for the executive officers was 2,765,417. Each executive officerwho held options that were accelerated entered into a Resale RestrictionAgreement, which restricts his or her sale of any shares obtained through

 

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theexercise of accelerated options before such time as vesting would otherwisehave taken place absent the acceleration or, if earlier, the executive officer’slast day of employment with us.

 

(2)                                 (a) Of Dr. Nottenburg’s500,000 unvested stock options, 125,000 stock options will vest on June 14,2009 and 10,416 will vest on the 14th of each month beginning July 14, 2009through June 14, 2012. (b) Of Mr. Gaynor’s 247,917 unvestedstock options, 7,292 will vest on the first of each month through September 30,2011. (c) Of Mr. Shanableh’s 166,667 unvested stock options from the August 15,2007 grant, 5,208 stock options will vest monthly on the 15th of eachmonth through August 15, 2011. Of Mr. Shanableh’s 125,000 unvestedstock options from the June 16, 2008 grant, 31,250 stock options will veston June 16, 2009 and 2,604 stock options will vest monthly on the16th of each month beginning July 16, 2009 through June 16,2012. (c) Of Mr. Dillon’s 27,083 unvested stock options from the January 9,2006 grant, 2,083 stock options will vest monthly on the 9th of each monththrough January 9, 2010. Of Mr. Dillon’s 93,333 unvested stockoptions from the August 15, 2007 grant, 2,917 will vest monthly on the15th of each month through August 15, 2011. (d) Of Mr. England’s9,375 unvested stock options from the April 29, 2005 grant, 2,677 stockoptions will vest monthly on the 15th of each month through April, 2009.Of Mr. England’s 46,667 unvested stock options from the August 15,2007 grant, 1,458 stock options will vest monthly on the 15th of eachmonth through August 15, 2011.

 

(3)                                 Dr. Nottenburg’s500,000 unvested shares of restricted stock will vest as follows:

 

| **Vest Date**     | ** ** | **Shares** | ** ** |
|------------------------|------------|------------|------------|
| June 13, 2009     |       | 125,000    |       |
| December 13, 2009 |       | 62,500     |       |
| June 13, 2010     |       | 62,500     |       |
| December 13, 2010 |       | 62,500     |       |
| June 13, 2011     |       | 62,500     |       |
| December 13, 2011 |       | 62,500     |       |
| June 13, 2012     |       | 62,500     |       |

 

Mr. Gaynor’s226,250 unvested shares of restricted stock will vest as follows:

 

| **Vest Date**      | ** ** | **Shares** | ** ** |
|-------------------------|------------|------------|------------|
| April 1, 2009      |       | 4,375      |       |
| September 15, 2009 |       | 50,000     |       |
| October 1, 2009    |       | 4,375      |       |
| April 1, 2010      |       | 4,375      |       |
| September 15, 2010 |       | 50,000     |       |
| October 1, 2010    |       | 4,375      |       |
| April 1, 2011      |       | 4,375      |       |
| September 15, 2011 |       | 100,000    |       |
| October 1, 2011    |       | 4,375      |       |

 

Mr. Shanableh’s201,750 unvested shares of restricted stock will vest as follows:

 

| **Vest Date**      | ** ** | **Shares** | ** ** |
|-------------------------|------------|------------|------------|
| February 14, 2009  |       | 6,250      |       |
| February 15, 2009  |       | 3,125      |       |
| June 16, 2009      |       | 6,250      |       |
| August 14, 2009    |       | 6,250      |       |
| August 15, 2009    |       | 3,125      |       |
| September 15, 2009 |       | 33,250     |       |
| December 16, 2009  |       | 3,125      |       |
| February 14, 2010  |       | 6,250      |       |
| February 15, 2010  |       | 3,125      |       |
| June 16, 2010      |       | 3,125      |       |
| August 14, 2010    |       | 6,250      |       |
| August 15, 2010    |       | 3,125      |       |
| September 15, 2010 |       | 33,250     |       |
| December 16, 2010  |       | 3,125      |       |
| February 15, 2011  |       | 3,125      |       |
| June 16, 2011      |       | 3,125      |       |
| September 15, 2011 |       | 66,500     |       |
| August 15, 2011    |       | 3,125      |       |
| December 16, 2011  |       | 3,125      |       |
| June 16, 2012      |       | 3,125      |       |

 

Mr. Dillon’s151,750 unvested shares of restricted stock will vest as follows:

 

| **Vest Date**      | ** ** | **Shares** | ** ** |
|-------------------------|------------|------------|------------|
| February 15, 2009  |       | 3,125      |       |
| August 15, 2009    |       | 3,125      |       |
| September 15, 2009 |       | 33,250     |       |
| February 15, 2010  |       | 3,125      |       |
| August 15, 2010    |       | 3,125      |       |
| September 15, 2010 |       | 33,250     |       |
| February 15, 2011  |       | 3,125      |       |
| August 15, 2011    |       | 3,125      |       |
| September 15, 2011 |       | 66,500     |       |

 

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Mr. England’s44,583 unvested shares of restricted stock will vest as follows:

 

| **Vest Date**      | ** ** | **Shares** | ** ** |
|-------------------------|------------|------------|------------|
| February 15, 2009  |       | 1,875      |       |
| August 15, 2009    |       | 1,875      |       |
| September 15, 2009 |       | 8,334      |       |
| February 15, 2010  |       | 1,875      |       |
| August 15, 2010    |       | 1,875      |       |
| September 15, 2010 |       | 8,333      |       |
| February 15, 2011  |       | 1,875      |       |
| August 15, 2011    |       | 1,875      |       |
| September 15, 2011 |       | 16,666     |       |

 

(4)                                 In accordancewith SEC rules, the market value of unvested shares of restricted stock isdetermined by multiplying the number of such shares by $1.58, the closingmarket price of our common stock on December 31, 2008.

 

(5)                                 On August 2,2007, we filed our Annual Report on Form 10-K for the year ended December 31,2006. In connection with this filing, we determined that the correct grant dateof the April 3, 2001 grant to Mr. Ahmed was August 3, 2001.Pursuant to the terms of Mr. Ahmed’s Consent, the exercise price for theportion of that option vesting after December 31, 2004 (representing53,334 shares) was increased from $13.875 to $24.50, reflecting the closingprice of our stock on August 3, 2001. The option remains exercisable for586,666 shares at the original exercise price of $13.875 a share.

 

(6)                                 On August 2,2007, we filed our Annual Report on Form 10-K for the year ended December 31,2006. In connection with this filing, we determined that the correct grant dateof the June 16, 2003 grant to Mr. Ahmed was June 18, 2003.Pursuant to the terms of Mr. Ahmed’s Consent, the exercise price for theportion of that option vesting after December 31, 2004 (representing1,250,000 shares) was increased from $4.47 to $4.79, reflecting the closingprice of our stock on June 18, 2003. Also, pursuant to the terms of theConsent, Mr. Ahmed became entitled to receive in January 2008 a cashpayment of $400,000, which is the amount of the aggregate increase in theexercise price of the 1,250,000 shares. The option remains exercisable for750,000 shares at the original exercise price of $4.47 a share.

 

(7)                                  On November 14,2007, we entered into a Retention and Restricted Stock Agreement with our thencurrent President, Chief Executive Officer and Chairman, Mr. Ahmed. On December 11,2008, Mr. Ahmed was terminated without cause and as a result of suchtermination Mr. Ahmed is entitled to receive the following under theRetention and Restricted Stock Agreement: (i) 375,000 of his shares ofrestricted stock immediately vested, (ii) his unvested stock options willcontinue to vest over the 18 month period following the date oftermination and thereafter will remain outstanding and exercisable for thelesser of 18 months from the date of termination or the life of the optionand (iii) vested and unexercised options will remain outstanding andexercisable for the lesser of 18 months from the date of termination orthe life of the option.

 

(8)                                 Due to thetermination of Mr. Udokwu’s employment with us, any remaining awards didnot vest and have been forfeited.

 

(9)                                 On June 24,2008, we entered into a Separation of Employment Letter with our then currentVice President, Marketing and Investor Relations, Ms. Philbrook. On June 30,2008, Ms. Philbrook was terminated without cause and as a result of suchtermination Ms. Philbrook is entitled to receive the following paymentsunder the Separation Letter: (i) 25,000 shares of restricted stock grantedon August 15, 2007 and 15,625 shares of restricted stock granted on August 14,2006 immediately vested, subject to shares to be returned to us to coverwithholding taxes and (ii) vested and unexercised options will remainoutstanding and exercisable for the lesser of 12 months from the date oftermination or the life of the option.

 

*OptionExercises and Stock Vested.*  The following table summarizes for the NamedExecutive Officers in 2008 (i) the number of shares acquired upon exerciseof stock options and the value realized and (ii) the number of sharesacquired upon the vesting of restricted stock and the value realized, beforepayout of any applicable withholding tax.

 

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**2008 OPTION EXERCISES AND STOCK VESTED**

 
| ** **            | ** ** | **Option Awards**                                          | ** ** | **Stock Awards**                          | ** ** |
|-----------------------|------------|-----------------------------------------------------------------|------------|------------------------------------------------|------------|
| ** **            | ** ** | **Number of  Shares Acquired  on Exercise  (#)** | ** ** | **Value Realized  on Exercise  ($)** | ** ** | **Number of  Shares Acquired  on Vesting  (#)(1)** | ** ** | **Value Realized  on Vesting  ($)(2)** | ** ** |
| Richard N. Nottenburg |       | —                                                          |       | $                                              | —     |   | — |   | $ | — |   |
| Richard J. Gaynor     |       | —                                                          |       | $                                              | —     |   | 8,750 |   | $ | 25,200 |   |
| Mohammed Shanableh    |       | —                                                          |       | $                                              | —     |   | 18,750 |   | $ | 66,125 |   |
| Matthew Dillon        |       | —                                                          |       | $                                              | —     |   | 6,250 |   | $ | 21,063 |   |
| Gale England          |       | —                                                          |       | $                                              | —     |   | 3,750 |   | $ | 12,638 |   |
| Hassan M. Ahmed       |       | —                                                          |       | $                                              | —     |   | 750,000 |   | $ | 1,732,500 |   |
| Chuba Udokwu          |       | —                                                          |       | $                                              | —     |   | 18,750 |   | $ | 66,125 |   |
| Jocelyn Philbrook     |       | —                                                          |       | $                                              | —     |   | 43,750 |   | $ | 154,969 |   |

 

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(1)                                 Of Mr. Gaynor’s8,750 shares that vested in 2008, 3,653 shares were returned to us to satisfythe tax withholding associated with the vesting of shares. Of Mr. Shanableh’s18,750 shares that vested in 2008, 5,988 shares were returned to us to satisfythe tax withholding associated with the vesting of the shares. Of Mr. Dillon’s6,250 shares that vested in 2008, 1,984 shares were returned to us to satisfythe tax withholding associated with the vesting of the shares. Of Mr. England’s3,750 shares that vested in 2008, 1,190 shares were returned to us to satisfythe tax withholding associated with the vesting of the shares. Of Mr. Ahmed’s750,000 shares that vested in 2008, 313,124 shares were returned to us tosatisfy the tax withholding associated with the vesting of the shares. Of Mr. Udokwu’s18,750 shares that vested in 2008, 6,339 shares were returned to us to satisfythe tax withholding associated with the vesting of the shares. Of Ms. Philbrook’s43,750 shares that vested in 2008, 14,081 shares were returned to us to satisfythe tax withholding associated with the vesting of the shares.

 

(2)                                 In accordancewith SEC rules, the aggregate dollar amount realized upon vesting of shares ofrestricted stock is determined by multiplying the number of shares by theclosing market price of our common stock on the date of vesting.

 

***Section 409A of the InternalRevenue Code***

 

In connection with thevoluntary review by us of our historical stock option grant practices withrespect to options granted since our initial public offering, we concluded thatthe appropriate measurement dates for financial accounting purposes of certainstock grants differ from the recorded measurement dates of those awards. Forcertain options that were determined to have a measurement date different fromthe original measurement date, and that have an exercise price less than thefair market value of our stock on the re-determined measurement date, theoption recipient is subject to adverse tax consequences, and we are subject toreporting and withholding obligations under Section 409A of the InternalRevenue Code (“Section 409A”). In addition, we must comply with certainreporting and withholding obligations under Section 409A.

 

In order to address theadverse tax consequences under Section 409A, on December 26, 2006,our current and former executive officers and directors who may have receivedoptions subject to Section 409A (the “Section 16 Persons”) eachexecuted a consent (the “Consent(s)”), pursuant to which they irrevocablyagreed that the exercise price of any of their stock options that aredetermined to be subject to Section 409A would be increased so as to beequal to the fair market value of our stock on the re-determined measurementdate.

 

In 2008, we compensated incash the Section 16 Persons for any increases in the exercise price oftheir options that are subject to Section 409A. However, the Section 16Persons did not receive compensation for grants that we determined to beout-of-the-money with exercise prices higher than the closing price of ourcommon stock on the NASDAQ Global Select Market as of February 16, 2007.

 

**POTENTIAL PAYMENTS UPON TERMINATION OR UPON CHANGE INCONTROL**

 

The table below showspotential payments to the Named Executive Officers with severance or change incontrol arrangements upon termination or upon a change of control of ourCompany. The amounts shown assume that termination and/or change of control waseffective as of December 31, 2008, the last day of our fiscal year, andare estimates of the amounts that would have been paid to the executives orrealized by the employees upon such a termination or change of control. The 

 

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actual amounts to be paid or realized can only be determined at thetime of an executive’s termination or following a change of control.

 
| ** **         | ** ** | **Termination  without Cause or  for Good Reason(1)** | ** ** | **Change in Control:  Stock Options  Assumed or  Substituted by  Acquiring  Company(2)** | ** ** | **Change in Control:  Stock Options  Not Assumed or  Substituted by  Acquiring  Company(3)** | ** ** | **Termination  without Cause or  for Good Reason  following  Change  in Control** | ** ** |
|--------------------|------------|---------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------|------------|
| Richard Nottenburg |       |                                                                      |       |                                                                                                              |       |                                                                                                                       |       |                                                                                                       |       |
| Cash Severance     |       | $                                                                         | 1,350,000  |                                                                                                              | $          | —                                                                                                                     |       | $                                                                                                          | —     |   | $ | 1,750,000 |   |
| Stock Options(4)   |       | —                                                                    |       | —                                                                                                            |       | —                                                                                                                     |       | —                                                                                                     |       |
| Stock Awards(5)    |       | 790,000                                                                   |       | 790,000                                                                                                           |       | 790,000                                                                                                                    |       | 790,000                                                                                                    |       |
| Health Benefits    |       | 29,824                                                                    |       | —                                                                                                            |       | —                                                                                                                     |       | 29,824                                                                                                     |       |
|               |       | $                                                                         | 2,169,824  |                                                                                                              | $          | 790,000                                                                                                                    |       | $                                                                                                          | 790,000    |   | $ | 2,569,824 |   |
| Richard J. Gaynor  |       |                                                                      |       |                                                                                                              |       |                                                                                                                       |       |                                                                                                       |       |
| Cash Severance     |       | $                                                                         | 470,250    |                                                                                                              | $          | —                                                                                                                     |       | $                                                                                                          | —     |   | $ | 470,250 |   |
| Stock Options(4)   |       | —                                                                    |       | —                                                                                                            |       | —                                                                                                                     |       | —                                                                                                     |       |
| Stock Awards(5)    |       | 357,475                                                                   |       | 357,475                                                                                                           |       | 357,475                                                                                                                    |       | 357,475                                                                                                    |       |
| Health Benefits    |       | 19,536                                                                    |       | —                                                                                                            |       | —                                                                                                                     |       | 19,536                                                                                                     |       |
|               |       | $                                                                         | 847,261    |                                                                                                              | $          | 357,475                                                                                                                    |       | $                                                                                                          | 357,475    |   | $ | 847,261 |   |
| Mohammed Shanableh |       |                                                                      |       |                                                                                                              |       |                                                                                                                       |       |                                                                                                       |       |
| Cash Severance     |       | $                                                                         | 521,113    |                                                                                                              | $          | —                                                                                                                     |       | $                                                                                                          | —     |   | $ | 521,113 |   |
| Stock Options(4)   |       | —                                                                    |       | —                                                                                                            |       | —                                                                                                                     |       | —                                                                                                     |       |
| Stock Awards(5)    |       | 318,765                                                                   |       | 318,765                                                                                                           |       | 318,765                                                                                                                    |       | 318,765                                                                                                    |       |
| Health Benefits    |       | 19,883                                                                    |       | —                                                                                                            |       | —                                                                                                                     |       | 19,883                                                                                                     |       |
|               |       | $                                                                         | 859,761    |                                                                                                              | $          | 318,765                                                                                                                    |       | $                                                                                                          | 318,765    |   | $ | 859,761 |   |
| Matthew Dillon     |       |                                                                      |       |                                                                                                              |       |                                                                                                                       |       |                                                                                                       |       |
| Cash Severance     |       | $                                                                         | 387,956    |                                                                                                              | $          | —                                                                                                                     |       | $                                                                                                          | —     |   | $ | 387,956 |   |
| Stock Options(4)   |       | —                                                                    |       | —                                                                                                            |       | —                                                                                                                     |       | —                                                                                                     |       |
| Stock Awards(5)    |       | 239,765                                                                   |       | 239,765                                                                                                           |       | 239,765                                                                                                                    |       | 239,765                                                                                                    |       |
| Health Benefits    |       | 19,883                                                                    |       | —                                                                                                            |       | —                                                                                                                     |       | 19,883                                                                                                     |       |
|               |       | $                                                                         | 647,604    |                                                                                                              | $          | 239,765                                                                                                                    |       | $                                                                                                          | 239,765    |   | $ | 647,604 |   |
| Gale England       |       |                                                                      |       |                                                                                                              |       |                                                                                                                       |       |                                                                                                       |       |
| Cash Severance     |       | $                                                                         | 305,805    |                                                                                                              | $          | —                                                                                                                     |       | $                                                                                                          | —     |   | $ | 305,805 |   |
| Stock Options(4)   |       | —                                                                    |       | —                                                                                                            |       | —                                                                                                                     |       | —                                                                                                     |       |
| Stock Awards(5)    |       | 70,441                                                                    |       | 70,441                                                                                                            |       | 70,441                                                                                                                     |       | 70,441                                                                                                     |       |
| Health Benefits    |       | 14,152                                                                    |       | —                                                                                                            |       | —                                                                                                                     |       | 14,152                                                                                                     |       |
|               |       | $                                                                         | 390,398    |                                                                                                              | $          | 70,441                                                                                                                     |       | $                                                                                                          | 70,441     |   | $ | 390,398 |   |

 

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(1)                                 Assumesemployment termination without a change of control.

 

(2)                                 If an acquiringcompany assumes or substitutes the stock options, under Sonus’ stock incentiveplans the number of shares subject to the option that are not then vested shallbecome accelerated in vesting by 12 months upon the closing of theAcquisition. In addition, 25% of the number of shares of restricted stock shallbecome vested.

 

(3)                                 If an acquiringcompany does not assume or substitute the stock options, under Sonus’ stockincentive plans the number of shares subject to the option that are not thenvested shall accelerate in full and become immediately exercisable upon theclosing of the Acquisition. In addition, 25% of the number of shares ofrestricted stock shall become vested.

 

(4)                                 Stock optionsfor Dr. Nottenburg, Mr. Gaynor, Mr. Shanableh, Mr. Dillonand Mr. England were out of the money on December 31, 2008.Accordingly, there would be no gain realized at December 31, 2008 relatedto the accelerated vesting of their stock options.

 

(5)                                 The value ofshares of restricted stock was calculated by multiplying the number of sharesof restricted stock by $1.58, the closing market price of our common stock on December 31,2008.

 

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***Employment, Severance and Change of ControlArrangements***

 

In addition to compensationdesigned to reward employees and executives for service and performance, we haveapproved certain severance and change of control provisions for certain of theNamed Executive Officers.

 

Executive retention andseverance agreements encourage executives to remain in our employ and tocontinue to devote their full attention to our success and provide enhancedfinancial security and incentive to the executives. In order to recruit andretain executives, we believed it was appropriate and necessary to provideassurance of certain severance payments if we terminated an executive’s employmentwithout cause or if the executive terminated his or her employment for goodreason. Sonus competes in a challenging market environment with largercompetitors which can provide greater cash incentives to executives. Inaddition, smaller private competitors can offer greater equity growthpotential.

 

On August 31, 2007,Richard J. Gaynor entered into an employment agreement with us, under which hebecame Chief Financial Officer as of October 1, 2007. In 2008, Mr. Gaynorreceived an annual base salary of $285,000, which may be increased insubsequent years. Pursuant to the terms of his employment agreement, Mr. Gaynorreceived an option to purchase 350,000 shares of our common stock at anexercise price equal to the closing price of our common stock on the NASDAQGlobal Select Market on October 15, 2007. 25% of the shares subject to theoption vested on the first anniversary of his commencement date. Subject to hiscontinued employment, the remaining 75% vests in equal monthly incrementsthrough the fourth anniversary of his commencement date. Mr. Gaynor alsoreceived 35,000 shares of restricted stock, 25% of which vested on the firstanniversary of his commencement date with the remaining 75% vesting in equalincrements semi-annually through the fourth anniversary of his commencementdate.

 

The employment agreementprovides that if Mr. Gaynor’s employment is terminated following anacquisition of our Company for any reason other than Cause (as defined in theagreement) or if he is not offered an equivalent position in the combinedentity, he will be eligible to receive the following severance and relatedpost-termination benefits: (i) 12 months salary continuation paymentsof his annual base salary; (ii) 12 months health benefitscontinuation; and (iii) 100% of all unvested options and restricted stockin his New Hire Grant shall immediately become vested and exercisable, subjectto his serving through a six month transition period, if requested.

 

On November 14, 2007,we entered into a Retention and Restricted Stock Agreement with our thencurrent President, Chief Executive Officer and Chairman, Mr. Ahmed. On December 11,2008, Mr. Ahmed was terminated without cause and as a result of suchtermination Mr. Ahmed is entitled to receive the following payments underthe Retention and Restricted Stock Agreement: (i) eighteen months of histhen current base salary at the time of the termination and 1.5x annual bonusplan amount assuming the target amount, (ii) for 35 days of accruedvacation, (iii) 375,000 of his shares of restricted stock shallimmediately vest, (iv) his COBRA premiums for a period of 18 monthsfor medical, dental and vision, (v) unvested stock options will continueto vest over the 18 month period following the date of termination andthereafter will remain outstanding and exercisable for the lesser of18 months from the date of termination or the life of the option, (vi) vestedand unexercised options will remain outstanding and exercisable for the lesserof 18 months from the date of termination or the life of the option, and (vii) anyunpaid expenses properly submitted pursuant to our expense reimbursementpolicy. In order to comply with Section 409A of the Internal Revenue Code,we must wait to make the payment of salary and bonus to Mr. Ahmed untilsix months and one day from the date of termination.

 

On May 16, 2008, Dr. RichardN. Nottenburg entered into an employment agreement with us to commenceemployment no later than June 14, 2008 as Sonus’ President and ChiefExecutive Officer. Dr. Nottenburg also joined our Board of Directors.Pursuant to his employment agreement, Dr. Nottenburg received an initialannual base salary of $500,000 and he is eligible for an “on target bonus” ofat least 80% of his annual base salary subject to the achievement of specificobjectives. For fiscal year 2008, Dr. Nottenburg was guaranteed a bonus of80% of his base salary pro rated for the days in 2008 he was employed by us. Wereimbursed Dr. Nottenburg for relocation costs up to $25,000. Dr. Nottenburgalso received an option to purchase 500,000 shares of our common stock at anexercise price equal to the closing price of our common stock on the NASDAQGlobal Select Market on the date of grant. Pursuant to his employmentagreement, on January 15, 2009, Dr. Nottenburg received an option topurchase 500,000 shares of our common stock at an exercise price equal to theclosing price of our common stock on the NASDAQ Global Select Market on thedate of grant. Each of the foregoing grants are subject to vesting. Dr. Nottenburgwill be entitled to two performance stock grants of 250,000 shares each uponour achieving certain performance metrics between January 1, 2010 and December 31,2012 as approved by the Compensation Committee of our Board.

 

In the event of an Acquisition(as defined in Dr. Nottenburg’s employment agreement), 100% of allunvested options and restricted stock shall accelerate and become vested. Inaddition, the options shall remain exercisable for the shorter of five yearsfrom the date of Acquisition or the original remaining life of the options. Dr. Nottenburg’semployment agreement also 

 

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provides that if he is terminated for anyreason other than Cause (as defined in his employment agreement), or isterminated due to his death or disability or if Dr. Nottenburg terminateshis employment with Good Reason (as defined in his employment agreement), hewill receive: (1) a lump sum payment equal to one and one half times histhen annual base salary and one and a half times his then target bonus (or twoand a half times his target bonus if the termination follows an Acquisition); (2) healthbenefits continuation at our expense for 18 months following histermination; (3) acceleration of the vesting of options unvested as of thetermination which would have vested over the 24 months followingtermination; (4) the right to exercise all vested options for the shorterof 5 years from the termination date or the original remaining life of theoptions; and (5) accelerated vesting of all unvested restricted shares atthe time of termination.

 

On June 24, 2008, weentered into a Separation of Employment Letter with our then current VicePresident, Marketing and Investor Relations, Ms. Philbrook. On June 30,2008, Ms. Philbrook was terminated without cause and as a result of suchtermination Ms. Philbrook is entitled to receive the following paymentsunder the Separation Letter: (i) continuation of payment of salary for aperiod of 52 weeks from the date of separation, (ii) a lump sumpayment of $165,300, calculated as (a) six months of base salary, or$109,200, (b) six months of pro-rated bonus, or $54,600, and (c) a$1,500 special bonus, (iii) her COBRA premiums for a period of12 months for medical, dental and vision, (iv) 25,000 shares ofrestricted stock granted on August 15, 2007 and 15,625 shares ofrestricted stock granted on August 14, 2006 immediately vested, subject toshares to be returned to us to cover withholding taxes, and (v) vested andunexercised options will remain outstanding and exercisable for the lesser of12 months from the date of termination or the life of the option.

 

On October 3, 2008, theCompensation Committee of our Board approved a severance and retention programand agreement for each of Matthew Dillon, Gale England, Richard J. Gaynor andMohammed Shanableh (each an “Executive”). The severance program and agreementprovide for post-termination benefits in the event an Executive’s employment isterminated by us without Cause (as defined in the agreement) or is terminatedby the Executive for Good Reason (as defined in the agreement). Thepost-termination benefits include: (1) a lump sum payment equal to theExecutive’s annual base salary and target bonus; (2) continuation ofpayment of our share of benefits for 12 months; (3) payment ofunreimbursed expenses and any accrued but unused vacation pay; (4) 12-monthsforward vesting of unvested options; and (5) complete vesting of unvestedrestricted stock. Pursuant to the program and agreement, we will grant eachExecutive: (1) certain restricted shares of our common stock $0.001 parvalue per share (“Restricted Stock”) under the 2007 Plan, subject to the termsof the 2007 Plan and our restricted stock agreement, which Restricted Stockshall vest 25% on September 15, 2009, 25% on September 15, 2010 and50% on September 15, 2011 subject to continued employment by theExecutive; and (2) additional Restricted Stock upon the achievement ofcertain performance metrics for the 2010, 2011 and 2012 fiscal years asdetermined by the Compensation Committee of our Board (“Performance Stock”),with the Executive eligible to be granted 1/3 of such Performance Stock duringeach of such fiscal years, and when issued, such Performance Stock shall befully vested on the date of grant. In the event of a change in control (asdefined in the agreement), 100% of all Restricted Stock granted to an Executiveshall accelerate and become fully vested and any and all restrictions on suchRestricted Stock shall be terminated.

 

The number of sharesgranted, or eligible for granting, as applicable, to each Executive under theseverance and retention program is set forth as follows:

 
| **Name**           | ** ** | **Title**                                        | ** ** | **Restricted  Stock** | ** ** | **Performance  Stock** | ** ** |
|--------------------|------------|--------------------------------------------------|------------|-----------------------|------------|------------------------|------------|
| Matthew Dillon     |       | Vice President, Global  Services                 |       | 133,000               |       | 66,000                 |       |
| Gale England       |       | Vice President, Operations                       |       | 33,333                |       | 16,667                 |       |
| Richard J. Gaynor  |       | Chief Financial Officer  and Assistant Secretary |       | 200,000               |       | 100,000                |       |
| Mohammed Shanableh |       | Vice President of  Worldwide Sales               |       | 133,000               |       | 66,000                 |       |

 

For each employee includingthe Named Executive Officers, in the event of an Acquisition in which an optionis assumed or substituted in the Acquisition, then the number of shares subjectto the option that are not then vested shall become accelerated in vesting by12 months upon the closing of the Acquisition. If an option is not assumedor substituted, then the number of shares that are not then vested shallaccelerate in full and become immediately exercisable. In addition, 25% of thenumber of shares covered by a restricted stock award shall become vested.

 

On October 10, 2008, weterminated the employment of Chuba Udokwu, Vice President of Engineering. Inconnection with Mr. Udokwu’s termination, we and Mr. Udokwu enteredinto a Separation of Employment Agreement signed on October 10, 2008 (the “SeparationAgreement”). Under the Separation Agreement, Mr. Udokwu will receive, thefollowing in connection with his termination, (1) salary continuationpayments for a 37-week period following the termination date at his annual basesalary and (2) continued payment of health benefits for a 37-week periodfollowing the termination date.

 

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***Indemnification Agreements***

 

Certain of our current andformer officers and directors are parties to legal proceedings because of theirstatus as officers and directors. We have generally entered intoindemnification agreements with our officers and directors and we may be liablefor judgments, fines and expenses in connection with such proceedings, which,in the aggregate, may be material. We are paying legal fees for counselrepresenting our officers and directors in connection with such proceedings.

 

***Compensation Committee Interlocks andInsider Participation***

 

No interlocking relationshipexists between any member of our Board or our Compensation Committee and anymember of our Board or Compensation Committee of any other company, and none ofthese interlocking relationships have existed in the past.

 

**Item 12. Security Ownership of Certain Beneficial Owners and Management andRelated Stockholder Matters**

 

**EQUITY COMPENSATION PLAN INFORMATION**

 

The following table providesinformation as of December 31, 2008 with respect to the shares of ourcommon stock that may be issued under our existing equity compensation plans.

 
| ** **                                             | ** ** | **(A)**                                                                                            | ** ** | **(B)**                                                                            | ** ** | **(C)**                                                                                                                                            | ** ** |
|--------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Plan Category**                                      | ** ** | **Number of Securities to be  Issued upon Exercise of  Outstanding Options,  Warrants and Rights** | ** ** | **Weighted Average  Exercise Price of  Outstanding Options,  Warrants and Rights** | ** ** | **Number of Securities  Remaining Available for  Future Issuance Under Equity  Compensation Plans  (Excluding Securities  Reflected in Column A)** | ** ** |
| Equity Compensation Plans Approved by Stockholders(1)  |       | 36,875,380                                                                                         | (2)        | $                                                                                  | 5.19       |                                                                                                                                               | 36,060,079 | (3) |
| Equity compensation Plans Not Approved by Stockholders |       | —                                                                                             |       | —                                                                             |       | —                                                                                                                                             |       |
| Total                                                  |       | 36,875,380                                                                                         |       | $                                                                                  | 5.19       |                                                                                                                                               | 36,060,079 |   |

 

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(1)                                Consists of the2007 Plan and the 2000 Employee Stock Purchase Plan, or the ESPP.

 

(2)                                Excludespurchase rights accruing under the ESPP. On January 25, 2008, our Boardapproved an Amended and Restated ESPP. Effective March 1, 2008, theAmended and Restated ESPP eliminates the original ESPP’s two year offeringperiods comprised of four six-month purchase periods. The Amended and RestatedESPP provides for a six-month offering period commencing with the March 1,2008 purchase period. The purchase price of the stock is equal to 85% of themarket price on the last day of the offering period. Participation is limitedto 20% of an employee’s eligible compensation not to exceed amounts allowed bythe Internal Revenue Code.

 

(3)                                Consists ofshares available for future issuance under the 2007 Plan and the ESPP. As of December 31,2008, no shares of common stock were available for issuance under the 1997Plan, which expired as of November 18, 2007; 4,891,581 shares of commonstock were available for issuance under the 2007 Plan; and 31,168,498 shares ofcommon stock were available for issuance under the ESPP. The ESPP incorporatesan evergreen provision pursuant to which, on January 1 of each year, theaggregate number of shares reserved for issuance under the ESPP automaticallyincreases by a number equal to the lesser of (i) 2% of the total number ofshares of common stock outstanding on December 31 of the preceding year,or (ii) such number as our Board may determine, but the total sharesreserved for issuance cannot increase to more than 75,000,000 without furtherstockholder approval (except as the ESPP provides with respect to certainchanges in our equity structure).

 

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**BENEFICIAL OWNERSHIP OF SECURITIES**

 

The following table setsforth information regarding beneficial ownership of our common stock as of March 31,2009 by:

 

·                  each person whobeneficially owns, to the best of our knowledge, more than 5% of theoutstanding shares of our common stock;

 

·                  each of ourNamed Executive Officers (as defined in the Summary Compensation Table below);

 

·                  each of ourdirectors; and

 

·                  all of ourcurrent executive officers and directors as a group.

 

Beneficial ownership isdetermined in accordance with the rules of the Securities and ExchangeCommission, and includes voting or investment power with respect to shares. Incomputing the number of shares beneficially owned by each person named in the followingtable and the percentage ownership of that person, shares of common stock thatare subject to stock options held by that person that are currently exercisableor exercisable within 60 days of March 31, 2009 are deemed owned bythat person and are also deemed outstanding. These shares are not, however,deemed outstanding for purposes of computing the percentage ownership of anyother person.

 

Unless otherwise indicatedbelow, to our knowledge, all persons named in the table have sole voting andinvestment power with respect to their shares of common stock, except to theextent authority is shared by spouses under applicable law. The percentage ofcommon stock outstanding as of March 31, 2009 is based on 273,509,970shares of common stock outstanding on that date plus shares subject to optionsto the extent noted above.

 
| **Name of Beneficial Owner**                                                             | ** ** | **Number of Shares  Beneficially Owned** | ** ** | **Percentage  Outstanding** | ** ** |
|------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|-----------------------------|------------|
| **Named Executive Officers:**                                                            |       |                                     |       |                        |       |
| Richard N. Nottenburg(1)                                                                 |       | 1,000,000                                |       | *                           |       |
| Richard J. Gaynor(2)                                                                     |       | 371,389                                  |       | *                           |       |
| Mohammed Shanableh(3)+                                                                   |       | 508,799                                  |       | *                           |       |
| Matthew Dillon(4)                                                                        |       | 776,575                                  |       | *                           |       |
| Gale England(5)                                                                          |       | 209,057                                  |       | *                           |       |
| Hassan M. Ahmed(6)+                                                                      |       | 10,115,207                               |       | 3.70                        | %          |
| Chuba Udokwu(7)                                                                          |       | 20,943                                   |       | *                           |       |
| Jocelyn Philbrook (8)                                                                    |       | 136,926                                  |       | *                           |       |
| **Non-Employee Directors:**                                                              |       |                                     |       |                        |       |
| John P. Cunningham(9)                                                                    |       | 82,084                                   |       | *                           |       |
| Howard E. Janzen(10)                                                                     |       | 55,834                                   |       | *                           |       |
| John A. Schofield                                                                        |       | —                                   |       | *                           |       |
| Scott Schubert                                                                           |       | —                                   |       | *                           |       |
| Paul J. Severino(11)+                                                                    |       | 576,656                                  |       | *                           |       |
| H. Brian Thompson(12)                                                                    |       | 113,855                                  |       | *                           |       |
| All current executive officers and directors as a group (11  persons)(13)                |       | 3,694,249                                |       | 1.35                        | %          |
| **5% Owners:**                                                                           |       |                                     |       |                        |       |
| Senate Limited (Trustee)—P.O. Box 71082, Dubai, United Arab  Emirates(14) |       | 67,295,079                               |       | 24.60                       | %          |
| FMR Corp.—82 Devonshire Street, Boston, MA 02109(15)                                |       | 16,158,103                               |       | 5.91                        | %          |
| T. Rowe Price Associates, Inc.—100 E. Pratt Street, Baltimore,  MD 21202(16)   |       | 16,152,900                               |       | 5.91                        | %          |

 

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*                                       Less than 1% ofthe outstanding shares of common stock.

 

+                                       The executiveofficer or director has implemented a 10b5-1 trading plan under which shares ofour common stock may be sold from time to time.

 

(1)                                Shares arerestricted stock subject to vesting.

 

(2)                                Includes138,542 shares subject to outstanding options that are exercisable as of May 30,2009, and 221,875 shares of restricted stock subject to vesting.

 

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(3)                                Includes289,375 shares subject to outstanding options that are exercisable as of May 30,2009, and 192,375 shares of restricted stock, subject to vesting.

 

(4)                                Includes621,244 shares subject to outstanding options that are exercisable as of May 30,2009, and 148,625 shares of restricted stock subject to vesting.

 

(5)                                Includes159,125 shares subject to outstanding options that are exercisable as of May 30,2009, and 42,708 shares of restricted stock subject to vesting.

 

(6)                                Includes4,003,000 shares subject to outstanding options that are exercisable as of May 30,2009. Mr. Ahmed’s employment with us terminated on December 11, 2008.

 

(7)                                Mr. Udokwu’semployment with us terminated on October 10, 2008.

 

(8)                                Includes102,991 shares subject to outstanding options that are exercisable as of May 30,2009. Ms. Philbrook’s employment with us terminated on June 30, 2008.

 

(9)                                Consists of82,084 shares subject to outstanding options that are exercisable as of May 30,2009.

 

(10)                          Consists of55,834 shares subject to outstanding options that are exercisable as of May 30,2009.

 

(11)                          Includes 72,084shares subject to outstanding options that are exercisable as of May 30,2009.

 

(12)                          Includes 93,855shares subject to outstanding options that are exercisable as of May 30,2009.

 

(13)                          Includes1,543,393 shares subject to outstanding options that are exercisable as of May 30,2009 and 1,932,250 shares of restricted stock subject to vesting owned by allof our current executive officers and directors. Each of our directors andofficers may be reached at 7 Technology Drive, Westford, Massachusetts 01886.

 

(14)                          According to aSchedule 13D/A No. 8 filed on January 12, 2009, reporting thebeneficial ownership of 67,295,079 shares of common stock, each of GalahadSecurities Limited, Legatum Capital Limited, Legatum Global Holdings Limited,Legatum Global Investment Limited and Senate Limited, Trustee (acting on behalfof a trust formed under the laws of the Cayman Islands as of July 1,1996), reports sole voting power and dispositive power of the 67,295,079shares.

 

(15)                          According to aSchedule 13G/A No. 7 filed on February 17, 2009, FidelityManagement & Research Company (“Fidelity”) was the beneficial owner of16,158,103 shares of common stock in its capacity as investment advisor tovarious registered investment companies. Fidelity is a wholly owned subsidiaryof FMR LLC. The power to vote the shares of Fidelity resides solely with theBoard of Trustees of the Fidelity funds and Edward C. Johnson 3d andFMR LLC each have the sole power to dispose of or direct the dispositionof the shares of Fidelity funds.

 

(16)                          According to aSchedule 13G filed on February 10, 2009, reporting the beneficialownership of 16,152,900 shares of common stock, T. Rowe Price Associates, Inc.,reports sole power dispositive power of an aggregate of 16,152,900 shares andsole voting power over 3,572,400 shares.

 

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**Item 13. Certain Relationships and Related Transactions, and DirectorIndependence**

 

**Certain Relationships andRelated Transactions**

 

Our Board has adopted writtenpolicies and procedures for the review of any transaction, arrangement orrelationship in which we are a participant, the amount involved exceeds$120,000, and one of our executives, directors, director nominees or 5%stockholders (or their immediate family members), each of whom we refer to as “relatedperson,” has a direct or indirect material interest.

 

If a related person proposesto enter into such a transaction, arrangement or relationship, which we referto as a “related person transaction,” the related person must report therelated person transaction to our Chairman of the Audit Committee. The policycalls for the related person transaction to be reviewed and, if deemedappropriate, approved by the Audit Committee. Whenever practicable, the reporting,review and approval will occur prior to entry into the transaction. If advancereview and approval is not practicable, the Committee will review and, in itsdiscretion, may ratify the related person transaction. The policy also permitsthe chairman of the Committee to review and, if deemed appropriate, approverelated person transactions that arise between Committee meetings, subject toratification by the Committee at its next meeting. Any related persontransactions that are ongoing in nature will be reviewed annually. In our lastfiscal year, there has not been, nor is there currently proposed, any suchrelated person transaction.

 

A related person transactionreviewed under the policy will be considered approved or ratified if it isauthorized by the Committee after full disclosure of the related person’sinterest in the transaction. As appropriate for the circumstances, theCommittee will review and consider:

 

·                  the relatedperson’s interest in the related person transaction;

 

·                  the approximatedollar value of the amount involved in the related person transaction;

 

·                  the approximatedollar value of the amount of the related person’s interest in the transactionwithout regard to the amount of any profit or loss;

 

·                  whether thetransaction was undertaken in the ordinary course of our business;

 

·                  whether thetransaction with the related person is proposed to be, or was, entered into onterms no less favorable to us than terms that could have been reached with anunrelated third party;

 

·                  the purpose of,and the potential benefits to us of, the transaction; and

 

·                  any otherinformation regarding the related person transaction or the related person inthe context of the proposed transaction that would be material to investors inlight of the circumstances of the particular transaction.

 

The Audit Committee mayapprove or ratify the transaction only if the Committee determines that, underall of the circumstances, the transaction is in our best interests. TheCommittee may impose any conditions on the related person transaction that itdeems appropriate.

 

In addition to thetransactions that are excluded by the instructions to the SEC’s related persontransaction disclosure rule, our Board has determined that the followingtransactions do not create a material direct or indirect interest on behalf ofrelated persons and, therefore, are not related person transactions for thepurposes of our related person transaction policy:

 

·                  transactionsfor which the related person’s interest arises solely from the related person’sposition as an executive officer of another entity (whether or not the personis also a director of such entity) that is a participant in the transactionwhere (a) the related person and all other related persons own in theaggregate less than a 10% equity interest in such entity, (b) the relatedperson and his or her immediate family members are not involved in thenegotiation of the terms of the transaction and do not receive any specialbenefits as a result of the transaction, and (c) the amount involved inthe transaction equals less than the greater of $200,000 or 5% of the annualconsolidated gross revenues of the other entity that is a party to thetransaction; and

 

·                  transactionsthat are specifically contemplated by provisions of our charter or bylaws.

 

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Ourrelated person transaction policy provides that transactions involvingcompensation of executive officers shall be reviewed and approved by theCompensation Committee in the manner specified in its charter.

 

**Item 14. Principal Accounting Fees and Services**

** **

**FEES FOR INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRMS DURING**

**FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007**

** **

The following is a summaryof the aggregate fees billed to us by Deloitte & Touche LLP, ourindependent registered public accounting firm, for the fiscal years ended December 31,2008 and 2007 for each of the following categories of professional services.

 
| **Fee Category**   | ** ** | **Fiscal 2008 Fees** | ** ** | **Fiscal 2007 Fees** | ** ** |
|--------------------|------------|----------------------|------------|----------------------|------------|
| Audit Fees         |       | $                    | 4,344,091  |                 | $          | 5,310,570 |   |
| Audit-Related Fees |       | 20,850               |       | 12,500               |       |
| Tax Fees           |       | 635,951              |       | 444,409              |       |
| All Other Fees     |       | 18,000               |       | —               |       |
| Total Fees         |       | $                    | 5,018,892  |                 | $          | 5,767,479 |   |

 

The following is a summaryof the aggregate fees billed to us by Ernst & Young LLP, ourformer independent registered public accounting firm, for the fiscal year endedDecember 31, 2008 and December 31, 2007.

 
| **Fee Category**   | ** ** | **Fiscal 2008 Fees** | ** ** | **Fiscal 2007 Fees** | ** ** |
|--------------------|------------|----------------------|------------|----------------------|------------|
| Audit Fees         |       | $                    | —     |                 | $          | 715,490 |   |
| Audit-Related Fees |       | 19,814               |       | —               |       |
| Tax Fees           |       | —               |       | —               |       |
| All Other Fees     |       | —               |       | —               |       |
| Total Fees         |       | $                    | 19,814     |                 | $          | 715,490 |   |

** **

**Audit Fees**

** **

Audit fees consist ofprofessional services rendered for the audit of our consolidated financialstatements included in our Annual Report on Form 10-K and review of theinterim consolidated financial statements included in our Quarterly Reports on Form 10-Q,and the audit of the effectiveness of internal control over financialreporting. Audit fees for 2007 include fees related to the audit of ourrestated financial statements and the review of the independent investigationinto our historical stock option practices and accounting.

 

**Audit-Related Fees**

** **

Audit-related fees consistof professional services that are reasonably related to the performance of theaudit or review of our consolidated financial statements and the audit of theeffectiveness of internal control over financial reporting, but are notreported under “*Audit Fees*.”These services include consultations concerning financial accounting andreporting standards and the review of a tender offer filing.

 

**Tax Fees**

** **

Tax fees consist ofprofessional services for tax compliance, tax advice and tax planning. Theseservices include assistance regarding federal, state and international taxcompliance, value-added tax compliance, research and development tax creditcompliance, and transfer pricing advice and planning.

 

**All Other Fees**

** **

All other fees consist ofprofessional services other than the services reported above, including feesfor our subscription to Deloitte’s on-line accounting research tool.

 

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**Policy On Audit Committee Pre-Approval Of Audit AndNon-Audit Services**

** **

The Audit Committee hasadopted a policy to pre-approve audit and permissible non-audit servicesprovided by our independent registered public accounting firm. These servicesmay include audit services, audit-related services, tax services and otherservices. Prior to engagement of the independent registered public accountingfirm for the next year’s audit, the independent registered public accountingfirm and our management submit an aggregate of services expected to be renderedduring that year for each of the four categories of services to the AuditCommittee for approval. Pre-approval is generally provided for up to one yearand any pre-approval is detailed as to the particular service or category ofservices. The independent registered public accounting firm and our managementperiodically report to the Audit Committee regarding the extent of servicesprovided by the independent registered public accounting firm in accordancewith this pre-approval process. The Audit Committee may also pre-approveparticular services on a case-by-case basis. The Audit Committee may ratify,without prior approval, certain *de minimis*non-audit services if the aggregate amount of all such non-audit servicesprovided to us constitutes not more than $5,000 during the fiscal year in whichthe services are provided. During the fiscal years ended December 31, 2008and 2007, there were no *de minimis*non-audit services provided that the Audit Committee subsequently ratified.

 

Our Audit Committee requiresthe regular rotation of the lead audit partner and concurring partner asrequired by Section 203 of the Sarbanes-Oxley Act of 2002 and isresponsible for recommending to our Board policies for hiring employees orformer employees of the independent registered public accounting firm.

 

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**PART IV**

** **

**Item 15. Exhibits and Financial Statement Schedules**

 

(a)(3) The following exhibits are filed as part of this Form 10-K/A:

 
| **Exhibit No.** | ** ** | **Description**                                                                |
|----------------------|------------|--------------------------------------------------------------------------------|
| 31.1                 |       | Certification of Chief Executive Officer.                                      |
| 31.2                 |       | Certification of Principal Financial Officer.                                  |
| 32.1                 |       | Certification pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. |
| 32.2                 |       | Certification pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. |

 

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**SIGNATURES**

** **

Pursuant to the requirementsof Section 13 or 15(d) of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 
|                | SONUS NETWORKS, INC. |
|---------------------|---------------------------|
| April 30, 2009 | By:                       | /s/ RICHARD N. NOTTENBURG |
|                |                      |   |
|                |                      | Richard N. Nottenburg |
|                |                      | *President and Chief Executive Officer* |

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the registrant and in the capacities and onthe dates indicated:

 
| **Signature**             | ** ** | **Title**                                               | ** ** | **Date**            |
|---------------------------|------------|---------------------------------------------------------|------------|---------------------|
|                      |       |                                                    |       |                |
| /s/ RICHARD N. NOTTENBURG |       | President and Chief Executive Officer (Principal        |       | April 30, 2009 |
| Richard N. Nottenburg     |       | Executive Officer)                                      |       |                |
|                      |       |                                                    |       |                |
| /s/ RICHARD J. GAYNOR     |       | Chief Financial Officer (Principal Financial Officer)   |       | April 30, 2009 |
| Richard J. Gaynor         |       |                                                    |       |                |
|                      |       |                                                    |       |                |
| /s/ HOWARD E. JANZEN      |       | Chairman                                                |       | April 30, 2009 |
| Howard E. Janzen          |       |                                                    |       |                |
|                      |       |                                                    |       |                |
| /s/ WAYNE PASTORE         |       | Vice President of Finance, Corporate Controller and     |       | April 30, 2009 |
| Wayne Pastore             |       | Chief Accounting Officer (Principal Accounting Officer) |       |                |
|                      |       |                                                    |       |                |
| /s/ JOHN P. CUNNINGHAM    |       | Director                                                |       | April 30, 2009 |
| John P. Cunningham        |       |                                                    |       |                |
|                      |       |                                                    |       |                |
| /s/ JOHN A. SCHOFIELD     |       | Director                                                |       | April 30, 2009 |
| John A. Schofield         |       |                                                    |       |                |
|                      |       |                                                    |       |                |
| /s/ SCOTT E. SCHUBERT     |       | Director                                                |       | April 30, 2009 |
| Scott E. Schubert         |       |                                                    |       |                |
|                      |       |                                                    |       |                |
| /s/ PAUL J. SEVERINO      |       | Director                                                |       | April 30, 2009 |
| Paul J. Severino          |       |                                                    |       |                |
|                      |       |                                                    |       |                |
| /s/ H. BRIAN THOMPSON     |       | Director                                                |       | April 30, 2009 |
| H. Brian Thompson         |       |                                                    |       |                |

 

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**EXHIBIT INDEX**

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                  |
|----------------------|------------|----------------------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                             |
| 31.1                 |       | Certificate of Sonus Networks, Inc. Chief Executive Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2                 |       | Certificate of Sonus Networks, Inc. Chief Financial Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1                 |       | Certificate of Sonus Networks, Inc. Chief Executive Officer  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2                 |       | Certificate of Sonus Networks, Inc. Chief Financial Officer  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

 

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