CARRIER ACCESS CORP, S-1, 1998-05-29

CARRIER ACCESS CORP
S-1, 1998-05-29

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1998.
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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CARRIER ACCESS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 3661 84-1208770
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

5395 PEARL PARKWAY
BOULDER, COLORADO 80301
(303) 442-5455
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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ROGER L. KOENIG
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CARRIER ACCESS CORPORATION
5395 PEARL PARKWAY
BOULDER, COLORADO 80301
(303) 442-5455
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

---------------

COPIES TO:

THOMAS A. BEVILACQUA, ESQ. MARK A. BERTELSEN, ESQ.
JEREMY W. MAKARECHIAN, ESQ. JAMES N. STRAWBRIDGE, ESQ.
ARMANDO CASTRO, ESQ. JOSE F. MACIAS, ESQ.
ELIZABETH A.R. YEE, ESQ. RICHARD G. STEELE, ESQ.
CAMERON M. KENYON, ESQ. MICHAEL S. ELLIS, ESQ.
BROBECK, PHLEGER & HARRISON LLP WILSON SONSINI GOODRICH & ROSATI
1125 SEVENTEENTH STREET, SUITE 2525 650 PAGE MILL ROAD
DENVER, COLORADO 80202 PALO ALTO, CALIFORNIA 94304-1050
(303) 293-0760 (650) 493-9300

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

---------------

If the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1993, as amended (the "Securities Act"), check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
PROPOSED
MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED OFFERING REGISTRATION
PRICE(1) FEE
- -----------------------------------------------------------------------------
Common Stock, par value $.001 per share...... $41,400,000 $12,213
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o).

---------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 29, 1998

[LOGO OF CARRIER ACCESS CORPORATION APPEARS HERE]

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SHARES
COMMON STOCK

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All of the shares of Common Stock, par value $.001 per share
("Common Stock"), offered hereby (the "Offering") are being sold by Carrier
Access Corporation (the "Company"). Prior to this Offering, there has been no
public market for the Common Stock. It is currently estimated that the
initial public offering price will be between $ and $ per share. See
"Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. The Company has applied to
have the Common Stock approved for quotation on the Nasdaq National Market
under the symbol "CACS."

FOR INFORMATION CONCERNING CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS" COMMENCING ON PAGE 5.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PROCEEDS
PRICE TO UNDERWRITING TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share $ $ $
Total(3) $ $ $
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses estimated at $ , payable by the
Company.
(3) The Company has granted the Underwriters an option, exercisable within
thirty (30) days hereof, to purchase up to additional shares
of Common Stock solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discount
and Proceeds to Company will be $ , $ , and $ ,
respectively. See "Underwriting."

The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to
approval of certain legal matters by counsel and certain other conditions.
The Underwriters reserve the right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. Delivery of the shares of Common
Stock offered hereby to the Underwriters is expected to be made in New York,
New York, on or about , 1998.

DEUTSCHE MORGAN GRENFELL

HAMBRECHT & QUIST

UBS SECURITIES

The date of this Prospectus is , 1998.
<PAGE>

GATEFOLD DESCRIPTION:

A diagram depicting the Carrier Access logo surrounded by seven graphical
representations of applications of the Company's products: (i) a CLEC
deploying enhanced local voice services over T1 connections with CAC's Access
Bank I TR08; (ii) an ISP deploying high bandwidth T1 Internet connections via
T3 access connections with CAC's Wide Bank 28; (iii) a CLEC deploying multi-
line voice and high-speed data services to small businesses with CAC's Access
Bank II and Wide Bank 28; (iv) a long distance carrier (IXC) deploying
integrated local voice and data services to a small business with CAC's Access
Exchange; (v) deployment of high bandwidth digital radio access between
businesses using CAC's Wide Bank 28; deployment of digital voice and high-
speed data services over unbundled copper with CAC's Access Bank II HDSL; and
(vii) expanded high-bandwidth access for ISPs with CAC's Wide Bank 28.

The title to the diagram contains the text, "Carrier Access Corporation
provides innovative multi-service digital access equipment to competitive
telecommunications carriers." Below the diagram is a box with the title,
"Benefits of the Carrier Access Solution," followed by text in bullet point
format: "Enable Multiple Service Offerings," "Facilitate Rapid Deployment,"
"Reduce Cost of Ownership," "Programmable Functionality," Scaleability and
Manageability."
<PAGE>

[INSIDE FRONT COVER]

[A diagram depicting the Company's Access Bank and Wide Bank product
families.]

Carrier Access Corporation(R), DataSplit(R) and Access Bank(R) are
registered trademarks of the Company. Access Exchange and Wide Bank 28 are
trademarks of the Company. This Prospectus contains other product names, trade
names and trademarks of the Company and of other organizations.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

Except as set forth in the financial statements or as otherwise specified
herein, all information in this Prospectus (i) assumes no exercise of the
Underwriters' over-allotment option, (ii) reflects a three for two forward
split of the outstanding shares of Common Stock to be effected prior to the
effectiveness of the registration statement related to the Offering made
hereby, (iii) reflects the conversion of all of the Company's outstanding
shares of Convertible Preferred Stock into Common Stock upon the closing of
the Offering made hereby, and (iv) reflects the reincorporation of the Company
into Delaware. See "Underwriting" and "Description of Capital Stock."
<PAGE>

PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and Financial Statements and
Notes thereto appearing elsewhere in this Prospectus.

THE COMPANY

Carrier Access Corporation ("CAC" or the "Company") is a leading provider of
Multi-service Digital Access ("MDA") equipment to competitive
telecommunications carriers, including competitive local exchange carriers
("CLECs"), Internet service providers ("ISPs") and wireless carriers. The
Company's MDA equipment is used for the provisioning of enhanced voice and
high-speed data services by carriers to end users such as small and medium-
sized businesses and government and educational institutions. The Company's MDA
equipment provides a comprehensive "last mile" solution for the voice and data
connectivity needs of competitive carriers and end users throughout the United
States. Mass deployment of digital last mile connectivity from end users to
carrier networks is enabled through the Company's cost-effective, compact,
scaleable and easily installed customer premises and central office
telecommunications equipment. The Company's products allow competitive carriers
to leverage their existing digital infrastructure to cost-effectively connect
end users to their networks. The Company's MDA products utilize high bandwidth
digital deployment targeted at end users requiring between 6 and 672 telephone
line equivalents of bandwidth. The Company's MDA products enable a broad
variety of enhanced carrier service offerings including high-speed Internet
access, virtual private networks, switched local and long distance voice,
Caller ID, distinctive ringing, direct inward dialing, automatic call routing
and other widely-used telecommunications services. The Company believes that
over 100 competitive carriers have purchased the Company's products through its
distributors. Carriers which have purchased the Company's products include
Allegiance Telecom, Inc., Cablevision Systems Corp., Commonwealth Telephone
Enterprises, Inc., e.spire Communications, Inc., Frontier Corporation, GST
Telecommunications, Inc., ICG Communications, Inc., Intermedia Communications,
Inc., Logix Communications, Inc., MGC Communications, Inc., NEXTLINK
Communications, Inc., Pacific Bell, a division of SBC, Inc., PSINet, Inc., STAR
Telecommunications, Inc., Teleport Communications Group, Inc., US LEC Corp., US
West, Inc., WinStar Communications, Inc. and Worldcom Inc. The Company was
incorporated in Colorado in September 1992 and intends to reincorporate in
Delaware in June 1998. The Company's principal executive offices are located at
5395 Pearl Parkway, Boulder, Colorado 80301, and its telephone number at that
location is (303) 442-5455.

THE OFFERING

Common Stock offered.................. shares
Common Stock to be outstanding after
the Offering(1)....................... shares

Use of proceeds....................... For general corporate purposes,
including working
capital, product development and
capital expenditures. See
"Use of Proceeds."
Proposed Nasdaq National Market
symbol................................ CACS

SUMMARY FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
FOR THE ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------ ---------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenue........................... $ 2,058 $ 5,809 $18,719 $ 2,496 $ 7,243
Gross profit.......................... 771 2,525 9,250 1,240 3,475
Income (loss) from operations......... 135 (100) 2,346 185 955
Net income (loss)..................... 181 (76) 1,735 134 723
Income (loss) per common share--
diluted.............................. $ 0.01 $ (0.01) $ 0.10 $ 0.01 $ 0.03
Weighted average outstanding common
shares--diluted...................... 13,665 13,881 17,607 16,332 20,896
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31,
1998
-------------------
AS
ACTUAL ADJUSTED(2)
------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 6,379 $
Working capital............................................. 17,209
Total assets................................................ 22,936
Total liabilities........................................... 4,244
Total stockholders' equity.................................. 18,692
</TABLE>
- -------
(1) Based on the number of shares outstanding as of March 31, 1998. Excludes
1,317,981 shares of Common Stock issuable upon exercise of stock options
outstanding as of March 31, 1998 at a weighted average exercise price of
$0.76 per share, and 1,906,357 shares of Common Stock reserved for grant of
future options as of March 31, 1998, which reserve includes an increase of
750,000 shares reserved for issuance under the 1995 Stock Option Plan
approved by the Board on April 1, 1998. In addition, subsequent to March
31, 1998, the Board of Directors adopted, subject to stockholder approval,
the 1998 Employee Stock Purchase Plan pursuant to which 262,500 shares of
Common Stock were reserved for issuance. See "Capitalization,"
"Management--Benefit Plans," "Description of Capital Stock" and Note 6 of
Notes to Financial Statements.
(2) Adjusted to reflect the conversion of the Convertible Preferred Stock to
Common Stock upon the closing of the Offering and the sale of shares of
Common Stock offered by the Company hereby at an assumed initial public
offering price of $ per share and after deducting the estimated
underwriting discount and estimated offering expenses. See "Use of
Proceeds" and "Capitalization."

3
<PAGE>

THE COMPANY

The Company's MDA products currently include the Access Bank and the Wide
Bank product families. The Access Bank I offers digital connectivity for local
and long distance carrier voice services, and converts a single T1 digital
network access into 24 telephone circuits for voice, facsimile and modem
connections. The Access Bank II expands on the voice functions of the Access
Bank I and adds high-speed data ports for computer connectivity and dual T1
line interfaces for increasing data speeds and connecting digital phone
systems. The Access Exchange, introduced in April 1998, is a customer-located
access switch that enables long distance carriers ("IXCs") to offer local
services from their embedded base switching equipment. The Wide Bank 28 is a
highly-integrated M1-3 standard multiplexer for connecting T1 equipment to
high-bandwidth T3 digital circuits, providing up to 28 T1 connections for
enhanced voice and high-speed data services. The Company's products are used
with optical fiber, HDSL on copper pairs, or digital radio transmission
technologies. The Company differentiates its products on their ability to
enable multiple service offerings, facilitate the rapid deployment of new
services, reduce cost of ownership, provide programmable software-based
functionality, scale cost-effectively at carrier and end user locations, and
satisfy the safety and regulatory requirements of carriers and end users.

The Company's objective is to become the leading supplier of innovative
telecommunications solutions utilized by competitive carriers to enable en-
hanced voice and high-speed digital access services. To achieve this objec-
tive, the Company intends to extend its technology leadership, develop and ex-
pand its end-to-end voice and data solutions, increase penetration of its ex-
isting competitive carrier customer base, gain entry into new markets, lever-
age third-party distribution channels and maintain rapid product fulfillment
and manufacturing efficiency. The Company believes that over 100 competitive
carriers have purchased the Company's products through its distributors. Car-
riers which have purchased the Company's products include Allegiance Telecom,
Inc., ("Allegiance"), Cablevision Systems Corp. ("Cablevision"), Commonwealth
Telephone Enterprises, Inc. ("Commonwealth"), e.spire Communications, Inc.
(formerly ASCI) ("e.spire"), Frontier Corporation ("Frontier"), GST
Telecommunications, Inc. ("GST"), ICG Communications, Inc. ("ICG"), Intermedia
Communications, Inc. ("Intermedia"), Logix Communications, Inc. ("Logix"), MGC
Communications, Inc. ("MGC"), NEXTLINK Communications, Inc. ("NEXTLINK"), Pa-
cific Bell, a division of SBC, Inc., PSINet, Inc. ("PSINet"), STAR Telecommu-
nications, Inc. ("STAR"), Teleport Communications Group, Inc. ("TCG"), US LEC
Corp. ("US LEC"), US West, Inc. ("US West"), WinStar Communications, Inc.
("WinStar") and Worldcom Inc. ("Worldcom"). The Company's products are sold
through the Company's network of distributors throughout the United States.

4
<PAGE>

RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk. The following factors, in addition to the other information
contained in this Prospectus, should be carefully considered in evaluating the
Company and its business before purchasing the Common Stock offered hereby.
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such differences include those discussed below and in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business,"
as well as those discussed elsewhere in this Prospectus.

LIMITED OPERATING HISTORY; FUTURE RESULTS OF OPERATIONS UNCERTAIN. The
Company was incorporated in September 1992 and did not commence commercial
deployment of its distributed digital access equipment until the summer of
1995. Prior to the summer of 1995 the Company derived substantially all of its
net revenue from providing systems integration services and other consulting
services. Accordingly, the Company has only a limited operating history on
which to base an evaluation of its current business and prospects. The Company
and its prospects must be considered in light of the risks, uncertainties and
difficulties frequently encountered by companies in an early stage of
development, particularly companies in new and rapidly evolving markets. As a
result of the Company's limited operating history, rapid growth and the
emerging nature of the markets in which it competes, the Company's historical
financial data is of limited value in evaluating the future prospects of the
Company. Further, the Company intends to significantly increase its business
development, sales and marketing and research and development expenses to
expand operations and enhance the Company's name recognition. To the extent
that such expenses precede or are not rapidly followed by increased net
revenue, the Company's business, financial condition and results of operations
may be materially adversely affected. There can be no assurance that the
Company will be able to increase or sustain its revenues or its rate of
revenue growth in future periods or be able to sustain profitability on a
quarterly or annual basis. See "--Significant Fluctuations in Results of
Operations" and "--Dependence on Emerging Competitive Carriers; Regulatory
Uncertainty of Telecommunications Industry."

SIGNIFICANT FLUCTUATIONS IN RESULTS OF OPERATIONS. The Company's results of
operations have fluctuated significantly in the past and are likely to
fluctuate significantly in the future, both on a quarterly and annual basis,
as a result of a variety of factors, many of which are outside of the
Company's control. Among other things, the Company's results of operations
have fluctuated in the past due to (i) the availability of adequate supplies
of key components and assemblies and the adequacy of third-party manufacturing
capabilities; (ii) delays in the introduction of new products or product
enhancements by the Company; (iii) customer order deferrals in anticipation of
product enhancements or new product offerings by the Company; (iv) the
Company's ability to affect and judge the timing and size of orders from its
distributors; and (v) materials kitting and shipping errors. The Company's
results of operations may also fluctuate in the future due to a number of
factors, including, but not limited to, those listed above as well as (i) the
timing and size of orders which are received and which can be shipped in any
particular period; (ii) the commercial success of the Company's products;
(iii) changes in the financial stability of the Company's distributors,
competitive carrier customers or suppliers; (iv) changes in pricing policies
by the Company or its competitors; (v) seasonality in the placement of orders;
(vi) changes in the level of the Company's operating expenses; (vii) changes
in the Company's distribution channels; (viii) delays or deferrals of any
competitive carrier's or end user's implementation of the Company's products;
(ix) product life cycles; (x) customization or integration problems with end
user systems; (xi) changes in the Company's

5
<PAGE>

strategy; (xii) product failures or errors; or (xiii) the level of
international expansion. A significant portion of the Company's net revenue
has been, and the Company believes will continue to be, derived from a limited
number of large orders, and the timing of such orders and their fulfillment
has caused, and are expected to continue to cause, material fluctuations in
the Company's operating results. The Company's distribution agreements
generally allow distributors to cancel orders without penalty until a
relatively short period of time prior to shipment. The Company has experienced
cancellation and delays of orders from time to time, and expects to continue
to experience order cancellations and delays from time to time in the future,
which could adversely affect the Company's revenue and results of operations
for a quarter or series of quarters.

To achieve its quarterly revenue objectives, the Company depends upon
obtaining orders in any given quarter for shipment during that quarter.
Product orders are typically shipped shortly after receipt and, consequently,
order backlog at the beginning of any quarter has in the past represented only
a small portion of that quarter's net revenue. Furthermore, the Company has
from time to time, including the four quarters of 1997 and the first quarter
of 1998, recognized a substantial portion of its net revenue from sales booked
and shipped during the last two weeks of a quarter. Accordingly, a delay in
shipment near the end of a particular quarter may cause net revenue in a
particular quarter to fall significantly below the Company's expectations and
may materially adversely affect the Company's operating results for such
quarter, particularly since the Company cannot adjust spending quickly enough
to compensate for any revenue shortfall. Conversely, to the extent that
significant net revenue occurs earlier than expected, operating results for
subsequent quarters may fail to keep pace with, or even decline from, results
of previous quarters. Moreover, any downturn in general economic conditions
could precipitate significant reductions in customer spending for
telecommunications equipment, which could result in delays or cancellations of
orders for the Company's products.

Net revenue is difficult to forecast because the markets for the Company's
products are rapidly evolving, and the sales cycle to the Company's
distributors and related competitive carrier customers, from initial
evaluation to purchase, can be lengthy and varies substantially among
distributors, competitive carrier customers and end users. Because
substantially all of the sales of the Company's products are through indirect
channels of distribution, the Company's ability to affect and judge the timing
and size of individual orders is more limited than for manufacturers selling
directly to the end users of their products. In addition, the Company's
revenues for a given quarter may depend to a significant degree upon planned
product shipments for a single competitive carrier equipment deployment
project. As a result, the Company's ability to forecast revenues accurately
(notwithstanding the forecasts of its distributors), may be hindered, which
could have a material adverse effect on the Company's results of operations. A
significant portion of the Company's expenses are relatively fixed in the
short term. Accordingly, if revenue levels fall below expectations, operating
results are likely to be disproportionately adversely affected. Due to one or
more of these or other factors, the Company's quarterly and annual revenues,
expenses and results of operations are likely to vary significantly in the
future, and period-to-period comparisons should not be relied upon as
indications of future performance. Actual or potential fluctuations in
operating results may result in volatility in the price of the Common Stock.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."

DEPENDENCE ON EMERGING COMPETITIVE CARRIERS; REGULATORY UNCERTAINTY OF
TELECOMMUNICATIONS INDUSTRY. The competitive carrier customers of the
Company's products to date have consisted primarily of CLECs and, to a lesser
extent, IXCs, ISPs and wireless carriers. The market for the services provided
by these competitive carriers has only begun to emerge since the passage of
the Telecommunications Act of 1996 (the "1996 Act"),

6
<PAGE>

and many competitive carriers are still building their infrastructure and
rolling out their services. These competitive carriers require substantial
capital for the development, construction and expansion of their networks and
the introduction of their services. The ability of these emerging competitive
carriers to fund such expenditures often depends on their ability to obtain
sufficient financing. There can be no assurance that such financing will be
available to emerging competitive carriers on favorable terms, if at all. The
inability of the Company's current or potential emerging competitive carrier
customers to successfully raise needed funds, or any other trends adversely
affecting such carriers' operating results or profitability, could adversely
affect such carriers' capital spending programs. If the Company's current or
potential competitive carrier customers are forced to defer or curtail their
capital spending programs, the Company's sales may be adversely affected,
which would have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, many of the
industries in which the competitive carriers operate have recently experienced
consolidation. In particular, many telecommunication carriers have recently
acquired or merged with ISPs. The loss of one or more of the Company's
competitive carrier customers, through industry consolidation or otherwise,
could have a material adverse affect on the Company's business, financial
condition or results of operations.

Competitive carriers have been allowed to compete with incumbent local
exchange carriers ("ILECs") in the provisioning of local exchange services
primarily as a result of the adoption of regulations under the 1996 Act which
impose new duties on ILECs to open local telephone markets to competition.
Although the 1996 Act was designed to expand competition in the
telecommunications industry, the realization of the objectives of the 1996 Act
is subject to many uncertainties, including judicial and administrative
proceedings designed to define rights and obligations pursuant to the 1996
Act, actions or inactions by ILECs or other carriers that affect the pace at
which changes contemplated by the 1996 Act occur, resolution of questions
concerning which parties will finance such changes, and other regulatory,
economic and political factors. Any changes to legal requirements, the
adoption of new regulations by federal or state regulatory authorities under
the 1996 Act or any legal challenges to the 1996 Act could have a material
adverse effect upon the market for the Company's products. The Company is
aware of certain litigation challenging the validity of the 1996 Act and local
telephone competition rules adopted by the Federal Communications Commission
("FCC") for the purpose of implementing the 1996 Act. Such litigation may
serve to delay implementation of the 1996 Act, which could adversely affect
demand for the Company's products. Moreover, the Company's distributors or
competitive carrier customers may require, or the Company may otherwise deem
it necessary or advisable, that the Company modify its products to address
actual or anticipated changes in the regulatory environment.

INTENSE COMPETITION. The market for telecommunications equipment is
characterized by intense competition, with a large number of suppliers
providing a variety of products to diverse market segments within the
telecommunications industry. The Company's existing and potential competitors
include many large domestic and international companies, including certain
companies that have substantially greater financial, manufacturing,
technological, sales and marketing, distribution and other resources. The
Company's principal competitors for its Access Bank product family include
Advanced Fibre Communications ("AFC"), Cisco Systems, Inc. ("Cisco"), DSC
Communications Corp. ("DSC"), General Datacom Industries, Inc. ("General
Datacom"), Lucent Technologies, Inc. ("Lucent"), NEC Corp. ("NEC"), Newbridge
Networks Corp. ("Newbridge"), Northern Telecom ("Nortel"), Pairgain
Technologies, Inc. ("Pairgain"), Paradyne Corp., Premisys Communications, Inc.
("Premisys"), Pulse Communications, Inc. ("Pulsecom"), Reltec Corp.
("Reltec"), Telco Systems ("Telco") and other small private companies. The
Company's principal competitors for its Wide Bank product family include
Alcatel Alsthom Compagnie Generale d'Electricite ("Alcatel"), NEC, Nortel and
Telco. The Company expects that many of its competitors who currently offer
products competitive with

7
<PAGE>

only one of the Company's product lines will eventually offer products
competitive with all of the Company's product lines. In addition, several start
up companies have recently begun to manufacture products similar to those
offered by the Company. Due to the rapidly evolving markets in which the
Company competes, additional competitors with significant market presence and
financial resources, including large telecommunications equipment manufacturers
and computer hardware and software companies, may enter those markets, thereby
further intensifying competition. Additionally, one of the Company's
distributors is currently competing with the Company, and there can be no
assurance that additional distributors will not begin to develop or market
products in competition with the Company.

Many of the Company's current and potential competitors are substantially
larger than the Company and have significantly greater financial, sales and
marketing, technical, manufacturing and other resources and more established
channels of distribution. As a result, such competitors may be able to respond
more rapidly to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the development, promotion and
sale of their products than the Company. Such competitors may enter the
Company's existing or future markets with solutions which may be less costly,
provide higher performance or additional features or be introduced earlier than
the Company's solutions. Many telecommunications companies have large internal
development organizations which develop software solutions and provide services
similar to the Company's products and services. Some of the Company's
competitors currently offer financing alternatives to their customers, a
service that the Company does not provide at this time. The Company expects its
competitors to continue to improve the performance of their current products
and to introduce new products or technologies that provide added functionality
and other features. Successful new product introductions or enhancements by the
Company's competitors could cause a significant decline in sales or loss of
market acceptance of the Company's products and services, could result in
continued intense price competition or could make the Company's products and
services or technologies obsolete or noncompetitive. To be competitive, the
Company will be required to continue to invest significant resources in
research and development and sales and marketing. There can be no assurance
that the Company will have sufficient resources to make such investments or
that the Company will be able to make the technological advances necessary to
be competitive. In addition, current and potential competitors have established
or may establish cooperative relationships among themselves or with third
parties to increase the ability of their products to address the needs of the
Company's prospective customers. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Increased competition is likely to result in price
reductions, reduced gross margins and loss of market share, any of which would
have a material adverse effect on the Company's business, financial condition
and results of operations. There can be no assurance that the Company will be
able to compete successfully against current or future competitors or that
competitive pressures will not have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Competition."

DEPENDENCE ON DISTRIBUTION CHANNELS; POTENTIAL FOR CHANNEL
CONFLICT. Substantially all of the sales of the Company's products are made
through distributors. In addition to product sales, the Company from time to
time relies on its distributors to provide installation, training and customer
support to the ultimate end users of the Company's products. As a result, the
Company's success depends on the continued sales and customer support efforts
of its network of distributors. Sales of the Company's products historically
have been made to a limited number of distributors. In 1995, Telco, C&L
Communications ("C&L"), Phillips Communications and Equipment ("Phillips") and
Telsource Corporation ("Telsource") accounted for 26%, 13%, 13% and 12% of net
revenue, respectively. In 1996, Telco, Phillips, Telsource and C&L accounted
for 47%, 18%, 18% and 11% of net revenue, respectively. In 1997, Walker &
Associates ("Walker"), ADC Telecommunications ("ADC") and Phillips accounted
for 36%, 20% and 14% of

8
<PAGE>

net revenue, respectively. In the first quarter of 1998, Walker and Phillips
accounted for 48% and 22% of net revenue, respectively. The Company expects
that the sale of products will continue to be made to a small number of
distributors. Accordingly, the loss of, or reduction in sales to, any of the
Company's key distributors could have a material adverse effect on the
Company's business, financial condition and results of operations. Moreover,
the Company depends on ADC to actively market and promote the Company's
solution for the HDSL market. If ADC does not actively market or promote the
Company's solution to the HDSL market, the Company would need to seek another
OEM for this market, which could take six months or longer.

The Company's ability to achieve future revenue growth will depend in large
part on its success in maintaining its current distributor relationships,
diversifying its distribution channels by selling to new distributors,
establishing relationships with OEMs and maintaining as well as expanding the
Company's current competitive carrier customer base. Most of the Company's
existing distributors currently distribute, or may in the future distribute,
the product lines of the Company's competitors. There can be no assurance that
the Company will be able to attract and retain a sufficient number of its
existing or future distributors or that the Company's distributors will
recommend, or continue to recommend, the Company's products or that the
Company's distributors will devote sufficient resources to market and provide
the necessary customer support for such products. In the event that any of the
Company's current distributors reduce their purchases of the Company's
products, or that the Company fails to obtain future distributors, the
Company's business, financial condition or results of operations could be
materially and adversely affected. In addition, there can be no assurance that
the Company's distributors will give a high priority to the marketing and
customer support of the Company's products as compared to competitive products
or alternative solutions or that the Company's distributors will continue to
offer the Company's products. The Company's distributor relationships are
established through formal agreements that generally do not grant exclusivity,
do not prevent the distributor from carrying competing product lines and do
not require them to purchase any minimum dollar amount of the Company's
products. In addition, the Company's distribution agreements do not attempt to
allocate certain territories for its products among its distributors. To the
extent different distributors target the same end users of the Company's
products, distributors may come into conflict with one another, which could
damage the Company's relationship with, and sales to, such distributors. The
Company has limited knowledge of the financial condition of certain of its
distributors; however it is aware that some of its distributors have limited
financial and other resources which could impair their ability to pay the
Company. Although the financial instability of these distributors has not
limited any distributor's ability to pay the Company for its products to date,
there can be no assurance that any bad debt incurred by the Company will not
exceed the Company's reserves therefor or that the financial instability of
one or more of the Company's distributors will not materially adversely affect
the Company's business, financial condition or results of operations.

The Company generally provides its distributors with limited stock rotation
and price protection rights. Other than limited stock rotation rights, the
Company does not provide its distributors with general product return rights.
The Company has limited knowledge of the inventory levels of its products
carried by its OEMs and distributors, and the Company's OEMs and distributors
have in the past reduced, and may in the future reduce, planned purchases of
the Company's products due to overstocking. Moreover, distributors who have
overstocked the Company's products have in the past reduced, and may in the
future reduce, their inventories of the Company's products by selling such
products at significantly reduced prices. Any such reduction in planned
purchases or sales at reduced prices by distributors or OEMs in the future
could reduce the demand for the Company's products, create conflicts with
other distributors or materially adversely affect the Company's business,
financial condition and results of operations. In addition, three times a
year, distributors are allowed to return a maximum of fifteen percent of the
Company's unsold products held in stock by such distributor, which were

9
<PAGE>

purchased within the four month period prior to such return date, for an equal
dollar amount of new equipment. While to date these returns have not had a
material impact on the Company's results of operations, there can be no
assurance that the Company will not experience significant returns in the
future or that it will have made adequate allowances to offset such returns.
The Company is generally required to give its distributors a sixty (60) day
notice of price increases. Orders entered by distributors within the sixty
(60) day period are filled at the lower product price. In addition, the
Company grants certain of its distributors "most favored customer" terms,
pursuant to which the Company has agreed to not knowingly grant another
distributor the right to resell the Company's products on terms more favorable
than those granted to the existing distributor, without offering the more
favorable terms to the existing distributor. There can be no assurance that
these price protection and "most favored customer" clauses will not cause a
material decrease in the average selling prices and gross margins of the
Company's products, which could have a material adverse effect on the
Company's business, financial condition and results of operations. See "--
Lengthy Sales Cycle," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business--Sales and Marketing and
Note 7 of Notes to Financial Statements."

COMPETITIVE CARRIER CUSTOMER CONCENTRATION. In addition to being dependent
on a small number of distributors for a majority of its revenue, the Company
believes its products are distributed to a limited number of competitive
carrier customers who are primarily CLECs. The Company believes that in 1997,
22 competitive carrier customers indirectly accounted for approximately 75% of
its net revenue and that for the first quarter of 1998, 25 competitive carrier
customers indirectly accounted for approximately 73% of its net revenue. In
particular, the Company believes (based on information from its distributors)
that TCG, NEXTLINK, WinStar and eSpire each accounted for a significant
portion of the Company's net revenue in 1997 and the first quarter of 1998.
None of such competitive carrier customers has any obligation to purchase
additional products or services. Accordingly, there can be no assurance that
present or future competitive carrier customers will not terminate their
purchasing arrangements with the Company's distributors, or significantly
reduce or delay the amount of the Company's products they order. Any such
termination, change, reduction or delay in orders could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "--Dependence on Distribution Channels; Potential for Channel
Conflict" and "Business--Customers."

POSSIBLE DECLINE IN PRICES. The Company believes that average selling prices
and gross margins for its products will decline as such products mature, as
volume price discounts in contracts take effect and as competition
intensifies, among other factors. To offset declining selling prices, the
Company believes that it must successfully reduce the costs of production of
its existing products and introduce and sell new products and product
enhancements on a timely basis at a lower cost or sell products and product
enhancements that incorporate features that enable them to be sold at higher
average selling prices. In particular, the Company believes that it will need
to achieve significant cost reductions through engineering improvements and
economies of scale in production and purchasing. There can be no assurance
that the Company will be able to achieve the desired cost savings. To the
extent that the Company is unable to reduce costs sufficiently to offset any
declining average selling prices or unable to introduce enhanced products with
higher selling prices, the Company's gross margins will decline, and such
decline would have a material adverse effect on the Company's business,
financial condition and results of operations. See "--Dependence on New
Product Introductions and Product Enhancements; Risk of Product Defects,
Returns and Liability."

DEPENDENCE ON EMERGING MARKET FOR MULTI-SERVICE DIGITAL ACCESS EQUIPMENT;
RISKS ASSOCIATED WITH MARKET ACCEPTANCE OF WIDE BANK PRODUCT FAMILY. The
Company currently derives all of its net revenue from sales of its MDA
equipment and accessories and expects that this concentration will continue in
the foreseeable future. In 1997, the Company's Access Bank

10
<PAGE>

product family and the Wide Bank product family accounted for approximately
80% and 16% of the Company's net revenue, respectively. In the first quarter
of 1998, the Company's Access Bank product family and Wide Bank product family
accounted for approximately 63% and 33% of the Company's net revenue,
respectively. As a result, any decrease in the overall level of sales of, or
the prices for, MDA equipment due to product enhancements, new product
introductions or announcements by the Company's competitors, a decline in the
demand for MDA equipment, product obsolescence, price competition,
technological change or any other reason could have a material adverse effect
on the Company's business, financial condition and results of operations. In
addition, the Company's future financial performance will depend in part on
the general growth of the MDA equipment market, and in particular on the
successful development, introduction and customer acceptance of new and
enhanced versions of its existing Access Bank and Wide Bank product families.
The Company began commercial development of the Wide Bank product family in
November 1997 and anticipates that this product family will account for an
increasing share of its net revenue. There can be no assurance that the market
for this product family will grow or the Company will be successful in
introducing the Wide Bank or any other products, or that any of these products
will achieve widespread customer acceptance. If the market for MDA equipment
fails to grow or grows more slowly than the Company currently anticipates, the
Company's business, financial condition and results of operations would be
materially adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

DEPENDENCE ON SOLE AND SINGLE SOURCE SUPPLIERS AND THIRD PARTY
MANUFACTURERS. Although the Company generally uses standard parts and
components for its products, many key components are purchased from sole or
single source vendors for which alternative sources are not currently
available. The Company currently purchases 20 key components from vendors for
which there is currently no substitute and purchases an additional 43 key
components from single vendors. In particular, the Company uses several
independent manufacturers to provide certain printed circuit boards ("PCBs"),
chassis and subassemblies. The inability to obtain sufficient quantities of
these components has in the past resulted in, and may in the future result in,
delays or reductions in product shipments which could materially adversely
affect the Company's business, financial condition and results of operations.
In the event of a reduction or interruption of supply, as much as six months
could be required before the Company would begin receiving adequate supplies
from alternative suppliers, if any. No assurance can be given that any such
source would become available to the Company or that any such source would be
in a position to satisfy the Company's production requirements on a timely
basis, if at all. In such event, the Company's business, financial condition
and results of operations would be materially adversely affected. In addition,
the manufacture of certain of these single or sole source components is
extremely complex, and the Company's reliance on the suppliers of these
components exposes the Company to potential production difficulties and
quality variations, which could negatively impact cost and timely delivery of
the Company's products. Any significant interruption in the supply, or
degradation in the quality, of any such component could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Manufacturing."

The Company's distributors frequently require rapid delivery after placing
an order. Because the Company does not maintain significant component
inventories, a delay in shipment by a supplier could lead to lost sales. Lead
times for materials and components vary significantly and depend on many
factors, some of which are beyond the Company's control, such as specific
supplier performance, contract terms and general market demand for components.
If orders vary from forecasts, the Company may experience inadequate inventory
of certain materials and components to fill orders. While the Company has not
experienced any material shortages of these components to date, any shortages
in the future, including those

11
<PAGE>

occasioned by increased sales, could result in delays in fulfillment of
customer orders. Such delays could have a material adverse effect on the
Company's business, financial condition and results of operations. See "--
Dependence on Distribution Channels; Potential for Channel Conflict" and
"Business--Manufacturing."

The Company currently uses several independent manufacturers to provide
certain PCBs, chassis and subassemblies. The Company's reliance on independent
manufacturers involves a number of risks, including the absence of adequate
capacity, the unavailability of or interruptions in access to certain process
technologies and reduced control over delivery schedules, manufacturing yields
and costs. Some of the Company's manufacturers and supplies are
undercapitalized, and there can be no assurance that such manufacturers or
suppliers will be able to continue to provide manufacturing services or
components to the Company. In the event that these manufacturers are unable or
unwilling to continue to manufacture the Company's components in required
volumes, the Company will have to identify and qualify acceptable additional
or alternative manufacturers, which could take in excess of six months. No
assurance can be given that any such source would become available to the
Company or that any such source would be in a position to satisfy the
Company's production requirements on a timely basis, if at all. Any
significant interruption in the supply of these components to the Company
would result in the allocation of products to customers, which in turn could
have a material adverse effect on the Company's business, financial condition
and results of operations. Moreover, since all of the Company's final assembly
and test are performed in one location, any fire or other disaster at the
Company's assembly facility would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Manufacturing."

DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a significant
degree upon the continued contributions of its Chief Executive Officer, Chief
Financial Officer and its key management, sales, engineering, customer support
and product development personnel, many of whom would be difficult to replace.
In particular, the loss of either Roger Koenig, President and Chief Executive
Officer, or Nancy Pierce, Chief Financial Officer, who co-founded the Company,
could materially and adversely affect the Company. Certain members of the
Company's senior management, including Randy Shipley, Vice President-Sales and
John Stahura, Vice President-Operations, have only recently joined the
Company. The Company is currently in the process of recruiting a Vice
President-Marketing. There can be no assurance that if hired, the new Vice
President-Marketing or other recently hired employees, will be assimilated
into the Company successfully. The Company believes that its future success
will depend in large part upon its ability to attract and retain highly-
skilled managerial, sales, customer support and product development personnel.
Competition for qualified personnel in the Company's industry and geographic
location is intense, and there can be no assurance that the Company will be
successful in attracting and retaining such personnel. The Company does not
have employment contracts with any of its key personnel. The loss of the
services of any such persons, the inability to attract or retain qualified
personnel in the future or delays in hiring required personnel, particularly
engineering personnel and qualified sales personnel, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Employees" and "Management--Executive Officers and
Directors."

MANAGEMENT OF GROWTH. The Company has experienced rapid growth in net
revenue and expansion of its operations and anticipates that further
significant expansion will be required to address potential growth in its
customer base and market opportunities. Such growth has placed, and, if
sustained, will continue to place, significant strain on the Company's
management, information systems, operations and resources. For example, the
Company has experienced materials kitting and shipping errors in the past
primarily as a result of its limited resources in the face of a period of
rapid growth. The Company's ability to manage any future

12
<PAGE>

growth will continue to depend upon the successful expansion of its sales,
marketing, research and development, customer support, manufacturing and
administrative infrastructure and the ongoing implementation and improvement
of a variety of internal management systems, procedures and controls.
Continued growth will also require the Company to hire more engineering, sales
and marketing and administrative personnel, expand customer support
capabilities, expand management information systems and improve its inventory
management practices. Recruiting qualified personnel is an intensely
competitive and time-consuming process. There can be no assurance that the
Company will be able to attract and retain the necessary personnel to
accomplish its growth strategies or that it will not experience constraints
that will adversely affect its ability to satisfy customer demand in a timely
fashion or to support satisfactorily its customers and operations. There can
be no assurance that the Company will be able to attract, manage and retain
additional personnel to support any future growth, if any, or will not
experience significant problems with respect to any infrastructure expansion
or the attempted implementation of systems, procedures and controls. If the
Company's management is unable to manage growth effectively, the Company's
business, financial condition and results of operations could be materially
adversely affected. The Company believes that it will require up to 50,000
additional square feet of office, manufacturing and research and development
space within the next 24 months. There can be no assurance that suitable
additional space will be available on commercially reasonable terms or at all.
See "--Dependence on Sole and Single Source Suppliers and Third Party
Manufacturers," "--Dependence on Key Personnel," "Business--Employees" and
"Management--Executive Officers and Directors."

DEPENDENCE ON NEW PRODUCT INTRODUCTIONS AND PRODUCT ENHANCEMENT; RISK OF
PRODUCT DEFECTS, RETURNS AND LIABILITY. The Company's success will depend to a
substantial degree upon its ability to enhance its existing products and to
develop and introduce, on a timely and cost-effective basis, new products and
features that meet changing end user requirements and emerging industry
standards; however, there can be no assurance that the Company will be
successful in identifying, developing, manufacturing, and marketing product
enhancements or new products that will respond to technological change or
evolving industry standards. The Company intends to continue to invest
significantly in product and technology development. The Company has in the
recent past experienced delays in the development and commencement of
commercial shipment of new products and enhancements, resulting in distributor
and end user frustration and delay or loss of net revenue. There can be no
assurance that the Company will not experience similar or other difficulties
in the future that could delay or prevent the successful development,
production or shipment of such new products and enhancements, or that its new
products and enhancements will adequately meet the requirements of the
marketplace and achieve market acceptance. Announcements of currently planned
or other new product offerings by the Company or its competitors have in the
past caused, and may in the future cause, distributors or end users to defer
or cancel the purchase of existing Company products. The Company's inability
to develop on a timely basis new products or enhancements to existing
products, or the failure of such new products or enhancements to achieve
market acceptance, could have a material adverse effect on the Company's
business, financial condition and results of operations.

Certain of the Company's competitive carrier customers have purchased the
Company's MDA products with the expectation that the Company would develop a
full deployment end-to-end solution for commercial use during the fourth
quarter of 1998. While the Company intends to substantially invest in the
research and development of such a solution, there can be no assurance that
the Company will develop such a solution or that such a solution can be
developed in a cost-effective manner. If the Company is unable to develop an
end-to-end solution in a timely and cost-effective manner that achieves market
acceptance, the competitive carriers who purchased the Company's MDA products
with the expectation of such a

13
<PAGE>

development could discontinue their use of the Company's MDA products, which
could have a material adverse effect on the Company's business, financial
condition and results of operations.

The development of new, technologically advanced products is a complex and
uncertain process requiring high levels of innovation, as well as the accurate
anticipation of technological and market trends. The introduction of new or
enhanced products will also require the Company to manage the transition from
older products in order to minimize disruption in customer ordering patterns,
avoid excessive levels of older product inventories and ensure that adequate
supplies of new products can be delivered to meet customer demand. During the
first quarter of 1998, the Company reworked certain of its Wide Bank products
previously sold to a certain distributor in order to add new features which
were included in a subsequent release of such product. While these actions did
not cause the Company to record lower than anticipated net revenue for the
quarter, the Company's gross margin was adversely affected. There can be no
assurance that the Company will continue to successfully develop, introduce or
manage the transition to new products. Furthermore, the Company's products
have in the past contained, and may in the future contain, undetected or
unresolved errors when first introduced or as new versions are released. There
can be no assurance that, despite extensive testing by the Company, errors,
defects or failures will not be found in the Company's current or future
products or enhancements after commencement of commercial shipments, resulting
in delay in or loss of market acceptance and sales, product returns, diversion
of development resources, injury to the Company's reputation or increased
service and warranty costs, any of which could have a material adverse effect
on the Company's business, financial condition and results of operations.
Significant delays in meeting deadlines for announced product introductions or
enhancements or performance problems with such products could result in an
undermining of customer confidence in the Company's products, which would
materially and adversely affect its customer relationships as well. Although
the Company has not experienced any product liability claims to date, the sale
and support of the Company's products entails the risk of such claims, and
there can be no assurance that the Company will not be subject to such claims
in the future. A successful product liability claim brought against the
Company could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company's agreements with
its distributors typically contain provisions designed to limit the Company's
exposure to potential product liability claims. However, it is possible that
the limitation of liability provisions contained in the Company's agreements
may not be effective under the laws of certain jurisdictions.

LENGTHY SALES CYCLE. The sale of the Company's MDA products averages
approximately four months in the case of competitive carrier, but can take
significantly longer in the case of ILECs and certain distributors and end
users. This process is often subject to delays over which the Company has
little or no control, including a distributor's or a competitive carrier's
budgetary constraints, distributor or competitive carrier internal acceptance
reviews, the success and continued internal support of competitive carrier's
own development efforts, and the possibility of cancellation or delay of
projects by distributors or competitive carriers. In addition, as competitive
carriers have matured and grown larger, their purchase process has become more
institutionalized, and it has become increasingly difficult, and required more
of the Company's time and effort, to gain the initial acceptance and adoption
of its products by these end users. Although the Company attempts to develop
its products with the goal of facilitating the time to market of its
competitive carrier's products, the timing of the commercialization of a new
distributor or competitive carrier's application or service based on the
Company's products is primarily dependent on the success and timing of a
competitive carrier's own internal deployment program. Delays can also be
caused by late deliveries by other vendors, changes in implementation
priorities and slower than anticipated growth in

14
<PAGE>

demand for the Company's products. A delay in, or a cancellation of, the sale
of the Company's products could have a material adverse effect on the
Company's business, financial condition and results of operations and cause
the Company's results of operations to vary significantly from quarter to
quarter. See "Business--Sales and Marketing."

RAPID TECHNOLOGICAL CHANGE; EVOLVING MARKET FOR TELECOMMUNICATIONS
SERVICES. The telecommunications and data communications market is
characterized by rapidly changing technology, evolving industry standards,
changes in end user requirements and frequent new product introductions and
enhancements that may render the Company's existing products obsolete. The
Company expects that new technologies will emerge as competition in the
telecommunications and data communications industry increases and the need for
higher volume and more cost efficient transmission equipment expands. Industry
standards for distributed digital access equipment and technology are still
evolving. The introduction of products embodying new technologies or the
emergence of new industry standards can render existing products obsolete or
unmarketable. For example, if the market were to broadly adopt
telecommunications equipment based on cable modems or cable telephony, sales
of the Company's existing or future products could be significantly
diminished. As standards and technologies evolve, the Company will be required
to modify its products or develop and support new versions of its products.
The failure of the Company's products to comply, or delays in achieving
compliance, with the various existing and evolving industry standards could
adversely affect sales of the Company's current products, or delay
introduction of the Company's future products.

The Company's success will also depend on continued growth in the market for
telecommunications and data communications services. The global
telecommunications marketplace is evolving and it is difficult to predict its
potential size or future growth rate. There can be no assurance this market
will continue to grow or that increased regulation will not present barriers
to the sales of existing or future products. If this market fails to grow or
grows more slowly or in a different direction than the Company currently
anticipates, the Company's business, financial condition and results of
operations would be materially and adversely affected. See "--Dependence on
New Product Introductions and Product Enhancement; Risk of Product Defects,
Returns and Liability" and "--Intense Competition."

DEPENDENCE ON PROPRIETARY RIGHTS. The Company relies primarily on a
combination of patent, copyright, trademark and trade secret laws, as well as
confidentiality procedures and contractual restrictions, to establish and
protect its proprietary rights. As of May 18, 1998, a total of two U.S.
patents had been awarded to the Company. The Company has a total of six U.S.
patent applications pending. The Company also has three U.S. registered
trademarks and two U.S. trademark applications pending. The Company has also
entered into confidentiality agreements with all of its employees and
consultants and enters into non-disclosure agreements with its suppliers and
distributors in order to limit access to and disclosure of its proprietary
information. There can be no assurance such measures will be adequate to deter
and prevent misappropriation of the Company's technologies or independent
third-party development of similar technologies. Despite the Company's efforts
to protect its proprietary rights, unauthorized parties may attempt to copy
aspects of the Company's products or to obtain and use trade secrets or other
information that the Company regards as proprietary. Further, the Company may
be subject to additional risks as it enters into transactions in foreign
countries where intellectual property laws do not protect the Company's
proprietary rights as fully as do the laws of the U.S. There can be no
assurance that the Company's competitors will not independently develop
similar or superior technologies or duplicate any technology developed by the
Company. Any such events could have a material adverse effect on the Company's
business, financial condition and results of operations.

15
<PAGE>

The telecommunications industry is characterized by the existence of a large
number of patents and frequent litigation based on allegations of patent
infringement. As the number of entrants in the Company's markets increases and
the functionality of the Company's products is enhanced and overlaps with the
products of other companies, the Company may become subject to claims of
infringement or misappropriation of the intellectual property rights of
others. From time to time, third parties may assert patent, copyright,
trademark and other intellectual property rights to technologies that are
important to the Company. Although the Company has not received communications
from third parties asserting that the Company's products infringe or may
infringe proprietary rights of third parties, the Company has no assurance
that any future claims, if determined adversely to the Company, would not have
a material adverse effect on the Company's business, financial condition or
results of operations. In its distribution agreements, the Company agrees to
indemnify distributors and competitive carrier customers for any expenses or
liabilities resulting from claimed infringements of patents, trademarks or
copyrights of third parties. In certain limited instances, the amount of such
indemnities may be greater than the net revenue the Company may have received
from the distributor. There can be no assurance that third parties will not
assert infringement or misappropriation claims against the Company in the
future with respect to current or future products. In the event litigation is
required to determine the validity of any third-party claims, such litigation,
whether or not determined in favor of the Company, could result in significant
expense to the Company, divert the efforts of the Company's technical and
management personnel, cause product shipment delays or require the Company to
enter into royalty or licensing agreements. Such royalty or licensing
arrangements, if required, may not be available on reasonable commercial terms
acceptable to the Company, if at all. In the event of an adverse ruling in any
litigation, the Company might be required to discontinue the use and sale of
infringing products, expend significant resources to develop non-infringing
technology or obtain licenses from third parties. In the event of a claim or
litigation against or by the Company or the failure of the Company to develop
or license a substitute technology on commercially reasonable terms, the
Company's business, financial condition and results of operations would be
materially adversely affected. See "Business--Intellectual Property."

RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION. To date, the Company has not
recorded material sales outside of the U.S. The Company intends to expand its
operations outside the U.S. and enter into international markets, which will
require significant management attention and financial resources. There can be
no assurance that the Company will be successful in achieving significant
sales of its distributed digital access equipment in international markets.
There may not be a demand in foreign countries with respect to new products,
if any, that the Company may offer in the future. In addition, international
sales are subject to a variety of risks, including difficulties in
establishing and managing international distribution channels, in servicing
and supporting products sold outside the U.S. and in translating products and
related materials into foreign languages. International operations are also
subject to difficulties in collecting accounts receivable, staffing, managing
personnel and enforcing intellectual property rights. The Company also
anticipates that product service and support will be more complicated and
expensive with respect to products sold in international markets. The Company
may need to adapt its products to conform to different technical standards
that may exist in foreign countries. Future customer purchase agreements may
be governed by foreign laws, which may differ significantly from U.S. laws.
Other factors that can adversely affect international operations include
fluctuations in the value of foreign currencies and currency exchange rates,
changes in import/export duties and quotas, introduction of tariff or non-
tariff barriers and economic or political changes in international markets.
Any inability to obtain foreign regulatory approvals on a timely basis could
have a material adverse effect on the Company's business, financial condition
and results of operations. If the Company's international sales increase, its
net revenue may also be affected to a greater extent by seasonal fluctuations
resulting from lower levels of sales which typically occur during the summer
months in Europe and other parts of the world. There can be no assurance that
these factors will not have

16
<PAGE>

a material adverse effect on the Company's future international sales and,
consequently, on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business--Strategy."

POTENTIAL NEED FOR ADDITIONAL CAPITAL; RISKS RELATING TO POTENTIAL
ACQUISITIONS. The Company currently anticipates that the proceeds of the
Offering, together with its existing cash balances and available line of
credit and cash flows expected to be generated from future operations, will be
sufficient to meet the Company's liquidity needs for at least the next 12
months. However, the Company may need to raise additional funds if its
estimates of net revenue, working capital and/or capital expenditure
requirements change or prove inaccurate or in order for the Company to respond
to unforeseen technological or marketing hurdles or to take advantage of
unanticipated opportunities. In addition, the Company expects to review
potential acquisitions that would complement its existing product offerings or
enhance its technical capabilities. While the Company has no present
commitments or agreements with respect to acquisitions, the Company may, from
time to time, pursue the acquisition of other companies, assets, products and
technologies. Acquisitions involve a number of operating risks that could
materially adversely affect the Company's results of operations, including the
diversion of management's attention to assimilate the operations, products and
personnel of the acquired companies, the amortization of acquired intangible
assets, and the potential loss of key employees of the acquired companies.
Furthermore, acquisitions may involve businesses in which the Company lacks
experience. Because management has limited experience in acquisitions and the
Company has no experience in integrating acquired companies or technologies
into its operations, there can be no assurance that the Company will be able
to manage one or more acquisitions successfully, or that the Company will be
able to integrate the operations, products or personnel gained through any
such acquisitions without a material adverse effect on the Company's business,
financial condition and results of operations. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

YEAR 2000 COMPLIANCE. Many existing computer systems and applications, and
other control devices, use only two digits to identify a year in the date code
field, and were not designed to account for the upcoming change in the
century. As a result, such systems and applications could fail or create
erroneous results unless corrected so that they can process data related to
the year 2000. The Company relies on its systems, applications and devices in
operating and monitoring all major aspects of its business, including
financial systems (such as general ledger, accounts payable and accounts
receivable modules), inventory and receivables systems, customer services,
infrastructure, embedded computer chips, networks and telecommunications
equipment and end products. The Company also relies, directly and indirectly,
on systems of external business enterprises such as distributors, suppliers,
creditors, financial organizations, and of governmental entities, for accurate
exchange of data. Even if the internal systems of the Company are not
materially affected by the year 2000 issue, the Company could be affected
through disruptions in the operation of the enterprises with which the Company
interacts. Based on the information currently available, the Company believes
that the costs associated with the year 2000 issue, and the consequences of
incomplete or untimely resolution of the year 2000 issue, will not have a
material adverse effect on its business, financial condition and results of
operations in any given year; however, there can be no assurance that year
2000 issues will not have a material adverse effect on the Company's business,
financial condition or results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior to this
Offering there has been no public market for the Company's Common Stock, and
there can be no assurance that an active public market for the Company's
Common Stock will develop or be sustained after the

17
<PAGE>

Offering. The initial offering price will be determined by negotiation among
the Company and the Underwriters based upon several factors and may not be
indicative of the market price of the Common Stock after the Offering. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The trading price of the Company's Common
Stock could be subject to wide fluctuations in response to variations in
operating results, announcements of technological innovations or new products
by the Company or its competitors, changes in financial estimates by
securities analysts, regulatory developments and other events or factors. In
addition, the stock market in general and the market prices of equity
securities of many high technology companies in particular, have experienced
extreme price fluctuations, which often have been unrelated to the operating
performance of such companies. These broad market fluctuations may materially
adversely affect the market price of the Company's Common Stock. There can be
no assurance that the trading price of the Company's Common Stock will not
decline below its initial offering price to the public. See "Underwriting."

CONTROL BY EXISTING STOCKHOLDERS; EFFECTS OF CERTAIN ANTI-TAKEOVER
PROVISIONS. Following the completion of this Offering, members of the Board of
Directors and the executive officers of the Company, together with members of
their families and entities that may be deemed affiliates of or related to
such persons or entities, will beneficially own approximately % of the
outstanding shares of Common Stock of the Company. In particular, Mr. Koenig
and Ms. Pierce, the Company's Chief Executive Officer and Chief Financial
Officer, respectively, are married and will beneficially own approximately %
of the outstanding shares of Common Stock of the Company. Accordingly, these
stockholders will be able to elect all members of the Company's Board of
Directors and determine the outcome of all corporate actions requiring
stockholder approval, such as mergers and acquisitions. This level of
ownership by such persons and entities may have a significant effect in
delaying, deferring or preventing a change in control of the Company and may
adversely affect the voting and other rights of other holders of Common Stock.

Upon completion of this Offering, the Company's Board of Directors will have
the authority to issue up to 5,000,000 shares of Preferred Stock and to
determine the price, rights, preferences, privileges and restrictions,
including voting rights, of those shares without any further vote or action by
the stockholders. The rights of the holders of Common stock will be subject
to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock, while providing flexibility in connection with possible acquisitions
and other corporate purposes, could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. The Company has no current plans to issue shares of
Preferred Stock. The Company is also subject to certain provisions of Delaware
law which could have the effect of delaying, deterring or preventing a change
in control of the Company, including Section 203 of the Delaware General
Corporation Law, which prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder unless certain conditions
are met. In addition, the Company's certificate of incorporation and bylaws
contain certain provisions that, together with the ownership position of the
officers, directors and their affiliates, could discourage potential takeover
attempts and make more difficult attempts by stockholders to change
management, which could adversely affect the market price of the Company's
Common Stock. See "Management--Executive Officers and Directors," "Certain
Transactions," "Principal Stockholders" and "Description of Capital Stock."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. Sales of a substantial
number of shares of Common Stock in the public market following this Offering
could adversely affect the market price for the Common Stock. The number of
shares of Common Stock available for sale in the public market is limited by
restrictions under the Securities Act of 1933, as amended (the "Securities
Act"), and lock-up agreements under which certain stockholders have agreed not
to sell or otherwise dispose of any of their shares for a period of 180 days
after the date of this

18
<PAGE>

Prospectus without the prior written consent of Deutsche Morgan Grenfell Inc.
However, Deutsche Morgan Grenfell Inc. may, in their sole discretion and at
any time without notice, release all or any portion of the securities subject
to these lock-up agreements. When determining whether or not to release shares
from the lock-up agreements, Deutsche Morgan Grenfell Inc. will consider,
among other factors, the person's reasons for requesting the release, the
number of shares for which the release is being requested and market
conditions at the time. As a result of these restrictions, based on shares
outstanding and options granted as of March 31, 1998, and assuming no options
are exercised between March 31, 1998 and the date of this Prospectus, the
following shares of Common Stock will be eligible for future sale. On the date
of this Prospectus, shares (including the shares offered hereby) will
be eligible for sale. An additional shares will be eligible for sale 90
days after the date of this Prospectus pursuant to Rule 701 of the Securities
Act of 1933, as amended, and upon the expiration of the lock-up agreements an
additional shares will be eligible for sale 180 days after the date of
this Prospectus, subject to certain limitations of Rule 144 of the Securities
Act. In addition, the Company intends to register on a registration statement
on Form S-8, within 90 days after the effective date of this Offering, a total
of 4,012,500 shares of Common Stock subject to outstanding options or reserved
for issuance under the 1998 Stock Incentive Plan and 1998 Employee Stock
Purchase Plan. Upon expiration of the lock-up agreements referred to above,
holders of approximately 5,593,132 shares of Common Stock will be entitled to
certain registration rights with respect to such shares. If such holders, by
exercising their registration rights, cause a large number of shares to be
registered and sold in the public market, such sales could have a material
adverse effect on the market price for the Common Stock. See "Shares Eligible
for Future Sale."

MANAGEMENT'S DISCRETION OVER PROCEEDS OF THE OFFERING. The primary purposes
of this Offering are to create a public market for the Common Stock, to
facilitate future access to public markets and to obtain additional equity
capital. As of the date of this Prospectus, the Company has no specific plans
as to the use of the net proceeds from this Offering; accordingly, the
Company's management will have broad discretion as to the application of such
net proceeds. Pending any such uses, the Company plans to invest the net
proceeds in short-term investment grade, interest-bearing securities. See "Use
of Proceeds."

IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of shares of Common Stock in
this Offering will incur immediate and substantial dilution in the net
tangible book value per share of the Common Stock from the initial public
offering price. To the extent that outstanding options and warrants to
purchase the Company's Common Stock are exercised, there will be further
dilution. See "Dilution."

19
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale and issuance of the shares
of Common Stock offered hereby are estimated to be approximately $ million
(approximately $ million if the Underwriters' over-allotment option is
exercised in full), at an assumed initial public offering price of $ per
share and after deducting the estimated underwriting discount and the
estimated offering expenses. The Company intends to use the net proceeds for
general corporate purposes, including working capital, product development and
capital expenditures. In particular, the Company expects to use a portion of
the net proceeds to expand its facilities. The Company believes it will
require up to 50,000 additional square feet of office, manufacturing and
research and development space in the next 24 months. A portion of the net
proceeds may also be used to acquire or invest in complementary businesses or
products or to obtain the right to use complementary technologies. The Company
has no agreements or commitments with respect to any such acquisition or
investment, and the Company is not currently engaged in any material
negotiations with respect to any such transaction. Pending such uses, the net
proceeds of this Offering will be invested in short-term, interest-bearing,
investment grade securities.

DIVIDEND POLICY

The Company has never declared or paid dividends on its capital stock and
does not anticipate paying cash dividends in the foreseeable future. Payments
of future dividends, if any, will be at the discretion of the Company's Board
of Directors after taking into account various factors, including the
Company's financial condition, operating results, current and anticipated cash
needs and plans for expansion. The Company's line of credit arrangement
prohibits the payment of dividends by the Company without the lender's prior
consent. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

20
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
31, 1998, (i) on an actual basis; (ii) on a pro forma basis giving effect to
the conversion of all outstanding shares of the Convertible Preferred Stock
upon the completion of this Offering and effectiveness of the Company's
reincorporation in the State of Delaware; and (iii) as adjusted to reflect the
estimated net proceeds from the sale of shares of Common Stock offered by
the Company hereby at an assumed initial public offering price of $ and
after deducting the estimated underwriting discount and estimated offering
expenses. This table should be read in conjunction with the Financial
Statements and Notes thereto appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
PRO AS
ACTUAL FORMA ADJUSTED
-------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Stockholders' equity:
Preferred Stock, 5,000,000 shares authorized,
actual, 9,000,000 shares authorized, pro forma and
5,000,000 shares authorized, as adjusted; 3,728,755
shares issued and outstanding, actual, no shares
issued and outstanding, pro forma and as adjusted.. $ 16,002 $ -- $ --
Common Stock, $0.001 par value; 60,000,000 shares
authorized, actual and pro forma, shares
authorized, as adjusted; 14,400,662 shares issued
and outstanding actual, 18,129,417 shares issued
and outstanding pro forma and shares issued
and outstanding, as adjusted(1).................... 19 23 --
Additional paid-in capital.......................... 234 16,232 --
Retained earnings................................... 2,437 2,437 --
-------- ------- ------
Total stockholders' equity and capitalization..... $ 18,692 $18,692 $ --
======== ======= ======
</TABLE>
- --------
(1) Excludes 1,317,981 shares of Common Stock issuable upon exercise of stock
options outstanding as of March 31, 1998 at a weighted average exercise
price of $0.76 per share, and 1,906,357 shares of Common Stock reserved
for grant of future options as of March 31, 1998, which reserve includes
an increase of 750,000 shares reserved for issuance under the 1995 Stock
Option Plan approved by the Board on April 1, 1998. In addition,
subsequent to March 31, 1998, the Board of Directors adopted, subject to
stockholder approval, the 1998 Employee Stock Purchase Plan pursuant to
which 262,500 shares of Common Stock were reserved for issuance. See
"Management--Benefit Plans," "Description of Capital Stock" and Note 6 of
Notes to Financial Statements.

21
<PAGE>

DILUTION

The pro forma net tangible book value of the Company at March 31, 1998,
after giving effect to the conversion of the Convertible Preferred Stock into
Common Stock upon completion of the Offering, was approximately $18.7 million,
or $1.03 per share. Pro forma net tangible book value per share represents
total tangible assets less total liabilities, divided by the number of shares
of Common Stock outstanding after giving effect to the conversion of all
outstanding Convertible Preferred Stock. After giving effect to the sale of
shares of Common Stock offered hereby by the Company at the assumed
initial public offering price of $ per share and after deducting the
estimated underwriting discount and estimated offering expenses, the Company's
pro forma net tangible book value at March 31, 1998, would have been $ , or
$ per share. This represents an immediate increase in net tangible book
value of $ per share to existing stockholders and an immediate dilution of
$ per share to new investors purchasing shares of Common Stock in this
Offering. The following table illustrates this dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.....................
Pro forma net tangible book value per share prior to the Offering. $1.03
Increase per share attributable to the Offering...................
-----
Pro forma net tangible book value per share after the Offering......
----
Net tangible book value dilution per share to new investors in the
offering...........................................................
====
</TABLE>

The following table summarizes, as of March 31, 1998, on the pro forma basis
described above, the total number of shares and consideration paid to the
Company and the average price per share paid by existing stockholders and by
new investors purchasing shares of Common Stock in this Offering at an assumed
initial public offering price of $ per share (before deducting the estimated
underwriting discount and estimated offering expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 18,129,417 $16,254,558 $0.90
New investors..............
---------- --- ----------- ---
Totals................... 100% 100%
========== === =========== ===
</TABLE>

The foregoing computations are based on the number of shares of Common Stock
outstanding as of March 31, 1998 and excludes 1,317,981 shares of Common Stock
outstanding at a weighted average exercise price of $0.76 per share and
1,906,377 shares of Common Stock reserved for future issuance, (which reserve
includes an increase of 750,000 shares reserved for issuance under the 1995
Stock Option Plan approved by the Board on April 1, 1998), and 262,500 shares
of Common Stock reserved for future issuance under the 1998 Employee Stock
Purchase Plan. To the extent that these options are exercised, there will be
further dilution to new investors. See "Management-- Benefit Plan" and Note 6
of Notes to Financial Statements.

22
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data is qualified by reference to and
should be read in conjunction with the Company's Financial Statements and
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus. The
statement of operations data for the years ended December 31, 1995, 1996 and
1997, and the balance sheet data at December 31, 1996 and 1997, are derived
from, and are qualified by reference to, the audited financial statements
included elsewhere in this Prospectus. The statement of operations data for
the year ended December 31, 1994 and the balance sheet data at December 31,
1994 and 1995 are derived from audited financial statements not included in
this Prospectus. The statement of operations data for the year ended December
31, 1993 and the balance sheet data at December 31, 1993 are derived from
unaudited financial statements not included in this Prospectus. The statement
of operations data for the three months ended March 31, 1997 and 1998 and the
balance sheet data at March 31, 1998 have been derived from the unaudited
financial statements of the Company included elsewhere in this Prospectus. The
unaudited financial statements have been prepared on the same basis as the
audited financial statements and, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information set forth therein. The historical results
are not necessarily indicative of the operating results to be expected in the
future.

<TABLE>
<CAPTION>
FOR THE THREE
FOR THE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- --------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------ ------- ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net revenue............. $ 384 $ 741 $2,058 $5,809 $18,719 $2,496 $7,243
Cost of goods sold...... 140 379 1,287 3,284 9,469 1,256 3,768
------ ------ ------ ------ ------- ------ ------
Gross profit............ 244 362 771 2,525 9,250 1,240 3,475
Operating expenses:
Sales and marketing.... 75 170 269 844 2,395 432 975
Research and
development........... 77 129 164 874 2,848 372 843
General and
administrative........ 50 87 203 907 1,661 251 702
------ ------ ------ ------ ------- ------ ------
Total operating
expenses............. 202 386 636 2,625 6,904 1,055 2,520
------ ------ ------ ------ ------- ------ ------
Income (loss) from
operations............. 42 (24) 135 (100) 2,346 185 955
Other income, net....... -- 29 46 24 180 10 168
------ ------ ------ ------ ------- ------ ------
Income (loss) before
income taxes........... 42 5 181 (76) 2,526 195 1,123
Income taxes(1)......... -- -- -- -- 791 61 400
------ ------ ------ ------ ------- ------ ------
Net income (loss)...... $ 42 $ 5 $ 181 $ (76) $ 1,735 $ 134 $ 723
Accretion of preferred
stock.................. -- -- -- -- (25) (5) (25)
------ ------ ------ ------ ------- ------ ------
Net income available to
common stockholders.... $ 42 $ 5 $ 181 $ (76) $ 1,710 $ 129 $ 698
====== ====== ====== ====== ======= ====== ======
Income (loss) per share:
Basic.................. $ 0.01 $ 0.00 $ 0.01 $(0.01) $ 0.12 $ 0.01 $ 0.05
====== ====== ====== ====== ======= ====== ======
Diluted(2)............. $ 0.01 $ 0.00 $ 0.01 $(0.01) $ 0.10 $ 0.01 $ 0.03
====== ====== ====== ====== ======= ====== ======
Weighted average common
shares outstanding:
Basic.................. 11,475 11,475 13,665 13,881 14,131 14,076 14,318
====== ====== ====== ====== ======= ====== ======
Diluted................ 11,475 11,475 13,665 13,881 17,607 16,332 20,896
====== ====== ====== ====== ======= ====== ======
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------------------------- MARCH 31,
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.................... $ 13 $ 24 $ 128 $ 929 $ 6,104 $ 6,379
Working capital......... 21 14 121 2,941 16,615 17,209
Total assets............ 149 243 1,045 4,822 21,680 22,936
Total liabilities....... 112 201 823 1,258 3,762 4,244
Total stockholders'
equity................. 37 42 222 3,564 17,918 18,692
</TABLE>
- --------
(1) The Company was a subchapter S Corporation for income tax purposes prior
to January 1, 1996 and, accordingly, taxable income was reported in the
individual tax returns of the stockholders. See Financial Statements for
pro forma information as if the Company was a taxable entity for the year
ended December 31, 1995.
(2) The diluted net income (loss) per share computation includes potential
shares of Common Stock (Convertible Preferred Stock, options to purchase
Common Stock and Common Stock subject to repurchase rights held by the
Company), unless their effect would be antidilutive.

23
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Company's Financial Statements and Notes
thereto included elsewhere in this Prospectus. This Prospectus contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ materially from the results discussed in such
forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed below and in "Risk Factors"
and "Business," as well as those discussed elsewhere in this Prospectus.

OVERVIEW

The Company is a leading provider of Multi-service Digital Access ("MDA")
equipment to competitive carriers for the provisioning of enhanced voice and
high-speed data services to end users such as small and medium-sized
businesses and government and educational institutions. CAC was incorporated
in September 1992 as a successor company to Koenig Communications, an
equipment systems integration and consulting company which had been in
operation since 1986. From inception through May 1995, the Company's operating
activities related primarily to providing systems integration and other
consulting services, establishing a research and development organization,
developing and testing prototype designs, building a national distribution
base, establishing a marketing and sales organization and developing customer,
vendor and manufacturing relationships.

From 1992 through June 30, 1995, the Company derived substantially all of
its net revenue from its systems integration and consulting business, in which
the Company purchased other vendors' products and configured the products in
combination with the Company's private-label DataSplit product, for each
customer's unique network requirements. In the summer of 1995, the Company
ceased its systems integration and consulting business and commenced its main
product sales with the introduction of the Access Bank I. In the fourth
quarter of 1997, the Company began commercial deployment of its Wide Bank
product. Accordingly, the Company has only a limited operating history on
which to base an evaluation of its business and prospects. The Company and its
prospects must be considered in light of the risks, uncertainties and
difficulties frequently encountered by companies in an early stage of
development, particularly companies in new and rapidly evolving markets. See
"Risk Factors--Limited Operating History; Future Results of Operations
Uncertain."

The Company's net revenue is derived from the sales of MDA equipment and
accessories. The Company recognizes revenue upon shipment of product from the
Company's factory to its distributors' warehouses. In 1997, the Company's
Access Bank product family and the Wide Bank product family accounted for
approximately 80% and 16%, respectively, of the Company's net revenue. In the
three months ended March 31, 1998, the Company's Access Bank product family
and Wide Bank product family accounted for approximately 63% and 33%,
respectively, of the Company's net revenue. See "Risk Factors--Dependence on
Emerging Market for Multi-service Digital Access Equipment; Risks Associated
With Market Acceptance of Wide Bank Product Family" and Note 1 of Notes to
Financial Statements.

Substantially all of the sales of the Company's products are through
distributors. In addition to product sales, the Company from time to time
relies on its distributors to provide installation, training and customer
support to the ultimate end users of the Company's products. As a result, the
Company's success depends on the continued sales and customer support efforts
of its network of distributors. Sales of the Company's products historically
have been made to a limited number of distributors. In 1995, Telco, C&L,
Phillips and Telsource accounted for 26%, 13%, 13% and 12% of net revenue,
respectively. In 1996, Telco, Phillips, Telsource and C&L

24
<PAGE>

accounted for 47%, 18%, 18% and 11% of net revenue, respectively. In 1997,
Walker, ADC and Phillips accounted for 36%, 20% and 14% of net revenue,
respectively. In the three months ended March 31, 1998, Walker and Phillips
accounted for 48% and 22% of net revenue, respectively. The Company expects
that sales of its products will continue to be made to a small number of key
distributors. Accordingly, the loss of, or reduction in sales to, any of the
Company's key distributors could have a material adverse effect on the
Company's business, financial condition and results of operations. See "Risk
Factors--Dependence on Distribution Channels; Potential for Channel Conflict"
and Note 7 of Notes to Financial Statements.

In addition to being dependent on a small number of distributors for a
majority of its net revenue, the Company believes its products are distributed
to a limited number of competitive carrier customers who are primarily CLECs.
The Company believes that in 1997, 22 competitive carrier customers indirectly
accounted for 75% of its net revenue and that for the three months ended March
31, 1998, 25 competitive carrier customers indirectly accounted for 73% of its
net revenue. In particular, the Company believes (based on information from
its distributors) that TCG, NEXTLINK, WinStar and e.spire each accounted for a
significant portion of the Company's net revenue in 1997 and the three months
ended March 31, 1998. None of these competitive carrier customers has any
obligation to purchase additional products or services. Accordingly, there can
be no assurance that present or future competitive carrier customer will not
terminate their purchasing arrangements with the Company's distributors or
significantly reduce or delay the amount of the Company's products that they
order. Any such termination, change, reduction or delay in orders could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company generally provides its distributors with
limited stock rotation and price protection rights, and the Company has
granted certain of its distributors "most favored customer" terms. There can
be no assurance that these stock rotation rights, price protection rights or
most favored customer provisions will not have a material adverse affect on
the Company's business, operating results or financial condition. See "Risk
Factors--Dependence on Distribution Channels; Potential for Channel Conflict,"
"--Competitive Carrier Customer Concentration" and "Business--Customers."

The Company believes that average selling prices and gross margins for its
products will decline as such products mature, as volume price discounts in
distributor contracts take effect and as competition intensifies, among other
factors. In addition, discounts to distributors vary among product lines and
are based on volume shipments, both of which affect gross margins. The
Company's gross margin for its Access Bank product family is higher than the
gross margin for its Wide Bank product family. The Company believes its gross
margins are likely to fluctuate based on product mix and channel mix. Margins
will also likely be adversely affected from time to time by new product
introductions. See "Risk Factors--Significant Fluctuation in Results of
Operations" and "--Possible Declining Prices."

25
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth statements of operations data of the Company
expressed as a percentage of net revenue for the periods indicated. The
Company does not believe its historical results of operations are indicative
of future results:

<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
FOR THE YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
------------------------- ---------------
1995 1996 1997 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net revenue....................... 100% 100% 100% 100% 100%
Cost of goods sold................ 63 57 51 50 52
------ ------ ------ ------ ------
Gross margin...................... 37 43 49 50 48
Operating expenses:
Sales and marketing............. 13 14 12 18 13
Research and development........ 8 15 15 15 12
General and administrative...... 9 16 9 10 10
------ ------ ------ ------ ------
Total operating expenses...... 30 45 36 43 35
------ ------ ------ ------ ------
Income (loss) from operations..... 7 (2) 13 7 13
Other income, net................. 2 0 0 0 2
------ ------ ------ ------ ------
Income (loss) before income taxes. 9 (1) 13 7 15
Income taxes...................... 0 0 4 2 5
------ ------ ------ ------ ------
Net income (loss)................. 9% (1)% 9% 5% 10%
====== ====== ====== ====== ======
</TABLE>

THREE MONTHS ENDED MARCH 31, 1997 AND 1998

Net Revenue. Net revenue increased by approximately 190% from $2.5 million
in the three months ended March 31, 1997 to $7.2 million in the three months
ended March 31, 1998. The growth in net revenue was primarily attributable to
sales of products introduced since the first quarter of 1997 and increased
sales of existing products.

GROSS MARGIN. The Company's cost of goods sold consists primarily of costs
associated with parts and components, outsourced manufacturing of certain
printed circuit boards, chassis and subassemblies and in-house labor
associated with assembly, testing, shipping and quality assurance. Gross
profit increased by approximately 180% from $1.2 million in the first quarter
of 1997 to $3.5 million in the first quarter of 1998. Gross margin was
approximately 50% and 48% for the first quarters of 1997 and 1998,
respectively. The absolute dollar increase in gross profit was due to
increases in sales, partially offset by increases in component costs,
compensation costs and overhead related to the Company's manufacturing
operations as well as warranty expenses. Gross margin declined in the three
months ended March 31, 1998 as compared to the three months ended March 31,
1997 due primarily to introduction of the Wide Bank product, which carries a
lower gross margin, and, to a lesser extent, to the rework of previously
shipped Wide Bank products to add features included in a subsequent release.

SALES AND MARKETING. Sales and marketing expenses consist of salaries and
related expenses for personnel engaged in sales and marketing of the Company's
products, as well as trade shows and promotional expenses. Sales and marketing
expenses increased approximately 126% from $432,000 for the three months ended
March 31, 1997 to $975,000 for the three months ended March 31, 1998. This
increase was primarily due to sales commissions on a higher level of sales,
increased staffing levels, and increased spending on trade shows, travel and
entertainment and other marketing programs. The Company intends to hire
additional sales and marketing personnel and to continue to aggressively
pursue sales and marketing campaigns, and therefore expects these expenses to
increase in absolute dollars in the future.

26
<PAGE>

Research and Development. Research and development expenses consist
principally of salaries and related personnel expenses, consultant fees, and
prototype expenses related to the design, development and testing of the
Company's MDA equipment. Research and development expenses increased
approximately 127% from $372,000 for the three months ended March 31, 1997 to
$843,000 for the three months ended March 31, 1998. The increase in the level
of research and development expenses was due primarily to increased personnel,
consulting costs and depreciation expense related to new test and laboratory
capabilities. The Company expects the amount of research and development
expenses to continue to increase to fund the development of new products and
enhancements.

General and Administrative. General and administrative expenses consist
primarily of salaries and related expenses for executive, accounting and
administrative personnel, recruiting expenses, professional fees and other
general corporate expenses. General and administrative expenses increased
approximately 180% from $251,000 for the three months ended March 31, 1997 to
$702,000 for the three months ended March 31, 1998 primarily as a result of
increased personnel. The Company expects general and administrative expenses
to increase in absolute dollars as the Company adds personnel and incurs
additional costs related to the expansion of its business and operation as a
public company.

Other Income, Net. Other income increased from $10,000 in the three months
ended March 31, 1997 to $168,000 in the three months ended March 31, 1998. The
increase was a result of sublease rental income and an increase in interest
income received on cash equivalent investments and other short-term
securities.

Income Taxes. The provision for income taxes was $399,000 in the first
quarter of 1998 compared to $61,000 in the first quarter of 1997. The
effective tax rate of 36% in the first quarter of 1998 approximates the
federal statutory rate of 34% plus a provision for state taxes less research
and development tax credits. The Company expects its effective tax rate to
increase in the future due to the expiration of the research and development
tax credit. See Notes 1 and 5 of Notes to Financial Statements.

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

Net Revenue. Net revenue increased by approximately 222% from $5.8 million
for 1996 to $18.7 million for 1997 and by approximately 176% from $2.1 million
for 1995 to $5.8 million in 1996. The increase in 1997 was due to new product
introductions and increased distributor sales of the Company's existing
products. The increase in 1996 was a result of a full year of production and
sale of the Company's Access Bank I product, which began shipping in mid-1995.
In 1995, approximately $313,000 of the Company's net revenues were related to
the Company's systems integration and consulting business, which the Company
no longer operates.

Gross Margin. Gross profit in 1995, 1996 and 1997 was approximately
$771,000, $2.5 million, and $9.3 million, respectively. Gross margin was 37%,
43% and 49%, respectively, for these years. Gross profit increased between the
periods primarily as a result of increased production. Gross margin improved
as a result of volume purchase discounts and efficiencies associated with
increased manufacturing volume.

Sales and Marketing. Sales and marketing expenses increased approximately
214% from $269,000 in 1995 to $844,000 in 1996 and approximately 184% to $2.4
million in 1997. The increase in 1996 stemmed from increased sales commissions
on higher sales and increased spending on personnel, advertising and trade
shows as the Company began marketing the Access Bank II. The increase in 1997
reflected the expansion of the sales force as well as costs associated with
increased marketing activity with respect to the introduction of the Wide Bank
and other products in the second half of 1997, customer support, advertising
and trade shows.

27
<PAGE>

Research and Development. Research and development expenses in 1995, 1996
and 1997 were approximately $164,000, $874,000 and $2.8 million, respectively.
Research and development expenses increased $710,000, or 433%, from 1995 to
1996. This increase was due primarily to an increase in the number of
personnel engaged in the development of new products, including the Access
Bank II. Research and development expenses increased approximately $2.0
million, or 226%, from 1996 to 1997. This increase was principally due to
personnel added to expand the Company's product line, which included the Wide
Bank 28, new modules for the Access Bank I and Access Bank II products, new
software features and line cards for the Access Bank I and Access Bank II
products and new power and other equipment accessories.

General and Administrative. General and administrative expenses in 1995,
1996 and 1997 were approximately $203,000, $907,000 and $1.7 million,
respectively. General and administrative expenses increased $704,000, or 347%,
from 1995 to 1996 and $754,000, or 83%, from 1996 to 1997. The increases in
each year were principally due to increases in personnel and facilities costs
necessary to support the expansion of the Company's business.

Other Income, Net. The Company recognized other income of approximately
$46,000 and $24,000 for 1995 and 1996, respectively. The other income in 1995
and 1996 includes sublease rental income and, in 1995, the sale of the
Company's domain name. The Company had other expenses of $180,000 for 1997,
consisting of sublease rental and interest income.

Income Taxes. The Company did not provide for income taxes in 1995 because
it was a subchapter S Corporation for income tax purposes and did not record a
tax benefit in 1996 due to the uncertainty relating to the utilization of the
net operating loss carryforward. The effective tax rate of 31% in 1997 was
less than the combined federal and state statutory rate primarily as a result
of the utilization of the research and development tax credit, which was
extended through June 1998, and a change in the valuation allowance for
deferred tax assets. The Company expects its tax rate to increase after June
1998 as a result of the expiration of the research and development tax credit.
See Notes 1 and 5 of Notes to Financial Statements.

28
<PAGE>

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain quarterly financial data for the
eight quarters ending with the quarter ended March 31, 1998, including such
amounts expressed as a percentage of total net revenue. This quarterly
information is unaudited, has been prepared on the same basis as the annual
financial statements and, in the opinion of the Company's management, reflects
all normal recurring adjustments necessary for a fair presentation of the
information for the periods presented. Operating results for any quarter are
not necessarily indicative of results for any future period.

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-----------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31
1996 1996 1996 1997 1997 1997 1997 1998
-------- --------- -------- --------- -------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenue....................... $ 1,681 $ 1,369 $ 1,317 $ 2,496 $ 3,996 $ 5,636 $ 6,591 $ 7,243
Cost of goods sold................ 1,015 863 485 1,256 1,975 2,752 3,486 3,768
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit...................... 666 505 831 1,240 2,021 2,884 3,105 3,475
Operating expenses:
Sales and marketing.............. 181 259 341 432 528 615 820 975
Research and development......... 248 257 287 372 400 923 1,153 843
General and administrative....... 224 242 254 251 355 496 559 702
-------- -------- -------- -------- -------- -------- -------- --------
Total operating expenses........ 654 757 883 1,055 1,283 2,034 2,532 2,520
Income (loss) from operations..... 12 (252) (51) 185 738 850 573 955
Other income (expense), net....... (29) 19 48 10 (6) 18 158 168
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes. (17) (233) (3) 195 732 868 731 1,123
Income taxes...................... -- -- -- 61 229 273 228 400
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)................. $ (17) $ (233) $ (3) $ 134 $ 503 $ 595 $ 503 $ 723
======== ======== ======== ======== ======== ======== ======== ========
AS A PERCENTAGE OF NET REVENUE:
Net revenue....................... 100% 100% 100% 100% 100% 100% 100% 100%
Cost of goods sold................ 60 63 37 50 49 49 53 52
-------- -------- -------- -------- -------- -------- -------- --------
Gross margin...................... 40 37 63 50 51 51 47 48
Operating expenses:
Sales and marketing.............. 11 19 26 18 14 11 12 13
Research and development......... 15 18 22 15 10 16 17 12
General and administrative....... 13 18 19 10 9 9 8 10
-------- -------- -------- -------- -------- -------- -------- --------
Total operating expenses........ 39 55 67 43 33 36 38 35
Income (loss) from operations..... 1 (18) (4) 7 18 15 9 13
Other income (expense), net....... (2) 1 4 0 0 0 2 2
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes. (1) (17) 0 7 18 15 11 15
Income taxes...................... 0 0 0 2 5 4 3 5
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)................. (1)% (17)% 0% 5% 13% 11% 8% 10%
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>

The Company's net revenue has increased each quarter since the three months
ended December 31, 1996, primarily as result of new product introductions,
product enhancements and increased distributor sales of the Company's existing
products. Gross margin varied significantly for the three months ended
September 30, 1996, December 31, 1996 and March 31, 1997. In the three months
ended December 31, 1996, the Company introduced a new software feature
(embedded in a chip set) that facilitated the upgrade of the Company's Access
Bank I product to include TR-08 functionality. A large quantity of these chip
sets, which carried a higher gross margin than the Company's other products,
was sold in that quarter. Operating expenses during these time periods also
generally increased, principally due to increased costs related to personnel
and facilities necessary to support the expansion of Company's business.

29
<PAGE>

Research and development expenses during the quarter ended December 31, 1997
increased significantly from the previous quarter primarily as a result of the
Company's purchase of embedded software stacks.

The Company's results of operations have fluctuated significantly in the
past and are likely to fluctuate significantly in the future, both on a
quarterly and annual basis, as a result of a variety of factors, many of which
are outside of the Company's control. Among other things, the Company's
results of operations have fluctuated in the past due to (i) the availability
of adequate supplies of key components and assemblies and the adequacy of
third-party manufacturing capabilities; (ii) delays in the introduction of new
products or product enhancements by the Company; (iii) customer order
deferrals in anticipation of product enhancements or new product offerings by
the Company; (iv) the Company's ability to affect and judge the timing and
size of orders from its distributors; and (v) materials kitting and shipping
errors. The Company's results of operations may also fluctuate in the future
due to a number of factors, including, but not limited to, those listed above
as well as (i) the timing and size of orders which are received and which can
be shipped in any particular period; (ii) the commercial success of the
Company's products; (iii) changes in the financial stability of the Company's
distributors, competitive carrier customers or suppliers; (iv) changes in
pricing policies by the Company or its competitors; (v) seasonality in the
placement of orders; (vi) changes in the level of the Company's operating
expenses; (vii) changes in the Company's distribution channels; (viii) delays
or deferrals of any competitive carrier's or end user's implementation of the
Company's products; (ix) product life cycles; (x) customization or integration
problems with end user systems; (xi) changes in the Company's strategy; (xii)
product failure or error; or (xiii) the level of international expansion. A
significant portion of the Company's net revenue has been, and the Company
believes will continue to be, derived from a limited number of large orders,
and the timing of such orders and their fulfillment has caused, and are
expected to continue to cause, material fluctuations in the Company's
operating results. The Company's distribution agreements generally allow
distributors to cancel orders without penalty until a relatively short period
of time prior to shipment. The Company has experienced cancellation and delays
of orders from time to time, and expects to continue to experience order
cancellations and delays from time to time in the future, which could
adversely affect the Company's revenue and results of operations for a quarter
or series of quarters. Fluctuations in operating results may result in
volatility in the price of the Company's Common Stock. Due to all of the
foregoing factors, it is possible that in some future quarter, the Company's
results of operations will be below the expectations of market analysts and
investors. In such event, the market price of the Company's Common Stock would
likely be materially adversely affected. See "Risk Factors--Significant
Fluctuations in Results of Operations."

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations to date primarily through cash
generated from operations, private sales of preferred stock totaling
approximately $15.6 million (net of issuance costs) and periodic borrowings
under its credit facilities.

Net cash used in operating activities for 1995, 1996, 1997 and the three
months ended March 31, 1998 totaled approximately $224,000, $1.7 million, $3.5
million and $427,000, respectively. In all periods, cash used in operating
activities was primarily due to increases in inventory and accounts
receivable, partially offset by increases in accounts payable and other
liabilities, and, in each period except 1996, by net income.

Cash used in investing activities was approximately $93,000, $639,000 and
$3.6 million in 1995, 1996 and 1997, respectively. In each year, cash used in
investing activities was primarily attributable to purchases of equipment,
and, in 1997, by purchases of securities available for sale. Cash provided by
investing activities for the three months ended March 31, 1998 of
approximately $673,000 was primarily attributable to sales of securities,
partially offset by purchases of equipment.

30
<PAGE>

Cash provided by financing activities was approximately $422,000, $3.1
million, $12.3 million and $29,000 for 1995, 1996, 1997 and the three months
ended March 31, 1998, respectively. Cash provided by financing activities was
primarily from short term borrowings in 1995, proceeds from the issuance of
preferred stock and short term borrowings in 1996 and 1997, and proceeds from
the issuance of common stock in the three months ended March 31, 1998. Cash
provided by financing activities in 1997 was somewhat offset by repayment of
short term borrowings.

At March 31, 1998, the Company's principal sources of liquidity included
cash and marketable securities of approximately $7.9 million and a bank credit
facility of $1.0 million, which bears interest at the bank's prime rate plus
0.25%. This working capital line of credit is limited to a borrowing base
determined by the balance of the Company's eligible receivables and inventory.
At March 31, 1998 there were no outstanding borrowings under the working
capital line. See Note 4 of Notes to the Financial Statements.

At December 31, 1997 the Company's working capital was approximately $16.6
million and had increased to $17.2 million at March 31, 1998. The Company has
no significant capital spending or purchase commitments other than normal
inventory purchase commitments and commitments under facilities leases.
However, the Company believes that it will require up to 50,000 additional
square feet of office, manufacturing and research and development space in the
next 24 months, which will materially increase the amount of its operating
lease commitments. There can be no assurance that suitable space will be
available on commercially reasonable terms or at all. See Note 9 of Notes to
Financial Statements.

The Company believes that the proceeds from this Offering, together with
available funds, anticipated cash flows from operations and its line of
credit, will satisfy the Company's projected working capital and capital
expenditure requirements for at least the next 12 months. Although operating
activities may provide cash in certain periods, to the extent the Company
experiences growth in the future, the Company anticipates that its operating
and investing activities may use cash. Consequently, any such growth could
require the Company to obtain additional financing. See "Risk Factors--
Potential Need for Additional Capital; Risks Relating to Potential
Acquisitions."

31
<PAGE>

BUSINESS

OVERVIEW

Carrier Access Corporation ("CAC" or the "Company") is a leading provider of
Multi-service Digital Access ("MDA") equipment to competitive
telecommunications carriers, including competitive local exchange carriers
("CLECs"), Internet service providers ("ISPs") and wireless carriers. The
Company's MDA equipment is used for the provisioning of enhanced voice and
high-speed data services by carriers to end users such as small and medium-
sized businesses and government and educational institutions. The Company's
MDA equipment provides a comprehensive "last mile" solution for the voice and
data connectivity needs of competitive carriers and end users throughout the
United States. Mass deployment of digital last mile connectivity from end user
to carrier networks is enabled through the Company's cost-effective, compact,
scaleable and easily installed customer premises and central office
telecommunications equipment. The Company's products allow competitive
carriers to leverage their existing digital infrastructure to cost-effectively
connect end users to their networks. The Company's MDA products utilize high
bandwidth digital deployment targeted at end users requiring between 6 and 672
telephone line equivalents of bandwidth. The Company's MDA products enable a
broad variety of enhanced carrier service offerings including high-speed
Internet access, virtual private networks, switched local and long distance
voice, Caller ID, distinctive ringing, direct inward dialing, automated call
routing and other widely-used telecommunications services. The Company
believes that over 100 competitive carriers have purchased the Company's
products through its distributors. Carriers which have purchased the Company's
products include Allegiance Telecom, Inc., Cablevision Systems Corp.,
Commonwealth Telephone Enterprises, Inc., e.spire Communications, Inc.,
Frontier Corporation, GST Telecommunications, Inc., ICG Communications, Inc.,
Intermedia Communications, Inc., Logix Communications, Inc., MGC
Communications, Inc., NEXTLINK Communications, Inc., Pacific Bell, a division
of SBC, Inc., PSINet, Inc., STAR Telecommunications, Inc., Teleport
Communications Group, Inc., US LEC Corp., US West, Inc., WinStar
Communications, Inc. and Worldcom Inc.

INDUSTRY BACKGROUND

Increasing demand for enhanced voice and high-speed data communications,
together with technological advances, has created a significant market for the
provisioning of communications services to businesses and government and
educational institutions. In addition, as a result of recent deregulation, a
variety of telecommunications service providers (commonly called "carriers")
have emerged in this market to offer local telecommunications services in
competition with the incumbent local exchange carriers (the "ILECs"). These
new competitive carriers are seeking to differentiate themselves and to
capitalize on the growing demand for enhanced voice and high-speed data
communications by deploying advanced technologies and continuing to build
alternative networks. In order to reduce the cost of providing these services,
competitive carriers are attempting to leverage their existing network
infrastructure, in which they have made a substantial investment. As a result,
competitive carriers are focused on deploying new equipment that enables them
to quickly and cost-effectively provide reliable enhanced voice and high-speed
data services.

Emergence of Competitive Carriers. Historically, the telecommunications
industry in the United States was highly regulated, with both local and long
distance service providers operating as monopolies. As a result of the passage
of the Telecommunications Act of 1996, competitive carriers have emerged to
compete with the ILECs in the provisioning of local exchange services. The
market for local exchange services consists of two types of carriers: ILECs
who own the existing local telephone wire, and carriers such as CLECs and
other competitive carriers who do not, but are capitalizing on recent
regulatory changes to lease existing lines and offer local services.
Currently, over 100 CLECs in the United States have

32
<PAGE>

entered the market for local telephone services and are building their own
networks. In addition, many CLECs, through the acquisition of ISPs, have
sought to expand their service offerings to include data. Competitive carriers
are offering customers competitively priced, highly reliable
telecommunications services by deploying local access networks which are more
flexible and cost-effective than traditional copper-based local networks
operated by the ILECs. To do so, competitive carriers have invested
substantial resources over the past several years to build an infrastructure
which enables them to link their customers to existing local telephone lines,
and as a result, continually seek ways to increase revenue and market share
while reducing initial and ongoing costs. One method utilized by carriers has
been the delivery of multiple, rather than individual, voice and data circuits
which can be aggregated on single high-speed digital connections. In addition,
many carriers have invested in switching and transmission technologies to
increase capacity and efficiency in the backbones of their telecommunications
networks. According to New Paradigm Resources Group, Inc., a CLEC research
organization, competitive carriers installed approximately 1.8 million access
lines in 1997, a number which is expected to double in 1998. Additionally,
CLECs have invested over $5 billion in equipment to build their local access
networks in 1997.

Increasing Demand for Enhanced Voice and High-Speed Data Connectivity. The
volume of data traffic transmitted over telecommunications networks has grown
dramatically in recent years. Growing demand for new services, such as high-
speed Internet access, as well as the increasing use of the Internet and
corporate intranets as vehicles to communicate and disseminate information,
has driven demand for digital telecommunications equipment which integrate
enhanced voice and high-speed data. Due to the mission critical nature of
their enhanced voice and high-speed data traffic, businesses and government
and educational institutions are driving demand for additional bandwidth and
higher transmission rates.

Competitive Carriers Targeting Underserved Business Markets. According to
the Small Business Administration, there were approximately 6.2 million
businesses in the United States in 1996, 90% of which had less than 20
employees and 99% of which had less than 500 employees. According to
International Data Corporation ("IDC"), the number of telephone lines a
business uses is related to the number of people it employs; however, there is
generally not a one-to-one correlation. For example, businesses with fewer
than 100 employees typically use fewer than 20 lines. Small and medium-sized
businesses typically access the Internet via dial-up modems, and generally do
not have access to or have not implemented high-speed digital connections.
According to IDC, dial-up access represented approximately 90% of all
corporate access connections for Internet usage in 1997. However, small and
medium-sized businesses are increasingly demanding the enhanced service
offerings that are available to large businesses, including high-speed
Internet access, virtual private networks and direct inward dialing services.
To cost-effectively meet this demand and capture an increasing share of the
market to provide such services, competitive carriers are bundling enhanced
voice and high-speed data services. Bundled services also enable competitive
carriers to offer a single point of contact and consolidated billing. However,
equipment capable of providing such bundled services has typically been
provided by large telecommunications equipment vendors that designed their
products for high-line density installations. As a result, legacy
telecommunications equipment providers have been unable to effectively serve
installations requiring lower line densities.

Adoption of Digital Access Equipment in the "Last Mile." The access portion
of the local exchange network, which is known as the "last mile" and connects
end users to the carrier network, was originally constructed with copper
twisted-pair wiring designed to support low bandwidth voice traffic. Due to
the increased level of enhanced voice and high-speed data traffic that now
must pass over these analog lines, carriers have begun to install higher speed
digital transmission technologies in the last mile. Digital transmission has
distinct advantages over

33
<PAGE>

analog transmission, including increased speed, lower cost, higher reliability
and quality, and better manageability. The transmission components of today's
high-speed digital telecommunications access networks in the United States are
T1 connections, which transmit at 1.544 Mbps (the equivalent of 24 voice
circuits), and T3 connections, which transmit at 45 Mbps (and can aggregate up
to 28 T1 connections or the equivalent of 672 voice circuits). By offering T1
and T3 connectivity, carriers enable increased usage of enhanced voice and
high-speed data which, in turn, can expand their revenue base. New digital
technologies have been introduced in recent years to increase the speed and
quality of digital transmission over copper wires in the last mile and provide
alternative means of accessing the wireline network backbone. While the costs
of deploying these solutions varies between carriers, technological
developments such as Digital Loop Carriers ("DLC") and HDSL have made digital
services more accessible in recent years. However, traditional equipment for
the provisioning of digital service is expensive, takes up a considerable
amount of space at the carrier's location or the customer's premises, and is
difficult and time consuming to install and maintain.

Need for New Digital Access Equipment. Competitive carriers, facing growing
pressure to increase service revenues by delivering enhanced voice and high-
speed data services quickly, reliably and cost-effectively, are investing
heavily in new digital access technologies and equipment. More specifically,
these carriers are seeking multi-service digital access equipment that
addresses the following needs:

Enhanced Services. Digital access equipment must allow competitive carriers
to provide enhanced voice and high-speed data services, such as high-speed
Internet access, virtual private networks, switched local and long distance
voice, Caller ID, distinctive ringing, direct inward dialing, automated call
routing and other widely used telecommunications services increasingly being
demanded by their end user customers.

Rapid Deployment. To allow competitive carriers to rapidly deploy new
service offerings to their customers, digital access equipment must be easy to
install and test and must integrate with customer premises and central office
equipment.

Lowest Cost. Compared to current offerings, digital access equipment must
be cost-effective throughout its lifetime, and reduce installation and ongoing
capital expenditures with regard to operations, service management and
maintenance.

High Quality. To enable competitive carriers to compete effectively,
digital access equipment must provide enhanced voice and high-speed data
services with quality and reliability which equals or exceeds comparable ILEC
offerings.

Scaleability. To serve the rapidly growing enhanced voice and high-speed
data requirements of competitive carriers and end users such as small and
medium-sized businesses, digital access equipment must be scaleable.

Safety and Regulatory Requirements. Because the equipment resides at both
the carrier's facility and the customer's premises, digital access equipment
must enable competitive carriers to satisfy all applicable regulatory
requirements and remain compliant with industry safety standards.

34
<PAGE>

THE CARRIER ACCESS SOLUTION

The Company is a leading provider of Multi-service Digital Access ("MDA")
equipment to competitive telecommunications carriers. The Company's MDA
equipment is used for the provisioning of enhanced voice and high-speed data
services by carriers to end users such as small and medium-sized businesses
and government and educational institutions. The Company's MDA products enable
a broad variety of enhanced carrier service offerings and provide a
comprehensive "last mile" solution for the voice and data connectivity needs
of its competitive carriers and end users throughout the United States. Mass
deployment of digital last mile connectivity from end user to carrier networks
is enabled through the Company's cost-effective, compact, scaleable and easily
installed customer premises and central office telecommunications equipment.
The Company's products allow competitive carriers to leverage their existing
T1 and T3 digital transmission infrastructure, including optical fiber SONET,
HDSL and digital radio, and to cost-effectively connect end users to their
networks. The Company's MDA products utilize high bandwidth digital deployment
targeted at end users requiring between 6 and 672 telephone line equivalents
of bandwidth. The Company believes that over 100 competitive carriers have
purchased the Company's products through its distributors. The Company
believes that its MDA products offer the following features and benefits:

Enable Multiple Service Offerings. The Company's MDA products allow
competitive carriers to provide enhanced voice and high-speed data services to
their end users. Competitive carriers are using the Company's solutions to
cost-effectively offer bundled voice and data services such as high-speed
Internet access, virtual private networks, switched local and long distance
voice, Caller ID, distinctive ringing, direct inward dialing, automated call
routing and other widely used telecommunications services. The Company's MDA
products are currently used in a wide variety of competitive carrier
applications, including local exchange services, long distance bypass, high
bandwidth Internet connections, cellular/PCS service connections, high
bandwidth digital radio and computer telephony interfaces.

Facilitate Rapid Deployment of New Services. The Company's MDA products are
designed to allow competitive carriers to increase revenues and market share
by offering their customers new services more quickly than traditional access
products. The Company's products are easy to install, and work with existing
central office equipment and customer premises phone systems and data
equipment, facilitating the rapid deployment of new services. Technicians can
install and service the Company's products without specialized equipment or
training, enabling installation in less than one hour, which the Company
believes is significantly less installation time than that required for
traditional equipment. Self-testing and telephone line tests are also
incorporated into the products to accelerate installation time and reduce or
eliminate the need for test equipment.

Reduce Cost of Ownership. Due to reduced labor, space and power requirements
and increased reliability, the Company believes that its MDA products offer a
lower cost of ownership to competitive carriers than traditional access
products. The compact size of the Company's MDA equipment allows it to be wall
or rack-mounted in minimal space, such as telephone wiring closets located at
customer premises or in carrier co-location spaces, reducing the need to lease
costly additional equipment space. The Company's MDA products are designed
with a high level of integration, which lowers manufacturing costs, decreases
power consumption, decreases the need for the customer to invest in new
circuits, and extends product life. Safety and protection requirements are
achieved without the use of fuses, substantially increasing reliability and
reducing long-term service costs. Such built-in product reliability features,
as well as self-test facilities, heat dissipation improvements and battery
backup reduce costly service calls. Additionally, the Company's MDA equipment
can be

35
<PAGE>

monitored and managed remotely, decreasing service costs. Remote configuration
also allows customer upgrades with reduced on-site technical support.

Provide Programmable Software-Based Functionality. The Company's products
incorporate an advanced software-based architecture which enables a broad
range of functions with a minimum of components. Valuable service functions
such as integrated line testing are provided without increasing product costs.
In addition, several of the Company's MDA products are based on digital signal
processing ("DSP") software, which allows the Company to add advanced features
with little or no hardware redesign, thereby facilitating the customer's
ability to rapidly deploy new services and meet regulatory requirements.

Scale Through Ease of Reconfiguration and Upgradeability. The Company's MDA
products are modular and flexible, providing a migration path for carriers
which allows them to leverage their existing infrastructure as end user
requirements and industry standards evolve. The Company's Access Bank products
are designed to enable carriers to reduce the cost of connecting an end user
with less than 12 lines to a T1 connection, then scale to meet the needs of
carriers as their customers add additional lines. All of the Company's line
cards within a product family are based on a common design, enabling Access
Banks to be easily upgraded to provide additional lines and interfaces, as
well as support enhanced voice and high-speed data features. Similarly, the
Company's Wide Bank family of products allows for cost-effective scaleability
from four to 28 T1 connections to a single aggregated T3 connection.

Satisfy Carrier and End User Safety and Regulatory Requirements. The
Company's products are designed to meet all of the safety requirements for
carrier and customer premises installations, thereby reducing carriers'
exposure to liability related to their customers' on-site equipment. The
Company's product lines are fully certified to comply with National Electrical
Code requirements (U.L. 1459) on all line interfaces. U.L. 1459 listing has
become an important requirement for carriers installing equipment within
customer buildings, and is designed to prevent the product and the telephone
wiring from creating building fires. Additionally, a member of the Company's
Wide Bank product family has been certified as compliant with Bellcore's
Network Equipment Building System ("NEBS") standards, which facilitates
deployment in carrier central office locations.

STRATEGY

The Company's objective is to become the leading supplier of innovative
telecommunications solutions utilized by competitive carriers to provide
enhanced voice and high-speed digital access services. Key elements of the
Company's strategy include the following:

Extend Technology Leadership. The Company believes that its MDA products
were among the first to be designed to meet rigorous carrier requirements, yet
still be well-suited for installation on customer premises. The software-
intensive and modular design of the Company's products allows the Company to
meet the changing needs of competitive carriers by adding new features and
functionality without costly research and development. The compact design of
the Company's MDA products also facilitates rapid product deployment, which
the Company regards as a key advantage over competitors' equipment. The
Company intends to maintain and extend its technological leadership by
improving its MDA products, while maintaining the lowest overall cost to its
customers.

Provide End-to-End Voice and Data Solutions. The Company believes that, due
to the increasing product and integration complexity of telecommunications
equipment, carriers and end users are increasingly seeking fully integrated
voice and data systems solutions from the carrier point of presence to the
customer premises. Accordingly, the Company has developed its MDA products in
close cooperation with its competitive carrier customers to ensure that its
solutions incorporate the specific technologies, features and functionalities
necessary to

36
<PAGE>

maintain a competitive advantage in the Company's selected markets. The
Company intends to develop and expand its end-to-end MDA solutions to meet the
evolving voice and data needs of its customers.

Increase Penetration of Existing Competitive Carrier Customer Base. The
Company is a leading provider of digital access equipment solutions to CLECs
in the United States. The Company believes that over 100 competitive carriers
have purchased its products through its distributors including many of the
largest CLECs. The Company believes that a significant opportunity exists to
increase sales to its existing CLEC customers as they grow. To do so, the
Company intends to maintain a high level of customer support, extend the MDA
product families sold to existing customers, and leverage the sales success
achieved in key geographic locations. The Company also intends to introduce
new products which will enable CLECs to more cost-effectively provide combined
voice and high-speed data services to end users. Additionally, the Company
intends to expand its sales and marketing efforts in order to increase sales
to other carriers such as IXCs, ISPs and wireless carriers. The Company
believes that, similar to CLECs, customers in these markets make purchase
decisions based on product reliability, flexibility, cost-effectiveness, and
ease of use.

Gain Entry into New Markets. The Company believes that, due to the
price/performance advantages of its MDA products, several of its current
solutions are applicable within any telecommunications network, regardless of
size. Consequently, the Company intends to expand the marketing of its
products to ILECs, primarily through strategic relationships and joint sales
strategies. Certain of the Company's products have already met the safety and
certification requirements necessary for installation in ILEC central offices.
In addition, although the international competitive carrier markets are still
in the early stages of development, the Company intends to work with overseas
distributors and strategic partners to provide access solutions to targeted
international carriers.

Leverage Third Party Distribution Channels. The Company intends to increase
the penetration of its products in new and existing markets by strengthening
and expanding its network of third party distributors. Third party
distributors and OEMs, as well as VARs and systems integrators who do not
currently purchase the Company's products, are an integral part of the
Company's distribution strategy because, in conjunction with the Company, they
are responsible for identifying potential end users, selling the Company's
products as part of a complete solution, and customizing and integrating the
Company's products at the end user premises. The Company intends to direct its
marketing activities toward enhancing relationships with its current
distributors, as well the recruitment of additional distributors in key
markets.

Maintain Rapid Product Fulfillment and Manufacturing Efficiency. The Company
has historically fulfilled a majority of its equipment orders within 30 days,
which it views as a key competitive advantage in an industry where competitive
carriers are under continuous pressure to rapidly deploy new services. The
Company intends to continue to design and manufacture its products to
facilitate rapid order fulfillment and network deployment. In addition, the
Company operates in a competitive, high-growth industry where minimizing costs
through manufacturing efficiencies is critical. To increase yield, quality and
reliability, while reducing cost, the Company currently performs in-house
final assembly and test processes, such as automated software-based printed
circuit board testing. Additionally, the Company has developed third-party
manufacturing relationships designed to decrease production costs, realize
rapid order fulfillment, and accelerate time-to-market. The Company intends to
continue improving the flexibility and efficiency of its operations.

PRODUCTS

The Company's MDA products currently include the Access Bank and the Wide
Bank product families. The Access Bank I offers digital connectivity for local
and long distance carrier

37
<PAGE>

voice services, and converts a single T1 digital network access into 24
telephone circuits for voice, facsimile and modem connections. The Access Bank
II expands on the voice functions of the Access Bank I and adds high-speed
data ports for computer connectivity and dual T1 line interfaces for
increasing data speeds and connecting digital phone systems. The Access
Exchange is a customer-located access switch that enables long distance
carriers to offer local services from their embedded base switching equipment.
The Wide Bank 28 is a highly-integrated M1-3 standard multiplexer for
connecting T1 equipment to high-bandwidth T3 digital circuits, providing up to
28 T1 connections for enhanced voice and high-speed data services. The
Company's products are used with optical fiber, HDSL on copper pairs, or
digital radio. The Company differentiates its products on their ability to
enable multiple service offerings, facilitate the rapid deployment of new
services, reduce cost of ownership, provide programmable software-based
functionality, scale cost-effectively at carrier and end user locations, and
satisfy the safety and regulatory requirements of carriers and end users. The
retail list prices of the Company's Access Bank family of products range from
$3,000 to $7,000, depending upon configuration, and the retail list prices of
the Company's Wide Bank family of products range from $3,500 to $10,000,
depending upon configuration.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
PRODUCT FEATURES/FUNCTIONALITY CUSTOMER APPLICATIONS
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ACCESS BANK I
. Converts a T1 digital line to . Economical local service delivery
Released 12 or 24 analog telephone lines by CLECs
June 1995 . Programmable signaling and 5 . Long distance service delivery
circuit types support popular using T1 access
voice services . Digital voice networking equipment
. Removable 12-channel voice connectivity such as voice over IP
cards and frame relay
. Integration of T1 network . ISP modem pool connections to T1
interface, signaling software, . Branch office/remote site
test functions, and ringing connectivity to T1
power . Rapid deployment of temporary
. Enhanced voice service quality telephone services
and high-speed modem . Computer telephony line interfaces
connections
. Local CLASS service delivery
such as Caller ID and
distinctive ringing
. Compact one-rack unit size for
wall or rack mounting
. Low power consumption with
compact eight-hour battery
backup option
. Solid state protection (no
fuses) for increased reliability
. Three-mile high-quality loop
range
- ---------------------------------------------------------------------------------------------

ACCESS BANK I TR08
All Access Bank I functions plus:
. Direct connection to local . Economical local service delivery
Released switch line-side T1 ports by CLECs
November 1996 . Supports Bellcore standard . Expansion of line capacity for
local switches TR-08 signaling
modes
. Complete 12 or 24 line digital
loop carrier remote terminal
- ---------------------------------------------------------------------------------------------

ACCESS BANK II
All Access Bank I functions plus:
Released . Bandwidth expansion to two T1s . Multi-line voice plus high-speed
November 1996 (3.0 Mbps) data services to businesses
. Second T1 for PBX connection, . Branch office voice and data
network protection or bandwidth connectivity
expansion . Protection of mission critical
. Supports fractional T1 data voice and data
services . Integration of fax, modem, and
. Built-in standards-based data high-speed data on digital PBX T1s
management and diagnostics
. Digital cross-connect system
functionality
. Built-in remote management
. Optional Ethernet SNMP LAN
management connection
- ---------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PRODUCT FEATURES/FUNCTIONALITY CUSTOMER APPLICATIONS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ACCESS BANK II HDSL
(SOLD BY ADC AS All Access Bank II features plus: . Provides multi-line voice and
EZT/DI/HDSL) . ONE T1 PORT REPLACED BY ADC 4-WIRE high-speed data services over
HDSL network interface existing copper infrastructure
. Remotely managed from ADC SONEPLEX
HDSL central office transmission
Released platform
May 1998 . Provides CLECs with T1 quality
performance monitoring and
maintenance functions comparable to
leased Type II T1 services
- ------------------------------------------------------------------------------------------------------

ACCESS EXCHANGE
All Access Bank II features plus: . Allows long distance carriers
Released . Automatic call routing to provide local service from
April 1998 . Programmable digit translation existing switches. Provides
. Combines T1 access with existing automatic call routing functions
phone lines and T1 connectivity for
. Connects branch offices to virtual existing phone systems
private voice and enterprise data . Integrates high-speed
networks fractional T1 data connectivity
- ------------------------------------------------------------------------------------------------------

ACCESS BANK LINE
CARDS AND . FXS and FXO Loop Start and Ground . Telephone, fax and modem
ACCESSORIES Start Signaling connections
. DPO and DPT Reverse Battery Signaling . Business phone system
Released . E&M and TO 4-Wire Tie Lines connections
May 1996- . Programmable signaling conversion . Business tie line connections
February 1997 . Optional battery back-up and charger . Analog leased line modem
connections
. Direct inward dialing services
. Private line automatic ringdown
connections
. Central office line connections
to T1s
. International dial-back
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------

WIDE BANK 28
. Converts M1-3 standards-based . Consolidates multiple T1s into
Released protected T3 circuit to four to 28 T1 T3 services to reduce monthly
November 1997 circuits access costs for ISPs, CLECs,
. Modular design provides for T1 wireless carriers and end users
circuit growth and redundancy . Provides redundant T3 service
. T3 electronic and circuit protection distribution from digital radio
. Built-in circuit and network testing connections
. Built-in T1 network interface units . T1 service expansion from fiber
(NIUs) reduce equipment, labor and multiplexers
space requirements . Connection of T3 LEC services
. Fuseless circuit protection increases to ISP remote access servers
reliability
. Ethernet SNMP management enables
centralized management
. One-rack unit size minimizes
collocation costs
- ------------------------------------------------------------------------------------------------------

WIDE BANK 28 NEBS
All features of the Wide Bank 28 plus: . Co-location of T3 service
Released . Compliance with Network Building connections in carrier central
May 1998 System (NEBS) criteria for offices
installation in central office
locations
. Hardened for strenuous environmental
conditions
- ------------------------------------------------------------------------------------------------------
</TABLE>

39
<PAGE>

THE ACCESS BANK FAMILY OF PRODUCTS

Access Bank I

The Company's Access Bank I provides an economical, compact, and reliable
solution for converting T1 digital access services from ILECs and CLECs to 12
or 24 individual analog telephone circuits at end user locations. The T1
Channel Service Unit ("CSU"), ringing generator, power converters, ringback
tone generator, and channel bank controller are all integrated into a Line
Interface Unit ("LIU"). The design of the Access Bank I incorporates an
integrated CSU, which allows customers to plug in a T1 line without having to
connect other peripheral devices or customized circuit cards to address
specific network requirements. Five different types of 12-channel telephone
line interface circuit cards provide popular voice service delivery options.
Interface circuit cards allow for the delivery of enhanced local services such
as Caller ID and distinctive ringing. The Access Bank I operates with a
variety of high-speed modems, and automatically adjusts matching
characteristics to different modems and line conditions in order to provide a
clean, high-quality transmission path. The Access Bank I is principally used
by competitive carriers for economical local service delivery, long distance
service delivery using T1 access, digital voice networking equipment
connectivity, ISP modem pool connections to T1, branch office connectivity to
T1, and rapid deployment of temporary telephone services. Systems integrators
use Access Bank I to convert T1 connections to a variety of analog service
connections for applications such as remote access router interfaces, frame
relay and IP voice telephone system connectivity, and computer telephony
interfaces.

Access Bank I TR-08

The Access Bank I TR-08 provides a Bellcore Standard TR-08 digital loop
carrier software protocol for T1 connections directly to the line side T1
ports of local switches. Local exchange carriers use the Access Bank I TR-08
for economical local service delivery and expansion by competitive carriers of
line capacity for local switches. The Access Bank I TR-08 provides low-cost,
compact, wiring closet deployment of carrier-class enhanced voice features
such as Caller ID and distinctive ringing to competitive carriers utilizing
Nortel, Lucent, Siemens and other local exchange switches. Access Bank I TR-08
enables inexpensive carrier provisioning of physically separate single shelf
groups for 12 or 24 managed telephone lines from a T1.

Access Bank II

The Access Bank II enables carriers to provide multi-line voice and data
over one or two T1 access lines. Carriers use the Access Bank II for multi-
line voice plus high-speed data services, branch office voice and data
connectivity, the protection of mission critical voice and data, and the
integration of fax, modem, and high-speed data on digital PBX T1s. The Access
Bank II includes two T1 network interfaces with fully integrated CSU and Data
Service Units ("DSU"), offering up to 3.0 Mbps of total throughput. Dual T1
interfaces can accommodate future bandwidth requirements and integration of
fax, modem and high-speed data on digital PBX T1s, and can provide protection
for end users' mission critical voice and data applications. The two built-in
data interfaces offer connectivity for high-speed Internet routers, frame
relay devices, video and other high-speed data applications. By combining
digital data with voice over one or two T1 lines, bandwidth can be utilized
more efficiently, saving on communications access costs. The Access Bank II
also includes sophisticated management capabilities such as an optional
Ethernet SNMP LAN management connection for configuration and monitoring.

Access Bank II HDSL

The Access Bank II HDSL (sold by ADC as EZT/DI/HDSL) is used by competitive
carriers to provide multi-line voice and high-speed data services over
carriers' existing copper

40
<PAGE>

infrastructure. Access Bank II HDSL represents the integration of ADC's HDSL
technology into the Access Bank II, creating an end-to-end digital deployment
solution for competitive carriers from wiring centers to customer locations.
This solution enables competitive carriers to decrease their monthly access
costs while providing T1 quality digital service delivery over low-cost
unbundled copper access loops.

Access Exchange

The Access Exchange, released in April 1998, performs the functions of the
Access Bank II and includes software for automatic call routing and number
translation on a call-by-call basis. This product allows long distance
carriers to combine local voice services with long distance and high-speed
data services on their existing switch infrastructure.

WIDE BANK FAMILY OF PRODUCTS

Wide Bank 28

The Wide Bank 28 connects a high bandwidth digital T3 access line to four to
28 T1 service connections. The Wide Bank 28 allows competitive carriers to
consolidate multiple T1s into T3 services to reduce monthly access costs for
ISPs, CLECs, wireless carriers and end users; provide redundant T3 service
distribution from digital radio connections; provide T1 service expansion from
fiber multiplexers; and connect T3 LEC services to ISP remote access servers.
Up to seven quad Digital Signal Cross-Connect Level 1 (T1) interface cards
support up to 28 T1 connections. Cards can therefore be quickly and easily
added to meet bandwidth requirements. An identical spare quad T1 provides
software-controlled redundancy. The Wide Bank 28 also incorporates T1 Network
Interface Unit ("NIU") functionality to eliminate additional equipment and
installation labor costs for carriers. Redundancy options on the Wide Bank 28
include programmable T1 and T3 software-based functionality and electronics
protection through the use of an additional quad T1 card or T3 controller card
respectively. The unit incorporates solid-state fuseless protection, hot-
swappable cards, multiple T1 and T3 line tests for fault isolation and built-
in bit error rate testing. The Wide Bank 28 is housed in a compact, single
rack-unit case. Twenty-one Wide Bank 28 multiplexers can be mounted in a
standard rack for high channel density, or wall-mounted for lower density
applications.

Wide Bank 28 NEBS

The Wide Bank 28 NEBS offers the features and performance of the standard
version of the Wide Bank 28 in compliance with NEBS criteria. Wide Bank 28
NEBS allows carriers to install the Wide Bank 28 in central office locations
and provides additional hardening for strenuous environmental conditions.

TECHNOLOGY AND SYSTEM ARCHITECTURE

The Company's Access Bank system architecture is designed to offer
advantages in cost, performance, reliability, size and power consumption as
compared to competitive products. The Company employs a unique proprietary
architecture based on its subscriber line interface circuit ("SLIC")
technology and power conversion. The Company's SLIC technology is based on a
dual current source technique which provides: (i) the ability to use
unconditioned power sources for the telephone line current, (ii) fuseless
overvoltage protection against accidental power crosses and lightening
strikes, (iii) high efficiency ringing generation, (iv) signaling using solid
state components and (v) the ability to automatically adapt to different
telephone line conditions. SLICs are a fundamental component of any telephone
service delivery system because they are the interfaces between the telephone
network and the physical copper lines, and are found in digital loop carrier
systems, central office switching systems and PBX systems.

41
<PAGE>

The Company has also developed its products around a software-intensive
architecture to allow for maximum design and upgrade flexibility. For its
Access Bank II product family, DSP-software based control structures allow the
products to perform a variety of advanced voice, data and management functions
with a minimal amount of electronics. These include, for example, software-
based automatic route selection, data testing capabilities and digital cross-
connect and network protection. DSP often allows the Company to expand the
features of its products through software upgrades rather than hardware
redesign. DSP has enabled the integration of high bandwidth data connections
with voice and the ability to perform digital loop carrier software protocols
and signaling conversions.

The following diagram depicts the key technology features of the Access Bank
II, which incorporates all of the features of the Access Bank product family.

[ACCESS BANK II TECHNOLOGY DIAGRAM]

[A diagram of the Access Bank II Technology, depicting the Technology
Advantages, DSP Control Features and SLIC Features incorporated into the
Access Bank II product.]

The Company's unique Wide Bank 28 architecture has incorporated the
functionality that traditionally would require separate devices into a single
compact architecture. For example, the Wide Bank 28 enables hitless T3 network
integration, integrated T1 NIUs and bit error rate testing capabilities. This
has been accomplished through the use of high-level integration of hardware
components, software-based functionality and innovations in high density
circuit packages.

42
<PAGE>

The following diagram depicts the key technology features of the Wide Bank
28.

[WIDE BANK 28 TECHNOLOGY DIAGRAM]

[A diagram of the Wide Bank 28 Technology, depicting the Technology
Advantages, T1 Quad Card Features and T3 Features incorporated into the Wide
Bank 28 product.]

CUSTOMERS

The Company primarily sells its products through third-party distributors to
competitive carriers such as CLECs, ISPs and wireless carriers who provide
enhanced voice and high-speed data services to end users such as small and
medium-sized businesses. Set forth below is a list of the Company's third-party
distributors, as well as a partial list of competitive carriers and end users
who the Company believes have each purchased the Company's products.The Company
believes that all of these competitive carrier customers and end users are
currently using the Company's products and are representative of the Company's
overall competitive carrier customers and end users.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTORS COMPETITIVE CARRIER CUSTOMERS AND END USERS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ADC Telecommunications, Inc. (OEM) Allegiance Telecom, Inc. Logix Communications, Inc.
Advantage Telcom AllTel Supply, Inc. MGC Communications, Inc.
AllTel Supply, Inc. BTI Telecommunications Services National Telecommunications
C&L Communications Cablevision Systems Corp. NEXTLINK Communications, Inc.
Graybar Electric Company, Inc. Commonwealth Telephone Pacific Bell, a division of SBC, Inc.
Phillips Communications & Enterprises, Inc. Prodigy, Inc. (Split Rock Services)
Equipment Co. e.spire Communications, Inc. PSINet, Inc.
Solunet, Inc. (formerly ACSI) STAR Telecommunications, Inc.
Sprint North Supply Extreme Technologies, Inc. Teleport Communications Group, Inc.
Telsource Corporation Frontier Corporation Tharaldson, Inc.
Walker & Associates Graybar Electric Company, Inc. US LEC Corp.
Williams Telecommunications GST Telecommunications, Inc. US West, Inc.
Systems, Inc. ICG Communications, Inc. WinStar Communications, Inc.
Intermedia Communications, Inc. Worldcom Inc.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>

The Company's customer base is highly concentrated and a small number of
distributors have historically accounted for a majority of the Company's net
revenue. For the year ended December 31, 1997, Walker, ADC and Phillips
accounted for approximately 36%, 20%, and 14% of the Company's net revenue,
respectively. In the three months ended March 31, 1998, Walker and Phillips
accounted for 48% and 22%, respectively, of net revenue. In addition to being
dependent on a small number of distributors for a majority of its net revenue,
the Company believes its products are distributed to a limited number of
competitive carrier customers who are primarily CLECs. The Company believes
that in 1997, 22 competitive carrier customers accounted for approximately 75%
of its net revenue and that for the first quarter of 1998, 25 competitive
carrier customers accounted for approximately 73% of net revenue. See "Risk
Factors--Dependence on Distribution Channels; Potential for Channel Conflict"
and Note 7 of Notes to Financial Statements.

The following customer case studies illustrate how certain of the Company's
competitive carrier customers have deployed its products:

CLEC. As a leading CLEC began rolling out switches for local voice services,
it needed to deploy telephone lines quickly to businesses and high density
residential customers. T1 access lines (called "Type II T1"), leased from the
ILECs, would allow this CLEC to cost-effectively connect its metropolitan
wiring centers to end users. This CLEC could use the TR-08 ports of its local
switches to provide enhanced voice services such as Caller ID, distinctive
ringing and calling party disconnect, and minimize its switching equipment
costs. However, traditional T1 digital loop carrier equipment that supported
TR-08 protocols and offered these enhanced service offerings were too
expensive and too large to install at small and medium-sized business
locations. This CLEC's solution was CAC's Access Bank I TR-08. The Access Bank
I TR-08 allowed this CLEC to economically offer its customers up to 24
enhanced voice lines over Type II T1 connections to end users. Access Bank I
TR-08 decreased installation time and per-line costs, mounted in end user
wiring closets with a minimum of space, provided a small battery backup
option, offered high speed modem connectivity to end user lines, and reliably
satisfied telephone wiring safety requirements at end user sites.

The following diagram depicts a CLEC deploying enhanced local voice services
over T1 connections with CAC's Access Bank I TR08.

[A diagram which depicts a CLEC deploying enhanced local voice services over
T1 connections with CAC's Access Bank I TR08.]

ISP. A leading ISP faced growing demand from its business customers for high
bandwidth TI Internet connections. By consolidating up to 28 T1 access
circuits into T3 connections to its point of presence, this ISP believed that
it could decrease its access costs by a factor of three or more, while
providing service growth for its customers. Traditional M1-3 T1 to T3
muliplexers that were necessary for deployment could not monitor T1 and T3
service delivery, required long installation times and required large amounts
of space in valuable co-located ILEC racks at end user sites. This ISP chose
CAC's Wide Bank 28 to consolidate T1 service connections into T3 circuits as
elements of its network. By deploying the Wide Bank 28, this ISP utilizes SNMP
network management to monitor and test T1 and T3 customer services remotely.
Its compact one rack unit size and plug-in installation capabilities provided
substantial savings, inexpensive installation space and labor, and enabled
this ISP to cost-effectively satisfy end user demand for T1 Internet service
connections, while meeting end user service availability expectations.

The following diagram depicts an ISP deploying high bandwidth T1 Internet
connections via T3 access connections with CAC's Wide Bank 28.

[A diagram which depicts an ISP deploying high bandwidth T1 Internet
connections via T3 access connections with CAC's Wide Bank 28.

44
<PAGE>

CLEC. An emerging CLEC desired to offer a wide variety of digital services,
including local telephone, long distance, Internet access and enterprise data
services. This CLEC planned to target business customers with 8 to 24 lines
that required reliable and cost-effective equipment at end user sites. In
addition, this CLEC required easy installation with a minimum of maintenance
or training. To decrease monthly customer access costs, both enhanced voice
and high speed data services were to be combined on T1 access lines from ILEC
co-location wiring centers at end user sites. This CLEC also required a
managed solution which would allow it to consolidate a large number of T1
access lines to single high speed T3 connections at its wiring centers in
order to reduce transmission costs and simplify its network maintenance. This
CLEC's solution was deploying CAC's Access Bank II at end user sites and the
Wide Bank 28 in ILEC wiring centers. CAC's Wide Bank 28 allowed this CLEC to
consolidate up to 28 remote business sites into each protected T3 connection,
providing up to 672 circuits. The deployment of Access Bank II equipment
permitted the combination of up to 24 enhanced voice lines with managed high
speed Internet or enterprise connection data services on T1 access lines. With
CAC's equipment deployed, this CLEC's customers are able to combine voice
services with new high speed data services at very cost-effective rates.

The following diagram depicts a CLEC deploying multi-line voice and high-
speed data services to small businesses with CAC's Access Bank II and Wide
Bank 28

[A diagram which depicts a CLEC deploying multi-line voice and high-speed
data services to small businesses with CAC's Access Bank II and Wide Bank 28.

SALES, MARKETING AND CUSTOMER SUPPORT

SALES. The Company employs a leveraged sales model currently consisting of
11 third-party distributors and an internal sales engineering support group,
which supports its distributors and provides pre- and post-sales support to
its competitive carrier customers and end users. Sales from third party
distributors accounted for substantially all of the Company's revenues for the
year ended December 31, 1997 and the three months ended March 31, 1998. See
"Risk Factors--Reliance on Distribution Channels; Potential for Channel
Conflict."

THIRD PARTY DISTRIBUTORS. The Company's distributors are responsible for
identifying potential competitive carrier customers, selling the Company's
products as part of a complete solution and, in some cases, customizing and
integrating the Company's products at end users' sites. The Company
establishes relationships with distributors through written agreements which
provide prices, discounts and other material terms and conditions under which
the distributor is eligible to purchase the Company's products for resale.
Such agreements generally do not grant exclusivity to the distributors, do not
prevent the distributors from carrying competing product lines, and do not
require the distributors to sell any particular dollar amount of the Company's
products, although the contracts may be terminated at the election of the
Company if specified sales targets and end user satisfaction goals are not
attained. The Company generally provides its distributors with limited stock
rotation and price protection rights. Other than limited stock rotation
rights, the Company does not provide its distributors with general product
return rights. The Company has limited knowledge of the financial condition of
certain of its distributors; however it is aware that some of its distributors
have limited financial and other resources which could impair their ability to
pay the Company. Although the financial instability of these distributors has
not limited any distributor's ability to pay the Company for its products to
date, there can be no assurance that any bad debt incurred by the Company will
not exceed the Company's reserves therefor or that the financial instability
of one or more of the Company's distributors will not materially adversely
affect the Company's business, financial condition or results of operations.
The Company has limited knowledge of the inventory levels of its products
carried by its OEMs and distributors, and the Company's OEMs and distributors
have in the past reduced, and may in the future reduce, planned

45
<PAGE>

purchases of the Company's products due to overstocking. Moreover,
distributors who have overstocked the Company's products have in the past
reduced, and may in the future reduce, their inventories of the Company's
products by selling such products at significantly reduced prices. Any such
reduction in planned purchases or sales at reduced prices by distributors or
OEMs in the future could reduce the demand for the Company's products, create
conflicts with other distributors or materially adversely affect the Company's
business, financial condition and results of operations. In addition, three
times a year, distributors are allowed to return a maximum of fifteen percent
of the Company's unsold products held in stock by such distributor, which were
purchased within the four month period prior to such return date, for an equal
dollar amount of new equipment. While to date these returns have not had a
material impact on the Company's results of operations, there can be no
assurance that the Company will not experience significant returns in the
future or that it will have made adequate allowances to offset such returns.
The Company is generally required to give its distributors a sixty (60) day
notice of price increases. Orders entered by distributors within the sixty
(60) day period are filled at the lower product price. In addition, the
Company grants certain of its distributors "most favored customer" terms,
pursuant to which the Company has agreed to not knowingly grant another
distributor the right to resell the Company's products on terms more favorable
than those granted to the existing distributor, without offering the more
favorable terms to the existing distributor. There can be no assurance that
these price protection and "most favored customer" clauses will not cause a
material decrease in the average selling prices and gross margins of the
Company's products, which could have a material adverse effect on the
Company's business, financial condition and results of operations. See "Risk
Factors--Dependence on Distribution Channels; Potential for Channel Conflict."

SALES ENGINEERING SUPPORT. The Company's sales engineering support group is
responsible for platform configuration, price quotations and telephone sales
activities. The Company's sales support and sales engineering strategy focuses
on assisting carriers and end users in rapidly integrating the Company's
products into their networks. The sales engineering support group identifies
carrier and end user leads and, based on initial presentations, provides
evaluation units for trial in carrier and end user networks. After successful
trial and approval, the carrier or end user is provided with product
installation and maintenance training. The sale of the Company's products
averages approximately four months in the case of competitive carriers, but
can take significantly longer in the case of ILECs and certain distributors
and end users. Initially, the Company's sales engineering support group is
involved in educating carriers and end users on the functionality and benefits
which may be derived from using the Company's products. Subsequently, members
of both the Company's sales engineering and research and development
organizations are involved in providing the carrier or end user with the
required training and technical support to integrate the Company's products
into a new application or service.

MARKETING. The Company's marketing organization develops strategies for
product lines and, along with the Company's sales force, develops key account
strategies and defines product and service functions and features. Marketing
is responsible for sales support, RFPs and RFQs, in-depth product
presentations, interfacing with operations, setting price levels to achieve
targeted margins, developing new services/business opportunities and writing
proposals in response to customer requests for information or quotations. In
order to create awareness, market demand and sales opportunities, the Company
engages in a number of marketing activities which include exhibiting products
and customer applications at industry trade shows, advertising in selected
publications aimed at targeted markets, public relations activities with trade
and business press, publication of technical articles and the distribution of
sales literature, technical specifications and documentation.

46
<PAGE>

CUSTOMER SERVICE AND SUPPORT. The Company believes that ongoing customer
support is critical to maintaining and enhancing relationships with carriers,
end users and distributors. The carrier and end user support group is composed
of five functions: (i) new product development, which provides for product
ideas and enhancements based on customer requirements through the pre- and
post-sales support effort, (ii) inbound technical support, which focuses on
pre- and post-sales calls made to the Company from its customers, (iii)
outbound application support and response to RFPs and RFQs, (iv) training,
including installation and application development training for customers,
sales engineers and employees and (v) reporting and analysis based on the
automated trouble ticket and returned material systems.

COMPETITION

The market for telecommunications equipment is characterized by intense
competition, with a large number of suppliers providing a variety of products
to diverse market segments within the telecommunications industry. Management
believes that the principal competitive factors in the Company's markets
include: performance and reliability; flexibility, scaleability and ease-of-
use; breadth of features and benefits; and, initial and lifetime cost. The
Company believes that it competes favorably with respect to each of these
factors.

The Company's existing and potential competitors include many large domestic
and international companies, including certain companies that have
substantially greater financial, manufacturing, technological, sales and
marketing, distribution and other resources. The Company's principal
competitors for its Access Bank product family include AFC, Cisco, DSC,
General Datacom, Lucent, NEC, Newbridge, Nortel, Pairgain, Paradyne, Premisys,
Pulsecom, Reltec, Telco and other small private companies. The Company's
principal competitors for its Wide Bank product family include Alcatel, NEC,
Nortel and Telco. The Company expects that many of its competitors who
currently offer products competitive with only one of the Company's product
lines will eventually offer products competitive with all of the Company's
product lines. In addition, several start up companies have recently begun to
manufacture products similar to those offered by the Company. Due to the
rapidly evolving markets in which the Company competes, additional competitors
with significant market presence and financial resources, including large
telecommunications equipment manufacturers and computer hardware and software
companies, may enter those markets, thereby further intensifying competition.
Additionally, one of the Company's distributors is currently competing with
the Company, and there can be no assurance that additional distributors will
not begin to develop or market products in competition with the Company.

47
<PAGE>

technologies obsolete or noncompetitive. To be competitive, the Company will
be required to continue to invest significant resources in research and
development and sales and marketing. There can be no assurance that the
Company will have sufficient resources to make such investments or that the
Company will be able to make the technological advances necessary to be
competitive. In addition, current and potential competitors have established
or may establish cooperative relationships among themselves or with third
parties to increase the ability of their products to address the needs of the
Company's prospective customers. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Increased competition is likely to result in price
reductions, reduced gross margins and loss of market share, any of which would
have a material adverse effect on the Company's business, financial condition
and results of operations. There can be no assurance that the Company will be
able to compete successfully against current or future competitors or that
competitive pressures will not have a material adverse effect on the Company's
business, financial condition and results of operations. See "Risk Factors--
Intense Competition."

MANUFACTURING

The Company's manufacturing operations consist of materials planning and
procurement, final assembly, product assurance testing, quality control, and
packaging and shipping. The Company procures components for PCBs for assembly.
The Company currently uses several independent manufacturers to provide
certain PCBs, chassis and subassemblies. The Company has developed a
manufacturing process that enables it to configure its products to be adapted
to different customer hardware and software applications at the final assembly
stage. This flexibility is designed to reduce both the Company's manufacturing
cycle time and the Company's need to maintain a large inventory of finished
goods. The Company believes that the efficiency of its manufacturing process
to date has largely been driven by the Company's product architecture and the
Company's commitment to manufacturing process design.

The Company spends significant engineering resources producing customized
software and hardware to assure consistently high product quality. The Company
tests its products both during and after the assembly process using
internally-developed product assurance testing procedures. These procedures
consist of automated board and automated system testing as well as
environmental testing. Through March 31, 1998, the Company had experienced a
return rate for defective products of less than 2%. Although the Company
generally uses standard parts and components for its products, many key
components are purchased from sole or single source vendors for which
alternative sources are not currently available. There can be no assurance
that the Company will not experience supply problems in the future from any of
its manufacturers. Any such difficulties could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Risk Factors--Dependence on Sole and Single Source Suppliers and Third Party
Manufacturers."

RESEARCH AND PRODUCT DEVELOPMENT

The Company focuses its development efforts on providing enhanced
functionality to its existing products, including total network solutions and
performance and the development of additional software-based features and
functionality. Extensive product development input is obtained from customers
and the Company's monitoring of end user needs and changes in the marketplace.
The Company's current product development focus has been on developing MDA
access products and completing new products such as the recently introduced
Access Exchange, and the Company's end-to-end voice and data solution which is
still under development.

48
<PAGE>

Management believes that the Company's success will depend, in part, on its
ability to develop and introduce in a timely fashion new products and
enhancements to its existing products. The Company has in the past made, and
intends to continue to make, significant investments in product and
technological development. The Company's engineering, research and development
expenditures totaled approximately $164,000, $874,000, $2.8 million and
$843,000 in 1995, 1996, 1997 and the first three months of 1998, respectively.
The Company performs its research and product development activities at its
principal offices in Boulder, Colorado. As of March 31, 1998, the Company had
36 employees in its design engineering department. The Company's inability to
develop on a timely basis new products or enhancements to existing products,
or the failure of such new products or enhancements to achieve market
acceptance, could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Risk Factors--Dependence
on New Product Introductions and Product Enhancements; Risk of Product
Defects, Returns and Liability" and "Risk Factors--Rapid Technological Change;
Evolving Market for Telecommunications Services."

INTELLECTUAL PROPERTY

The Company relies upon a combination of patent, copyright and trademark and
trade secret laws as well as confidentiality procedures and contractual
restrictions to establish and protect its proprietary rights. The Company has
also entered into confidentiality agreements with its employees and
consultants and enters into non-disclosure agreements with its suppliers and
distributors so as to limit access to and disclosure of its proprietary
information. There can be no assurance such measures will be adequate to deter
and prevent misappropriation of the Company's technologies or independent
third-party development of similar technologies. The laws of certain foreign
countries in which the Company's products are or may be developed,
manufactured or sold may not protect the Company's products or intellectual
property rights to the same extent as do the laws of the United States and
thus make the possibility of piracy of the Company's technology and products
more likely.

As of March 31, 1998, a total of two U.S. patents have been awarded to the
Company. The Company has a total of six U.S. patent applications pending. The
issued patents cover various aspects of: (i) voice and data circuits, (ii)
switching technologies and (iii) redundancy. The U.S. patents begin to expire
commencing in the year 2015. The Company also has two U.S. trademark
applications pending and three trademarks registered. The telecommunications
industry is characterized by the existence of a large number of patents and
frequent litigation based on allegations of patent infringement. From time to
time, third parties may assert patent, copyright, trademark and other
intellectual property rights to technologies that are important to the
Company. Although the Company not received communications from third parties
asserting that the Company's products infringe or may infringe proprietary
rights of third parties, the Company has no assurance any future claims, if
determined adversely to the Company, would not have a material adverse effect
on the Company's business, financial condition or results of operations. See
"Risk Factors--Dependence on Proprietary Rights."

EMPLOYEES

At March 31, 1998, the Company employed 106 full-time employees in seven
cities. Of these employees, 36 were involved in design engineering, 37 in
manufacturing engineering and operations, 19 in sales, marketing and technical
support and training and 14 in general administration and finance.
Additionally, the Company employs a limited number of engineering employees on
a part-time basis. No employees are covered by any collective bargaining
agreements. The Company believes that its relationships with its employees are
good. The loss of any of the key management or technical personnel could have
a material adverse effect on the Company. See "Risk Factors--Dependence on Key
Personnel" and "Risk Factors--Management of Growth."

49
<PAGE>

FACILITIES

The Company's principal administrative, sales and marketing, research and
development and support facilities consist of approximately 38,000 square feet
of office space in Boulder, Colorado. The Company occupies these premises
under a lease expiring December 31, 2005. As of March 31, 1998, the annual
base rent for this facility was approximately $400,000. The Company has
planned an expansion of approximately 22,000 square feet of office space at
this location scheduled for completion in late 1998 or early 1999.

In addition to its principal office space in Boulder, Colorado, the Company
leases approximately 9,550 square feet of additional office space in Boulder,
which is currently subleased. The Company also leases facilities and offices
in Butler, NJ, Dallas, TX and Greensboro, NC , for its field sales and support
organization. The Company believes that its current facilities and planned
expansions are adequate to meet its needs through the next 12 months. However,
the Company believes that it will require up to 50,000 additional square feet
of office, manufacturing and research and development space in the next 24
months. Although the Company believes that suitable additional space will be
available, there can be no assurance that suitable additional space will be
available on commercially reasonable terms or at all. See "Risk Factors--
Management of Growth" and "Management's Discussion and Analysis of Financial
Conditions and Results of Operations--Liquidity and Capital Resources."

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings.

50
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information regarding the executive
officers and directors of the Company as of May 29, 1998:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Roger L. Koenig...................... 44 President, Chief Executive Officer and
Chairman of the Board of Directors
Nancy G. Pierce...................... 40 Vice President-Finance and
Administration, Chief Financial
Officer, Treasurer and Secretary and
Director
Shrichand B. Dodani.................. 40 Vice President, Engineering
J. Randy Shipley..................... 43 Vice President, Sales
John W. Stahura...................... 43 Vice President, Operations
Douglas Carlisle .................... 41 Director
Joseph Graziano (1)(2)............... 54 Director
Ryal Poppa (1)(2).................... 64 Director
</TABLE>
- --------
(1) Member of Audit Committee
(2) Member of Compensation Committee

ROGER L. KOENIG. Mr. Koenig has served as President, Chief Executive Officer
and Chairman of the Board of Directors of the Company since its inception in
September 1992. Prior to co-founding the Company, Mr. Koenig served as the
President and Chief Executive Officer of Koenig Communications, an equipment
systems integration and consulting firm. Prior to founding Koenig
Communications, Mr. Koenig held a number of positions with IBM/ROLM Europe, a
telecommunications equipment manufacturer, including Engineering Section
Manager for Europe. Mr. Koenig received a B.S. in Electrical Engineering from
Michigan State University and an M.S. in Engineering Management from Stanford
University.

NANCY G. PIERCE. Ms. Pierce has served as Vice President-Finance and
Administration, Chief Financial Officer, Treasurer, Secretary and Director of
the Company since its inception in September 1992. Prior to co-founding the
Company, Ms. Pierce served as the Controller of Koenig Communications, an
equipment systems integration and consulting firm. Prior to joining Koenig
Communications, Ms. Pierce was a systems analyst at IBM Corporation and an
internal auditor at ROLM Corporation. Ms. Pierce received a B.S. in
Communication Disorders from Colorado State University and an M.B.A. from
California State University, Chico.

SHRICHAND B. DODANI. Mr. Dodani has served as Vice President, Engineering
since April 1998, after having served as Vice President, Manufacturing and
Engineering from August 1997 through April 1998. Mr. Dodani served as Vice
President, Engineering and Sales of Aztek Engineering from March 1996 through
August 1997. From August 1993 through March 1996, Mr. Dodani served as a Vice
President for Nortel Asia Pacific and as director for Nortel European
Transmission System, both of which are subsidiaries of Nortel. From August
1988 through August 1993, Mr. Dodani served as Segment Manager (Director of
Product Management) in Europe and the U.S. for Alcatel Network Systems. Mr.
Dodani received a B.S. in Physics and Math from Gujarat University, India and
an M.B.A. and an M.S. in Computer Science from the University of Texas.

51
<PAGE>

J. RANDY SHIPLEY. Mr. Shipley has served as Vice President, Sales of the
Company since April 1998. From April 1997 to April 1998, Mr. Shipley served as
Senior Vice President, National Distribution for e.spire, a CLEC. From
September 1986 to April 1997, Mr. Shipley served in several capacities, the
final position being Vice President, Data Network Systems Integration, for
Williams Telecommunications Systems, Inc., a diversified telecommunications
company.

JOHN W. STAHURA. Mr. Stahura has served as Vice President, Operations of the
Company since April 1998. From July 1996 to April 1998, Mr. Stahura served as
President of Vaner, Inc., an electronics power conversion company. From May
1990 to May 1996, Mr. Stahura served as Vice President, Operations for
Solidstate Controls, Inc., a power conversion company. From January 1984 to
May 1990, Mr. Stahura served as Director of Operations for Keltec Florida
Manufacturing, an electronics manufacturing company. Mr. Stahura received a
B.S. in Mathematics from the U.S. Naval Academy.

DOUGLAS CARLISLE. Mr. Carlisle has served as a Director of the Company since
September 1997. Mr. Carlisle has been a General Partner of Menlo Ventures
since September 1984. Mr. Carlisle has served as a director of numerous public
and private companies over the past 15 years. Mr. Carlisle received a B.S.E.E.
in Electrical Engineering from the University of California, Berkeley and a
J.D. and an M.B.A. from Stanford University.

JOSEPH GRAZIANO. Mr. Graziano has served as a Director of the Company since
July 1996. Mr. Graziano served as Executive Vice President, Chief Financial
Officer of Apple Computer, Inc. during the period from June 1989 through
October 1995. Mr. Graziano also served as a Director at Apple Computer from
June 1993 through October 1995. Mr. Graziano also serves as a Director of
IntelliCorp., Inc., an enterprise software company, Pixar Animation Studios
and CIDCO, a developer of advanced telephony products, and several private
companies in the software and telecommunications industries. Mr. Graziano
received a B.S.B.A. in Business Administration from Merrimack College. Mr.
Graziano is also a Certified Public Accountant.

RYAL POPPA. Mr. Poppa has served as a Director of the Company since May
1996. Mr. Poppa has been a private investor since June 1996. Mr. Poppa was the
Chairman of the Board of Directors, President and Chief Executive Officer of
Storage Technology Corporation, a data storage company, from January 1985 to
May 1996. Mr. Poppa also currently serves as a Director of Metrocall, a paging
company, and Redcape Policy Software, Inc., an enterprise software company.
Mr. Poppa received a B.A. in Business Administration from Claremont McKenna
College.

There are no family relationships between any of the executive officers and
directors, other than that between Mr. Koenig and Ms. Pierce. See "Certain
Transactions."

BOARD COMMITTEES

The Company currently has authorized seven directors. Each director holds
office until the next annual meeting of stockholders or until his or her
successor is duly elected and qualified. The officers serve at the discretion
of the Board.

The Audit Committee reviews and supervises the Company's financial controls,
including selecting the Company's auditors, reviewing the books and accounts
of the Company, meeting with the officers of the Company regarding the
Company's financial controls, acting upon recommendations of auditors and
taking such further action as the Audit Committee deems necessary to complete
an audit of the books and accounts of the Company, as well as other matters
which may come before it or as directed by the Board of Directors. The Audit
Committee currently consists of two directors, Mr. Graziano and Mr. Poppa.

52
<PAGE>

The Compensation Committee reviews and approves the compensation and
benefits for the Company's executive officers, administers the Company's stock
plans and performs such other duties as may from time to time be determined by
the Board of Directors. The Compensation Committee currently consists of two
directors, Mr. Graziano and Mr. Poppa.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee of the Company's Board of
Directors are Mr. Graziano and Mr. Poppa. No executive officer of the Company
serves on the board of directors or compensation committee of any entity which
has one or more executive officers serving as a member of the Company's Board
of Directors or Compensation Committee.

DIRECTOR COMPENSATION

The Company currently does not compensate any member of the Company's Board
of Directors. However, members of the Board of Directors are eligible to
receive discretionary option grants and stock issuances under the Company's
1998 Stock Incentive Plan (the "1998 Plan"). In addition, following the
completion of this Offering, non-employee directors will receive automatic
option grants upon becoming directors and on the date of each annual meeting
of stockholders pursuant to the 1998 Plan. The 1998 Plan also permits the plan
administrator to activate a director fee option grant program. Should this
program be activated in the future, each non-employee Board member will have
the opportunity to apply all or a portion of any annual retainer fee otherwise
payable in cash to the acquisition of a below-market option grant. See "--
Benefit Plans."

Mr. Graziano and Mr. Poppa were each granted an option to purchase 75,000
shares of Common Stock in connection with their respective appointments to the
Board of Directors on July 1, 1996 and May 21, 1996. Each option is
immediately exercisable and vests in four equal annual installments upon the
completion of each year of service measured from the date of grant. Each
option has an exercise price of $0.33 per share. These options were exercised
by Mr. Graziano and Mr. Poppa on September 15, 1997.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Company's Certificate of Incorporation eliminates, subject to certain
exceptions, directors' personal liability to the Company or its stockholders
for monetary damages for breaches of fiduciary duties. The Certificate of
Incorporation does not, however, eliminate or limit the personal liability of
a director for (i) any breach of the director's duty of loyalty to the Company
or its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payments
of dividends or unlawful stock repurchases or redemptions as provided in
Section 174 of the Delaware General Corporation Law or (iv) any transaction
from which the director derived an improper personal benefit.

The Company's Bylaws provide that the Company shall indemnify its directors
and executive officers to the fullest extent permitted under the Delaware
General Corporation Law and may indemnify its other officers, employees and
other agents as set forth in the Delaware General Corporation Law. In
addition, the Company has entered into indemnification agreements with its
directors and officers. The indemnification agreements contain provisions that
require the Company, among other things, to indemnify its directors and
executive officers against certain liabilities (other than liabilities arising
from intentional or knowing and culpable violations of law) that may arise by
reason of their status or service as directors or executive officers of the
Company or other entities to which they provide service at the request of the
Company and to advance expenses they may incur as a result of any proceeding
against them as to which they could be indemnified. The Company believes that
these Bylaw provisions and

53
<PAGE>

indemnification agreements are necessary to attract and retain qualified
directors and officers. The Company has obtained an insurance policy covering
directors and officers for claims that such directors and officers may
otherwise be required to pay or for which the Company is required to indemnify
them, subject to certain exclusions.

At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened
litigation or proceeding which may result in a claim for such indemnification.

EXECUTIVE COMPENSATION

The following table sets forth certain information with respect to the
compensation of the Company's Chief Executive Officer and the other four most
highly compensated executive officers of the Company (collectively, the "Named
Executive Officers") for the fiscal year ended December 31, 1997 (the "Last
Fiscal Year") and whose salary and bonus exceeded $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------- ------------
NUMBER OF
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(1) COMPENSATION($)
- --------------------------- ---- ---------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Roger L. Koenig
President, Chief
Executive Officer and
Chairman of the Board
of Directors........... 1997 143,269 -- -- --
Nancy G. Pierce
Vice President-Finance
and Administration,
Chief Financial
Officer, Treasurer and
Secretary(3)........... 1997 94,615 -- -- --
Shrichand B. Dodani(4)
Vice President
Engineering............ 1997 43,538 -- 187,500 --
Arthur L. Schultz(5)
Vice President, Sales.. 1997 118,269 76,375 37,500 --
Kevin C. Leibl(6)
Vice President,
Marketing.............. 1997 111,732 65,983 112,500 10,008
</TABLE>
- --------
(1) The options listed in the table were granted under the Company's 1995
Stock Option Plan. See "--Option Grants During Last Fiscal Year" for a
description of the terms of these options. The options outstanding under
the 1995 Stock Option Plan will be incorporated into the 1998 Stock
Incentive Plan but will continue to be governed by their existing terms.
See "--1998 Stock Incentive Plan."
(2) All Other Compensation $10,800 paid to Mr. Leibl for relocation expenses.
(3) Ms. Pierce will earn over $100,000 in fiscal year 1998.
(4) Mr. Dodani commenced employment with the Company in August 1997. His
annual salary was $125,000.
(5) Mr. Schultz resigned from the Company on April 10, 1998.
(6) Mr. Leibl resigned from the Company on December 1, 1997, effective May 15,
1998.

54
<PAGE>

OPTION GRANTS DURING LAST FISCAL YEAR

The following table sets forth information concerning the stock option
grants made to each of the Named Executive Officers in the Last Fiscal Year.
No stock appreciation rights were granted during the Last Fiscal Year.

OPTION GRANTS DURING LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM($)(5)
--------------------------------------------------------- ---------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE
OPTIONS TO EMPLOYEES IN PRICE PER DATE OF
NAME GRANTED(#)(1) FISCAL YEAR(%)(2) SHARE($)(3) EXPIRATION(4) 5% 10%
---- ------------- ----------------- ----------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Roger L. Koenig......... -- -- -- -- -- --
Nancy G. Pierce......... -- -- -- -- -- --
Shrichand B. Dodani..... 37,500 4.04 0.33 8/29/02 3,419 7,555
150,000 16.17 0.33 8/29/02 13,676 30,220
Arthur L. Schultz....... 37,500 4.04 0.83 10/1/02 8,599 19,002
Kevin C. Leibl.......... 112,500 12.13 0.33 1/15/02 10,257 22,655
</TABLE>
- --------
(1) All options were granted under the 1995 Stock Option Plan. Each option is
immediately exercisable for all the option shares, but any unvested shares
purchased upon exercise of the option are subject to repurchase by the
Company, at the option exercise price paid per share, should the
optionee's service with the Company cease prior to vesting of such shares.
With the exception of Mr. Dodani's 37,500-share option grant, which vested
completely upon the date of grant, all options granted to the Named
Executive Officers in the Last Fiscal Year vest as follows: Twenty-five
percent (25%) of the option shares will vest upon the optionee's
continuation in service through one year following the grant date and the
balance of the shares vest in twelve (12) successive equal quarterly
installments upon optionee's continued service at the completion of each
of the next twelve (12) quarters thereafter.
(2) Based on an aggregate of 927,675 options granted in the Last Fiscal Year.
(3) The exercise price per share of options granted represents fair market
value of the Common Stock on the dates the respective options were granted
as determined by the Board of Directors. No public market existed for the
Common Stock on the respective dates of grant. The exercise price may be
paid in cash, in shares of the Company's Common Stock valued at fair
market value on the exercise date or through a cashless exercise procedure
involving a same-day sale of the purchased shares. The Company may also
finance the option exercise by loaning the optionee sufficient funds to
pay the exercise price for the purchased shares, together with any federal
and state income tax liability incurred by the optionee in connection with
such exercise.
(4) The date of Mr. Dodani's 37,500-share option grant and his 150,000-share
option grant was August 30, 1997. The date of Mr. Schultz's 37,500-share
grant was October 2, 1997. The date of Mr. Leibl's 112,500-share option
grant was January 16, 1997.
(5) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 5% and
10% rates of stock price appreciation are mandated by the rules of the
Securities and Exchange Commission, and there can be no assurance provided
to any executive officer or any other holder of the Company's securities
that the actual stock price appreciation over the five-year option term
will be at the assumed 5% and 10% levels or at any other defined level.
Unless the market price appreciates over the option term, no value will be
realized from the option grant.

55
<PAGE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table sets forth information concerning option exercises and
option holdings for the Last Fiscal Year, with respect to each of the Named
Executive Officers. No stock options or stock appreciation rights were
exercised during the Last Fiscal Year by the Named Executive Officers and no
stock appreciation rights were outstanding at the end of the Last Fiscal Year.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT FISCAL YEAR END(#) FISCAL YEAR END($)(2)
---------------------------- ----------------------------
NAME EXERCISABLE(1) UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE
---- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Roger L. Koenig...... -- -- -- --
Nancy G. Pierce...... -- -- -- --
Shrichand B. Dodani.. 187,500 -- 262,500 --
Arthur L. Schultz.... 112,500 -- 138,750 --
Kevin C. Leibl....... 112,500 -- 157,500 --
</TABLE>
- --------
(1) The options are immediately exercisable for all the option shares, but any
shares purchased under the options will be subject to repurchase by the
Company at the original exercise price per share upon the optionee's
cessation of service prior to vesting in such shares. As of December 31,
1997, the Company's repurchase right had lapsed as to 37,500 shares for
Mr. Dodani, 28,125 shares for Mr. Schultz and no shares for Mr. Leibl.
(2) Based on the fair market value of the Common Stock at the end of the Last
Fiscal Year, as determined by the Board of Directors, $1.73 per share,
less the option exercise price payable for such shares.

BENEFIT PLANS

1998 STOCK INCENTIVE PLAN. The Company's 1998 Stock Incentive Plan (the
"1998 Plan") is intended to serve as the successor equity incentive program to
the Company's existing 1995 Stock Option Plan (the "Predecessor Plan"). The
1998 Plan was adopted by the Board in May 1998 and is expected to be approved
by the stockholders in June 1998. The Discretionary Option Grant and Stock
Issuance Programs under the 1998 Plan became effective immediately upon the
Board's adoption of the Plan (the "Plan Effective Date"). The Automatic Option
Grant Program will become effective on the date the Underwriting Agreement for
the Offering is executed (the "Underwriting Date").

A total of 3,750,000 shares of Common Stock has been authorized for issuance
under the 1998 Plan. Such share reserve consists of the number of shares
available for issuance under the Predecessor Plan on the Plan Effective Date,
including the shares subject to outstanding options. To the extent any shares
of Common Stock issued under the Predecessor Plan are repurchased by the
Company after the Underwriting Date, at the exercise price paid per share, in
connection with the holder's termination of service, those repurchased shares
will be added to the reserve of Common Stock available for issuance under the
1998 Plan. In addition, the number of shares of Common Stock reserved for
issuance under the 1998 Plan will automatically be increased on the first
trading day of each calendar year, beginning in calendar year 1999, by an
amount equal to two and one-half percent (2.5%) of the total number of shares
of Common Stock outstanding on the last trading day of the preceding calendar
year, but no such annual increase shall exceed 562,500 shares.

On the Underwriting Date, outstanding options and unvested shares issued
under the Predecessor Plan will be incorporated into the 1998 Plan, and no
further option grants will be made under the Predecessor Plan. The
incorporated options will continue to be governed by their existing terms,
unless the Compensation Committee, as Plan Administrator, elects to extend one
or more features of the 1998 Plan to those options. Except as otherwise noted
below, the incorporated options have substantially the same terms as will be
in effect for grants made under the Discretionary Option Grant Program of the
1998 Plan.

56
<PAGE>

The 1998 Plan is divided into five separate components: (i) the
Discretionary Option Grant Program under which eligible individuals in the
Company's employ or service (including officers, non-employee Board members
and consultants) may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock at an exercise price determined by
the Plan Administrator on the grant date, (ii) the Stock Issuance Program
under which such individuals may, in the Plan Administrator's discretion, be
issued shares of Common Stock directly through the purchase of such shares at
a price not less than their fair market value at the time of issuance or as a
bonus tied to the performance of services, (iii) the Salary Investment Option
Grant Program which may, in the Plan Administrator's sole discretion, be
activated for one or more calendar years and, if so activated, will allow
executive officers and other highly compensated employees the opportunity to
apply a portion of their base salary to the acquisition of special below-
market stock option grants, (iv) the Automatic Option Grant Program under
which option grants will automatically be made at periodic intervals to
eligible non-employee Board members to purchase shares of Common Stock at an
exercise price equal to their fair market value on the grant date and (v) the
Director Fee Option Grant Program which may, in the Plan Administrator's sole
discretion, be activated for one or more calendar years and, if so activated,
will allow non-employee Board members the opportunity to apply a portion of
the annual retainer fee otherwise payable to them in cash each year to the
acquisition of special below-market option grants. In no event may any one
participant in the 1998 Plan receive option grants, separately exercisable
stock appreciation rights or direct stock issuances for more than 500,000
shares of Common Stock in the aggregate per calendar year.

The Discretionary Option Grant Program and the Stock Issuance Program will
be administered by the Compensation Committee. The Compensation Committee as
Plan Administrator will have the discretion to determine which eligible
individuals are to receive option grants or stock issuances under those
programs, the time or times when such option grants or stock issuances are to
be made, the number of shares subject to each such grant or issuance, the
status of any granted option as either an incentive stock option or a non-
statutory stock option under the federal tax laws, the vesting schedule to be
in effect for the option grant or stock issuance and the maximum term for
which any granted option is to remain outstanding. The Compensation Committee
will also have the authority to select the executive officers and other highly
compensated employees who may participate in the Salary Investment Option
Grant Program in the event that program is activated for one or more calendar
years, but neither the Compensation Committee nor the Board will exercise any
administrative discretion with respect to option grants made under the Salary
Investment Option Grant Program or under the Automatic Option Grant or
Director Fee Option Grant Program for the non-employee Board members. All
grants under those three latter programs will be made in strict compliance
with the express provisions of each such program.

In the event that the Company is acquired by merger or sale of all or
substantially all of its assets or securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's outstanding
securities, each outstanding option under the Discretionary Option Grant
Program which is not to be assumed by the successor corporation or otherwise
continued in effect will automatically accelerate in full, and all unvested
shares under the Discretionary Option Grant and Stock Issuance Programs will
immediately vest, except to the extent the Company's repurchase rights with
respect to those shares are assigned to the successor corporation or otherwise
continued in effect. The Plan Administrator will have complete discretion to
grant options under the Discretionary Option Grant Program which will become
exercisable on an accelerated basis for all of the option shares upon (i) an
acquisition or other change in control of the Company, whether or not those
options are assumed or continued in effect, or (ii) the termination of the
optionee's service within a designated period (not to exceed 18 months)
following an acquisition or other change in control in which those

57
<PAGE>

options are assumed or continued in effect. The vesting of outstanding shares
under the Stock Issuance Program may be accelerated upon similar terms and
conditions. The Plan Administrator is also authorized under the Discretionary
Option Grant and Stock Issuance Programs to grant options and to structure
repurchase rights so that the shares subject to those options or repurchase
rights will immediately vest in connection with a change in the majority of
the Board by reason of one or more contested elections for Board membership,
with such vesting to occur either at the time of such change in control or
upon the subsequent termination of the individual's service within a
designated period following such change in control. The Board has the
discretion to cause the options incorporated from the Predecessor Plan to vest
on an accelerated basis upon an acquisition of the Company by merger or asset
sale. The Plan Administrator will have discretion to extend one or more of the
other acceleration provisions of the 1998 Plan to those options.

In the event the Plan Administrator elects to activate the Salary Investment
Option Grant Program for one or more calendar years, each executive officer
and other highly compensated employee of the Company selected for
participation may elect, prior to the start of the calendar year, to reduce
his or her base salary for that calendar year by a specified dollar amount not
less than $10,000 nor more than $50,000. If such election is approved by the
Plan Administrator, the individual will automatically be granted, on the first
trading day in January of the calendar year for which that salary reduction is
to be in effect, a non-statutory option to purchase that number of shares of
Common Stock determined by dividing the salary reduction amount by two-thirds
of the fair market value per share of Common Stock on the grant date. The
option will be exercisable at a price per share equal to one-third of the fair
market value of the option shares on the grant date. As a result, the total
spread on the option shares at the time of grant (the fair market value of the
option shares on the grant date less the aggregate exercise price payable for
those shares) will be equal to the amount of salary invested in that option.
The option will become exercisable for the option shares in a series of 12
equal monthly installments over the calendar year for which the salary
reduction is to be in effect and will be subject to full and immediate vesting
upon certain changes in the ownership or control of the Company.

Under the Automatic Option Grant Program, each individual who first becomes
a non-employee Board member at any time after the Underwriting Date will
automatically receive an option grant for 15,000 shares of Common Stock on the
date such individual joins the Board, provided such individual has not been in
the prior employ of the Company. In addition, on the date of each annual
meeting of stockholders held after the Underwriting Date, each non-employee
Board member who is to continue to serve as a non-employee Board member will
automatically be granted an option to purchase 3,500 shares of Common Stock,
provided such individual has served on the Board for at least six months.

Each automatic grant for the non-employee Board members will have a term of
ten years, subject to earlier termination following the optionee's cessation
of Board service. Each automatic option will be immediately exercisable for
all of the option shares; however, any unvested shares purchased under the
option will be subject to repurchase by the Company, at the exercise price
paid per share, should the optionee's Board service cease prior to vesting in
those shares. The shares subject to each initial 15,000-share automatic option
grant will vest in series of four successive equal annual installments upon
the individual's completion of each year of Board service over the four-year
period measured from the option grant date. The shares subject to each annual
3,500-share automatic grant will vest upon the individual's completion of one
year of Board service measured from the option grant date. However, the shares
subject to each automatic grant will immediately vest in full upon certain
changes in control or ownership of the Company or upon the optionee's death or
disability while serving as a Board member.

58
<PAGE>

Should the Director Fee Option Grant Program be activated in the future,
each non-employee Board member will have the opportunity to apply all or a
portion of any annual retainer fee otherwise payable in cash to the
acquisition of a below-market option grant. The option grant will
automatically be made on the first trading day in January in the year for
which the retainer fee would otherwise be payable in cash. The option will
have an exercise price per share equal to one-third of the fair market value
of the option shares on the grant date, and the number of shares subject to
the option will be determined by dividing the amount of the retainer fee
applied to the program by two-thirds of the fair market value per share of
Common Stock on the grant date. As a result, the total spread on the option
shares at the time of grant (the fair market value of the option shares on the
grant date less the aggregate exercise price payable for those shares) will be
equal to the portion of the retainer fee invested in that option. The option
will become exercisable for the option shares in a series of 12 equal monthly
installments over the calendar year for which the election is to be in effect.
However, the option will become immediately exercisable for all the option
shares upon (i) certain changes in the ownership or control of the Company or
(ii) the death or disability of the optionee while serving as a Board member.

The 1998 Plan and the Predecessor Plan also include non-competition
provisions which give the Plan Administrator discretion to cancel options,
reacquire options and recover profits on the sale of shares from service
providers and former service providers who compete with the Company while
still providing services or within one year after termination of services.

The shares subject to each option under the Salary Investment Option Grant,
Automatic Option Grant and Director Fee Option Grant Programs will immediately
vest upon (i) an acquisition of the Company by merger or asset sale, (ii) the
successful completion of a tender offer for more than 50% of the Company's
outstanding voting stock or (iii) a change in the majority of the Board
effected through one or more contested elections for Board membership.

The Board may amend or modify the 1998 Plan at any time, subject to any
required stockholder approval. The 1998 Plan will terminate on the earlier of
(i) May 2008, (ii) the date on which all shares available for issuance under
the 1998 Plan have been issued as fully-vested shares and (iii) the
termination of all outstanding options in connection with certain changes in
control or ownership of the Company.

1998 EMPLOYEE STOCK PURCHASE PLAN The Company's 1998 Employee Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board in May 1998 and
is expected to be approved by the stockholders in June 1998 and will become
effective when activated by the Board. The Purchase Plan is designed to allow
eligible employees of the Company to purchase shares of Common Stock, at semi-
annual intervals, through their periodic payroll deductions under the Purchase
Plan. A reserve of 262,500 shares of Common Stock has been established for
this purpose. This reserve will be increased on the first trading day in each
calendar year, beginning in calendar year 1999, by an amount equal to one-half
of one percent (0.5%) of the total number of shares outstanding on the last
trading day of the preceding calendar year, but no such annual increase shall
exceed 112,500 shares.

The Purchase Plan will be implemented in a series of successive offering
periods, each with a maximum duration of 24 months. However, the initial
offering period will begin on the Underwriting Date and will end on the last
business day in July 2000. The next offering period will commence on the first
business day in August 2000, and subsequent offering periods will commence as
designated by the Plan Administrator.

Individuals who are eligible employees (scheduled to work more than 20 hours
per week for more than 5 calendar months per year) on the start date of any
offering period may enter

59
<PAGE>

the Purchase Plan on that start date or on any subsequent semi-annual entry
date (the first business day of February or August each year). Individuals who
become eligible employees after the start date of the offering period may join
the Purchase Plan on any subsequent semi-annual entry date within that
offering period.

Payroll deductions may not exceed 10% of base salary, and the accumulated
payroll deductions of each participant will be applied to the purchase of
shares on his or her behalf on each semi-annual purchase date (the last
business day in January and July each year) at a purchase price per share
equal to 85% of the LOWER of (i) the fair market value of the Common Stock on
the participant's entry date into the offering period or (ii) the fair market
value on the semi-annual purchase date.

Should the fair market value per share of Common Stock on any purchase date
be less than the fair market value per share on the start date of the two-year
offering period, then that offering period will automatically terminate, and a
new two-year offering period will begin on the next business day, with all
participants in the terminated offering to be automatically transferred to the
new offering period.

In the event the Company is acquired by merger or asset sale, all
outstanding purchase rights will automatically be exercised immediately prior
to the effective date of such acquisition. The purchase price will be equal to
85% of the LOWER of (i) the fair market value per share of Common Stock on the
participant's entry date into the offering period in which such acquisition
occurs or (ii) the fair market value per share of Common Stock immediately
prior to such acquisition.

The Purchase Plan will terminate on the earlier of (i) the last business day
of July 2008, (ii) the date on which all shares available for issuance under
the Purchase Plan shall have been sold pursuant to purchase rights exercised
thereunder or (iii) the date on which all purchase rights are exercised in
connection with an acquisition of the Company by merger or asset sale.

The Board may at any time alter, suspend or discontinue the Purchase Plan.
However, certain amendments to the Purchase Plan may require stockholder
approval.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AGREEMENTS AND CHANGE OF
CONTROL ARRANGEMENTS

The Company does not currently have any employment contracts in with any of
its executive officers.

In connection with an acquisition of the Company by merger or asset sale,
each outstanding option held by an executive officer originally granted under
the Predecessor Plan may, in the sole discretion of the Board of Directors or
a Committee, be terminated as of a certain date or become immediately vested
in full. Each outstanding option held by an executive officer under the 1998
Plan will automatically accelerate in full and all unvested shares of Common
Stock issued to such individuals pursuant to the exercise of options granted
or direct stock issuances made under such plans will immediately vest in full,
except to the extent such options are to be assumed by, and the Company's
repurchase rights with respect to those shares are to be assigned to, the
successor corporation. In the event an optionee engages in competitive
activities while providing services to the Company or within one year after
terminating his or her employment or consulting arrangement with the Company,
the Board may in its sole discretion terminate any option granted to such
optionee, and may also repurchase any shares which have been acquired by such
optionee pursuant to an option exercise at a price equal to the exercise
price. In addition, the Compensation Committee as Plan Administrator of the
1998

60
<PAGE>

Plan will have the authority to provide for the accelerated vesting of the
shares of Common Stock subject to outstanding options held by the Chief
Executive Officer or any other executive officer or the shares of Common Stock
purchased pursuant to the exercise of options or subject to direct issuances
held by such individual, in connection with the termination of the officer's
employment following: (i) a merger or asset sale in which those options are
assumed or the Company's repurchase rights with respect to unvested shares are
assigned or (ii) certain hostile changes in control of the Company. See "--
Benefit Plans--1998 Stock Incentive Plan."

MANAGEMENT INCENTIVE COMPENSATION PLAN. In May 1998, the Board of Directors
approved a Management Incentive Compensation Plan, under which selected key
employees, including executive officers, are eligible to receive bonus
payments. At the beginning of each year, financial, strategic and individual
performance objectives, which vary from year to year and may be based on
measures of profitability, cash flow and other measures for the Company, are
established and approved by Mr. Koenig and the Compensation Committee of the
Board of Directors for each participant in the program. A minimum performance
level must be achieved by the Company before any bonus may be earned by a
participant. Thereafter, an established progression rewards higher levels of
achievement with greater bonus payments. Aggregate bonuses payable under the
Management Incentive Compensation Plan in any one year will be capped at a
pre-determined percentage of each participant's salary.

61
<PAGE>

CERTAIN TRANSACTIONS

Since June 1996, the Company has raised capital primarily through the sale
of its Convertible Preferred Stock. In June 1996, the Company sold 1,210,861
shares of Series A Preferred Stock at a price of $2.86 per share. In September
1997, the Company sold 2,517,894 shares of Series B Preferred Stock at a price
of $4.99 per share. The following table summarizes the shares of Preferred
Stock purchased by executive officers, directors and 5% percent stockholders
of the Company and persons associated with them since June 1995.

<TABLE>
<CAPTION>
SERIES A SERIES B
PREFERRED PREFERRED TOTAL SHARES ON AN
INVESTOR PREFERRED STOCK PREFERRED STOCK AS-CONVERTED BASIS(1)
-------- --------------- --------------- ---------------------
<S> <C> <C> <C>
Entities affiliated with
Needham & Company,
Inc.(2)................. 559,440 320,642 1,320,123
Entities affiliated with
Menlo Ventures(3)....... -- 1,047,094 1,570,641
Entities affiliated with
New Enterprise
Associates(4)........... -- 1,013,026 1,519,539
Roger L. Koenig(5)....... 67,839 -- 101,758
Nancy G. Pierce(6)....... 67,839 -- 101,758
Shrichand B. Dodani(7)... 17,483 -- 26,224
Joseph Graziano(8)....... 61,189 16,171 116,040
Ryal Poppa............... 104,895 27,721 198,924
</TABLE>
- --------
(1) Reflects a three-for-two conversion to Common Stock ratio for each share
of Series A and Series B Preferred Stock.
(2) Represents shares originally purchased by Needham Capital Partners L.P.,
Needham Omni Fund, L.P., Needham Emerging Growth Partners, L.P. and
Needham Capital SBIC, L.P (collectively, the "Needham Partnerships").
Subsequent to the June 1996 closing of the Company's Series A Preferred
Stock financing, the Needham Omni Fund, L.P. (the holder of 34,965 shares
of Series A Preferred Stock) was renamed the Galleon Omni Fund, Ltd. and
its affiliation with the other Needham Partnerships was severed.
(3) Represents shares purchased by Menlo Ventures VII, L.P. and by Menlo
Entrepreneurs Fund VII, L.P. (the "Menlo Partnerships"). Mr. Carlisle, a
Director of the Company, is a managing member of MV Management VII, LLC,
the General Partner of each of the Menlo Partnerships.
(4) Represents shares held by New Enterprise Associates VII, L.P., NEA
Presidents Fund, L.P. and NEA Ventures 1997, L.P.
(5) Represents shares acquired by Mr. Koenig in exchange for cancellation of
indebtedness owed to Mr. Koenig by the Company. See "--Other Relationships
and Transactions." Mr. Koenig subsequently sold 5,000 shares of Series A
Preferred Stock to an unaffiliated third party.
(6) Represents shares acquired by Ms. Pierce in exchange for cancellation of
indebtedness owed to Ms. Pierce by the Company. See "--Other Relationships
and Transactions."
(7) Represents shares purchased by Mr. Dodani from a third party stockholder
in February 1997 at a price of $2.86 per share.
(8) Series A Preferred Stock was purchased by the Joseph A. and Mari Ann J.
Graziano Trust dated March 13, 1984, of which Mr. Graziano, a Director of
the Company, is Trustee.

Holders of shares of Convertible Preferred Stock are entitled to certain
registration rights in respect of the Common Stock issued or issuable upon
conversion thereof. See "Description of Capital Stock--Registration Rights."

OTHER RELATIONSHIPS AND TRANSACTIONS

Roger Koenig, the Company's President and Chief Executive Officer, and Nancy
Pierce, the Company's Vice President--Finance and Administration, Chief
Financial Officer, Treasurer and Secretary, are married to each other.

In the past, the Company has granted options to certain of its executive
officers and directors and the Company intends to continue to grant options to
its executive officers and directors in the future. See "Management--Director
Compensation," "Management--Option Grants in Last Fiscal Year" and "Principal
Stockholders."

62
<PAGE>

Beginning in 1993, and from time to time thereafter, Mr. Koenig and Ms.
Pierce jointly extended loans to the Company in order to provide working
capital to the Company. Such loans were evidenced by promissory notes bearing
interest at 9.5% per annum. As of June 19, 1996, the principal amount and
accrued interest on these loans was $388,039. In connection with the Company's
Series A Preferred Stock financing in June 1996, these loans were converted
into an aggregate of 135,678 shares of Series A Preferred Stock at a price of
$2.86 per share. Of such shares, 67,839 were issued to Mr. Koenig and 67,839
shares were issued to Ms. Pierce. See Notes 3 and 5 of Notes to Financial
Statements.

In connection with the Company's September 1997 Series B Preferred Stock
financing, the Company and the purchasers of its Series A and Series B
Preferred Stock, including Mr. Koenig, Ms. Pierce, Mr. Dodani, Mr. Graziano
and Mr. Poppa, entered into an Amended and Restated Shareholder Agreement (the
"Shareholder Agreement"). Pursuant to the Shareholder Agreement, the parties
agreed to vote their shares of Preferred Stock (and, in the case of Mr. Koenig
and Ms. Pierce, shares of Common Stock) for the election of the following
persons as directors of the Company: (i) two representatives designated by Mr.
Koenig and Ms. Pierce; (ii) one representative designated by the holders of a
majority of the outstanding Series A Preferred Stock; (iii) one representative
designated by the holders of a majority of the outstanding Series B Preferred
Stock; and (iv) two "outside directors" nominated by the Board of Directors.
The Shareholder Agreement will terminate upon the closing of this Offering.

The Company has entered into an Indemnification Agreement with each of its
executive officers and directors containing provisions that may require the
Company, among other things, to indemnify its officers and directors against
certain liabilities that may arise by reason of their status or service as
officers or directors (other than liabilities arising from willful misconduct
of a culpable nature) and to advance their expenses incurred as a result of
any proceeding against them as to which they could be indemnified. See
"Management--Limitation on Liability and Indemnification Matters."

The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been otherwise
obtained from unaffiliated third parties. All future transactions, including
loans, if any, between the Company and its officers, directors and principal
stockholders and their affiliates will be approved by a majority of the Board
of Directors, including a majority of the independent and disinterested
outside directors of the Board of Directors and will be on terms no less
favorable to the Company than could be obtained from unaffiliated third
parties.

63
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of May 29, 1998 by (i) all persons who are
beneficial owners of 5% or more of the Common Stock, (ii) each of the
Company's Directors, (iii) each of the Named Executive Officers and (iv) all
current Directors and executive officers of the Company as a group. Unless
otherwise indicated, each of the stockholders has sole voting and investment
power with respect to the shares beneficially owned, subject to community
property laws, where applicable.

<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES
BENEFICIALLY
OWNED(2)
NUMBER OF -----------------
SHARES AFTER
BENEFICIALLY PRIOR TO THE
NAME AND ADDRESS OF BENEFICIAL OWNER (1) OWNED (2) OFFERING OFFERING
- ---------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
Entities affiliated with Menlo Ventures (3)..... 1,570,641 7.8%
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, CA 94025
Entities affiliated with New Enterprise
Associates (4)................................. 1,519,539 7.6
2490 Sand Hill Road
Menlo Park, CA 94025
Entities affiliated with Needham & Company, Inc.
(5)............................................ 1,267,675 6.3
445 Park Avenue
New York, NY 10012
Roger L. Koenig (6)............................. 13,923,116 69.4
Nancy G. Pierce (7)............................. 13,923,116 69.4
Shrichand B. Dodani (8)......................... 213,724 1.1
J. Randy Shipley (9)............................ 150,000 *
John W. Stahura (10)............................ 112,500 *
Douglas Carlisle (3)............................ 1,570,641 7.8
Joseph Graziano (11)............................ 191,040 *
Ryal Poppa (12)................................. 273,924 1.4
Arthur L. Schultz (13).......................... -- *
Kevin C. Leibl (14)............................. 23,968 *
All Directors and executive officers as a group
(eight persons)(15)............................ 16,434,945 80.2%
</TABLE>
- --------
* Less than 1%.
(1) Except as otherwise noted, the address of each person listed on the table
is c/o Carrier Access Corporation, 5395 Pearl Parkway, Boulder, Colorado
80301.
(2) Number and percentage of shares beneficially owned is based on 20,054,752
shares outstanding as of May 29, 1998 and assumes no exercise of the
underwriters' overallotment option. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities.
Shares of Common Stock subject to options currently exercisable or
exercisable within 60 days of May 29, 1998 are deemed to be outstanding
and to be beneficially owned by the person holding such options for the
purpose of computing the number of shares beneficially owned and the
percentage of such person or entity holding such securities but are not
outstanding for the purpose of computing the percentage of any other
person or entity. Except as indicated by footnotes to the table, and
subject to the applicable community property laws, based on information
provided by the persons shown in the table, such persons have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(3) Represents 1,503,006 shares held of record by Menlo Ventures VII, L.P.
and 67,635 shares held of record by Menlo Entrepreneurs Fund VII, L.P.
(collectively, the "Menlo Partnerships"). Mr. Carlisle, a director of the
Company, is a managing member of MV Management VII, LLC, the General
Partner of each of the Menlo Partnerships, and has shared voting and
investment power with respect to the shares held by the Menlo
Partnerships. However, Mr. Carlisle disclaims beneficial ownership of all
such shares, except to the extent of his pecuniary interest therein as a
result of his indirect general partnership interest in each of the Menlo
Partnerships.
(4) Represents 1,503,006 shares held of record by New Enterprise Associates
VII, L.P., 15,030 shares held of record by NEA Presidents Fund, L.P. and
1,503 shares held of record by NEA Ventures 1997, L.P.

64
<PAGE>

(5) Represents 292,929 shares held of record by Needham Capital Partners
L.P., 607,614 shares held of record by Needham Emerging Growth Partners,
L.P. and 367,132 shares held of record by Needham Capital SBIC, L.P.
(Collectively the "Needham Partnerships").
(6) Represents 1,711,558 shares held by Mr. Koenig, 1,711,558 shares held by
Ms. Pierce and 10,500,000 shares held by KELD, LLC. Mr. Koenig is a
managing member of KELD, LLC and has shared voting and investment power
over the shares held by KELD, LLC.
(7) Represents 1,711,558 shares held by Ms. Pierce, 1,711,558 shares held by
Mr. Koenig and 10,500,000 shares held by KELD, LLC. Ms. Pierce is a
managing member of KELD, LLC and has shared voting and investment power
over the shares held by KELD, LLC.
(8) Includes 187,500 shares of Common Stock issuable upon exercise of
immediately exercisable options, 150,000 of which are subject to the
Company's right of repurchase.
(9) Includes 150,000 shares of Common Stock issuable upon exercise of
immediately exercisable options, all of which are subject to the
Company's right of repurchase.
(10) Includes 112,500 shares of Common Stock issuable upon exercise of
immediately exercisable options, all of which are subject to the
Company's right of repurchase.
(11) Includes 75,000 shares of Common Stock issued upon exercise of
immediately exercisable options, 56,250 of which are subject to the
Company's right of repurchase. See "Management--Director Compensation."
(12) Includes 75,000 shares of Common Stock issued upon exercise of
immediately exercisable options, 37,500 of which are subject to the
Company's right of repurchase. See "Management--Director Compensation."
(13) Mr. Schultz resigned from the Company on April 10, 1998.
(14) Mr. Leibl resigned from the Company on December 1, 1997, effective May
20, 1998.
(15) Includes 450,000 shares of Common Stock issuable upon exercise of
immediately exercisable options, 412,500 of which are subject to the
Company's right of repurchase. Also includes 93,750 shares issued
pursuant to early option exercises which are subject to the Company's
right of repurchase.

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DESCRIPTION OF CAPITAL STOCK

Immediately following the closing of this Offering, the authorized capital
stock of the Company will consist of 60,000,000 shares of Common Stock, $0.001
par value, and 5,000,000 shares of Preferred Stock, $0.001 par value, after
giving effect to the amendment of the Company's Certificate of Incorporation
to delete references to the Convertible Preferred Stock following conversion
of such stock. The following description of capital stock gives effect to the
Restated Certificate of Incorporation to be filed upon closing of this
Offering. Immediately following the completion of this Offering, and assuming
no exercise of the Underwriters' overallotment, an aggregate of shares
of Common Stock will be issued and outstanding, and no shares of Preferred
Stock will be issued or outstanding.

The following description of the Company's capital stock does not purport to
be complete and is subject to and qualified in its entirety by the Company's
Restated Certificate of Incorporation and Bylaws and by the provisions of
applicable Delaware law.

COMMON STOCK

The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding Preferred Stock that may come into existence,
the holders of Common Stock are entitled to receive ratably such dividends, if
any, as may be declared from time to time by the Board of Directors out of
funds legally available therefor. See "Dividend Policy." In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior distribution rights of Preferred Stock, if any,
then outstanding. The Common Stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are
fully paid and nonassessable, and the shares of Common Stock to be outstanding
upon completion of this Offering will be fully paid and nonassessable.

PREFERRED STOCK

The Company's Board of Directors is authorized to issue from time to time,
without stockholder authorization, in one or more designated series, any or
all of the authorized but unissued shares of Preferred Stock with such
dividend, redemption, conversion and exchange provisions as may be provided in
the particular series. Any series of Preferred Stock may possess voting,
dividend, liquidation and redemption rights superior to that of the Common
Stock. The rights of the holders of Common Stock will be subject to, and may
be adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. Issuance of a new series of Preferred Stock,
while providing desirable flexibility in connection with possible acquisition
and other corporate purposes, could have the effect of entrenching the
Company's Board of Directors and make it more difficult for a third party to
acquire, or discourage a third party from acquiring, a majority of the
outstanding voting stock of the Company. The Company has no present plans to
issue any shares or designate any series of Preferred Stock.

REGISTRATION RIGHTS

Pursuant to the Amended and Restated Investor Rights Agreement dated as of
September 16, 1997 among the Company and certain holders of its securities
(the "Rights Agreement"), the holders of approximately 5,593,132 shares of
Common Stock (the "Registrable Securities") after this Offering will be
entitled to certain rights with respect to the registration of the Registrable

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Securities under the Securities Act. Under the Rights Agreement, if the
Company proposes to register any of its securities under the Securities Act,
either for its own account or the account of other stockholders, the holders
of Registrable Securities are entitled to notice of such registration and are
entitled to include their Registrable Securities therein. In addition, if at
any time beginning six months after the date of this Prospectus the Company
receives a request from holders of at least 50% of the Registrable Securities
then outstanding (the "Investors' Shares"), the Company is obligated to cause
such shares to be registered under the Securities Act. Holders of Investors'
Shares have the right to cause two such demand registrations. Further, holders
of Registrable Securities may require the Company to register all or a portion
of their Registrable Securities on Form S-3 under the Securities Act (provided
that the offering size would exceed $500,000), when such form becomes
available for use by the Company, and subject to certain other conditions and
limitations. The holders' rights with respect to all such registrations are
subject to certain conditions, including the right of the underwriters of any
such offering to limit the number of shares included in any such registration.
The Company has agreed to pay all expenses related to registrations made
pursuant to the Rights Agreement, except for underwriting discounts and
commissions or other compensations to effect the sale of the Registrable
Securities.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION,
BYLAWS AND DELAWARE LAW

Certificate of Incorporation and Bylaws

The Company's Restated Certificate of Incorporation authorizes the Board to
establish one or more series of undesignated Preferred Stock, the terms of
which can be determined by the Board at the time of issuance. See "--Preferred
Stock." The Restated Certificate of Incorporation also provides that all
stockholder action must be effected at a duly called meeting of stockholders
and not by a consent in writing. In addition, the Bylaws do not permit
stockholders of the Company to call a special meeting of stockholders; only
the Company's Chief Executive Officer, President, Chairman of the Board or a
majority of the Board are permitted to call a special meeting of stockholders.
The Bylaws also require that stockholders give advance notice to the Company's
Secretary of any nominations for director or other business to be brought by
stockholders at any stockholders' meeting and require a supermajority vote of
members of the Board and/or stockholders to amend certain Bylaw provisions.
These provisions of the Restated Certificate of Incorporation and Bylaws could
discourage potential acquisition proposals and could delay or prevent a change
in control of the Company. Such provisions also may have the effect of
preventing changes in the management of the Company. See "Risk Factors--
Control by Existing Stockholders; Effects of Certain Anti-Takeover
Provisions."

Delaware Takeover Statute

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three (3) years following the date that
such stockholder became an interested stockholder, unless: (i) prior to such
date, the board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction that
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (x) by persons
who are directors and also officers and (y) by employee stock plans in which
employee participants do not have the right

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<PAGE>

to determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or (iii) on or subsequent to such
date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock that is not owned by the interested stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition of 10% or more of the assets
of the corporation involving the interested stockholder; (iii) subject to
certain exceptions, any transaction that results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transaction involving the corporation that has the
effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder; or
(v) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is American Securities
Transfer and Trust.

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<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this Offering, there has not been any public market for the Common
Stock of the Company. Future sales of substantial amounts of Common Stock in
the public market could adversely affect prevailing market prices from time to
time. Furthermore, since only a limited number of shares will be available for
sale shortly after this Offering because of certain contractual and legal
restrictions on resale (as described below), sales of substantial amounts of
Common Stock in the public market after the restrictions lapse could adversely
affect the prevailing market price and the ability of the company to raise
equity capital in the future.

Upon completion of this Offering, the Company will have shares of Common
Stock outstanding, assuming no exercise of options and no repurchase of option
shares by the Company after March 31, 1998. Of these shares, the shares
sold in this Offering will be freely tradeable without restriction or further
registration under the Securities Act, except that any shares purchased by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act ("Affiliates"), may generally only be sold pursuant to an
effective registration statement under the Securities Act or in compliance
with the limitations of Rule 144 as described below.

SALES OF RESTRICTED SHARES

The remaining shares of Common Stock held by existing stockholders are
"restricted securities" as that term is defined in Rule 144 ("Restricted
Shares"). Restricted Shares generally may be sold in the public market only if
registered or if they qualify for an exemption from registration under Rules
144, 144(k) or 701 promulgated under the Securities Act, which rules are
summarized below. As a result of the contractual restrictions described below
and the provisions of Rules 144, 144(k) and 701, additional shares will be
available for sale in the public market as follows: (i) shares will be
eligible for immediate sale on the date of this Prospectus, (ii) shares
will be eligible for sale 90 days after the date of this Prospectus, and (iii)
shares will be eligible for sale upon expiration of lock-up agreements
180 days after the date of this Prospectus.

All of the officers and directors and certain stockholders and optionholders
of the Company have entered into lock-up agreements generally providing that
they will not offer, pledge, sell, offer to sell, contract to sell, sell any
option or contract to purchase, purchase any option to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any of the shares of Common Stock or any securities convertible
into, or exercisable or exchangeable for, Common Stock owned by them, or enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Common Stock, for a
period of 180 days after the date of this Prospectus, without the prior
written consent of Deutsche Morgan Grenfell Inc., subject to certain limited
exceptions. Deutsche Morgan Grenfell Inc. may, in its sole discretion and at
any time without notice, release all or any portion of the shares subject to
lock-up agreements. Deutsche Morgan Grenfell Inc currently has no plans to
release any portion of the shares subject to lock-up agreements. When
determining whether or not to release shares from the lock-up agreements,
Deutsche Morgan Grenfell Inc. will consider, among other factors, the
stockholder's reasons for requesting the release, the number of shares for
which the release is being requested and market conditions at the time.

In general, under Rule 144 as currently in effect, beginning 90 days after
this Offering, a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least one year (including the
holding period of any prior owner other than a person who may be deemed an
Affiliate), would be entitled to sell within any three-month period a number

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<PAGE>

of shares of Common Stock that does not exceed the greater of 1% of the then-
outstanding shares of Common Stock of the Company (approximately shares
after giving effect to this Offering) and the average weekly trading volume of
the Common Stock on The Nasdaq National Market during the four calendar weeks
preceding the filing of a Form 144 notice with respect to such sale. Sales
under Rule 144 of the Securities Act are also subject to certain restrictions
relating to manner of sale, notice and the availability of current public
information about the Company. Under Rule 144(k), a person who is not deemed
to have been an Affiliate of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least two years (including the holding period of any prior owner
other than an Affiliate), would be entitled to sell such shares immediately
following this Offering without regard to the volume limitation, manner of
sale, public information or notice provisions of Rule 144 of the Securities
Act. However, the transfer agent may require an opinion of counsel that a
proposed sale of shares comes within the terms of Rule 144 prior to effecting
a transfer of such shares.

OPTIONS

Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from the Company by its
employees, directors, officers, consultants or advisors prior to the date the
Company became subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), pursuant to written
compensatory benefit plans or written contracts relating to the compensation
of such persons. In addition, the Securities and Exchange Commission has
indicated that Rule 701 will apply to typical stock options granted by an
issuer before it becomes subject to the reporting requirements of the Exchange
Act, along with the shares acquired upon exercise of such options (including
exercises after the date of this Offering). Securities issued in reliance on
Rule 701 are Restricted Shares and, subject to the contractual restrictions
described above, beginning 90 days after the date of this Prospectus, may be
sold (i) by persons other than Affiliates, subject only to the manner of sale
provisions of Rule 144 and (ii) by Affiliates, under Rule 144 without
compliance with its one-year minimum holding period requirements.

As of March 31, 1998, options to purchase a total of 1,317,981 shares of
Common Stock were outstanding and exercisable under the Predecessor Plan. An
additional 1,906,357 shares of Common Stock were available as of March 31,
1998 for future option grants under the Predecessor Plan. See "Management--
Benefit Plans," and Notes and of Notes to Consolidated Financial
Statements. The Company intends to file, within 90 days of the effective date
of this Offering, a registration statement on Form S-8 under the Securities
Act to register all shares of Common Stock subject to outstanding stock
options and Common Stock issued or issuable pursuant to the Predecessor Plan,
the 1998 Plan and the Purchase Plan. Such registration statement is expected
to become effective upon filing. Shares covered by these registration
statements will thereupon be eligible for sale in the public markets, subject
to the lock-up agreements, if applicable.

REGISTRATION RIGHTS

Upon completion of this Offering, the holders of approximately 5,593,132
shares of Common Stock will be entitled to certain rights with respect to
registration of such shares under the Securities Act. Registration of such
shares under the Securities Act would result in such shares becoming freely
tradeable without restriction under the Securities Act (except for shares
purchased by an Affiliate) immediately upon the effectiveness of such
registration. See "Description of Capital Stock--Registration Rights."

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UNDERWRITING

The Underwriters named below, for whom Deutsche Morgan Grenfell Inc.,
Hambrecht & Quist LLC and UBS Securities LLC are acting as representatives
(the "Representatives"), have severally agreed, subject to the terms and
conditions contained in the Underwriting Agreement (the form of which will be
filed as an exhibit to the Registration Statement of which this Prospectus is
a part), to purchase from the Company the respective number of shares of
Common Stock set forth opposite their names below. The Underwriters are
committed to purchase all of the shares, if they purchase any.

<TABLE>
<CAPTION>
NUMBER
OF
NAME SHARES
---- ------
<S> <C>
Deutsche Morgan Grenfell Inc..........................................
Hambrecht & Quist LLC.................................................
UBS Securities LLC....................................................
----
Total...............................................................
====
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to the approval of certain legal matters
by their counsel and to certain other conditions.

The Representatives have advised the Company that the Underwriters propose
initially to offer the Common Stock directly to the public on the terms set
forth on the cover page hereof. The Underwriters may allow to selected dealers
(who may include the Underwriters) a concession not in excess of $ per
share under the initial public offering price. The selected dealers may
reallow a concession not in excess of $ per share to certain other dealers.
After the initial public offering of the shares of Common Stock, the offering
price and other selling terms may from time to time be changed by the
Representatives. The Common Stock is offered subject to receipt and acceptance
by the Underwriters, and to certain other conditions, including the right to
reject orders in whole or in part. The Representatives of Underwriters have
informed the Company that the Underwriters do not intend to sell any of the
shares offered hereby to accounts for which they exercise discretionary
authority.

Pursuant to the Underwriting Agreement, the Company has granted the
Underwriters an option, exercisable for thirty (30) days from the date of this
Prospectus, to purchase up to an aggregate of additional shares of
Common Stock at the initial public offering price set forth on the cover page
hereof, less underwriting discounts and commissions. The Underwriters may
exercise such option solely for the purpose of covering over-allotments, if
any, made in connection with the Offering. To the extent such option is
exercised, each Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares of Common Stock as the number set forth next to such Underwriter's name
in the preceding table bears to the total number of shares of Common Stock
offered hereby.

See "Shares Eligible for Future Sale" for a description of certain
arrangements by which all officers, directors and certain stockholders and
optionholders of the Company have agreed not to sell or otherwise dispose of
Common Stock or convertible securities of the Company without the prior
written consent of Deutsche Morgan Grenfell Inc. The Company has agreed in the

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Underwriting Agreement that it will not, directly or indirectly, without the
prior written consent of Deutsche Morgan Grenfell Inc., offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of any shares of Common Stock or any securities convertible into or
exchangeable for Common Stock, for a period of 180 days after the date of the
final Prospectus without the consent of Deutsche Morgan Grenfell Inc., except
under certain circumstances.

The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including civil liabilities
under the Securities Act, or will contribute to payments the Underwriters may
be required to make in respect thereof.

Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiation
between the Company and the Representatives. The principal factors to be
considered in determining the initial public offering price will include the
information set forth in this Prospectus and otherwise available to the
Representatives; the history and the prospects for the industry in which the
Company will compete; the ability of the Company's management; the prospects
for future earnings of the Company; the present state of the Company's
development and its current financial condition; the general condition of the
securities market at the time of the Offering; and the recent market prices
of, and the demand for, publicly traded common stock of generally comparable
companies. Each of the Representatives has informed the company that it
currently intends to make a market in the shares subsequent to the
effectiveness of this Offering, but there can be no assurance that the
Representatives will take any action to make a market in any securities of the
Company.

At the request of the Company, the Underwriters have reserved for sale at
the initial public offering price to persons designated by the Company a
number of shares of Common Stock not to exceed [five] percent of the total
number of shares of Common Stock in this Offering. The number of shares
available for sale to the general public will be reduced to the extent such
persons purchase these shares.

In order to facilitate the Offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the Offering, creating a short position in the Common Stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the Common Stock, the Underwriters may bid for, and purchase,
shares of Common Stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an Underwriter or a dealer for
distributing the Common Stock in the Offering, if the syndicate repurchases
previously distributed Common Stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Common Stock above
independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, Denver, Colorado. Certain legal
matters in connection with the Offering will be passed upon for the
Underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California.

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EXPERTS

The financial statements and schedule of the Company as of December 31, 1996
and 1997 and for each of the years in the three year period ended December 31,
1997 have been included herein and in the Registration Statement in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm
as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission, a
Registration Statement on Form S-1 under the Securities Act with respect to
the Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules to the Registration Statement. For further information with respect
to the Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement. Statements contained in this Prospectus concerning the
contents of any contract or any other document referred to are not necessarily
complete; reference is made in each instance to the copy of such contract or
document filed as an exhibit to the Registration Statement. Each such
statement is qualified in all respects by such reference to such exhibit. The
Registration Statement, including exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, NY 10048, and the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any part
thereof may be obtained from the Commission upon payment of certain fees
prescribed by the Commission. Such reports and other information may also be
inspected without charge at a World Wide Web site maintained by the
Commission. The address of such site is HTTP://WWW.SEC.GOV.

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GLOSSARY OF TECHNICAL TERMS

CLASS....... Custom Local Area Signaling Services. CLASS are Bellcore
standard enhanced telephone services for local customer line
connections. CLASS uses channel interoffice signaling to provide
enhanced switching services such as caller ID, call forwarding,
call waiting, distinctive ringing, automatic callback, automatic
recall, and selective call rejection.

CLEC........ Competitive Local Exchange Carrier. A telecommunications carrier
that provides its customers with local transport of private
lines, data access lines, and switched access telecommunications
services within local calling areas, in competition with the
regulated Incumbent Local Exchange Carriers. CLECs typically do
not own the physical copper wiring and right-of-ways that
provide connections to customer sites.

CSU......... Channel Service Unit. A device used to connect a digital phone
line, such as a T1, coming from a carrier to network access
equipment located on the customer premises. A CSU may also be
built into the network interface of access equipment.

DI.......... Drop and Insert (also called D&I). A process in which one or
more channels in a transmission are groomed (dropped) at an
intermediate point and different channels are inserted in their
place.

DID......... Direct Inward Dialing. A voice switching service that allows an
outside caller to reach an internal business extension of a PBX
without having to pass through an operator or attendant. DID
requires that the Central Office (CO) pass the dialed digits
down the line to the customer phone system, which then completes
the call to the extension. Unique types of telephone line
interface equipment are required to connect to DID services.

DLC......... Digital Loop Carrier. A digital transmission system designed for
providing local loops to subscribers or access networks. Digital
Loop Carrier systems carry multiple channels of 64 Kbps
digitized voice or data.

DPO......... Dial Pulse Origination. Equipment that sends dialed digits
consisting of tones or pulses. May be used at the Central Office
end of a DID service connection.

DPT......... Dial Pulse Termination. Equipment that receives and processes
dialed digits consisting of tones or pulses. May be used at the
customer end of a DID service connection.

DS1......... Digital Service Level 1 (also called T1). DS1 describes a
digital signal interface standard for the transmission of 1.544
Mbps data on two copper wire pairs. It is typically formatted as
twenty-four 64 Kbps voice or data channels multiplexed into a
193-bit frame, along with overhead data. A variation of DS1 is
called DSX-1, which is intended for short connection distances,
and has somewhat different electrical specifications.

DSP......... Digital Signal Processor. A specialized digital microprocessor
that performs rapid calculations on digitized waveforms such as
voice signals. DSPs are able to perform mathematical and data
manipulations on digital telecommunications signals in real time
in order to add desired functionality through software, rather
than added hardware.

<PAGE>

DSU......... Data Service Unit. A communications device that connects a
customer data interface to network circuit. The DSU transmits
and receives signals and provides buffering, flow control, and
data communications testing.

E&M......... In telephony, an arrangement of four to eight wires that
provides two-way signaling and communications from switch-to-
switch or switch-to-network. The term E&M originates from Ear
and Mouth, used to label the signaling and voice wires. The M
lead transmits ground or battery to the distant end of the
circuit, while incoming signals are received as either a
grounded or open condition on the E lead. Digital E&M signaling
formats are commonly used on T1 service connections, even though
they may never be converted to physical E&M signaling wires.

FXO......... Foreign Exchange Office. A type of telephone line interface that
sinks battery current and detects ringing voltage provided by a
connected Central Office (CO) line or PBX extension. FXO
circuits provide a method to transport dial tone lines, and may
be designed to extend support of PBX or CO line features to
remote locations.

FXS......... Foreign Exchange Station. A type of telephone line interface
that delivers loop-start or ground-start dial tone line
connections to telephones, off-premises extensions, facsimile
machines, modems, PBXs and other conventional analog telephony
devices. FXS interfaces can be designed to support the delivery
of Calling Party Disconnect (CPD) and CLASS features such as
caller ID and distinctive ringing.

HDSL........ High bit-rate Digital Subscriber Line. A technology that enables
digital network services to be carried over existing twisted-
pair copper wire pairs between the central office (CO) and the
customer site. HDSL differs from other DSL technologies (such as
ADSL) in that it allows data to flow at equal rates in both
directions at 1.544 Mbps. HDSL is commonly used by ILECs to
deploy T1 services to customers.

ILEC........ Incumbent Local Exchange Carrier. A regulated common
telecommunications carrier that provides its customers with
local transport of private lines, data access lines, and
switched access telecommunications services within local calling
areas. ILECs typically own physical copper wiring and right-of-
ways that provide connections to customer sites.

ISP......... Internet Service Provider. A company that provides access to the
Internet for corporate customers and consumers by providing
Internet Protocol (IP) service connections to the Internet
backbone.

IXC......... Inter-Exchange Carrier. A company providing long distance
switched services between many Local Exchange Carriers (LECs)
and Local Access and Transport Areas (LATAs).

KBPS........ Kilobits per second. A transmission rate for digital data
expressed in thousands of bits per second.

LAN......... Local Area Network. A short distance network providing data
communications typically between computers and peripheral
devices such as printers.

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LATA........ Local Access and Transport Area. One of 196 local geographical
areas in the US within which a local telephone company may offer
telecommunications services.

LIU......... Line Interface Unit.

M1-3........ Multiplexer, DS1 to DS3 (or T1 to T3). A device that converts or
"multiplexes" 28 digital T1 signals at 1.544 Mbps to and from
one T3 signal at 44.736 Mbps.

MBPS........ Megabits per second. A transmission rate for digital data
expressed in millions of bits per second.

NEBS........ Network Equipment Building Standards. A Bell Company Research
(Bellcore) standard defining a rigid and extensive set of
performance, quality, environmental, and safety requirements for
telecommunications equipment installed inside switching offices.

NIU......... Network Interface Unit. A protection and test device installed
between a Local Exchange Carrier (LEC) network and the customer
premise. The NIU typically includes protection for high-voltage
surges and electronics so the LEC can test the integrity of the
local digital connection.

PBX......... Private Branch Exchange. A privately-owned telephone switching
system located within the customer premises. PBXs are commonly
used in office buildings and campuses to connect calls between
internal extension users and to telephone company lines.

PCB......... Printed Circuit Board. A fiberglass laminated board with etched
copper traces for mounting electronic circuits. PCB often refers
to the complete assembly with parts.

POTS........ Plain Old Telephone Service. Basic "dial-tone" telephone service
making voice calls. POTS does not include enhanced services such
as caller ID, centrex, and direct inward dialing.

PSTN........ Public Switched Telephone Network. PSTN refers to the collection
of local exchange and long distance carrier facilities that
interconnect to provide a common telephone service within a
country. It is the domestic telecommunications network commonly
accessed by ordinary telephones, modems, and PBXs. The PSTN also
connects the mobile telephone switching office with the local
exchange carrier (LEC) to facilitate incoming and outgoing calls
over the wireline network to and from wireless subscribers.

SLIC........ Subscriber Line Interface Circuit. An electronic circuit found
in large numbers in most digital telephone service delivery
systems, such as digital loop carrier systems, central office
switching systems, and PBXs. SLICs provide the interface
electronics between the digital network and the physical copper
telephone lines. Desired functions are battery current feeding,
overvoltage protection, ringing application, signaling of call
states, hybrid transmission conversion, and testing access to
lines.

SNMP........ Simple Network Management Protocol. A standard network
management software protocol based on TCP/IP. SNMP allows
monitoring, test, and configuration information to be routed
from central management locations to many remote and local
elements in a network, as needed to manage the network.

76
<PAGE>

SONET....... Synchronous Optical Network. The electronics and network
architecture that enables the transmission of digitized voice or
data on fiber optic channels at speeds up to 10 billion bits per
second.

T1.......... T1, also called DS1, describes a digital signal interface
standard for the transmission of 1.544 Mbps data on two copper
wire pairs. It is typically formatted as twenty-four 64 Kbps
voice or data channels multiplexed into a 193-bit frame, along
with overhead data. Electrical T1 signals can travel up to 6,000
feet on twisted copper wire pairs, under ideal conditions. T1 is
commonly converted to fiber optic and digital radio transmission
media for long telecommunications distances. T1 has become a
ubiquitous telecommunications interface standard in North
America.

T3.......... A digital transmission interface (also called DS3) with a
capacity of 44.736 Mbps. One T3 line can carry 28 T1 lines, the
equivalent 672 voice circuits. T3 connections are commonly
established with two coaxial cables for distances up to a few
hundred feet. Network connections are transported over fiber-
optic cable or high-bandwidth digital radio links.

TO.......... Transmission Only. A private line telephone line interface for
"transmit only" devices such as leased-line modems and radio
equipment.

TR-08....... A Bellcore standard defining the transmission and management
requirements for digital loop carrier equipment providing up to
96 calls over a group of four T1 lines. The standard was
developed from AT&T SLC-96 digital loop carrier protocols
carried on T1 lines.

77
<PAGE>

CARRIER ACCESS CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Balance Sheets as of December 31, 1996 and 1997 and March 31, 1998
(unaudited).............................................................. F-3
Statements of Operations for the years ended December 31, 1995, 1996 and
1997 and the three months ended March 31, 1997 and 1998 (unaudited)...... F-4
Statements of Stockholders' Equity for the years ended December 31, 1995,
1996 and 1997 and the three months ended March 31, 1998 (unaudited)...... F-5
Statements of Cash Flows for the years ended December 31, 1995, 1996 and
1997 and the three months ended March 31, 1997 and 1998 (unaudited)...... F-6
Notes to Financial Statements............................................. F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS
CARRIER ACCESS CORPORATION:

We have audited the accompanying balance sheets of Carrier Access
Corporation as of December 31, 1996 and 1997, and the related statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Carrier Access Corporation
as of December 31, 1996 and 1997, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1997, in conformity with generally accepted accounting principles.

Boulder, Colorado
February 6, 1998,
except for note 1 (k)
which is as of
May 28, 1998

F-2
<PAGE>

CARRIER ACCESS CORPORATION

BALANCE SHEETS

DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1996 1997 1998
----- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 929 $ 6,104 $ 6,379
Securities available for sale....................... -- 2,516 1,571
Accounts receivable, less allowance for doubtful
accounts of $20, $398 and $706 in 1996, 1997 and
1998, respectively................................. 1,027 4,645 4,728
Inventory (note 2).................................. 2,211 6,784 8,346
Deferred income taxes (note 5)...................... -- 237 385
Prepaid expenses and other.......................... 32 91 44
----- ------- -------
Total current assets.............................. 4,199 20,377 21,453
----- ------- -------

Equipment, net of accumulated depreciation and
amortization (note 3).............................. 388 1,267 1,446
Software development costs, net of accumulated
amortization....................................... 235 -- --
Other assets........................................ -- 36 37
------ ------- -------
Total assets..................................... $4,822 $21,680 $22,936
====== ======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................... $ 601 $ 2,685 $ 2,270
Accrued warranty costs............................. 56 286 390
Accrued payroll costs.............................. 179 381 535
Cooperative advertising............................ -- 159 195
Note payable to bank (note 4)...................... 249 -- --
Deferred rent concessions (note 9)................. 139 217 229
Income taxes payable............................... -- -- 548
Other liabilities.................................. 34 34 77
------ ------- -------
Total current liabilities........................ 1,258 3,762 4,244
------ ------- -------
Stockholders' equity (note 6):
Series A convertible preferred stock, $0.10 par
value; 1,210,861 shares authorized, issued and
outstanding; liquidation preference of $3,463 .... 3,437 3,457 3,460
Series B convertible preferred stock, $0.10 par
value; 2,725,998 shares authorized; 2,517,894
shares issued and outstanding; liquidation
preference of $12,564............................. -- 12,520 12,542
Common stock, $.001 par value; 60,000,000 shares
authorized; 14,025,000, 14,299,689 and 14,400,662
shares issued and outstanding in 1996, 1997 and
1998, respectively................................ 19 19 19
Additional paid-in capital......................... 31 183 234
Retained earnings.................................. 77 1,739 2,437
------ ------- -------
Total stockholders' equity....................... 3,564 17,918 18,692
Commitments (note 9)................................
------ ------- -------
Total liabilities and stockholders' equity....... $4,822 $21,680 $22,936
====== ======= =======
</TABLE>
See accompanying notes to financial statements.

F-3
<PAGE>

CARRIER ACCESS CORPORATION

STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 AND
THREE MONTHS ENDED MARCH 31, 1997 AND 1998 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------- ----------------
1995 1996 1997 1997 1998
------- ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue...................... $ 2,058 $ 5,809 $ 18,719 $ 2,496 $ 7,243
Cost of sales.................... 1,287 3,284 9,469 1,256 3,768
------- ------- -------- ------- -------
Gross profit................. 771 2,525 9,250 1,240 3,475
Operating expenses:
Sales and marketing............ 269 844 2,395 432 975
Research and development....... 164 874 2,848 372 843
General and administrative..... 203 907 1,661 251 702
------- ------- -------- ------- -------
Total operating expenses..... 636 2,625 6,904 1,055 2,520
------- ------- -------- ------- -------
Income (loss) from
operations.................. 135 (100) 2,346 185 955
Other income, net................ 46 24 180 10 168
------- ------- -------- ------- -------
Income (loss) before income
taxes....................... 181 (76) 2,526 195 1,123
Income tax expense (note 5)...... -- -- 791 61 400
------- ------- -------- ------- -------
Net income (loss)............ 181 (76) 1,735 134 723
Accretion of preferred stock to
liquidation value............... -- -- (25) (5) (25)
------- ------- -------- ------- -------
Net income (loss) available
to common stockholders...... $ 181 $ (76) $ 1,710 $ 129 $ 698
======= ======= ======== ======= =======
<CAPTION>
Pro forma information (unaudited)
(note 1):
<S> <C> <C> <C> <C> <C>
Historical net income.......... $ 181
Pro forma adjustment to income
tax expense................... (68)
-------
Pro forma net income......... $ 113
=======
Pro forma and historical income
(loss) per share:
Basic.......................... $ 0.01 $ (0.01) $ 0.12 $ 0.01 $ 0.05
======= ======= ======== ======= =======
Diluted........................ $ 0.01 $ (0.01) $ 0.10 $ 0.01 $ 0.03
======= ======= ======== ======= =======
Weighted average common shares
outstanding:
Basic.......................... 13,665 13,881 14,131 14,076 14,318
======= ======= ======== ======= =======
Diluted........................ 13,665 13,881 17,607 16,332 20,896
======= ======= ======== ======= =======
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE>

CARRIER ACCESS CORPORATION

STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 AND THREE MONTHS ENDED MARCH 31,
1998 (UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
SERIES A SERIES B
PREFERRED PREFERRED
STOCK STOCK COMMON STOCK ADDITIONAL TOTAL
------------- -------------- -------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ------ ------- ------ ------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1,
1995................... -- $ -- -- $ -- 11,475 $ 16 $ (3) $ 29 $ 42
Issuance of common stock
for cash............... -- -- -- -- 2,400 3 29 -- 32
Distribution to
stockholders........... -- -- -- -- -- -- -- (32) (32)
Net income.............. -- -- -- -- -- -- -- 181 181
----- ------ ----- ------- ------ ------- -------- --------- -----------
BALANCES AT DECEMBER 31,
1995................... -- -- -- -- 13,875 19 26 178 223
Issuance of preferred
stock for cash, net of
offering costs......... 1,075 3,049 -- -- -- -- -- -- 3,049
Conversion of debt into
preferred stock, net of
costs (note 4)......... 136 388 -- -- -- -- -- -- 388
Exercise of stock
options................ -- -- -- -- 150 -- 5 -- 5
Distribution to
stockholders........... -- -- -- -- -- -- -- (25) (25)
Net loss................ -- -- -- -- -- -- -- (76) (76)
----- ------ ----- ------- ------ ------- -------- --------- -----------
BALANCES AT DECEMBER 31,
1996................... 1,211 3,437 -- -- 14,025 19 31 77 3,564
Issuance of preferred
stock for cash, net of
offering costs......... -- -- 2,518 12,514 -- -- -- -- 12,514
Exercise of stock
options................ -- -- -- -- 275 -- 69 -- 69
Compensation expense
related to stock
options issued at less
than fair value (note
6)..................... -- -- -- -- -- -- 83 -- 83
Accretion of preferred
stock to liquidation
value.................. -- 20 -- 6 -- -- -- (25) --
Distribution to
stockholders........... -- -- -- -- -- -- -- (48) (48)
Net income.............. -- -- -- -- -- -- -- 1,735 1,735
----- ------ ----- ------- ------ ------- -------- --------- -----------
BALANCES AT DECEMBER 31,
1997................... 1,211 3,457 2,518 12,520 14,300 19 183 1,739 17,918
Exercise of stock op-
tions ................. -- -- -- -- 101 -- 30 -- 30
Compensation expense
related to stock
options issued at less
than fair value (note
6)..................... -- -- -- -- -- -- 21 -- 21
Accretion of preferred
stock to liquidation
value.................. -- 3 -- 22 -- -- -- (25) --
Net income.............. -- -- -- -- -- -- -- 723 723
----- ------ ----- ------- ------ ------- -------- --------- -----------
BALANCES AT MARCH 31,
1998 (UNAUDITED)....... 1,211 $3,460 2,518 $12,542 14,401 $ 19 $ 234 $ 2,437 $ 18,692
===== ====== ===== ======= ====== ======= ======== ========= ===========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>

CARRIER ACCESS CORPORATION

STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 AND
THREE MONTHS ENDED MARCH 31, 1997 AND 1998 (UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
----------------------- ---------------
1995 1996 1997 1997 1998
----- ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................... $ 181 $ (76) $ 1,735 $ 134 $ 723
Adjustments to reconcile net income
(loss) to net cash used by
operating activities:
Depreciation and amortization
expense.......................... 19 119 421 13 93
Provision for doubtful accounts... -- 20 382 50 309
Compensation expense related to
stock options issued at less than
fair value....................... -- -- 83 -- 21
Accrued interest payable converted
to preferred stock............... -- 18 -- -- --
Deferred income tax benefit....... -- -- (237) (22) (148)
Changes in operating assets and
liabilities:
Accounts receivable.............. (84) (912) (4,000) 22 (392)
Inventory........................ (535) (1,544) (4,573) 107 (1,563)
Prepaid expenses and other....... (4) (20) (59) (53) 48
Accounts payable................. 142 364 2,083 (17) (415)
Accrued warranty costs........... -- 45 230 41 104
Accrued payroll costs............ 48 148 203 43 153
Cooperative advertising.......... -- -- 159 -- 36
Deferred rent concessions........ -- 139 78 8 12
Income taxes payable............. -- -- -- -- 548
Other liabilities................ 9 3 -- (5) 44
----- ------- ------- ------ -------
Net cash provided (used) by
operating activities........... (224) (1,696) (3,495) 321 (427)
----- ------- ------- ------ -------
Cash flows from investing activities:
Purchase of equipment............... (93) (401) (1,065) (56) (272)
Sales (purchases) of securities
available for sale................. -- -- (2,514) -- 946
Software development costs.......... -- (238) -- -- --
Other............................... -- -- (38) (19) (1)
----- ------- ------- ------ -------
Net cash provided (used) by
investing activities........... (93) (639) (3,617) (75) 673
----- ------- ------- ------ -------
Cash flows from financing activities:
Cash overdraft...................... 170 (170) -- -- --
Proceeds from issuance of preferred
stock, net......................... -- 3,049 12,514 -- --
Proceeds from issuance of common
stock.............................. 32 -- -- -- --
Proceeds from exercise of stock
options............................ -- 5 69 3 29
Distributions to stockholders....... (32) (25) (48) -- --
Proceeds from short-term
borrowings......................... 252 276 1,900 -- --
Payments on short-term borrowings... -- -- (2,148) -- --
----- ------- ------- ------ -------
Net cash provided by financing
activities..................... 422 3,135 12,287 3 29
----- ------- ------- ------ -------
Net increase in cash and cash
equivalents.................... 105 801 5,175 249 275
Cash and cash equivalents at
beginning of year................... 23 128 929 929 6,104
----- ------- ------- ------ -------
Cash and cash equivalents at end of
year................................ $ 128 $ 929 $ 6,104 $1,178 $ 6,379
===== ======= ======= ====== =======
Supplemental disclosure of cash flow
and financing activities
information:
Cash paid for interest.............. $ -- $ 2 $ 22 $ -- $ --
===== ======= ======= ====== =======
Cash paid for income taxes.......... $ -- $ -- $ 948 $ -- $ --
===== ======= ======= ====== =======
Conversion of debt and accrued
interest payable into preferred
stock.............................. $ -- $ 388 $ -- $ -- $ --
===== ======= ======= ====== =======
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE>

CARRIER ACCESS CORPORATION

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998
(INFORMATION AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BUSINESS AND BASIS OF PRESENTATION--Carrier Access Corporation ("CAC" or
the "Company") is a leading provider of Multi-service Digital Access ("MDA")
equipment to competitive telecommunications carriers, including competitive
local exchange carriers,, Internet service providers and wireless carriers.
The Company's MDA equipment is used for the provisioning of enhanced voice and
high-speed data services by carriers to end users such as small and medium-
sized businesses and government and educational institutions. The Company
sells its products through distributors.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.

The financial statements, and related notes, as of March 31, 1998 and for
the three months ended March 31, 1997 and 1998 are unaudited but, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, which are necessary for a fair presentation of the
financial condition, results of operations and cash flows of the Company. The
operating results for the three months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998.

B. CASH AND CASH EQUIVALENTS AND SECURITIES AVAILABLE FOR SALE--Cash and
cash equivalents include investments in highly liquid debt securities with
maturities or interest reset dates of three months or less at the time of
purchase.

Securities available for sale represent U.S. Government Agency and Corporate
bonds with maturities of greater than three months and are recorded at the
lower of amortized cost or market value. At December 31, 1997 and March 31,
1998, amortized cost approximates market value.

C. INVENTORY--Inventory is recorded at the lower of cost or market, using
standard costs. Costs includes freight, certain warehousing costs and other
allocable overhead.

D. EQUIPMENT--Equipment and leasehold improvements are recorded at cost and
are depreciated and amortized using the straight-line method over useful lives
ranging from three to seven years or the lease term. Depreciation and
amortization expense for the years ended December 31, 1995, 1996 and 1997 and
the three months ended March 31, 1997 and 1998 totaled $19,502, $114,687,
$185,701, $12,222 and $92,692, respectively.

E. REVENUE RECOGNITION--Revenue from sales of products is recognized upon
shipment. Reserves for estimated sales returns, including stock rotation, are
recorded when sales are made to customers with the right of return and are
based on historical experience and management's estimate of expected returns.

F. SOFTWARE DEVELOPMENT COSTS--During 1996, the Company capitalized various
costs related to the development of software included in products intended for
future sale in the amount of $237,761. Due to technological feasibility
generally occurring when the product is available for general release, the
Company anticipates that it will no longer capitalize software development
costs. As a result, no such costs were capitalized in 1997 or in the three
months ended March 31, 1998.

F-7
<PAGE>

CARRIER ACCESS CORPORATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

Software development costs are recorded at the lower of cost or net
realizable value and are amortized based on the greater of the amount computed
using the ratio of the current year gross revenue to the total of the current
and anticipated future gross revenue for the product or the straight-line
method over a seven-year period. Amortization expense for the year ended
December 31, 1996 and 1997 totaled $2,831 and $234,930, respectively.
Amortization expense for 1997 reflects a change in the anticipated utilization
of the software in future products.

G. ADVERTISING COSTS--In addition to its own advertising activities, the
Company accrues a specified percentage of the previous month's sales over
certain contractual minimums to reimburse distributors for a portion of their
advertising costs. Any unused allowance expires if not used during the
following six months. Cooperative advertising expense for the year ended
December 31, 1997 and the three months ended March 31, 1998 totaled $217,687
and $42,659, respectively, and is included in sales and marketing expenses.
The Company had no cooperative advertising expense during the years ended
December 31, 1995 and 1996 and the three months ended March 31, 1997.

H. RESEARCH AND DEVELOPMENT COSTS--Research and development costs are
charged to operations as incurred.

I. LONG-LIVED ASSETS--The Company accounts for long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, ACCOUNTING
FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE
DISPOSED OF (SFAS 121), which requires that long-lived assets and certain
identifiable intangibles held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying value
of an asset may not be recoverable. An impairment loss is generally recognized
when estimated undiscounted future cash flows expected to be generated by the
asset is less than its carrying value. Measurement of impairment loss is based
on the fair value of the asset, which is generally determined using valuation
techniques such as the discounted present value of expected future cash flows.

J. INCOME TAXES AND PRO FORMA NET INCOME--The Company accounts for income
taxes under the provisions of Statement of Financial Accounting Standards No.
109, ACCOUNTING FOR INCOME TAXES (SFAS 109). Under the asset and liability
method of SFAS 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under
SFAS 109, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
A valuation allowance is required to the extent any deferred tax assets may
not be realizable.

Prior to January 1, 1996, the Company elected to be treated as a S
Corporation for income tax purposes. Accordingly, no provision for federal and
state income taxes has been included in the accompanying financial statements
for 1995 as all income and losses were reported in the individual tax returns
of the Company's stockholders. On January 1, 1996, the Company elected C
Corporation status under the Internal Revenue Code. Distributions to
stockholders, including distributions in 1997, represent the distribution of
taxable income generated while the Company was an S Corporation for income tax
purposes.

F-8
<PAGE>

CARRIER ACCESS CORPORATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

The Company has presented pro forma net income for the year ended December
31, 1995 as if the Company had been a taxable entity and its taxable income
had been subject to income taxes at the applicable federal and state tax
rates.

K. INCOME (LOSS) PER SHARE, COMMON STOCK SPLIT AND RE-INCORPORATION--Income
(Loss) per share is presented in accordance with Statement of Financial
Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE (SFAS 128). SFAS 128
requires the presentation of basic and diluted EPS. Under SFAS 128, basic EPS
excludes dilution for potential common shares and is computed by dividing
income or loss available to common shareholders by the weighted average number
of common shares outstanding during the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted, which resulted in the issuance of
common stock. In 1997 and the three months ended March 31, 1998, convertible
preferred stock has been considered to be potential common stock for purposes
of the calculation of diluted income per share. Potential common stock
instruments in 1995 and 1996 were either not significant or antidilutive.

On May 28, 1998 the Company's Board of Directors approved a three for two
forward split of the Company's Common Stock. In addition, the Board also
approved re-incorporation as a Delaware corporation, which included an
increase to 60 million authorized common shares and a change to a par value of
$.001 per share. All share and per share information included in the
accompanying financial statements and notes thereto have been restated for the
stock split.

L. STOCK-BASED COMPENSATION--The Company accounts for its stock-based
employee compensation plan using the intrinsic value based method prescribed
by Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES (APB 25), and related interpretations. As such, compensation expense
is recorded on the date of grant only if the current market price of the
underlying stock exceeds the exercise price. The Company has provided pro
forma disclosures of net income (loss) and income (loss) per share, as if the
fair value based method of accounting for the plan, as prescribed by Statement
of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION (SFAS 123), had been applied. Pro forma disclosures include the
effects of employee stock options granted during the years ended December 31,
1995, 1996 and 1997.

M. RECLASSIFICATIONS--Certain reclassifications have been made to conform
prior year financial statements to the 1997 presentation.

2. INVENTORY

The components of inventory as of December 31, 1996 and 1997 and March 31,
1998 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1996 1997 1998
------ ------ ----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials......................................... $ 978 $3,320 $3,560
Work-in-process....................................... 43 351 1,185
Finished goods........................................ 1,190 3,041 3,338
Off-site evaluation units............................. -- 72 263
------ ------ ------
$2,211 $6,784 $8,346
====== ====== ======
</TABLE>

F-9
<PAGE>

CARRIER ACCESS CORPORATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. EQUIPMENT

Equipment as of December 31, 1996 and 1997 and March 31, 1998 consisted of
the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER
31,
------------ MARCH 31,
1996 1997 1998
---- ------ -----------
<S> <C> <C> <C>
(UNAUDITED)
Machinery and software............................... $448 $1,349 $ 1,544
Furniture, fixtures and other........................ 117 160 225
Leasehold improvements............................... 13 134 146
---- ------ -----------
578 1,643 1,915
Less accumulated depreciation........................ (190) (376) (469)
---- ------ -----------
$388 $1,267 $ 1,446
==== ====== ===========
</TABLE>

4. DEBT AND RELATED PARTY TRANSACTIONS

In June 1996, the Company converted total notes payable to stockholders,
bearing interest at 9.5%, of $370,612, and $17,427 of related accrued interest
payable, into 135,678 shares of Series A preferred stock at a price of $2.86
per share, in connection with the private placement of preferred shares
discussed in Note 6.

In April 1996, the Company entered into two credit agreements with a bank
that provided for a $500,000 revolving line of credit and a $300,000 equipment
loan. In May 1997, the $500,000 revolving line of credit was converted into a
note bearing interest at the bank prime plus 1%, (9.5% at December 31, 1997).
The note matured in 1998, and was secured by substantially all of the assets
of the Company. The equipment loan also bore interest at prime plus 1%,
matured in 2001, and was also secured by substantially all of the assets of
the Company. Outstanding borrowings at December 31, 1996 totaled $248,750.
There were no borrowings outstanding at December 31, 1997. These agreements
were terminated as of March 31, 1998.

The Company has a credit agreement with a bank which provides for a $1
million revolving line of credit. The revolving line of credit bears interest
at prime plus 0.5% (9.0% at December 31, 1997), matures in 1998, and is
secured by substantially all of the assets of the Company. No borrowings were
outstanding under the revolving line of credit at December 31, 1997.

The Company's credit agreements contain certain restrictive covenants,
including the maintenance of various financial ratios.

5. INCOME TAXES

Income tax expense (benefit) consists of the following for the year ended
December 31, 1997 and the three months ended March 31, 1997 and 1998 (in
thousands):

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
YEAR ENDED 31,
DECEMBER 31, ---------------
1997 1997 1998
------------ ------ -------
(UNAUDITED)
<S> <C> <C> <C>
Current........................................... $ 1,028 $ 83 $ 548
Deferred.......................................... (237) (22) (148)
----------- ------ -------
Income tax expense.............................. $ 791 $ 61 $ 400
=========== ====== =======
</TABLE>

F-10
<PAGE>

CARRIER ACCESS CORPORATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

A reconciliation of expected income tax expense (benefit) computed using the
statutory Federal tax rate of 34% to actual income tax expense for the years
ended December 31, 1996 and 1997 and the three months ended March 31, 1997 and
1998, is as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER THREE MONTHS ENDED
31, MARCH 31,
----------- -------------------
1996 1997 1997 1998
----- ---- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Expected income tax expense (benefit).... $ (26) $859 $ 66 $ 382
Change in valuation allowance for
deferred tax assets..................... 26 (67) (7) --
Research and development tax credit...... -- (112) (7) (30)
State income taxes, net of federal tax
benefit................................. (2) 64 7 45
Other.................................... 2 47 2 3
----- ---- -------- ---------
Actual income tax expense.............. $ -- $791 $ 61 $ 400
===== ==== ======== =========
</TABLE>

No tax benefit was recorded for the year ended December 31, 1996 due to the
Company's net loss and the uncertainty relating to the ultimate utilization of
the Company's net operating loss carryforward.

The tax effects of significant temporary differences that result in deferred
tax assets and liabilities at December 31, 1996 and 1997 and March 31, 1998
are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------ MARCH 31,
1996 1997 1998
----- ----- ---------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Accounts receivable, primarily due to
differences in accounting for doubtful
accounts...................................... $ 8 $ 151 $ 268
Accrued expenses, due to differences in the
period of recognition for financial statement
and income tax purposes....................... 37 143 195
Net operating loss carryforward................ 77 -- --
Research and development tax credit
carryforward.................................. 33 -- --
Valuation allowance............................ (67) -- --
----- ----- --------
Net deferred tax asset....................... $ 88 $ 294 $ 463
Deferred tax liabilities:
Software development costs, capitalized for
financial statement purposes.................. (88) -- --
Equipment, primarily due to differences in
depreciation.................................. -- (43) (64)
Other.......................................... -- (14) (14)
----- ----- --------
Total deferred tax liabilities............... (88) (57) (78)
----- ----- --------
Net deferred tax asset....................... $ -- $ 237 $ 385
===== ===== ========
</TABLE>

6. STOCKHOLDERS' EQUITY

Preferred Stock and Private Placements

During 1995, the Company authorized a new class of preferred stock,
consisting of 5,000,000 convertible Series A preferred shares with a par value
of $0.10 per share. The preferred shares may be converted, at the option of
the holder, into the same number of shares of common

F-11
<PAGE>

CARRIER ACCESS CORPORATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

stock. The preferred shares have the same voting rights as the Company's
common stock and will be automatically converted into common stock upon the
closing of a public offering of the Company's common stock meeting certain
thresholds.

On June 21, 1996, the Company completed a private placement of 1,210,861
shares of Series A preferred stock at a price of $2.86 per share, for net
proceeds of $3,049,406. The private placement included 135,678 preferred
shares issued to noteholders, as discussed in Note 3. In the event of the
Company's liquidation, the Series A preferred stockholders are entitled to
$2.86 per share plus all accrued and unpaid dividends.

During 1997, the Company amended its articles of incorporation to authorize
a new class of preferred stock, consisting of 2,725,998 convertible Series B
preferred shares with a par value of $0.10 per share. The preferred shares may
be converted, at the option of the holder, into the same number of shares of
common stock. The preferred shares have the same voting rights as the
Company's common stock and will be automatically converted into common stock
upon the closing of a public offering of the Company's common stock meeting
certain thresholds. In the event of the Company's liquidation, the Series B
stockholders are entitled to $4.99 per share plus all accrued and unpaid
dividends. On September 16, 1997, the Company completed a private placement of
2,517,894 shares of Series B preferred stock at a price of $4.99 per share,
for net proceeds of $12,514,291.

At December 31, 1997, the Company has 5,000,000 authorized shares of
preferred stock; however, as a result of the amendment of its articles of
incorporation in connection with the issuance of the Series B preferred stock,
the authorized number of Series A preferred stock was reduced from 5,000,000
to 1,210,861 shares. The remaining 1,063,141 authorized but unissued shares
are undesignated and may be issued as either Series A or Series B preferred
shares in the future.

Common Stock

Common stock issued at inception was recorded at the historical cost basis
of assets contributed by the Company's founders, which amount was less than
the par value of the shares issued.

Stock Options

Pursuant to the Company's 1995 stock option plan (the "Plan") a committee
appointed by the Company's Board of Directors may grant incentive and
nonqualified options to employees, consultants and directors. The Plan
authorizes the grant of options to purchase up to 3,000,000 shares of
authorized but unissued common stock. Incentive stock options have a ten-year
term and non-qualified stock options have a five-year term. All stock options
vest 25% on the first anniversary date of the grant and 6.25% each calendar
quarter thereafter. Of the 2,437,500 options granted as of December 31, 1997,
1,323,750 were nonqualified.

F-12
<PAGE>

CARRIER ACCESS CORPORATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

The following summarizes stock option activity under the Plan:

<TABLE>
<CAPTION>
WEIGHTED
SHARES AVERAGE
UNDER EXERCISE
OPTION PRICE
--------- --------
<S> <C> <C>
Options outstanding at January 1, 1995...................... -- --
Granted................................................... 540,000 $ 0.14
---------
Options outstanding at December 31, 1995.................... 540,000 0.14
Granted................................................... 970,500 0.33
Exercised................................................. (150,000) 0.03
Canceled.................................................. (596,250) 0.33
---------
Options outstanding at December 31, 1996.................... 764,250 0.25
Granted................................................... 927,000 0.50
Exercised................................................. (274,689) 0.25
Canceled.................................................. (72,609) 0.33
---------
Options outstanding at December 31, 1997.................... 1,343,952 0.42
Granted................................................... 186,750 3.00
Exercised................................................. (100,973) 0.29
Canceled.................................................. (111,748) 0.91
---------
Options outstanding at March 31, 1998 (unaudited)........... 1,317,981 0.76
=========
Options available for grant at March 31, 1998 (unaudited)... 1,156,357
=========
</TABLE>

The following summarizes information about outstanding options at March 31,
1998:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING
NUMBER CONTRACTUAL NUMBER
EXERCISE OUTSTANDING AT LIFE VESTED AND
PRICE MARCH 31, 1998 (YEARS) EXERCISABLE
-------- -------------- ----------- -----------
<S> <C> <C> <C>
$0.03 112,500 7.7 70,088
0.33 809,481 8.5 165,790
0.83 210,750 9.6 1,500
1.73 38,250 4.8 --
3.33 147,000 5.0 --
</TABLE>

As discussed in Note 1, the Company applies APB 25 and related
interpretations in accounting for its stock option plan. As a result, for
options issued with exercise prices below the estimated fair market value on
the date of grant, the Company will recognize compensation expense totaling
approximately $333,000, of which $83,250 and $20,812 were recognized for the
year ended December 31, 1997 and the three months ended March 31, 1998,
respectively.

The weighted average fair values of options granted during 1995, 1996 and
1997 were $0.02 and $0.05 and $0.30 per share, respectively, using the Black-
Scholes option-pricing model with the following assumptions: no expected
dividends, no volatility, expected life of the options of three years and a
risk-free interest rate of 6%. Had compensation cost for the Company's stock-

F-13
<PAGE>

CARRIER ACCESS CORPORATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

based compensation plan been determined based upon the fair value of options
on the grant dates, consistent with the provisions of SFAS 123, the Company's
1995, 1996 and 1997 pro forma net income (loss) would have been as follows (in
thousands, except per share data):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1995 1996 1997
----- ------ ------
<S> <C> <C> <C>
Net income (loss):
As reported............................................. $ 113 $ (76) $1,735
Pro forma............................................... 111 (81) 1,698
Income (loss) per common share:
As reported and pro forma:
Basic................................................. $0.01 $(0.01) $ 0.05
Diluted............................................... 0.01 (0.01) 0.03
</TABLE>

7. SIGNIFICANT CUSTOMERS AND CONCENTRATION OR CREDIT RISK

The Company's customers are distributors who resell the Company's products
to end users. The Company recognized revenue from the following significant
customers for the years ended December 31, 1995, 1996 and 1997 and the three
months ended March 31, 1998 (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED THREE
DECEMBER 31, MONTHS
------------------ ENDED MARCH
1995 1996 1997 31, 1998
---- ------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Walker & Associates.............................. $-- $ -- $6,840 $3,474
ADC Telecommunications........................... -- -- 3,802 85
Phillips Communications and Equipment............ 275 1,027 2,698 1,618
Telco Systems.................................... 530 2,756 1,161 --
Telsource Corporation............................ 248 1,017 1,253 613
C&L Communications............................... 277 631 650 248
</TABLE>

The Company is exposed to potential concentrations of credit risk from its
accounts receivable with its various customers. The Company's receivables are
concentrated in customers in the telecommunications industry. To reduce this
risk, the Company has a policy of assessing the creditworthiness of its
customers and monitors the aging of its accounts receivable.

8. EMPLOYEE BENEFIT PLAN

In May 1996, the Company adopted a defined contribution employee benefit
plan (the Plan) under Section 401(k) of the Internal Revenue Code which is
available to all employees who meet the Plan's eligibility requirements.
Employees may contribute up to the maximum limits allowed by the Internal
Revenue Code. The Company may make discretionary employer matching
contributions to the Plan. No contributions were made to the Plan by the
Company in 1995, 1996, 1997 or the three months ended March 31, 1998.

F-14
<PAGE>

9. COMMITMENTS

The Company leases office space under various noncancelable operating leases
which expire through 2005. Future obligations under these leases are as
follows (in thousands):

<TABLE>
<S> <C>
Year ending December 31:
1998........................................................... $ 504
1999........................................................... 525
2000........................................................... 493
2001........................................................... 458
2002........................................................... 481
Thereafter..................................................... 1,591
------
$4,052
======
</TABLE>

The Company records rent expense under noncancelable operating leases using
the straight-line method after consideration of increases in rental payments
over the lease term, and records the difference between actual payments and
rent expense as deferred rent concessions.

Rent expense for the years ended December 31, 1995, 1996 and 1997 totaled
$89,928, $549,105 and $547,130, respectively. Rent expense for the three
months ended March 31, 1997 and 1998 was $136,782 and $136,782, respectively.

The Company also subleases office space under various noncancelable
operating leases which expire through 2000. Future rental income under these
subleases are as follows (in thousands):

<TABLE>
<S> <C>
Year ending December 31:
1998............................................................. $131
1999............................................................. 142
2000............................................................. 75
----
$348
====
</TABLE>

F-15
<PAGE>

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
THE COMMON STOCK IN ANY JURISDICTION WHERE, OR ANY PERSON TO WHOM, IT IS UN-
LAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
The Company............................................................... 4
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 20
Dividend Policy........................................................... 20
Capitalization............................................................ 21
Dilution.................................................................. 22
Selected Financial Data................................................... 23
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 24
Business.................................................................. 32
Management................................................................ 51
Certain Transactions...................................................... 62
Principal Stockholders.................................................... 64
Description of Capital Stock.............................................. 66
Shares Eligible for Future Sale........................................... 69
Underwriting.............................................................. 71
Legal Matters............................................................. 72
Experts................................................................... 73
Additional Information.................................................... 73
Glossary of Technical Terms............................................... 74
Index to Financial Statements............................................. F-1
</TABLE>

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------

[LOGO OF CARRIER ACCESS CORPORATION APPEARS HERE]

COMMON STOCK

DEUTSCHE MORGAN GRENFELL

HAMBRECHT & QUIST

UBS SECURITIES

PROSPECTUS

, 1998
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates
except the SEC registration fee and the NASD filing fees.

<TABLE>
<S> <C>
SEC Registration Fee................................................ $12,213
NASD Filing Fee..................................................... 4,640
Nasdaq National Market Listing Fee.................................. *
Printing and Engraving Expenses..................................... *
Legal Fees and Expenses of the Company.............................. *
Accounting Fees and Expenses........................................ *
Blue Sky Fees and Expenses.......................................... *
Transfer Agent Fees................................................. *
Miscellaneous....................................................... *
-------
Total............................................................. *
=======
</TABLE>
- --------
* To be filed by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article of the Company's Bylaws provides
for mandatory indemnification of its directors and officers and permissible
indemnification of employees and other agents to the maximum extent permitted
by the Delaware General Corporation Law. The Company's Certificate of
Incorporation provides that, subject to Delaware law, its directors shall not
be personally liable for monetary damages for breach of the directors'
fiduciary duty as directors to the Company and its stockholders. This
provision in the Certificate of Incorporation does not eliminate the
directors' fiduciary duty, and in appropriate circumstances equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company or its
stockholders for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware law. The
provision also does not affect a director's responsibilities under any other
law, such as the federal securities laws or state or federal environmental
laws. The Company has entered into indemnification agreements with its
officers and directors, a form of which was previously filed with the
Securities and Exchange Commission as an Exhibit to the Registrant's
Registration Statement on Form S-1 (No. 333- ) (the "Indemnification
Agreements"). The Indemnification Agreements provide the Company's officers
and directors with further indemnification to the maximum extent permitted by
the Delaware General Corporation Law. Reference is also made to Section 7 of
the Underwriting Agreement contained in Exhibit 1.1 hereto, indemnifying
officers and directors of the Company against certain liabilities, and Section
of the Amended and Restated Registration Rights Agreement contained in
Exhibit 4.3 hereto, indemnifying certain of the Company's stockholders,
including controlling stockholders, against certain liabilities.

II-1
<PAGE>

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

(a) Since June 1995, the Company has issued and sold the following
securities:

(1) The Company issued and sold 391,080 shares of its Common Stock to
employees and consultants for an aggregate purchase price of $124,009
pursuant to direct issuances and the exercise of options under its 1995
Stock Option Plan (Exhibit 10.6).

(2) On July 11, 1996, the Company issued 1,210,861 shares of its Series A
Preferred Stock at a per share price of $2.86, for an aggregate of
$3,463,062.46 to several investors.

(3) On September 16, 1997, the Company issued and sold an aggregate of
2,517,894 shares of its Series B Preferred Stock at a per share price of
$4.99 for an aggregate of $12,564,291.06 to several investors.

(b) The issuances described in Item 15(a)(1) were deemed exempt from
registration under the Securities Act in reliance upon Rule 701 promulgated
under the Securities Act. The issuances of the securities described in items
15(a)(2) through 15(a)(3) were deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act as
transactions by an issuer not involving any public offering. In addition, the
recipients of securities in each such transaction represented their intentions
to acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate legends were
affixed to the share certificates issued in such transactions. All recipients
had adequate access, through their relationships with the Company, to
information about the Company.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
1.1* Form of Underwriting Agreement among the Registrant, Deutsche Morgan
Grenfell, Inc., Hambrecht & Quist LLC and UBS Securities LLC (Draft
dated June , 1998).
3.1 Form of Registrant's Amended and Restated Certificate of Incorporation
to become effective upon the closing of the offering.
3.2 Form of Registrant's Bylaws.
4.1* Form of Registrant's Specimen Common Stock Certificate.
4.2 Amended and Restated Investor Rights Agreement, among the Registrant
and the investors and founders named therein, dated September 16,
1997.
4.3 Reference is made to Exhibits 3.1 and 3.2.
5.1* Opinion of Brobeck, Phleger & Harrison LLP, counsel for the
Registrant, with respect to the Common Stock being registered.
10.1 Form of Diamond Level Distributor Agreement.
10.2 Form of Platinum Level OEM Agreement.
10.3* Line of Credit Agreement with Bank One for $5,000,000 dated ,
1998.
10.4 Lease Agreement between Carrier Access Corporation and Cottonwood Land
and Farms Ltd. for facilities at 5395 Pearl Parkway, Boulder,
Colorado, dated June 1, 1995.
10.5 Amendment to Lease Agreement between Carrier Access Corporation and
Cottonwood Land and Farms Ltd. dated September 20, 1995.
10.6 Registrant's 1995 Stock Option Plan.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
10.7* Registrant's 1998 Stock Incentive Plan.
10.8* Registrant's 1998 Employee Stock Purchase Plan.
10.9 Form of Directors' and Officers' Indemnification Agreement.
10.10* Management Incentive Compensation Plan.
23.1 Consent of KPMG Peat Marwick LLP, Independent Public Accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion
filed as Exhibit 5.1).
24.1 Power of Attorney. Reference is made to Page II-4.
27.1 Financial Data Schedule. (In EDGAR format only)
</TABLE>
- --------
* To be filed by amendment.

(b)Financial Statement Schedules

(1) Report of Independent Auditors on Financial Statement Schedule

(2) Schedule II--Valuation and Qualifying Accounts

ITEM 17. UNDERTAKINGS

The Company hereby undertakes to provide to the Underwriters at the closing
specified in the Underwriting Agreement, certificates in such denominations
and registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation or the Bylaws of the Company, Indemnification Agreements entered
into between the Company and its officers and directors, the Underwriting
Agreement, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a director,
officer, or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered
hereunder, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.

The undersigned registrant hereby undertakes:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on this Registration Statement on Form S-1 and
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boulder, State of
Colorado, on this 29th day of May, 1998.

Carrier Access Corporation

/s/ Roger L. Koenig
By: _________________________________
Roger L. Koenig
President and Chief Executive
Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, jointly and severally, Roger Koenig and Nancy
G. Pierce, and each one of them, his or her true and lawful attorneys-in-fact
and agents, each with full power of substitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering
covered by this Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as
amended, and all post-effective amendments thereto, and to file the same, with
all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming that each of said attorneys-in-fact
and agents or any of them, or his or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the persons whose signatures appear
below, which persons have signed such Registration Statement in the capacities
and on the dates indicated:

Signature Title Date

/s/ Roger L. Koenig President, Chief Executive May 29, 1998
- ----------------------- Officer (Principal Executive
(Roger L. Koenig) Officer) and Chairman
of the Board of Directors

II-4
<PAGE>

SIGNATURE TITLE DATE

/s/ Nancy G. Pierce Vice President-Finance and May 29, 1998
- ----------------------- Administration, Chief Financial
(Nancy G. Pierce) Officer, Treasurer (Principal
Financial and Accounting
Officer), Secretary and Director

/s/ Douglas Carlisle Director May 29, 1998
- -----------------------
(Douglas Carlisle)

/s/ Joseph Graziano Director May 29, 1998
- -----------------------
(Joseph Graziano)

/s/ Ryal Poppa Director May 29, 1998
- -----------------------
(Ryal Poppa)

II-5

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Carrier Access Corporation

Under date of February 6, 1998 we reported on the balance sheets of Carrier
Access Corporation as of December 31, 1996 and 1997, and the related
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1997, which are included in
the prospectus. In connection with our audits of the aforementioned financial
statements, we also audited the related financial statement Schedule II,
Valuation and Qualifying Accounts, included in the registration statement.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

KPMG PEAT MARWICK LLP

Boulder, Colorado
February 6, 1998

S-1
<PAGE>

SCHEDULE II

CARRIER ACCESS CORPORATION

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED TO END
OF PERIOD OPERATIONS WRITE-OFFS OF PERIOD
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Ac-
counts
Year Ended:
December 31, 1995............ $ -- $ -- $ -- $ --
========== ============ ========== ============
December 31, 1996............ $ -- $ 20 $ -- $ 20
========== ============ ========== ============
December 31, 1997............ $ 20 $ 382 $ (4) $ 398
========== ============ ========== ============
</TABLE>

See accompanying independent auditors report.

S-2
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement among the Registrant, Deutsche Morgan
Grenfell, Inc., Hambrecht & Quist LLC and UBS Securities LLC (Draft
dated May , 1998).
3.1 Form of Registrant's Amended and Restated Certificate of Incorporation
to become effective upon the closing of the offering.
3.2 Form of Registrant's Bylaws.
4.1* Form of Registrant's Specimen Common Stock Certificate.
4.2 Amended and Restated Investor Rights Agreement, among the Registrant
and the investors and founders named therein, dated September 16,
1997.
4.3 Reference is made to Exhibits 3.1 and 3.2.
5.1* Opinion of Brobeck, Phleger & Harrison LLP, counsel for the
Registrant, with respect to the Common Stock being registered.
10.1 Form of Diamond Level Distributor Agreement.
10.2 Form of Platinum Level OEM Agreement.
10.3* Line of Credit Agreement with Bank One for $5,000,000 dated ,
1998.
10.4 Lease Agreement between Carrier Access Corporation and Cottonwood Land
and Farms Ltd. for facilities at 5395 Pearl Parkway, Boulder,
Colorado, dated June 1, 1995.
10.5 Amendment to Lease Agreement between Carrier Access Corporation and
Cottonwood Land and Farms Ltd. dated September 20, 1995.
10.6 Registrant's 1995 Stock Option Plan.
10.7* Registrant's 1998 Stock Incentive Plan.
10.8* Registrant's 1998 Employee Stock Purchase Plan.
10.9 Form of Directors' and Officers' Indemnification Agreement.
10.10* Management Incentive Compensation Plan.
23.1 Consent of KPMG Peat Marwick LLP, Independent Public Accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion
filed as Exhibit 5.1).
24.1 Power of Attorney. Reference is made to Page II-4.
27.1 Financial Data Schedule. (In EDGAR format only)
</TABLE>
- --------
* To be filed by amendment.

<PAGE>

EXHIBIT 3.1

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CARRIER ACCESS CORPORATION

Carrier Access Corporation, originally incorporated on June __, 1998,
restates the Certificate of Incorporation. This Amended and Restated
Certificate of Incorporation has been duly adopted in accordance with the
provisions of Sections 245 and 242 of the General Corporation Law of the State
of Delaware by the directors and stockholders of the Corporation and is set
forth in its entirety as follows:

FIRST: The name of this corporation is CARRIER ACCESS CORPORATION.

SECOND: The address, including street, number, city and country, of the
registered office of the corporation in the State of Delaware is 1209 Orange
Street, City of Wilmington 19801, County of New Castle; and the name of the
registered agent of the corporation in the State of Delaware at such address is
the Corporation Trust Company.

THIRD: The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the Delaware General
Corporation Law.

FOURTH:

This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares that the Corporation is authorized to issue is Sixty Five Million
(65,000,000) shares, Sixty Million (60,000,000) shares of which shall be Common
Stock, each having a par value of $0.001 (the "Common Stock") and Five Million
(5,000,000) shares of which shall be Preferred Stock, each having a par value of
$0.001 (the "Preferred Stock"). The Preferred Stock may be issued from time to
time in one or more series. The Board of Directors is hereby authorized to fix
or alter the dividend rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption, redemption price or prices, and the liquidation
preferences of any wholly unissued series of Preferred Stock, and the number of
shares constituting any such series and the designation thereof, or any of them;
and to increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series not
designated herein shall be so decreased, the shares constituting such decrease
shall resume the status that they had prior to the adoption of the resolution
originally fixing the numbers of shares of such series.

<PAGE>

FIFTH:

1. A director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derives an
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.

2. Any repeal or modification of this Article V shall be prospective
and shall not affect the rights under this Article V in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability
or indemnification.

SIXTH:

1. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, except as
provided in paragraph 2 of this Article VI, and all rights conferred upon the
stockholders herein are granted subject to this reservation.

2. Notwithstanding any other provisions of the Amended and Restated
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any affirmative note of the
holders of any particular class or series of the voting Stock required by law,
this Amended and Restated Certificate of Incorporation or any Preferred Stock
Designation, the affirmative vote of the holders of at least a majority of the
voting power of all of the then-outstanding shares of the Voting Stock, voting
together as a single class, shall be required to alter, amend or repeal Articles
V or VI.

[Rest of Page Intentionally Left Blank]
<PAGE>

IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by Roger L. Koenig, its
President and Chief Executive Officer, and attested to by Nancy G. Pierce, its
Secretary, on this __ day of June, 1998.

CARRIER ACCESS CORPORATION

By:
----------------------------------
Roger L. Koenig
President and Chief Executive Officer

ATTEST:

- ---------------------------------------
Nancy G. Pierce
Chief Financial Officer and Secretary

<PAGE>

EXHIBIT 3.2

BYLAWS

CARRIER ACCESS CORPORATION

A Delaware Corporation

ARTICLE I
---------

OFFICES
-------

Section 1. Registered Office. The registered office of Carrier Access
--------- -----------------
Corporation (the "Corporation") in the State of Delaware shall be at 1209 Orange
Street, Wilmington, New Castle Country. The name of the Corporation's
registered agent at such address shall be The Corporation Trust Company.

Section 2. Other Offices. The Corporation may also have offices at such
--------- -------------
other places, both within and without the State of Delaware, as the Company's
Board of Directors may from time to time determine or the business of the
Corporation may require.

ARTICLE II
----------

MEETING OF STOCKHOLDERS
-----------------------

Section 1. Place and Time of Meetings. An annual meeting of the
--------- --------------------------
stockholders shall be held for the purpose of electing directors and conducting
such other business as may come before the meeting. The date, time and place of
the annual meeting shall be determined by resolution of the Board of Directors.
Special meetings of stockholders for any other purpose may be held at such time
and place, within or without the State of Delaware, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof. Special
meetings of the stockholders may be called by the President for any purpose and
shall be called by the President or Secretary at the request in writing of a
majority of the Board of Directors, or at the request in writing of stockholders
owning at least fifty percent (50%) of the entire capital stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.

Section 2. Notice. Written or printed notice of every annual or special
--------- ------
meeting of the stockholders, stating the place, date, time, and, in the case of
special meetings, the purpose or purposes of such meeting, shall be given to
each stockholder entitled to vote at such meeting not less than ten (10) nor
more than sixty (60) days before the date of the meeting. All such notices
shall be delivered, either personally or by mail, by or at the direction of the
Board of Directors, the Chairman of the Board or the Secretary, and if mailed,
such notice shall be
<PAGE>

deemed to be delivered when deposited in the United States mail addressed to the
stockholder at his or her address as it appears on the records of the
Corporation, with postage prepaid. Business transacted at any special meeting
of stockholders shall be limited to the purpose stated in the notice.

Section 3. Stockholders List. The officer having charge of the stock
--------- -----------------
ledger of the Corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, specifying the address of and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.

Section 4. Quorum. The holders of a majority of the stock issued and
--------- ------
outstanding, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business,
except as otherwise provided by statute or by the certificate of incorporation.
If a quorum is not present, the holders of the shares present in person or
represented by proxy at the meeting and entitled to vote thereat, shall have the
power, by the affirmative vote of the holders of a majority of such shares, to
adjourn the meeting to another time and/or place. Unless the adjournment is for
more than thirty days or unless a new record date is set for the adjourned
meeting, no notice of the adjourned meeting need be given to any stockholder,
provided that the time and place of the adjourned meeting were announced at the
meeting at which the adjournment was taken. At the adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting.

Section 5. Vote Required. When a quorum is present or represented by
--------- -------------
proxy at a meeting, the vote of the holders of a majority of the shares present
in person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which, by express provisions of an
applicable statute or of the certificate of incorporation, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.

Section 6. Voting Rights. Except as otherwise provided in the certificate
--------- -------------
of incorporation and subject to Section 3 of Article VI hereof, every
stockholder shall, at every meeting of the stockholders, be entitled to one vote
in person or by proxy for each share of capital stock held by such stockholder,
except that no proxy shall be voted after three years from its date, unless such
proxy provides for a longer period.

Section 7. Nomination of Directors. Nominations for election to the Board
--------- -----------------------
of Directors must be made by the Board of Directors or by any stockholder of any
outstanding class of capital stock of the Corporation entitled to vote for the
election of directors. Nominations, other than those made by the Board of
Directors of the Corporation, must be

2
<PAGE>

preceded by notification in writing received by the Secretary of the Corporation
not less than twenty (20) days nor more than sixty (60) days prior to any
meeting of stockholders called for the election of directors. Such notification
shall contain the written consent of each proposed nominee to serve as a
director if so elected and the following information as to each proposed nominee
and as to each person, acting alone or in conjunction with one or more other
persons as a partnership, limited partnership, syndicate or other group, who
participates or is expected to participate in making such nomination or in
organizing, directing or financing such nomination or solicitation of proxies to
vote for the nominee:

(a) the name, age, residence, address, and business address of each
proposed nominee and of each such person;

(b) the principal occupation or employment, the name, type of business and
address of the corporation or other organization in which such employment is
carried on of each proposed nominee and of each such person;

(c) the amount of stock of the Corporation owned beneficially, either
directly or indirectly, by each proposed nominee and each such person; and

(d) a description of any arrangement or understanding of each proposed
nominee and of each such person with each other or any other person regarding
future employment or any future transaction to which the Corporation will or may
be a party.

The presiding officer of the meeting shall have the authority to determine
and declare to the meeting that a nomination not preceded by notification made
in accordance with the foregoing procedure shall be disregarded.

Section 8. At any meeting of the stockholders, only such business shall be
---------
conducted as shall have been brought before the meeting (a) pursuant to the
Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the Corporation who is a stockholder of
record at the time of giving of the notice provided for in this Bylaw, who shall
be entitled to vote at such meeting and who complies with the notice procedures
set forth in this Bylaw.

For business to be properly brought before any meeting by a stockholder
pursuant to clause (c) of this Section 8, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than twenty (20) days
nor more than sixty (60) days prior to the date of the meeting. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the meeting (a) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, and the name
and address of the beneficial owner, if any, on whose behalf the proposal is
made, (c) the class and number of shares of the Corporation which are owned
beneficially and of record by such stockholder of record and by the beneficial
owner, if any,

3
<PAGE>

on whose behalf of the proposal is made and (d) any material interest of such
stockholder of record and the beneficial owner, if any, on whose behalf the
proposal is made in such business.

Notwithstanding anything in these bylaws to the contrary, no business shall
be conducted at a meeting except in accordance with the procedures set forth in
this Section 8. The presiding officer of the meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting and in accordance with the procedures prescribed by
this Section 8, and if such person should so determine, such person shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted. Notwithstanding the foregoing provisions of
this Section 8, a stockholder shall also comply with all applicable requirements
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder with respect to the matters set forth in this Section 8.

Section 9. Effective upon the closing of the Corporation's initial public
---------
offering of securities pursuant to a registration statement filed under the
Securities Act of 1933, as amended, the stockholders of the Corporation may not
take action by written consent without a meeting but must take any such actions
at a duly called annual or special meeting in accordance with these bylaws and
the certificate of incorporation.

ARTICLE III
-----------

DIRECTORS
---------

Section 1. Number, Election and Term of Office. The number of directors
--------- -----------------------------------
which constitute the Board of Directors shall be fixed by resolution of the
Board of Directors, with the number initially being seven (7) persons. The
number of directors may be fixed at any time by the affirmative vote of a
majority of the stockholders or by the affirmative vote of a majority of the
directors at a regular or special meeting called for that purpose, provided,
however, that no vote to decrease the number of the directors of the Corporation
shall shorten the term of any incumbent director.

The directors shall be elected at the annual meeting of stockholders,
except as provided in Section 3 of this Article III, and each director elected
shall hold office until the next annual meeting of stockholders and until a
successor is duly elected and qualified or until his or her death, resignation
or removal as hereinafter provided. Directors need not be stockholders.

Section 2. Removal. Any director or the entire Board of Directors may be
--------- -------
removed at any time, with or without cause, by the holders of a majority of the
shares of stock of the Corporation then entitled to vote at an election of
directors, except as otherwise provided by statute.

Section 3. Vacancies. Vacancies and newly created directorships resulting
--------- ---------
from any increase in the authorized number of directors may be filled by a
majority of the directors

4
<PAGE>

then in office, though less than a quorum, and each director so chosen shall
hold office until the next annual meeting of stockholders and until a successor
is duly elected and qualified or until his or her earlier death, resignation or
removal as hereinafter provided. If there are no directors in office, then an
election of directors may be held in the manner provided by statute.

Section 4. Place of Meetings. The Board of Directors of the Corporation
--------- -----------------
may hold meetings, both regular and special, either within or without the State
of Delaware.

Section 5. Annual Meeting. The first meeting of each newly elected Board
--------- --------------
of Directors shall be held at such time and place as shall be fixed by the vote
of the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.

Section 6. Other Meetings and Notice. Regular meetings of the Board of
--------- -------------------------
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board. Special meetings of the Board of
Directors may be called by or at the request of the President or the Chairman of
the Board on at least two (2) hours notice to each director either personally,
or by telephone, telegram or facsimile. In like manner and on like notice, the
President or Secretary must call a special meeting upon the written request of a
majority of directors unless the Board consists of only one director, in which
case special meetings shall be called by the President or Secretary in like
manner and on like notice on the written request of the sole director. A
written waiver of notice, signed by the person entitled thereto, whether before
or after the time of the meeting stated therein, shall be deemed equivalent to
notice.

Section 7. Quorum. A majority of the total number of directors shall
--------- ------
constitute a quorum for the transaction of business. The vote of a majority of
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. If a quorum is not present at any meeting of the Board
of Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.

Section 8. Committees. The Board of Directors may, by resolution passed
--------- ----------
by a majority of the whole Board, designate one or more committees. Each
committee shall consist of one or more of the directors of the Corporation,
which, to the extent provided in such resolution and not otherwise limited by
statute, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers that
may require it; but no such committee shall have the power or authority in
reference to amending the certificate of incorporation, adopting an agreement of
merger or consolidation,

5
<PAGE>

recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the bylaws of the Corporation; and, unless the resolution or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. The Board of Directors may designate one or more directors as alternate
members of any committee who may replace any absent or disqualified member at
any meeting of the committee. Such committee or committees shall have such name
or names as may be determined from time to tine by resolution adopted by the
Board of Directors. Each committee shall keep regular minutes of its meetings
and shall report the same to the directors when required.

Section 9. Informal Action. Any action required or permitted to be taken
--------- ---------------
at any meeting of the Board of Directors, or of any committee thereof, may be
taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing and the writing or writings are filed with
the minutes of proceedings of the Board or committee.

Section 10. Participation in Meetings. Unless otherwise restricted by the
---------- -------------------------
certificate of incorporation or these bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or any committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.

Section 11. Compensation of Directors. Unless otherwise restricted by the
---------- -------------------------
certificate of incorporation or these bylaws, the Board of Directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.

ARTICLE IV
----------

OFFICERS
--------

Section 1. Number. The officers of the Corporation shall be elected by
--------- ------
the Board of Directors and shall consist of a President, a Secretary, a
Treasurer, and such other Vice Presidents, Assistant Secretaries and Assistant
Treasurers as may be deemed necessary or desirable by the Board of Directors.
Any number of offices may be held by the same person. The Board of Directors
may elect from among its members a Chairman of the Board and a Vice Chairman of
the Board. The Board of Directors may also appoint such other officers

6
<PAGE>

and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined by the Board.

Section 2. Election and Term of Office. The officers of the Corporation
--------- ---------------------------
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of stockholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as may be convenient. Vacancies may be filled or new
offices created and filled at any meeting of the Board of Directors. Each
officer shall hold office until the next annual meeting of the Board of
Directors and until a successor is duly elected and qualified or until his or
her earlier death, resignation or removal as hereinafter provided.

Section 3. Removal. Any officer or agent elected by the Board of
--------- -------
Directors may be removed by the affirmative vote of a majority of the Board of
Directors whenever, in its judgment, the best interests of the Corporation would
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed.

Section 4. Vacancies. A vacancy in any office because of death,
--------- ---------
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term by the Board of Directors
then in office.

Section 5. Compensation. Compensation of all officers shall be fixed by
--------- ------------
the Board of Directors, and no officer shall be prevented from receiving such
compensation by virtue of the fact that he or she is also a director of the
Corporation. The salaries of agents of the Corporation shall, unless fixed by
the Board, be fixed by the President or any Vice President of the Corporation.

Section 6. Chairman of the Board. The Chairman of the Board, if any,
--------- ---------------------
shall preside at all meetings of the Board of Directors and of the stockholders
at which he shall be present. He or she shall have and may exercise such powers
as are, from time to time, assigned to him by the Board and as may be provided
by law. In the absence of the Chairman of the Board, the Vice Chairman of the
Board, if any, shall preside at all meetings of the Board of Directors and of
the stockholders at which he shall be present. He shall have and may exercise
such powers as are, from time to time, assigned to him by the Board and as may
be provided by law.

Section 7. The President. The President shall be the chief executive
--------- -------------
officer of the Corporation. In the absence of the Chairman and Vice Chairman of
the Board, the President shall preside at all meetings of the Board of Directors
and all meetings of the stockholders and shall have such other powers and
perform such duties as are specified in these bylaws and as may from time to
time be assigned to him or her by the Board of Directors. In the event there is
a deadlock among directors, the President shall be empowered to cast the
deciding vote.

The President shall have general and active management of the business of
the Corporation and shall see that all orders and resolutions of the Board of
Directors are carried

7
<PAGE>

into effect. The President shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. The President
shall have general powers of supervision and shall be the final arbitrator of
all differences between officers of the Corporation, subject only to the Board
of Directors.

Section 8. Vice Presidents. The Vice President, if any (or in the event
--------- ---------------
there be more than one Vice President, the Vice Presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election), shall, in the absence or upon the disability of the
President, perform the duties and exercise the powers of the President and shall
perform such other duties and have such other powers as the Board of Directors
may, from time to time, determine or these bylaws may prescribe.

Section 9. The Secretary and Assistant Secretaries. The Secretary shall
--------- ---------------------------------------
attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings of the Corporation
and the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors; shall perform such other duties as
may be prescribed by the Board of Directors or President, under whose
supervision he or she shall be; shall have custody of the corporate seal of the
Corporation, if any there be; and the Secretary, or an Assistant Secretary, if
any (or in the event there be more than one, the Assistant Secretaries in the
order designated by the directors or in the absence of any designation, then in
the order of their election), shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by his or her
signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his or her signature. The
Assistant Secretary, if any (or in the event there be more than one, the
Assistant Secretaries in the order designated by the directors, or in the
absence of any designation, then in the order of their election), shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.

Section 10. The Treasurer and Assistant Treasurer. The Treasurer shall be
---------- -------------------------------------
the chief financial officer of the Corporation; shall have the custody of the
corporate funds and securities; shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation; shall deposit
all monies and other valuable effects in the name and to the credit of the
Corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements; and shall render to the President and the Board of
Directors, at its regular meeting or when the Board of Directors so requires, an
account of the Corporation. If required by the Board of Directors, the
Treasurer shall give the Corporation a bond (which shall be rendered every six
years) in such sums and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of the office
of Treasurer and for the restoration to the Corporation, in case of death,
resignation, retirement, or removal from office, of all books, papers, vouchers,
money, and other property

8
<PAGE>

of whatever kind in the possession or under the control of the Treasurer
belonging to the Corporation. The Assistant Treasurer, if any (or in the event
there be more than one, the Assistant Treasurers in the order designated by the
directors, or in the absence of any designation, then in the order of their
election), shall, in the absence of disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.

Section 11. Other Officers, Assistant Officers and Agents. Officers,
---------- ---------------------------------------------
assistant officers and agents, if any, other than those whose duties are
provided for in these bylaws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the Board of Directors.

ARTICLE V
---------

INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
-------------------------------------------------

Section 1. The Corporation shall indemnify its officers and directors to
---------
the full extent and in the manner permitted by the General Corporation Law of
Delaware against expenses (including attorneys' fees), judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with any proceeding arising by reason of the fact such person is or was an
officer or director of the Corporation. Reasonable expenses incurred by a
director or officer of the Corporation in defending a civil or criminal action,
suit or proceeding by reason of the fact that he or she is or was a director or
officer of the Corporation (or was serving at the Corporation's request as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise) shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of a statement from
such director or officer requesting such advance and an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
Corporation as authorized by relevant sections of the General Corporation Law of
Delaware.

The Corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (in addition to directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an employee or agent of the
Corporation. For purposes of this Section, an "employee" or "agent" of the
Corporation includes any person (i) who is or was an employee or agent of the
Corporation, or (ii) who is or was serving at the request of the Corporation as
an employee or agent of another corporation, partnership, joint venture, trust
or other enterprise.

A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its

9
<PAGE>

stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, or (iv) for any transaction from which the
director derived any improper personal benefit. If the Delaware General
Corporation Law is hereafter amended to authorize, with the approval of a
corporation's stockholders, further reductions in the liability of the
corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended. Any repeal or
modification of the foregoing provisions of this Article V, Section 1 by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.

The Corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.

The foregoing rights of indemnification shall not be deemed exclusive of
any other rights to which any director or officer may be entitled apart from the
provisions of this Article V.

Section 2. The indemnification and advancement of expenses provided by, or
---------
granted pursuant to this Article V shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

ARTICLE VI
----------

CERTIFICATES OF STOCK
---------------------

Section 1. Form. Every holder of stock in the Corporation shall be
--------- ----
entitled to have a certificate signed by or in the name of the Corporation by,
the Chairman of the Board or by the President or a Vice President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation, certifying the number of shares owned by him or her in the
Corporation. Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent other than the Corporation or its employee or (2) by a
registrar, other than the Corporation or its employee, the signature of any such
chairman of the Board, Chief Executive Officer, President, Vice President,
Secretary, or Assistant Secretary may be facsimile. In case any officer who has
signed, or whose facsimile signature has been used on, any such certificate
shall cease to be such officer of the Corporation, whether because of death,
resignation or otherwise, before such certificate has been delivered by the
Corporation, such certificate may nevertheless be issued and delivered as though
the person who signed

10
<PAGE>

such certificate or whose facsimile signature has been used on any such
certificate had not ceased to be such officer of the Corporation. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered in the books of the
Corporation. All certificates surrendered to the Corporation for transfer shall
be canceled, and no new certificate shall be issued in replacement until the
former certificate for a like number of shares shall have been surrendered or
canceled, except as otherwise provided in Section 2 with respect to lost, stolen
or destroyed certificates.

If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate that the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designation, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.

Section 2. Lost Certificates. The Board of Directors may direct a new
--------- -----------------
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, or destroyed
certificate, or his or her legal representative, to give the Corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.

Section 3. Fixing a Record Date. The Board of Directors may fix in
--------- --------------------
advance a date, not more than sixty (60) nor less than ten (10) days preceding
the date of any meeting of stockholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining any consent, as a record date for the determination of
the stockholders entitled to notice of, and to vote at, any such meeting, and
any adjournment thereof, or entitled to receive payment of any such dividends or
to any such allotment to rights, or to exercise the rights in respect to any
such change, conversion, or exchange of capital stock, or to give such consent,
and in such case such stockholders and only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to such notice of,
and to vote at, such meeting and any adjournment thereof, or to receive payment
of such dividends or to receive such allotment of rights, or to exercise such
rights, or to give such consent, as the case may be notwithstanding any transfer
of any stock on the books of the Corporation after any such record date fixed as
aforesaid. If no record date is

11
<PAGE>

fixed, the time for determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. The
time for determining stockholders for stock of the Corporation, subject to the
provisions of the certificate of incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock subject to
the provisions of the certificate of incorporation. Before payment of any
dividend there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the directors shall
think in the best interests of the Corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.

Section 4. Securities Owned by Corporation. Voting securities in any
--------- -------------------------------
other corporation or other enterprise held by the Corporation shall be voted by
the President, unless the Board of Directors specifically confers authority to
vote with respect thereto, which may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.

Section 5. Registered Stockholders. The Corporation shall be entitled to
--------- -----------------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on the books as the owner of
shares and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.

ARTICLE VII
-----------

MISCELLANEOUS
-------------

Section 1. Dividends. Subject to the provisions of the certificate of
--------- ---------
incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the Corporation as and when they deem expedient. Before declaring any
dividend, there may be set apart out of any funds of the Corporation available
for dividends such sum as the directors from time to time in their discretion
deem proper for working capital or as a reserve fund to meet other contingencies
or for equalizing dividends or for such other purposes as the directors shall
deem conducive to the interests of the Corporation.

Section 2. Fiscal Year. The fiscal year of the Corporation shall be
--------- -----------
determined by the Board of Directors.

12
<PAGE>

Section 3. Checks. All checks or demands for money and notes of the
--------- ------
Corporation shall be signed by such officer or such other person as the Board of
Directors may from time to time designate.

Section 4. Notice and Waiver of Notice. Whenever any notice is required
--------- ---------------------------
to be given, personal notice shall not be necessary unless expressly so stated,
and any notice so required shall be deemed to be sufficient if given by
depositing the same in the United States mail, first class mail (air-mail to an
address outside of the United States), postage prepaid, addressed to the person
entitled thereto at his or her address as it appears on the records of the
Corporation, in which case such notice shall be deemed given on the day of such
mailing, unless it is notice of a director's meeting, in which case such notice
shall be deemed given three days after the date of such mailing. Notice may
also be given personally, against receipt, or by telegram, telex or similar
communication and notice so given shall be deemed given when so delivered
personally or when delivered for transmission.

Whenever any notice whatsoever is required or permitted to be given under
the provisions of any law, or under the provisions of the certificate of
incorporation or these bylaws, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time such notice
is required to be given, shall be deemed equivalent thereto. A telegram, telex
or similar communication waiving any such notice sent by a person entitled to
notice shall be deemed equivalent to a waiver in writing signed by such person.
Neither the business nor the purpose of any meeting need be specified in any
waiver.

Section 5. Seal. The Board of Directors may adopt a corporate seal having
--------- ----
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.

ARTICLE VIII
------------

AMENDMENTS
----------

These bylaws may be amended, altered or repealed and new bylaws adopted at
any meeting of the Board of Directors by a majority vote. The fact that the
power to adopt, amend, alter or repeal the bylaws has been conferred upon the
Board of Directors shall not divest the stockholders of the same powers.

<PAGE>

EXHIBIT 4.2

- --------------------------------------------------------------------------------

CARRIER ACCESS CORPORATION

AMENDED AND RESTATED

INVESTOR RIGHTS AGREEMENT

SEPTEMBER 16, 1997

- --------------------------------------------------------------------------------
<PAGE>

TABLE OF CONTENTS

PAGE

1. DEFINITIONS.......................................................... 1

2. RESTRICTIONS ON TRANSFER............................................. 2

2.1 Restrictions on Transfer........................................ 2

2.2 "Market Stand Off" Agreement.................................... 4

3. REGISTRATION......................................................... 4

3.1 Demand Registration............................................. 4

3.2 Piggyback Registrations......................................... 6

3.3 Form S-3 Registration........................................... 6

3.4 Registration Expenses........................................... 7

3.5 Obligations of the Company...................................... 8

3.6 Termination of Registration Rights.............................. 8

3.7 Furnish Information............................................. 9

3.8 Delay of Registration........................................... 9

3.9 Assignment of Registration Rights............................... 9

3.10 Amendment of Registration Rights............................... 9

3.11 Limitation on Subsequent Registration Rights................... 9

3.12 Indemnification................................................ 9

4. COVENANTS OF THE COMPANY............................................. 12

4.1 Basic Financial Information and Reporting....................... 12

4.2 Inspection Rights............................................... 12

4.3 Confidentiality of Records...................................... 13

4.4 Reservation of Common Stock..................................... 13

4.5 SEC Compliance.................................................. 13

4.6 Stock Vesting................................................... 13

4.7 Prompt Payment of Taxes, Etc.................................... 13

4.8 Maintenance of Properties and Lease............................. 14

4.9 Insurance....................................................... 14

4.10 Independent Accountants........................................ 14

i.
<PAGE>

Table Of Contents
(CONTINUED)

PAGE

4.11 Compliance with Laws........................................... 14

4.12 Maintenance of Corporate Existence, Etc........................ 14

4.13 Termination of Covenants....................................... 15

5. RIGHTS OF FIRST REFUSAL.............................................. 15

5.1 Subsequent Offerings............................................ 15

5.2 Exercise of Rights.............................................. 15

5.3 Issuance of Equity Securities to Other Persons.................. 15

5.4 Termination of Rights of First Refusal.......................... 16

5.5 Transfer of Rights of First Refusal............................. 16

5.6 Excluded Securities............................................. 16

6. MISCELLANEOUS........................................................ 17

6.1 Governing Law................................................... 17

6.2 Successors and Assigns.......................................... 17

6.3 Severability.................................................... 17

6.4 Amendment and Waiver............................................ 17

6.5 Notices, etc.................................................... 17

6.6 Attorneys' Fees................................................. 17

6.7 Titles and Subtitles............................................ 18

6.8 Complete Agreement.............................................. 18

6.9 Counterparts.................................................... 18

ii.
<PAGE>

CARRIER ACCESS CORPORATION

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as of the
16th day of September, 1997, by and among CARRIER ACCESS CORPORATION, a Colorado
corporation (the "Company"), and the purchasers of the Company's Series A
Preferred Stock (the "Series A Stock") and Series B Preferred Stock ("Series B
Stock") set forth on Exhibit A hereto (referred to hereinafter as the
"Investors" and each individually as an "Investor").

WHEREAS, pursuant to Section 6.4 of the Amended and Restated Investor
Rights Agreement between the Company and certain purchasers of the Company's
Series A Stock dated July 11, 1996 (the "Prior Agreement"), the Prior Agreement
may be amended with the written consent of the Holders of a majority of the
Registrable Securities (as defined therein); and

WHEREAS, this Agreement has been executed and consented to by the Holders
of a majority of the Registrable Securities under the Prior Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto hereby agree to amend and restate the Prior Agreement as
follows:

1. DEFINITIONS

1.1 "COMMON STOCK" shall mean the Common Stock, $0.01 par value per share,
of the Company.

1.2 "EQUITY SECURITIES" shall mean (i) any Common Stock, Preferred Stock
or other security of the Company, (ii) any security convertible into any Common
Stock, Preferred Stock or other security (including any option to purchase such
a convertible security), (iii) any security carrying any warrant or right to
subscribe to or purchase any Common Stock, Preferred Stock or other security or
(iv) any such warrant or right.

1.3 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.

1.4 "FORM S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other document filed by the Company with
the SEC.

1.5 "HOLDER" means any Investor owning of record Registrable Securities
that have not been sold to the public or any assignee of record of such
Registrable Securities in accordance with Section 3.9 hereof.

1.
<PAGE>

1.6 "INITIAL OFFERING" shall mean the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.

1.7 "PREFERRED STOCK" shall mean the Preferred Stock, $0.10 par value per
share, of the Company.

1.8 The terms "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.

1.9 The term "REGISTRABLE SECURITIES" means (a) Common Stock of the
Company issued or issuable upon conversion of the Series A Stock and Series B
Stock and (b) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, such above-described securities. Notwithstanding the foregoing,
Registrable Securities shall not include any securities sold by a person to the
public either pursuant to a registration statement or Rule 144 or sold in a
private transaction in which the transferor's rights under Section 3 of this
Agreement with respect to such registration rights are not assigned.

1.10 "REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.

1.11 "RULE 144" shall mean Rule 144 of the rules and regulations
promulgated under the Securities Act.

1.12 "SEC" or "COMMISSION" means the Securities and Exchange Commission.

1.13 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

2. RESTRICTIONS ON TRANSFER

2.1 RESTRICTIONS ON TRANSFER.

(A) Each Holder agrees not to make any disposition of all or any
portion of the Registrable Securities unless and until the transferee has agreed
in writing for the benefit of the Company to be bound by this Section 2.1,
provided and to the extent such Section is then applicable and:
<PAGE>

(I) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or

(II) (A) Such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (B) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144.

(III) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A) a partnership to its partners in
accordance with partnership interests, (B) a corporation to its shareholders in
accordance with their interest in the corporation, (C) a limited liability
company to its members or former members in accordance with membership interest,
(D) by a trust to its beneficiaries in accordance with their interests in the
trust or (E) to the Holder's family member or trust for the benefit of an
individual Holder, provided the transferee will be subject to the terms of this
Agreement to the same extent as if he were an original Holder hereunder.

(B) Each certificate representing Registrable Securities shall
(unless otherwise permitted by the provisions of the Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws or as
provided elsewhere in this Agreement):

First Legend:
------------

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION
IS NOT REQUIRED.

Second Legend:
-------------

THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT IN COMPLIANCE WITH
THE AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT DATED SEPTEMBER 16,
1997, COPIES OF WHICH ARE ON FILE AT THE OFFICE OF THE ISSUER.

3.
<PAGE>

(C) The Company shall reissue promptly unlegended certificates at the
request of any holder thereof if the holder shall have obtained an opinion of
counsel (which counsel may be counsel to the Company) reasonably acceptable to
the Company to the effect that the securities proposed to be disposed of may
lawfully be so disposed of without registration, qualification or legend.

(D) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.

2.2 "MARKET STAND OFF" AGREEMENT. Each Holder hereby agrees that during
the one hundred eighty (180) day period following the effective date of a
registration statement of the Company filed under the Securities Act, it shall
not, to the extent requested by the Company and the managing underwriter, sell
or otherwise transfer or dispose of (other than to donees who agree to be
similarly bound) any Common Stock of the Company held by it at any time during
such period except Common Stock included in such registration; provided,
however, that:

(A) Such agreement shall be applicable only to the Company's Initial
Offering;

and

(B) All officers and directors of the Company and all other persons
with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements.

In order to enforce the foregoing covenant, the Company may impose stop-
transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.

3. REGISTRATION

3.1 DEMAND REGISTRATION.

(A) Subject to the conditions of this Section 3.1, if the Company
shall receive a written request from the Holders of fifty percent (50%) or more
of the Registrable Securities then outstanding (the "Initiating Holders") that
the Company effect a registration statement under the Securities Act covering
the registration of Registrable Securities, then the Company shall, within
thirty (30) days of the receipt thereof, give written notice of such request to
all Holders, and subject to the limitations of this Section 3.1, use its best
efforts to effect, as soon as practicable, the registration under the Securities
Act of all Registrable Securities that the Holders request to be registered. The
Company shall use its best efforts to keep such registration current for a
period of six (6) months following the effectiveness of such registration
statement.

(B) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 3.1
and the Company shall include such information in the written notice referred to
in Section 3.1(a). In such event, the right of any

4.
<PAGE>

Holder to include its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders (which underwriter or underwriters shall be reasonably acceptable to the
Company). Notwithstanding any other provision of this Section 3.1, if the
underwriter advises the Company that marketing factors require a limitation of
the number of securities to be underwritten (including Registrable Securities)
then the Company shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares that
may be included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including Initiating Holders). Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration.

(I) prior to the third anniversary of the date of this
Agreement, provided that this restriction shall not apply if the Company has
effected an Initial Offering; or

(II) after the Company has filed two (2) registration
statements pursuant to this Section 3.1, and either: (A) such registrations have
been declared or ordered effective; or (B) the Initiating Holders do not pay or
reimburse the Company for the fees and expenses incurred in connection with the
registration and the request for such registration has been subsequently
withdrawn by the Initiating Holders, unless the withdrawal is based upon
material adverse information concerning the Company of which the Initiating
Holders were not aware at the time of such request; or

(III) during the period starting with the date of filing of, and
ending on the date one hundred eighty (180) days following the effective date of
the registration statement pertaining to the Initial Offering; provided that the
Company makes reasonable good faith efforts to cause such registration statement
to become effective; or

(IV) if within thirty (30) days of receipt of a written request
from Initiating Holders pursuant to Section 3.1(a), the Company gives notice to
the Holders of the Company's intention to make its Initial Offering within
ninety (90) days; or

(V) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 3.1, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than one hundred eighty (180) days after receipt of the request of
the Initiating Holders;

5.
<PAGE>

provided that the right to delay a request under either this Section or Section
3.3(b)(iii) shall be exercised by the Company, in aggregate, not more than once.

3.2 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans and corporate reorganizations) and will afford each such Holder an
opportunity to include in such registration statement all or part of such
Registrable Securities held by such Holder. Each Holder desiring to include in
any such registration statement all or any part of the Registrable Securities
held by it shall, within fifteen (15) days after receipt of the above-described
notice from the Company, so notify the Company in writing. Such notice shall
state the intended method of disposition of the Registrable Securities by such
Holder. If a Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.

If the registration statement under which the Company gives notice under
this Section 3.2 is for an underwritten offering, the Company shall so advise
the Holders of Registrable Securities. In such event, the right of any such
Holder to be included in a registration pursuant to this Section 3.2 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting. If any Holder disapproves of the terms of any such underwriting,
he may elect to withdraw therefrom by written notice to the Company and the
underwriter, delivered at least five (5) days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be withdrawn from the registration. If the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that may be included
in the underwriting shall be allocated as follows: (i) first, to the Company,
(ii) second to the Holders on a pro rata basis based on the total number of
Registrable Securities held by the Holders, and (iii) third, to any shareholder
of the Company (other than a Holder) on a pro rata basis. In no event will
shares of any other selling shareholder be included in such registration which
would reduce the number of shares which may be included by the Holders without
the written consent of Holders of a majority of the Registrable Securities
proposed to be sold in the offering.

3.3 FORM S-3 REGISTRATION. In case the Company shall receive from
any Holder or Holders of Registrable Securities a written request or requests
that the Company effect a registration on Form S-3 (or any successor to Form S-
3) or any similar short-form registration statement and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:

6.
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(A) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and

(B) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 3.3:

(I) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or

(II) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $500,000, or

(III) if the Company shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors of the Company stating that, in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than one hundred eighty (180) days after receipt of the
request of the Holder or Holders under this Section 3.3; provided, that the
right to delay a request under either this Section or Section 3.1(c)(v) shall be
exercised by the Company, in aggregate, not more than once, or

(IV) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.

(C) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders.

3.4 REGISTRATION EXPENSES. The Company shall bear all fees and expenses
incurred in connection with any registration under this Agreement, including
without limitation all registration, filing, qualification, printers' and
accounting fees, fees and disbursements of counsel to the Company, and the
reasonable fees and disbursements of a single counsel to the selling Holders,
except that each participating Holder shall bear its proportionate share of all
amounts payable to underwriters in connection with such offering for discounts
and commissions. The Company shall not, however, be required to pay for
expenses of any registration proceeding begun pursuant to Sections 3.1 or 3.3,
the request of which has been subsequently withdrawn by

7.
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the Initiating Holders unless the withdrawal is based upon material adverse
information concerning the Company of which the Initiating Holders were not
aware at the time of such request.

3.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:

(A) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to ninety (90) days.

(B) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.

(C) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.

(D) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.

(E) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

(F) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such Holder, prepare and
furnish to such Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statement therein not misleading or
incomplete in the light of the circumstances then existing;

8.
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(G) Cause all such Registrable Securities to be listed on each
securities exchange or quotation system on which similar securities issued by
the Company are then listed or quoted;

(H) Otherwise use its best efforts to comply with the securities laws
of the United States and other applicable jurisdictions and all applicable rules
and regulations of the SEC and comparable governmental agencies in other
applicable jurisdictions and make generally available to its holders, in each
case as soon as practicable, but not later than 45 days after the close of the
period covered thereby, an earnings statement of the company which will satisfy
the provisions of Section 11(a) of the Securities Act;

(I) Otherwise cooperate with the underwriter or underwriters, the
Commission and other regulatory agencies and take all actions and execute and
deliver or cause to be executed and delivered all documents necessary to effect
the registration of any Registrable Securities under this Section 3.

3.6 TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to
request inclusion of Registrable Securities in any registration pursuant to this
Section 3 shall terminate when (i) all Registrable Securities beneficially owned
by such Holder may be sold in a three-month period under Rule 144(k), and (ii)
the Company's Common Stock is listed on a national securities exchange or traded
in The Nasdaq Stock Market; provided, however, that the provisions of this
Section 3.6 shall not apply to any Holder of Registrable Securities representing
more than five percent (5%) of the Company's then-outstanding Common Stock.

3.7 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 3 that
the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.

3.8 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 3.

3.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Section 3 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (i) is a
subsidiary, parent, general partner, limited partner, retired partner or trust
beneficiaries of a Holder, (ii) is a Holder's family member or trust for the
benefit of an individual Holder, or (iii) acquires at least one hundred thousand
(100,000) shares of Registrable Securities (as adjusted for stock splits, stock
dividends and combinations); provided, however, (A) the transferor shall, within
ten (10) days after such transfer, furnish to the Company written notice of the
name and address of such transferee or assignee and the securities with respect
to which such registration rights are being assigned and (B) such transferee
shall agree to be subject to all restrictions set forth in this Agreement.

3.10 AMENDMENT OR WAIVER OF REGISTRATION RIGHTS. Any provision of Section
3 of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
a majority of the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 3.10 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Agreement, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.

3.11 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. The holders of the
Series A Stock consent to the amendment and restatement of the Prior Agreement
and the grant of registration rights under this Agreement to the holders of the
Series B Stock. After the date of this Agreement, the Company shall not, without
the prior written consent of the holders of a majority of the Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company that would grant such holder registration rights
senior to those granted to the Holders hereunder.

9.
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3.12 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 3.1, 3.2 or 3.3:

(A) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers, directors and legal counsel
of each Holder, any underwriter (as defined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided however, that the indemnity
agreement contained in this Section 3.12(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.

(B) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers, and legal counsel and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will reimburse any legal
or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 3.12(b) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder, which
consent shall not be unreasonably withheld; provided further, that in no event
shall any indemnity under this Section 3.12(b) exceed the net proceeds from the
offering received by such Holder.

(C) Promptly after receipt by an indemnified party under this Section
3.12 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 3.12, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or reasonably likely differing interests between such indemnified
party and any other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if materially prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 3.12, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 3.12. The indemnifying party in any action shall have the right to
settle such action on terms determined by the indemnifying party; provided that
such settlement has no material adverse financial or business impact on the
indemnified party.

(D) If the indemnification provided for in this Section 3.12 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.

(E) The obligations of the Company and Holders under this Section
3.12 shall survive completion of any offering of Registrable Securities in a
registration statement. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.

10.
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4. COVENANTS OF THE COMPANY

4.1 BASIC FINANCIAL INFORMATION AND REPORTING.

(A) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.

(B) As soon as practicable after the end of each fiscal year of the
Company, and in any event within 120 days thereafter, the Company will furnish
each holder of 100,000 shares or greater of Registrable Securities an audited
consolidated balance sheet of the Company, as at the end of such fiscal year, an
audited consolidated statement of income and an audited consolidated statement
of cash flows of the Company, for such year, all prepared in accordance with
generally accepted accounting principles and setting forth in each case, in
comparative form, the figures for the previous fiscal year, all in reasonable
detail. Such financial statements shall be accompanied by a report and opinion
thereon by independent public accountants of national standing selected by the
Company's Board of Directors and shall be certified by the chief financial
officer of the Company.

(C) The Company will furnish each holder of 100,000 shares or greater
of Registrable Securities, as soon as practicable after the end of the first,
second, third and fourth quarterly accounting periods in each fiscal year of the
Company, and in any event within forty-five (45) days thereafter, an unaudited
consolidated balance sheet of the Company as of the end of each such quarterly
period, an unaudited consolidated statement of income and an unaudited
consolidated statement of cash flows of the Company for such period and for the
current fiscal year to date, certified by the chief financial officer of the
Company and prepared in accordance with generally accepted accounting
principles, with the exception that no notes need be attached to such statements
and year-end audit adjustments may not have been made.

4.2 INSPECTION RIGHTS. Each holder of 100,000 shares or greater if
Registrable Securities, and its authorized representative, shall have the right
to visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss the affairs, finances and accounts of the Company
or any of its subsidiaries with its officers, and to review such information as
is reasonably requested all at such reasonable times and as often as may be
reasonably requested; provided, however, that the Company shall not be

11.
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obligated under this Section 4.2 with respect to a competitor of the Company or
with respect to information which the Board of Directors determines in good
faith is confidential and should not, therefore, be disclosed.

4.3 CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives uses, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
such Investor (or any financial advisor or legal counsel thereto) for the
purpose of evaluating its investment in the Company as long as such party is
advised of the confidentiality provisions of this Section 4.3.

4.4 RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Series A Stock and Series B Stock, all Common Stock issuable from time to time
upon such conversion.

4.5 SEC COMPLIANCE. During any time that the Company is subject to the
reporting requirements of the Exchange Act, the Company shall timely file all
required reports pursuant to the Exchange Act. Additionally, the Company shall
make available to Investors the information contemplated by Rule 144A. At such
time that any stock held by an Investor is eligible for transfer pursuant to
Rule 144(k), the Company shall, upon the request of such Investor, remove any
restrictive legend from the applicable stock certificate at no cost to such
Investor.

4.6 STOCK VESTING. Unless otherwise approved by the Board of Directors,
all stock options and other stock equivalents issued to employees, directors,
consultants and other service providers pursuant to the Company's 1995 Stock
Option Plan shall be subject to vesting that is no less favorable to the Company
than the following: (i) for employees, consultants and other service providers
(A) twenty-five percent (25%) of such stock shall vest at the end of the first
year following the earlier of the date of issuance or such person's services
commencement date with the Company, and (B) seventy-five (75%) of such stock
shall vest monthly or quarterly, at the discretion of the Company, over the
remaining three (3) years, and (ii) for non-employee directors one hundred
percent (100%) of such stock shall vest quarterly over three (3) years. With
respect to any shares of stock purchased by any such person, the option shall
provide that upon such person's termination of employment or service with the
Company, with or without cause, the Company or its assignee (to the extent
permissible under applicable securities laws and other laws) shall have the
option to purchase at cost any unvested shares of stock held by such person and
shall have the option to purchase at the then fair market price any vested
shares of stock held by such person.

4.7 PROMPT PAYMENT OF TAXES, ETC. The Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate

12.
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proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto; and provided, further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefor. The Company will promptly pay or cause to be paid when due, in
conformance with customary trade terms, all other obligations incident to the
operations of the Company.

4.8 MAINTENANCE OF PROPERTIES AND LEASES. The Company will keep its
properties and those of its subsidiaries, if any, in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company and its subsidiaries will at all times comply with each
material provision of all leases to which any of them is a party or under which
any of the occupies property if the breach of such provisions might have a
material and adverse effect on the condition, financial or otherwise, or
operations of the Company.

4.9 INSURANCE. The Company will keep its assets and those of its
subsidiaries which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company's line of business, and
the Company will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated.

4.10 INDEPENDENT ACCOUNTANTS. The Company will retain a "Big Six"
national accounting firm as its independent public accountants who shall certify
the Company's financial statements at the end of each fiscal year and shall
review or prepare the Company's income tax returns at the end of each fiscal
year for 1996 and thereafter. In the event the services of the independent
public accountants so selected are terminated, the Company will promptly
thereafter notify the Investors or their authorized transferees under this
Agreement, as applicable, and will request the firm of independent public
accountants whose services are terminated to deliver to the Investors or their
authorized transferees, as applicable, a letter from such firm setting forth the
reasons for the termination of services. In the event of such termination, the
Company will promptly thereafter engage another "Big Six" national accounting
firm as it independent public accountants. In its notice to the Investors the
Company shall state whether the change of accountants was recommended or
approved by the Board of Directors of the Company or any committee thereof.

4.11 COMPLIANCE WITH LAWS. The Company and all its subsidiaries shall
duly observe and conform to all applicable laws and valid requirements of
governmental authorities relating to the conduct of their businesses or to their
properties or assets.

4.12 MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Company shall maintain
in full force and effect its corporate existence, rights and franchises and all
licenses and other rights in or to use patents, processes, licenses, trademarks,
tradenames or copyrights owned or possessed by it or any subsidiary and deemed
by the Company to be necessary to the conduct of its businesses.

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4.13 TERMINATION OF COVENANTS. All covenants of the Company contained in
Section 4, with the exception of those set forth in Sections 4.4 and 4.5, shall
expire and terminate as to each Investor upon the Company's consummation of the
Company's Initial Offering.

4.14 AFFILIATED TRANSACTIONS. Except as permitted in this Agreement, all
transactions by and between the Company and any officer, key employee,
stockholder or partner of the Company, or persons controlled by or affiliated
with such officer, key employee, stockholder or partner, shall be conducted on
an arm's-length basis and shall be on terms and conditions no less favorable to
the Company than could be obtained from nonrelated persons. Except as permitted
by this Agreement, all transactions by and between the Company and Roger Koenig,
Nancy Pierce and any sibling or lineal descendent or ancestor of any of them
shall be approved in advance by the Board of Directors (including a majority of
the Investors' Nominees) after full disclosure of the terms thereof, for which
purpose the interested party, if a Director, and any affiliate of the interested
party who is a Director shall not be entitled to vote. Each Management Director
shall recuse himself or herself from voting on any transaction in which another
Management Director is an interested party.

5. RIGHTS OF FIRST REFUSAL.

5.1 SUBSEQUENT OFFERINGS. Each Investor shall have a right of first
refusal to purchase its pro rata share of all Equity Securities that the Company
may, from time to time, propose to sell and issue after the date of this
Agreement, other than the Equity Securities excluded by Section 5.6 hereof. Each
Investor's pro rata share is equal to the ratio of (A) the number of shares of
the Company's Common Stock (including all shares of Common Stock issued or
issuable upon conversion of the Preferred Stock or upon the exercise of any
outstanding warrants or options for Common Stock or Preferred Stock) which such
Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (B) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Preferred Stock or upon the exercise of any outstanding
warrants or options for Common Stock or Preferred Stock) immediately prior to
the issuance of the Equity Securities.

5.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Investor shall have fifteen
(15) days from the giving of such notice to agree to purchase its pro rata share
of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Investor who would cause the Company to be in violation of
applicable federal securities laws as a result of such offer or sale.

5.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of the
Investors elect to purchase their pro rata share of the Equity Securities, then
the Company shall promptly notify in writing the Investors who do so elect and
shall offer such Investors the right to acquire such unsubscribed shares. The
Investors shall have five (5) days after receipt of such notice to notify the
Company of its election to purchase all or a portion thereof of the unsubscribed
shares. If the Investors fail to exercise in full the rights of first refusal,
the Company shall have ninety (90) days thereafter to sell the Equity Securities
in respect of which the Investor's rights were not exercised, at a price and
upon general terms and conditions materially no more favorable to the purchasers
thereof than specified in the Company's notice to the Investors pursuant to
Section 5.2 hereof. If the Company has not sold such Equity Securities within
ninety (90) days of the notice provided pursuant to Section 5.2, the Company
shall not thereafter issue or sell any Equity Securities, without first offering
such securities to the Investors in the manner provided above.

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5.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
established by this Section 5 shall not apply to, and shall terminate upon the
Company's consummation of its Initial Offering.

5.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
each Investor under this Section 5 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights pursuant
to Section 3.9.

5.6 EXCLUDED SECURITIES. The rights of first refusal established by this
Section 5 shall have no application to any of the following Equity Securities:

(A) shares of Common Stock (and/or Common Stock options, warrants or
other Common Stock purchase rights) issued or to be issued to employees,
officers or directors of, or consultants or advisors to the Company or any
subsidiary, pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board of Directors;

(B) any Equity Securities issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, including without limitation,
convertible securities, options and warrants; and any Equity Securities issued
pursuant to any such rights or agreements granted after the date of this
Agreement, provided that the rights of first refusal established by this Section
5 applied with respect to the initial sale or grant by the Company of such
rights or agreements;

(D) any Equity Securities issued to persons who are non-affiliates of
the Company for consideration other than cash pursuant to a merger,
consolidation, acquisition or similar business combination;

(E) shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company;

(F) shares of Common Stock issued upon conversion of the Preferred
Stock; or

(G) issuances of Equity Securities to non-affiliates of the Company
in connection with equipment lease financing arrangements approved by the Board
of Directors.

6. MISCELLANEOUS

6.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Colorado as such laws are applied to agreements between
Colorado residents entered into and performed entirely in Colorado.

15.
<PAGE>

6.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.

6.3 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

6.4 AMENDMENT AND WAIVER.

(A) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of a majority of the Registrable Securities.

(B) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of a majority of the Registrable
Securities.

6.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by registered or
certified mail, return receipt requested, postage prepaid, and, if to an address
outside the United States of America, by telex or facsimile transmitted
substantially concurrently with the mailing of such written notice, addressed:
(a) if to a Holder, at such Holder's address as set forth on the Company's
records, or at such other address as such Holder shall have furnished to the
Company in writing or (b) if to the Company, at its address as set forth at the
end of this Agreement, or at such other address as the Company shall have
furnished to the Holders in writing.

6.6 ATTORNEYS' FEES.' If legal action is brought to enforce or interpret
this Agreement, the prevailing party shall be entitled to recover from the
losing party all fees, costs and expenses of enforcing any rights of such
prevailing party under or with respect to this Agreement, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and expenses of
appeals.

6.7 TITLES AND SUBTITLES. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

6.8 EFFECT ON PRIOR AGREEMENT; COMPLETE AGREEMENT. The parties to the
Prior Agreement agree that the Prior Agreement and the Investor Rights Agreement
between the Company and certain purchasers of the Company's Series A Stock dated
as of June 19, 1996 are superseded by this Agreement and are no longer of any
force or effect. This Agreement constitutes the entire agreement and supersedes
all other prior and contemporaneous agreements and undertakings, both written
and oral, between the parties hereto with regard to the subject matter hereof
and; is not intended to confer upon any person any rights or remedies hereunder
or with respect to the subject matter hereof except as specifically provided.

6.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

16.
<PAGE>

In Witness Whereof, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph hereof.

COMPANY: INVESTORS:

CARRIER ACCESS CORPORATION MENLO VENTURES VII, L.P.

By: /s/ Roger L. Koenig By: /s/
------------------------- -------------------------
Roger L. Koenig
Chief Executive Officer Title:______________________

Address: 5395 Pearl Parkway
Boulder, CO 80301 MENLO ENTREPRENEURS VII, L.P.

By: /s/
-------------------------
Title:______________________

NEEDHAM CAPITAL PARTNERS, L.P.

By: /s/
-------------------------

Title:______________________

NEEDHAM CAPITAL SBIC, L.P.

By: /s/
-------------------------

Title:______________________

NEEDHAM EMERGING GROWTH
PARTNERS, L.P.

By: /s/
-------------------------

Title:______________________

INVESTORS RIGHTS AGREEMENT
<PAGE>

GALLEON OMNI FUND, LTD.

By: /s/
-------------------------
Title:______________________

THE ROSER PARTNERSHIP II, L.P.

By: Roser Ventures LLC,
Its General Partner

By: /s/ Christopher W. Roser
-------------------------
Christopher W. Roser,
Managing Member

JOHN PAPPAJOHN

/s/ John Pappajohn
----------------------------
John Pappajohn

THE K&M TRUST

By: /s/
-------------------------
Title:______________________

JOHN J. MCMANUS

/s/ John J. McManus
----------------------------
John J. McManus

GNANALINGAM ARJAVALINGAM

/s/ Gnanalingam Arjavalingam
----------------------------
Gnanalingam Arjavalingam

INVESTORS RIGHTS AGREEMENT
<PAGE>

CHAD W. KECK

/s/ Chad W. Keck
----------------------------
Chad W. Keck

JOHN M. GUARINO

/s/ John M. Guarino
----------------------------
John M. Guarino

GARY S. ROSENBACH

/s/ Gary S. Rosenbach
----------------------------
Gary S. Rosenbach

KRISHEN K. SUD

/s/ Krishen K. Sud
----------------------------
Krishen K. Sud

ROBERT R. MAXFIELD, TRUSTEE
UA DTD 12/14/87

/s/ Robert R. Maxfield
----------------------------
Robert R. Maxfield, Trustee

SHRICHAND B. DODANI

/s/ Schrichand B. Dodani
----------------------------
Schrichand B. Dodani

INVESTORS RIGHTS AGREEMENT
<PAGE>

M. ALEX MENDEZ

/s/ M. Alex Mendez
----------------------------
M. Alex Mendez

RYAL R. POPPA

/s/ Ryal R. Poppa
----------------------------
Ryal R. Poppa

JOSEPH A. GRAZIANO

/s/ Joseph A. Graziano
----------------------------
Joseph A. Graziano

DANIEL L. EILERS

/s/ Daniel L. Eilers
----------------------------
Daniel L. Eilers

O.S. VENTURES, L.P.

By: /s/
-------------------------
Title:______________________

ROGER L. KOENIG

/s/ Roger L. Koenig
----------------------------
Roger L. Koenig

INVESTORS RIGHTS AGREEMENT
<PAGE>

NANCY PIERCE

/s/ Nancy Pierce
----------------------------
Nancy Pierce

INVESTORS RIGHTS AGREEMENT
<PAGE>

NEW ENTERPRISE ASSOCIATES VII, L.P.

By: NEA Partners VII, L.P.
Its General Partner

By: /s/
-------------------------
General Partner

NEA PRESIDENTS FUND, L.P.

By: NEA Partners, L.P.
Its General Partner

By: /s/
-------------------------
General Partner

NEA VENTURES 1997, L.P.

By: /s/
-------------------------
Vice President

ROBERT CONEYBEER

/s/ Robert Coneybeer
----------------------------
Robert Coneybeer

INVESTORS RIGHTS AGREEMENT
<PAGE>

EXHIBIT A

CARRIER ACCESS CORPORATION
INVESTOR RIGHTS AGREEMENT

SCHEDULE OF PURCHASERS

SHARES OF SERIES A SHARES OF SERIES B
NAME: PREFERRED STOCK PREFERRED STOCK
- -------------------------------------- ------------------ ------------------
Menlo Ventures VII, L.P. 1,002,004
Menlo Entrepreneurs Fund VII, L.P. 45,090
New Enterprise Associates VII, L.P. 1,002,004
NEA Presidents Fund, L.P. 10,020
NEA Ventures 1997, L.P. 1,002
Needham Capital Partners, L.P. 34,965 160,321
Needham Capital SBIC, L.P. 244,755
Needham Emerging Growth Partners, L.P. 244,755 160,321
Galleon Omni Fund, Ltd. 34,965 9,240
The Roser Partnership II, L.P. 52,448 13,861
Mr. John Pappajohn 34,965 9,240
The K&M Trust 8,750 10,000
Mr. John J. McManus 8,741
Mr. Gnanalingam Arjavalingam 8,741 2,310
Mr. Chad W. Keck 8,741 2,310
Mr. John M. Guarino 3,496
Mr. Gary S. Rosenbach 13,986 3,696
Mr. Krishen K. Sud 8,741 2,310
Robert R. Maxfield, Trustee 34,965
UA DTD 12/14/87
Mr. Shrichand B. Dodani 17,483
Mr. M. Alex Mendez 34,965 9,240
Mr. Ryal R. Poppa 104,895 27,721
Mr. Joseph A. Graziano 61,189 16,171
Mr. Daniel L. Eilers 26,224 6,930
O-S Ventures 87,413 23,101
Mr. Roger L. Koenig 67,839
Ms. Nancy Pierce 67,839
Robert Coneybeer 1,002

<PAGE>

EXHIBIT 10.1

[LOGO OF CARRIER ACCESS CORPORATION APPEARS HERE]

DIAMOND LEVEL DISTRIBUTOR AGREEMENT
<PAGE>

TABLE OF CONTENTS

DEFINITIONS 3

ARTICLE 1 - AUTHORIZATION 4

ARTICLE 2 - TERM 4

ARTICLE 3 - TERMINATION AND ASSIGNMENT 5

ARTICLE 4 - RESPONSIBILITIES OF CAC 5

ARTICLE 5 - RESPONSIBILITIES OF DISTRIBUTOR 6

ARTICLE 6 - MINIMUM ORDER SIZE 8

ARTICLE 7 - QUOTAS AND DISCOUNTS 8

ARTICLE 8 - ACCEPTANCE OF ORDERS 8

ARTICLE 9 - ORDER CANCELLATION 9

ARTICLE 10 - PRODUCT IDENTIFICATION 9

ARTICLE 11 - PACKAGING 9

ARTICLE 12 - INSPECTIONS, AND RECORDS 9

ARTICLE 13 - SHIPPING AND DELIVERY 10

ARTICLE 14 - PRICE 10

ARTICLE 15 - DISTRIBUTOR RESALE PRICE 10

ARTICLE 16 - PAYMENT 10

ARTICLE 17 - RETURNS AND REJECTIONS 11

ARTICLE 18 - TERRITORY 11

ARTICLE 19 - WARRANTY AND REMEDIES 11

ARTICLE 20 - WARRANTY PASS THROUGH 11

ARTICLE 21 - EXERCISE OF RIGHTS 11

ARTICLE 22 - NEW PRODUCTS 11

ARTICLE 23 - DISCONTINUED PRODUCTS 12

ARTICLE 24 - DOCUMENTATION 12

ARTICLE 25 - TRADEMARKS 12

ARTICLE 26 - NOTICES 13

ARTICLE 27 - SURVIVAL OF OBLIGATIONS 13

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ARTICLE 28 - TAXES 13

ARTICLE 29 - TECHNICAL DATA AND LICENSING 13

ARTICLE 30 - PATENT INFRINGEMENT - IDEMNIFICATION 14

ARTICLE 31 - LIMITATION OF LIABILITY 14

ARTICLE 32 - GENERAL PROVISIONS 15

ARTICLE 33 - STOCK ROTATION 15

APPENDIX

APPENDIX A - PRODUCT PRICE LIST 17
APPENDIX B - PRODUCT RETURNS 18
APPENDIX C - WARRANTIES AND LIMITATION OF REMEDIES 20
APPENDIX D - SOFTWARE LICENSE AGREEMENT 21
APPENDIX E - TERRITORY 24
APPENDIX F - NEW PRODUCTS 25
APPENDIX G - COOPERATIVE MARKET DEVELOPMENT 26

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<PAGE>

Confidential Information DATE:____________

CAC Diamond Level
Distributor Agreement

THIS Agreement, Number CAC/27374 by and between Carrier Access Corporation, a
Colorado Corporation, having its principle business at 5395 Pearl Parkway,
Boulder, Colorado, 80301 (hereinafter called "CAC"), and
______________________________________________________, (hereinafter called
"Distributor") sets forth the terms and conditions for the sale of Products by
CAC and the purchase of same by Distributor.

DEFINITIONS

The term "Agreement" means all of the terms and conditions of this Diamond
Distributor Agreement.

The term "Net Purchases" means the total invoiced Products shipped to
Distributor, less any issued credits

The term " New Products" means all equipment, firmware and software supplied by
CAC listed in Appendix G.

The term "Product" means all equipment, firmware and software supplied by CAC
listed in Appendix A.

The term "Unit" means a single working system of the Product designated in
Appendix A.

THIS Agreement contains all of the representation and agreements between the
parties hereto. No modification of this Agreement or waiver of the terms and
conditions hereof will be binding upon either party unless approved in writing
by authorized representatives of both parties, nor will it be affected by the
acknowledgment or acceptance of purchase order forms or releases containing
other or different terms and conditions, whether or not signed by an authorized
representative of such party.

By execution of this Agreement, the parties do hereby agree the provisions of
this Agreement shall supersede all prior oral and written communications,
agreements and understandings of the parties with respect to the subject of the
Agreement.

RECITALS
--------

Whereas, CAC develops, manufactures and distributes certain telecommunications
Products, including the Products set forth on Appendix A and, when applicable,
on Appendix G hereto, and,

CAC and Distributor desire that Distributor act as a non-exclusive Distributor
for the Products under the terms and conditions set forth below,

Now, therefore CAC and Distributor agree as follows:

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<PAGE>

ARTICLE 1 - AUTHORIZATION

Appointment

Subject to the terms of this Agreement, CAC appoints Distributor, and
Distributor accepts such appointment, as a non-exclusive Distributor for the
Products, and when applicable for New Products, in and limited to the territory
set forth in Appendix F - Territory.

Format

Distributor may use or resell the Products as either stand-alone Products, or in
combination with other products of Distributor's choice to meet Distributor's
customer requirements. CAC makes no representation that the Products will be
appropriate for combination with any other product(s).

Nature of Agreement

To the extent that any Product contains or consists of software, Distributor's
appointment only grants to Distributor a license to distribute such software
Product, and does not transfer any right, title or interest to any such software
Product to Distributor or Distributor's customers. CAC will transfer title to
Products to Distributor only to the extent that such Products consist of non-
software items on the terms specified herein. To the extent that such Products
contain software, such software (including firmware) will be licensed to
Distributor and its customers on a right to use basis with all copyright,
priority, or intellectual rights remaining the property of CAC. Use of the
terms "sell", "license", "purchase", "license fees" and "price" will be
interpreted in accordance with this Article. CAC's Software License Agreement
is attached herein as Appendix E.

Other Distribution Channels

CAC reserves the right to sell its Products directly, through other
Distributors, and through other third party intermediaries, including without
limitation to OEMs, Dealers and Value Added Partners who will normally add value
to the Product in the form of features, services, and/or brand recognition, and
who will sell the resulting derivitive product through their own channels of
distribution.

Independent Contractor

The relationship established by this Agreement is that of an independent
contractor. Distributor has no expressed or implied authorization to incur any
obligation or commitment on behalf of CAC, unless specifically approved in
writing by an authorized CAC officer. Distributor shall employ its own personnel
and shall be responsible for them and their acts. CAC shall in no way be liable
for Distributor, its employees, or third parties, for any losses, injuries,
damages, or the like occasioned by Distributor's activities in connection with
this Agreement, except as expressly provided for herein.

ARTICLE 2 - TERM

THIS Agreement will commence on ________________ and continue for a twelve (12)
month period (hereinafter called "Term") through __________________ unless
terminated in accordance with the conditions of this Agreement. It may be
renewed for one additional 12 month period unless terminated by either party in
accordance with the conditions of this agreement.

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<PAGE>

ARTICLE 3 - TERMINATION AND ASSIGNMENT

Either party may terminate this agreement:

i. With or without cause upon ninety (90) days prior written notice to the
other party.

ii. Immediately if the other party:

(a) assigns this Agreement or any of its rights hereunder without the
prior written consent of the other party ("assigns" to include,
without limiting the generality thereof, a sale or transfer of a
majority ownership interest);

(b) makes an assignment for the benefit of creditors, or a receiver,
trustee in bankruptcy or similar officer is appointed to take
charge of all or part of its property;

(d) fails to perform any material obligations under this Agreement and
such failure is not remedied within ten (10) days after written
notice thereof has been given to the other party;

(e) any termination of this Agreement pursuant to this Article will be
in addition to and will not be exclusive of or prejudicial to any
other rights or remedies at law or in equity available to the
other party.

iii. Upon termination, other than for cause or pursuant to (ii.) above, CAC
will continue to provide spare parts for one (1) year so that Distributor
can properly support its existing customer base. Spares will be provided
at the then current CAC Distributor pricing and terms and conditions of
sale for such spares.

iv. Upon termination without cause by CAC, CAC, at the option of Distributor,
will repurchase any remaining unsold Distributor inventory at the price
paid to CAC by Distributor for such equipment. Such repurchased equipment
must be unused and in original containers, identified by serial numbers
or some other agreed to identifier.

ARTICLE 4 - RESPONSIBILITIES OF CAC

CAC agrees to:

Provide Sales Materials

CAC will provide Distributor at no charge with an initial supply of one hundred
(100) copies of current sales literature to promote and sell CAC Products.
These materials may include, but are not limited to, brochures, application
notes, technical white papers, sales presentations in slide, overhead or
magnetic form, and any other appropriate material necessary to aid in the
selling process. Distributor may be charged for unreasonable amounts of
marketing collateral materials at CAC cost or a mutually agreed upon price. Such
cost will be furnished to Distributor prior to delivery of materials. This
material may be provided in original art work form

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<PAGE>

to Distributor to enable Distributor to develop material for its own internal
programs. All Distributor material developed as a result of this program must be
approved by CAC in writing prior to release.

Provide Sales Leads

To periodically provide Distributor, at CAC's discretion, with pre-screened and
qualified sales leads applicable to Distributor's markets from CAC's
promotional programs; provided however, that Distributor pursues and further
qualifies such leads and provides monthly reports as to their status or
disposition.

Offer Sales Training

To provide sales training on CAC Products and applications at Distributor's
expense for Distributor's sales personnel at CAC's corporate headquarters or
Distributor's locations as agreed upon.

Provide Technical Support

i. Provide a technical support telephone number to Distributor's personnel for
Product installation, trouble shooting, and Product applications advice.
After normal business hours (8:00 AM - 5:30 PM-Mountain Standard/Daylight
Time, Monday through Friday) this telephone number will provide the option
of paging an appropriate CAC customer service representative for emergency
situations.

ii. Provide technical updates and product bulletins via facsimile and CAC's
Internet web page.

Provide Marketing Support

Provide Distributor with timely reports detailing marketing or technical
information on products, competitive comparisons, special sales suggestions,
competitive announcements, pre-announcement product releases, and to respond
promptly to all inquiries and requests for sales assistance by Distributor.

Offer Co-Op Market Development Assistance

CAC will reserve two (2) % of the previous quarter's Net Purchases received from
Distributor to be used as matching funds for advertisements, and other mutually
agreed upon marketing programs. To qualify for these funds Distributor must
have achieved their minimum quarterly purchase obligation as outlined in
Article 7 - Quotas and Discounts during such previous quarter. This program is
described in Appendix H - Cooperative Market Development.

CAC Advisory Council

Distributor will be eligible to participate in the CAC advisory council. This
council will provide direct input to CAC management on new product requirements,
existing product and service concerns and distribution channel issues.
Notification of meeting dates and time will be supplied to Distributor.

ARTICLE 5 - RESPONSIBILITIES OF DISTRIBUTOR

Distributor Agrees to:

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<PAGE>

Comply with Law

Distributor will comply with all applicable international, national, state,
regional and local laws and regulations in connection with its activities under
of this Agreement.

Comply with U.S. Export Laws

Distributor acknowledges that the Products, including related documentation and
other technical data (collectively, "Technical Data"), are subject to export
--------------
controls imposed by the U.S. Export Administration Act of 1979, as amended (the
"Act"), and the regulations promulgated thereunder ("BXA Regulations").
--- ---------------
Distributor will not export or re-export (directly or indirectly) the Technical
Data without complying with the Act and the BXA Regulations. Distributor
certifies that: (a) neither the Technical Data nor its direct Product is
intended to be used for any purposes prohibited by the BXA regulations,
including, but not limited to, nuclear proliferation; and (b) unless Distributor
first obtains written permission to do so from the appropriate U.S. governmental
agencies, no Technical Data will be exported to any country to which the U.S.
has prohibited shipment.

Perform No Engineering Modifications

Distributor shall not reverse assemble, reverse compile or reverse engineer the
Product hardware or software supplied by CAC in any way.

Provide Contact Personnel

Distributor shall appoint an individual to be the primary CAC support contact
for its customers. Furthermore, Distributor will agree that this individual
attends at least one CAC training session annually.

Provide Sales and Service Coverage

Provide trained/authorized sales and technical service coverage to Distributor's
customers for CAC Products. Such coverage includes but not limited to responding
to initial technical support inquiries, following up on sales leads, and
performing all activities required to execute a sale.

Meet Purchase Commitments

To meet or exceed purchase commitments as set forth Article 7 - Quotas and
Discounts and any minimum annual purchase quotas for New Products which may be
agreed upon by both CAC and Distributor.

Provide Forecasts

Provide CAC with written monthly 90 day rolling sales forecasts which must
include the number of sales expected on each Product, Unit type, expected
delivery dates, and any special sales that require special equipment or of an
extremely large volume.

Special Services and Materials

To pay CAC agreed upon and reasonable charges for mutually agreed upon special
support services and/or materials which are provided at Distributor's request,
which are not normally covered in accordance with the warranty or CAC practices.

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<PAGE>

Provide Warranty Registration and Service

To properly register the warranty for each and every Unit including Unit's
serial number by providing a CAC Warranty card with every unit sold, and to
maintain a log of service activity on all CAC Products, so that CAC can properly
track, investigate and resolve Product service issues.

Furnish Reports

To furnish CAC with monthly written reports on the disposition of CAC provided
sales leads, technical issues and any other marketing information that may
enhance the sale of CAC products

Point of Sale Reports

Distributor will provide to CAC within ten (10) days of the end of each month,
an electronic report showing Distributor's shipments of Product by date,
customer, city, state and zip code shipped, part number, number of units, and
unit cost within Product type.

ARTICLE 6 - MINIMUM ORDER SIZE

The minimum order lot size per Distributor order is one (1) AB-I, AB-II or
DataSplit Unit within a product group listed in Appendix A.

ARTICLE 7 - QUOTAS AND DISCOUNTS

Minimum Contract Quota/Commitment

Distributor is required to make Net Purchases for a minimum commitment of
$250,000 of Net Purchases per calendar quarter. Should Distributor fail to
reach or maintain the Net Purchases stated herein, Distributor shall not be
entitled to any amounts under the 2% Co-op Market Development program described
in Article 4 and Distributor's Discount shall revert to 50% until Net Purchases
exceed $250,000 in a quarter. If Net Purchases per calendar quarter fall below
$125,000, Distributor discount shall revert to 45% until Net Purchases exceed
$125,000 per calendar quarter. CAC, as its sole remedy for such failure, may
terminate this Agreement in accordance with Article 3 (i) (d) - Termination and
Assignment. Quarterly performance reviews will be conducted to monitor
Distributor's performance against plan.

Discounts

Distributor discounts are based upon meeting the minimum quarterly Net Purchase
commitments. All discounts represent a percentage off the List Price of Product
described in Appendix B.

Minimum Quarterly Quota Discount

$250,000 55%

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<PAGE>

ARTICLE 8 - ACCEPTANCE OF ORDERS

Distributor shall purchase Products by issuing a written purchase order
indicating specific Products, quantity, price, total purchase price, shipping
instructions, requested delivery dates, and any other special instructions.
Distributor must place orders in writing and submit them via mail, express
delivery and/or by facsimile.

All purchase orders issued under this agreement shall reference Distributor's
contract number assigned to this agreement. The terms and conditions of this
agreement prevail regardless of any conflicting terms on the purchase order or
other documents of either CAC or Distributor.

All orders are subject to written acceptance or rejection by CAC, in its sole
discretion, which CAC shall do within five working days, otherwise orders shall
be deemed accepted.

CAC shall fulfill all orders with new and latest revision of Product, unless
otherwise agreed.

Distributor will submit all purchase orders to:

Carrier Access Corporation
Attn.: Customer Service
5395 Pearl Parkway
Boulder, CO 80301
Telephone: 800-495-5455 or 303-442-5455
Facsimile: 303-443-5908 (Facsimile orders are acceptable.)

CAC may reject a Distributor's order by reason of (but not limited to) current
availability of Product.

ARTICLE 9 - ORDER CANCELLATION

Orders canceled or rescheduled by Distributor within fifteen (15) days of
scheduled shipment date are subject to a fifteen (15) % re-stocking fee.

ARTICLE 10 - PRODUCT IDENTIFICATION

All Products supplied to Distributor pursuant to this agreement shall be marked,
as applicable and in accordance with standard practices of CAC, as appropriate,
with: (1) CAC's name and/or logo; (2) model number or part number; (3) serial
number; (4) shipping date; (5) copyright notice; (6) country of origin; and (7)
such other markings as may be required for warranty period identification or by
applicable law.

ARTICLE 11 - PACKAGING

Products will be packed or packaged for U.S. shipment in accordance with
standard commercial practices. Distributor and CAC will agree to a price for
packaging if Distributor requests packaging outside of standard commercial
practices.

ARTICLE 12 - INSPECTIONS, AND RECORDS

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<PAGE>

Notification

Distributor will: (i) notify CAC in writing of any claim or proceeding
involving the Products within ten (10) working days after Distributor learns of
such claim or proceeding; (ii) report promptly to CAC all claimed or suspected
Product defects.

Records

Distributor will maintain, for at least one (1) year after termination of this
Agreement, its records, contracts, and accounts relating to distribution of the
Products, and will permit examination thereof by authorized CAC representatives
with reasonable notice to Distributor.

CAC will inspect Products prior to shipment in accordance with its normal
practices, which shall be no less than standard industry practices. CAC
reserves the right to charge for other inspections or tests requested by
Distributor.

ARTICLE 13 - SHIPPING AND DELIVERY

Shipping dates will be established by CAC upon receipt of purchase orders from
Distributor. Shipping dates will be assigned as close as practical to
Distributor's requested date. CAC will use best efforts to notify Distributor
of the actual scheduled shipping date within five (5) working days after receipt
of order (ARO).

Distributor has the right to defer Product shipment for no more than thirty (30)
days from the scheduled shipping date, provided written notice is received by
CAC at least fifteen (15) days before originally scheduled shipping date.
Deferrals for greater than thirty (30) days will be deemed canceled. Deferrals
or cancellations within thirty (30) days are subject to charges and terms
outlined in Article 9 - Order Cancellation.

Distributor shall be responsible for all freight handling and insurance charges.
CAC shall select the carrier, acquire in-transit insurance and invoice
Distributor for freight handling and insurance charges, unless specifically
declined in writing by Distributor. In no event shall CAC have any liability in
connection with shipment, nor shall the carrier be deemed to be an agent of CAC.

Title, risk of loss, and insurance responsibilities pass to Distributor upon
delivery of Products by CAC to the shipping agent or carrier at the FOB point.
Delivery shall be deemed made upon transfer of possession to the carrier. All
orders are shipped FOB Boulder, Colorado. Drop Shipment orders may be subject
to a 10% surcharge.

ARTICLE 14 - PRICE

List prices for Products shall be those specified in Appendix B, as updated from
time to time by CAC. Distributor's price is the CAC List Price less the
applicable discounts specified in Article 7 - Quotas and Discounts. Such prices
are subject to change at any time and Appendix B shall be deemed amended.
Changes shall be preceded by sixty (60) days written notice and will become
effective on all Distributor shipments after that period. In the event of
list price decreases by CAC, CAC will offer to credit Distributor with the
currently effective discounted price differential for Distributor owned stock
on-hand at the effective date of the price

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decrease. CAC reserves the right to audit Distributor stock on-hand at the
effective date.

ARTICLE 15 - DISTRIBUTOR RESALE PRICE

Although CAC may publish suggested wholesale or retail prices, these are
suggestions only and Distributor will be entirely free to determine the actual
prices and license fees at which the Products will be sold or licensed to its
customers.

ARTICLE 16 - PAYMENT

Subject to prior credit approval, the terms of payment are 30 days from date of
invoice. Where credit approval has not been granted or Distributor is at their
credit limit as determined by CAC, the terms are wire transfer of funds prior to
shipment. Invoices for Products will be rendered as shipments are made. Late
charges of 1.5% (or the maximum amount permitted by law if less), per month, on
outstanding balances will be charged.

ARTICLE 17 - RETURNS AND REJECTIONS

Returns and rejections are covered in Appendix C - Product Returns.

ARTICLE 18 - TERRITORY

This Agreement and appointment only applies to the territories listed in
Appendix F - Territory

ARTICLE 19 - WARRANTY AND REMEDIES

Limited Warranty

CAC MAKES NO WARRANTIES OR REPRESENTATIONS AS TO PERFORMANCE OF PRODUCTS OR AS
TO SERVICE TO DISTRIBUTOR OR TO ANY OTHER PERSON, EXCEPT AS SET FORTH IN CAC's
LIMITED WARRANTY ATTACHED HERETO AS APPENDIX D. CAC RESERVES THE RIGHT TO
CHANGE THE WARRANTY AND SERVICE POLICY SET FORTH IN SUCH LIMITED WARRANTY, OR
OTHERWISE, AT ANY TIME, WITH NINETY (90) DAYS WRITTEN NOTICE AS IT APPLIES TO
EQUIPMENT PURCHASES AFTER THE 90 DAY PERIOD, AND WITHOUT LIABILITY TO
DISTRIBUTOR OR TO ANY OTHER PERSON. SUCH CHANGES WILL NOT APPLY TO ANY PRODUCT
SHIPPED PRIOR TO THE END OF THE NINETY (90) DAY NOTICE PERIOD.

Distributor's Warranty

Distributor will make no warranty, guarantee or representation on CAC's behalf.
In the event that Distributor makes unauthorized representations or guarantees
beyond those contained in Appendix D - Warranties and Limitation of Remedies,
Distributor shall hold harmless and indemnify CAC for any expenses, claims,
damages or liability of any nature whatsoever arising from or related to such
unauthorized representations or guarantees, including without limitation,
reasonable attorney's fees.

ARTICLE 20 - WARRANTY PASS THROUGH

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Upon the resale of Products purchased hereunder, Distributor is required to pass
through to its customer(s) a document with terms and conditions equivalent to
Appendix D - Warranties and Limitation of Remedies. This pass through applies
to those Products purchased from CAC and resold by Distributor without
alteration, modification, assembly with other manufacturer's equipment or re-
labeling by Distributor.

ARTICLE 21 - EXERCISE OF RIGHTS

A failure by one of the parties to this Agreement to assert its rights for or
upon any breach of this Agreement will not be deemed a waiver of such rights,
nor will any such waiver be implied from acceptance of any payment. No waiver
written by one of the parties herein with respect to any right under this
Agreement will extend to or affect any subsequent breach of any kind.

ARTICLE 22 - NEW PRODUCTS

During the term of this agreement CAC may introduce New Products that
Distributor wishes to include in this agreement. New Products may have minimum
purchase commitments and special discounts associated with them that CAC and
Distributor will mutually agree to. CAC will have no obligation to offer New
Products to Distributor or to offer any particular terms and conditions
concerning such New Products. Any New Products added to this Agreement and
their commitments and discounts may be added to Appendix G - New Products when
appropriate.

ARTICLE 23 - DISCONTINUED PRODUCTS

CAC will give Distributor 180 days written notice of any manufacturer
discontinued (MD) products.

ARTICLE 24 - DOCUMENTATION

Standard Documentation

CAC shall provide installation manuals and available user guides with each
Product.

Documentation Reproduction and Modification

With CAC prior approval, Distributor shall have the right to reproduce in whole
or in part, the documentation relating to Product, for use in conjunction with
Products and training and any updates, modifications and revisions thereto.

ARTICLE 25 -TRADEMARKS

Right To Use

Distributor will not incorporate under or otherwise make use of the name of CAC,
or any of its trademarks or trade names except to use the name, logo and other
marks of CAC ("Marks") for all proper purposes in the sale of CAC Products and
the performance of Distributor's duties hereunder only so long as this agreement
is in effect. Distributor will not alter or remove any trademark or trade name
applied by CAC to the Products except

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upon prior written authorization by CAC. Distributor's rights to use any
trademarks or trade names under this Article 26 immediately terminate upon
written notice from CAC or upon termination of this Agreement.

Proprietary Rights

Distributor acknowledges that CAC owns and retains all Marks and other
proprietary rights in or associated with CAC Products, and agrees that it will
not at any time during or after this Agreement assert or claim any interest in
or do anything that may adversely affect the validity of any Mark or copyright
belonging to or licensed to CAC (including, without limitation any act which may
infringe or lead to the infringement of any of CAC's proprietary rights).

No Continuing Rights

Upon expiration or termination of this Agreement, Distributor will immediately
cease use of all CAC Marks and will not thereafter use, advertise or display any
mark which is similar to or confusing with any mark associated with any CAC
Product.

Obligation to Protect

Distributor agrees to use reasonable efforts to protect CAC's proprietary rights
and to cooperate in CAC's efforts to protect its proprietary rights.
Distributor agrees to promptly notify CAC of any known or suspected breach of
CAC'S proprietary rights that comes to Distributor's attention.

ARTICLE 26 - NOTICES

Any notice, approval, request, authorization, direction or other communication
under this agreement shall be given in writing and shall be deemed to have been
delivered and given for all purposes (i) on the delivery date if delivered
personally to the party to whom the same is directed; (ii) one business day
after deposit with a commercial overnight carrier, with written verification
receipt, (iii) by facsimile with written confirmation of receipt, or (iv) five
days after the mailing date, whether or not actually received, if sent by U.S.
Postal Service, return receipt requested, postage and charges pre-paid, or any
other means of rapid mail delivery for which a receipt is available to the
address of the party to whom same is directed as set forth as follows.

For CAC: Carrier Access Corporation
Attention: Contracts
5395 Pearl Parkway
Boulder, CO 80301

For Distributor: ____________________
Attention: ____________________
____________________
____________________

The above addresses may be changed at any time by giving prior written notice as
provided herein.

ARTICLE 27 - SURVIVAL OF OBLIGATIONS

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Each party's obligations under this Agreement which by their nature would
continue beyond termination, cancellation or expiration of this Agreement,
including by way of illustration only and not limitation, those in the Warranty
& Limitation of Remedies, and technical data will survive the termination or
cancellation of this agreement for a period of two years from such termination
or cancellation. Articles 3, 16, 17, 19, 21, 24, 25, 26 and 28 shall survive the
cancellation or termination of this Agreement for any reason.

ARTICLE 28 - TAXES

In addition to the purchase price, Distributor will pay CAC the amount of all
taxes, excises, export duties, or governmental charges that CAC may be required
to pay with respect to the sale or transportation of any Products delivered
hereunder, except taxes on or measured by CAC's net income. If Distributor
claims exemption from any taxes by purchase of Products under this Agreement,
Distributor will provide CAC with documentation required by the taxing authority
to support the exemption.

ARTICLE 29- TECHNICAL DATA AND LICENSING

All drawings, data, designs, tooling, equipment, procedures, engineering
changes, inventions, computer software and all parts thereof, and all other
information, technical or otherwise which was developed, made or supplied by CAC
in the Production of any Product or the performance of any Service sold,
rendered or licensed hereunder will be and remain the sole property of CAC.

Distributor agrees that CAC software and firmware Products, or any software or
firmware in CAC Products is hereby licensed (not sold) subject to the terms set
forth in this Article and contains information and trade secrets proprietary to
or licensed to CAC. No change, modification, defacement, alteration, reverse
engineering, disassembly, de-compilation or reproduction of such Product or
disclosure of programming content to other parties is allowed without the
express written consent of CAC. Software and firmware are unpublished, and any
copyright notices placed thereon will not be deemed to constitute publication.
Distributor agrees to pass on all terms of CAC's software and firmware licenses
to the ultimate user. See Appendix E - Software License Agreement.

ARTICLE 30 - PATENT INFRINGEMENT - IDEMNIFICATION

Each Party (the "Indemnitor") hereby indemnifies and holds the other Party (the
"indemnitee"), its directors, officers, agents and employees harmless against
any and all claims, actions and damages, liabilities or expenses including
attorneys fees and other legal costs for injury to or death to any person, and
for loss of or damage to any and all property arising out of the negligent acts
or omissions of the Indemnitor under this Agreement.

CAC will defend, at its own expense, any action brought against Distributor to
the extent that it is based on a claim that any CAC supplied designs, material,
processes, or documentation hereunder constitutes a direct infringement of any
duly issued United States patent or infringement of any copyright, in the United
States. CAC will pay all damages and costs finally awarded against Distributor
in such action which are attributable to such action, provided that CAC is
promptly informed in writing and furnished a copy of each communication, notice,
or other action relating to the alleged infringement and is given authority,
information, and assistance necessary to defend or settle such claim. Should
equipment likely to become the subject of a claim of infringement of any United
States patent or any copyright, trade

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secret, or other proprietary rights in the United States, then CAC may, at its
option: (i) procure for Distributor the right to use such equipment free of any
liability for infringement; (ii) replace such equipment with non-infringing
substitutes otherwise complying substantially with all the requirements of the
contract; or (iii) refund the purchase price, less a charge for equal to one
sixtieth (1/60) of the purchase price of the Product for each month that
Distributor enjoyed beneficial use, and accept the return of such equipment.

THE FOREGOING STATES THE SOLE AND EXCLUSIVE LIABILITY OF THE PARTIES TO THIS
AGREEMENT FOR PATENT AND COPYRIGHT INFRINGEMENT AND IS IN LIEU OF ALL CONDITIONS
OR WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, IN REGARD THERETO.

ARTICLE 31 - LIMITATION OF LIABILITY

CAC shall not be liable for delays in delivery or failure to manufacture or
deliver Product or to otherwise perform any obligation due to Distributor under
this Agreement due to any cause beyond CAC's reasonable control, such as acts
of God, acts of civil or military authority, labor disputes, fire, riots,
sabotage, war, embargo, blockage, floods, earthquake, epidemics, power
shortages, or when due to government restrictions. The rights of Distributor
under this Agreement, including the right to continue the Agreement shall not be
affected by Distributor's failure to perform any obligation contained herein
where such failure is due to any cause beyond its control, such as acts of God,
acts of civil or military authority, labor disputes, fire, riots, sabotage, or
when due to government restrictions.

Since Distributor will have the exclusive control over the use and disposition
of the Product purchased under this agreement, Distributor shall be responsible
for the proper use, protection, supervision, and ultimate disposition of that
Product in accordance with Distributor's own rules and regulations. Distributor
indemnifies and agrees to hold CAC harmless with respect to any cost, damage, or
expense (including reasonable attorney fees) arising from breach by Distributor
of its obligations under this Agreement or from claims made by Distributor's
customers concerning the selling, renting, leasing, operation, service, of the
Product or from damage, injury or loss to third parties caused by Distributor's
fault or negligence.

In no event shall CAC's liability under this agreement, regardless of the form
of action, include any special, indirect, incidental or consequential damages or
claims for loss of business or loss of profits, even if CAC shall have been
advised of the possibility of such potential loss or damage. The liability of
CAC arising out of the supplying of any Product or its use, whether based upon
warranty, contract, negligence or otherwise, shall not in any case exceed the
original cost to Distributor of such Product.

ARTICLE 32 - GENERAL PROVISIONS

The laws of the State of Colorado, USA will apply and govern in the construction
and application of this Agreement and to all transactions hereunder. Any
action hereunder will be brought in the courts of the Twentieth Judicial
District, County of Boulder, State of Colorado, USA and will be governed by and
interpreted and constituted in accordance with the laws of the State of
Colorado. Any claim, except for nonpayment, will be brought within one year of
the Product shipment. Distributor will be liable for all collection costs and
attorney fees. CAC may only subcontract any obligations contained in this
Agreement with prior written notice.

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If any provision of this Agreement is deemed invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions will not
be affected or impaired thereby.

No waiver will be valid unless in writing and no waiver granted will release
Distributor or CAC from subsequent strict compliance herewith.

ARTICLE 33- STOCK ROTATION

Three times a year, at a maximum of 15% of Stock, distributor may exchange, upon
thirty (30) day advance notice, unsold inventory purchased within the prior four
(4) month period, at distributor options, for a like dollar amount of new
equipment. Such exchanged equipment must be unused and in original containers,
identified by serial numbers or some other agreed to identifier and remain on
the current Carrier Access Corporation price list.

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IN WITNESS WHEREOF, the parties hereto executed this Agreement as of the data
written below.

CARRIER ACCESS CORPORATION DISTRIBUTOR

______________________________ __________________________________
SIGNATURE SIGNATURE

______________________________ __________________________________
NAME (PRINT/TYPE) NAME (PRINT/TYPE)

______________________________ __________________________________
TITLE TITLE

______________________________ __________________________________
DATE DATE

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APPENDIX A - PRODUCT PRICE LIST

See attached CAC Product List Prices , Updated 5/12/97, Release 1.8.

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APPENDIX B - PRODUCT RETURNS

RETURN MATERIAL AUTHORIZATION

A Return Material Authorization (RMA) number and corresponding tracking sheet
must accompany all Products returned to CAC. An RMA number must be obtained
from CAC's technical product support department prior to returning any Product.
Warranty registration cards should be returned to CAC after product installation
to help expedite RMA process. Upon issuance of an RMA number, CAC's technical
support group will fax a product tracking sheet to product owner that must be
completed and included with the return shipment. It is product owner's
responsibility to properly insure and pack all returned materials. All Products
must be returned freight pre-paid in the original packaging materials with the
RMA number clearly displayed on the outside of the box. If original shipping
materials are not available, CAC will ship replacement materials to the
requester at a rate of $15.00/container plus freight charges.

Any Product returned without a valid RMA number will be rejected and returned to
sender freight collect. Product found damaged, improperly used, or modified so
that it does not meet specification will be returned to sender freight collect.

When returning parts under this procedure Distributor shall do the following
with respect to each shipment:

Prepare RMA parts lists and indicate:
- Part Number and serial number of returned part*
- Quantity of each item
- Description of failure or reason for return
- Completed CAC Tracking Sheet

Product must be identified and RMA number referenced on shipping materials.
Distributor is responsible for insurance and shipping charges.

COLLECT ON DELIVERY (COD) SHIPMENTS CANNOT BE ACCEPTED

*An equipment description must accompany the shipment. "Channel Bank" will not
be accepted. The correct description would be: AB-I/FXS/FXS --Serial Number
________.

RETURNED UNITS THAT ARE TESTED WITH NO TROUBLE FOUND WILL BE RETURNED TO SENDER
FOR NO TROUBLE FOUND AND RETURN SHIPPING CHARGES. TO SAVE NO TROUBLE FOUND
CHARGES, ONLY RETURN COMPONENTS THAT HAVE BEEN VERIFIED AS FAILURES. FOR
EXAMPLE, RETURN A SINGLE FXS CARD THAT HAS BEEN IDENTIFIED WITH A FAILED CHANNEL
9, RATHER THAN AN ENTIRE ACCESS BANK.

SHIPPING

CAC assumes no liability for damage, loss, or shortage incurred during shipment
of the Product to Distributor. Products found to be defective as the result of
shipment or mishandling will be either returned to Distributor or repaired on a
time and materials fee basis. These charges will also include a time/labor
charge for testing the Product to insure it conforms to specification.

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Upon receipt of Product, Distributor should inspect the shipment before
accepting delivery. Damage, breakage, or shortages should be noted on the
carrier's freight bill with supporting documentation for Distributor's claim
against the freight carrier. Shortages or variances from a Distributor's order
should be forwarded to CAC within fifteen (15) days of shipment. All shipments
should be shipped freight pre-paid and insured to cover any losses.

ADVANCE REPLACEMENT

Distributor should maintain adequate stock to provide advance replacement units
for out of box failures if it is their policy to offer this service. If an
advance replacement is sent to Distributors customer by CAC, Distributor must
provide a purchase order for the equipment advance replaced to Distributors
customer. Distributor must provide CAC with an open purchase order for advance
replacement units if CAC is to provide advance replacement units after
Distributors normal working hours. In the event that a RMA is issued by CAC for
an out of box failure, it will be replaced immediately upon receipt of product
and verification of defect at CAC.

If a product owner needs expedited delivery/overnight service for failed product
under warranty, they must contact their authorized Distributor. The Distributor
may then offer expedited delivery and process the product owner's RMA through
the proper channels with CAC.

SUMMARY OF SERVICE FEES

PRODUCTS UNDER WARRANTY

1. Warranty Repair (Parts & Time) $ 0
2. No Trouble Found Test Fee 10% of List Price plus
Return Shipping Charges

PRODUCTS OUT OF WARRANTY

1. Time (Labor) $90.00/Hour
2. Materials Current Price of Replacement Part

REFURBISHMENT OF DEMO EQUIPMENT

1. Labor $250.00 flat fee
2. Material CAC cost

SPARE PARTS

Parts displaced from out of warranty equipment may be returned to CAC for repair
but must follow the above RMA procedure and have a repair/replacement purchase
order accompanying the shipment. CAC reserves the right to use refurbished or
used parts for repair.

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APPENDIX C - WARRANTIES AND LIMITATION OF REMEDIES

Carrier Access Corporation warrants to Distributor that Products are free from
substantial defect in material and workmanship under normal use given proper
installation and maintenance for period of five (5) years from the date of
shipment by CAC.

Distributor will promptly notify CAC of any defect in the Product. CAC or its
agent will have the right to inspect the Product or workmanship on Distributor's
premises or Distributor's customer's premises. CAC has the option to: (a)
repair, replace or service at its factory or on the premises the Product or
workmanship found to be defective, or (b) credit BUYER for the PRODUCT in
accordance with CAC's depreciation policy. Refurbished material may be used to
repair or replace the Product. Products returned to CAC for repair,
replacement, or service will be shipped pre-paid by Distributor.

LIMITATION OF WARRANTY & LIMITATION OF REMEDIES

Correction of defects by repair, replacement, or service will be at CAC's option
and constitute fulfillment of all obligations to Distributor for breach of
warranty.

CAC assumes no warranty liability with respect to defects in the Product caused
by:

i. modification, repair, installation, operation or maintenance of the
Product by anyone other than CAC or its agent, except as described in
CAC's documentation; or

ii. the negligent or other improper use of the Product; or

iii. handling or transportation after title of the Product passes to
Distributor.

Other manufacturer's equipment purchased by CAC and resold to Distributor will
be limited to that manufacturer's warranty. CAC assumes no warranty liability
for other manufacturer's equipment furnished by Distributor.

Distributor understands and agrees as follows: the warranties in this agreement
replace all other warranties, expressed or implied, and all other obligations or
liabilities of CAC, including any warranties of merchantability and fitness for
a particular purpose. All other warranties are disclaimed and excluded by CAC.

The remedies contained in this agreement will be the sole and exclusive remedies
whether in contract, tort or otherwise, and CAC will not be liable for injuries
or damages to persons or property resulting from any cause whatsoever, with the
exception of injuries or damages caused by the gross negligence of CAC. This
limitation applies to all services, software and products during and after the
warranty period. In no event will CAC be liable for any special, incidental or
consequential damages or commercial losses even if CAC has been advised thereof.

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No agent, Distributor, or representative is authorized to make any warranties on
behalf of CAC or to assume for CAC any other liability in connection with any of
CAC's Products, software or services.

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APPENDIX D - SOFTWARE LICENSE AGREEMENT

License

Subject to the following terms and conditions Carrier Access Corporation (CAC)
grants to the original purchaser (Purchaser) of CAC hardware and software
products (Products) and Purchaser accepts a perpetual, non-exclusive license to
use the object code software and firmware provided by CAC (the Licensed Program)
only with CAC Products with all copyright, patent and intellectual property
rights remaining the sole property of CAC.

Purchaser shall receive software support and upgrades for the Licensed Program
in accordance with the applicable then current CAC software support policy in
effect and upon payment of any applicable fees.

PROTECTION AND SECURITY OF LICENSED PROGRAMS

Purchaser acknowledges and agrees that the Licensed Program contains proprietary
and confidential information of CAC and/or its third party supplier. Purchaser
agrees to protect the confidential and proprietary nature of the Licensed
Program as confidential information and a trade secret of CAC.

Purchaser shall not use, print, copy, translate, adapt, create derivative works
from, record, transmit, display, disclose, publish, encumber by way of security
interest or otherwise pledge or transfer, modify, assign, distribute, rent, loan
or make available to any third party the Licensed Program in whole or in part,
except as expressly provided in this Agreement.

Purchaser shall refrain from and shall prevent others from de-compiling or
applying any procedure to the Licensed Program, including reverse engineering or
any similar process, in order to derive and/or appropriate for use, the source
code or source listings for the Licensed Program.

TERM

This Agreement shall become effective for each Licensed Program upon delivery of
the Licensed Program to Purchaser.

CAC may terminate this Agreement and the license upon notice to Purchaser if any
amount payable by Purchaser in respect of any of the Products is not paid within
thirty (30) days of the date such payment is due, or if Purchaser otherwise
breaches any provision of this Agreement and fails to cure such breach within
thirty (30) days of notice thereof, or if Purchaser becomes bankrupt, makes an
assignment for the benefit of creditors or a trustee is appointed for Purchaser,
or if the assets of Purchaser vest in or become subject to the rights of any
trustee, receiver, board, tribunal, commission or any body, corporation or
person, other than Purchaser, or if bankruptcy, reorganization or insolvency
proceedings are instituted by or against Purchaser and are not dismissed within
30 days.

LIMITED WARRANTIES

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to be satisfied unless Purchaser gives CAC notice within 90 days of the date CAC
ships the original copy of such Licensed Program that the warranty has not been
met, in which case CAC shall have the opportunity to make repeated efforts
within a reasonable time to satisfy its obligations under this warranty. If,
after repeated efforts, Purchaser notifies CAC that this warranty has not been
met, CAC will take back the Licensed Program and refund to Purchaser all amounts
paid by Purchaser hereunder with respect to such Licensed Program.

THE WARRANTY SET OUT ABOVE SHALL CONSTITUTE THE SOLE LIABILITY OF CAC AND THE
SOLE REMEDY OF PURCHASER FOR ANY FAILURE OF ANY PROGRAM TO FUNCTION AS
WARRANTED.

EXCEPT AS EXPRESSLY PROVIDED HEREIN THERE ARE NO WARRANTIES, CONDITIONS OR
REPRESENTATIONS EXPRESS OR IMPLIED BY STATUTE, USAGE, CUSTOM OF THE TRADE OR
OTHERWISE WITH RESPECT TO THE LICENSED PROGRAMS PROVIDED BY CAC HEREUNDER,
INCLUDING BUT NOT LIMITED TO, WARRANTIES OR REPRESENTATIONS OF WORKMANSHIP,
MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR DURABILITY,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, CAC DOES NOT WARRANT THAT THE
LICENSED PROGRAM WILL MEET ALL OF PURCHASER'S NEEDS OR THAT OPERATION OF THE
LICENSED PROGRAM WILL BE ERROR FREE.

LIMITATION OF LIABILITY

IN NO EVENT WHATSOEVER, REGARDLESS OF THE FORM OR CAUSE OF ACTION WHETHER IN
CONTRACT OR TORT (INCLUDING NEGLIGENCE) OR THE NUMBER OF CLAIMS ASSERTED, SHALL
CAC's, ITS EMPLOYEES', DIRECTORS', OFFICERS' AND AGENTS' TOTAL COLLECTIVE
LIABILITY TO PURCHASER FOR ALL CLAIMS EXCEED THE AMOUNT PAID UNDER THIS
AGREEMENT FOR THE LICENSED PROGRAM THAT IS THE SUBJECT MATTER OF OR THAT IS
DIRECTLY RELATED TO CAUSE OF ACTION, PROVIDED THAT IN NO EVENT SHALL THE TOTAL
COLLECTIVE LIABILITY OF CAC, ITS EMPLOYEES, OFFICERS, AGENTS AND DIRECTORS
EXCEED THE AMOUNT PAID TO CAC PURSUANT TO THIS AGREEMENT.

CAC, ITS EMPLOYEES, AGENTS, OFFICERS AND DIRECTORS SHALL NOT BE LIABLE IN ANY
WAY WHATSOEVER, WHETHER AS A RESULT OF A CLAIM OR ACTION IN CONTRACT OR TORT,
INCLUDING NEGLIGENCE OR OTHERWISE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL
DAMAGES, INCLUDING BUT NOT LIMITED TO, LOST PROFITS OR LOST BUSINESS REVENUE,
LOST BUSINESS, FAILURE TO REALIZE EXPECTED SAVINGS, OR OTHER COMMERCIAL OR
ECONOMIC LOSS OF ANY KIND WHATSOEVER, OR FOR ANY DAMAGES, DIRECT OR INDIRECT,
SPECIAL OR CONSEQUENTIAL ARISING OUT OF ANY CLAIM AGAINST PURCHASER BY ANY
PERSON WHETHER OR NOT SUCH DAMAGES ARE FORESEEABLE AND WHETHER OR NOT CAC, ITS
EMPLOYEES, AGENTS, OFFICERS OR DIRECTORS HAVE BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES WHICH ARE IN ANY WAY RELATED TO THIS AGREEMENT OR THE LICENSED
PROGRAM.

THE FOREGOING PROVISIONS LIMITING THE LIABILITY OF CAC EMPLOYEES, AGENTS,
OFFICERS AND DIRECTORS SHALL BE DEEMED TO BE FOR THE BENEFIT OF SUCH EMPLOYEES,
OFFICERS, DIRECTORS AND AGENTS AND SHALL BE ENFORCEABLE BY SUCH AS THIRD PARTY
BENEFICIARIES.

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PATENT, COPYRIGHT, TRADE NAME AND TRADE SECRET INFRINGEMENT

CAC shall defend any suit alleging the infringement of any patent, copyright or
trade secret which is brought against Purchaser on account of its use of the
Licensed Program and shall pay all reasonable legal costs and expenses incurred
by Purchaser in conjunction therewith and satisfy all monetary judgments and
decrees against Purchaser, provided that Purchaser notifies CAC within ten (10)
business days of the date any such claim becomes known to Purchaser, that CAC
shall have sole control of the defense or settlement of such actions, and that
Purchaser provides such assistance and cooperation to CAC as is reasonably
requested.

In the event Purchaser is enjoined from its use of CAC Licensed Program due to
proceeding based upon any infringement of any patent, copyright or trade secret,
CAC shall either:

i) promptly render the Licensed Program non-infringing and capable of
providing services as intended; or

ii) procure for Purchaser the right to continue using the Licensed
Program; or

iii) replace the Licensed Program with a non-infringing version; or

iv) remove the Licensed Program and refund the purchase price, less a
monthly usage fee equal to one sixtieth of the license for each month
that Purchaser has had use of the Licensed Program.

The foregoing constitutes the entire liability of CAC to Purchaser with respect
to infringement of patents, copyrights, and trade secrets for Products purchased
pursuant to this Agreement and CAC hereby disclaims any implied warranty of non-
infringement.

MISCELLANEOUS

Notwithstanding anything else in this Appendix, CAC shall not, in any way
whatsoever, be held liable or responsible for any failure by it to meet its
obligations or responsibilities under this Appendix where such failure results
from causes beyond CAC's reasonable control.

This Appendix constitutes the entire understanding between CAC and Purchaser
with respect to the licensing of the Licensed Programs to Purchaser by CAC and
supersedes all prior oral and written communications with respect to the
Licensed Programs licensed under this Appendix. This Appendix may be amended or
modified only by means of a written Agreement signed by both CAC and Purchaser.

If any provision of this Appendix shall be held to be invalid, illegal or
unenforceable, such provision shall be severed therefrom and the validity,
legality or enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

Purchaser shall comply with all export regulations pertaining to the Licensed
Program in effect from time to time. In particular, without limiting the
generality of the foregoing, Purchaser hereby warrants that it will not directly
or indirectly export, re-export or transship the Licensed Program or such other
information, media or products in violation of or otherwise in contravention of
the export laws, rules and regulations of the United States.

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<PAGE>

APPENDIX E - TERRITORY

Distributor will have the non-exclusive rights to market the Product within the
fifty (50) U.S. states, Canada, Mexico and Latin America unless otherwise
authorized in writing and subject to the terms and conditions set forth in this
Agreement.

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<PAGE>

APPENDIX F - NEW PRODUCTS

THIS PAGE LEFT INTENTIONALLY BLANK

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<PAGE>

APPENDIX G - COOPERATIVE MARKET DEVELOPMENT

REQUIREMENTS FOR CLAIM SUBMITTAL

NEWSPAPER
. Tear sheet of the full page on which the ad appeared.
. Photostatic copies are not acceptable
. Copy of the paid invoice.

DIRECT MAIL
. Copy of mailer and mailing list
. Metered mail invoice from mail service substantiating quantity mailed.
Postage for mailing "invoice stuffers" is not reimbursable.
. Actual mailer invoices
. Other paid invoices

MAGAZINE OR TRADE JOURNAL
. Tear sheet of full page of ad (photostatic copies not acceptable).
. Ad tear sheet must show date of publication or an affidavit of insertion is
required from publisher.
. Paid Invoices

TRADE SHOW - PRE-APPROVED PROPOSAL ACCEPTED BY VP OF SALES IN WRITING
. Photograph of display
. Paid invoice for show space rental
. Labor costs, receptions, hospitality, food, lodging and entertainment are not
reimbursable.

CAC LITERATURE AND MARKETING AIDS
. Paid Carrier Access Invoice

SEMINARS
. Printed materials regarding CAC products
. Paid invoice for materials.

HOW TO RECEIVE YOUR CO-OP FUNDS
. Submit completed Co-op Cooperative Market Development Refund Request Form
with all paid invoices and proof of performance, i.e. tear sheets,
photographs, etc.
. Upon verification of the claim, your Carrier Access account will be credited
for 50% of the costs and your co-op fund will be debited for the same up to
the limit of the accrued funds.
. Claims that are correctly submitted with all necessary supporting data, and
for which sufficient funds are available will be processed within 30 days.
. Proof of credit will be forwarded within 30 days of claim processing
. Claims which exceed funds available will be held for 60 days or until
sufficient funds accrue, whichever comes first.

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Items that are not covered include but are not limited to:
. Shipping and freight charges
. Office supply items such as envelopes, company letterhead or forms using the
Carrier Access logos or product trademarks, etc.
. State, City or use taxes
. Giveaway items
. Sponsorship donations
. Political and/or religious publications
. Association Dues
. Hotel accommodations for shows or meetings
. Travel expenses
. Incentive travel programs
. Labor charges for exhibits and displays
. Food items

No freight charges, service charges or other miscellaneous charges will be used
in calculating cooperative market development funds.. Any returned product will
have its corresponding cooperative market development funds deducted from the
accrual account.

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<PAGE>
[LOGO OF CARRIER ACCESS CORPORATION]

DISTRIBUTOR COOPERATIVE MARKET DEVELOPMENT REGISTRATION FORM
------------------------------------------------------------

Company Name:__________________________________________________________

Contact Name:__________________________________________________________

Addresss:______________________________________________________________

City:___________________________ State:_______________ Zip:____________

Phone #:_____________________________Fax #:____________________________

I have read and understand the Distributor Cooperative Market Development
------------------------------
Policies and Procedures

Customer Signature:____________________________________________________

Date:__________________________________________________________________

Submit to:
Carrier Access Corporation
Attn: Marketing
5395 Pearl Parkway
Boulder, CO 80301

This form must be completed and returned by all new distributors in order to
initiate the accrual of Cooperative Market Development funds.
------------------------------

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<PAGE>
[LOGO OF CARRIER ACCESS CORPORATION APPEARS HERE]

COOPERATIVE MARKET DEVELOPMENT REFUND REQUEST
---------------------------------------------

Use this form for all claims for cooperative market development reimbursement

Company Name:__________________________________________________________

Contact Name:__________________________________________________________

Addresss:______________________________________________________________

City:___________________________ State:_______________ Zip:____________

Phone #:_____________________________Fax #:____________________________

The following is a recap of our cooperative market development expenditures for
which we request reimbursement under the terms of the CAC cooperative market
development Program.

Please list one item per line.

<TABLE>
<CAPTION>
____________________________________________________________________
NAME OF PUBLICATION, JOURNAL, REFUND
TRADE SHOW, OR MEDIA USED DATE TOTAL COST EXPECTED
____________________________________________________________________
<S> <C> <C> <C>
____________________________________________________________________

____________________________________________________________________

____________________________________________________________________
TOTAL
____________________________________________________________________
</TABLE>

Attached are supporting materials as required in the cooperative market
development procedures section showing that we have met the requirements to be
reimbursed. We understand this material is subject to review and approval by
CAC Marketing..

____________________________________________________________________
Customer Signature Date

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<PAGE>

Submit to: Carrier Access Corporation
Attn: CAC Marketing
5395 Pearl Parkway
Boulder, CO 80301

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<PAGE>
[LOGO OF CARRIER ACCESS CORPORATION APPEARS HERE]

COOPERATIVE MARKET DEVELOPMENT SPECIAL REQUEST
----------------------------------------------

Use this form for all special requests for cooperative market development
approval, including trade shows, distributor made ads, etc. at least 30 days
prior to the event/project date.

Company Name:__________________________________________________________

Requested by:__________________________________________________________

Addresss:______________________________________________________________

City:___________________________ State:_______________ Zip:____________

Phone #:_____________________________Fax #:____________________________

Event/Project:_________________________________________________________

Date of Event/Project:_________________________________________________

Estimated Cost:________________________________________________________

How much do you expect to use from your CAC cooperative market
development Account? __________________________________________________

Explanation:___________________________________________________________

_______________________________________________________________________

We understand this request is subject to review by CAC Marketing.

_______________________________________________________________________
Customer Signature Date

_______________________________________________________________________
CAC Marketing Approval Date

_______________________________________________________________________
CAC Co-op Advertising Department Approval Date

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<PAGE>

Submit to:
Carrier Access Corporation
Attn: CAC Marketing
5395 Pearl Parkway
Boulder, CO 80301

<PAGE>

EXHIBIT 10.2

Sample - Non-Executable

[LOGO OF CARRIER ACCESS(TM)
CORPORATION APPEARS HERE)

OEM AGREEMENT
<PAGE>

Sample - Non-Executable

TABLE OF CONTENTS

DEFINITIONS................................................................ 3
ARTICLE 1 - AUTHORIZATION................................................. 4
ARTICLE 2 - TERM.......................................................... 4
ARTICLE 3 - TERMINATION AND ASSIGNMENT.................................... 5
ARTICLE 4 - RESPONSIBILITIES OF CAC....................................... 5
ARTICLE 5 - RESPONSIBILITIES OF OEM....................................... 6
ARTICLE 6 - MINIMUM ORDER SIZE............................................ 7
ARTICLE 7 - QUOTAS AND DISCOUNTS.......................................... 7
ARTICLE 8 - ACCEPTANCE OF ORDERS.......................................... 8
ARTICLE 9 - ORDER CANCELLATION............................................ 8
ARTICLE 10 - PRODUCT IDENTIFICATION........................................ 8
ARTICLE 11 - PACKAGING..................................................... 8
ARTICLE 12 - INSPECTIONS AND RECORDS....................................... 9
ARTICLE 13 - SHIPPING AND DELIVERY......................................... 9
ARTICLE 14 - PRICE......................................................... 9
ARTICLE 15 - OEM RESALE PRICE.............................................. 10
ARTICLE 16 - PAYMENT....................................................... 10
ARTICLE 17 - RETURNS AND REJECTIONS........................................ 10
ARTICLE 18 - TERRITORY..................................................... 10
ARTICLE 19 - WARRANTY AND REMEDIES......................................... 10
ARTICLE 20 - WARRANTY PASS THROUGH......................................... 10
ARTICLE 21 - EXERCISE OF RIGHTS............................................ 11
ARTICLE 22 - NEW PRODUCTS.................................................. 11
ARTICLE 23 - DOCUMENTATION................................................. 11
ARTICLE 24 - TRADEMARKS.................................................... 11
ARTICLE 25 - NOTICES....................................................... 12
ARTICLE 26 - SURVIVAL OF OBLIGATIONS....................................... 12

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ARTICLE 27 - TAXES......................................................... 12
ARTICLE 28 - TECHNICAL DATA AND LICENSING.................................. 12
ARTICLE 29 - PATENT INFRINGEMENT - IDEMNIFICATION.......................... 13
ARTICLE 30 - LIMITATION OF LIABILITY....................................... 13
ARTICLE 31 - GENERAL PROVISIONS............................................ 14

APPENDIX

APPENDIX A - PRODUCTS...................................................... 16
APPENDIX B - LIST PRICE.................................................... 17
APPENDIX C - PRODUCT RETURNS............................................... 18
APPENDIX D - WARRANTIES AND LIMITATION OF REMEDIES......................... 20
APPENDIX E - SOFTWARE LICENSE AGREEMENT.................................... 22
APPENDIX F - TERRITORY..................................................... 25
APPENDIX G - NEW PRODUCTS.................................................. 26

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Sample - Non-Executable

Confidential Information DATE:____________

CAC Platinum Level
OEM Agreement

THIS Agreement, Number CAC/ ________ by and between Carrier Access Corporation,
a Colorado Corporation, having its principle business at 5395 Pearl Parkway,
Boulder, Colorado, 80301 (hereinafter called "CAC"), and _____________________
_________________, with headquarters at,______________________________________,
(hereinafter called "OEM") sets forth the terms and conditions for the sale of
Products by CAC and the purchase of same by OEM.

DEFINITIONS

The term "Agreement" means all of the terms and conditions of this OEM
Agreement.

The term "Net Purchases" means the total invoiced Products shipped to OEM, less
any issued credits

The term " New Products" means all equipment, firmware and software supplied by
CAC listed in Appendix G.

The term "Product" means all equipment, firmware and software supplied by CAC
listed in Appendix A.

The term "Unit" means a single working system of the Product designated in
Appendix A.

RECITALS
--------

Whereas, CAC develops, manufactures and distributes certain telecommunications
Products, including the Products set forth on Appendix A and, when applicable,
on Appendix G hereto, and,

CAC and OEM desire that OEM act as a non-exclusive OEM for the Products under
the terms and conditions set forth below,

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Sample - Non-Executable

Now, therefore CAC and OEM agree as follows:

ARTICLE 1 - AUTHORIZATION

Appointment

Subject to the terms of this Agreement, CAC appoints OEM, and OEM accepts such
appointment, as a non-exclusive OEM for the Products, and when applicable for
New Products, in and limited to the territory set forth in Appendix F -
Territory.

Format

OEM may use or resell the Products as either stand-alone Products, or in
combination with other products of OEM's choice to meet OEM's customer
requirements. CAC makes no representation that the Products will be appropriate
for combination with any other product(s).

Nature of Agreement

To the extent that any Product contains or consists of software, OEM's
appointment only grants to OEM a license to distribute such software Product,
and does not transfer any right, title or interest to any such software Product
to OEM or OEM's customers. CAC will transfer title to Products to OEM only to
the extent that such Products consist of non-software items on the terms
specified herein. To the extent that such Products contain software, such
software (including firmware) will be licensed to OEM and its customers on a
right to use basis with all copyright, priority, or intellectual rights
remaining the property of CAC. Use of the terms "sell", "license", "purchase",
"license fees" and "price" will be interpreted in accordance with this Article.
CAC's Software License Agreement is attached herein as Appendix E.

Other Distribution Channels

CAC reserves the right to sell its Products directly, through other OEMs, and
through other third party intermediaries, including without limitation to
Distributors, Dealers and Value Added Partners who will normally add value to
the Product in the form of features, services, and/or brand recognition, and who
will sell the resulting derivitive product through their own channels of
distribution.

Independent Contractor

The relationship established by this Agreement is that of an independent
contractor. OEM has no expressed or implied authorization to incur any
obligation or commitment on behalf of CAC, unless specifically approved in
writing by an authorized CAC officer. OEM shall employ its own personnel and
shall be responsible for them and their acts. CAC shall in no way be liable for
OEM, its employees, or third parties, for any losses, injuries, damages, or the
like occasioned by OEM's activities in connection with this Agreement, except as
expressly provided for herein.

ARTICLE 2 - TERM

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Sample - Non-Executable

THIS Agreement will commence on __________________ and continue for a twelve
(12) month period (hereinafter called "Term") through _________________ unless
terminated in accordance with the conditions of this Agreement. It may be
renewed for one additional 12 month period unless terminated by either party in
accordance with the conditions of this agreement.

ARTICLE 3 - TERMINATION AND ASSIGNMENT

Either party may terminate this agreement:

i. With or without cause upon ninety (90) days prior written notice to the
other party.

ii. Immediately if the other party:

(A) assigns this Agreement or any of its rights hereunder without the
prior written consent of the other party ("assigns" to include,
without limiting the generality thereof, a sale or transfer of a
majority ownership interest);

(B) makes an assignment for the benefit of creditors, or a receiver,
trustee in bankruptcy or similar officer is appointed to take charge
of all or part of its property;

(A) fails to perform any material obligations under this Agreement and
such failure is not remedied within ten (10) days after written notice
thereof has been given to the other party;

(B) any termination of this Agreement pursuant to this Article will be in
addition to and will not be exclusive of or prejudicial to any other
rights or remedies at law or in equity available to the other party.

iii. Upon termination, other than for cause or pursuant to (ii.) above, CAC
will continue to provide spare parts for one (1) year so that OEM can
properly support its existing customer base. Spares will be provided at
the then current CAC OEM pricing and terms and conditions of sale for such
spares.

ARTICLE 4 - RESPONSIBILITIES OF CAC

CAC agrees to:

Offer Sales Training

To provide sales training on CAC Products and applications at OEM's expense for
OEM's sales personnel at CAC's corporate headquarters or OEM's locations as
agreed upon.

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<PAGE>

Sample - Non-Executable

Offer Technical Training

To provide at no charge, one (1) one technical training class annually at a OEM
location to enable OEM's sales and technical support personnel to properly
represent and offer technical support to their customers.

Provide Technical Support

I. Provide a technical support telephone number to OEM's personnel for Product
installation, trouble shooting, and Product applications advice. After
normal business hours (8:00 AM - 5:30 PM-Mountain Standard/Daylight Time,
Monday through Friday) this telephone number will provide the option of
paging an appropriate CAC customer service representative for emergency
situations.

II. Provide technical updates and product bulletins via facsimile and CAC's
Internet web page.

Provide Marketing Support

Provide OEM with timely reports detailing marketing or technical information on
products, competitive comparisons, special sales suggestions, competitive
announcements, pre-announcement product releases, and to respond promptly to all
inquiries and requests for sales assistance by OEM.

ARTICLE 5 - RESPONSIBILITIES OF OEM

OEM Agrees to:

Comply with Law

OEM will comply with all applicable international, national, state, regional and
local laws and regulations in connection with its activities under of this
Agreement.

Comply with U.S. Export Laws

OEM acknowledges that the Products, including related documentation and other
technical data (collectively, "Technical Data"), are subject to export controls
--------------
imposed by the U.S. Export Administration Act of 1979, as amended (the "Act"),
---
and the regulations promulgated thereunder ("BXA Regulations"). OEM will not
---------------
export or re-export (directly or indirectly) the Technical Data without
complying with the Act and the BXA Regulations. OEM certifies that: (a)
neither the Technical Data nor its direct Product is intended to be used for any
purposes prohibited by the BXA regulations, including, but not limited to,
nuclear proliferation; and (b) unless OEM first obtains written permission to do
so from the appropriate U.S. governmental agencies, no Technical Data will be
exported to any

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<PAGE>

Sample - Non-Executable

country to which the U.S. has prohibited shipment.

Perform No Engineering Modifications

OEM shall not reverse assemble, reverse compile or reverse engineer the Product
hardware or software supplied by CAC in any way.

Provide Contact Personnel

OEM shall appoint an individual to be the primary CAC support contact for its
customers. Furthermore, OEM will agree that this individual attends at least
one CAC training session annually.

Provide Sales and Service Coverage

Provide trained/authorized sales and technical service coverage to OEM's
customers for CAC Products. Such coverage includes but not limited to responding
to initial technical support inquiries, following up on sales leads, and
performing all activities required to execute a sale.

Meet Purchase Commitments

To meet or exceed purchase commitments as set forth Article 7 - Quotas and
Discounts and any minimum annual purchase quotas for New Products which may be
agreed upon by both CAC and OEM.

Provide Forecasts

Special Services and Materials

To pay CAC agreed upon and reasonable charges for special support services
and/or materials which are provided at OEM's request, which are not normally
covered in accordance with the warranty or CAC practices.

Provide Warranty Registration and Service

To properly register the warranty for each and every Unit including Unit's
serial number and to maintain a log of service activity on all CAC Products, so
that CAC can properly track, investigate and resolve Product service issues.

Receive Technician Training

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<PAGE>

Sample - Non-Executable

To have at a minimum of two technicians who have completed CAC technical
training.

Stock Spare Parts

To maintain a minimum supply of spare parts to provide immediate service to
OEM's customers.

ARTICLE 6 - MINIMUM ORDER SIZE

The minimum order lot size per OEM order is one (1) Units within a product
group.

ARTICLE 7 - QUOTAS AND DISCOUNTS

To be determined.

ARTICLE 8 - ACCEPTANCE OF ORDERS

OEM shall purchase Products by issuing a written purchase order indicating
specific Products, quantity, price, total purchase price, shipping instructions,
requested delivery dates, and any other special instructions. OEM must place
orders in writing and submit them via mail, express delivery and/or by
facsimile.

All purchase orders issued under this agreement shall reference OEM's contract
number assigned to this agreement. The terms and conditions of this agreement
prevail regardless of any conflicting terms on the purchase order or other
documents of either CAC or OEM.

All orders are subject to written acceptance or rejection by CAC, in its sole
discretion, which CAC shall do within five working days, otherwise orders shall
be deemed accepted.

CAC shall fulfill all orders with new and latest revision of Product, unless
otherwise agreed.

OEM will submit all purchase orders to:

Carrier Access Corporation
Attn.: Customer Service
5395 Pearl Parkway
Boulder, CO 80301
Telephone: 800-495-5455 or 303-442-5455
Facsimile: 303-443-5908 (Facsimile orders are acceptable.)

CAC may reject a OEM's order by reason of (but not limited to) current
availability of Product.

ARTICLE 9 - ORDER CANCELLATION

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<PAGE>

Sample - Non-Executable

Orders canceled or rescheduled by OEM within fifteen (15) days of scheduled
shipment date are subject to a fifteen (15) % re-stocking fee. Orders cannot be
canceled or rescheduled less than fifteen (15) days prior to shipment.

ARTICLE 10 - PRODUCT IDENTIFICATION

All Products supplied to OEM pursuant to this agreement shall be marked, as
applicable and in accordance with standard practices of CAC, as appropriate,
with: (1) OEM's name and/or logo; (2) model number or part number; (3) serial
number; (4) shipping date; (5) copyright notice; (6) country of origin; and (7)
such other markings as may be required for warranty period identification or by
applicable law.

ARTICLE 11 - PACKAGING

Products will be packed or packaged for U.S. shipment in accordance with
standard commercial practices. OEM and CAC will agree to a price for packaging
if OEM requests packaging outside of standard commercial practices.

ARTICLE 12 - INSPECTIONS AND RECORDS

Notification

OEM will: (i) notify CAC in writing of any claim or proceeding involving the
Products within ten (10) working days after OEM learns of such claim or
proceeding; (ii) report promptly to CAC all claimed or suspected Product
defects.

Records

OEM will maintain, for at least one (1) year after termination of this
Agreement, its records, contracts, and accounts relating to distribution of the
Products, and will permit examination thereof by authorized CAC representatives
with reasonable notice to OEM.

ARTICLE 13 - SHIPPING AND DELIVERY

Shipping dates will be established by CAC upon receipt of purchase orders from
OEM. Shipping dates will be assigned as close as practical to OEM's requested
date. CAC will use best efforts to notify OEM of the actual scheduled shipping
date within five (5) working days after receipt of order (ARO).

OEM has the right to defer Product shipment for no more than thirty (30) days
from the scheduled shipping

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<PAGE>

Sample - Non-Executable

date, provided written notice is received by CAC at least fifteen (15) days
before originally scheduled shipping date. Deferrals for greater than thirty
(30) days will be deemed canceled. Deferrals or cancellations within thirty (30)
days are subject to charges and terms outlined in Article 9 - Order
Cancellation.

OEM shall be responsible for all freight handling and insurance charges. CAC
shall select the carrier, acquire in-transit insurance and invoice OEM for
freight handling and insurance charges, unless specifically declined in writing
by OEM. In no event shall CAC have any liability in connection with shipment,
nor shall the carrier be deemed to be an agent of CAC.

Title, risk of loss, and insurance responsibilities pass to OEM upon delivery of
Products by CAC to the shipping agent or carrier at the FOB point. Delivery
shall be deemed made upon transfer of possession to the carrier. All orders are
shipped FOB Boulder, Colorado. Orders less than minimum order size and for
expedited delivery are subject to a fifteen (15%) surcharge.

ARTICLE 14 - PRICE

To be determined.

ARTICLE 15 - OEM RESALE PRICE

Although CAC may publish suggested wholesale or retail prices, these are
suggestions only and OEM will be entirely free to determine the actual prices
and license fees at which the Products will be sold or licensed to its
customers.

ARTICLE 16 - PAYMENT

Subject to prior credit approval, the terms of payment are 30 days from date of
invoice. Where credit approval has not been granted or OEM is at their credit
limit as determined by CAC, the terms are wire transfer of funds prior to
shipment. Invoices for Products will be rendered as shipments are made. Late
charges of 1.5% (or the maximum amount permitted by law if less), per month, on
outstanding balances will be charged.

ARTICLE 17 - RETURNS AND REJECTIONS

Returns and rejections are covered in Appendix C - Product Returns.

ARTICLE 18 - TERRITORY

This Agreement and appointment only applies to the territories listed in
Appendix F - Territory

ARTICLE 19 - WARRANTY AND REMEDIES

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Sample - Non-Executable

Limited Warranty

CAC MAKES NO WARRANTIES OR REPRESENTATIONS AS TO PERFORMANCE OF PRODUCTS OR AS
TO SERVICE TO OEM OR TO ANY OTHER PERSON, EXCEPT AS SET FORTH IN CAC's LIMITED
WARRANTY ATTACHED HERETO AS APPENDIX D. CAC RESERVES THE RIGHT TO CHANGE THE
WARRANTY AND SERVICE POLICY SET FORTH IN SUCH LIMITED WARRANTY, OR OTHERWISE, AT
ANY TIME, WITH NINETY (90) DAYS WRITTEN NOTICE AS IT APPLIES TO EQUIPMENT
PURCHASES AFTER THE 90 DAY PERIOD, AND WITHOUT LIABILITY TO OEM OR TO ANY OTHER
PERSON. SUCH CHANGES WILL NOT APPLY TO ANY PRODUCT SHIPPED PRIOR TO THE END OF
THE NINETY (90) DAY NOTICE PERIOD.

OEM's Warranty

OEM will make no warranty, guarantee or representation on CAC's behalf. In the
event that OEM makes unauthorized representations or guarantees beyond those
contained in Appendix D - Warranties and Limitation of Remedies, OEM shall hold
harmless and indemnify CAC for any expenses, claims, damages or liability of any
nature whatsoever arising from or related to such unauthorized representations
or guarantees, including without limitation, reasonable attorney's fees.

ARTICLE 20 - WARRANTY PASS THROUGH

Upon the resale of Products purchased hereunder, OEM is required to pass through
to its customer(s) a document with terms and conditions equivalent to Appendix D
- - Warranties and Limitation of Remedies. This pass through applies to those
Products purchased from CAC and resold by OEM without alteration, modification,
assembly with other manufacturer's equipment or re-labeling by OEM.

ARTICLE 21 - EXERCISE OF RIGHTS

ARTICLE 22 - NEW PRODUCTS

During the term of this agreement CAC may introduce New Products that OEM wishes
to include in this agreement. New Products may have minimum purchase
commitments and special discounts associated with them that CAC and OEM will
mutually agree to. CAC will have no obligation to offer New Products to OEM or
to offer any particular terms and conditions concerning such New Products. Any
New Products added to this Agreement and their commitments and discounts may be
added to Appendix G - New Products when appropriate.

ARTICLE 23 - DOCUMENTATION

Standard Documentation

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<PAGE>

Sample - Non-Executable

CAC shall provide a soft copy (disc) of Product manual(s) when available.
Production of these manuals will be the responsibility of OEM. CAC will provide
updates to these manuals as they become available.

Documentation Reproduction and Modification

With CAC prior approval, OEM shall have the right to reproduce in whole or in
part, the documentation relating to Product, for use in conjunction with
Products and training and any updates, modifications and revisions thereto. CAC
is not responsible for errors and omissions in OEM manuals.

ARTICLE 24 -TRADEMARKS

Right To Use

Use of OEM's Trademarks.

The Products provided to OEM pursuant to this Agreement will be distributed and
marketed by OEM under OEM's own trademarks and trade names, except as stipulated
in Article 10 Product Identification. OEM's trademarks, trade names, insignia,
symbols, and/or decorative designs and part numbers may, at OEM's request, be
affixed or applied by CAC to the Equipment purchased by OEM hereunder. OEM
shall provide such items as are to be affixed (or the artwork necessary to
create the images to be applied) and shall reimburse CAC for its actual
incremental expenses for materials consumed in such process.

OEM will include on each CAC Product that it distributes, and on all containers
and storage media therefor, all trademark, copyright and other notices of
proprietary rights included by CAC on such CAC Product. OEM agrees not to
alter, erase, deface or overprint any such notice on anything provided by CAC.
OEM also will include the appropriate trademark notices when referring to any
CAC Product in advertising and promotional materials.

ARTICLE 25 - NOTICES

For CAC: Carrier Access Corporation
Attention: Contracts
5395 Pearl Parkway
Boulder, CO 80301

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<PAGE>

Sample - Non-Executable

For OEM: ____________________
Attention: ____________________
____________________
____________________

The above addresses may be changed at any time by giving prior written notice as
provided herein.

ARTICLE 26 - SURVIVAL OF OBLIGATIONS

Each party's obligations under this Agreement which by their nature would
continue beyond termination, cancellation or expiration of this Agreement,
including by way of illustration only and not limitation, those in the Warranty
& Limitation of Remedies, and technical data will survive the termination or
cancellation of this agreement for a period of two years from such termination
or cancellation. Articles 3, 16, 17, 20, 23, 26, 27, 28, 30, 34, and 35 shall
survive the cancellation or termination of this Agreement for any reason.

ARTICLE 27 - TAXES

In addition to the purchase price, OEM will pay CAC the amount of all taxes,
excises, export duties, or governmental charges that CAC may be required to pay
with respect to the sale or transportation of any Products delivered hereunder,
except taxes on or measured by CAC's net income. If OEM claims exemption from
any taxes by purchase of Products under this Agreement, OEM will provide CAC
with documentation required by the taxing authority to support the exemption.

ARTICLE 28 - TECHNICAL DATA AND LICENSING

OEM agrees that CAC software and firmware Products, or any software or firmware
in CAC Products is hereby licensed (not sold) subject to the terms set forth in
this Article and contains information and trade secrets proprietary to or
licensed to CAC. No change, modification, defacement, alteration, reverse
engineering, disassembly, de-compilation or reproduction of such Product or
disclosure of programming content to other parties is allowed without the
express written consent of CAC. Software and firmware are unpublished, and any
copyright notices placed thereon will not be deemed to constitute publication.
OEM agrees to pass on all terms of CAC's software and firmware licenses to the
ultimate user. See Appendix E - Software License Agreement.

ARTICLE 29 - PATENT INFRINGEMENT - IDEMNIFICATION

Each Party (the "Indemnitor") hereby indemnifies and holds the other Party (the
"indemnitee"), its directors, officers, agents and employees harmless against
any and all claims, actions and damages,

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Sample - Non-Executable

liabilities or expenses including attorneys fees and other legal costs for
injury to or death to any person, and for loss of or damage to any and all
property arising out of the negligent acts or omissions of the Indemnitor under
this Agreement.

CAC will defend, at its own expense, any action brought against OEM to the
extent that it is based on a claim that any CAC supplied designs, material,
processes, or documentation hereunder constitutes a direct infringement of any
duly issued United States patent or infringement of any copyright, in the United
States. CAC will pay all damages and costs finally awarded against OEM in such
action which are attributable to such action, provided that CAC is promptly
informed in writing and furnished a copy of each communication, notice, or other
action relating to the alleged infringement and is given authority, information,
and assistance necessary to defend or settle such claim. Should equipment
likely to become the subject of a claim of infringement of any United States
patent or any copyright, trade secret, or other proprietary rights in the United
States, then CAC may, at its option: (i) procure for OEM the right to use such
equipment free of any liability for infringement; (ii) replace such equipment
with non-infringing substitutes otherwise complying substantially with all the
requirements of the contract; or (iii) refund the purchase price, less a charge
for equal to one sixtieth (1/60) of the purchase price of the Product for each
month that OEM enjoyed beneficial use, and accept the return of such equipment.

ARTICLE 30 - LIMITATION OF LIABILITY

CAC shall not be liable for delays in delivery or failure to manufacture or
deliver Product or to otherwise perform any obligation due to OEM under this
Agreement due to any cause beyond CAC's reasonable control, such as acts of
God, acts of civil or military authority, labor disputes, fire, riots, sabotage,
war, embargo, blockage, floods, earthquake, epidemics, power shortages, or when
due to government restrictions. The rights of OEM under this Agreement,
including the right to continue the Agreement shall not be affected by OEM's
failure to perform any obligation contained herein where such failure is due to
any cause beyond its control, such as acts of God, acts of civil or military
authority, labor disputes, fire, riots, sabotage, or when due to government
restrictions. Since OEM will have the exclusive control over the use and
disposition of the Product purchased under this agreement, OEM shall be
responsible for the proper use, protection, supervision, and ultimate
disposition of that Product in accordance with OEM's own rules and regulations.
OEM indemnifies and agrees to hold CAC harmless with respect to any cost,
damage, or expense (including reasonable attorney fees) arising from breach by
OEM of its obligations under this Agreement or from claims made by OEM's
customers concerning the selling, renting, leasing, operation, service, of the
Product or from damage, injury or loss to third parties caused by OEM's fault or
negligence.

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have been advised of the possibility of such potential loss or damage. The
liability of CAC arising out of the supplying of any Product or its use, whether
based upon warranty, contract, negligence or otherwise, shall not in any case
exceed the original cost to OEM of such Product.

ARTICLE 31 - GENERAL PROVISIONS

The laws of the State of Colorado, USA will apply and govern in the construction
and application of this Agreement and to all transactions hereunder. Any
action hereunder will be brought in the courts of the Twentieth Judicial
District, County of Boulder, State of Colorado, USA and will be governed by and
interpreted and constituted in accordance with the laws of the State of
Colorado. Any claim, except for nonpayment, will be brought within one year of
the Product shipment. OEM will be liable for all collection costs and attorney
fees. CAC may only subcontract any obligations contained in this Agreement with
prior written notice.

If any provision of this Agreement is deemed invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions will not
be affected or impaired thereby.

No waiver will be valid unless in writing and no waiver granted will release OEM
or CAC from subsequent strict compliance herewith.

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IN WITNESS WHEREOF, the parties hereto executed this Agreement as of the data
written below.

CARRIER ACCESS CORPORATION OEM

__________________________ __________________________
SIGNATURE SIGNATURE

__________________________ __________________________
NAME (PRINT/TYPE) NAME (PRINT/TYPE)

__________________________ __________________________
TITLE TITLE

__________________________ __________________________
DATE DATE

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APPENDIX A - PRODUCTS

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APPENDIX B - LIST PRICE

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APPENDIX C - PRODUCT RETURNS

RETURN MATERIAL AUTHORIZATION

A Return Material Authorization (RMA) number and corresponding tracking sheet
must accompany all Products returned to CAC. An RMA number must be obtained from
CAC's technical product support department prior to returning any Product.
Warranty registration cards should be returned to CAC to help expedite RMA
process. Upon issuance of an RMA number, CAC's technical support group will fax
a product tracking sheet to OEM that must be completed and included with the
return shipment. It is OEM's responsibility to properly insure and pack all
returned materials. All Products must be returned freight pre-paid in the
original packaging materials with the RMA number clearly displayed on the
outside of the box. If original shipping materials are not available, CAC will
ship replacement materials to OEM at a rate of $25.00/container plus freight
charges.

Any Product returned without a valid RMA number will be rejected and returned to
OEM freight collect. Product found damaged, improperly used, or modified so that
it does not meet specification will be returned to OEM freight collect.

When returning parts under this procedure OEM shall do the following with
respect to each shipment:

Prepare RMA parts lists and indicate:
- Part Number and serial number of returned part*
- Quantity of each item
- Description of failure or reason for return
- Completed CAC Tracking Sheet

Product must be identified and RMA number referenced on shipping materials. OEM
is responsible for insurance and shipping charges.

COLLECT ON DELIVERY (COD) SHIPMENTS CANNOT BE ACCEPTED

* An equipment description must accompany the shipment. "Channel Bank" will not
be accepted. The correct description would be: AB-I/FXS/FXS --Serial Number
________.

Returned units that are tested with no trouble found will be returned to OEM's
COD for no trouble found and return shipping charges. To save on no trouble
found charges, only return components that have been verified as failures. For
example, return a single FXS card that has been identified with a failed channel
9, rather than an entire Access Bank.

SHIPPING

CAC assumes no liability for damage, loss, or shortage incurred during shipment
of the Product to OEM.

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Products found to be defective as the result of shipment or mishandling will be
either returned to OEM or repaired on a time and materials fee basis. These
charges will also include a time/labor charge for testing the Product to insure
it conforms to specification.

Upon receipt of Product, OEM should inspect the shipment before accepting
delivery. Damage, breakage, or shortages should be noted on the carrier's
freight bill with supporting documentation for OEM's claim against the freight
carrier. Shortages or variances from a OEM's order should be forwarded to CAC
within fifteen (15) days of shipment. All shipments should be shipped freight
pre-paid and insured to cover any losses.

ADVANCE REPLACEMENT

OEM should maintain adequate stock to provide advance replacement units if it is
their policy to offer this service. CAC will not drop ship to OEM's customer.
In the event that a RMA is issued by CAC for an out of box failure, it will be
replaced immediately upon receipt of product and verification of defect at CAC.

SUMMARY OF SERVICE FEES

PRODUCTS UNDER WARRANTY

1. Warranty Repair (Parts & Time) $ 0
2. No Trouble Found Test Fee 10% of List Price
Return Shipping Charges

PRODUCTS OUT OF WARRANTY

1. Time (Labor) $90.00/Hour
2. Materials Current Price of Replacement Part

REFURBISHMENT OF DEMO EQUIPMENT

1. Labor $250.00 flat fee
2. Material CAC cost

SPARE PARTS

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APPENDIX D - WARRANTIES AND LIMITATION OF REMEDIES

Carrier Access Corporation warrants to OEM that Products are free from
substantial defect in material and workmanship under normal use given proper
installation and maintenance for period of five (5) years from the date of
shipment by CAC.

OEM will promptly notify CAC of any defect in the Product. CAC or its agent
will have the right to inspect the Product or workmanship on OEM's premises or
OEM's customer's premises. CAC has the option to: (a) repair, replace or
service at its factory or on the premises the Product or workmanship found to be
defective, or (b) credit BUYER for the PRODUCT in accordance with CAC's
depreciation policy. Refurbished material may be used to repair or replace the
Product. Products returned to CAC for repair, replacement, or service will be
shipped pre-paid by OEM.

LIMITATION OF WARRANTY & LIMITATION OF REMEDIES

Correction of defects by repair, replacement, or service will be at CAC's option
and constitute fulfillment of all obligations to OEM for breach of warranty.

CAC assumes no warranty liability with respect to defects in the Product caused
by:

i. modification, repair, installation, operation or maintenance of the Product
by anyone other than CAC or its agent, except as described in CAC's
documentation; or

ii. the negligent or other improper use of the Product; or

iii. handling or transportation after title of the Product passes to OEM.

Other manufacturer's equipment purchased by CAC and resold to OEM will be
limited to that manufacturer's warranty. CAC assumes no warranty liability for
other manufacturer's equipment furnished by OEM.

OEM understands and agrees as follows: the warranties in this agreement replace
all other warranties, expressed or implied, and all other obligations or
liabilities of CAC, including any warranties of merchantability and fitness for
a particular purpose. All other warranties are disclaimed and excluded bY CAC.

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whatsoever, with the exception of injuries or damages caused by the gross
negligence of CAC. This limitation applies to all services, software and
Products during and after the warranty period. In no event will CAC be liable
for any special, incidental or consequential damages or commercial losses even
if CAC has been advised thereof.

No agent, OEM, or representative is authorized to make any warranties on behalf
of CAC or to assume for CAC any other liability in connection with any of CAC's
Products, software or services.

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APPENDIX E - SOFTWARE LICENSE AGREEMENT

LICENSE

PROTECTION AND SECURITY OF LICENSED PROGRAMS

Purchaser shall refrain from and shall prevent others from decompiling or
applying any procedure to the Licensed Program, including reverse engineering or
any similar process, in order to derive and/or appropriate for use, the source
code or source listings for the Licensed Program.

TERM

This Agreement shall become effective for each Licensed Program upon delivery of
the Licensed Program to Purchaser.

LIMITED WARRANTIES

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CAC warrants that when the Licensed Program is delivered that it will function
substantially in accordance with the functional description set out in the
applicable portion of the version of the user manual supplied with the Licensed
Program when used in accordance with such user manual. This warranty will be
conclusively deemed to be satisfied unless Purchaser gives CAC notice within 90
days of the date CAC ships the original copy of such Licensed Program that the
warranty has not been met, in which case CAC shall have the opportunity to make
repeated efforts within a reasonable time to satisfy its obligations under this
warranty. If, after repeated efforts, Purchaser notifies CAC that this warranty
has not been met, CAC will take back the Licensed Program and refund to
Purchaser all amounts paid by Purchaser hereunder with respect to such Licensed
Program.

THE WARRANTY SET OUT ABOVE SHALL CONSTITUTE THE SOLE LIABILITY OF CAC AND THE
SOLE REMEDY OF PURCHASER FOR ANY FAILURE OF ANY PROGRAM TO FUNCTION AS
WARRANTED.

LIMITATION OF LIABILITY

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POSSIBILITY OF SUCH DAMAGES WHICH ARE IN ANY WAY RELATED TO THIS AGREEMENT OR
THE LICENSED PROGRAM.

PATENT, COPYRIGHT, TRADE NAME AND TRADE SECRET INFRINGEMENT

In the event Purchaser is enjoined from its use of CAC Licensed Program due to
proceeding based upon any infringement of any patent, copyright or trade secret,
CAC shall either:

i) promptly render the Licensed Program non-infringing and capable of
providing services as intended; or

ii) procure for Purchaser the right to continue using the Licensed
Program; or

iii) replace the Licensed Program with a non-infringing version; or

iv) remove the Licensed Program and refund the purchase price, less a
monthly usage fee equal to one sixtieth of the license for each month
that Purchaser has had use of the Licensed Program.

MISCELLANEOUS

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only by means of a written Agreement signed by both CAC and Purchaser.

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APPENDIX F - TERRITORY

OEM will have the non-exclusive rights to market the Product within the fifty
(50) U.S. states and Canada unless otherwise authorized in writing and subject
to the terms and conditions set forth in this Agreement.

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APPENDIX G - NEW PRODUCTS
THIS PAGE LEFT INTENTIONALLY BLANK

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EXHIBIT 10.4

LEASE AGREEMENT

THIS LEASE AGREEMENT is entered into this 1st day of June, 1995 between
Cottonwood Land and Farms Ltd., hereinafter called "Lessor," and Carrier Access
Corporation hereinafter called "Lessee."

1. Introduction. The Lessor has the legal right to lease the real property
and improvements (hereinafter called "Premises") described in Exhibit "A," which
exhibit is attached hereto and incorporated by reference. The Premises comprise
a portion of 5395 Pearl Parkway, Boulder, Colorado. The parties now desire to
enter into an agreement providing for the Lessee's lease of the Premises, and
this document sets forth in writing the terms of their agreement.

2. Premises, Term of Lease, Rental. The Lessor hereby leases the Premises
to the Lessee, and the Lessee hereby leases the Premises from the Lessor, for a
term commencing at 12:01 A.M. on the 1st day of January, 1996 and ending at
11:59 P.M. on the 31st day of December, 2005 unless sooner terminated as herein
set forth. The Lessee agrees to pay Lessor as rent for the Premises according to
the terms of the RENT SCHEDULE in paragraph 31 of this lease. Said rent is
payable, in advance, by 12:00 noon on the first day of each and every month of
the term hereof at the office of the Lessor.

In the event that the tenancy commences on a date other than the first day
of a month, the rent for the first and last months of the tenancy

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shall be prorated and paid on the date of commencement and the first day of the
last month, respectively.

3. Condition of Premises. The Lessor, shall deliver the Premises to Lessee
clean and free of debris on the Lease commencement date (unless the Lessee is
already in possession) and the Lessor warrants to the Lessee that the plumbing,
lighting, air-conditioning, and heating in the Premises shall be in good
operating condition on the Lease commencement date. In the event that it is
determined that this warranty has been violated, then it shall be the obligation
of the Lessor, after receipt of written notice from THE LESSEE SETTING FORTH
WITH THE specificity the nature of the violation, to promptly rectify such
violation. The Lessee's failure to give such written notice within thirty (30)
days after the Lease commencement date shall cause the conclusive presumption
that the Lessor has complied with all of the Lessor's obligations hereunder. The
warranty contained in this paragraph shall be of no force or effect if, prior to
this date, the Lessee was an occupant of the Premises. Except as otherwise set
forth in this paragraph, the Lessee accepts the Premises in the condition
existing as of the Lease commencement date or the date that the Lessee takes
possession of the Premises, whichever is earlier.

4. Use of Premises. The Lessee covenants and agrees that it will not
without Lessor's previous written consent, use, suffer or permit the Premises,
or any part thereof, to be used for any purpose other than that of conducting
thereon a communication software/hard ware development business. Lessee
acknowledges that its use of the Premises is subject to all applicable zoning,
municipal, county and state laws, ordinances and

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regulations governing and regulating the use of the Premises, and further
subject to any covenants or restrictions of record (a copy of such covenants are
attached as Exhibit "B" and incorporated by reference). Lessee further agrees
that no materials (including toxic chemicals) other than trash and rubbish in
sanitary containers approved by Lessor will be placed outside the building. No
vehicles of any kind will be parked on the Premises except in the designated
parking areas. No vehicles will be parked at the loading docks other than while
being actively loaded or unloaded. No vehicles, trailers, or other equipment of
Lessee or its agents, employees, or invitees shall be parked overnight on the
Premises without the written permission of Lessor.

5. Assignment. It is expressly understood and agreed by the Lessee that the
Lessee's leasehold interest may not be assigned or sublet in whole or in part
without in each case having first obtained the written consent of the Lessor.
Such consent will not be unreasonably withheld.

6. Access to Premises. It is expressly understood and agreed by the Lessee
that the Lessor or their agents shall have free access at all reasonable hours
to the Premises for the purpose of examining the same or exhibiting the same to
prospective buyers or lessees or for making repairs on the Premises which the
Lessor may desire to make. Lessor shall have the right to use any and all means
that Lessor may deem necessary and proper to enter any portion of the Premises
in an emergency, and such entry shall not under any circumstances be construed
or deemed to be a forcible or unlawful entry into, or a detainer of, the
Premises or an eviction, actual or constructive, of the Lessee from the
Premises.

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7. Alterations. Lessee shall not make any alterations, additions, or
improvements including, but not limited to painting and signs, in or to the
Premises without Lessor's prior written consent, which may be withheld without
cause. In particular, and not by way of limitation, Lessee agrees that: (a)
Lessee will submit to Lessor all plans for signs to be erected, substituted,
changed or modified on the Premises, including color, site, location, height,
and fighting; (b) No temporary structure, tent, or trailer shall be constructed
or permitted to remain on the premises; (c) No apparatus of any kind may be
added to the exterior of the building by Lessee; and (d) No locks may be changed
on the Premises without Lessor's consent. Any alterations, additions, or
improvements that the Lessee shall desire to make and which require the consent
of the Lessor shall be presented to the Lessor in written form with scaled,
detailed plans showing modifications of all electrical, heating, ventilating,
air-conditioning, plumbing and other systems as well as modifications to walls,
permanent partitions, doors and other structures, and the Lessee shall furnish
as-built scaled plans upon the completion of the modifications.

8. Landlord Not Liable. Lessor shall not be liable for any damages
occasioned by failure to keep the Premises in repair, and shall not be liable
for any damage done or occasioned by or from electrical current, plumbing, gas,
water, steam, or sewage, or the bursting, leaking, running or failure of
operation of any radiator, tank, water closet, wash stand, waste pipe, air
conditioning, or any other apparatus, above, upon, or about the Premises or the
Building, nor the damage occasioned by water, snow, or ice being upon any
sidewalk or entrance way, or being upon or coming through the roof,

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sky light, trap door or any other opening in the Premises or the Building, nor
from loss suffered by fire, regardless of origin, wind, rain, flood or other
elements, nor from any damage arising from the action or negligence of Lessee or
other occupants of the Building or of any owners or occupants of its adjacent or
contiguous property. Lessee hereby releases, discharges, and agrees to indemnify
Lessor of and from any and all claims, demands, and liability for any loss,
damage, injury, or other casualty to property, whether it be that of either of
the parties hereto or of third persons, whether they be third persons of Lessee
or agents or employees of Lessee, caused by, arising from, or happening in
connection with Lessee's use or occupancy of the Premises or Lessee's use of any
equipment, facilities, or property in, on, or adjacent to the Premises or the
Building.

9. Additional Areas. It is expressly understood and agreed by Lessee that
if the Lessor shall furnish any automobile parking spaces, common areas, or any
other facilities, equipment or appliances outside of and in addition to the
Lessee's Premises, the same shall be deemed gratuitously furnished by the Lessor
and that if any person shall use the same, such person does so at his or her own
risk and upon the express understanding and stipulation that the Lessor shall
not be liable for any loss of property through theft, casualty, or otherwise, or
for any damage or injury whatsoever to person or property. Maintenance of such
additional areas for normal wear and tear shall be the responsibility of Lessor,
but Lessee agrees to be responsible for any additional damage caused by its
agents, employees, guests or invitees.

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10. Additional Rent. The Lessee shall pay Lessor additional annual rent
equal to the cost of all operating expenses for the Building multiplied by 65%
percent. Operating expenses shall include, but not be limited to: (a) taxes,
assessments and governmental taxes, whether federal, state, county or municipal,
which are levied on or charged against the Premises and any other taxes and
assessments attributable to the Premises and its operation excluding, however,
federal and state income taxes; (b) all insurance premiums paid by the Lessor
attributable to the Premises: (c) all expenses incurred in connection with the
maintenance, operation, and repair of the Building, associated equipment,
adjacent walks, parking areas, and landscaped areas; (d) Building and cleaning
supplies and materials; (e) the cost of all charges for cleaning, maintenance
and service contracts, trash collection, snow removal, and other services with
independent contractors; (f) the reasonable amortization of any capital
improvements which are made or installed by Lessor after the commencement of
this Lease for the purpose of saving labor or otherwise reducing applicable
operating expenses; (g) all other costs and expenses reasonably necessary in the
operation and maintenance of a first class Building; (h) the cost of all common
utility and service charges for the Premises, including, without limitation,
gas, electricity, water, and sewer. Operating costs shall not include the cost
of any work or service performed specially by the Lessor for any lessee at the
cost of such lessee. Such additional rent shall be paid at monthly intervals in
advance upon receipt of statements of estimated charges from Landlord. At the
end of each calendar year, or, at Lessor's option, at any other more frequent
interval, Lessor shall provide an accounting of the total operating

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expenses for the building, Lessee's share of such amount, and Lessee's payments
toward such amount during the year or interval. During the thirty-day period
following such accounting, Lessor shall pay any excess to the Lessee if payments
exceed expenses, and the Lessee shall pay additional rent to Lessor if expenses
exceed payments.

11. Personal Property Taxes. The Lessee shall pay and discharge all
personal property taxes which are levied, assessed, imposed or charged upon its
personal property and inventory or which arise out of or result from the
activities carried on by the Lessee at or upon the leased Premises.

12. Insurance. The Lessee shall, at its expense, acquire a general
liability insurance policy effective as of the date of this Lease Agreement.
Said policy shall be acquired from a company qualified and permitted to do
business in the State of Colorado. Said policy shall be in the minimum total
amounts of $1,000,000.00 combined single limits for bodily injury and property
damage. Said policy shall be maintained in full force and effect during the
entire lease term and shall contain a provision prohibiting cancellation thereof
without at least ten (10) days' notice to the Lessor, who shall be a named
insured. A copy of the Policy and Current Declaration of coverage shall be
provided to the Lessor within ten (10) days after commencement of the lease and
each renewal date.

The Lessor shall maintain on the Building and other improvements (but not
Lessee's personal property, fixtures, equipment, and tenant improvements) in
which the Premises are located a policy of standard fire and extended coverage
insurance to the extent of at least ninety percent (90%) of full replacement
value. The insurance policy shall be issued in the

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names of Lessor and Lessor's lender, as their interest appear, and any proceeds
shall be made payable to Lessor. The cost of such insurance shall be passed on
to the Lessee as part of the operating expenses for the Building.

The parties release each other, and their respective authorized
representatives, from any claims for damages arising out of or incident to the
perils insured against or under the insurance policies carried by the parties
and in force at the time of such damage, whether due to the negligence of Lessor
or Lessee or their agents, employees, or invitees. The parties shall, upon
obtaining the policies of insurance required herein, give notice to the
insurance carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Agreement.

13. Indemnification. The Lessee agrees to indemnify and hold the Lessor
harmless from any claims, damages, liens, or judgments that may be filed,
entered or asserted against it by virtue of the Lessee's use of the Premises or
by virtue of any act of the Lessee, its agents, servants or employees.

14. Condemnation. If any part of the Premises are taken or condemned for a
public or quasi-public use (or any transfer is made in lieu thereof), and a part
thereof remains which is suitable for the Lessee's business use, then, this
lease shall, as to the part so taken, and only as to such part,. terminate as of
the date that title is taken by the condemnor and the rent payable hereunder
shall be adjusted so that the Lessee shall be required to pay for the remainder
of the term only such percentage of such rental as the remaining usable square
footage of the building included in the

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Premises bears to the original total square footage of such building. Lessor
shall, after the taking of all or any portion of the Premises, provide the same
amount of square feet of usable building space for Lessee's operations in the
immediate vicinity of the Premises, and, in the event Lessor cannot do so,
Lessee shall have the right to terminate this Lease, but shall not receive
payment in any form of compensation. All compensation awarded upon any such
condemnation or taking shall go to the Lessor except that the Lessee shall be
entitled to that part of the total award, if any, specifically allocated to the
value of the Lessee's fixtures so taken.

15. Release of Liens. Lessee expressly covenants and agrees that it will,
during the term hereof, promptly remove or release, by the posting of a bond or
otherwise, as required or permitted by law, any lien attached to or upon the
Premises or any portion thereof by reason of any act or omission on the part of
the Lessee, and it hereby expressly agrees to save and hold harmless the Lessor
from or against any such lien or claim of lien. In the event any such lien does
attach, or any claim of lien is made against the Premises, which may be
occasioned by any act or omission upon the part of the Lessee, and it is not
thus released within thirty (30) days after notice thereof, Lessor, in its sole
discretion, (but nothing herein contained shall be construed as requiring it so
to do) may pay and discharge the said lien and relieve the said demised Premises
from any such lien, and the Lessee agrees to pay and reimburse Lessor upon
demand for or on account of any expense which may be incurred by Lessor in
connection with such lien of claim, including reasonable attorney's fees.

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16. Repair and Maintenance. The Lessor shall be responsible for all repair,
maintenance, and replacements required to maintain and keep the Building in good
condition and shall receive reimbursement of such costs as part of the operating
expenses for the Building; provided, however, that the Lessee shall be wholly
responsible for replacement of cracked or broken glass, replacement of all
incandescent and fluorescent lights and maintenance of all light fixtures on the
Premises and all damage to the Building resulting from acts or omissions of the
Lessee, its agents, employees or invitees. The Lessee shall not be responsible
for maintenance or repair resulting from acts or omissions of other tenants,
their agents, employees, or invitees.

17. Compliance With Laws and Regulation. The Lessee shall comply with all
laws and regulations of governmental entities, agencies or authorities having
jurisdiction over the Premises and the uses made therein. The Lessee shall not
permit a nuisance to exist on the leased Premises.

18. Payments to Lessor. Until notice to the contrary is given to the
Lessee, all payments to be made to the Lessor hereunder shall be made by
delivering the same at the address of the Lessor as set forth in Paragraph 19
hereof so that payment is received by the Lessor on or before the due date.

19. Notice. Whenever notice is required to be given to a party hereunder,
said notice shall be in writing and shall be given to the party entitled thereto
by delivering a copy thereof to the party entitled thereto or by mailing a copy
thereof to the party entitled thereto by registered or certified mail, return
receipt requested. If such notice is given by delivering a copy to the person
entitled thereto, said notice shall be complete and

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effective on the date of such delivery. If such notice is given by mailing a
copy to the person entitled thereto, said notice shall be complete and effective
on the date it is deposited in the mail to the following persons at the
addresses indicated:

Lessor: Cottonwood Land and Farms Ltd.
c/o Flatiron Park Company
5540 Central Avenue
Boulder, Colorado 80301

Lessee: Carrier Access Corporation
5395 Pearl Parkway
Boulder, Colorado 80301

20. Surrender of Premises. The Lessee shall, upon the termination of this
lease, whether said termination occurs due to the expiration of the lease term
or otherwise, surrender the Premises in as good a condition as when entered
upon, subject only to ordinary wear and tear. Upon the surrender of the
Premises, the Lessee shall, if it is not then in default hereunder, have the
right to remove its inventory, furnishings, equipment and trade fixtures from
the leased Premises provided that it repair all damage done to the leased
Premises in accomplishing said removal so as to leave the Premises in the same
condition as when entered upon, ordinary wear and tear excepted.

11
<PAGE>

21. Removal of Lessee's Property. Lessee hereby grants Lessor a security
interest in all its inventory, equipment, furnishings, and trade fixtures
located on the Premises to secure Lessee's obligations hereunder. If Lessee
defaults in any payment obligation of this lease, or if Lessee fails to remove
such property from the Premises within five days after termination of this
lease, or if Lessee abandons the Premises as defined in Paragraph 23, then
Lessor shall have the right and option to remove such property from the Premises
and exercise all rights granted by Article 9 of the Colorado Uniform Commercial
Code, without any liability for damage or injury caused to the property by any
removal, restoration of Premises, or storage, even If Lessor is negligent.

The Lessee shall be responsible for the cost incurred in said removal,
storage and restoration, including any reasonable attorney's fees. The Lessor
shall give notice of removal to the Lessee in the manner provided for in this
agreement and the Lessee shall have three (3) days after the effective date of
such notice to recover such property by paying all monies owed and fulfilling
all other obligations hereunder. If the Lessee does not take such actions,
Lessor may retain such property as its sole and separate property or may sell
such property in any commercially reasonable fashion and apply the proceeds to
Lessee's obligations hereunder.

22. Premises Damages or Destroyed. In the event the Premises are damaged or
rendered wholly or partially unusable by fire, flood, windstorm, explosion or
any other casualty, then the rights and obligations of the parties shall be as
follows:

12
<PAGE>

Lessor shall promptly repair or replace the damaged Premises, and if
reasonably possible the repair or replacement shall be completed within 180 days
from date of the damage. In the event the repairs or replacements are not
completed within 180 days, the Lessee may at its option terminate this lease,
and all the Lessee's obligation for further rent payments shall cease as of the
date of said termination. Rent shall not be abated unless more than 30 percent
of the interior floor space in the Premises is rendered untenantable and the
total repairs are not completed in 30 days, in which event there shall be an
abatement of rent in proportion to the portion of the interior floor space
rendered untenantable. In no event shall there be an abatement of rent if the
damage is caused by any casualty on the Premises as a result of acts or
omissions of the Lessee.

The parties recognize that the Lessee on most occasions will be storing
valuable materials and equipment within the Premises. In the event the Premises
are so damaged by such casualty that Lessee's property would be endangered by
exposure to the elements, and in the further event that Lessee desires to
complete emergency repairs, the restoration of any alterations to the Premises
occasioned by emergency repairs shall also be borne by the Lessee. Lessor shall
have no obligation to make such emergency repairs nor any liability for damage
directly or indirectly caused to Lessee's property by such casualty.

23. Default and Abandonment. If the Lessee defaults in any of its
obligations hereunder and fails to correct said default within three days after
written notice thereof from the Lessor, or, if such breach is not in payment of
money, has not within said three-day period of time commenced

13
<PAGE>

substantial efforts to cure said breach and thereafter continued its efforts to
cure said breach with due diligence, or, if the Lessee abandons the Premises,
which shall be conclusively deemed to occur if Lessee makes no use of the
Premises for five consecutive days during the term of this lease, then the
Lessor shall have the right to declare this agreement terminated and to re-enter
and take immediate possession of the demised Premises, or, without in any way
being obligated so to do, the Lessor may elect to retake possession of said
Premises and rent the same for such rent and pursuant to such conditions as the
Lessor believes best, making such changes and repairs as may be required, and
giving credit for the amount of rent so received less all expenses for
reletting, advertising, cleaning, removal or storage of Lessee's property, and
repairs, and in such event, said Lessee shall be liable for the balance of the
rent herein reserved until the expiration of the term of this lease.

The Lessee shall pay unto the Lessor additional rent for late rent payments
as to all rental payments not made on or before the fifth (5th) day of the month
in which they are due, said additional rent to be one and three quarter (1 3/4%)
percent of the rent payment so delinquent for each month or fraction thereof
that such payment is late. The parties agree that this late charge is reasonable
liquidated damages taking into account the time spent by Lessor, its agents and
employees because of such late rent payments, processing and accounting charges,
and late charges that may be imposed on Lessor under the trust deed covering the
Premises.

In the event of a default by the Lessee in the performance of any of its
duties and obligations hereunder, the Lessee shall pay all costs incurred

14
<PAGE>

by the Lessor in the enforcement of the provisions of this lease (including
this provision) as against said Lessee, said costs to include reasonable
attorneys' fees whether or not litigation is commenced.

24. Holding Over. If Lessee remains in possession of the Premises
after the expiration of this lease and without the execution of a new lease, it
shall be deemed to be occupying said Premises as Lessee from month to
month at a rent equal to two times the monthly rental being paid by it at the
time of said expiration of lease.

25. Bankruptcy. If at any time during the term hereof proceedings in
Bankruptcy shall be instituted by or against the Lessee which result in an
adjudication of bankruptcy as to the Lessee, or if the Lessee makes an
assignment for the benefit of creditors, then the Lessor may, at its option, in
either or any of such events, immediately take possession of the demised
Premises and terminate this lease. Upon such termination, all installments
of rent earned to the date of termination and unpaid shall at once become
due and payable, and in addition thereto Lessor shall have all rights provided
by the bankruptcy laws relative to the proof of claims on an anticipatory
breach on an executory contract.

26. Rent Regulations. If the rent to be paid by the Lessee to the
Lessor hereunder, whether pursuant to Paragraph 2 or Paragraph 24, is
subject to regulation by law, then the rent to be so paid shall be the
maximum rental permitted by said laws but in no event in excess of the rent
provided for or determined in accordance with the applicable provisions of
this Lease Agreement.

15
<PAGE>

27. Meaning of Words. Unless the context clearly indicates a contrary
intention, all words used herein in one gender shall extend to and include the
other gender; all words in the singular number shall extend to and include the
plural; and all words used in the plural number shall extend to and include the
singular.

28. Remedies Not Exclusive. It is agreed that each and every one of the
rights, remedies and benefits provided by this lease shall be cumulative, and
shall not be exclusive of any other of said rights, remedies and benefits, or of
any other rights, remedies and benefits allowed by law.

29. Waiver. One or more waivers of any covenant or condition by the Lessor
shall not be construed as a waiver of a further breach of the same.

30. Lease Binding. The covenants, conditions and agreements contained in
this lease shall bind and inure to the benefit of the Lessor and Lessee and
their respective heirs, personal representatives and successors, and except as
otherwise provided in this lease, their assigns.

16
<PAGE>

31. Rent Schedule.

January 1, 1996 through March 31, 1996 $0.00 per month
April 1, 1996 through December 31, 1996 $20,583.00 per month
January 1, 1997 through December 31, 1997 $20,583.00 per month
January 1, 1998 through December 31, 1998 $21,406.00 per month
January 1, 1999 through December 31, 1999 $22,262.00 per month
January 1, 2000 through December 31, 2000 $23,376.00 per month
January 1,2001 through December 31, 2001 $24,544.00 per month
January 1, 2002 through December 31, 2002 $25,772.00 per month
January 1, 2003 through December 31, 2003 $27,060.00 per month
January 1, 2004 through December 31, 2004 $28,413.00 per month
January 1, 2005 through December 31, 2005 $29,834.00 per month

17
<PAGE>

32. Quiet Enjoyment. Subject to the terms and conditions of this lease,
Lessor covenants that so long as the rental is current for the demised Premises
and there is no default in any of the covenants to be performed by Lessee, the
Lessee shall peaceably and quietly hold and enjoy the demised Premises for the
entire term of this lease and any renewals thereof.

33. Subordination. This lease is and shall be subordinate to any
encumbrance now of record or recorded after the date of this lease affecting the
Premises. Such subordination is effective without any further act of Lessee.
Lessee shall from time to time on request from Lessor execute and deliver any
documents that may be required by a lender to effectuate any subordination. If
Lessee fails to execute and deliver such documents, Lessee irrevocably
constitutes and appoints Lessor as Lessee's special attorney-in-fact to execute
and deliver such documents on Lessee's behalf.

34. Security Deposit. On execution of this lease, Lessee shall deposit with
Lessor $644.00 (already held by Lessor), to be held by Lessor without liability
for interest, as a security deposit for the performance by Lessee of all its
obligations under this lease. If Lessee is in default, Lessor can use the
security deposit, or any portion of it, to cure the default or to compensate
Lessor for all damage sustained by Lessor resulting from Lessee's default.
Lessee shall immediately on demand pay such amount to Lessor as is necessary to
restore the security deposit to the amount set forth above. At the expiration or
termination of this lease, Lessor shall return to Lessee that portion of the
security deposit remaining after application of such amounts as are necessary to
compensate Lessor for Lessee's defaults, if any.

18
<PAGE>

35. Additional Rent and Interest. Any monetary obligations of Lessee to
Lessor under the terms of this lease shall be deemed to be rent. Any amount due
to Lessor under any of the provisions of this lease shall bear interest from the
date due at twenty-one (21%) percent per annum, provided, however, that interest
shall not be payable on late charges nor any amounts upon which late charges are
paid. Payment of such interest shall not cure or excuse any default by Lessee.

36. Severability. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction shall in no way affect the
validity of any other provision hereof.

37. Prohibition on Animals. Lessee, its employees, authorized
representatives, and invitees shall not permit any access to or use of the
Premises or any part of the Premises by any animals, whether domestic or
agricultural. Any such use shall constitute a default under this lease, and
Lessee shall be fully responsible for any damages caused thereby.

38. Environmental Matters

38.1 Section I Definitions

38.1.1 Hazardous Material. Hazardous Material means any substance:

(a) which is or becomes defined as a "hazardous material, "hazardous
waste," "hazardous substance, " "regulated substance," pollutant or contaminant
under any federal, state or local statute, regulation, rule, order, or ordinance
or amendments thereto; or

(b) the presence of which on the Premises causes or threatens to cause a
nuisance upon the Premises or to adjacent properties or poses or

19
<PAGE>

threatens to pose a hazard to the health or safety of persons on or about the
Premises or requires investigation or remediation under any federal, state or
local statute, regulation, rule, order, or ordinance or amendments thereto.

38.1.2 Environmental Requirements. Environmental Requirements means all
applicable present and future statutes, regulations, rules, ordinances, codes,
licenses, permits, orders, approvals, plans, authorization, concessions,
franchises, and similar items, of all governmental agencies, departments,
commissions, boards, bureaus, or instrumentalities, of the United States, states
and political subdivisions thereof and all applicable judicial, administrative,
and regulatory decrees, judgments, and orders relating to the protection of
human health or the environment.

38.1.3 Environmental Damages. Environmental Damages means all claims,
judgments, injuries, damages (including without limitation damages for
diminution in the value of the Premises and adjoining property and for the loss
of business from the Premises and adjoining property), losses, penalties, fines,
liabilities (including strict liability), encumbrances, liens, costs, and
expenses of investigation and defense of any claim, and of any good faith
settlement of judgment, of whatever kind or nature, contingent or otherwise,
matured or unmatured, foreseeable or unforeseeable, including without limitation
reasonable attorneys' fees and disbursements and consultants' fees, any of which
are incurred at any time as a result of the existence of "Hazardous Material"
upon, about, beneath the Premises or migrating or threatening to migrate to or
from the Premises or the existence of a violation of "Environmental
Requirements" pertaining to the Premises.

20
<PAGE>

38.2 Section II Obligation To Indemnify, Defend and Hold Harmless

38.2.1 Lessee, its successors, assigns and guarantors, agree to indemnify,
defend, reimburse and hold harmless the following persons from and against any
and all "Environmental Damages" arising from activities of Lessee or its
employees, agents, or invitees which (a) result in the presence of "Hazardous
Materials" upon, about or beneath the Premises or migrating to or from the
Premises, or (b) result in the violation of any "Environmental Requirements"
pertaining to the Premises and the activities thereon:

(i) Lessor;

(ii) any other person who acquires a portion of the Premises in any
manner, including but not limited to through purchase, at a foreclosure sale or
otherwise through the exercise of the rights and remedies of Lessor under this
Agreement; and

(iii) the directors, officers, shareholders, employees, partners,
agents, contractors, subcontractors, experts, licensees, affiliates, lessees,
mortgagees, trustees, heirs, devisees, successors, assigns and invitees of such
persons.

38.2.2 This obligation shall include, but not be limited to, the burden and
expense of defending all claims, suits and administrative proceedings (with
counsel reasonably approved by the indemnified parties), and conducting all
negotiations of any description, and paying and discharging, when and as the
same become due, any and all judgments, penalties or other sums due against such
indemnified persons. Lessee, at its sole expense, may employ additional counsel
of its choice to associate with counsel representing Lessor.

21
<PAGE>

38.2.3 The obligations of Lessee in this section shall survive the
expiration or termination of this Lease.

38.3 Section III Notification

38.3.1 If Lessee shall become aware of or receive notice or other
communication concerning any actual, alleged, suspected or threatened violation
of "Environmental Requirements," or liability of Lessee for "Environmental
Damages" in connection with the Premises or past or present activities of any
person thereon, or that any representation set forth in this Agreement is not or
is no longer accurate, then Lessee shall deliver to Lessor, within ten days of
the receipt of such notice, or communication or correcting information by
Lessee, a written description of such information or condition, together with
copies of any documents evidencing same.

38.4 Section IV Negative Covenants

38.4.1 No Hazardous Material on Premises. Except in strict compliance with
all Environmental Requirements, Lessee shall not cause, permit or suffer any
"Hazardous Material" to be brought upon, treated, kept, stored, disposed of,
discharged, released, produced, manufactured, generated, refined or used upon,
about or beneath the Premises or any portion thereof by Lessee, its agents,
employees, contractors, tenants or invitees, on any other person without prior
written consent of Lessor.

38.4.2 No Violations of Environmental Requirements. Lessee shall not cause,
permit or suffer the existence or the commission by Lessee, its agents,
employees, contractors, or invitees, or by any other person of a violation of
any "Environmental Requirements" upon, about or beneath the Premises or any
portion thereof.

22
<PAGE>

38.5 Section V Right To Inspect

38.5.1 Lessor shall have the right in its sole and absolute discretion, but
not the duty, to enter and conduct an inspection of the Premises at any
reasonable time to determine whether Lessee is complying with the terms of this
Agreement, including but not limited to the compliance of the Premises and the
activities thereon with "Environmental Requirements" and the existence of
"Environmental Damages." Lessee hereby grants to Lessor the right to enter the
Premises and to perform such tests on the Premises as are reasonably necessary
in the opinion of Lessor to conduct such reviews and investigations. Lessor
shall use its best efforts to minimize interference with the business of Lessee
but Lessor shall not be liable for any interference caused thereby.

38.6 Section VI Right To Remediate

38.6.1 Should Lessee fail to perform or observe any of its obligations or
agreements pertaining to "Hazardous Materials" or "Environmental Requirements,"
then Lessor shall have the right, but not the duty, without limitation upon any
of the rights of Lessor pursuant to this Agreement, to enter the Premises
personally or through its agents, consultants or contractors and perform the
same. Lessee agrees to indemnify Lessor for the costs thereof and liabilities
therefrom as set forth in Section 11.

39. Monitoring equipment, Should equipment for monitoring fire systems
and/or security systems be deemed necessary by the Lessee or be required for the
Premises by Federal, State, or Local Governing Agencies because of Lessee's
equipment, the nature of Lessee's business, or Lessee's modification of the
Premises, Lessee shall be

23
<PAGE>

responsible for installation of such monitoring system, for any required
building permits, and monthly monitoring fees. Should such monitoring systems be
otherwise required by Federal, State, or Local Governing Agencies, Lessor shall
be responsible for installation of such monitoring systems, but Lessee shall pay
for monthly monitoring fees as additional rent.

40 Other. Lessee shall have a right of first refusal on adjoining space. Lessee
must respond, in writing, within three (3) business days of notification by
Lessor of the availability of an adjoining space, of its intent to exercises its
right of first refusal. Failure to notify Lessor within the specific time frame
shall result in Lessee loosing its first right of refusal.

IN WITNESS WHEREOF, the parties have hereunto set their hands and seals this
date and year above written.

LESSOR: Cottonwood Land and Farms, Ltd.

BY: /s/ signature illegible
-------------------------------

LESSEE: Carrier Access Corporation

BY: /s/ Nancy Gene Koenig
-------------------------------
ITS: SECTY/TREASURER
-------------------------------

24
<PAGE>

STATE OF COLORADO)
)SS

COUNTY OF BOULDER)

The foregoing instrument was acknowledged before me by
SCOTT A. PATTEN , of COTTONWOOD LAND & FARMS, LTD. , Lessor,
- ----------------------- ------------------------------
on the 22ND day of JUNE , 1995.
-------- -------------------- -

Witness my Hand and official Seal.

My commission expires: JUNE 2ND, 1998
--------------

Notary Public: /s/ signature illegible
------------------------

STATE OF COLORADO)
-------- )SS

COUNTY OF BOULDER)
-------

The foregoing instrument was acknowledged before me by
NANCY GENE KOENIG , of CARRIER ACCESS CORPORATION , Lessee,
- ----------------------- ---------------------------
on the 9 day of JUNE , 1995.
---- -------------------------- -

Witness my Hand and official Seal.

My Commission expires: JUNE 2, 1998
------------

Notary Public: /s/ signature illegible
-----------------------
<PAGE>

EXHIBIT "A" 1st floor

[FLOORPLAN APPEARS HERE]

<PAGE>

EXHIBIT 10.5

AMENDMENT TO LEASE AGREEMENT
(Modification of terms and rents)

The purpose of this Amendment, dated September 20,1995 is to modify the terms of
the Lease as noted, between Cottonwood Land and Farms, Ltd., "LESSOR, " and
Carrier Access Corporation, "LESSEE," for The Premises located at 5395 Pearl
Parkway, Boulder, CO.

This Amendment adds approximately 13,300 square feet and brings the total square
feet leased to 37,280 (app.), as shown on Exhibit "A", modifies the term of the
Lease Agreement, dated June 1, 1995 as referenced in Paragraph 2, and provides
for paragraph 10 Additional Rent and the rent schedule Paragraph 31 and terms to
be modified.

The Lessor hereby leases the Premises to the Lessee, and the Lessee hereby
leases the Premises from the Lessor, for a term commencing at 12:01 AM. on the
1st day of January, 1996 and ending at 11:59 P.M. on the 31st day of December,
2005 unless sooner terminated as herein set forth. The Lessee agrees to pay
Lessor as rent for the premises according to the terms of the RENT SCHEDULE
below:

January 1, 1996 through March 31, 1996 $0.00 per month
April 1, 1996 through April 30,1996 $20,583.00 per month
May 1, 1996 through December 31,1996 $31,999.00 per month
January 1, 1997 through December 31,1997 $31,999.00 per month
January 1, 1998 through December 31,1998 $33,278.00 per month
January 1, 1999 through December 31, 1999 $34,609.00 per month
January 1, 2000 through December 31, 2000 $36,341.00 per month
January 1, 2001 through December 31, 2001 $38,157.00 per month
January 1, 2002 through December 31, 2002 $40,066.00 per month
January 1, 2003 through December 31, 2003 $42,068.00 per month
January 1, 2004 through December 31, 2004 $44,172.00 per month
January 1, 2005 through December 31, 2005 $46,381.00 per month

<PAGE>

Paragraph 10 Additional Rent, shall be modified from sixty-five percent(65%) to
one hundred percent (100%).

All other terms and conditions of the original Lease are to remain in full force
and effect.

IN WITNESS WHEREOF, the parties have hereunto set their hands and seals this
date and year above written.

LESSOR: Cottonwood Land and Farms, Ltd.

BY: /s/ Richard L. Hedges
--------------------------

LESSEE: Carrier Access Corporation

BY: /s/ Nancy Gene Koenig
--------------------------
ITS: SEC/TREASURER
--------------------------
<PAGE>

STATE OF COLORADO)
)SS
COUNTY OF BOULDER)

The foregoing instrument was acknowledged before me by
RICHARD L. HEDGES , of COTTONWOOD LAND & FARMS, LTD. , Lessor,
- ----------------------- ------------------------------
on the 25TH day of SEPTEMBER , 1995.
-------- -------------------- -

Witness my Hand and official Seal.

My commission expires: JUNE 2ND, 1998
--------------

Notary Public: /s/ signature illegible
------------------------

STATE OF COLORADO)
-------- )SS
COUNTY OF BOULDER)
-------

The foregoing instrument was acknowledged before me by
NANCY GENE KOENIG , of CARRIER ACCESS CORPORATION , Lessee,
- ----------------------- ------------------------------
on the 21ST day of SEPTEMBER , 1995.
-------- -------------------- -

Witness my Hand and official Seal.

My commission expires: JUNE 2ND, 1998
--------------

Notary Public: /s/ signature illegible
------------------------
<PAGE>

EXHIBIT "A"

[FIRST FLOORPLAN APPEARS HERE]
<PAGE>

EXHIBIT "A"

[SECOND FLOORPLAN APPEARS HERE]

<PAGE>
EXHIBIT 10.6

CARRIER ACCESS CORPORATION
1995 STOCK OPTION PLAN

1. Purposes of the Plan
--------------------

This Plan is intended to assist the Company in retaining and attracting the
best available personnel for positions of substantial responsibility, to provide
additional incentive to Employees and Consultants, to secure and increase the
proprietary interest of such persons in the continued success of the Company,
and to promote the success of the business of the Company and its Subsidiaries.

Options granted hereunder may be either "incentive stock options" as
defined in Section 422 of the Code, or "nonqualified stock options," at the
discretion of the Board and as reflected in the terms of the written option
agreement.

2. Definitions
-----------

As used herein, the following definitions shall apply:

(a) "Board" shall mean the Board of Directors of the Company.

(b) "Cause" shall mean willful and gross misconduct on the part of an Employee
or Consultant that is materially detrimental to the Company or any
subsidiary as determined by the Board in its sole discretion.

(d) "Committee" shall mean the committee, if any, established by the Board
to administer this Plan. The Committee shall consist of members of the
Board who shall serve at the pleasure of the Board.

(e) "Common Shares" shall mean the Common Shares of the Company, par value
$.0l per share.

(f) "Company" shall mean Carrier Access Corporation, a Colorado
corporation.

(g) "Consultant" shall mean any person who is engaged by the Company or any
Parent or Subsidiary to render consulting services and is compensated for
such consulting services, and any director of the Company whether
compensated for such services or not. "Consultant" may also apply to other
select parties, where "select" shall mean any individual or business entity
as determined appropriate by the Board or the Committee.

(h) "Continuous Status as an Employee or a Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any
other leave or absence approved by the Board; provided that such leave is
for a

1
<PAGE>

period of not more than ninety (90) days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.

(i) "Employee" shall mean any common law employee, including officers of
the Company or any parent or Subsidiary of the Company.

(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

(k) "Incentive Option" shall mean a stock option granted pursuant to the
Plan, and intended to qualify as an incentive stock option within the
meaning of Section 422 of the Code.

(l) "Nonqualified Option" shall mean an Option which does not qualify under
Section 422 of the Code.

(m) "Option" shall mean a stock option granted pursuant to the Plan to
purchase Common Shares, including Incentive Options, Nonqualified Options
and Reload Options.

(n) "Optioned Shares" shall mean the Common Shares subject to an Option.

(o) "Optionee" shall mean an Employee or Consultant who receives an
Option.

(p) "Parent" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.

(q) "Plan" shall mean this Carrier Access Corporation 1995 Stock Option
Plan.

(r) "Reload Option" shall mean the right to receive a further Option for
a number of Common Shares not greater than the number of Common Shares
surrendered by the Optionee upon exercise of the original Option as
contemplated by Section 5 of the Plan.

(s) "Securities Act" shall mean the Securities Act of 1933, as amended.

(t) "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424 (f) of the Code.

3. Shares Subject to the Plan
--------------------------

Subject to the provisions of Section 8, the Common Shares which may be
issued or transferred pursuant to the Plan shall not exceed 2,000,000 Common
Shares in the aggregate, less any Common Shares issued to Employees or
consultants pursuant to stock purchase agreements after the effective date of
the Plan, and not repurchased by the Company thereunder. The Common Shares
which are made the subject of the Plan may be Common Shares now or hereafter
authorized but unissued, or Common Shares subsequently reacquired by the
Company.

If an Option should expire or become unexercisable for any reason
without having been exercised in full, the Common Shares not purchased which
were subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.

2
<PAGE>

4. Administration of the Plan
--------------------------

(a) Procedure. The Plan shall be administered by the Board.

The Board may delegate its authority to a Committee, appointed by it,
consisting of not less than two (2) members of the Board, to administer the Plan
on behalf of the Board, subject to such terms and conditions as the Board may
prescribe. Once appointed, the Committee shall continue to serve until
otherwise directed by the Board. From time to time, the Board may increase the
size of the Committee and appoint additional members thereof, remove members
(with or without Cause), appoint new members in substitution therefor, fill
vacancies however caused, and remove all members of the Committee, and
thereafter directly administer the Plan. References in this Plan to the Board
shall include the Committee, if there is a Committee, unless the context
otherwise requires.

Members of the Board who are either eligible for Options or have been
granted Options may vote on any matters affecting the administration of the Plan
or the grant of any Options pursuant to the Plan, except that no such member
shall act upon the granting of an Option to himself, but any such member may be
counted in determining the existence of a quorum at any meeting of the Board
during which action is taken with respect to the granting of Options to him.

At such time as there is a public market for the Common Shares, or any
class of equity securities of the Company is registered under Section 12 of the
Exchange Act, the Plan shall thereupon be administered by a Committee of
disinterested persons (as such term is defined by Rule 16b-3 under the Exchange
Act) appointed by the Board each of whom is a member of the Board. During the
one year prior to commencement of service on the Committee, the Committee
members will not have participated in, and while serving and for one year after
serving on the Committee, such members shall not be eligible for selection as
persons to whom Common Shares may be allocated or to whom Options or share
appreciation rights may be granted under the Plan or any other discretionary
plan of the Company under which participants are entitled to acquire Common
Shares, options or share appreciation rights of the Company, except as otherwise
permitted by Section 16 of the Exchange Act and the Rules and Regulations
thereunder.

(b) Powers of the Board/Committee. Subject to the provisions of the Plan,
the Board or Committee shall have the authority, in its sole discretion, to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. Any controversy or claim arising
out of or relating to the Plan shall be determined unilaterally by and at the
sole discretion of the Board or Committee.

(c) Effect of Board's/Committee's Decision. All decisions, determinations
and interpretations of the Board or the Committee shall be final and binding on
all Optionees and any other holders of any Options granted under the Plan.

3
<PAGE>

5. Eligibility
-----------

Options may be granted only to Employees and Consultants. Incentive
Options may be granted only to Employees. An Employee or Consultant who has
been granted an Option may, if he is otherwise eligible, be granted an
additional Option or Options. The Board or the Committee shall determine from
time to time those Employees and Consultants to whom Options are to be granted,
and those Employees to whom Incentive Options are to be granted.

Without in any way limiting the authority of the Board hereunder, the Board
or the Committee shall have authority to grant Reload Options. Any such Reload
Option shall be subject to such other terms and conditions as the Board or
Committee may determine, but in all events subject to the provisions of the
Plan. Notwithstanding the foregoing, (i) the Board or Committee shall have the
right, in its sole discretion, to withdraw a Reload Option to the extent that
the grant thereof will result in any adverse accounting consequences to the
Company, (ii) no additional Reload Options shall be granted upon the exercise
of a Reload Option, and (iii) every Reload Option shall have an exercise price
fixed in accordance with Section 6 of this Plan on the date the Reload Option is
granted.

No Incentive Option may be granted to an Employee if, as the result of such
grant, the aggregate fair market value (determined as of the time the Incentive
Option is granted) of the Common Shares for which such Optionee has been granted
Incentive Options exercisable for the first time by such Employee during any
calendar year under all incentive stock option plans of the Company and any
Parent and Subsidiary would exceed $100,000. Any Option purporting to
constitute an Incentive Option in excess of such limitation shall constitute a
Nonqualified Option to the extent of such excess.

The Plan shall not confer upon any Optionee any right with respect to
continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his right or the Company's right to terminate
his employment or consulting relationship at any time.

6. Terms and Conditions
--------------------

(a) The per Common Share exercise price for the Common Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, except that (i) in the case of an Incentive Option the exercise price
shall not be less than 100% of the fair market value of a Common Share on the
date the Incentive Option is granted, provided that if an Incentive Option is
granted to an Employee who, at the time of the grant of such Incentive Option,
owns stock possessing more than ten (10%) percent of the total combined voting
power of all classes of stock of the Company, directly or indirectly as
contemplated by Section 422 of the Code, the exercise price shall be at least
110% of the fair market value of the Common Shares subject to the Incentive
Option, and (ii) in the case of a Nonqualified Option, the exercise price shall
not be less than 85% of the fair market value of a Common Share on the date such
Nonqualified Option is granted.

(b) The fair market value shall be determined in good faith by the Board in
its discretion; provided, however, that if there is a public market for the
Common Shares, the fair market value per Common Share shall be the mean of the
bid and ask prices of the Common Shares for the date of grant, as reported in
the Wall Street Journal (or if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotation (NASDAQ) System)
or, in the event the Common Shares are listed on an

4
<PAGE>

exchange, the fair market value per Common Share shall be the closing price on
such exchange on the date of grant of the Option, as reported in the Wall Street
Journal. For purposes of determining whether the option price equals the fair
market value of the Common Shares (as required by Section 422(b)(4) of the
Code), the Common Shares must be valued without regard to any restriction other
than a restriction which, by its terms, will never lapse.

(c) The consideration to be paid for the Common Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Board or Committee and may consist entirely of cash, check, other Common
Shares having a fair market value on the date of surrender equal to the
aggregate exercise price of the Common Shares as to which the Option shall be
exercised, or any combination of such methods of payment, or such other
consideration and method of payment for the issuance of the Common Shares to the
extent permitted under Section 7-106-202 of the Colorado Business Corporation
Act (or any successor provision). In making its determination as to the type
of consideration to accept, the Board or Committee shall consider if acceptance
of such consideration is adequate and may be reasonably expected to benefit the
Company.

(d) The Board or Committee, in its sole discretion, shall determine
whether any particular Option shall become exercisable in one or more
installments, specify the installment dates, and, within the limitations
provided in the Plan, determine the total period during which the Option is
exercisable. Further, the Board or Committee may make such other provisions as
may appear generally acceptable or desirable to the Board or Committee or
necessary to qualify the Incentive Options as "incentive stock options" under
the provisions of Section 422 of the Code. The Board or Committee may also, in
its sole discretion, authorize acceleration of the exercise of an Option or
installment.

(e) No Option shall be exercisable more than ten (10) years from the date
the Option is granted, or such shorter term as may be provided in the stock
option agreement. However, in the case of an Incentive Option granted to an
Employee who, at the time the Incentive Option is granted, owns stock possessing
more than ten (10%) percent of the total combined voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Incentive
Option shall be five (5) years from the date of grant thereof, or such shorter
time as may be provided in the stock option agreement.

(f) An Incentive Option may be exercised by an Optionee only if such
Optionee enjoyed Continuous Status as an Employee at all times during the period
beginning on the day of the grant of the Incentive Option and ending on the day
three (3) months before the date of such exercise; provided, however, that in
the case of an Employee who is disabled (within the meaning of Section 22(e)(3)
of the Code), the three (3) month period shall be one (1) year.

(g) No Incentive Option shall be exercisable prior to one year from the
date the Incentive Option was granted.

(h) No Incentive Option shall be granted more than ten (10) years from the
date the Plan is adopted.

5
<PAGE>

7. Exercise of Option
------------------

(a) Procedure for Exercise. Subject to the terms hereof, any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board or Committee, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under
the terms of this Plan.

An Option may not be exercised for a fraction of a share.

An Option may be exercised in whole or in part only by the delivery by the
Optionee (or legal representative thereof) of written notice to the Company in
accordance with the terms of the stock option agreement by the person entitled
to exercise the Option and full payment for the Common Shares with respect to
which notice of exercise has been received by the Company. Full payment may,
as authorized by the Board, consist of any consideration and method of payment
allowable under Section 6(c) of the Plan. In the event of failure of the
Optionee to take and pay for the number of Common Shares specified in the notice
of exercise on the date stated therein, the Option shall become inoperative as
to such number of Common Shares, but shall continue with respect to any
remaining Common Shares subject to the Option as to which notice of exercise has
not been given.

Exercise of an Option in any manner shall result in a decrease in the
number of Common Shares which thereafter may be available both for purposes of
the Plan and for sale under the Option.

The Option may not be exercised until the Company has taken all action to
comply with all federal and state laws, rules and regulations and the rules and
regulations of any securities exchange on which the Common Shares may then be
listed applicable to the issuance of the Common Shares to be acquired, as the
Company shall, in its absolute discretion upon the advice of counsel, determine
to be necessary or advisable.

(b) No Rights as a Shareholder. The Optionee shall have no rights as a
shareholder with respect to the Common Shares covered by the Option until
payment for such Common Shares shall have been made in full and until the date
of the issuance of a share certificate for such Common Shares. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the share certificate is issued, except as provided in Section 8 of the
Plan.

Unless the Common Shares to be acquired pursuant to the exercise of the
Option shall have been registered under the Securities Act, prior to such
exercise, each notice of the exercise of the Option shall include a
representation that any of the Common Shares purchased pursuant to the Option
shall be acquired for investment only, and not with a view to, or for sale in
connection with, any public distribution, or that any subsequent resale of any
of such Common Shares either shall be made pursuant to a registration statement
under the Securities Act which has become effective and is current with regard
to the Common Shares being sold, or shall be made pursuant to an exemption from
registration under the Securities Act. In addition, the certificates
representing such Common Shares shall bear (i) any legend required by applicable
Blue Sky or other state securities laws, and (ii) a legend in substantially the
following form:

6
<PAGE>

These securities have not been registered under the Securities Act of
1933, as amended, and may be offered and sold only if registered
pursuant to the provisions of that Act or if, in the opinion of
counsel to the seller, an exemption from registration thereunder is
available, the availability of which must be established to the
satisfaction of the Company.

(c) Termination of Status as an Employee or Consultant. Except in the
case of an Incentive Option to which Section 6 (f) of this Plan applies, if an
Employee or Consultant ceases to serve as an Employee or Consultant, other than
by reason of death or permanent disability, as the case may be, he may, but only
prior to the effective date of termination, exercise his Option to the extent
that he was entitled to exercise it as of the effective date of such
termination, unless the written option agreement otherwise provides. To the
extent that he was not entitled to exercise the Option at the date of such
termination, or if he does not exercise the Option to the extent to which he was
entitled within the time specified herein, or by Section 6(f) in the case of an
Incentive Option, the Option shall terminate. Notwithstanding the foregoing, in
no event may an Incentive Option be exercised after the expiration of ten (10)
years from the date on which it was granted.

(d) Disability of Optionee. Notwithstanding the provisions of Section 7
(c) above, in the event an Employee or Consultant is unable to continue his
employment or consulting relationship, as the case may be, with the Company as a
result of his total and permanent disability (as defined in Section 22 (e) (3)
of the Code), he may, but only within 12 months, or such other period of time as
is determined by the Board, from the date of termination, exercise his Option to
the extent to which he was entitled to exercise it at the date of such
termination; provided, however, that an Incentive Option must provide that it
may be exercised within 12 months of such termination, but only to the extent of
the right to exercise that had accrued at the date of termination. The
foregoing 12-month periods are subject in all cases to the earlier expiration of
the Option. To the extent that he was not entitled to exercise the Option at
the date of termination, or if he does not exercise such Option to the extent to
which he was entitled within the time specified herein, the Option shall
terminate. Notwithstanding the foregoing, in no event may an Incentive Option
be exercised after the expiration of ten (10) years from the date on which it
was granted.

(e) Death of Optionee. In the event of the death of an Optionee:

i) during the term of the Option, who is at the time of his death an
Employee or Consultant of the Company and who shall have been in Continuous
Status as an Employee or Consultant since the date of grant of the Option,
the Option may be exercised at any time prior to the expiration of the
Option or within 12 months following the date of death, whichever first
occurs, by the Optionee's personal representative or by a person who
acquired the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that had accrued at the date of
death of the Optionee; or

ii) within three months, or such other period of time as is determined by
the Board (however, in no event may such period exceed three months for an
Incentive Stock Option), after termination of Continuous Status as an
Employee or Consultant, the Option may be exercised at any time prior to
the expiration of the Option or within 12 months following the date of
death, whichever first occurs, by the Optionee's personal representative or
by a person who acquired the

7
<PAGE>

right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued at the date of
termination.

Notwithstanding the foregoing, in no event may an Incentive Option be
exercised after the expiration of ten (10) years from the date on which it was
granted.

(f) Termination for Cause. If an Optionee is terminated by the Company for
Cause, all outstanding Options held by the Optionee shall be immediately
forfeited to the Company and no additional exercise period shall be allowed,
regardless of the vested status of the Options.

(g) Restriction on Disposition. Common Shares acquired pursuant to an
Incentive Option shall not be disposed of by the holder thereof within 24 months
from the date of grant of the Option nor within 12 months from the date of
transfer of such Common Shares by the Company, other than pursuant to the laws
of descent or distribution.

(h) Competition. Anything in this Plan to the contrary notwithstanding:

(i) In the event the Board determines that an Employee or Consultant
is engaging in Competitive Activity with the Company, any Subsidiary, or
any business in which any of the foregoing has a material interest (the
"CAC Businesses"), the Board may cancel any Option granted to such Employee
or Consultant, whether or not vested, in whole or in part. Such
cancellation shall be effective as of the date specified by the Board.
"Competitive Activity" shall mean any business or activity in the same
geographical market where a substantially similar business activity is
being carried on by a CAC Business, including, but not limited to,
representing or providing consulting services to any person or entity that
is engaged in competition with a CAC Business or that takes a position
adverse to a CAC Business. However, "Competitive Activity" shall not
include ownership as a shareholder of an immaterial interest in a competing
business which is publicly held.

(ii) In the event an Optionee ceases to serve as an Employee or
Consultant, and if within a period of one year following the effective date
of such termination (the "Noncompete Period") the Board determines that the
Optionee has engaged during the Noncompete Period in a Competitive Activity
with that of any CAC Business, then the Board in its sole discretion may
cancel any Option granted to such Optionee, whether or not vested, in whole
or in part, and still outstanding pursuant to any provision of this Plan.
Moreover, if before or during the Noncompete Period such Optionee has
exercised any Option granted to it by the Company pursuant to this Plan, in
whole or in part, for the underlying Common Shares, and if the Board
determines that, while an Employee or Consultant or during the Noncompete
Period, the Optionee has engaged in a Competitive Activity with that of any
CAC Business, upon written demand and tender by the Company (not later than
the expiration of the Noncompete Period) to the Optionee of cash equal to
the exercise price paid by the Optionee for the underlying Common Shares,
the Optionee shall assign, transfer and convey forthwith such underlying
Common Shares to the Company; and if the Optionee has sold any or all of
the underlying Common Shares (the "Sold Shares"), then upon written demand
and tender by the Company (not later than the expiration of the Noncompete
Period) to the Optionee of cash equal to the exercise price paid for the
underlying Common Shares, the Optionee shall assign, transfer and convey
forthwith any remaining underlying Common Shares to the Company,

8
<PAGE>

and shall pay forthwith to the Company in cash an amount equal to the sale
price or market price obtained by the Optionee for the Sold Shares.

8. Adjustments Upon Changes in Capitalization or Merger
----------------------------------------------------
Subject to any required action by the shareholders of the Company the
number of Common Shares covered by each outstanding Option, and the number of
Common Shares which have been authorized for issuance under the Plan, but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of the Option, as well as the price per share
covered by each such outstanding Option, shall be proportionately adjusted for
any increase or decrease in the number of issued Common Shares resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Shares, or any other increase or decrease in the
number of issued Common Shares effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustments shall be made by the Board or Committee, whose
determination in that respect shall be final, binding and conclusive. Except as
otherwise expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Common Shares subject to an Option.

In the event of the proposed dissolution or liquidation of the Company,
the Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board or Committee. The Board or
Committee may, in the exercise of its sole discretion in such instance, declare
that any Option shall terminate as of the date fixed by the Board or Committee,
give each Optionee the right to exercise his Option as to all or any part of the
Optioned Shares, including Common Shares as to which the Option would not
otherwise be exercisable. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the Option shall be assumed or an equivalent
option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Board or Committee
determines, in the exercise of its sole discretion, and in lieu of such
assumption or substitution, that the Optionee shall have the right to exercise
the Option as to all of the Optioned Shares, including the Common Shares as to
which the Option would not otherwise be exercisable. If the Board or Committee
makes an Option fully exercisable in lieu of assumption or substitution in the
event of a merger or sale of assets, the Board or Committee shall notify the
optionee that the Option shall be fully exercisable for a period of thirty (30)
days from the date of such notice, and the Option will terminate upon the
expiration of such period; provided, however, with regard to an Incentive
Option, in the event of a corporate merger or consolidation, or the acquisition
by the Company of property or stock of an acquired corporation or any
reorganization or other transaction qualifying under Section 424 (a) of the
Code, the Board or Committee may, only in accordance with the provisions of that
Section, substitute for the Incentive Option options under a plan of the
acquired corporation only if (i) the excess of the aggregate fair market value
of the shares subject to option immediately after the substitution over the
aggregate option price of such shares is not more than the similar excess
immediately before such substitution, and (ii) the new option does not give the
Employee additional benefits, including any extension of the exercise.

9
<PAGE>

9. Non-Transferability of Options
------------------------------

No grant of any "derivative security" (as defined by Rule 16a-l(c) under
the Exchange Act) made under the Plan or any rights or interests therein shall
be assignable or transferable by an Optionee except by will or the laws of
descent and distribution and except to the extent it is otherwise permissible
under the Exchange Act, it being understood that no grant of any "derivative
security" shall be assignable or transferable pursuant to a domestic relations
order. During the lifetime of an Optionee, Options granted hereunder shall be
exercisable only by the Optionee, the Optionee's guardian or its legal
representative.

10. Amendment and Termination of the Plan
-------------------------------------

(a) The Board, or the Committee with the approval of the Board, may amend
or terminate the Plan from time to time in such respects as the Board or the
Committee may deem advisable; provided, however, that the following revisions or
amendments shall require approval of a majority of each voting group entitled to
vote thereon:

(i) any increase in the number of Common Shares subject to the Plan,
other than in connection with an adjustment under Section 8 of the Plan; or

ii) any change in the designation of the class of Employees or
Consultants eligible to be granted Options; or

(b) If any amendment requiring shareholder approval under Section 13 of
the Plan is made subsequent to the first registration of any class of equity
securities by the Company under Section 12 of the Exchange Act, such shareholder
approval shall be solicited as described in Section 13 of the Plan.

(c) Any such amendment or termination of the Plan shall not affect Options
already granted, and such Options shall remain in full force and effect as if
this Plan had not been amended or terminated, unless mutually agreed otherwise
between the Optionee and the Board or Committee, which agreement must be in
writing and signed by the Optionee and the Company.

11. Reservation of Common Shares
----------------------------

The Company during the term of this Plan will at all times reserve and keep
available such number of Common Shares as shall be sufficient to satisfy the
requirements of the Plan.

Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Common Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Common Shares as to which such requisite authority shall not have been
obtained.

12. Option Agreement
----------------

Options shall be evidenced by written option agreements in such form as the
Board or Committee shall approve.

10
<PAGE>

13. Effective Date and Duration of the Plan
---------------------------------------

The Plan shall become effective as of August 31, 1995, the date of its
adoption by the Board. However, unless on, or within twelve (12) months after,
the date the Plan is adopted by the Board, the Plan is approved by a majority of
each voting group entitled to vote thereon, the Plan and any Options already
granted shall be canceled. If such shareholder approval is obtained by written
consent, it must be obtained by the unanimous consent of all voting groups of
the Company entitled to vote thereon.

This Plan shall terminate at the close of business on August 31, 2005, and
no Option may be granted under the Plan after such date, but such termination
shall not affect any Option previously granted.

14. Time of Granting Options
------------------------

The date of grant of an Option shall, for all purposes, be the date on
which the Board or Committee makes the determination granting such Option.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.

<PAGE>

EXHIBIT 10.9

INDEMNIFICATION AGREEMENT
-------------------------

THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into this ___ day of May, 1998, by and between CARRIER ACCESS CORPORATION, a
Delaware corporation (the "Company"), and ____________________ ("Indemnitee").

WHEREAS, Indemnitee, a member of the Board of Directors or an officer,
employee or agent of the Company, performs a valuable service in such
capacity for the Company;

WHEREAS, the stockholders of the Company have adopted Bylaws (the "Bylaws")
providing for the indemnification of the officers, directors, employees and
agents of the Company to the maximum extent authorized by the Delaware
General Corporation Law, as amended (the "DGCL");

WHEREAS, the Bylaws, the Certificate of Incorporation and the DGCL, by
their non-exclusive nature, permit contracts between the Company and the
members of its Board of Directors, officers, employees or agents with
respect to indemnification of such directors, officers, employees or
agents;

WHEREAS, in accordance with the authorization as provided by the DGCL, the
Company either has purchased and presently maintains or intends to purchase
and maintain a policy or policies of Directors and Officers Liability
Insurance ("D&O Insurance") covering certain liabilities which may be
incurred by its directors and officers in the performance of their duties
as directors and officers of the Company;

WHEREAS, as a result of developments affecting the terms, scope and
availability of D&O Insurance there exists general uncertainty as to the
extent of protection afforded members of the Board of Directors or
officers, employees or agents by such D&O Insurance and by statutory and
bylaw indemnification provisions; and

WHEREAS, in order to induce Indemnitee to continue to serve as a member of
the Board of Directors, officer, employee or agent of the Company, the
Company has determined and agreed to enter into this contract with
Indemnitee.

NOW, THEREFORE, in consideration of Indemnitee's continued service as a
director, officer, employee or agent after the date hereof, and for other good
and valid consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:

1. Indemnification of Indemnitee. The Company hereby agrees to hold
-----------------------------
harmless and indemnify Indemnitee to the fullest extent authorized or permitted
by the provisions of the DGCL, as may be amended from time to time.
<PAGE>

2. Additional Indemnity. Subject only to the exclusions set forth in
--------------------
Sections 3 and 6(c) hereof, the Company hereby further agrees to hold harmless
and indemnify Indemnitee:

(a) Against any and all expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Indemnitee in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Company) to which
Indemnitee is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Indemnitee is, was or at any time becomes a
director, officer, employee or agent of the Company or any subsidiary of the
Company, or is or was serving or at any time serves at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise;
and

(b) Otherwise to the fullest extent as may be provided to
Indemnitee by the Company under the non-exclusivity provisions of Article VII,
Section 6 of the Bylaws of the Company, the Certificate of Incorporation and the
DGCL.

3. Limitations on Additional Indemnity.
-----------------------------------

(a) No indemnity pursuant to Section 2 hereof shall be paid by the
Company:

i) In respect to remuneration paid to Indemnitee if it shall
be determined by a final judgment or other final adjudication that such
remuneration was in violation of law;

ii) On account of any suit in which judgment is rendered
against Indemnitee for an accounting of profits made from the purchase or sale
by Indemnitee of securities of the Company pursuant to the provisions of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any federal, state or local statutory law;

iii) On account of Indemnitee's conduct which is finally
adjudged to have been knowingly fraudulent or deliberately dishonest or to
constitute willful misconduct;

iv) On account of Indemnitee's conduct which is the subject of
an action, suit or proceeding described in Section 6(c)(ii) hereof;

v) On account of any action, claim or proceeding (other than
a proceeding referred to in Section 7(b) hereof) initiated by the Indemnitee
unless such action, claim or proceeding was authorized in the specific case by
action of the Board of Directors;
<PAGE>

vi) If a final decision by a Court having jurisdiction in the
matter shall determine that such indemnification is not lawful (and, in this
respect, both the Company and Indemnitee have been advised that the Securities
and Exchange Commission believes that indemnification for liabilities arising
under the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); and

vii) Except to the extent the aggregate of losses to be
indemnified thereunder exceeds the sum of (a) such losses for which the
Indemnitee is indemnified pursuant to Section 1 hereof and (b) any additional
amount paid to the Indemnitee pursuant to any D&O Insurance purchased and
maintained by the Company.

(b) No indemnity pursuant to Section 1 or 2 hereof shall be paid by
the Company if the action, suit or proceeding with respect to which a claim for
indemnity hereunder is made arose from or is based upon any of the following:

i) Any solicitation of proxies by Indemnitee, or by a group
of which he was or became a member consisting of two or more persons that had
agreed (whether formally or informally and whether or not in writing) to act
together for the purpose of soliciting proxies, in opposition to any
solicitation of proxies approved by the Board of Directors.

ii) Any activities by Indemnitee that constitute a breach of
or default under any agreement between Indemnitee and the Company.

4. Contribution. If the indemnification provided in Sections 1 and 2
------------
hereof is unavailable by reason of a Court decision described in Section
3(a)(vi) hereof based on grounds other than any of those set forth in paragraphs
(i) through (v) of Section 3 (a) hereof, then in respect of any threatened,
pending or completed action, suit or proceeding in which the Company is jointly
liable with Indemnitee (or would be if joined in such action, suit or
proceeding), the Company shall contribute to the amount of expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred and paid or payable by Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and Indemnitee on the other hand from the transaction from which such
action, suit or proceeding arose, and (ii) the relative fault of the Company on
the one hand and of Indemnitee on the other in connection with the events which
resulted in such expenses, judgments, fines or settlement amounts, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and of Indemnitee on the other shall be determined by reference
to, among other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances resulting in
such expenses, judgments, fines or settlement amounts. The Company agrees that
it would not be just and equitable if contribution pursuant to this Section 4
were determined by pro rata allocation or any other method of allocation which
does not take account of the foregoing equitable considerations.
<PAGE>

5. Notification and Defense of Claim. Not later than thirty (30) days
---------------------------------
after receipt by Indemnitee of notice of the commencement of any action, suit or
proceeding, Indemnitee shall, if a claim in respect thereof is to be made
against the Company under this Agreement, notify the President of the Company of
the commencement thereof; but Indemnitee's omission to notify the Company will
not relieve the Company from any liability which it may have to Indemnitee
otherwise than under this Agreement. The Company shall promptly acknowledge the
notice from the Indemnitee. With respect to any such action, suit or proceeding
as to which Indemnitee notifies the Company of the commencement thereof:

(a) The Company will be entitled to participate therein at its own
expense.

(b) Except as otherwise provided below, to the extent that it may
wish, the Company shall, jointly with any other indemnifying party similarly
notified, be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Indemnitee. After notice from the Company to Indemnitee of its
election to assume the defense thereof, the Company will not be liable to
Indemnitee under this Agreement for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense thereof, other than
reasonable costs of investigation or as otherwise provided below. Indemnitee
shall have the right to employ its own counsel in such action, suit or
proceeding, but the fees and expenses of such counsel incurred after notice from
the Company of the Company's assumption of the defense thereof shall be at the
expense of Indemnitee unless (i) the employment of counsel by Indemnitee has
been authorized by the Company; (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and Indemnitee in
the conduct of the defense of such action; or (iii) the Company shall not in
fact have employed counsel to assume the defense of such action; in each of
which cases the fees and expenses of Indemnitee's separate counsel shall be paid
by the Company. The Company shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of the Company or as to which
Indemnitee shall have made the conclusion provided for in (ii) above.

(c) The Company shall not be liable to indemnify Indemnitee under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall be permitted to settle
any action except that it shall not settle any action or claim in any manner
which would impose any penalty or limitation on Indemnitee without Indemnitee's
written consent. Neither the Company nor Indemnitee will unreasonably withhold
its consent to any proposed settlement.

6. Advancement and Repayment of Expenses.
-------------------------------------

(a) In the event that Indemnitee employs his or her own counsel
pursuant to Sections 5(b)(i) through (iii) above, the Company shall advance to
Indemnitee, prior to any final disposition of any threatened or pending action,
suit or proceeding, whether civil, criminal, administrative or investigative,
any and all reasonable expenses (including legal fees and
<PAGE>

expenses) incurred in investigating or defending any such action, suit or
proceeding within ten (10) days after receiving from Indemnitee copies of
invoices presented to Indemnitee for such expenses.

(b) Indemnitee agrees that Indemnitee will reimburse the Company
for all reasonable expenses paid by the Company in investigating or defending
any civil or criminal action, suit or proceeding against Indemnitee in the event
and only to the extent it shall be ultimately determined by a final judicial
decision (from which there is no right of appeal) that Indemnitee is not
entitled, under the provisions of the DGCL, the Bylaws, this Agreement or
otherwise, to be indemnified by the Company for such expenses.

(c) Notwithstanding the foregoing, the Company shall not be
required to advance such expenses to Indemnitee in respect of any action arising
from or based upon any of the matters set forth in subsection (b) of Section 3
or if Indemnitee (i) commences any action, suit or proceeding as a plaintiff
unless such advance is specifically approved by a majority of the Board of
Directors or (ii) is a party to an action, suit or proceeding brought by the
Company and approved by a majority of the Board which alleges willful
misappropriation of corporate assets by Indemnitee, disclosure of confidential
information in violation of Indemnitee's fiduciary or contractual obligations to
the Company, or any other willful and deliberate breach in bad faith of
Indemnitee's duty to the Company or its shareholders.

7. Enforcement.
-----------

(a) The Company expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on the Company hereby in
order to induce Indemnitee to continue as a director, officer, employee or other
agent of the Company, and acknowledges that Indemnitee is relying upon this
Agreement in continuing in such capacity.

(b) In the event Indemnitee is required to bring any action to
enforce rights or to collect moneys due under this Agreement and is successful
in such action, the Company shall reimburse Indemnitee for all Indemnitee's
reasonable fees and expenses, including attorney's fees, in bringing and
pursuing such action.

8. Subrogation. In the event of payment under this agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.

9. Continuation of Obligations. All agreements and obligations of the
---------------------------
Company contained herein shall commence upon the date that Indemnitee first
became a member of the Board of Directors or an officer, employee or agent of
the Company, as the case may be, and shall continue during the period Indemnitee
is a director, officer, employee or agent of the Company (or is or was serving
at the request of the Company as a director, officer, employee or
<PAGE>

agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal or investigative,
by reason of the fact that Indemnitee was a director, officer, employee or agent
of the Company or serving in any other capacity referred to herein.

10. Survival of Rights. The rights conferred on Indemnitee by this
------------------
Agreement shall continue after Indemnitee has ceased to be a director, officer,
employee or other agent of the Company and shall inure to the benefit of
Indemnitee's heirs, executors and administrators.

11. Non-Exclusivity of Rights. The rights conferred on Indemnitee by
-------------------------
this Agreement shall not be exclusive of any other right which Indemnitee may
have or hereafter acquire under any statute, provision of the Company's
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office; provided, however, that this
-------- -------
Agreement shall supersede and replace any prior indemnification agreements
entered into by and between the Company and Indemnitee and that any such prior
indemnification agreement shall be terminated upon the execution of this
Agreement.

12. Separability. Each of the provisions of this Agreement is a
------------
separate and distinct agreement and independent of the others, so that if any or
all of the provisions hereof shall be held to be invalid or unenforceable for
any reason, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof or the obligation of the Company
to indemnify the Indemnitee to the full extent provided by the Bylaws or the
DGCL.

13. Governing Law. This Agreement shall be interpreted and enforced in
-------------
accordance with the laws of the State of Delaware.

14. Binding Effect. This Agreement shall be binding upon Indemnitee
--------------
and upon the Company, its successors and assigns, and shall inure to the benefit
of Indemnitee, his or her heirs, personal representatives and assigns and to the
benefit of the Company, its successors and assigns.

15. Amendment and Termination. No amendment, modification, termination
-------------------------
or cancellation of this Agreement shall be effective unless it is in writing and
is signed by both parties hereto.
<PAGE>

SIGNATURES
----------

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.

COMPANY

Carrier Access Corporation

By:_____________________________
Roger Koenig
President and Chief Executive
Officer

INDEMNITEE

________________________________________
Roger Koenig
President and Chief Executive Officer

Address: 5395 Pearl Parkway
Boulder, Colorado 80301

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
Carrier Access Corporation:

We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the Prospectus.

/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP

Boulder, Colorado
May 28, 1998

<PAGE>
<ARTICLE> 5

<S> <C> <C>
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<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
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