LIONBRIDGE TECHNOLOGIES INC /DE/, S-1/A, 1999-08-20

LIONBRIDGE TECHNOLOGIES INC /DE/
S-1/A, 1999-08-20
BUSINESS SERVICES, NEC

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 20, 1999

REGISTRATION NO. 333-81233
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 5 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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LIONBRIDGE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 7389 04-3398462
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)
</TABLE>

LIONBRIDGE TECHNOLOGIES, INC.
950 WINTER STREET
WALTHAM, MASSACHUSETTS 02451
(781) 890-6612
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

RORY J. COWAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
LIONBRIDGE TECHNOLOGIES, INC.
950 WINTER STREET
WALTHAM, MASSACHUSETTS 02451
(781) 890-6612
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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COPIES TO:

<TABLE>
<S> <C>
GEORGE W. LLOYD, ESQ. STEPHEN A. RIDDICK, ESQ.
TESTA, HURWITZ & THIBEAULT, LLP BROBECK, PHLEGER & HARRISON LLP
125 HIGH STREET 701 PENNSYLVANIA AVENUE NW, SUITE 220
BOSTON, MASSACHUSETTS 02110 WASHINGTON, D.C. 20004
(617) 248-7000 (202) 220-6000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
------------------------------

If any of 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
1933, 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, 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,
check the following box. / /

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

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 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.

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SUBJECT TO COMPLETION--AUGUST 20, 1999

PROSPECTUS

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
LIONBRIDGE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
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3,500,000 Shares

[LOGO]
Common Stock

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Lionbridge Technologies, Inc. is offering 3,500,000 shares of its common stock
in an initial public offering. Prior to this offering, there has been no public
market for Lionbridge's common stock.

Lionbridge adapts and translates products, information and other materials to
the requirements of local markets for technology companies worldwide.

Limited partnerships sponsored by Advent International and Morgan Stanley Dean
Witter, who are existing Lionbridge stockholders, have indicated their interest
in purchasing up to $7,280,000 of our stock at the public offering price. These
stockholders will also receive approximately 49% of the net proceeds of this
offering.

It is anticipated that the public offering price will be $10.00 per share. The
shares of Lionbridge will be quoted in the Nasdaq National Market under the
symbol "LIOX".

<TABLE>
<CAPTION>
Shares Sold
Shares Sold to Advent and
to Public Morgan Stanley
(Per Share) (Per Share) Total
<S> <C> <C> <C>
Public offering price................................. $ $ $

Underwriting discounts and commissions................ $ $ $
Proceeds, before expenses, to Lionbridge.............. $ $ $
</TABLE>

SEE "RISK FACTORS" ON PAGES 7 TO 13 FOR FACTORS THAT SHOULD BE CONSIDERED BEFORE

INVESTING IN THE SHARES OF LIONBRIDGE.

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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.

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The underwriters may purchase up to 525,000 additional shares from selling
stockholders and Lionbridge at the public offering price, less underwriting
discounts and commissions. Delivery and payment for the shares will be on
, 1999.

PRUDENTIAL SECURITIES

U.S. BANCORP PIPER JAFFRAY

ADAMS, HARKNESS & HILL, INC.

, 1999
<PAGE>

<PAGE>

INSIDE FRONT COVER

Representative Clients

Lionbridge has provided services to the following companies:

3Com
Adobe
Aurum
Autodesk
Avid
Baan
Bentley Systems
Bull
Candle
Cognos
Corel
Data General
Gateway
IBM
JD Edwards
Kodak
Macromedia
Microsoft
Motorola
Network Associates
Novell
Oce
Oracle
Page Factory
Parametric Technology
Portal
PowerQuest
SPSS
Silicon Graphics
Sun Microsystems

Language Diversity
Lionbridge has delivered multilingual versions in the following languages:

Arabic
Bulgarian
Chinese Simplified
Chinese Traditional
Czech
Danish
Dutch
English - American
English - UK
Finnish
French
French - Canadian
German
Greek
Hebrew
Hungarian
Italian
Japanese
Korean
Norwegian
Polish
Portuguese - Iberian
Portuguese - Brazilian
Romanian
Russian
Spanish Iberian
Spanish Latin American
Swedish
Thai
Turkish

Worldwide Locations
Lionbridge has facilities around the world
Lionbridge Globalization Centers

Japan
China
South Korea
Silicon Valley
Boston
Ireland
France
The Netherlands

Graphic showing world map with the locations of Lionbridge globalization
centers and VeriTest Testing Labs indicated

VeriTest Testing Labs

Los Angeles
Silicon Valley
France
Ireland
Japan

<PAGE>

INSIDE FRONT COVER - FOLDOUT

Simultaneous Worldwide Release ...Continuous Multilingual Delivery

[Two-page graphic illustrating Lionbridge processes and customer
examples. The graphic contains three sections.

On the far left are three computer screen capture images of English software
products from Lionbridge customers. Below each screen shot is text
indicating the customer and describing the software.

CISCO delivers Web-based education to thousands of schools
around the world through the Cisco Networking Academy Program.

To help launch NOVELL Groupwise in Asia, Lionbridge simultaneously
translated Japanese, Simplified Chinese, Traditional Chinese, and
Korean versions of Novell's messaging and collaboration software.

PORTAL is a rapidly growing Internet company that provides Internet
Service Providers with customer account management software. Their
customers are global telecommunications companies requiring global
solutions.

On the far right are the corresponding foreign language versions of the
screen samples in French, Chinese, and Japanese. Below each screen shot is
text describing the work performed by Lionbridge.

CISCO selected Lionbridge to localize the Networking Academy curriculum
and keep it continuously updated in several languages, including French.

Chinese versions of NOVELL Groupwise involved localization and testing
of the software, creation of Windows and HTML help systems, and
translation and publishing of the user documentation.

Lionbridge provided a complete globalization solution for PORTAL's
flagship Infranet product, including source code internationalization,
software localization in Japanese and seven other languages, and
client server testing.

In the middle is a large circle representing the Lionbridge globalization
process. Centered inside the circle is the lion head from the company logo.
Surrounding the outside of the circle are eight ovals, each representing a
step in the Lionbridge process. Below the circle is a rectangular box
representing Lionbridge's global network of translation resources.]

Text inside the circle, above the lion head: "Rapid Globalization
Methodology-TM-"

Text inside the circle, below the lion head: "LionTrack-TM- Workflow Systems"

Text inside the ovals:

Oval #1 "Localization Engineering"
Oval #2 "Internationalization Engineering
Oval #3 "Multilingual Technical Publishing"
Oval #4 "Project Management"
Oval #5 "Translation"
Oval #6 "Localization Testing"
Oval #7 "Compatibility Testing"
Oval #8 "Logo Certification"

Text inside the rectangular box: "Global Network of 2,000 Independent
Technical Translators"

Above and below each of the three sections of the graphic are rectangular
boxes with the following text:

Lower left (below the English screen shots): "Lionbridge clients ..."
Lower middle (below the Lionbridge circle): "...use our services ..."
Lower right (below the foreign language screen shots): "...to reach
global markets."

On the bottom in fine print is the following copyright notice:

"Cisco, Cisco Systems, and the Cisco Systems bridge logo are trademarks of
Cisco Systems, Inc. Portal, Infranet, and the Portal logo are registered
trademarks of Portal Software, Inc. Novell and GroupWise are registered
trademarks of Novell, Inc.

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TABLE OF CONTENTS

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PAGE
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<S> <C>
Prospectus Summary............................. 3

Risk Factors................................... 7

Forward-Looking Statements..................... 13

Use of Proceeds................................ 15

Dividend Policy................................ 15

Capitalization................................. 16

Dilution....................................... 17

Selected Consolidated Financial Data........... 18

Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 21

Business....................................... 33

Management..................................... 42

Certain Transactions........................... 50

Principal and Selling Stockholders............. 53

Description of Capital Stock................... 56

Shares Eligible For Future Sale................ 61

Underwriting................................... 63

Legal Matters.................................. 66

Experts........................................ 66

Available Information.......................... 66

Index to Financial Statements.................. F-1
</TABLE>

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"Lionbridge" is a registered trademark and "lionbridge.com" and the
Lionbridge logo are trademarks of Lionbridge. "VeriTest" is a registered
trademark of Lionbridge. All other trade names and trademarks referred to in
this prospectus are the property of their respective owners.

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You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are not
making an offer of these securities in any jurisdiction where the offer or sale
is not permitted. You should not assume that the information contained in this
prospectus is accurate as of any date other than the date on the front cover of
this prospectus.
<PAGE>
PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
Investors should read the entire prospectus carefully.

LIONBRIDGE

Lionbridge is a provider of globalization services to technology companies
worldwide. Globalization is the process of adapting products or services to meet
the demands of local cultures. Our software, test, Web, and linguistic
engineering groups create and maintain multilingual versions of our clients'
software and hardware, as well as Web-based technical support, training
materials, and sales and marketing information for worldwide release via
traditional means and the Internet.

Four business trends are driving the demand for our services:

- the increasingly global operations of companies around the world,

- the widespread adoption of information technology,

- the impact of the Internet on commerce, and

- the increased outsourcing by companies of technology services.

Lionbridge serves as a globalization partner throughout our clients' product
development and support lifecycle by offering the following services:

- LOCALIZATION. The modification and translation of user interfaces, online
help, documentation, technical support databases, training materials, and
sales and marketing information.

- INTERNATIONALIZATION. The modification of source code so that products and
applications are compatible with country-specific operating systems and
software.

- MULTILINGUAL PRODUCT TESTING. The testing of products to verify that they
have been properly localized and/or internationalized.

- PROJECT MANAGEMENT. The workflow and project management skills necessary
to direct, track, and monitor at times hundreds of discrete documents that
require the input of dozens of different service groups both inside and
outside Lionbridge.

As product releases, technical support and training have evolved toward a
Web-based business model, we have in turn begun to offer multilingual Internet
services. While the Internet has been an integral part of our operations and our
relationships with our customers for several years, in the last year we have
developed new multilingual Internet service offerings that are focused on this
rapidly changing business opportunity. These multilingual Internet service
offerings include:

- ERELEASE--we modify, translate, and test our clients' software products
and Web applications in multiple languages.

- ESUPPORT--we translate, test, and maintain technical support databases
which are accessible to our clients' customers through the Internet.

- ELEARNING--we enable our clients to provide updated training materials on
the Web in multiple languages.

- ECOMMERCE--we modify Web-based sales and marketing materials for our
clients who sell their products through the Internet in multiple
languages.

We use a proprietary methodology we call the Lionbridge RAPID GLOBALIZATION
METHODOLOGY and proprietary workflow management tools we call LIONTRACK to
deliver our services.

We service our technology clients, including IBM, Microsoft, Motorola,
Novell, Oracle, and Sun Microsystems from our facilities in the United States,
Europe, and Asia.

3
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OUR MARKET OPPORTUNITY

Companies around the world are increasingly operating on a global scale. To
operate efficiently, they must standardize their hardware, software, and
telecommunications infrastructures throughout their global organization.
Historically, technology providers first developed products for their home
markets and then created foreign language versions that were compatible with
local operating systems and standards. The complexity of developing these
localized versions often resulted in product releases being delayed from six
months to a year after delivery of the home-country version. In the interim, end
users often faced version and compatibility conflicts throughout their global
organizations. As a result, global end users of technology now demand:

- simultaneous product release of the home country and localized versions,

- independent third party testing and certification to provide assurance of
compatibility with local operating systems and international standards,
and

- customer support, testing, and training in local languages wherever the
end user operates.

To meet these end user demands, the market for globalization services has
evolved beyond translation to include adapting to local operating systems,
standards, products and cultural requirements.

With the increasing complexity of many technology products, globalization
requires the application of sophisticated project management skills to integrate
a broad range of disciplines and specialized technical resources.

Technology companies now use the Internet to release products, provide
technical support, deliver product training, and sell and market products.
Internet content is predominantly in English, but a growing percentage of
Internet users do not speak English as their first language. Although the
Internet offers significant opportunities, companies cannot take full advantage
of these opportunities on a global basis unless they accommodate users' local
languages, cultures, and technical environments.

Few companies have the combination of engineering, linguistic, testing, and
project management skills needed to globalize their products successfully. We
offer a complete globalization and multilingual Internet service that improves
the quality, consistency, and timeliness of our clients' international product
releases, technical support, training materials, and sales and marketing
information.

We believe that expanded global competition and worldwide Internet access
will increase the demand for our services. We also believe that by offering
one-stop globalization and multilingual Internet services, Lionbridge is an
attractive partner to companies operating in a global marketplace.

OUR STRATEGY

Lionbridge's goal is to become the leading provider of globalization and
multilingual Internet services. The following are the key elements of our
strategy:

- leverage existing clients,

- continue strategic acquisitions,

- evolve our methodology and workflow systems,

- pursue multi-year relationships with clients, and

- expand into additional vertical markets.

OUR HISTORY AND OFFICES

Our predecessor, Lionbridge America, Inc., was incorporated in Delaware in
September 1996 (under the name Lionbridge Technologies, Inc.). We were
incorporated in Delaware in October 1997 (under the name Lionbridge Technologies
Holdings, Inc.) and completed a reorganization in February 1998 in which
Lionbridge America became our wholly owned subsidiary. In June 1999, we changed
our name to Lionbridge Technologies, Inc. from Lionbridge Technologies Holdings,
Inc. and the name of our subsidiary Lionbridge Technologies, Inc. to Lionbridge
America, Inc. Our principal executive offices are located at 950 Winter Street,
Waltham, Massachusetts 02451, our telephone number is (781) 890-6612, and our
Web site is www.lionbridge.com. Information contained on our Web site is not a
part of this prospectus.

4
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THE OFFERING

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<S> <C>
Shares offered by Lionbridge................ 3,500,000 shares

Total shares outstanding after this 14,719,450 shares (1)
offering....................................

Use of proceeds............................. To (i) redeem our Series B redeemable
preferred stock, (ii) repay a portion of our
subordinated debt and (iii) provide for other
general corporate purposes.

Proposed Nasdaq National Market symbol...... LIOX
</TABLE>

(1) Based on 11,219,450 shares of common stock outstanding as of June 30, 1999.
Excludes 1,616,594 shares issuable upon exercise of warrants and 2,621,945
shares issuable upon the exercise of stock options as of June 30, 1999 and
2,890,791 shares available for future grant or issuance under our 1998 Stock
Plan and 1999 Employee Stock Purchase Plan.

Limited partnerships sponsored by Advent International and Morgan Stanley
Dean Witter, who are existing Lionbridge stockholders, have indicated their
interest in purchasing up to $7,280,000 of our stock from the underwriters at
the public offering price. The underwriters will not receive any underwriting
discount or commission in connection with the sale of shares to these
purchasers.

Except as set forth in the consolidated financial statements or as otherwise
indicated, all information in the prospectus:

- does not include 131,666 shares offered if the underwriters exercise their
over-allotment option from Lionbridge,

- reflects the conversion of our Series C preferred stock into shares of our
common stock and the redemption of our Series B preferred stock upon the
closing of the offering, and

- reflects a two-for-three reverse stock split effective August 13, 1999.

Upon the closing of the offering, Lionbridge will pay an aggregate of
approximately $21,531,000, or 67%, of its net proceeds from the offering to
affiliates of Lionbridge to redeem shares of our Series B redeemable preferred
stock and to repay $6,000,000 of our senior subordinated notes held by those
affiliates. For more information, see "Use of Proceeds."

5
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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following table summarizes the financial data for our business. We
commenced operations on December 23, 1996 through the acquisition of the
localization businesses of Stream International. The information for the year
ended December 31, 1996 reflects Stream International's results of operations
for the acquired businesses. For the years ended December 31, 1997 and 1998 and
the six months ended June 30, 1998, our loss from operations and net loss
include restructuring charges of $541,000, $501,000 and $451,000 related to
workforce reductions in France.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- ------------------------
1996 1997 1998 1998 1999
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>

<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue..................................... $ 28,134 $ 26,462 $ 38,412 $ 18,132 $ 23,783
Gross profit................................ 3,157 7,548 12,866 5,906 7,176
Income (loss) from operations............... 13 (6,909) (3,404) (2,183) (4,142)
Net loss.................................... (213) (7,654) (4,262) (2,523) (9,765)
Basic and diluted net loss per common share
attributable to common stockholders....... $ (8.85) $ (2.99) $ (1.89) $ (4.64)
Shares used in computing basic and diluted
net loss per share attributable to common
stockholders.............................. 985 1,782 1,613 2,218
</TABLE>

The pro forma as adjusted column below gives effect upon the closing of this
offering to:

- the exchange of all outstanding shares of our Series A convertible
preferred stock and Series D nonvoting convertible preferred stock into
shares of our Series B redeemable preferred stock and Series C convertible
preferred stock,

- the redemption of all outstanding shares of our Series B redeemable
preferred stock for $100,000 per share plus an 8% annual premium,

- the conversion of all outstanding shares of our Series C convertible
preferred stock into shares of our common stock,

- the repayment of $6,000,000 of, or 50% of, the outstanding amounts due
under the subordinated notes, and

- the sale of 3,500,000 shares of common stock in this offering at an
assumed initial public offering price of $10.00 per share, after deducting
underwriting discounts and commissions and estimated offering expenses,
and application of the estimated net proceeds.

<TABLE>
<CAPTION>
JUNE 30, 1999
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DECEMBER 31, PRO FORMA
1998 ACTUAL AS ADJUSTED
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<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
CONSOLIDATED BALANCE SHEET DATA:
Cash.................................................................. $ 732 $ 1,455 $ 11,566
Working capital (deficit)............................................. (7,718) (2,919) 7,192
Total assets.......................................................... 22,402 28,107 38,218
Long-term debt, net of discount....................................... -- 10,964 4,964
Redeemable convertible preferred stock................................ 15,418 15,949 --
Total stockholders' equity (deficit).................................. (13,521) (17,032) 15,028
</TABLE>

6
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RISK FACTORS

You should carefully consider the following risk factors, in addition to the
other information set forth in this prospectus, before purchasing shares of
common stock of Lionbridge. Each of these risk factors could adversely affect
our business, operating results and financial condition, as well as adversely
affect the value of an investment in our common stock. This investment involves
a high degree of risk.

RISKS RELATED TO OUR BUSINESS

OUR REVENUE COULD BE NEGATIVELY AFFECTED BY THE DELAY OF ONE OF OUR CLIENTS'
PRODUCT RELEASES OR THE LOSS OF A MAJOR CLIENT.

A significant portion of our revenue is linked to the product release cycle
of our clients. As a result, we perform varying amounts of work for specific
clients from year to year based on their product development schedule. A major
client in one year may not have use for a similar level of our services in
another year. In addition, we derive a significant portion of our revenues from
large projects and programs for a limited number of clients. In 1998, IBM
accounted for approximately 14% of our revenue and our five largest clients
(including IBM) accounted for approximately 39% of our revenue. In the first six
months of 1999, our five largest clients accounted for approximately 34% of our
revenue. As a result, the loss of any major client or a significant reduction in
a large project's scope could materially reduce our revenue and cash flow, and
adversely affect our ability to achieve and maintain profitability.

WE GENERALLY DO NOT HAVE LONG-TERM CONTRACTS, WHICH MAKES REVENUE
FORECASTING DIFFICULT.

A majority of our revenue is derived from individual projects rather than
long-term contracts. We cannot assure you that a client will engage us for
further services once a project is completed or that a client will not
unilaterally reduce the scope of, or terminate, existing projects. You should
not predict or anticipate our future revenues based on the number of clients we
have or the size of our existing projects. The absence of long-term contracts
makes it difficult to predict our future revenues.

OUR BRIEF OPERATING HISTORY MAKES IT DIFFICULT TO PREDICT OUR SUCCESS.

Lionbridge was formed in September 1996 to acquire the localization
businesses and assets of Stream International and commenced operations at the
end of December 1996 upon closing this acquisition. As a result, we have a brief
operating history upon which you can evaluate our business and prospects. Our
historical results of operations do not fully give effect to the operations of
the companies we have acquired after the Stream acquisition. As a result, our
historical results of operations may not give you an accurate indication of our
future results of operations or prospects. We are in an early stage of
development and the market for some of our services is new and rapidly evolving.
We cannot be sure that we will be successful in meeting the challenges we face.
If we are unable to do so, our business will not be successful and the value of
your investment in Lionbridge will decline.

WE HAVE AN ACCUMULATED DEFICIT, ARE NOT CURRENTLY PROFITABLE, AND ANTICIPATE
FUTURE LOSSES.

We have incurred substantial losses since Lionbridge was founded, and we
anticipate we will continue to incur substantial losses for the foreseeable
future. We had an accumulated deficit of approximately $24.5 million as of June
30, 1999 and a net loss of $4.3 million for the year ended December 31, 1998.
Although our revenues have grown significantly since 1997, this growth may not
be sustainable or indicative of future results of operations. We intend to
continue to invest in internal expansion, infrastructure, integration of our
acquired companies into our existing operations, select

7
<PAGE>
acquisitions, and our sales and marketing efforts. In addition, our acquisitions
have significantly increased our intangible assets, such as goodwill, and the
charges we expect to incur in connection with the amortization of these
intangible assets will have a material adverse impact on our ability to achieve
and maintain profitability for the foreseeable future. We cannot predict when we
will operate profitably, if ever.

IF OUR LOSSES CONTINUE, WE WILL NEED TO RAISE ADDITIONAL CAPITAL. IF WE ARE
UNABLE TO DO SO, OR WE DO SO ON UNFAVORABLE TERMS, THE VALUE OF YOUR
INVESTMENT IN OUR STOCK MAY DECLINE.

If our losses continue, we will be unable to pay our expenses unless we
raise additional capital. If we need to raise additional capital but are unable
to do so, we may not be able to continue as a going concern. If we need to raise
additional capital but are able to do so only on unfavorable terms, the value of
your investment in our stock may decline.

POTENTIAL FLUCTUATIONS IN OUR QUARTERLY RESULTS MAKE FINANCIAL FORECASTING
DIFFICULT AND COULD AFFECT OUR COMMON STOCK TRADING PRICE.

As a result of fluctuations in our revenues tied to our clients' product
release cycles, the length of our sales cycle, rapid growth, acquisitions, the
emerging nature of the markets in which we compete, and other factors outside
our control, we believe that quarter-to-quarter comparisons of results of
operations are not necessarily meaningful. You should not rely on the results of
any one quarter as an indication of our future performance. We may not
experience revenue increases in the remainder of 1999 comparable to the revenue
increases in 1998. If in some future quarter our results of operations were to
fall below the expectations of securities analysts and investors, the trading
price of our common stock would likely decline.

IF WE FAIL TO ATTRACT AND RETAIN PROFESSIONAL STAFF, OUR ABILITY TO COMPLETE
OUR PROJECTS AND OBTAIN NEW PROJECTS COULD SUFFER.

Our failure to attract and retain qualified employees could impair our
ability to complete existing projects and bid for or obtain new projects and, as
a result, could have a material adverse effect on our business and revenues. Our
ability to grow and increase our market share largely depends on our ability to
hire, train, retain, and manage highly skilled employees, including project
managers and technical, translation, and sales and marketing personnel. There is
a significant shortage of, and intense competition for, personnel who are
qualified to perform the services we provide. For example, in June 1998, the
general manager of our Irish operations, our largest operating location at the
time, unexpectedly resigned his employment with the Company. In addition, we
must make sure our employees maintain their technical expertise and business
skills. We cannot assure you that we will be able to attract a sufficient number
of qualified employees or that we will successfully train and manage the
employees we hire.

WE MAY BE UNABLE TO CONTINUE TO GROW AT OUR HISTORICAL GROWTH RATES OR TO
MANAGE OUR GROWTH EFFECTIVELY.

Continued, planned growth is a key component of increasing the value of our
common stock. In the past two years, our business has grown significantly and we
anticipate future internal growth and growth through acquisitions. From December
31, 1996 to June 30, 1999, our staff increased from approximately 270 to
approximately 450 employees. This rapid growth places a significant demand on
management and operational resources. In order to manage growth effectively, we
must implement and improve our operational systems and controls. In addition,
the proceeds of this offering will be used in part to expand our operations and
our sales and marketing capabilities. This additional growth may further strain
our management and operational resources. Our growth could also be adversely
affected by many other factors, including economic downturns. As a result of
these concerns, we cannot be sure

8
<PAGE>
that we will continue to grow, or, if we do grow, that we will be able to
maintain our historical growth rate.

BECAUSE OF THE CRITICAL NATURE OF THE SERVICES WE PROVIDE TO OUR CLIENTS, WE
MAY BE LIABLE FOR DEFECTS OR ERRORS IN THE SOLUTIONS WE DEVELOP.

Many of the services we provide are critical to our clients' businesses. Any
defects or errors in these solutions could result in:

- delayed or lost client revenues,

- adverse reaction to our clients from their end users and, ultimately,
toward Lionbridge,

- claims against us,

- negative publicity, and

- additional expenditures to correct the problem.

Liability claims could require us to spend significant time and money in
litigation or to pay significant damages. Although we maintain general liability
insurance, including coverage for errors and omissions, we cannot assure you
that this coverage will be available in amounts sufficient to cover one or more
large claims, or that the insurer will not disclaim coverage as to any future
claim.

OUR OUTSOURCE ACQUISITION STRATEGY MAY CAUSE US TO LOSE MONEY.

Part of our strategy is to acquire other companies' internal localization
operations and then enter into multi-year contracts with the sellers of these
operations to meet their globalization requirements on an outsourcing basis. As
such, our strategy is to buy these operations with the objective of recouping
our up-front purchase price out of future revenues from the seller. If we pay
too much for these acquisitions or these contracts prove unprofitable, our
revenues and profitability will suffer.

OUR INTANGIBLE ASSETS REPRESENT A SIGNIFICANT PORTION OF OUR ASSETS;
AMORTIZATION OF OUR INTANGIBLE ASSETS WILL ADVERSELY IMPACT OUR NET INCOME,
AND WE MAY NEVER REALIZE THE FULL VALUE OF OUR INTANGIBLE ASSETS.

Our original purchase of the business operations from Stream International
together with subsequent acquisitions have resulted in the creation of
significant goodwill and other intangible assets, which are being amortized over
five-year periods. At June 30, 1999, we had goodwill of approximately $10.3
million, net of accumulated amortization, which represented approximately 37% of
our total assets. The amount of goodwill associated with our acquisitions of
Japanese Language Services and VeriTest may increase in the future as a result
of the contingent purchase price that may become payable if the agreed-upon
operating targets for Japanese Language Services and VeriTest, as the case may
be, are fully met. We will continue to incur non-cash charges in connection with
the amortization of our intangible assets over their respective useful lives,
and we expect these charges will have a significant adverse impact on our
ability to achieve and maintain profitability for the foreseeable future.

We cannot assure you that we will ever realize the value of these intangible
assets. In the future, as events or changes in circumstances indicate that the
carrying amount of our intangible assets may not be recoverable, we will
evaluate the carrying value of our intangible assets and may take an accelerated
charge to our earnings. Any future determination requiring the write-off of a
significant portion of unamortized intangible assets could have a material
adverse effect on our ability to achieve and maintain profitability.

9
<PAGE>
WE MAY HAVE DIFFICULTY IN IDENTIFYING AND COMPETING FOR ACQUISITION
OPPORTUNITIES.

Our business strategy includes the pursuit of strategic acquisitions. From
time to time, we have engaged in discussions with third parties concerning
potential acquisitions of niche expertise, businesses, and operations. We
currently do not have commitments or agreements with respect to any acquisition.
In executing our acquisition strategy, we may be unable to identify suitable
acquisition candidates. In addition, we expect to face competition from other
companies for acquisition candidates, making it more difficult to acquire
suitable companies on favorable terms.

PURSUING AND COMPLETING POTENTIAL ACQUISITIONS COULD DIVERT MANAGEMENT
ATTENTION AND FINANCIAL RESOURCES AND MAY NOT PRODUCE THE DESIRED BUSINESS
RESULTS.

As part of our growth strategy, we intend to pursue and make acquisitions of
other complementary businesses. We do not have specific personnel dedicated
solely to pursuing and making acquisitions. As a result, if we pursue any
acquisition, our management, in addition to their operational responsibilities,
could spend a significant amount of time and management and financial resources
to pursue and integrate the acquired business with our existing business. To pay
for an acquisition, we might use capital stock, or cash, including the proceeds
from this offering, or a combination of both. Alternatively, we may borrow money
from a bank or other lender. If we use capital stock, our stockholders will
experience dilution. If we use cash or debt financing, our financial liquidity
will be reduced. In addition, from an accounting perspective, an acquisition may
involve nonrecurring charges or involve amortization of significant amounts of
goodwill that could adversely affect our ability to achieve and maintain
profitability.

Despite the investment of these management and financial resources and
completion of due diligence with respect to these efforts, an acquisition may
not produce the revenue, earnings or business synergies that we anticipated, and
an acquired service or technology may not perform as expected for a variety of
reasons, including:

- difficulties in the assimilation of the operations, technologies, products
and personnel of the acquired company,

- risks of entering markets in which we have no or limited prior experience,

- expenses of any undisclosed or potential legal liabilities of the acquired
company,

- the applicability of rules and regulations that might restrict our ability
to operate, and

- the potential loss of key employees of the acquired company.

For example, after we acquired Japanese Language Services, Inc. in February
1998, our Japanese language revenue (including that from both our existing and
the newly-acquired operations) for the quarter ended June 30, 1998 declined as
compared to the previous quarter.

IF WE FAIL TO KEEP PACE WITH CHANGING TECHNOLOGIES, WE MAY LOSE CLIENTS.

Our market is characterized by rapidly changing client requirements, and
evolving technologies and industry standards. If we cannot keep pace with these
changes, our business could suffer. The Internet's recent growth and strong
influence in our industry magnifies these characteristics. To achieve our goals,
we need to develop strategic business solutions and methodologies that keep pace
with continuing changes in industry standards, information technology, and
client preferences.

IF WE LOSE THE SERVICES OF OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER, RORY
J. COWAN, OR OTHER KEY PERSONNEL, OUR BUSINESS AND STOCK PRICE COULD SUFFER.

In order to continue to provide quality services in our rapidly changing
business, we believe it is particularly important to retain personnel with
experience and expertise relevant to our business. Our

10
<PAGE>
future success, therefore, depends in large part on the continued services of a
number of our key personnel, including our President and Chief Executive
Officer, Rory J. Cowan. The loss of the services of Mr. Cowan or any of our
other key personnel could seriously impede our success. We might not be able to
prevent key personnel, who may leave our employ in the future, from disclosing
or using our technical knowledge, practices or procedures. One or more of our
key personnel might resign and join a competitor or form a competing company. As
a result, we might lose existing or potential clients.

DIFFICULTIES PRESENTED BY INTERNATIONAL ECONOMIC, POLITICAL, LEGAL,
ACCOUNTING, AND BUSINESS FACTORS COULD NEGATIVELY AFFECT OUR BUSINESS IN
INTERNATIONAL MARKETS.

A large component of our operations is our ability to conduct business in
international markets, as evidenced by the fact that a majority of our current
operations are outside of the United States. As a result, our business is
subject to the political and economic fluctuations in various countries,
including Japan and other Asian countries. For example, in the past, we have
experienced periods of slowdowns in revenue growth as our clients reassessed
their strategies in China and Japan based on political and economic conditions.

We must employ and retain personnel throughout the world. Furthermore,
employment laws vary widely from country to country where we operate. To date,
we have been able to successfully staff our international operations, but if we
continue to grow our operations, it may become more difficult to manage our
business. If we fail to manage these operations successfully, our ability to
service our clients and grow our business will be seriously impeded.

We have experienced long payment cycles and occasional problems in
collecting accounts receivable originating outside of the United States. We have
experienced foreign currency fluctuations and they may have a more significant
impact on our revenues, cash flow and ability to achieve and maintain
profitability as we attempt to grow our business. For more information, see
"Management's Discussion and Analysis of Financial Condition--Foreign Currency
Exchange Rate Losses" and our consolidated financial statements.

WE COMPETE IN A HIGHLY COMPETITIVE MARKET THAT HAS LOW BARRIERS TO ENTRY.

The market for our services is very competitive and we face many
competitors. We cannot assure you that we will compete successfully against
these competitors in the future. Many of these companies have longer operating
histories; significantly greater resources; and greater name recognition than
Lionbridge. If we fail to be competitive with these companies in the future, we
may lose market share and our revenues could fail to grow or decline.

There are relatively few barriers preventing companies from competing with
us. We do not own any patented technology that precludes or inhibits others from
entering our market. As a result, new market entrants also pose a threat to our
business. In addition to our existing competitors, we may face further
competition in the future from companies that do not currently offer
globalization services. Companies currently providing information technology
services may choose to broaden their range of services to include globalization.
While we currently use translation memory software in our localization process,
and to a lesser extent machine translation software, these technologies may
improve and become sophisticated enough to enable more companies to offer
localization services and thus to compete with us. We cannot assure you that we
will be able to compete effectively with these potential future competitors. For
more information, see "Business--Competition."

WE MAY NOT BE ABLE TO MAINTAIN OUR REPUTATION OR EXPAND OUR NAME
RECOGNITION.

We believe that establishing and maintaining a good reputation and name
recognition is critical to retaining our existing clients and attracting new
clients. We also believe that the importance of reputation and name recognition
will increase due to the growing number of service providers in our

11
<PAGE>
segment. If our reputation is damaged or if potential clients do not know what
services we provide, we may become less competitive or lose market share.
Promotion and enhancement of our name will depend largely on our success in
providing high quality globalization and multilingual Internet services, which
we cannot assure. If clients do not perceive our services to be of high value or
high quality, our brand name and reputation could be materially and adversely
affected.

PROBLEMS RELATED TO THE YEAR 2000 ISSUE COULD REQUIRE US TO INCUR
UNANTICIPATED DELAYS AND EXPENSES IN THE OPERATION OF OUR BUSINESS.

Year 2000 problems could cause us to incur unanticipated delays and expenses
in the operation of our business. These delays and expenses could have a
material adverse effect on our business, financial condition and results of
operations. Clients' and potential clients' purchasing patterns may be affected
by Year 2000 issues as companies expend significant resources to correct or
replace their current systems for Year 2000 compliance. These clients and
potential clients may have fewer funds available to purchase our services. We
may experience operations difficulties because of undetected errors or defects
in the technology we use in our internal systems. We have made representations
to clients concerning Year 2000 compliance and may become involved in disputes
regarding Year 2000 problems involving our solutions.

RISKS RELATED TO THIS OFFERING

THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK OR FOR THE COMMON
STOCK OF OTHER COMPANIES OFFERING THE RANGE OF SERVICES WE PROVIDE, AND THE
PRICE OF OUR COMMON STOCK AFTER THIS OFFERING MAY BE LOWER THAN THE PRICE
YOU PAY.

Prior to this offering, there has not been a public market for our common
stock or for companies providing the same range of services we offer. We intend
to include the common stock for quotation in the Nasdaq National Market. We do
not know the extent to which investor interest in Lionbridge will lead to the
development of a trading market for our common stock or how our common stock
will trade in the future. The public offering price will be determined by
negotiations between us and the representatives of the underwriters. You may not
be able to resell your shares at or above the initial public offering price.

WE ARE CONTROLLED BY A SMALL NUMBER OF STOCKHOLDERS WHICH COULD RESULT IN
THEIR TAKING ACTIONS WHICH OTHER STOCKHOLDERS DO NOT APPROVE.

Immediately following this offering and assuming the limited partnerships
sponsored by Advent International and Morgan Stanley Dean Witter purchase an
aggregate of up to 728,000 shares in the offering, Rory Cowan, Morgan Stanley
Dean Witter Venture Partners, Advent International, and Capital Resource
Partners collectively will beneficially own approximately 82.4% of the
outstanding shares (or 84.1% if the underwriters' over-allotment options are
exercised in full). If these stockholders choose to act or vote in concert, they
will have the power to influence the election of our directors, the appointment
of new management and the approval of any other action requiring the approval of
our stockholders, including any amendments to our Certificate of Incorporation
and mergers or sales of all of our assets. If these stockholders withhold their
consent, we could be prevented from entering into transactions that could be
beneficial to us.

SHARES ARE RESTRICTED FROM IMMEDIATE RESALE BUT MAY BE SOLD INTO THE MARKET
IN THE NEAR FUTURE. THIS COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO
DROP SIGNIFICANTLY.

After this offering, we will have outstanding 14,719,450 shares of common
stock. This includes the 3,500,000 shares we are selling in this offering, of
which 2,772,000 shares may be resold in the public market immediately. The
remaining 11,947,450 shares of our total outstanding shares will become
available for resale in the public market as shown in the chart below.

12
<PAGE>
As restrictions on resale end, the market price could drop significantly if
the holders of these restricted shares sell them or are perceived by the market
as intending to sell them.

<TABLE>
<CAPTION>
DATE OF AVAILABILITY FOR RESALE
NUMBER OF SHARES INTO PUBLIC MARKET
- ------------------ ----------------------------------------------------------------------------------------------
<S> <C>
11,923,178 180 days after the date of this prospectus due to a lock-up agreement these shareholders have
with Prudential Securities. However, Prudential Securities can waive this restriction at any
time and without notice.

24,272 Between 180 and 365 days after the date of this prospectus due to the requirements of the
federal securities laws.
</TABLE>

An additional 1,533,260 shares will be available for resale between 180 and
365 days after the date of this prospectus if Capital Resource Lenders and the
Morgan Stanley-sponsored limited partnerships exercise their warrants in full.
For more information, see "Certain Transactions."

OUR MANAGEMENT HAS BROAD DISCRETION OVER THE USE OF A PORTION OF THE NET
PROCEEDS FROM THIS OFFERING AND MAY ALLOCATE THESE NET PROCEEDS IN WAYS IN
WHICH YOU DO NOT AGREE.

Our management has significant flexibility in applying the proceeds we
receive in this offering. Although we are required to repay our subordinated
indebtedness and to redeem our Series B redeemable preferred stock, the
remaining net proceeds will not be allocated to any specific investment or
transaction.

YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION BECAUSE THE NET TANGIBLE
BOOK VALUE OF OUR COMMON STOCK ISSUED IN THIS OFFERING WILL BE LESS THAN THE
OFFERING PRICE.

The initial public offering price for this offering is substantially higher
than the net tangible book value per share of the outstanding common stock
immediately after the offering. If you purchase common stock in the offering,
you will incur immediate and substantial dilution of $9.68 per share, based on
an assumed initial public offering price of $10.00 per share. Dilution is a
reduction in the net tangible book value per share from the price you pay per
share for our common stock. We also have outstanding a large number of stock
options and warrants to purchase common stock with exercise prices significantly
below the estimated initial public offering price of the common stock. To the
extent these options or warrants are exercised, there will be further dilution.
We intend to continue to grant a significant number of stock options to our
employees.

YOU SHOULD NOT EXPECT TO RECEIVE DIVIDENDS FROM US.

Our commercial credit facility and subordinated debt restrict our ability to
pay dividends and we do not expect to declare or pay any cash dividends in the
near future.

FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements based largely on our
current expectations and projections about future events and financial trends
affecting the financial condition of our business. The words "believe", "may",
"will", "estimate", "continue", "anticipate", "intend", "expect" and similar
expressions, as they relate to Lionbridge, our business or our management, are
intended to identify forward-looking statements. These forward-looking
statements are subject to a number of risks, uncertainties and assumptions,
including, among other things:

- general economic and business conditions, both nationally and in our
markets,

- our expectations and estimates concerning future financial performance,
financing plans and the impact of competition,

13
<PAGE>
- anticipated trends in our business,

- existing and future regulations affecting our business,

- our acquisition opportunities, and

- other risk factors set forth under "Risk Factors" in this prospectus.

We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of risks and uncertainties, the forward-looking events and
circumstances discussed in this prospectus may not occur and actual results
could differ materially from those anticipated or implied in the forward-looking
statements.

14
<PAGE>
USE OF PROCEEDS

The net proceeds to Lionbridge from the sale of the 3,500,000 shares of
common stock in this offering, assuming a public offering price of $10.00 per
share, are estimated to be $32,060,000 ($33,284,000 if the underwriters'
over-allotment option is exercised in full from us), after deducting
underwriting discounts and commissions and estimated offering expenses.

The principal purposes of this offering are to:

- repay debt;

- obtain working capital;

- establish a public market for our common stock and increase our visibility
in the marketplace;

- create a currency for future acquisitions;

- facilitate future access to public capital markets; and

- provide liquidity to existing stockholders and optionholders.

We intend to use the net proceeds as follows:

- To pay off an aggregate of $6,000,000 of the $12,000,000 principal amount
of our senior subordinated notes held by affiliates of our directors,
Stephen M. Jenks and Guy L. de Chazal. The notes accrue interest of 12.0%
per year, interest is required to be paid quarterly and the notes mature
upon the earlier of August 25, 2001, and the completion of an underwritten
public offering by Lionbridge (other than this offering) with aggregate
gross proceeds of at least $10,000,000. Lionbridge issued the notes in
February and March 1999 and used the proceeds to finance the acquisition
of its VeriTest business and for general corporate purposes.

- To redeem all outstanding shares of our Series B redeemable preferred
stock at $100,000 per share plus and 8% annual premium. Although we have
the option to defer the redemption in full of our Series B redeemable
preferred stock under the terms of our certificate of incorporation, we
have decided to redeem all of our Series B redeemable preferred stock upon
the closing of this offering. As of June 30, 1999, the redemption amount
is approximately $15,949,000; of which approximately $843,000 is payable
to Rory J. Cowan, $7,209,000 is payable to affiliates of our director
Marcia J. Hooper, $7,209,000 is payable to affiliates of our director Guy
L. de Chazal, and $120,000 is payable to our director Paul Kavanagh.

- For general corporate purposes, including expanding our sales and
marketing capabilities, capital expenditures and potential acquisitions.

Pending these uses, we may invest the net proceeds from this offering
temporarily in short-term, investment-grade, interest-bearing securities or
guaranteed obligations of the United States government.

Lionbridge will not receive any proceeds from the sale of common stock by
the selling stockholders if the underwriters exercise their over-allotment
options.

DIVIDEND POLICY

Lionbridge has not declared or paid and does not anticipate declaring or
paying any dividends on its common stock in the near future. In addition, the
terms of our credit facility with Silicon Valley Bank prohibit the payment of
cash dividends to us by our European subsidiaries and the terms of the
subordinated notes held by Capital Resource Lenders and limited partnerships
sponsored by Morgan Stanley prohibit us from paying any dividends to our
stockholders. We currently intend to retain future earnings, if any, to fund the
expansion and growth of our business. Any future determination as to the
declaration and payment of dividends will be at the discretion of our Board of
Directors and will depend on then existing conditions, including our financial
condition, results of operations, contractual restrictions, capital
requirements, business prospects, and other factors as our Board of Directors
considers relevant.

15
<PAGE>
CAPITALIZATION

The following table sets forth as of June 30, 1999:

(i) the actual capitalization of Lionbridge,

(ii) the pro forma as adjusted capitalization of Lionbridge after giving
effect upon the closing of this offering to:

- the redemption of all outstanding shares of our Series B redeemable
preferred stock for $100,000 per share plus an 8% annual premium,

- the conversion of all outstanding shares of our Series C convertible
preferred stock into shares of our common stock,

- the repayment of $6,000,000 of the subordinated notes, and

- the sale of 3,500,000 shares of our common stock in this offering at an
assumed initial public offering price of $10.00 per share, after deducting
underwriting discounts and commissions and estimated offering expenses,
and application of the estimated net proceeds.

You should read the following table in conjunction with Lionbridge's
consolidated financial statements and related notes appearing elsewhere in this
prospectus. This information excludes 2,621,945 shares of common stock issuable
upon exercise of outstanding options as of June 30, 1999, of which options to
purchase 472,490 shares were then exercisable, and 1,890,791 shares of common
stock reserved for future issuance under our 1998 Stock Plan. This information
also excludes 1,616,594 shares of common stock issuable upon exercise of
warrants as of June 30, 1999 and 1,000,000 shares reserved for issuance under
our 1999 Employee Stock Purchase Plan.

<TABLE>
<CAPTION>
JUNE 30, 1999
------------------------
PRO FORMA
ACTUAL AS ADJUSTED
----------- -----------
(UNAUDITED) (UNAUDITED)

(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE
DATA)
<S> <C> <C>
Amounts owed to banks........................................................... $ 143 $ 143
Short-term debt................................................................. 5,893 5,893
Long-term debt, net of discount................................................. 10,964 4,964

Redeemable convertible preferred stock, $0.01 par value:
Series A convertible preferred stock, 17,271,314 shares authorized; 13,271,314
shares issued and outstanding actual; no shares issued and outstanding pro
forma as adjusted .......................................................... 15,949 --
Series B redeemable preferred stock, 200 shares authorized; no shares issued
and outstanding actual and pro forma as adjusted............................ -- --
Series C convertible preferred stock, 17,271,514 shares authorized; no shares
issued and outstanding actual and pro forma as adjusted..................... -- --
Series D nonvoting convertible preferred stock, 200 shares authorized; 140
shares issued and outstanding actual; no shares issued and outstanding pro
forma as adjusted........................................................... -- --

Stockholders' equity (deficit):
Common stock, $0.01 par value; 25,950,867 shares authorized; 2,371,799 shares
issued and outstanding actual; 14,719,450 shares issued and outstanding pro
forma as adjusted........................................................... 24 147
Additional paid-in capital.................................................... 10,516 42,453
Accumulated deficit........................................................... (24,518) (24,518)
Deferred compensation......................................................... (3,529) (3,529)
Accumulated other comprehensive income (1).................................... 475 475
----------- -----------
Total stockholders' equity (deficit).......................................... (17,032) 15,028
----------- -----------
Total capitalization............................................................ $ 15,917 $ 26,028
----------- -----------
----------- -----------
</TABLE>

- --------------------------
(1) Represents the cumulative effect of foreign currency translation
adjustments. For more information, see Note 2 of notes to consolidated
financial statements.

16
<PAGE>
DILUTION

Purchasers of the common stock in this offering will experience immediate
and substantial dilution in the net tangible book value of the common stock from
the initial public offering price. Net tangible book value per share represents
the amount of the total tangible assets less total liabilities of Lionbridge,
divided by the number of shares of common stock outstanding. At June 30, 1999,
Lionbridge had a pro forma net tangible book value of $(27,357,000) or $(2.44)
per share of common stock, assuming

- the redemption of all outstanding shares of our Series B redeemable
preferred stock for $100,000 per share plus an 8% annual premium upon the
closing of this offering, and

- the conversion of all outstanding shares of our Series C convertible
preferred stock into shares of our common stock upon the closing of this
offering.

After giving effect to the sale of 3,500,000 shares of common stock offered
by Lionbridge at an assumed initial public offering price of $10.00 per share
and the deduction of underwriting discounts and commissions and estimated
offering expenses, the pro forma net tangible book value of Lionbridge as of
June 30, 1999 would have been approximately $4,703,000, or $0.32 per share. This
represents an immediate increase in pro forma net tangible book value of $2.76
per share to existing stockholders and an immediate and substantial dilution of
$9.68 per share to new investors purchasing shares of common stock in this
offering. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price...................................... $ 10.00
Pro forma net tangible book value per share at June 30,
1999........................................................ $ (2.44)
Increase attributable to new investors........................ $ 2.76
---------
Pro forma net tangible book value after this offering...................... $ 0.32
---------
Dilution in pro forma net tangible book value to new investors............. $ 9.68
---------
---------
</TABLE>

The following table summarizes, on the pro forma basis set forth above as of
June 30, 1999, the differences between existing stockholders and new investors
in this offering with respect to the number of shares of common stock purchased
from Lionbridge, the consideration paid to Lionbridge and the average
consideration paid per share (before the deduction of underwriting discounts and
commissions and offering expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................... 11,219,450 76% $13,860,000 28% $ 1.24
New investors............................ 3,500,000 24% $35,000,000 72% $ 10.00
--------- ----- ---------- -----
Totals............................. 14,719,450 100% $48,860,000 100%
--------- ----- ---------- -----
--------- ----- ---------- -----
</TABLE>

The foregoing discussion and tables assume no sale of shares of common stock
held by existing stockholders pursuant to the underwriters' over-allotment
options. The foregoing discussion and tables also do not assume exercise of any
stock options or warrants after June 30, 1999. As of June 30, 1999, there were
83,334 shares of common stock issuable upon exercise of outstanding warrants at
an exercise price of $2.40 per share and 1,533,260 shares of common stock
issuable upon exercise of outstanding warrants at an exercise price of $0.015
per share. As of June 30, 1999, there were 2,621,945 shares of common stock
issuable upon exercise of outstanding stock options, at a weighted average
exercise price of $1.69 per share; and 1,890,791 shares of common stock reserved
for issuance under Lionbridge's 1998 Stock Plan. In addition, in June 1999,
effective upon closing of this offering, Lionbridge adopted the 1999 Employee
Stock Purchase Plan, pursuant to which 1,000,000 shares of common stock were
initially reserved for issuance. To the extent that these options are exercised,
there will be further dilution to new investors.

17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

Lionbridge was incorporated on September 11, 1996 and commenced operations
on December 23, 1996 through the acquisition of the localization businesses of
Stream International in France, Ireland, and The Netherlands. Until 1996, Stream
did not maintain complete accounting records for these localization businesses.
As a result, the accounting information required to prepare financial statements
for any period prior to 1996 is not available; and, therefore, we cannot present
selected financial data for 1994 and 1995.

The selected financial data for the year ended December 31, 1996 relating to
Stream's European localization businesses have been derived from the combined
financial statements of The Localization Businesses of Stream International
Holdings, Inc. in Ireland, The Netherlands and France which appear elsewhere in
this prospectus and which have been audited by PricewaterhouseCoopers LLP,
independent public accountants. The selected consolidated financial data as of
December 31, 1997 and 1998 and for the years then ended have been derived from
the consolidated financial statements of Lionbridge which appear elsewhere in
this prospectus and which have been audited by PricewaterhouseCoopers LLP,
independent public accountants. The selected financial data as of June 30, 1999
and for the six months ended June 30, 1998 and 1999 have been derived from
unaudited consolidated financial statements which appear elsewhere in this
prospectus. In the opinion of management, the unaudited consolidated financial
statements have been prepared on a basis consistent with the audited
consolidated financial statements that appear elsewhere in this prospectus and
include all adjustments, which are only normal recurring adjustments, necessary
for a fair presentation.

The results of operations of Lionbridge for the period from inception
(September 11, 1996) to December 31, 1996, are immaterial, consisting of no
revenues, general and administrative expenses of $158,000, interest expense of
$1,000, and a net loss of $159,000. As a result, we do not present selected
consolidated financial data for this period.

The historical results presented are not necessarily indicative of future
results. You should read the data set forth below in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes included
elsewhere in this prospectus.

18
<PAGE>

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, SIX MONTHS ENDED
------------------------------ JUNE 30,
1996(1) 1997 1998 -------------------------
-------- -------- -------- 1998 1999
----------- -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue........................................... $ 28,134 $ 26,462 $ 38,412 $18,132 $23,783
Cost of revenue................................... 24,977 18,914 25,546 12,226 16,607
-------- -------- -------- ----------- -----------
Gross profit.................................. 3,157 7,548 12,866 5,906 7,176
-------- -------- -------- ----------- -----------
Operating expenses:
Sales and marketing (1)......................... -- 1,306 2,735 1,206 2,613
General and administrative...................... 3,144 8,210 10,889 5,238 6,894
Amortization of acquisition-related intangible
assets........................................ -- 4,400 2,145 1,194 1,579
Restructuring charges........................... -- 541 501 451 --
Stock-based compensation........................ -- -- -- -- 232
-------- -------- -------- ----------- -----------
Total operating expenses...................... 3,144 14,457 16,270 8,089 11,318
-------- -------- -------- ----------- -----------
Income (loss) from operations..................... 13 (6,909) (3,404) (2,183) (4,142)
Interest expense:
Interest on outstanding debt.................... (154) (127) (648) (265) (889)
Amortization of original issue discount......... -- -- -- -- (4,099)
Other income (expense), net....................... (72) (506) 49 (22) (320)
-------- -------- -------- ----------- -----------
Loss before income taxes.......................... (213) (7,542) (4,003) (2,470) (9,450)
Provision for income taxes........................ -- 112 259 53 315
-------- -------- -------- ----------- -----------
Net loss.......................................... (213) (7,654) (4,262) (2,523) (9,765)
Accrued dividends on preferred stock.............. -- (1,062) (1,062) (531) (531)
-------- -------- -------- ----------- -----------
Net loss attributable to common stockholders...... $ (213) $ (8,716) $ (5,324) $(3,054) $(10,296)
-------- -------- -------- ----------- -----------
-------- -------- -------- ----------- -----------
Basic and diluted net loss per share attributable
to common stockholders (2)...................... $ (8.85) $ (2.99) $ (1.89) $ (4.64)
Shares used in computing basic and diluted net
loss per share attributable to common
stockholders.................................... 985 1,782 1,613 2,218
</TABLE>

(1) Results for the year ended December 31, 1996 reflect Stream International's
results of operations for the businesses we acquired from Stream
International on December 23, 1996. These businesses did not have any
dedicated sales and marketing personnel; therefore, Stream International
allocated a portion of its total sales and marketing expenses to these
businesses and these expenses are reflected within general and
administrative expenses for that period.

(2) See Note 2 to Lionbridge's consolidated financial statements for an
explanation of the basis used to calculate net loss per share attributable
to common stockholders.

19
<PAGE>

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1999
-------------------- -------------------------
1997 1998 ACTUAL PRO FORMA
-------- --------- ----------- AS ADJUSTED
-----------
(UNAUDITED)
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash........................................................ $ 1,098 $ 732 $ 1,455 $ 11,566
Working capital (deficit)................................... (1,476) (7,718) (2,919) 7,192
Total assets................................................ 18,756 22,402 28,107 38,218
Long-term debt, net of discount............................. -- -- 10,964 4,964
Redeemable convertible preferred stock...................... 14,356 15,418 15,949 --
Stockholders' equity (deficit).............................. (8,086) (13,521) (17,032) 15,028
</TABLE>

The pro forma as adjusted column above gives effect upon the closing of this
offering to:

- the redemption of all outstanding shares of our Series B redeemable
preferred stock for $100,000 per share plus an 8% annual premium,

- the conversion of all outstanding shares of our Series C convertible
preferred stock into shares of our common stock,

- the repayment of $6,000,000 of the subordinated notes, and

20
<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 Consolidated Financial Data" and the accompanying financial statements
and related notes included elsewhere in this prospectus.

OVERVIEW

ORGANIZATION OF LIONBRIDGE

Our predecessor, Lionbridge America, was incorporated in September 1996
(under the name Lionbridge Technologies, Inc.) to acquire the localization
businesses and assets of Stream International, as described in further detail
below under "--ACQUISITIONS." We were incorporated in October 1997 (under the
name Lionbridge Technologies Holdings, Inc.) and completed a reorganization in
February 1998 in which Lionbridge America became a wholly owned subsidiary of
Lionbridge. In June 1999, we changed our name to Lionbridge Technologies, Inc.
from Lionbridge Technologies Holdings, Inc. and the name of our subsidiary
Lionbridge Technologies, Inc. to Lionbridge America, Inc.

GENERAL

Lionbridge is a provider of globalization and multilingual Internet services
to industry-leading software publishers, computer hardware manufacturers, and
telecommunications companies. Since 1996, we have focused primarily on
globalization services, including localization, internationalization, and
testing, that enable simultaneous worldwide release and ongoing maintenance of
products and product-related technical support, training materials, and sales
and marketing information in multiple languages. More recently, as product
release, technical support, and training have evolved toward a Web-based
business model, we have begun to offer multilingual Internet services.

Lionbridge's revenues are derived from fees for services generated on a
project-by-project basis. Projects are generally billed on a time and materials
basis. Revenue is recognized using the percentage of completion method of
accounting, based on management's estimate of progress against the project plan.
The agreements entered into in connection with projects are generally terminable
by clients upon 30 days' prior written notice. If a client terminates an
agreement, it is required to pay Lionbridge for time and materials incurred
through the termination date. If clients terminate existing projects or if
Lionbridge is unable to enter into new engagements, our financial condition and
results of operations could be materially and adversely affected.

On March 19, 1999, in connection with our February and March 1999
subordinated debt financing, the Boston Business Journal published an article in
which Lionbridge was reported as estimating revenues for 1999 of $60 million.
This estimate was made while we were a private company (and thus at a time when
we did not contemplate the impact such a statement might have on potential
public investors) and was not based on a formal analysis or set of projections.
This estimate also reflected our expectation at the time that we would complete
an acquisition that we later decided not to pursue. This estimate does not
accurately reflect our current estimates of our financial performance and should
not be relied upon. In the future, our policy as a public company will be to
avoid making public estimates of our future financial performance unless
required to by law, stock exchange regulation or other compelling reasons.

Lionbridge has experienced operating losses, as well as net losses, for each
year of its operations and, as of June 30, 1999, had an accumulated deficit of
$24.5 million.

ACQUISITIONS

We have grown our business through a combination of acquisitions and organic
growth. Since our inception, we have acquired the following businesses and
assets.

21
<PAGE>
In 1996, we acquired the localization businesses of Stream International in
Ireland, The Netherlands, and France by acquiring all of the capital stock of
five subsidiaries of Stream--two subsidiaries incorporated in the Netherlands
and one each in Belgium, France and Ireland. The Belgian subsidiary was inactive
and was subsequently dissolved by Lionbridge. Stream's business was formed as
the result of a combination of R.R. Donnelley's localization business with the
business of another company, Corporate Software. R.R. Donnelley owned a majority
interest in Stream. We acquired these businesses on December 23, 1996 for $11.3
million in cash and the assumption of $100,000 of liabilities. Our acquisition
of the businesses was recorded as though the purchase had occurred on December
31, 1996, as the results of operations and changes in financial position between
the actual date of the purchase (December 23, 1996) and this date were
immaterial. In connection with this acquisition, we recorded $9.2 million of
goodwill, which is being amortized over five years. Additionally, during 1997,
we renegotiated an earlier agreement with Stream and purchased assets, including
cash, property and equipment, rights under contracts, and accounts receivable,
from three subsidiaries of Stream International which represented the
localization businesses of Stream in Japan, China, South Korea and Taiwan. We
paid approximately $100,000 in cash and assumed liabilities of $317,000 in
exchange for these assets. Following this transaction, we expanded our business
in Asia.

In June 1998, we entered into an agreement with Stream settling outstanding
inter-company balances as well as claims that we had made that Stream had
breached some of the representations, warranties and covenants that it had made
in connection with our acquisition of the European businesses. Our principal
claim was that in connection with this acquisition we had assumed more
liabilities and fewer assets than Stream had previously disclosed to us. Under
the terms of the settlement agreement, our purchase price for the European
business was reduced by $531,000.

As of January 2, 1998, Lionbridge acquired Japanese Language Services, a
company specializing in Japanese localization services with operations in the
United States and Japan, for total initial consideration of $2,323,000
consisting of cash of $2,237,000 and 286,959 shares of common stock valued at
$86,000. The shares of common stock may be redeemed, at the option of the
holder, at a price of $1.35 per share at any time from July 2001 to September
2001. Subsequent to the acquisition date, Lionbridge paid a further $449,000 and
issued 24,268 shares of common stock, valued at $36,400, in connection with the
purchase. Lionbridge may be required to pay up to an additional $125,000 in cash
based on future operating results of Japanese Language Services through December
31, 1999. In connection with this acquisition, we have recorded $2.7 million of
goodwill, not including any additional contingent amounts that may be paid in
the future. The goodwill is being amortized over five years.

In April 1998, Lionbridge acquired the business and assets of the Monterey,
California-based localization services division of Lucent Technologies for $1.0
million in cash. In connection with this acquisition, Lionbridge recorded
$470,000 of goodwill, which is being amortized over five years. The purchase of
assets from the former Lucent business provided us with a West Coast, U.S.-based
operation to enable us to further penetrate U.S.-based customers.

In January 1999, Lionbridge acquired all of the stock of VeriTest, a
California-based provider of contract and logo certification testing services.
Lionbridge paid $3.3 million in cash and issued notes totaling $750,000 and
66,668 shares of our common stock valued at $344,000. Lionbridge may also be
required to pay up to an additional $1.0 million in cash dependent upon future
operating performance of VeriTest through December 2000. In connection with this
acquisition, Lionbridge recorded $4.3 million of goodwill, not including any
additional contingent amounts that may be paid in the future. The goodwill is
being amortized over five years.

We believe our acquisitions contributed to our growth by rapidly expanding
our employee base, geographic coverage, client base, industry expertise, and
technical skills. Lionbridge anticipates that a material portion of its future
growth will be accomplished by acquiring existing businesses. Most of
Lionbridge's growth in personnel to date has been through acquisitions. The
success of this plan depends upon, among other things, Lionbridge's ability to
integrate acquired personnel, operations,

22
<PAGE>
products, and technologies into its organization effectively; to retain and
motivate key personnel of acquired businesses; and to retain customers of
acquired firms. Lionbridge cannot guarantee that it will be able to identify
suitable acquisition opportunities, obtain any necessary financing on acceptable
terms to finance any acquisitions, consummate any acquisitions, or successfully
integrate acquired personnel and operations.

RESTRUCTURING CHARGES

During the fourth quarter of 1997, the first quarter of 1998, and the fourth
quarter of 1998, Lionbridge recorded restructuring charges of $541,000, $451,000
and $50,000, respectively, in operating expenses. These charges related to
reductions to our workforce in France, where we reduced our technical staff by 9
and 5 employees in 1997 and 1998, respectively, as a result of a decrease in
resources required on a specific customer contract. These reductions in
workforce were completed to correspond with the anticipated lower volume of work
orders under the contract. All employees had been informed of their termination
and related benefits in the period that the corresponding charge was recorded
and have now left Lionbridge. The liabilities recorded in relation to the cost
of these reductions were matched by corresponding expenditures in 1998, and we
do not anticipate any future costs related to these actions nor do we anticipate
any further resource reductions associated with the customer contract. The
Company does not anticipate any significant net effect on operating results from
these actions.

NON-CASH CHARGES

DEFERRED COMPENSATION

Lionbridge recorded deferred compensation of approximately $3.8 million in
the first six months of 1999, representing the difference between the exercise
price of stock options granted and the fair market value for accounting purposes
of the underlying common stock at the date of the grant. The deferred
compensation is being amortized over the four-year vesting period of the
applicable options. Of the total deferred compensation amount, $232,000 had been
amortized as of June 30, 1999. The amortization of deferred compensation is
recorded as an operating expense. We currently expect to amortize the following
remaining amounts of deferred compensation as of June 30, 1999 in the fiscal
periods ending:

<TABLE>
<S> <C>
December 31, 1999................................................. $ 470,000
December 31, 2000................................................. $ 940,000
December 31, 2001................................................. $ 940,000
December 31, 2002................................................. $ 940,000
December 31, 2003................................................. $ 239,000
</TABLE>

ORIGINAL ISSUE DISCOUNT ON SUBORDINATED NOTES

Interest expense for the six months ended June 30, 1999 includes $4.1
million for the accretion of the original issue discount on $12.0 million of
subordinated notes issued in that period. This discount represents the $6.0
million value attributable to detachable warrants to purchase 1,533,260 shares
of common stock, at an exercise price of $0.015 per share, granted in connection
with this debt financing. As we were previously required to repay the
subordinated notes in full upon the closing of this offering, we are recording
the expense of this discount on a straight-line basis over a six-month period
from date of debt issuance to the date by which we expect this offering to
occur. Pursuant to an amendment of the debt agreements effective August 19,
1999, Lionbridge is now required to redeem only $6.0 million of the subordinated
notes upon the closing of this offering. We currently expect to record an
expense for the discount remaining as of June 30, 1999 as follows:

<TABLE>
<S> <C>
Quarter ending September 30, 1999.............................. $1.9 million
</TABLE>

23
<PAGE>
RESULTS OF OPERATIONS

The following table presents results of operations data for Lionbridge as a
percentage of total revenue for the periods presented:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- -----------------
1996(1) 1997 1998 1998 1999
----- ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue.......................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue.................................................. 88.8 71.5 66.5 67.4 69.8
----- ------ ------ ------ ------
Gross profit..................................................... 11.2 28.5 33.5 32.6 30.2
----- ------ ------ ------ ------
Operating expenses:
Sales and marketing(1)......................................... -- 4.9 7.1 6.6 11.0
General and administrative..................................... 11.2 31.1 28.4 28.9 29.0
Amortization of acquisition-related intangible assets.......... -- 16.6 5.6 6.6 6.6
Restructuring charges.......................................... -- 2.0 1.3 2.5 --
Stock-based compensation....................................... -- -- -- -- 1.0
----- ------ ------ ------ ------
Total operating expenses..................................... 11.2 54.6 42.4 44.6 47.6
----- ------ ------ ------ ------
Loss from operations........................................... -- (26.1) (8.9) (12.0) (17.4)
Interest expense................................................. (0.5) (0.5) (1.6) (1.5) (21.0)
Other income (expense), net...................................... (0.3) (1.9) 0.1 (0.1) (1.3)
----- ------ ------ ------ ------
Loss before income taxes......................................... (0.8) (28.5) (10.4) (13.6) (39.7)
Provision for income taxes....................................... -- 0.4 0.7 0.3 1.4
----- ------ ------ ------ ------
Net loss......................................................... (0.8)% (28.9)% (11.1)% (13.9)% (41.1)%
----- ------ ------ ------ ------
----- ------ ------ ------ ------
</TABLE>

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

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998

REVENUE. Revenue for the six months ended June 30, 1999 increased 31.2% to
$23.8 million as compared to $18.1 million for the same period of the prior
year. This increase results from additional project volume during the first half
of 1999 as compared to the first half of 1998, reflecting the continued impact
of a strengthened sales organization. In addition, the first half of 1999 also
reflects revenue derived from the operations of VeriTest, which was not included
in the first half of 1998 and accounted for $1.7 million in revenue in 1999.

COST OF REVENUE. Cost of revenue consists primarily of outsourcing expense
incurred for translation services provided by third parties as well as salaries
and associated employee benefits for personnel related to client projects. As a
percentage of revenue, cost of revenue remained relatively consistent for the
six months ended June 30, 1999 from the corresponding period of the prior year.
However, the Company's fixed costs of revenue as a percentage of revenue
increased in the six months ended June 30, 1999 compared to the corresponding
period in 1998 primarily as a result of the acquisition of VeriTest in January
1999.

24
<PAGE>
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and associated employee benefits, travel expenses of sales
and marketing personnel, and promotional expenses. Sales and marketing expenses
increased 116.7% to $2.6 million for the six months ended June 30, 1999 from
$1.2 million for the six months ended June 30, 1998. This increase is
attributable to increases in the number of employees and additional marketing
initiatives to support the continued growth of the business. As a percentage of
revenue, sales and marketing expenses increased to 11.0% for the six months
ended June 30, 1999 from 6.6% for the six months ended June 30, 1998. Sales and
marketing expenses are expected to continue to increase in absolute dollars as
we continue to expand our marketing programs and sales force.

GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
salaries of the management, purchasing, process and technology, finance and
administrative groups, and associated employee benefits; facilities costs,
including depreciation and amortization; information systems costs; professional
fees; travel; and all other site and corporate costs. General and administrative
expenses increased 31.6% to $6.9 million for the six months ended June 30, 1999
from $5.2 million for the six months ended June 30, 1998. This increase was
principally due to increased staffing and additional depreciation expense from a
larger fixed asset base necessary to support Lionbridge's continued growth. As a
percentage of revenue, general and administrative expenses remained constant for
the six months ended June 30, 1999 compared with the corresponding six months of
1998.

AMORTIZATION OF ACQUISITION-RELATED INTANGIBLE ASSETS. Amortization of
acquisition-related intangible assets consists of amortization of goodwill and
other intangible assets resulting from acquired businesses. Amortization
increased 32.2% to $1.6 million for the six months ended June 30, 1999 from $1.2
million for the six months ended June 30, 1998. This increase was due to the
amortization of goodwill recognized on the acquisition of VeriTest in the first
half of 1999.

INTEREST EXPENSE. Interest expense represents interest payable on debt and
the accretion of original issue discount on subordinated notes with detachable
warrants. Interest expense increased to $5.0 million for the six months ended
June 30, 1999 as compared to $265,000 for the six months ended June 30, 1998.
This increase was principally due to accretion of $4.1 million on the original
issue discount on our subordinated notes issued in 1999 and to increased
interest as a result of greater borrowings through notes issued, and our
commercial credit facility.

OTHER INCOME (EXPENSE), NET. Other income (expense), net consists primarily
of foreign currency transaction gains or losses arising from exchange rate
fluctuations on transactions denominated in currencies other than the local
currencies of the countries in which the transactions are recorded. As a
percentage of revenue, other income (expense), net increased to (1.3)% for the
six months ended June 30, 1999 from (0.1)% for the corresponding six months of
1998.

PROVISION FOR INCOME TAXES. The provision for income taxes in the six-month
periods ended June 30, 1999 and 1998 represents taxes generated in foreign
jurisdictions for which U.S. tax credit utilization is currently uncertain. We
recorded no tax benefit for losses generated during these periods due to the
uncertainty of realizing any benefit.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

REVENUE. In 1998, revenue increased 45.2% to $38.4 million from $26.5
million in 1997. This increase results from additional project volume during
1998 as compared to 1997, reflecting the impact of a more established sales and
marketing organization in 1998. Additionally, 1998 results reflect the impact of
the Japanese Language Services acquisition, which accounted for approximately
$4.0 million of revenue in 1998.

25
<PAGE>
COST OF REVENUE. As a percentage of revenue, cost of revenue decreased to
66.5% during 1998 as compared to 71.5% during 1997 due to improved utilization
of employees as Lionbridge realized increased operating leverage from its
services personnel.

SALES AND MARKETING. Sales and marketing costs increased 109.4% to $2.7
million in 1998 from $1.3 million in 1997. This increase was primarily due to
expenses associated with the hiring of additional direct sales personnel in
fiscal 1998 as we continued to establish our sales and marketing organization.
As a percentage of revenue, sales and marketing expenses increased to 7.1% from
4.9% during 1997.

GENERAL AND ADMINISTRATIVE. General and administrative costs increased
32.6% to $10.9 million in 1998 from $8.2 million in 1997 as a result of the
hiring of additional employees and other personnel-related costs as well as the
additional infrastructure costs of adding the Japanese Language Services,
Monterey and Ballina facilities. As a percentage of revenue, general and
administrative expenses decreased to 28.4% in 1998 from 31.1% in 1997 as we
began to realize the operating leverage from our infrastructure.

AMORTIZATION OF ACQUISITION-RELATED INTANGIBLE ASSETS. Amortization
decreased 51.3% to $2.1 million in 1998 from $4.4 million in 1997. This decrease
is due to the amortization of a six-month non-compete agreement between
Lionbridge and Stream International, valued at $2.6 million, which was fully
amortized in 1997. Partially offsetting this decrease is amortization expense
attributable to goodwill on the acquisition of the Japanese Language Services
and Lucent businesses in 1998.

INTEREST EXPENSE. Interest expense increased 410.2% to $648,000 in 1998
from $127,000 in 1997. The increase is due to additional interest incurred on
our commercial credit facility during 1998 as outstanding borrowings rose from
$2.2 million at December 31, 1997 to $7.7 million at December 31, 1998 to
support our growth.

OTHER INCOME (EXPENSE), NET. Other income (expense), net, was $49,000 for
the twelve months ended December 31, 1998 as compared to $(506,000) for the
twelve months ended December 31, 1997, or 0.1% and (1.9)% of revenue,
respectively.

PROVISION FOR INCOME TAXES. The provision for income taxes for the years
ended December 31, 1998 and 1997 represents taxes generated in foreign
jurisdictions for which U.S. tax credit utilization is currently uncertain. The
benefit from our utilization of net operating loss carryforwards in Europe
during those periods was recorded as a reduction of goodwill, rather than a tax
provision benefit, since the deferred tax assets associated with these
carryforwards had been fully reserved at the time we acquired Stream
International's localization businesses. We recorded no tax benefit for losses
generated during these periods due to the uncertainty of realizing any benefit.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

REVENUE. In 1997, revenue decreased 5.9% to $26.5 million as compared to
Stream International's revenues from the European localization business of $28.1
million in 1996. The decrease is primarily due to the expiration of two large
contracts at the end of 1996 and beginning of 1997. In addition, because Stream
International did not transfer any sales and marketing personnel to us, we
needed to build a sales and marketing team. As a result, sales in 1997 were
adversely impacted as we built this team.

OPERATING COSTS AND EXPENSES. Operating costs and expenses consist of cost
of revenue, sales and marketing, general and administrative expenses, and
restructuring charges. Our operating costs and expenses increased 3.0% to $29.0
million in 1997 from $28.1 million in 1996. As a percentage of revenue,
operating costs and expenses increased to 109.5% of revenue in 1997, up from
100.0% in 1996, reflecting the costs of establishing our direct sales force,
increased marketing activities, and the

26
<PAGE>
addition of centralized management and finance functions after the purchase of
Stream International's businesses in 1996.

PROVISION FOR INCOME TAXES. The provision for income taxes for the year
ended December 31, 1997 represents taxes generated in foreign jurisdictions for
which U.S. tax credit utilization is currently uncertain. The benefit from our
utilization of net operating loss carryforwards in Europe during that period was
recorded as a reduction of goodwill, rather than a tax provision benefit, since
the deferred tax assets associated with these carryforwards had been fully
reserved at the time we acquired Stream International's localization businesses.
We recorded no tax benefit for losses generated during this period due to the
uncertainty of realizing any benefit. There was no tax provision recorded for
the year ended December 31, 1996 because Stream International benefited the tax
provision with the utilization of previously unrecognized net operating loss
carryforwards.

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth unaudited consolidated quarterly financial
data for the periods indicated. We derived this data from our unaudited
consolidated financial statements, and, in the opinion of management, they have
been prepared on the same basis as the audited financial statements contained
elsewhere in this prospectus and include all adjustments, which consist only of
normal recurring adjustments, necessary to present fairly the financial results
for the periods. The operating results for any quarter are not necessarily
indicative of results for any future period.

27
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------
SEPT. MARCH SEPT. MARCH
30, DEC. 31, 31, JUNE 30, 30, DEC. 31, 31,
1997 1997 1998 1998 1998 1998 1999
-------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue........................................... $ 6,866 $ 7,382 $ 7,438 $10,694 $10,021 $10,259 $11,690
Cost of revenue................................... 5,161 5,138 5,344 6,882 6,550 6,770 8,195
-------- --------- -------- --------- -------- --------- --------
Gross profit.................................. 1,705 2,244 2,094 3,812 3,471 3,489 3,495
-------- --------- -------- --------- -------- --------- --------
Operating expenses:
Sales and marketing............................. 341 369 527 679 749 780 1,172
General and administrative...................... 2,139 2,327 2,387 2,851 2,690 2,961 3,233
Amortization of acquisition-related intangible
assets........................................ 1,100 1,100 561 633 441 510 766
Restructuring charges........................... -- 541 451 -- -- 50 --
Stock-based compensation........................ -- -- -- -- -- -- 45
-------- --------- -------- --------- -------- --------- --------
Total operating expenses...................... 3,580 4,337 3,926 4,163 3,880 4,301 5,216
-------- --------- -------- --------- -------- --------- --------
Loss from operations.............................. (1,875) (2,093) (1,832) (351) (409) (812) (1,721)
Interest expense.................................. (36) (27) (86) (179) (196) (187) (1,468)
Other income (expense), net....................... 60 (535) 42 (64) (22) 93 (181)
-------- --------- -------- --------- -------- --------- --------
Loss before income taxes.......................... (1,851) (2,655) (1,876) (594) (627) (906) (3,370)
Provision for income taxes........................ -- 112 36 17 36 170 45
-------- --------- -------- --------- -------- --------- --------
Net loss.......................................... $(1,851) $(2,767) $(1,912) $ (611) $ (663) $(1,076) $(3,415)
-------- --------- -------- --------- -------- --------- --------
-------- --------- -------- --------- -------- --------- --------
AS A PERCENTAGE OF REVENUE:
Revenue........................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue................................... 75.2 69.6 71.8 64.4 65.4 66.0 70.1
-------- --------- -------- --------- -------- --------- --------
Gross profit.................................. 24.8 30.4 28.2 35.6 34.6 34.0 29.9
-------- --------- -------- --------- -------- --------- --------
Operating expenses:
Sales and marketing............................. 5.0 5.0 7.1 6.3 7.5 7.6 10.0
General and administrative...................... 31.1 31.5 32.1 26.7 26.8 28.9 27.6
Amortization of acquisition-related intangible
assets........................................ 16.0 14.9 7.5 5.9 4.4 5.0 6.6
Restructuring charges........................... -- 7.3 6.1 -- -- 0.4 --
Stock-based compensation........................ -- -- -- -- -- -- 0.4
-------- --------- -------- --------- -------- --------- --------
Total operating expenses...................... 52.1 58.7 52.8 38.9 38.7 41.9 44.6
-------- --------- -------- --------- -------- --------- --------
Loss from operations.............................. (27.3) (28.3) (24.6) (3.3) (4.1) (7.9) (14.7)
Interest expense.................................. (0.5) (0.4) (1.2) (1.7) (2.0) (1.8) (12.6)
Other income (expense), net....................... 0.8 (7.3) 0.6 (0.6) (0.2) 0.9 (1.5)
-------- --------- -------- --------- -------- --------- --------
Loss before income taxes.......................... (27.0) (36) (25.2) (5.6) (6.3) (8.8) (28.8)
Provision for income taxes........................ -- 1.5 0.5 0.1 0.3 1.7 0.4
-------- --------- -------- --------- -------- --------- --------
Net loss.......................................... (27.0)% (37.5)% (25.7)% (5.7)% (6.6)% (10.5)% (29.2)%
-------- --------- -------- --------- -------- --------- --------
-------- --------- -------- --------- -------- --------- --------

JUNE 30,
1999
---------

<S> <C>
Revenue........................................... $12,093
Cost of revenue................................... 8,412
---------
Gross profit.................................. 3,681
---------
Operating expenses:
Sales and marketing............................. 1,441
General and administrative...................... 3,661
Amortization of acquisition-related intangible
assets........................................ 813
Restructuring charges........................... --
Stock-based compensation........................ 187
---------
Total operating expenses...................... 6,102
---------
Loss from operations.............................. (2,421)
Interest expense.................................. (3,520)
Other income (expense), net....................... (139)
---------
Loss before income taxes.......................... (6,080)
Provision for income taxes........................ 270
---------
Net loss.......................................... $(6,350)
---------
---------
AS A PERCENTAGE OF REVENUE:
Revenue........................................... 100.0%
Cost of revenue................................... 69.6
---------
Gross profit.................................. 30.4
---------
Operating expenses:
Sales and marketing............................. 11.9
General and administrative...................... 30.3
Amortization of acquisition-related intangible
assets........................................ 6.7
Restructuring charges........................... --
Stock-based compensation........................ 1.5
---------
Total operating expenses...................... 50.4
---------
Loss from operations.............................. (20.0)
Interest expense.................................. (29.1)
Other income (expense), net....................... (1.2)
---------
Loss before income taxes.......................... (50.3)
Provision for income taxes........................ 2.2
---------
Net loss.......................................... (52.5)%
---------
---------
</TABLE>

Lionbridge has experienced quarter-to-quarter variability in its revenues
and gross profit. This variability is due to fluctuations in our clients'
product release cycles, the length of our sales cycle, rapid growth,
acquisitions, the emerging nature of the markets in which we compete and other
factors outside our control. We believe that quarter-to-quarter comparisons of
results of operations are not necessarily meaningful. You should not rely on
these comparisons as a measure of future performance.

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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

Since its formation, Lionbridge has relied primarily on private sales of
equity securities (totaling approximately $13.3 million through December 31,
1998) and borrowings to fund operations. We have incurred significant losses
since our inception and, at June 30, 1999, had an accumulated deficit of $24.5
million and a working capital deficit of $2.9 million. We conduct our business
through our wholly owned subsidiaries in the United States and overseas.

We have a commercial credit facility with Silicon Valley Bank that allows
Lionbridge to borrow up to $8.0 million and that expires on September 20, 1999.
The facility requires Lionbridge to maintain financial ratios and restricts the
payment of dividends. The facility bears interest at the bank's prime rate plus
1% (8.75% at June 30, 1999) and is collateralized by worldwide accounts
receivable and work in process. As of June 30, 1999, $5.9 million was
outstanding under the facility.

In the first quarter of 1999, we entered into subordinated loan agreements
with Morgan Stanley Venture Capital Fund II Annex, L.P. and Morgan Stanley
Venture Investors Annex, L.P., each stockholders of Lionbridge, and Capital
Resource Lenders III, L.P. Under the terms of the agreements, we issued $12.0
million of subordinated notes with detachable warrants to purchase 1,533,260
shares of our common stock at an exercise price of $0.015 per share. In
connection with this offering, we are repaying $6.0 million of these notes. The
remaining $6.0 million of these notes bear interest at 12% per year and are due
upon the earlier of August 25, 2001 and our completion of an underwritten public
offering (other than this offering) with aggregate gross proceeds of at least
$10.0 million. Capital Resource Lenders and the limited partnerships affiliated
with Morgan Stanley have agreed to defer repayment in order to enable Lionbridge
to meet our anticipated liquidity needs over the next 18 months with reasonable
liquidity reserves to meet unanticipated contingencies. As of March 31, 1999, we
were not in compliance with one of the covenants common to each of the above
loan agreements. We subsequently obtained waivers from the Morgan
Stanley-sponsored limited partnerships and Capital Resource Lenders which
release us from the requirement to comply with that covenant for the quarter
ended March 31, 1999 and for the quarters ending June 30 and September 30, 1999.

Net cash used in operations was $1.4 million in 1997, $1.7 million in 1998,
and $4.4 million in the six months ended June 30, 1999. Cash used in these
periods was primarily to fund the net losses of $7.7 million, $4.3 million and
$9.8 million incurred during these periods, respectively, offset in part by
depreciation, amortization and other non-cash expenses and increases in
operating assets and liabilities. Increases in operating assets and liabilities
were largely the result of the growth of our business operations during these
periods. We have not experienced any significant trends in accounts receivable
other than changes relative to increases in sales. Fluctuations in accounts
receivable from period to period relative to changes in sales are a result of
the timing of customer invoicing and receipt of milestone payments from
customers.

Net cash used in investing activities was $426,000 in 1997, $4.5 million in
1998, and $4.8 million in the six months ended June 30, 1999. Investing
activities for these periods were primarily purchases of equipment and the
acquisitions of Japanese Language Services and the localization services
division of Lucent Technologies in 1998 and VeriTest in 1999.

Net cash provided by financing activities was $1.3 million in 1997, $5.9
million in 1998, and $10.0 million in the six months ended June 30, 1999,
primarily due to the borrowings against our bank line of credit in each period
as well as the issuance of the subordinated debt in 1999.

As of June 30, 1999, Lionbridge's other significant financial commitments
consisted of $750,000 of notes payable as well as obligations under operating
leases. Additionally, we will redeem our Series B redeemable preferred stock
upon the closing of this offering. The redemption amount at June 30, 1999 was
approximately $15.9 million.

29
<PAGE>
Lionbridge has an agreement with the Irish Industrial Development Agency
regarding financial grants to our Irish subsidiary from this agency. Under the
agreement, the Irish subsidiary may not pay dividends or otherwise distribute
its cash, including any distributions to Lionbridge. In addition, our European
subsidiaries, including our Irish subsidiary, are restricted from paying
dividends to us under the terms of our commercial credit facility with Silicon
Valley Bank. These restrictions have not had a material impact on Lionbridge or
any of our subsidiaries and we do not expect that these restrictions will have a
material impact in the future.

As of June 30, 1999, we had cash of $1.5 million and an additional $2.1
million available for borrowing under the bank line of credit. Our future
financing requirements will depend upon a number of factors, including the
Company's operating performance and increases in operating expenses associated
with growth in our business. We anticipate that the net proceeds of this
offering, together with existing cash and available financing, should provide
adequate cash to fund our currently anticipated cash needs through at least the
next 18 months. We cannot assure you that additional financing, if needed, will
be available to Lionbridge at terms acceptable to us, if at all.

YEAR 2000 READINESS DISCLOSURE

The Year 2000 problem is the potential for system and processing failures of
date-related data arising from the use of two digits by computer-controlled
systems, rather than four digits, to define the applicable year. Because we and
our clients are dependent, to a very substantial degree, upon the proper
functioning of our and their computer systems, a failure of our or their systems
to correctly recognize dates beyond December 31, 1999 could materially disrupt
our operations, which could materially and adversely affect our business,
results of operations, and financial condition. Additionally, our failure to
provide Year 2000-compliant services to our clients could result in financial
loss, harm to our reputation and legal liability. Likewise, the failure of
computer systems and products of the third parties with which we transact
business to be Year 2000-compliant could materially disrupt their and our
operations.

STATE OF READINESS. We have made an assessment of the Year 2000 readiness
of our information technology ("IT") systems, including the hardware and
software that enable us to provide services. Our Year 2000 readiness plan
consists of:

- quality assurance testing of our internally developed proprietary
software,

- contacting third-party vendors and licensors of material software and
services that are both directly and indirectly related to the delivery of
our services,

- assessing our repair and replacement requirements, and

- creating contingency plans in the event of Year 2000 failures.

We have begun to contact our third party vendors and service providers to
assess their Year 2000 compliance. We have been informed by all of our material
software component vendors that the products we use are currently Year
2000-compliant. We are currently completing the assessment of our non-IT systems
and will seek assurance of Year 2000 compliance from providers of material
non-IT systems. We expect to complete this review by September 30, 1999 and any
resulting contingency plans by October 31, 1999. Until testing is complete and
we contact these vendors and providers, we will not be able to completely
evaluate whether our IT systems or non-IT systems will need to be revised or
replaced.

COSTS. We have made the majority of our equipment and other purchases over
the course of the last two years, and we believe this equipment is Year
2000-compliant. As a result, we have not incurred any material costs in
identifying or evaluating Year 2000 compliance issues. Based on our assessment
to date, we do not anticipate that costs associated with remediating our
non-compliant IT systems or

30
<PAGE>
non-IT systems will be material. We expect that our existing employees or
consultants will perform any significant work pertaining to Year 2000
compliance.

RISKS. We believe that our internal software and hardware systems will
function properly with respect to dates in the Year 2000 and thereafter. Year
2000 problems of our clients, suppliers and service providers could affect our
systems or operations. Our primary vendors consist of individual translators and
other service professionals who are not expected to be materially impacted by
the Year 2000 issue. We do have relationships with various financial
institutions and telecommunications providers throughout the world which could
be materially impacted by this problem. We have contacted our financial
institutions and critical telecommunications providers and based on their
responses, we believe our operations will not be materially impacted by Year
2000 problems. In addition, we cannot assure you that governmental agencies,
utility companies, Internet access companies, third party service providers, and
others outside our control will be Year 2000-compliant. Because we depend
heavily on the availability of the Internet to conduct our business and provide
services to our clients, disruptions in the use of the Internet arising from
Year 2000 problems could materially affect our business, financial condition,
and results of operations.

Widespread Year 2000 difficulties could also decrease demand for our
services as companies expend resources upgrading their computer systems.
Although, as a general matter, we do not specifically contract with or warrant
to our clients that our work will be Year 2000-compliant, several clients have
requested and received this warranty. In these cases, we do not warrant the
compliance of the client's source material; rather, we warrant only that the
localized version created by us will not include new routines which fail to be
Year 2000-compliant. In addition, through our VeriTest labs we provide Year 2000
testing services on customer products, but we expressly exclude any warranty,
guaranty, or certification of Year 2000 compliance, compatability or the
functionality of the customer's products. Although we believe we have
effectively limited our risk of warranty claims for Year 2000 problems, there is
still a risk that clients for whom we have localized or tested software will
attempt to hold us liable for any damages that result in connection with Year
2000 problems.

CONTINGENCY PLAN. As discussed above, we are engaged in an ongoing Year
2000 assessment and are developing contingency plans in case of Year 2000
disruptions. We will take into account the results of our Year 2000 simulation
testing and the responses received from third party vendors and service
providers in determining the nature and extent of any contingency plans.

FOREIGN CURRENCY EXCHANGE RATE LOSSES

The majority of our contracts with clients are denominated in U.S. dollars.
However, 73% of our costs and expenses in 1998 and 62% of our costs and expenses
for the six months ended June 30, 1999 were denominated in foreign currencies.
59% and 64% of our assets were recorded in foreign currencies as of December 31,
1998 and June 30, 1999. 48% and 43% of our liabilities were recorded in foreign
currencies as of December 31, 1998 and June 30, 1999. Therefore, we are exposed
to foreign currency exchange risks. We have not historically tried to reduce our
exposure to exchange rate fluctuations by using hedging transactions. However,
we may choose to do so in the future. We may not be able to do this
successfully. Accordingly, we may experience economic loss and a negative impact
on earnings and equity as a result of foreign currency exchange rate
fluctuations.

CONVERSION TO THE EURO

On January 1, 1999, 11 European countries began using the euro as their
single currency, while still continuing to use their own notes and coins for
cash transactions. Banknotes and coins denominated in euros are expected to be
in circulation by 2002, at which time local notes and coins will cease to be
legal tender. Lionbridge conducts a significant amount of business in these
countries. The

31
<PAGE>
introduction of the euro has not resulted in any material adverse impact upon
our operations, although we continue to monitor the effects of the conversion.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair values. Changes in
the fair values of derivatives are recorded each period in current earnings or
other comprehensive income (loss), depending on whether or not a derivative is
designated as part of a hedge transaction and, if it is, depending on the type
of hedge transaction. SFAS No. 133, as amended by SFAS No. 137, will be
effective for Lionbridge's fiscal quarter beginning January 1, 2001, and we do
not expect its adoption will have a material impact on our financial position or
results of operations.

In April 1998, AcSEC issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities." Start-up activities are defined broadly as those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a new
class of customer, commencing some new operation or organizing a new entity.
Under SOP 98-5, the cost of start-up activities should be expensed as incurred.
SOP 98-5 is effective for our fiscal 1999 financial statements, and we do not
expect its adoption will have a material effect on our financial position or
results of operations.

32
<PAGE>
BUSINESS

OVERVIEW

Lionbridge is a provider of globalization services to industry-leading
software publishers, computer hardware manufacturers, and telecommunications
companies. Globalization is the process of adapting products or services to meet
the demands of local cultures. Since 1996, we have focused primarily on
globalization services, including localization, internationalization, and
testing, that enable simultaneous worldwide release and ongoing maintenance of
products and related technical support, training materials, and sales and
marketing information in multiple languages. As product releases, technical
support and training have evolved toward a Web-based business model, we have in
turn begun to offer multilingual Internet services. While the Internet has been
an integral part of our operations and our relationships with our customers for
several years, in the last year we have developed new multilingual Internet
service offerings that are focused on this rapidly changing business
opportunity.

INDUSTRY BACKGROUND

Companies around the world are increasingly operating on a global scale. To
operate efficiently, companies must standardize their hardware, software, and
telecommunications infrastructures throughout their global organization. As a
result, technology companies that provide hardware, software, and
telecommunications products must also operate on a global scale to address their
customers' needs. This is one of the reasons that in 1997 approximately 54% of
worldwide software sales were generated outside of the United States, according
to International Data Corporation.

Historically, technology companies first developed products for their home
markets and then created foreign language versions that were compatible with
local operating systems and standards. The complexity of developing these
localized versions often resulted in product releases being delayed from six
months to a year after delivery of the home-country version. In the interim, end
users of technology products often faced version and compatibility conflicts
throughout their global organizations. As a result, global end users of
technology now demand:

- simultaneous product release of the home-country and localized versions,

- independent third party testing and certification to provide assurance of
compatibility with local operating systems and international standards,
and

- customer support, testing, and training in local languages wherever the
end user operates around the world.

To meet these demands, the market for globalization services has evolved
beyond translation to encompass:

- LOCALIZATION. The re-engineering and translation of user interfaces,
online help, documentation, technical support databases, training
materials, and sales and marketing information.

- INTERNATIONALIZATION. The re-engineering of source code so that products
and applications are compatible with country-specific operating systems
and software.

- MULTILINGUAL PRODUCT TESTING. The testing of products to verify that they
have been properly localized and/or internationalized.

With the increasing complexity of many technology products today, product
globalization requires the integration of a broad range of disciplines and
specialized technical resources with a global communications and project
management infrastructure.

The Internet is transforming business worldwide by removing the barriers of
time and geography. As the world becomes more technology-enabled, companies are
using the Internet to conduct operations, manage constituents, distribute
products, and communicate both internally and externally

33
<PAGE>
on a worldwide basis. Internet content is predominantly in English, but a
growing percentage of Internet users do not speak English as their first
language. Computer Economics, an independent research firm, predicts that by
2002 a majority of Internet users will be non-English speaking. Although the
Internet offers significant opportunities, companies cannot take full advantage
of these opportunities unless they accommodate users' local languages, cultures,
and technical environments.

Technology companies now use the Internet to:

- RELEASE PRODUCTS. Software products are increasingly distributed over the
Internet or redesigned as Web-based applications. Today, many software
publishers regularly post product updates and enhancements on their Web
sites.

- PROVIDE TECHNICAL SUPPORT. Demonstrated cost benefits and improved
customer satisfaction are driving businesses to provide Web-based
technical support for their end users. As a result, companies are
supplementing technical support call centers with Web-based self-help
offerings such as frequently asked questions and technical support
databases. Gartner Group has estimated that the cost of providing
Internet-based support ranges between $0.25 and $3.50 per request compared
to $5.01 per call using traditional telephone-based customer support.
International Data Corporation estimates that this market was
approximately $1.8 billion in 1998 and expects it to grow to approximately
$13.9 billion in 2003.

- DELIVER PRODUCT TRAINING. Self-directed Web-based courseware, product
training, and accreditation is beginning to replace classroom-based,
instructor-led training. International Data Corporation estimates that the
market for Internet-based information technology learning will grow from
$440 million in 1998 to $4.1 billion in 2002.

- MARKET AND SELL PRODUCTS. Lionbridge believes that e-commerce, while
predominately U.S.-based today, will become a global phenomenon. Today,
companies routinely localize their sales and marketing information for
posting to their Web site. Lionbridge believes this trend will expand to
include Internet storefronts and e-commerce applications.

The following diagram depicts the effect the Internet is having on the way
companies conduct business.

[GRAPHIC]

Few companies have the combination of engineering, linguistic, testing, and
project management skills needed to successfully globalize their products and
services for simultaneous worldwide release. In addition, because the demand for
globalization services at most companies is variable, it is usually not

34
<PAGE>
cost-effective for them to maintain a full suite of in-house globalization
resources. Lionbridge believes that technology companies recognize that
localization is not a core competency. As a result, they are increasingly
outsourcing their globalization and multilingual Internet activities, which
allows them to accelerate time-to-market, minimize their fixed costs, and
reallocate their resources to core product development activities.

Although many companies provide translation and other discrete
localization-related services, Lionbridge believes few companies offer a
complete globalization and multilingual Internet solution. Lionbridge believes
that technology companies are demanding a one-stop globalization and
multilingual Internet service provider to meet their global product development,
technical support, training, and sales and marketing requirements.

LIONBRIDGE'S SOLUTION

We provide a complete globalization and multilingual Internet offering to
businesses, particularly industry-leading software publishers, computer hardware
manufacturers, and telecommunications companies. Our full suite of services
improve the quality, consistency, and timeliness of our clients' international
product releases, technical support, training materials, and sales and marketing
information. Lionbridge serves as a globalization partner throughout a client's
product development and support lifecycle by offering:

- localization, translation, and internationalization services,

- compliance, compatibility, and localization testing of software and
hardware, and

- project management throughout the globalization process.

We have invested in the development of our proprietary RAPID GLOBALIZATION
METHODOLOGY, a process which is at the heart of each client engagement. Our
RAPID GLOBALIZATION METHODOLOGY standardizes processes, defines key activities,
and specifies goals for each project. This approach to a project benefits our
clients by enabling Lionbridge to provide consistent quality and timely delivery
of localized versions of products and related materials across multiple
geographies and languages. Our RAPID GLOBALIZATION METHODOLOGY emphasizes the
integration of process and technology into the globalization process to achieve
operational efficiencies and predictable, measurable results. This methodology
also facilitates the identification, capture, and sharing of valuable knowledge
and best practices throughout our organization, enabling us to continuously
improve the quality and efficiency of our services. The RAPID GLOBALIZATION
METHODOLOGY is generally supported by our proprietary internal LIONTRACK
workflow systems, LIONTRACK WORKGROUP and LIONTRACK ENTERPRISE.

- LIONTRACK WORKGROUP enables our clients to submit files and translation
instructions to us via the Internet for automated routing throughout the
localization process. Our clients can use LIONTRACK WORKGROUP to monitor
the real-time progress of individual components of an assignment, which
allows them to plan their product release schedule more effectively.

- LIONTRACK ENTERPRISE has been designed for the demanding localization
requirements of large, complex Web sites that are subject to continuous
updating, and LIONTRACK ENTERPRISE, which became operational in July 1999,
connects directly to our client's Web site, automatically detecting and
extracting required changes through our Web-crawling technology. LIONTRACK
ENTERPRISE routes those changes for translation and localization, and
automatically inserts the localized material into the client's
multilingual Web sites. We expect LIONTRACK ENTERPRISE to enable clients
to maintain continuously updated multilingual Web sites without
disruption, freeing them to focus on content development.

We believe that expanded global competition and worldwide Internet access
will increase the demand for our services. We also believe that by offering a
one-stop solution to globalization and

35
<PAGE>
multilingual Internet service needs, Lionbridge is an attractive strategic
partner to companies operating in a global marketplace.

LIONBRIDGE'S GROWTH STRATEGY

Lionbridge's goal is to become the leading provider of globalization and
multilingual Internet services. The following are the key elements of our
strategy:

LEVERAGE EXISTING CLIENTS. We seek to increase the services we provide to
our existing clients by selling to other product groups within the same
client organization. In addition, we seek to leverage product knowledge
acquired on one project (for example, globalization of a product release) to
sell services to different enterprise functions within the same client (for
example, compliance testing, logo certification, localization of customer
support knowledgebases, and training materials).

CONTINUE STRATEGIC ACQUISITIONS. We intend to continue pursuing strategic
acquisitions that provide greater niche expertise, complementary service
offerings, additional geographic reach, and new clients. In 1998, we
acquired businesses that gave us valuable expertise in Japanese localization
and a facility on the west coast of the United States. In 1999, we acquired
compliance testing and certification capabilities.

EVOLVE OUR METHODOLOGY AND WORKFLOW SYSTEMS. Lionbridge intends to continue
investing in the development of our RAPID GLOBALIZATION METHODOLOGY and
LIONTRACK workflow systems. We have a dedicated process and technology group
that works closely with our operations groups to refine and enhance our core
methodology and systems based on best practices and client feedback. This
focus enables Lionbridge to continuously improve the quality,
predictability, and efficiency of our services across geographies and
languages.

PURSUE MULTI-YEAR RELATIONSHIPS WITH CLIENTS. We intend to pursue multi-year
relationships with clients who seek an outsourcing partner. This could
involve the acquisition of selected companies' internal localization
operations and entering into multi-year agreements with the sellers of these
operations.

EXPAND INTO ADDITIONAL VERTICAL MARKETS. We initially focused on providing
globalization and multilingual Internet services to software publishers and
computer hardware manufacturers. Our client base has since expanded to
include telecommunications companies. We intend to continue expanding into
additional industries that are global and information-intensive, such as the
automotive and medical device industries.

LIONBRIDGE SERVICES

We provide a full suite of globalization and multilingual Internet services
to businesses--primarily technology businesses--to improve the quality,
consistency, and timeliness of their international product releases, technical
support, training materials, and sales and marketing information. Our
globalization services consist of the following:

- SOFTWARE LOCALIZATION. Lionbridge creates foreign language versions of
software products and applications, including the user interface, online
help systems, and documentation. We provide our clients with
re-engineered, fully tested, and culturally adapted multilingual versions
of their products and applications.

- INTERNATIONALIZATION. Lionbridge provides source code analysis and
engineering services that enable software to be compatible with
country-specific operating systems and localized software. Through a
complex and highly specialized process, we re-engineer code to support the
"double-byte" character set requirements of the Japanese, Chinese, and
Korean languages.

36
<PAGE>
- TRANSLATION. Lionbridge uses a combination of internal and external
translators, as well as translation software, for its projects. We have
approximately 35 translators who are employees and we also have
established relationships with a global network of over 2,000 in-country
translators, including independent agencies and freelance professionals. A
majority of our translation costs are attributable to outsourcing these
services to in-country translators. We develop and apply glossaries to
ensure consistent terminology across projects for a specific company or
industry. We also use translation memory software to identify previously
translated material for re-use. Our project editors review translated
material to ensure that it meets our standards for quality and accuracy.
Historically, a majority of our revenue from translation services has
involved translating information from English to various foreign
languages.

- LOCALIZATION AND INTERNATIONALIZATION TESTING. We provide both
localization testing, and software, hardware, and telecommunications
internationalization testing through our global network of VeriTest labs.
Testing provides an opportunity to uncover errors before the product is
placed into production and into the hands of end users. The goal of
localization testing is to ensure that local language versions of the
product perform consistently with the source language version.
Internationalization testing is necessary to ensure that localized
products function properly in the local hardware and software environment,
including local operating systems, peripheral devices, and networking and
communications standards.

- LOGO CERTIFICATION. Lionbridge, under its VeriTest brand, provides logo
certification programs for many of the leading software companies,
including Autodesk, BMC Software, Microsoft, and Oracle. These sponsoring
companies retain Lionbridge to develop and administer test criteria that
independent software vendors must satisfy before they may display the
sponsor's logo (such as Microsoft's CERTIFIED FOR WINDOWS 2000-TM-) on
their products. The logo is an indication of software quality and
compatibility for end users. Other Lionbridge logo programs include BUILT
WITH OBJECT ARX-TM- (Autodesk), BMC CERTIFIED FOR PATROL-TM-, DESIGNED FOR
MICROSOFT WINDOWS NT AND WINDOWS 98-TM-, and ORACLE E-CERTIFIED
WAREHOUSE-TM-.

- MULTILINGUAL TECHNICAL PUBLISHING. We localize user manuals, marketing and
training materials, and other product support information using a variety
of desktop publishing and graphics software. Using workflow technology,
multiple language versions are simultaneously delivered to our clients in
formats ready for printing or Internet delivery.

Our revenues from primary products and services, excluding non-multilingual
compatibility testing and logo certification, were 100%, 100%, and approximately
93% of consolidated revenues for the years ended December 31, 1997 and 1998 and
for the six-month period ended June 30, 1999, respectively.

As our clients increasingly use the Internet to deliver products, technical
support, training materials, and sales and marketing information, we are
adapting our service offerings to support our clients' Web-based initiatives. We
are organizing our multilingual Internet services in four key areas:

ERELEASE

Lionbridge localizes software products and Web applications into multiple
languages. With the emergence of the Internet, our clients are redesigning their
software products as Web components and applications, then releasing them and
providing continuous updates over the Internet. Lionbridge provides the
methodology and workflow systems to support continuous release of multilingual
products and updates via the Web.

37
<PAGE>
ESUPPORT

We offer localization and maintenance of technical support Web sites,
including frequently asked questions, product specifications, white papers, and
technical support databases. As our clients continuously update this Web-based
information, we automatically update the multilingual versions as well. We have
also begun to assist our clients in providing local language responses to
technical support questions through e-mail.

ELEARNING

Our multilingual eLearning services enable our clients to provide updated
training materials on the Web in multiple languages and culturally appropriate
formats as they move from instructor-led classroom training to Internet distance
learning.

ECOMMERCE

We localize Web-based sales and marketing materials for our clients who sell
their products via the Internet. Our services support continuous updates and
revisions to these materials.

As corporate Web sites become an integrated global resource, Lionbridge
believes that our multilingual Internet services will assist multinational
corporations in maintaining the quality and consistency of their Web-based
products and content in multiple languages.

SALES AND MARKETING
Substantially all of Lionbridge's revenue has been generated through its
dedicated direct sales force. We currently have 20 direct sales professionals
based in the United States, Europe, and Asia who sell the full range of
Lionbridge globalization and multilingual Internet services. Our sales approach
is highly consultative and often involves planning for an organization's ongoing
requirements, including future versions of products, and ongoing support,
maintenance, and training, related to both traditional and Web deployment. There
are often several different functional areas within the same organization that
require one or more of our services. Many of our clients do not coordinate these
purchases but buy these services at the department head level. As a result, our
sales professionals may call on several functional departments and at various
management levels within the same client organization. Our sales cycle varies
significantly, but typically takes six to twelve months.

Lionbridge's marketing efforts are designed to create brand recognition and
demand for Lionbridge services throughout the world. Lionbridge's seven-person
corporate marketing team is supplemented by marketing representatives in each
country in order to provide a consistent global message. Marketing programs
include targeted industry and solution-specific advertising campaigns, trade
show participation, speaking engagements, and promotion of customer success
stories. We plan to continue expanding our sales and marketing activities.

38
<PAGE>
CLIENTS

Lionbridge customers are generally large multi-national organizations in the
software, hardware and telecommunications industries. The following companies
are representative Lionbridge clients in 1998:

<TABLE>
<S> <C> <C>
3Com Corel Novell
Adobe Data General Oce
Aurum Gateway Oracle
Autodesk IBM Page Factory
Avid J.D. Edwards Parametric Technology
Baan Kodak Portal
Bentley Systems Macromedia PowerQuest
Bull Microsoft Silicon Graphics
Candle Motorola SPSS
Cognos Network Associates Sun Microsystems
</TABLE>

In 1998, Lionbridge's largest client, IBM, accounted for approximately 14%
of total revenue. In 1997 and 1998, our five largest clients accounted for
approximately 52% and 39%, respectively, of revenue.

COMPETITION

Lionbridge provides a broad range of globalization and multilingual Internet
service offerings to its clients. The market for our services is highly
fragmented, and we have many competitors. Our current competitors include the
following:

- localization or translation services providers such as Berlitz
International, Bowne & Co., Lernout and Hauspie, Sykes Enterprises and
regional vendors of translation services specializing in specific
languages in particular geographic areas,

- companies providing outsourcing of technical support call centers
including Stream International and Sykes Enterprises, and

- independent testing labs providing testing and logo certification services
such as National Software Testing Laboratories (a division of CMP Media),
and Keylabs.

Although we have competed favorably with these companies to date, we cannot
assure you that we will be able to do so in the future. Many of these companies
have longer operating histories; significantly greater financial, marketing and
other resources; and greater name recognition than Lionbridge. If we fail to be
competitive with these companies in the future, our business will be materially
and adversely affected.

Lionbridge also faces competition from internal localization departments in
large multi-national companies. Although many companies are finding that
simultaneous global release and ongoing maintenance of Web-based applications
require new skill sets that are not available in-house, many companies may still
perform these services in-house rather than outsourcing them. If these companies
continue to localize their own products, Lionbridge's business, financial
condition and results of operations may be adversely affected.

We may also face competition from companies that provide outsourcing of
technical support call centers. As businesses shift from telephonic support
centers to Web-based support, companies such as Stream International, Sykes
Enterprises and others that currently provide traditional outsourcing services
may decide to provide comparable services over the Internet. If these or other
companies

39
<PAGE>
choose to expand their service offerings, we cannot assure you that Lionbridge
will be able to compete with them successfully.

Lionbridge believes the principal competitive factors in providing its
services include project management expertise, quality, speed of service
delivery, vertical industry knowledge, the ability to provide clients end-to-end
localization solutions, expertise in certain geographic areas, corporate
reputation, and expertise in Internet-related services.

We believe we compete favorably with respect to these factors. We have
developed significant expertise in project management which has allowed us to
provide high-quality and quick service in our clients' particular industries and
geographic regions. We have been able to successfully provide our customers with
a one-stop globalization service and have recently begun to offer our
Internet-related services. As a result, we have been able to develop a strong
reputation in our industry.

There are relatively few barriers preventing companies from competing with
us. We do not own any patented technology that precludes or inhibits others from
entering our market. As a result, new market entrants pose a threat to our
business. In addition to our existing competitors, we may face further
competition in the future from companies that do not presently offer
globalization services. Companies currently providing information technology
services may choose to broaden their range of services to include globalization.
While we presently use translation memory software licensed from third parties
in our localization process, and to a lesser extent machine translation software
also licensed from third parties, these technologies may improve and become
sophisticated enough to compete with our localization service offering. We
cannot assure you that we will be able to compete effectively with these
potential future competitors.

INTELLECTUAL PROPERTY RIGHTS

Our success is dependent, in part, upon our proprietary RAPID GLOBALIZATION
METHODOLOGY, our LIONTRACK workflow systems, and other intellectual property
rights. We do not have any patents or patent applications pending. Lionbridge
relies on a combination of trade secret, nondisclosure and other contractual
agreements, and copyright and trademark laws to protect its proprietary rights.
Existing trade secret and copyright laws afford us only limited protection. We
enter into confidentiality agreements with our employees, require that our
consultants and generally our clients enter into these agreements, and limit
access to and distribution of Lionbridge's proprietary information. We cannot
assure you that these arrangements will be adequate to deter misappropriation of
our proprietary information or that we will be able to detect unauthorized use
and take appropriate steps to enforce our intellectual property rights.

EMPLOYEES

As of June 30, 1999, we had 447 employees. Of these, 348 were consulting and
service delivery professionals and 99 were management and administrative
personnel performing marketing, sales, operations, process and technology,
finance, accounting, and administrative functions.

We have been successful in hiring individuals with leading-edge technical
skills and project management experience. In addition, Lionbridge is committed
to employee training and retention. Lionbridge has a dedicated process and
technology team that initiates and oversees the training and development of
Lionbridge professionals. Key organizational development initiatives include
ongoing technical and project management classes as well as career path
management and guidance. We plan to continue to invest in attracting the best
employees.

Lionbridge's employees in Paris, France are represented by a labor union,
and we have a works council in The Netherlands. We have never experienced a work
stoppage. We believe our employee relations are good.

40
<PAGE>
FACILITIES

We maintain offices in the United States, Ireland, France, The Netherlands,
China, Japan, and South Korea. We maintain sales offices in Charlotte, North
Carolina and the metropolitan areas of Seattle, Houston, Los Angeles, and San
Francisco in the United States; Dublin, Ireland; Paris, France; Beijing, China;
Tokyo, Japan; and Osaka, Japan.

Lionbridge's headquarters and principal administrative, finance, legal, and
marketing operations are located in leased office space in Waltham,
Massachusetts. Lionbridge's lease is for a term of 3 years and expires on August
1, 2002. Lionbridge maintains a facility in metropolitan Dublin, Ireland and
leases three floors under three separate leases expiring between September 14,
2025 and March 1, 2026. We also lease office space in Santa Monica, California;
Monterey, California; Ballina, Ireland; Velizy, France; Sophia Antipolis,
France; Amsterdam, The Netherlands; Seoul, South Korea; Beijing, China; Tokyo,
Japan; and Osaka, Japan. Lionbridge expects that it will need additional space
as it expands its business and believes that it will be able to obtain
additional space as needed on commercially reasonable terms.

LEGAL PROCEEDINGS

Lionbridge is not a party to any material legal proceedings.

41
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table presents information about each of Lionbridge's
executive officers and directors.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- -------------------------------------------------------
<S> <C> <C>
Rory J. Cowan................. 46 Chairman of the Board, Chief Executive Officer and
President
Stephen J. Lifshatz........... 40 Chief Financial Officer, Treasurer and Secretary
Myriam Martin-Kail............ 46 Vice President, Operations
Peter H. Wright............... 38 Vice President, Sales
Guy L. de Chazal.............. 51 Director
Marcia J. Hooper.............. 45 Director
Stephen M. Jenks.............. 40 Director
Paul Kavanagh................. 57 Director
Claude P. Sheer............... 49 Director
</TABLE>

RORY J. COWAN founded Lionbridge in September 1996. Mr. Cowan served as
Chairman and Chief Executive Officer of Stream International, Inc., a software
and services provider, from May 1995 to June 1996. Mr. Cowan was also the Chief
Executive Officer of Interleaf, Inc. from October 1996 to January 1997. He was
an Executive Vice President of R.R. Donnelley & Sons, a provider of commercial
print and print-related services, from January 1991 to June 1996. Mr. Cowan also
serves as a director of NewsEDGE Corporation and Interleaf, Inc., where he is
Chairman of the Board.

STEPHEN J. LIFSHATZ joined Lionbridge in January 1997. Mr. Lifshatz served
as the Chief Financial Officer of The Dodge Group from May 1996 to January 1997.
He served in a number of senior financial roles, including Chief Financial
Officer of Marcam Corporation, a publicly traded software company, from May 1984
to May 1996.

MYRIAM MARTIN-KAIL joined Lionbridge in December 1996. Ms. Martin-Kail
served as European Director for Localization of Stream International, Inc. from
April 1995 to December 1996 and Operations Manager, Dublin from September 1994
to September 1995. She was Internationalization Manager for Digital Equipment
Corporation in Europe from January 1992 to November 1994.

PETER H. WRIGHT joined Lionbridge in January 1997. Mr. Wright was previously
the Sales Director at Berlitz International, Inc. for their localization
business from August 1991 to November 1996.

GUY L. DE CHAZAL has been a director of Lionbridge since February 1998. Mr.
de Chazal has been with Morgan Stanley since 1984, most recently as a managing
director of Morgan Stanley and the President and a general partner of Morgan
Stanley Dean Witter Venture Partners. Mr. de Chazal is a director of PageMart
Wireless, Inc. and several private companies.

MARCIA J. HOOPER has been a director of Lionbridge since December 1996.
Since May 1996, Ms. Hooper has been a partner with the Information Technology
Group of Advent International Corporation, a venture capital company. From July
1994 to April 1996, she served as a partner of Viking Capital Group, a venture
capital company focused on early stage investments. Ms. Hooper was a partner of
Paine Webber/Ampersand Ventures, a venture capital company, from September 1985
to June 1994. Ms. Hooper is also a director of Wang Laboratories, Inc.,
Interleaf, Inc., Worldgate Communications, Inc. and PolyMedica Corporation.

STEPHEN M. JENKS has been a director of Lionbridge since March 1999. Mr.
Jenks has been a member of Capital Resource Management, LLC since 1993. He is
also a director of several privately held companies.

42
<PAGE>
PAUL KAVANAGH has been a director of Lionbridge since December 1996. Mr.
Kavanagh has served as an industry consultant since January 1998. Mr. Kavanagh
served as President Europe, Middle East and Africa of Stream International, Inc.
from August 1995 to January 1998. From April 1992 to August 1995, Mr. Kavanagh
was Managing Director Europe, Middle East and Africa of R.R. Donnelley & Sons.

CLAUDE P. SHEER has been a director of Lionbridge since March 1999. Mr.
Sheer has served as Senior Advisor to Ziff Davis since April 1999. Mr. Sheer
served as Chief Internet Strategist of Ziff Davis from November 1998 to April
1999. From 1980 to November 1998, Mr. Sheer served in a number of executive
roles for Ziff Davis, including President, ZD Publishing; President US
Publications; and President, Business Media Group.

The Board of Directors is currently fixed at six members. Lionbridge's
second amended and restated certificate of incorporation, as in effect
immediately following this offering, divides the Board of Directors into three
classes. The members of each class of directors serve for staggered three-year
terms. The Board of Directors is composed of (i) two Class I directors (Messrs.
Jenks and Sheer), whose terms expire upon the election and qualification of
directors at the annual meeting of stockholders to be held in 2000, (ii) two
Class II directors (Mr. de Chazal and Ms. Hooper), whose terms expire upon the
election and qualification of directors at the annual meeting of stockholders to
be held in 2001, and (iii) two Class III directors (Messrs. Cowan and Kavanagh),
whose terms expire upon the election and qualification of directors at the
annual meeting of stockholders to be held in 2002.

Our executive officers are elected by and serve at the discretion of the
Board of Directors. There are no family relationships among any of our executive
officers and directors.

COMMITTEES OF THE BOARD OF DIRECTORS

We have a standing compensation committee and audit committee of the Board
of Directors. The members of the compensation committee consist of Messrs. de
Chazal, Kavanagh and Sheer. The compensation committee's duties are to review
and evaluate the salaries and incentive compensation of our management and
employees and administer our 1998 Stock Plan and, upon adoption at the closing
of this offering, our 1999 Employee Stock Purchase Plan.

The members of the audit committee consist of Messrs. Jenks and Kavanagh and
Ms. Hooper. The audit committee is responsible for the selection of and
determination of fees paid to Lionbridge's independent public accountants,
reviewing the scope and results of audits and other services provided by our
independent public accountants and reviewing Lionbridge's system of internal
accounting and financial controls. The audit committee also reviews other
matters with respect to our accounting, auditing, and financial reporting
practices and procedures as it may find appropriate or may be brought to its
attention.

DIRECTOR COMPENSATION

Lionbridge does not currently compensate its directors. Each director is
reimbursed for reasonable travel and other out-of-pocket expenses incurred in
attending meetings of the Board of Directors or of any committee of the Board.
Non-employee directors are eligible to receive options to purchase shares of our
common stock.

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<PAGE>
EXECUTIVE COMPENSATION

The following summary compensation table sets forth the total compensation
paid or accrued for the year ended December 31, 1998 for our Chief Executive
Officer and all other executive officers whose salary and bonus for services
rendered in any capacities to Lionbridge for the fiscal year ended December 31,
1998 exceeded $100,000. We will use the term "named executive officers" to refer
to these people later in this prospectus.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- -------------
OTHER SECURITIES
ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS/SARS
- ----------------------------------------------------------- ---------- ---------- ----------------- -------------
<S> <C> <C> <C> <C>
Rory J. Cowan.............................................. $ 249,144 $ 112,500 -- --
Chairman of the Board, President and Chief Executive
Officer
Stephen J. Lifshatz........................................ $ 182,750 $ 41,250 -- 36,667
Chief Financial Officer, Treasurer and Secretary
Myriam Martin-Kail......................................... $ 128,256 $ 31,205 -- 20,000
Vice President, Operations
Peter H. Wright............................................ $ 151,614 $ 30,000 -- 33,334
Vice President, Sales
</TABLE>

OPTION GRANTS IN LAST FISCAL YEAR

The following table summarizes the options granted to each of Lionbridge's
named executive officers during the fiscal year ended December 31, 1998.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
------------------------------------------------------ STOCK
NUMBER OF PERCENT OF PRICE APPRECIATION
SECURITIES TOTAL OPTIONS FOR
UNDERLYING GRANTED TO OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION --------------------
NAME GRANTED FISCAL YEAR PRICE(1) DATE 5% 10%
- ------------------------------------------- ----------- --------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Rory J. Cowan.............................. -- -- -- -- -- --
Stephen J. Lifshatz........................ 36,667 9.0% $ 0.30 2/08/08 $ 6,918 $ 17,531
Myriam Martin-Kail......................... 20,000 4.9% $ 0.30 2/08/08 $ 3,773 $ 9,562
Peter H. Wright............................ 33,334 8.2% $ 0.30 4/01/08 $ 6,289 $ 15,937
</TABLE>

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

(1) The exercise price equals the fair market value of the common stock as of
the grant date as determined by our board of directors.

(2) The potential realizable value is calculated based on the term of the option
at the time of grant (10 years). Assumed stock price appreciation of 5% and
10% is based on the fair value at time of the grant.

44
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table sets forth information with respect to exercisable and
unexercisable stock options held as of December 31, 1998 by each of the named
executive officers and with respect to stock options exercised by the named
executive officers during the fiscal year ended December 31, 1998.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 31, 1998 AT DECEMBER 31, 1998(2)
ACQUIRED VALUE -------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- ----------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Rory J. Cowan........................... 187,689 $ 53,492 187,689 750,763 $ 1,845,921 $ 7,383,754
Stephen J. Lifshatz..................... 97,155 $ 34,004 -- 198,595 -- $ 1,950,661
Myriam Martin-Kail...................... -- -- 121,455 222,430 $ 1,196,332 $ 2,187,936
Peter H. Wright......................... -- -- 44,769 119,065 $ 440,975 $ 1,172,790
</TABLE>

(1) The value realized by Messrs. Cowan and Lifshatz upon the exercise of these
options represents the aggregate amount of the difference between the fair
market value for a share of our common stock on the date of exercise and the
exercise price per share, multiplied by the number of shares underlying such
options.

(2) There was no public trading market for our common stock as of December 31,
1998. Accordingly, as permitted by the rules of the Securities and Exchange
Commission, the value of unexercised in-the-money options has been
calculated by determining the difference between the exercise price per
share payable upon exercise of such options and an assumed initial public
offering price of $10.00.

STOCK PLANS

1998 STOCK PLAN. The 1998 Stock Plan has a total of 5,522,032 shares of
common stock reserved for issuance. The 1998 Stock Plan provides for the grant
of stock-based awards to our employees, officers, directors, and consultants.
Under the 1998 Stock Plan, we may grant options that are intended to qualify as
incentive stock options within the meaning of Section 422 of the Code, options
not intended to qualify as incentive stock options, stock-based awards and
opportunities to make direct purchases of stock. Incentive stock options may be
granted only to employees of Lionbridge. In general, options granted pursuant to
the 1998 Stock Plan are exercisable within ten years of the original grant date
and become exercisable over a period of four years as follows: 25% on the first
anniversary of the date of grant and semi-annually thereafter, in six equal
installments over the remaining three-year period. As of June 30, 1999, an
aggregate of 2,621,945 shares of common stock at an average exercise price of
$1.69 per share were outstanding under the 1998 Stock Plan. The maximum number
of shares with respect to which options, awards or purchase rights may be
granted to any employee under the 1998 Stock Plan shall not exceed 2,333,334
shares of common stock during any fiscal year of Lionbridge.

The 1998 Stock Plan is administered by the compensation committee. Subject
to the provisions of the 1998 Stock Plan, the compensation committee has the
authority to select the persons to whom options, awards or purchase rights are
granted and determine the terms of each option, award or purchase right,
including the number of shares of common stock subject to the option or award.
The compensation committee may also provide that any option shall become
immediately exercisable, in full or in part. Payment of the exercise price of an
option or award or purchase rights may be made in cash or check or, if approved
by the compensation committee, shares of common stock, a promissory note, an
assignment of common stock proceeds or any combination of the foregoing.
Incentive stock options are not assignable or transferable except by wills or
the laws of decent or distribution. Non-qualified

45
<PAGE>
stock options and other awards or purchase rights are assignable or transferable
to the extent set forth in the agreement relating to the non-qualified stock
option or award or purchase rights.

1999 EMPLOYEE STOCK PURCHASE PLAN. The 1999 Employee Stock Purchase Plan
(the "1999 Purchase Plan") was adopted by the Board of Directors and our
stockholders on June 15, 1999, to be effective upon the closing of this
offering. The 1999 Purchase Plan provides for the issuance of a maximum of
1,000,000 shares of common stock.

The 1999 Purchase Plan will be administered by the compensation committee of
the Board of Directors. All employees of Lionbridge whose customary employment
is for more than 20 hours per week and for more than three months in any
calendar year are eligible to participate in the 1999 Purchase Plan. Employees
who would own 5% or more of the total combined voting power or value of our
stock immediately after the grant of the option may not participate in the 1999
Purchase Plan. To participate in the 1999 Purchase Plan, an employee must
authorize us to deduct an amount (not less than one percent nor more than 10
percent of a participant's total cash compensation) from his or her pay during
six-month payment periods (each, a "Payment Period"). The first Payment Period
will commence on the earlier to occur of (1) November 1, 1999 and (2) the first
day of the first calendar month following the effective date of the Registration
Statement on Form S-8 filed with respect to the shares issued under the 1999
Purchase Plan and shall end April 30, 2000. Thereafter, the Payment Periods will
commence on the six-month periods commencing on May 1 and November 1,
respectively, and ending on the following October 31 and April 30, respectively,
of each year, but in no case shall an employee be entitled to purchase more than
500 shares in any one Payment Period. The exercise price for the option granted
in each Payment Period is 85% of the lesser of the average market price of the
common stock on the first or last business day of the Payment Period, in either
event rounded up to the nearest cent. If an employee is not a participant on the
last day of the Payment Period, such employee is not entitled to exercise his or
her option, and the amount of his or her accumulated payroll deductions will be
refunded. Options granted under the 1999 Purchase Plan may not be transferred or
assigned. An employee's rights under the 1999 Purchase Plan terminate upon his
or her voluntary withdrawal from the plan at any time or upon termination of
employment. No options have been granted to date under the 1999 Purchase Plan.

401(K) PLAN

We maintain a 401(k) plan qualified under Section 401(a) of the Code. Most
of our U.S.-based employees who are at least 21 years of age are eligible to
participate in the 401(k) plan. Under the 401(k) plan, a participant may
contribute a maximum of 15% of his or her pre-tax salary, commissions and
bonuses through payroll deductions (up to the statutorily prescribed annual
limit of $10,000 in calendar year 1999) to the 401(k) plan. The percentage
elected by more highly compensated participants may be required to be lower. In
addition, at the discretion of the Board of Directors, we may make matching
contributions to the 401(k) plan for all eligible employees. During the plan
year ended December 31, 1998, we made no matching contributions to the 401(k)
plan.

PENSION PLANS

We maintain a defined contribution pension plan for our employees in
Ireland. Our permanent employees in Ireland are eligible to participate in the
plan after one year of employment with us. Under the Ireland pension plan, we
contribute 5% of a participant's gross salary (excluding any overtime or bonus
payments) to the plan and a participant is entitled to contribute between 5% and
15% of his or her total earnings (gross salary plus bonus, overtime, and other
earnings) to the plan.

We also maintain a defined benefit pension plan for our employees in France
as required by and in accordance with French law. All of our employees in France
are entitled to participate in the plan.

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<PAGE>
We and our employees in France contribute to the plan in varying amounts based
upon French statutory requirements.

We maintain a defined benefit pension plan for our employees in The
Netherlands. All of our employees in The Netherlands with a fixed contract are
entitled to participate in the plan. The cost of funding the plan is split
equally between us and the participants. For married employees, 8% of their
salaries are contributed to the plan on an annual basis. and, for single
employees, 5% of their salaries are contributed to the plan on an annual basis.

EMPLOYMENT AND NON-COMPETITION AGREEMENTS

Rory J. Cowan entered into an employment agreement with Lionbridge on
December 23, 1996. Mr. Cowan's employment agreement provides for a two-year term
with automatic one-year renewals. Under the terms of his employment agreement,
Mr. Cowan receives a base salary of $225,000, subject to increase from time to
time by the Board of Directors in its sole discretion, and an annual
discretionary bonus in an amount up to Mr. Cowan's then current base salary.
Pursuant to his employment agreement, we also issued Mr. Cowan options to
purchase up to 1,501,529 shares of our common stock at an exercise price of
$0.15 per share. Mr. Cowan's options vest over a four-year period and 50% of any
unvested options held by Mr. Cowan will vest and become immediately exercisable
upon a merger or sale of all or substantially all of the assets of Lionbridge or
upon the disposition by Advent International and Morgan Stanley Dean Witter
Venture Partners of more than 50% of the aggregate amount of our capital stock
owned by them. If Lionbridge terminates Mr. Cowan's employment other than for
cause, he is entitled to receive twelve monthly severance payments, each in an
amount equal to his then current monthly base compensation (i.e., 1/12(th) of
Mr. Cowan's base salary). If Mr. Cowan is terminated for cause, he will not be
entitled to any severance payments or other benefits except as required by law.

Mr. Cowan entered into a non-competition agreement with Lionbridge on
December 23, 1996. The agreement provides that Mr. Cowan will not, during the
course of his employment and the twelve months following the date of the
termination of his employment with Lionbridge (1) engage or otherwise have a
financial interest in any business activity which is in competition with any of
the products or services being provided by Lionbridge, (2) solicit our employees
or (3) solicit or do business with any present or past customer of ours, or any
prospective customer of ours in connection with any business activity which
would be in violation of the non-competition agreement.

Stephen J. Lifshatz entered into an employment agreement with Lionbridge on
February 11, 1997. Mr. Lifshatz's employment agreement provides for a one-year
term with automatic one-year renewals. Under the terms of his employment
agreement, Mr. Lifshatz receives a base salary of $165,000, subject to increase
from time to time by the Board of Directors in its sole discretion, and an
annual discretionary bonus in an amount up to 50% of his then current base
salary. In connection with his employment agreement, we also issued Mr. Lifshatz
options to purchase up to 259,082 shares of our common stock at an exercise
price of $0.15 per share. Mr. Lifshatz's options vest over a four-year period.
If, during the six-month period following a change in control of Lionbridge, Mr.
Lifshatz ceases to be the Chief Financial Officer of the parent of the surviving
entity or suffers a substantial diminution of his responsibilities, 50% of any
unvested options then held by Mr. Lifshatz shall vest and become immediately
exercisable. If Lionbridge terminates Mr. Lifshatz's employment other than for
cause, he is entitled to receive six monthly severance payments, each in an
amount equal to his then current monthly base compensation (i.e., 1/12(th) of
Mr. Lifshatz's base salary). If Mr. Lifshatz is terminated for cause, he will
not be entitled to any severance payments or other benefits except as required
by law.

Mr. Lifshatz entered into a non-competition agreement with Lionbridge on
February 11, 1997. The agreement provides that Mr. Lifshatz will not, during the
course of his employment and the twelve

47
<PAGE>
months following the date of the termination of his employment with Lionbridge
(1) engage or otherwise have a financial interest in any business activity which
is in competition with any of the products or services being provided by
Lionbridge, (2) solicit our employees or (3) solicit or do business with any
present or past customer of ours, or any prospective customer of ours in
connection with any business activity which would be in violation of the
non-competition agreement.

Myriam Martin-Kail entered into an employment agreement with Lionbridge on
February 24, 1997, effective as of January 1, 1997. Under the terms of her
employment agreement, Ms. Martin-Kail receives a base salary of 650,000 French
Francs, subject to increase from time to time by the Board of Directors in its
sole discretion, and an annual discretionary bonus in an amount up to 50% of her
then current base salary. Ms. Martin-Kail is also entitled to a car allowance of
up to 63,000 French Francs per year. In connection with her employment
agreement, we also issued Ms. Martin-Kail options to purchase up to 323,885
shares of our common stock at an exercise price of $0.15 per share. Ms.
Martin-Kail's options vest over a four-year period. If Lionbridge terminates Ms.
Martin-Kail's employment, she is entitled to receive twelve monthly severance
payments, each in an amount equal to her then current monthly base compensation
(i.e., 1/12(th) of Ms. Martin-Kail's base salary).

Ms. Martin-Kail entered into a non-competition agreement with Lionbridge on
February 24, 1997. The agreement provides that Ms. Martin-Kail will not, during
the course of her employment and the twelve months following the date of the
termination of her employment with Lionbridge (1) engage or otherwise have a
financial interest in any business activity which is in competition with any of
the products or services being provided by Lionbridge, (2) solicit our employees
or (3) solicit or do business with any present or past customer of ours or any
prospective customer of ours which would be in violation of the non-competition
agreement.

Peter H. Wright entered into an employment agreement with Lionbridge on
February 28, 1997. Mr. Wright's employment agreement provides for a one-year
term with automatic one-year renewals. Under the terms of his employment
agreement, Mr. Wright receives a base salary of $125,000, subject to increase
from time to time by the Board of Directors in its sole discretion, and an
annual discretionary bonus in an amount up to 50% of his then current base
salary. In connection with his employment agreement, we issued Mr. Wright
options to purchase up to 97,166 shares of our common stock at an exercise price
of $0.15 per share. Mr. Wright's options vest over a four-year period. If
Lionbridge terminates Mr. Wright's employment other than for cause, he is
entitled to receive six monthly severance payments, each in an amount equal to
his then current monthly base compensation (i.e., 1/12(th) of Mr. Wright's base
salary). If Mr. Wright is terminated for cause, he will not be entitled to any
severance payments or other benefits except as required by law.

Mr. Wright entered into a non-competition agreement with Lionbridge on
February 28, 1997. The agreement provides that Mr. Wright will not, during the
course of his employment and the six months following the date of the
termination of his employment with Lionbridge (1) engage or otherwise have a
financial interest in any business activity which is in competition with any of
the products or services being provided by Lionbridge, (2) solicit our employees
or (3) solicit or do business with any present or past customer of ours, or any
prospective customer of ours which would be in violation of the non-competition
agreement.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to June 1999, we did not have a separate compensation committee or
other board committee performing equivalent functions. These functions were
performed by our board of directors. In June 1999, we established a compensation
committee and appointed Messrs. de Chazal, Kavanagh and Sheer to serve on the
compensation committee.

The compensation committee evaluates the salaries and incentive compensation
of management and employees of Lionbridge and administers our equity incentive
plans. No member of this committee

48
<PAGE>
was at any time during the past year an officer or employee of Lionbridge, was
formerly an officer of Lionbridge or any of its subsidiaries, or had any
relationship with Lionbridge. During the last year, none of our executive
officers served as:

- a member of the compensation committee (or other committee of the Board of
Directors performing equivalent functions or, in the absence of any such
committee, the entire Board of Directors) of another entity, one of whose
executive officers served on the compensation committee of Lionbridge;

- a director of another entity, one of whose executive officers served on
the compensation committee of Lionbridge; or

49
<PAGE>
CERTAIN TRANSACTIONS

ORGANIZATION OF LIONBRIDGE

In September 1996, Lionbridge America, Inc., our predecessor holding company
and current wholly owned subsidiary formerly known as Lionbridge Technologies,
Inc., issued 2,000 shares of its common stock to Rory J. Cowan, our President
and Chief Executive Officer at a purchase price of $0.15 per share, for an
aggregate of $30.

In December 1996, Lionbridge America acquired the localization businesses of
Stream International in Ireland, The Netherlands and France for $11,300,000 in
cash and the assumption of $100,000 of liabilities through its acquisition of
all of the capital stock of the following five foreign subsidiaries of Stream:
R.R. Donnelley Language Solutions International B.V., INK Nederland B.V., R.R.
Donnelley Language Solutions Belgium N.V., R.R. Donnelley Language Solutions
France SARL, and Stream International Language Solutions. Rory J. Cowan was an
executive officer of Stream International until June 1996 and our director Paul
A. Kavanagh was an executive officer of Stream International and R.R. Donnelley
& Sons until January 1998. As a result of this transaction, R.R. Donnelley
Language Solutions International B.V. became a subsidiary of Lionbridge America
and is now known as Lionbridge Technologies Holdings, B.V. and each of INK
Nederland B.V. (now known as Lionbridge Technologies B.V.), R.R. Donnelley
Language Solutions France SARL (now known as Lionbridge Technologies (France)),
and Stream International Language Solutions (now known as Lionbridge
Technologies Ireland) became subsidiaries of Lionbridge Technologies Holdings,
B.V. R.R. Donnelley Language Solutions Belgium N.V. was an inactive subsidiary
and was subsequently dissolved by Lionbridge. All subsidiaries of Lionbridge
are, directly or indirectly, wholly owned by Lionbridge.

In July 1997, Lionbridge America, through its Lionbridge Technologies
Holdings, B.V. subsidiary, acquired assets from the localization businesses of
Stream International in Japan, China, South Korea and Taiwan for $100,000 in
cash and the assumption of $317,000 of liabilities.

In June 1998, Lionbridge and Stream International entered into an agreement
to settle indemnity claims of Lionbridge against Stream under the December 1996
purchase agreement. Under the terms of the settlement agreement, Lionbridge's
purchase price for the European businesses acquired from Stream International
was reduced by $531,000.

The purchase price for and terms of these acquisitions and the terms of the
settlement agreement described above were the result of arms'-length
negotiations.

SALES OF STOCK OF LIONBRIDGE AMERICA

In December 1996, Lionbridge America issued 701,454 shares of its Series A
convertible preferred stock at a purchase price of $1.00 per share, for an
aggregate of $701,454, and an option to purchase up to 1,501,529 shares of its
common stock at an exercise price of $0.15 per share to Mr. Cowan.

In December 1996, Lionbridge America issued an aggregate of 1,000 shares of
its Series AA preferred stock to five limited partnerships sponsored by Advent
International Corporation, at a purchase price of $0.01 per share, for an
aggregate purchase price of $10.00. In December 1996, Lionbridge Technologies
Holdings, B.V., a subsidiary of Lionbridge, issued an aggregate of 248 of its
ordinary shares to the Advent-sponsored limited partnerships at a purchase price
of $24,193.55 per share, for an aggregate of $6,000,000. Marcia J. Hooper, a
partner of Advent International, has served as a member of the Board of
Directors of Lionbridge since December 1996.

In December 1996, Lionbridge America issued an aggregate of 6,000,000 shares
of its Series A convertible preferred stock to Morgan Stanley Venture Capital
Fund II Annex, L.P. and Morgan Stanley Venture Investors Annex, L.P. at purchase
price of $1.00 per share, for an aggregate of $6,000,000. Guy L. de Chazal, the
managing general partner of Morgan Stanley Venture Partners II, L.P., the
general partner of each of the Morgan Stanley-sponsored limited partnerships,
has served as a member of the Board of Directors of Lionbridge since February
1998.

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<PAGE>
In December 1996, Lionbridge America issued 971,654 shares of its Series A
convertible preferred stock to Stream International at a purchase price of $1.00
per share, for an aggregate of $971,654. The shares issued to Stream
International were subject to a stock option agreement providing a call option
to the Advent-sponsored limited partnerships, the Morgan Stanley-sponsored
limited partnerships and Lionbridge America to purchase the shares from Stream
and a put option to Stream to sell the shares to the Advent-sponsored limited
partnerships, the Morgan Stanley-sponsored limited partnerships and Lionbridge
America at Stream's original purchase price. In September 1997, Stream
International exercised its put option and sold the shares to Lionbridge America
at a purchase price of $1.00 per share, for an aggregate of $971,654.

In July 1997, Lionbridge America issued 100,000 shares of its Series A
convertible preferred stock to Paul Kavanagh at a purchase price of $1.00 per
share, for an aggregate of $100,000. Mr. Kavanagh has served as a member of the
Board of Directors of Lionbridge since December 1996.

SALES OF STOCK, NOTES AND WARRANTS OF LIONBRIDGE

In February 1998, Lionbridge America became a subsidiary of Lionbridge. We
accomplished this by issuing an aggregate of 1,359,993 shares of our common
stock, 13,271,314 shares of our Series A convertible preferred stock and 140
shares of our Series D nonvoting convertible preferred stock to Mr. Cowan, the
Advent-sponsored limited partnerships, the Morgan Stanley-sponsored limited
partnerships, and the other stockholders of Lionbridge America in exchange for
all of the outstanding shares of capital stock of Lionbridge America held by
these stockholders and the outstanding ordinary shares of Lionbridge
Technologies Holdings, B.V. held by the Advent-sponsored limited partnerships.
Lionbridge America also redeemed all of the outstanding shares of its Series AA
preferred stock held by the Advent-sponsored limited partnerships at the
original purchase price of $0.01 per share, for an aggregate of $10.00.

In January 1999, Lionbridge borrowed $4,000,000 from Capital Resource
Lenders, III, L.P. under a 12% senior subordinated convertible note due January
8, 2000. In connection with our issuance of the note to Capital Resource
Lenders, many of our subsidiaries executed guarantees in favor of Capital
Resource Lenders. In February 1999, we borrowed an additional $2,000,000 from
Capital Resource Lenders under an amended and restated 12% senior subordinated
note due February 26, 2006 in the aggregate principal amount of $6,000,000 and
issued to Capital Resource Lenders and an affiliated entity of Capital Resource
Lenders common stock purchase warrants exercisable for an aggregate of 1,277,716
shares of our common stock at an exercise price of $0.015 per share.

In February 1999, our indirect wholly owned subsidiary, Lionbridge
Technologies Holdings, B.V. borrowed $4,000,000 from Capital Resource Lenders
under a 12% senior subordinated note due February 26, 2006. In connection with
Lionbridge Technologies Holdings, B.V.'s issuance of the note to Capital
Resource Lenders, many of our subsidiaries executed guarantees in favor of
Capital Resource Lenders. Stephen M. Jenks, a member of Capital Research
Partners III, L.L.C. which is the general partner of Capital Resource Lenders,
has served as a member of our Board of Directors since March 1999.

In March 1999, Lionbridge and Lionbridge Technologies Holdings, B.V.
borrowed an aggregate of $2,000,000 from the Morgan Stanley-sponsored limited
partnerships under 12% senior subordinated notes due March 9, 2006 and issued to
the Morgan Stanley-sponsored limited partnerships common stock purchase warrants
exercisable for an aggregate of 255,544 shares of our common stock at an
exercise price of $0.015 per share. In connection with our issuance of the notes
to the Morgan Stanley-sponsored limited partnerships, many of our subsidiaries
executed guarantees in favor of the Morgan Stanley-sponsored limited
partnerships.

On August 19, 1999, Capital Resource Lenders and the Morgan
Stanley-sponsored limited partnerships agreed to defer, until the earlier of
August 25, 2001 and the completion of an underwritten public offering (other
than this offering) with aggregate gross proceeds of at least $10.0 million, our
repayment of $5,000,000 and $1,000,000, respectively, of the principal amount of
the subordinated notes due in 2006. These notes had previously required all of
the principal amount to be

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<PAGE>

repaid upon the closing of this offering. Capital Resource Lenders and the
limited partnerships affiliated with Morgan Stanley agreed to defer repayment of
$6 million of the subordinated notes in order to enable Lionbridge to meet its
anticipated liquidity needs over the next 18 months with reasonable liquidity
reserves to meet unanticipated contingencies.

TRANSACTIONS OCCURRING AT THE CLOSING OF THIS OFFERING

Upon closing of this offering:

- 50% of the principal amount of the notes issued to Capital Resource
Lenders and the Morgan Stanley-sponsored limited partnerships will be paid
in full. As of June 30, 1999, the amount to be repaid under the notes is
$5,000,000 and $1,000,000, respectively,

- the 13,271,314 outstanding shares of our Series A convertible preferred
stock and 140 outstanding shares of our Series D nonvoting convertible
preferred stock held by our preferred stockholders including Mr. Cowan,
Mr. Kavanagh, the Advent-sponsored limited partnerships and the Morgan
Stanley-sponsored limited partnerships will automatically be exchanged for
an aggregate of 132.7145 shares of our Series B redeemable preferred stock
and 8,847,649 shares of our Series C convertible preferred stock,

- the 132.7145 outstanding shares of our Series B redeemable preferred stock
will be redeemed for $100,000 per share plus an 8% annual premium. As of
June 30, 1999, the redemption amount to be paid to Mr. Cowan, the
Advent-sponsored limited partnerships, the Morgan Stanley-sponsored
limited partnerships, and Mr. Kavanagh is approximately $843,000,
$7,209,000, $7,209,000, and $120,000, respectively, and

- the 8,847,649 outstanding shares of our Series C convertible preferred
stock held by our preferred stockholders including Mr. Cowan, Mr.
Kavanagh, the Advent-sponsored limited partnerships and the Morgan
Stanley-sponsored limited partnerships will automatically convert into
8,847,649 shares of our common stock.

In addition, the Advent-sponsored limited partnerships have indicated their
interest in purchasing up to approximately $3,640,000 of Lionbridge shares at
the public offering price and the Morgan Stanley-sponsored limited partnerships
have indicated their interest in purchasing up to approximately $3,640,000 of
Lionbridge shares at the public offering price.

TRANSACTIONS OCCURRING AFTER THE CLOSING OF THIS OFFERING

Capital Resource Lenders and the Morgan Stanley-sponsored limited
partnerships have indicated to us that they intend to exercise their warrants to
acquire an aggregate of 1,533,260 shares promptly after the closing of this
offering, subject to compliance with applicable law.

STOCKHOLDERS' AGREEMENT

Lionbridge, Mr. Cowan, Mr. Kavanagh, the Advent-sponsored limited
partnerships, the Morgan Stanley-sponsored limited partnerships, Capital
Resource Lenders and each of the other preferred stockholders of Lionbridge are
parties to a Second Restated Stockholders' Agreement dated as of February 26,
1999. The stockholders agreement contains arrangements with respect to voting,
rights of first refusal, rights of first offer, as well as other agreements
relating to corporate governance. This agreement will terminate upon the closing
of this offering.

REGISTRATION RIGHTS AGREEMENT

We have entered into a Second Restated Registration Rights Agreement dated
as of February 26, 1999 with Mr. Cowan, Mr. Kavanagh, the Advent-sponsored
limited partnerships, the Morgan Stanley-sponsored limited partnerships, Capital
Resource Lenders, CRP Investment Partners and each of our other preferred
stockholders. This registration rights agreement provides these holders with
rights with respect to the registration by Lionbridge of their shares under the
Securities Act.

Lionbridge believes that all transactions described above were made on terms
no less favorable to us than would have been obtained from unaffiliated third
parties. All future transactions, if any, with our executive officers, directors
and affiliates will be on terms no less favorable to us than could be obtained
from unrelated third parties and will be approved by a majority of the Board of
Directors and by a majority of the disinterested members of the Board of
Directors.

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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of our common stock as of June 30, 1999, and as adjusted to reflect
the sale of the shares of common stock offered hereby, by:

- each of Lionbridge's directors and named executive officers,

- all directors and executive officers of Lionbridge as a group,

- each person who is known by us to own beneficially more than five percent
of the outstanding shares of our common stock, and

- each person who is a selling stockholder if the underwriters exercise
their over-allotment options.

Except as noted below, the address of each person listed on the table is c/o
Lionbridge Technologies, Inc., 950 Winter Street, Waltham, Massachusetts 02451,
and each person has sole voting and investment power over the shares shown as
beneficially owned, except to the extent authority is shared by spouses under
applicable law unless otherwise noted below.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. For purposes of calculating the percentage
of shares beneficially owned, the number of shares of our common stock
outstanding as of June 30, 1999 is 11,219,450 shares. Shares of common stock
issuable by Lionbridge to a person or entity named below pursuant to options or
warrants which may be exercised within 60 days after June 30, 1999 are deemed to
be beneficially owned and outstanding for purposes of calculating the number of
shares and the percentage beneficially owned by that person or entity. However,
these shares are not deemed to be beneficially owned and outstanding for
purposes of computing the percentage beneficially owned by any other person or
entity. The number of shares of common stock deemed outstanding after this
offering includes an additional 3,500,000 shares that are being offered for sale
by us in this offering.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING (1)
---------------------- ----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------------ --------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Rory J. Cowan (2)..................................... 2,390,706 21.0% 2,390,706 16.0%

Marcia J. Hooper (3)(15).............................. 4,000,004 35.7 4,000,004 27.2
c/o Advent International Corporation
75 State Street
Boston, MA 02109

Guy L. de Chazal (4)(15).............................. 4,255,546 37.1 4,255,546 28.4
c/o Morgan Stanley Dean Witter Venture Capital
1221 Avenue of the Americas, 33(rd) Floor
New York, New York 10020

Paul Kavanagh (5)..................................... 69,166 * 69,166 *
"Arcachon"
Strathmore Road
Killiney, Co. Dublin, Ireland

Stephen M. Jenks (6).................................. 1,277,716 10.2 1,277,716 8.0
c/o Capital Resource Lenders III, L.P.
85 Merrimac Street, Suite 200
Boston, MA 02114
</TABLE>

53
<PAGE>

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING (1)
---------------------- ----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------------ --------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Claude P. Sheer....................................... 0 * 0 *
240 Main Street
Boxford, MA 01921

Myriam Martin-Kail (7)................................ 209,925 1.8 209,925 1.4

Stephen J. Lifshatz (8)............................... 175,674 1.6 175,674 1.2

Peter H. Wright (9)................................... 85,726 * 85,726 *

Morgan Stanley-sponsored limited partnerships 4,255,546 37.1 4,255,546 28.4
(10)(15)............................................
1221 Avenue of the Americas, 33(rd) Floor
New York, New York 10020

Advent-sponsored limited partnerships (11)(15)........ 4,000,004 35.7 4,000,004 27.2
75 State Street
Boston, MA 02109

Capital Resource Lenders III, L.P. (12)............... 1,277,716 10.2 1,277,716 8.0
85 Merrimac Street, Suite 200
Boston, MA 02114

All executive officers and directors as a group (9
persons)............................................ 12,499,986 94.6 12,499,986 74.8

Kenneth L. Coleman Irrevocable Trust (13)............. 66,666 * 66,666 *

Martha Lynne Paschetag (14)........................... 9,582 * 9,582 *
</TABLE>

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

* Less than 1% of the outstanding shares.

(1) If the underwriters exercise their over-allotment option in full, then the
following stockholders named in the table above will sell the following
number of shares: Rory J. Cowan, 266,667 shares (200,001 shares from Mr.
Cowan personally, 33,333 shares from the Cowan Manchester Trust of which
Mr. Cowan is the settlor and is primarily for the benefit of Mr. Cowan's
children and 33,333 shares from the Cowan Stream Trust of which Mr. Cowan
is the settlor and is primarily for the benefit of Mr. Cowan's siblings and
their lineal descendants); Stephen J. Lifshatz, 50,000 shares; Peter H.
Wright, 50,000 shares; Kenneth L. Coleman Irrevocable Trust, 20,000 shares;
and Martha Lynne Paschetag, 6,667 shares.

(2) Includes an aggregate of 266,667 shares held by affiliated trusts of Mr.
Cowan. Includes 187,692 shares deemed to be beneficially owned by Mr. Cowan
pursuant to options exercisable within 60 days of June 30, 1999.

(3) Includes 328,001 shares held by Advent Euro-Italian Direct Investment
Program Limited Partnership; 88,001 shares held by Advent Partners Limited
Partnership; 2,396,000 shares held by Global Private Equity II Limited
Partnership; 504,001 shares held by Global Private Equity II-- Europe
Limited Partnership; and 684,001 shares held by Global Private Equity
II--PGGM Limited Partnership. Ms. Hooper is a partner of Advent
International Corporation, which is the general partner of Advent
International Limited Partnership, the general partner of each of the
Advent-sponsored entities. Ms. Hooper may be deemed to beneficially own the
shares held by the Advent-sponsored entities. Ms. Hooper disclaims
beneficial ownership of all such shares, except to the extent of her
pecuniary interest therein.

(4) Includes 3,743,642 shares, including 224,802 shares deemed to be
beneficially owned pursuant to warrants exercisable within 60 days of June
30, 1999, held by Morgan Stanley Venture Capital Fund II Annex, L.P. and
511,904 shares, including 30,742 shares deemed to be beneficially owned
pursuant to warrants exercisable within 60 days of June 30, 1999, held by
Morgan Stanley Venture Investors Annex, L.P. Mr. de Chazal is a general
partner of Morgan Stanley Venture Partners II, L.P., which is the managing
general partner of each of the Morgan Stanley-sponsored limited

54
<PAGE>
partnerships. Mr. de Chazal may be deemed to beneficially own the shares
held by the Morgan Stanley-sponsored limited partnerships. Mr. de Chazal
disclaims beneficial ownership of all such shares, except to the extent of
his pecuniary interest therein.

(5) Includes 2,499 shares deemed to be beneficially owned by Mr. Kavanagh
pursuant to options exercisable within 60 days of June 30, 1999.

(6) Represents an aggregate of 1,277,716 shares held by Capital Resource
Lenders III, L.P. and CRP Investment Partners III, L.L.C. deemed to be
beneficially owned pursuant to warrants exercisable within 60 days of June
30, 1999. Mr. Jenks is a member of Capital Resource Partners III, L.L.C.,
which is the general partner of Capital Resource Lenders III, L.P., and a
manager of CRP Investment Partners III, L.L.C. Mr. Jenks may be deemed to
beneficially own the shares held by Capital Resource Lenders and CRP
Investment Partners. Mr. Jenks disclaims ownership of all such shares,
except to the extent of his pecuniary interest therein.

(7) Represents 209,925 shares deemed to be beneficially owned by Ms.
Martin-Kail pursuant to options exercisable within 60 days of June 30,
1999.

(8) Includes 36,966 shares deemed to be beneficially owned by Mr. Lifshatz
pursuant to options exercisable within 60 days of June 30, 1999.

(9) Includes an aggregate of 6,668 shares held in trusts for the benefit of Mr.
Wright's children and 24,642 shares deemed to be beneficially owned by Mr.
Wright pursuant to options exercisable within 60 days of June 30, 1999.

(10) Includes 3,743,642 shares, including 224,802 shares deemed to be
beneficially owned pursuant to warrants exercisable within 60 days of June
30, 1999, held by Morgan Stanley Venture Capital Fund II Annex, L.P. and
511,904 shares, including 30,742 shares deemed to be beneficially owned
pursuant to warrants exercisable within 60 days of June 30, 1999, held by
Morgan Stanley Venture Investors Annex, L.P. The managing general partner
of each of the Morgan Stanley-sponsored limited partnerships is Morgan
Stanley Venture Partners II, L.P. Morgan Stanley Venture Capital II, Inc.
is the managing general partner of Morgan Stanley Venture Partners II, L.P.
and exercises sole voting and investment power with respect to all shares
held of record by the Morgan Stanley-sponsored limited partnerships;
individually, no stockholder, director or officer of Morgan Stanley Venture
Capital II, Inc. is deemed to have or share such voting or investment
power.

(11) Includes 328,001 shares held by Advent Euro-Italian Direct Investment
Program Limited Partnership; 88,001 shares held by Advent Partners Limited
Partnership; 2,396,000 shares held by Global Private Equity II Limited
Partnership; 504,001 shares held by Global Private Equity II-- Europe
Limited Partnership; and 684,001 shares held by Global Private Equity
II--PGGM Limited Partnership. The general partner of each of the
Advent-sponsored limited partnerships is Advent International Limited
Partnership. Advent International Corporation is the general partner of
Advent International Limited Partnership and exercises sole voting and
investment power with respect to all shares held of record by the
Advent-sponsored limited partnerships; individually, no stockholder,
director or officer of Advent International Corporation is deemed to have
or share such voting or investment power.

(12) Represents an aggregate of 1,277,716 shares held by the Capital Resource
Lenders III, L.P. and CRP Investment Partners III, L.L.C. deemed to be
beneficially owned pursuant to warrants exercisable within 60 days of June
30, 1999.

(13) Includes 16,257 shares held by Kenneth L. Coleman, our Vice President,
Marketing, and 415 shares deemed to be beneficially owned by Mr. Coleman
pursuant to options exercisable within 60 days of June 30, 1999. Mr.
Coleman is the settlor of the Kenneth L. Coleman Irrevocable Trust which is
for the benefit of the spouse and children of Mr. Coleman.

(14) Includes 2,080 shares deemed to be beneficially owned by Ms. Paschetag, our
Director of Financial Planning and Analysis, pursuant to options
exercisable within 60 days of June 30, 1999.

(15) Does not include any shares that the limited partnerships sponsored by
Advent International and Morgan Stanley may purchase in the offering.

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<PAGE>
DESCRIPTION OF CAPITAL STOCK

Effective upon the closing of this offering and the filing of our Second
Amended and Restated Certificate of Incorporation, the authorized capital stock
of Lionbridge will consist of 100,000,000 shares of common stock, par value
$0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01 per
share.

The following summary description of Lionbridge's capital stock, as of the
closing of this offering, is not intended to be complete and is qualified by
reference to Lionbridge's Second Amended and Restated Certificate of
Incorporation and Amended and Restated By-laws filed as exhibits to the
registration statement of which this prospectus is a part.

COMMON STOCK

As of June 30, 1999, there were 11,219,450 shares of common stock
outstanding and held of record by 37 stockholders, after giving effect to (1)
the exchange of all of the 13,271,314 outstanding shares of Series A convertible
preferred stock and 140 outstanding shares of Series D nonvoting convertible
preferred stock for an aggregate of 132.7145 shares of Series B redeemable
preferred stock and 8,847,649 shares of Series C convertible preferred stock,
(2) the redemption of all of the 132.7145 outstanding shares of Series B
redeemable preferred stock for $100,000 per share plus an 8% annual premium, and
(3) the conversion of all of the 8,847,649 outstanding shares of our Series C
convertible preferred stock into 8,847,649 shares of common stock upon the
closing of this offering. Based upon the number of shares outstanding as of June
30, 1999, assuming these exchanges and conversions and giving effect to the
issuance of the shares of common stock offered by Lionbridge hereby, there will
be 14,719,450 shares of common stock outstanding upon the closing of this
offering. In addition, as of June 30, 1999, there were outstanding stock options
and warrants for the purchase of a total of 4,238,539 shares of common stock.
Capital Resource Lenders and the Morgan Stanley-sponsored limited partnerships
have indicated to us they intend to exercise their warrants to acquire an
aggregate of 1,533,260 shares promptly after the closing of this offering,
subject to compliance with applicable law.

Holders of common stock are entitled to one vote per share for each share
held of record on all matters submitted to a vote of stockholders and do not
have cumulative voting rights. Directors are elected by a plurality of the votes
of the shares present in person or by proxy at the meeting. The holders of
common stock are entitled to receive ratably such lawful dividends as may be
declared by the Board of Directors. However, such dividends are subject to
preferences that may be applicable to the holders of any outstanding shares of
preferred stock. In the event of a liquidation, dissolution or winding up of the
affairs of Lionbridge, whether voluntarily or involuntarily, the holders of
common stock will be entitled to receive pro rata all of the remaining assets of
Lionbridge available for distribution to its stockholders. Any such pro rata
distribution would be subject to the rights of the holders of any outstanding
shares of preferred stock. The common stock has no preemptive, redemption,
conversion or subscription rights. All outstanding shares of common stock are
fully paid and non-assessable. The shares of common stock to be issued by
Lionbridge in this offering, when issued in consideration of payment, will be
fully paid and non-assessable. The rights, powers, preferences and privileges of
holders of common stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock which
Lionbridge may designate and issue in the future.

PREFERRED STOCK

The Board of Directors is authorized, subject to any limitations prescribed
by Delaware law, without further stockholder approval, to issue from time to
time up to an aggregate of 5,000,000 shares of preferred stock, in one or more
series. The Board of Directors is also authorized, subject to the

56
<PAGE>
limitations prescribed by Delaware law, to establish the number of shares to be
included in each series and to fix the designations, preferences, rights and any
qualifications, limitation or restrictions of the shares of any series,
including the dividend rights, dividend rates, conversion rights, voting rights,
redemption terms and prices, liquidation preferences and the number of shares
constituting any series. The Board of Directors is authorized to issue preferred
stock with voting, conversion and other rights and preferences that could
adversely affect the voting power or other rights of the holders of common
stock.

Upon the closing of this offering, there will be no shares of preferred
stock outstanding. Lionbridge has no current plans to issue any preferred stock.
However, the issuance of preferred stock or of rights to purchase preferred
stock could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, a majority
of the outstanding common stock of Lionbridge.

REGISTRATION RIGHTS

The Second Restated Registration Rights Agreement dated as of February 26,
1999, provides holders (the "Registration Rights Holders") of 12,215,870 shares
of our common stock (the "Registrable Shares") rights with respect to the
registration of the Registrable Shares under the Securities Act. If we propose
to register any of our securities under the Securities Act, either for our own
account or for the account of another securityholder, the Registration Rights
Holders are entitled to notice of this registration and to include the
Registrable Shares in this registration. However, in the event of a registration
pursuant to an underwritten public offering of common stock, the underwriters
will have the right to limit the number of shares included in the registration.
The Registration Rights Holders currently have piggyback registration rights in
connection with this offering. These holders have agreed to waive their
piggyback registration rights with respect to this offering. In addition, a
majority of the Registration Rights Holders have entered into a 180-day lock-up
agreement with the underwriters. After expiration of this lock-up period, these
Registration Rights Holders will have the ability to exercise the registration
rights set forth above.

In addition, six months after this offering, the holders of at least 40% of
the then outstanding Registrable Shares issued are entitled to request that we
file a registration statement under the Securities Act covering the sale of some
or all of the shares held by the requesting holder or holders. Upon the receipt
of a request, Lionbridge is generally required to use its best efforts to effect
a registration. Lionbridge is not required to effect more than two demand
registrations for the Registration Rights Holders, and each demand registration
must cover the sale shares of common stock representing at least 20% of the
Registrable Shares or any lesser percentage, so long as anticipated offering
price for these shares exceeds $5,000,000.

Once Lionbridge has qualified to use Form S-3 to register securities under
the Securities Act, the Registration Rights Holders have the right to request
that we file a registration statement on Form S-3 or any successor form for a
public offering of all or any portion of their Registrable Shares, provided that
the reasonably anticipated aggregate price to the public of such offering would
be at least $1,000,000. Upon the receipt of such a request, Lionbridge is
generally required to use its best efforts to effect such registration.

In general, all fees, costs and expenses of such registrations (other than
underwriting discounts and selling commissions), including the fees and
disbursements of one counsel to the Registration Rights Holders, will be borne
by us. Lionbridge has agreed to indemnify the Registration Rights Holders
against, and provide contribution with respect to, liabilities relating to any
registration in which any Registrable Shares of Registration Rights Holders are
sold under the Securities Act.

The previously described registration rights shall terminate for a
Registration Rights Holder upon the earlier to occur of (1) the fifth
anniversary of the closing of this offering, (2) such time as the

57
<PAGE>
particular holder remains an "affiliate" of Lionbridge pursuant to Rule 144
under the Securities Act and could sell all of such holder's shares under Rule
144 within any three month period, or (3) such time as the particular holder
ceases to be an "affiliate" of Lionbridge pursuant to Rule 144 and could sell
all of such holder's shares under the terms of Rule 144(k) under the Securities
Act.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF LIONBRIDGE'S SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION AND AMENDED AND RESTATED BY-LAWS AND DELAWARE LAW

Lionbridge's Second Amended and Restated Certificate of Incorporation (the
"Charter"), Lionbridge's Amended and Restated By-Laws (the "By-Laws") and
Delaware General Corporation Law contain provisions that could discourage, delay
or prevent a change in control of Lionbridge or an acquisition of Lionbridge at
a price which many stockholders may find attractive. The existence of these
provisions could limit the price that investors might be willing to pay in the
future for shares of common stock.

CHARTER AND BY-LAWS

The Charter provides for the division of the Board of Directors into three
classes as nearly as equal in size as possible with staggered three-year terms.
In addition, the Charter provides that directors may be removed without cause by
the affirmative vote of the holders of 75% of the shares of capital stock of
Lionbridge entitled to vote or with cause by the affirmative vote of the holders
of a majority of the shares. The By-Laws provide that, except as otherwise
provided by law or the Charter, newly created directorships resulting from an
increase in the authorized number of directors or vacancies on the Board may be
filled only by:

- a majority of the directors then in office, even though less than a quorum
may then be in office, or

- the sole remaining director.

These provisions prevent a stockholder from enlarging the Board and filling the
new directorships with this stockholder's own nominees without Board approval.

These provisions of the By-Laws may have the effect of discouraging a third
party from initiating a proxy contest, making a tender offer or otherwise
attempting to gain control of Lionbridge, or attempting to change the
composition or policies of the Board, even though these attempts might be
beneficial to Lionbridge or its stockholders.

The Charter and By-Laws provide that, unless otherwise prescribed by law,
only the Chairman of the Board, a majority of the Board of Directors, or the
President is able to call a special meeting of stockholders. The Charter and the
By-Laws also provide that, unless otherwise prescribed by law, stockholder
action may be taken only at a duly called and convened annual or special meeting
of stockholders and may not be taken by written consent. These provisions, taken
together, prevent stockholders from forcing consideration by the stockholders of
stockholder proposals over the opposition of the Board, except at an annual
meeting.

The By-Laws provide that any action required or permitted to be taken by the
stockholders of Lionbridge at an annual meeting or special meeting of
stockholders may only be taken if Lionbridge is given proper advance notice of
the action (the "Notice Procedure"). The Notice Procedure affords the Board an
opportunity to consider the qualifications of proposed director nominees or the
merit of stockholder proposals, and, to the extent deemed appropriate by the
Board, to inform stockholders about such matters. The Notice Procedure also
provides a more orderly procedure for conducting annual meetings of
stockholders. The By-Laws do not give the Board any power to approve or
disapprove stockholder nominations for the election of directors or proposals
for action. However, the Notice Procedure may prevent a contest for the election
of directors or the consideration of

58
<PAGE>
stockholder proposals. This could deter a third party from conducting a
solicitation of proxies to elect its own slate of directors or to approve its
own proposal if the proper advance notice procedures are not followed, without
regard to whether consideration of such nominees or proposals might be harmful
or beneficial to Lionbridge and its stockholders.

Lionbridge, without stockholder approval, can issue shares of common stock
and preferred stock up to the number of shares authorized for issuance in its
Charter, except as limited by Nasdaq rules. Lionbridge could use these
additional shares for a variety of corporate purposes. These purposes include
future public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. Lionbridge's ability to issue these shares of common
stock and preferred stock could make it more difficult or discourage an attempt
to obtain control of Lionbridge by means of a proxy contest, tender offer,
merger or otherwise.

The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares issued and outstanding is required
to amend a corporation's certificate of incorporation or by-laws, unless a
corporation's certificate of incorporation or by-laws, as the case may be,
requires a greater percentage. The Charter requires the affirmative vote of the
holders of at least 75% of the issued and outstanding shares of our capital
stock to amend many Charter provisions, including provisions relating to any
reduction in the number of authorized shares of our capital stock, our staggered
board, and director and officer indemnification. The By-Laws require the
affirmative vote of the holders of at least 75% of the issued and outstanding
shares of capital stock of Lionbridge entitled to vote to amend or repeal any of
the foregoing provisions of the By-Laws. The 75% stockholder vote would be in
addition to any separate class vote that might be required pursuant to the terms
of any series of preferred stock that might be outstanding at the time any
amendments are submitted to stockholders.

DELAWARE LAW

Lionbridge is subject to Section 203 of the Delaware General Corporation Law
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the time that such stockholder became an
interested stockholder.

Section 203 does not apply if:

- prior to such time, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;

- upon consummation of the transaction which 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 by persons who are
directors and also officers and by employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or

- at or subsequent to such time, 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 two-thirds of the outstanding voting stock which is not owned by the
interested stockholder.

The application of Section 203 may limit the ability of stockholders to approve
a transaction that they may deem to be in their best interests.

59
<PAGE>
Section 203 defines "business combination" to include:

- any merger or consolidation involving the corporation and the interested
stockholder;

- any sale, lease, transfer, pledge or other disposition of 10% or more of
the assets of the corporation to or with the interested stockholder;

- subject to limited exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation to
the interested stockholder;

- any transaction involving the corporation which 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

- 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 or is an affiliate or associate of the corporation and was the owner
of 15% or more of the outstanding voting stock of the corporation at any time
within the past three years, and any entity or person associated with,
affiliated with or controlling or controlled by such entity or person.

LIMITATION OF LIABILITY

The Charter provides that no director of Lionbridge shall be personally
liable to Lionbridge or to its stockholders for monetary damages for breach of
fiduciary duty as a director, except that the limitation shall not eliminate or
limit liability to the extent that the elimination or limitation of such
liability is not permitted by the Delaware General Corporation Law as the same
exists or may hereafter be amended.

The Charter further provides for the indemnification of Lionbridge's
directors and officers to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law, including circumstances in which
indemnification is otherwise discretionary. A principal effect of these
provisions is to limit or eliminate in most situations the potential liability
of Lionbridge's directors for monetary damages arising from breaches of their
duty of care. These provisions may also shield directors from liability under
federal and state securities laws.

Officers, directors or other persons controlling Lionbridge may be entitled
under these indemnification provisions to indemnification for liabilities
arising under the Securities Act of 1933. We have been informed that in the
opinion of the Securities and Exchange Commission, this indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.

STOCK TRANSFER AGENT

The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.

60
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common
stock. The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that these sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of common stock.

After this offering, 14,719,450 shares of common stock will be outstanding,
14,851,116 shares if the underwriters exercise their over-allotment option from
us in full. Of these shares, the 3,500,000 shares sold in this offering will be
freely tradeable without restriction under the Securities Act except for the
728,000 shares that the Advent-sponsored limited partnerships and Morgan
Stanley-sponsored limited partnerships have indicated their interest in
purchasing and any other shares that may be purchased by "affiliates" of
Lionbridge as defined in Rule 144 under the Securities Act. The remaining
11,947,450 shares are "restricted securities" within the meaning of Rule 144
under the Securities Act. The restricted securities generally may not be sold
unless they are registered under the Securities Act or are sold pursuant to an
exemption from registration, such as the exemption provided by Rules 144 or 701
under the Securities Act.

We, our officers and directors, and a majority of our stockholders,
including the selling stockholders, have entered into lock-up agreements
pursuant to which we and they have agreed not to offer or sell any shares of
common stock or securities convertible into or exchangeable or exercisable for
shares of common stock for a period of 180 days from the date of this prospectus
without the prior written consent of Prudential Securities, on behalf of the
underwriters. Transfers or dispositions can be made in the case of gifts or
estate planning transfers where the donee signs a lock-up agreement. Prudential
Securities may, at any time and without notice, waive any of the terms of these
lock-up agreements specified in the underwriting agreement. Following the
lock-up period, these shares will not be eligible for sale in the public market
without registration under the Securities Act unless these sales meet the
conditions and restrictions of Rules 144 or 701 as described below.

As restrictions on resale end, the market price could drop significantly if
the holders of these restricted shares sell them, or are perceived by the market
as intending to sell them.

<TABLE>
<CAPTION>
DATE OF AVAILABILITY FOR RESALE
NUMBER OF SHARES INTO PUBLIC MARKET
- ------------------ ----------------------------------------------------------------------------------------------
<S> <C>
11,923,178 180 days after the date of this prospectus due to a lock-up agreement these stockholders have
with Prudential Securities. However, Prudential Securities can waive this restriction at any
time and without notice.

24,272 Between 180 and 365 days after the date of this prospectus due to the requirements of the
federal securities laws.
</TABLE>

In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for a period of at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of

- 1% of the then-outstanding shares of common stock and

- the average weekly trading volume in the common stock during the four
calendar weeks immediately preceding the date on which the notice of such
sale on Form 144 is filed with the Securities and Exchange Commission.

61
<PAGE>
Sales under Rule 144 are also subject to certain provisions relating to
notice and manner of sale and the availability of current public information
about Lionbridge.

In addition, a person (or persons whose shares are aggregated) who has not
been an affiliate of Lionbridge at any time during the 90 days immediately
preceding a sale, and who has beneficially owned the shares for at least two
years, would be entitled to sell such shares under Rule 144(k) without regard to
the volume limitation and other conditions described above. Therefore, unless
otherwise restricted, Rule 144(k) shares may be sold immediately upon the
completion of this offering. The foregoing summary of Rule 144 is not intended
to be a complete description.

Subject to 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 Lionbridge by its employees, directors,
officers, consultants or advisors prior to the date the issuer becomes subject
to the reporting requirements of the Exchange Act. To be eligible for resale
under Rule 701, shares must have been issued pursuant to written compensatory
benefit plans or written contracts relating to the compensation of such persons.
In addition, the SEC 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 the offering). Securities
issued in reliance on Rule 701 are restricted securities and, subject to the
contractual restrictions described above, beginning 90 days after the date of
this prospectus, may be sold by persons other than affiliates, subject only to
the manner of sale provisions of Rule 144, and by affiliates, under Rule 144
without compliance with its one-year minimum holding period requirements. The
foregoing summary of Rule 701 is not intended to be a complete description.

Ninety days following the consummation of this offering, Lionbridge intends
to file a registration statement under the Securities Act to register the shares
of common stock available for issuance pursuant to its stock option plans as of
the date of this prospectus. Shares issued pursuant to these plans after the
effective date of such registration statement will be available for sale in the
open market subject to the lock-up period and, for affiliates of Lionbridge,
subject to conditions and restrictions of Rule 144.

62
<PAGE>
UNDERWRITING

We have entered into an underwriting agreement with the underwriters named
below, for whom Prudential Securities Incorporated, U.S. Bancorp Piper Jaffray
and Adams, Harkness & Hill, Inc. are acting as representatives. We and the
selling stockholders are obligated to sell, and the underwriters are obligated
to purchase, all of the shares offered on the cover page of this prospectus, if
any are purchased. Subject to conditions of the underwriting agreement, each
underwriter has severally agreed to purchase the shares indicated opposite its
name:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ---------------------------------------------------------------------------------------------------- ------------
<S> <C>
Prudential Securities Incorporated..................................................................
U.S. Bancorp Piper Jaffray Inc......................................................................

Adams, Harkness & Hill, Inc. .......................................................................
------------
Total........................................................................................... 3,500,000
------------
------------
</TABLE>

The underwriters may sell more shares than the total number of shares
offered on the cover page of this prospectus and they have, for a period of 30
days from the date of this prospectus, over-allotment option to purchase up to
131,666 additional shares from us and 393,334 additional shares from the selling
stockholders. If any additional shares are purchased, the underwriters will
severally purchase the shares in the same proportion as per the table above. If
the underwriters exercise the over-allotment option in part, the shares to be
purchased by the underwriters will be allocated first pro rata among the selling
stockholders up to the entire 393,334 shares to be sold by the selling
stockholders and then from us.

The representatives of the underwriters have advised us and the selling
stockholders that the shares will be offered to the public at the offering price
indicated on the cover page of this prospectus. The underwriters may allow to
selected dealers a concession not in excess of $ per share and such
dealers may reallow a concession not in excess of $ per share to certain
other dealers. After the shares are released for sale to the public, the
representatives may change the offering price and the concessions. The
representatives have informed us that the underwriters do not intend to sell
shares to any investor who has granted them discretionary authority.

63
<PAGE>
We and the selling stockholders have agreed to pay to the underwriters the
following fees, assuming both no exercise and full exercise of the underwriters'
over-allotment options to purchase additional shares:

<TABLE>
<CAPTION>
TOTAL FEES
-----------------------------------------------
WITHOUT EXERCISE
OF FULL EXERCISE OF
FEE PER OVER-ALLOTMENT OVER-ALLOTMENT
SHARE OPTIONS OPTIONS
--------- ----------------- -----------------
<S> <C> <C> <C>
Fees paid by us on shares not sold to
limited partnerships sponsored by Advent
International and Morgan Stanley Dean
Witter................................... $ $ $
Fees paid by us on shares sold to limited
partnerships sponsored by Advent
International and Morgan Stanley Dean
Witter................................... $ $ $
Fees paid by the selling stockholders...... $ $ $
</TABLE>

In addition, we estimate that we will spend approximately $1,000,000 in
expenses for this offering, including those of the selling stockholders. We and
the selling stockholders have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act, or
contribute to payments that the underwriters may be required to make in respect
of these liabilities.

Prior to this offering, there has been no public market for the common stock
of Lionbridge. The public offering price, negotiated among Lionbridge and the
representatives, is based upon various factors such as Lionbridge's financial
and operating history and condition, our prospects, the prospects for our
industry, and prevailing market conditions.

Prudential Securities, on behalf of the underwriters, may engage in the
following activities in accordance with applicable securities rules:

- over-allotments involving sales in excess of the offering size, creating a
short position. Prudential Securities may elect to reduce this short
position by exercising some or all of the over-allotment options.

- stabilizing and short covering; stabilizing bids to purchase the shares
are permitted if they do not exceed a specified maximum price. After the
distribution of shares has been completed, short covering purchases in the
open market may also reduce the short position. These activities may cause
the price of the shares to be higher than would otherwise exist in the
open market.

- penalty bids permitting the representatives to reclaim concessions from a
syndicate member for the shares purchased in the stabilizing or short
covering transactions.

Such activities, which may be commenced and discontinued at any time, may be
effected on the Nasdaq National Market, in the over-the-counter market or
otherwise.

64
<PAGE>
Each underwriter has represented that it has complied and will comply with
all applicable laws and regulations in connection with the offer, sale or
delivery of the shares and related offering materials in the United Kingdom,
including:

- the Public Offers of Securities Regulation 1995,

- the Financial Services Act 1986, and

- the Financial Services Act 1986, (Investment Advertisements) (Exemptions)
Order 1986 (as amended).

Limited partnerships sponsored by Advent International and Morgan Stanley
Dean Witter, who are existing Lionbridge stockholders, have indicated their
interest in purchasing up to $7,280,000 of our stock from the underwriters at
the public offering price. The underwriters will not receive any underwriting
discount or commission in connection with the sale of shares to these
purchasers.

We have asked the underwriters to reserve approximately 5% of the shares
offered for sale at the same offering price directly to our employees and other
business affiliates or related third parties. The number of shares available for
sale to the general public in the offering will be reduced to the extent such
persons purchase the reserved shares.

65
<PAGE>
LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for Lionbridge by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
George W. Lloyd, a partner at Testa, Hurwitz & Thibeault, LLP, is the beneficial
owner of 16,667 shares of common stock of Lionbridge. Certain legal matters will
be passed upon for the underwriters by Brobeck, Phleger & Harrison LLP,
Washington, District of Columbia.

EXPERTS

The consolidated financial statements of Lionbridge Technologies, Inc. as of
December 31, 1998 and 1997 and for the years then ended, the combined financial
statements of The Localization Businesses of Stream International Holdings, Inc.
in Ireland, The Netherlands and France for the year ended December 31, 1996, and
the financial statements of VeriTest, Inc. as of December 31, 1998 and for the
year then ended, included in this prospectus, have been so included in reliance
on the reports of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.

AVAILABLE INFORMATION

Lionbridge has filed with the Securities and Exchange Commission (the
"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. For further
information with respect to Lionbridge and the common stock, reference is made
to the registration statement. Statements contained in this prospectus as to the
contents of any contract or any other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of the contract
or document filed as an exhibit to the registration statement, and each such
statement is qualified in all respects by reference to such exhibit. Copies of
the registration statement may be examined without charge at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional Offices of
the Commission at Suite 1400, 500 West Madison Street, Chicago, Illinois 60661
and 7 World Trade Center, Thirteenth Floor, New York, New York 10048. Copies of
all or any portion of the registration statement may be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549, or by calling the Commission at
1-800-SEC-0330, at prescribed rates. The Commission also maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants, such as Lionbridge, that make
electronic filings with the Commission.

Lionbridge intends to furnish to its stockholders annual reports containing
financial statements audited by an independent public accounting firm.

66
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
LIONBRIDGE TECHNOLOGIES, INC.
Report of Independent Accountants.......................................................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 and June 30, 1999 (unaudited)................. F-3
Consolidated Statements of Operations for the years ended December 31, 1997 and 1998 and the six months
ended June 30, 1998 and 1999 (unaudited)................................................................. F-4
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit for the years
ended December 31, 1997 and 1998 and the six months ended June 30, 1999 (unaudited)...................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1997 and 1998 and the six months
ended June 30, 1998 and 1999 (unaudited)................................................................. F-6
Notes to Consolidated Financial Statements................................................................. F-7

THE LOCALIZATION BUSINESSES OF STREAM INTERNATIONAL HOLDINGS, INC. IN IRELAND,
THE NETHERLANDS AND FRANCE
Report of Independent Accountants.......................................................................... F-27
Combined Statement of Operations for the year ended December 31, 1996...................................... F-28
Combined Statement of Cash Flows for the year ended December 31, 1996...................................... F-29
Notes to Combined Financial Statements..................................................................... F-30

VERITEST, INC.
Report of Independent Accountants.......................................................................... F-34
Balance Sheet as of December 31, 1998...................................................................... F-35
Statement of Operations for the year ended December 31, 1998............................................... F-36
Statement of Shareholders' Equity for the year ended December 31, 1998..................................... F-37
Statement of Cash Flows for the year ended December 31, 1998............................................... F-38
Notes to Financial Statements.............................................................................. F-39

UNAUDITED PRO FORMA FINANCIAL INFORMATION
Introduction to Unaudited Pro Forma Financial Statements................................................... F-43
Unaudited Pro Forma Statement of Operations for the year ended December 31, 1998........................... F-44
Unaudited Pro Forma Statement of Operations for the six months ended June 30, 1999......................... F-45
Notes to Unaudited Pro Forma Financial Statements.......................................................... F-46
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Lionbridge Technologies, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, redeemable convertible preferred stock
and stockholders' deficit and cash flows present fairly, in all material
respects, the financial position of Lionbridge Technologies, Inc. at December
31, 1997 and 1998, and the consolidated results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/ PricewaterhouseCoopers LLP
- ----------------------------

Boston, Massachusetts
March 9, 1999, except as to Note 17,
which is as of August 19, 1999

F-2
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES AND PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------- JUNE 30, JUNE 30,
1997 1998 1999 1999
------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash................................................. $ 1,098 $ 732 $ 1,455 $ 1,455
Accounts receivable, net of allowances of $366, $573
and $546 at December 31, 1997 and 1998 and June 30,
1999 (unaudited), respectively..................... 6,902 7,321 9,133 9,133
Work in process...................................... 2,386 3,929 3,674 3,674
Other current assets................................. 624 805 1,045 1,045
------- -------- ----------- -----------
Total current assets............................. 11,010 12,787 15,307 15,307

Property and equipment, net............................ 951 1,840 2,155 2,155
Goodwill, net.......................................... 6,710 7,370 10,325 10,325
Other assets........................................... 85 405 320 320
------- -------- ----------- -----------
Total assets................................... $18,756 $ 22,402 $ 28,107 $ 28,107
------- -------- ----------- -----------
------- -------- ----------- -----------
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
Current liabilities:
Amounts owed to banks................................ $ 88 $ 416 $ 143 $ 143
Short-term debt...................................... 2,200 7,693 5,893 27,842
Accounts payable..................................... 3,118 3,964 3,761 3,761
Accrued compensation and benefits.................... 2,057 2,356 2,855 2,855
Other accrued expenses............................... 4,499 5,664 5,175 5,175
Deferred revenue..................................... 524 412 399 399
------- -------- ----------- -----------
Total current liabilities........................ 12,486 20,505 18,226 40,175
------- -------- ----------- -----------

Long-term debt, net of discount........................ -- -- 10,964 4,964

Redeemable convertible preferred stock, $0.01 par
value:
Series A convertible preferred stock, 17,271,314
shares authorized; 13,271,314 shares issued and
outstanding at December 31, 1997 and 1998 and June
30, 1999 (unaudited); no shares issued and
outstanding on a pro forma basis (unaudited)....... 14,356 15,418 15,949 --
Series B redeemable preferred stock, 200 shares
authorized; no shares issued and outstanding....... -- -- -- --
Series C convertible preferred stock, 17,271,514
shares authorized; no shares issued and
outstanding........................................ -- -- -- --
Series D nonvoting convertible preferred stock, 200
shares authorized; 140 shares issued and
outstanding at December 31, 1997 and 1998 and June
30, 1999 (unaudited); no shares issued and
outstanding on a pro forma basis (unaudited)....... -- -- -- --

Commitments and contingencies (Note 7)

Stockholders' deficit:
Common stock, $0.01 par value; 25,950,867 shares
authorized; 1,359,993, 1,963,614 and 2,371,799
shares issued and outstanding at December 31, 1997
and 1998 and June 30, 1999 (unaudited),
respectively, and 11,219,450 shares issued and
outstanding on a pro forma basis (unaudited)....... 14 20 24 112
Additional paid-in capital........................... 57 300 10,516 10,428
Accumulated deficit.................................. (8,898) (14,222) (24,518) (24,518)
Deferred compensation................................ -- -- (3,529) (3,529)
Accumulated other comprehensive income............... 741 381 475 475
------- -------- ----------- -----------
Total stockholders' deficit...................... (8,086) (13,521) (17,032) (17,032)
------- -------- ----------- -----------
Total liabilities, redeemable convertible
preferred stock and stockholders' deficit.... $18,756 $ 22,402 $ 28,107 $ 28,107
------- -------- ----------- -----------
------- -------- ----------- -----------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.

F-3
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------- ------------------------
1997 1998 1998 1999
--------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenue.............................................. $ 26,462 $ 38,412 $ 18,132 $ 23,783
Cost of revenue...................................... 18,914 25,546 12,226 16,607
--------- --------- ----------- -----------
Gross profit................................... 7,548 12,866 5,906 7,176
--------- --------- ----------- -----------
Operating expenses:
Sales and marketing................................ 1,306 2,735 1,206 2,613
General and administrative......................... 8,210 10,889 5,238 6,894
Amortization of acquisition-related intangible
assets........................................... 4,400 2,145 1,194 1,579
Restructuring charges (Note 10).................... 541 501 451 --
Stock-based compensation........................... -- -- -- 232
--------- --------- ----------- -----------
Total operating expenses....................... 14,457 16,270 8,089 11,318
--------- --------- ----------- -----------
Loss from operations................................. (6,909) (3,404) (2,183) (4,142)
Interest expense..................................... (127) (648) (265) (4,988)
Other income (expense), net.......................... (506) 49 (22) (320)
--------- --------- ----------- -----------
Loss before income taxes............................. (7,542) (4,003) (2,470) (9,450)
Provision for income taxes........................... 112 259 53 315
--------- --------- ----------- -----------
Net loss............................................. (7,654) (4,262) (2,523) (9,765)
Accrued dividends on preferred stock................. (1,062) (1,062) (531) (531)
--------- --------- ----------- -----------
Net loss attributable to common stockholders......... $ (8,716) $ (5,324) $ (3,054) $ (10,296)
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Basic and diluted net loss per share attributable to
common stockholders................................ $ (8.85) $ (2.99) $ (1.89) $ (4.64)
Shares used in computing basic and diluted net loss
per share attributable to common stockholders...... 985 1,782 1,613 2,218
Unaudited pro forma basic and diluted net loss
per share.......................................... $ (0.43) $ (0.77)
Shares used in computing unaudited pro forma
basic and diluted net loss per share............... 12,371 13,314
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.

F-4
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT

(AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
REDEEMABLE CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------------- ------------------------ PAID-IN ACCUMULATED
SHARES AMOUNT SHARES PAR VALUE CAPITAL DEFICIT
--------- ----------- --------- ------------- ----------- ------------
Balance at December 31, 1996...................... 13,673,098 $ 13,696 984,608 $ 10 $ 5 $ (182)
<S> <C> <C> <C> <C> <C> <C>
Stock options exercised........................... 375,385 4 52
Issuance of Series A convertible preferred
stock........................................... 570,010 570
Repurchase of Series A convertible preferred stock
to be retired................................... (971,654) (972)
Accrual of dividends on preferred stock........... 1,062 (1,062)
Comprehensive loss:
Net loss........................................ (7,654)
Other comprehensive income:
Translation adjustment........................
Comprehensive loss..............................
--------- ----------- --------- --- ----------- ------------
Balance at December 31, 1997...................... 13,271,454 14,356 1,359,993 14 57 (8,898)
Issuance of common stock in connection with the
acquisition of Japanese Language Services,
Inc............................................. 286,959 3 83
Stock options exercised........................... 316,662 3 39
Accrual of dividends on preferred stock........... 1,062 (1,062)
Accretion of common stock to redemption value..... 121
Comprehensive loss:
Net loss........................................ (4,262)
Other comprehensive loss:
Translation adjustment........................
Comprehensive loss..............................
--------- ----------- --------- --- ----------- ------------
Balance at December 31, 1998...................... 13,271,454 15,418 1,963,614 20 300 (14,222)
Issuance of common stock in connection with the
acquisition of VeriTest, Inc.................... 66,668 1 343
Issuance of common stock in connection with the
acquisition of Japanese Language Services,
Inc............................................. 24,268 -- 35
Issuance of warrants in connection with debt
financing....................................... 5,967
Deferred compensation............................. 3,761
Amortization of deferred compensation.............
Stock options exercised........................... 317,249 3 50
Accrual of dividends on preferred stock........... 531 (531)
Accretion of common stock to redemption value..... 60
Comprehensive loss:
Net loss........................................ (9,765)
Other comprehensive income:
Translation adjustment........................
Comprehensive loss..............................
--------- ----------- --------- --- ----------- ------------
Balance at June 30, 1999 (unaudited).............. 13,271,454 $ 15,949 2,371,799 $ 24 $ 10,516 $ (24,518)
--------- ----------- --------- --- ----------- ------------
--------- ----------- --------- --- ----------- ------------

<CAPTION>
ACCUMULATED
OTHER TOTAL
DEFERRED COMPREHENSIVE STOCKHOLDERS' COMPREHENSIVE
COMPENSATION INCOME DEFICIT LOSS
--------------- --------------- ------------- ---------------
Balance at December 31, 1996...................... $ (167)
<S> <C> <C> <C> <C>
Stock options exercised........................... 56
Issuance of Series A convertible preferred
stock...........................................
Repurchase of Series A convertible preferred stock
to be retired...................................
Accrual of dividends on preferred stock........... (1,062)
Comprehensive loss:
Net loss........................................ (7,654) $ (7,654)
Other comprehensive income:
Translation adjustment........................ $ 741 741 741
---------------
Comprehensive loss.............................. $ (6,913)
------- ------------- ---------------
---------------
Balance at December 31, 1997...................... 741 (8,086)
Issuance of common stock in connection with the
acquisition of Japanese Language Services,
Inc............................................. 86
Stock options exercised........................... 42
Accrual of dividends on preferred stock........... (1,062)
Accretion of common stock to redemption value..... 121
Comprehensive loss:
Net loss........................................ (4,262) $ (4,262)
Other comprehensive loss:
Translation adjustment........................ (360) (360) (360)
---------------
Comprehensive loss.............................. $ (4,622)
------- ------------- ---------------
---------------
Balance at December 31, 1998...................... 381 (13,521)
Issuance of common stock in connection with the
acquisition of VeriTest, Inc.................... 344
Issuance of common stock in connection with the
acquisition of Japanese Language Services,
Inc............................................. 35
Issuance of warrants in connection with debt
financing....................................... 5,967
Deferred compensation............................. $ (3,761) --
Amortization of deferred compensation............. 232 232
Stock options exercised........................... 53
Accrual of dividends on preferred stock........... (531)
Accretion of common stock to redemption value..... 60
Comprehensive loss:
Net loss........................................ (9,765) $ (9,765)
Other comprehensive income:
Translation adjustment........................ 94 94 94
---------------
Comprehensive loss.............................. $ (9,671)
------- ------- ------------- ---------------
---------------
Balance at June 30, 1999 (unaudited).............. $ (3,529) $ 475 $ (17,032)
------- ------- -------------
------- ------- -------------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.

F-5
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------- ------------------------
1997 1998 1998 1999
--------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................... $ (7,654) $ (4,262) $ (2,523) $ (9,765)
Adjustments to reconcile net loss to net cash used
in operating activities:
Amortization of acquisition-related intangible
assets......................................... 4,400 2,145 1,194 1,579
Compensation expense for stock options granted... -- -- -- 232
Accretion of discount on subordinated notes
payable........................................ -- -- -- 4,099
Depreciation and amortization of property and
equipment...................................... 1,164 1,187 573 741
Provision for doubtful accounts.................. 380 182 75 35
Deferred income taxes............................ 112 206 -- --
Foreign currency (gain) loss on intercompany
transactions................................... 353 (67) 549 555
Changes in operating assets and liabilities, net
of effects of acquisitions:
Accounts receivable............................ 187 214 93 (2,334)
Work in process................................ (592) (828) (1,163) (47)
Other current assets........................... 690 (295) (229) (255)
Other assets................................... (78) (193) (34) 67
Accounts payable............................... (426) (401) (189) 90
Accrued compensation and benefits.............. 781 341 299 499
Other accrued expenses......................... 184 478 755 104
Deferred revenue............................... (943) (440) (105) 12
--------- --------- ----------- -----------
Net cash used in operating activities........ (1,442) (1,733) (705) (4,388)
--------- --------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment................ (923) (1,363) (1,154) (1,039)
Payments for businesses acquired, net of cash
acquired......................................... (18) (3,141) (3,141) (3,726)
Payments for Asian asset purchase, net of cash
acquired......................................... (85) -- -- --
Transfer of funds from escrow...................... 600 -- -- --
--------- --------- ----------- -----------
Net cash used in investing activities........ (426) (4,504) (4,295) (4,765)
--------- --------- ----------- -----------
Cash flows from financing activities:
Net increase (decrease) in amounts owed to banks... (522) 328 (68) (178)
Net increase (decrease) in short-term debt......... 1,197 5,551 5,795 (1,843)
Proceeds from long-term debt....................... -- -- -- 12,000
Proceeds from issuance of preferred stock.......... 570 -- -- --
Proceeds from exercise of common stock options..... 56 42 43 53
--------- --------- ----------- -----------
Net cash provided by financing activities.... 1,301 5,921 5,770 10,032
--------- --------- ----------- -----------
Net increase (decrease) in cash...................... (567) (316) 770 879
Effects of exchange rate changes on cash............. (130) (50) (89) (156)
Cash at beginning of period.......................... 1,795 1,098 1,098 732
--------- --------- ----------- -----------
Cash at end of period................................ $ 1,098 $ 732 $ 1,779 $ 1,455
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.

F-6
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION:

NATURE OF THE BUSINESS

Lionbridge Technologies, Inc. and its subsidiaries (collectively,
"Lionbridge") is a provider of globalization services to software publishers,
computer hardware manufacturers and telecommunications companies. Globalization
services, including localization, internationalization and testing, enable
simultaneous worldwide release and ongoing maintenance of products and
product-related technical support, training materials, and sales and marketing
information in multiple languages. Lionbridge has its head office in the United
States, with operations in France, Ireland, The Netherlands, China, Japan, South
Korea and the United States.

FORMATION OF LIONBRIDGE AND BASIS OF PRESENTATION

Lionbridge was incorporated on September 11, 1996 in order to effect the
acquisition of certain elements of the localization businesses of Stream
International Holdings, Inc. ("Stream"). Funding for the acquisition was
provided through the issuance of common and preferred stock in Lionbridge and in
a majority-owned subsidiary of Lionbridge.

On December 23, 1996, Lionbridge entered into an agreement with Stream to
acquire its localization businesses in Ireland, The Netherlands and France (see
Note 4). The purchase accounting for the acquisition of the businesses was
recorded as though the purchase had occurred on December 31, 1996, as the
results of operations and changes in financial position between December 23,
1996 and this date were immaterial.

The December 23, 1996 agreement with Stream also contemplated the
acquisition of certain businesses in Asia. However, Lionbridge did not acquire
such businesses as planned, and renegotiated the agreement in July 1997. As a
result, a note payable for $840,000 issued to Stream in contemplation of the
December 23, 1996 agreement was canceled, and restricted cash of $600,000, which
was held in escrow at December 31, 1996 and was to be paid to Stream on
completion of the Asian acquisition, was returned to Lionbridge, net of certain
payments otherwise due.

On July 3, 1997, Lionbridge entered into a new agreement with Stream to
purchase work in process and certain other assets of Stream's Japanese, Chinese
and Taiwanese localization businesses as of April 1, 1997, and of the South
Korean localization business as of July 3, 1997, in exchange for approximately
$100,000 of cash plus the assumption of liabilities of $317,000 for the
completion of work under existing customer contracts. As these assets did not
comprise businesses, the Company allocated the purchase price based on their
fair values.

2. SIGNIFICANT ACCOUNTING POLICIES:

The accompanying consolidated financial statements of Lionbridge reflect the
application of certain significant accounting policies as described below:

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
Lionbridge and its wholly owned subsidiaries from the effective date of their
acquisition or formation. All significant intercompany accounts and transactions
have been eliminated in the consolidated financial statements.

F-7
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
UNAUDITED INTERIM FINANCIAL STATEMENTS

The consolidated financial statements and related notes of Lionbridge for
the six months ended June 30, 1998 and 1999 are unaudited. Management believes
the unaudited consolidated financial statements have been prepared on the same
basis as the audited consolidated financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations in such
periods. Results of operations for the six months ended June 30, 1998 and 1999
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1999, or for any other future period.

UNAUDITED PRO FORMA BALANCE SHEET

Upon the closing of Lionbridge's anticipated initial public offering of
securities, certain transactions will occur automatically. The unaudited pro
forma information included on the balance sheet at June 30, 1999 reflects these
transactions as if they had occurred on June 30, 1999, as follows (see Notes 6
and 8):

- the exchange of an aggregate of 13,271,454 shares of Series A convertible
preferred stock and Series D nonvoting convertible preferred stock
outstanding as of June 30, 1999 for 132.7145 shares of Series B redeemable
preferred stock and 8,847,649 shares of Series C convertible preferred
stock;

- the redemption of the 132.7145 shares of Series B redeemable preferred
stock for $15,949,000, including accrued and unpaid dividends, presented
as a reclassification of long-term debt, net of discount to short-term
debt;

- the conversion of the 8,847,649 shares of Series C convertible preferred
stock into 8,847,649 shares of common stock; and

- the repayment of $6,000,000 of the subordinated notes, presented as a
reclassification of long-term debt, net of discount to short-term debt.

REVENUE RECOGNITION

Lionbridge recognizes revenue from the provision of services to its
customers on the percentage-of-completion method of accounting, based on costs
incurred as a percentage of management's estimates of total costs of individual
contracts. Anticipated losses by project, if any, are recognized in the period
in which determined.

ADVERTISING COSTS

Advertising costs are included in sales and marketing expenses and are
expensed as incurred. Advertising costs were $0 and approximately $120,000 for
the years ended December 31, 1997 and 1998, respectively.

FOREIGN CURRENCY TRANSLATION

The functional currency for each of Lionbridge's foreign operations is the
local currency of the country in which those operations are based. Revenues and
expenses of foreign operations are translated into U.S. dollars at the average
rates of exchange during the period. Assets and liabilities of

F-8
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
foreign operations are translated into U.S. dollars at period-end rates of
exchange. Resulting cumulative translation adjustments are reflected as a
separate component of accumulated other comprehensive income in stockholders'
deficit. Foreign currency transaction gains or losses, arising from exchange
rate fluctuations on transactions denominated in currencies other than the
functional currencies, are included in other income (expense), net in the
consolidated statements of operations and were $(472,000) and $49,000 for the
years ended 1997 and 1998, respectively.

For the purpose of the disclosure of comprehensive loss, Lionbridge does not
record tax provisions or benefits for the net changes in foreign currency
translation adjustments, as Lionbridge intends to permanently reinvest
undistributed earnings in its foreign subsidiaries.

WORK IN PROCESS

Work in process represents the value of work performed but not billed. Work
in process is calculated using the percentage-of-completion method based on
total anticipated costs and is stated at cost plus estimated profit, but not in
excess of net realizable value. Billing of amounts in work in process occurs
according to customer-agreed payment schedules or upon completion of specified
project milestones. All of Lionbridge's projects in work in process are expected
to be billed and collected within one year.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost and depreciated over the estimated
useful lives of the assets using the straight-line method, based upon the
following asset lives:

<TABLE>
<S> <C>
Computer software and equipment 1 to 5 years
Furniture and office equipment 3 to 5 years
Leasehold improvements Shorter of lease term or useful life of
asset
</TABLE>

Upon retirement or other disposition, the cost and related accumulated
depreciation of the assets are removed from the accounts and the resulting gain
or loss is reflected in the determination of net income or loss. Expenditures
for maintenance and repairs are expensed as incurred.

INTANGIBLE ASSETS

Goodwill represents the excess of cost over the fair value of the net assets
of businesses acquired. Goodwill is amortized using the straight-line method
over five years.

LONG-LIVED ASSETS

Lionbridge periodically evaluates the net realizable value of long-lived
assets, including goodwill and property and equipment, relying on a number of
factors including operating results, business plans, economic projections and
anticipated future cash flows. An impairment in the carrying value of an asset
is assessed when the undiscounted, expected future operating cash flows derived
from the asset are less than its carrying value.

F-9
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES

Deferred income taxes are recognized based on the temporary differences
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the temporary differences are
expected to reverse. Valuation allowances are provided if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized.

NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS AND PRO FORMA NET
LOSS PER SHARE

Basic and diluted earnings per share are computed in accordance with SFAS
No. 128, "Earnings per Share." Basic net loss per share attributable to common
stockholders is computed by dividing net loss attributable to common
stockholders by the weighted average number of shares of common stock
outstanding. There is no difference between basic and diluted earnings per share
since potential common shares from the conversion of preferred stock and
exercises of stock options and warrants are anti-dilutive for all periods
presented.

Unaudited pro forma basic and diluted net loss per share for the year ended
December 31, 1998 and the six months ended June 30, 1999 is computed using the
weighted average number of common shares outstanding, adjusted to include the
impact of certain transactions that will occur automatically upon the closing of
Lionbridge's anticipated initial public offering of securities, as follows:

- the addition of 8,847,649 shares of common stock for each of the year
ended December 31, 1998 and the six months ended June 30, 1999, resulting
from the exchange of an aggregate of 13,271,454 shares of Series A and
Series D convertible preferred stock for 8,847,649 shares of Series C
convertible preferred stock, and the conversion of these shares into
8,847,649 shares of common stock; and

- the addition of 1,741,157 and 2,248,799 shares of common stock for the
year ended December 31, 1998 and the six months ended June 30, 1999,
respectively, to reflect the number of shares of common stock from the
anticipated initial public offering from which proceeds are deemed to be
used to repay $6,000,000 of the subordinated notes and to redeem the
132.7145 shares of Series B redeemable preferred stock with accrued
dividends for $15,949,000, based on an assumed net offering price of $9.16
per share, weighted from the beginning of the periods for the preferred
stock and from the date of issuance for the subordinated notes.

ACCOUNTING FOR STOCK-BASED COMPENSATION

Lionbridge accounts for stock-based awards to employees using the intrinsic
value method as prescribed by Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, no compensation expense is recorded for options issued to employees
in fixed amounts and with fixed exercise prices at least equal to the fair
market value of Lionbridge's common stock at the date of grant. When the
exercise price of stock options granted to employees is less than the fair
market value of common stock at the date of grant, Lionbridge records that
difference multiplied by the number of shares under option as deferred
compensation, which is then amortized over the vesting period of the options.
Lionbridge has adopted the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation," through disclosure only (see Note 8). All stock-based
awards to non-employees are accounted for at their fair value in accordance with
SFAS No. 123.

F-10
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
USE OF ESTIMATES

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
dates of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates. Estimates are used when accounting for the collectibility of
receivables, calculating revenue using the percentage-of-completion method, and
valuing intangible assets, deferred tax assets and net assets of businesses
acquired.

CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

Financial instruments which potentially subject Lionbridge to concentrations
of credit risk consist principally of trade accounts receivables. Concentrations
of credit risk with respect to trade accounts receivable are limited due to the
dispersion of customers across different geographic regions, although globally
some customers constitute a significant percentage of total revenue (see Note
11). Lionbridge does not require collateral or other security against trade
receivable balances; however, it maintains reserves for potential credit losses
and such losses have been within management's expectations.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments, including cash, accounts receivable, accounts
payable, redeemable preferred stock and debt, are carried in the consolidated
financial statements at amounts that approximate fair values at December 31,
1997 and 1998 and June 30, 1999 (unaudited). Fair values are based on quoted
market prices and assumptions concerning the amount and timing of estimated
future cash flows and assumed discount rates, reflecting varying degrees of
perceived risk.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The standard requires that all derivative
instruments be recorded on the balance sheet at their fair values. Changes in
the fair values of derivatives are recorded each period in current earnings or
other comprehensive income (loss), depending on whether or not a derivative is
designated as part of a hedge transaction and, if it is, depending on the type
of hedge transaction. SFAS No. 133, as amended by SFAS No. 137, will be
effective for Lionbridge's fiscal quarter beginning January 1, 2001 and its
adoption is not expected to have a material impact on Lionbridge's financial
position or results of operations.

In April 1998, AcSEC issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities." Start-up activities are defined broadly as those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a new
class of customer, commencing some new operation or organizing a new entity.
Under SOP 98-5, the cost of start-up activities should be expensed as incurred.
SOP 98-5 is effective for Lionbridge's fiscal 1999 financial statements, and
Lionbridge does not expect its adoption to have a material effect on its
financial position or results of operations.

F-11
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. PROPERTY AND EQUIPMENT:

Property and equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
Computer software and equipment................................. $ 1,400,000 $ 2,035,000
Furniture and office equipment.................................. 527,000 708,000
Leasehold improvements.......................................... 138,000 327,000
------------- -------------
2,065,000 3,070,000
Less: Accumulated depreciation and amortization................. (1,114,000) (1,230,000)
------------- -------------
$ 951,000 $ 1,840,000
------------- -------------
------------- -------------
</TABLE>

4. BUSINESS COMBINATIONS:

LOCALIZATION BUSINESS OF STREAM

On December 23, 1996, Lionbridge acquired the localization businesses of
Stream in Ireland, The Netherlands and France (see Note 1). In accordance with
the acquisition agreement, Lionbridge paid Stream aggregate cash consideration
of $11,300,000 in exchange for all of the outstanding common stock of R.R.
Donnelley Language Solutions International B.V. and Stream International
Language Solutions as well as the assumption of tax liabilities of $100,000
incurred in connection with the transaction.

The business combination was accounted for using the purchase method of
accounting, and the results of the acquired localization business have been
included in Lionbridge's financial statements as of December 31, 1996 (see Note
1). The purchase price, including direct costs of the acquisition, was allocated
based on the fair values of the acquired assets and assumed liabilities as
follows:

<TABLE>
<CAPTION>
<S> <C>
Current assets................................................................ $ 11,417,000
Current liabilities........................................................... (12,516,000)
Property and equipment........................................................ 1,350,000
Non-compete agreement......................................................... 2,559,000
Goodwill...................................................................... 9,224,000
--------------
$ 12,034,000
--------------
--------------
</TABLE>

In 1997, Lionbridge submitted a claim to Stream for the reimbursement of a
portion of the purchase consideration under the indemnity terms of the December
23, 1996 agreement. This claim was ultimately resolved through a settlement
agreement with Stream, effective December 31, 1997 (see Note 6). Under the terms
of this agreement, the purchase price for the European businesses was reduced by
$531,000. This amount was deducted from goodwill at December 31, 1997.

During 1997 and 1998, acquired net operating loss carryforwards of
$1,120,000 and $1,291,000, respectively, were utilized to offset taxable income
in Ireland and The Netherlands. As the deferred tax assets associated with these
losses had been fully reserved at the time of the Stream acquisition, the
benefits were recorded as reductions to goodwill of $112,000 and $207,000 in
1997 and 1998, respectively.

F-12
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. BUSINESS COMBINATIONS: (CONTINUED)
JAPANESE LANGUAGE SERVICES

On February 27, 1998, Lionbridge entered into an agreement to acquire all of
the outstanding stock of Japanese Language Services, Inc., a company based in
Massachusetts with additional operations in Japan, for total initial
consideration of $2,323,000 consisting of cash of $2,237,000 and 286,959 shares
of common stock valued at $86,000. The shares of common stock may be redeemed,
at the option of the holder, at a price of $1.35 per share at any time from July
2001 to September 2001. The carrying amount of the redeemable common stock will
be increased to the redemption amount of $387,000 over the 30-month period
ending July 2001. The agreement also requires certain contingent stock
issuances, limited to 24,268 shares of common stock, and cash payments, limited
to $625,000, dependent on future operating results of Japanese Language
Services, Inc. through December 31, 1999. This agreement was effective January
2, 1998, when operating control of Japanese Language Services, Inc. was assumed
by Lionbridge. The acquisition was accounted for using the purchase method of
accounting, and the results of Japanese Language Services, Inc. have been
included in Lionbridge's financial statements as of the effective date. The
purchase price, including direct costs of the acquisition, was allocated based
on the fair values of the acquired assets and assumed liabilities as follows:

<TABLE>
<CAPTION>
<S> <C>
Current assets................................................................ $ 935,000
Current liabilities........................................................... (789,000)
Property and equipment........................................................ 247,000
Goodwill...................................................................... 1,999,000
--------------
$ 2,392,000
--------------
--------------
</TABLE>

The initial calculation of goodwill did not include any anticipated
contingent consideration. Additional goodwill of $375,000 was recorded at
December 31, 1998 in connection with an incremental payment being due under the
contingent payment arrangement. Future payments under the contingent payment
arrangement, if any, will similarly increase goodwill. Goodwill was also
increased by $120,000 and $60,000 (unaudited) during the year ended December 31,
1998 and the six months ended June 30, 1999, respectively, related to the
accretion to the redemption amount of the redeemable common stock. Pro forma
statements of operations would not differ materially from reported results.

ILT SOLUTIONS GROUP

On April 1, 1998, Lionbridge acquired certain assets and operations of the
ILT Solutions Group of Lucent Technologies, Inc. for cash of $1,000,000. The
acquisition was accounted for using the purchase method of accounting. The
purchase price, including direct costs of the acquisition, was allocated to
current assets of $244,000, property and equipment of $299,000 and goodwill of
$470,000 based on their fair values at the acquisition date. The results of the
ILT Solutions Group are included in these financial statements from the date of
the acquisition. Pro forma statements of operations would not differ materially
from reported results.

VERITEST, INC.

On January 11, 1999, Lionbridge entered into an agreement to acquire all of
the stock of VeriTest, Inc., a company based in California, for total initial
consideration of $4,354,000 consisting of cash of $3,260,000, 66,668 shares of
common stock valued at $344,000, and notes payable for $750,000.

F-13
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. BUSINESS COMBINATIONS: (CONTINUED)
The agreement also requires certain contingent cash payments, limited to
$1,000,000, dependent on future operating performance through December 31, 2000.
This acquisition was accounted for using the purchase method of accounting. The
purchase price, including direct costs of the acquisition, was allocated based
on the fair values of the acquired assets and assumed liabilities as follows:

<TABLE>
<CAPTION>
<S> <C>
Current assets................................................................ $ 522,000
Current liabilities........................................................... (616,000)
Property and equipment........................................................ 175,000
Goodwill...................................................................... 4,338,000
--------------
$ 4,419,000
--------------
--------------
</TABLE>

The initial calculation of goodwill did not include any contingent
consideration. Future payments, if any, under the contingent payment arrangement
will increase goodwill. The initial calculation of goodwill is subject to
adjustment when additional information on the valuation of customer contracts
and intellectual property is finalized. An allocation of the purchase price to
such assets, if any, would decrease goodwill by a corresponding amount. The
results of VeriTest, Inc. are included in these financial statements from the
date of acquisition.

The following unaudited pro forma consolidated results of operations for the
year ended December 31, 1998 and the six-month period ended June 30, 1999 assume
that the acquisition of VeriTest, Inc. occurred as of January 1, 1998:

<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C> <C>
Revenue......................................................... $ 42,147 $ 23,783
Net loss........................................................ (6,615) (9,982)
Basic and diluted net loss per share attributable to common
stockholders.................................................. (4.08) (4.72)
</TABLE>

For each period presented, the pro forma results include estimates of the
interest expense on debt used to finance the purchase and the depreciation and
amortization of intangible and other fixed assets based on the purchase price
allocation. These pro forma amounts do not purport to be indicative of the
results that would have actually been obtained if the acquisition had occurred
on January 1, 1998 or that may be obtained in the future.

The expense of amortizing goodwill from all acquisitions prior to December
31, 1998 was $1,841,000 and $2,145,000 in 1997 and 1998, respectively.
Additionally, amortization of $2,559,000 was recorded in 1997 in connection with
a noncompete agreement between Lionbridge and Stream.

5. AMOUNTS OWED TO BANKS:

Amounts owed to banks represent temporary, unsecured overdraft facilities
utilized by Lionbridge's operations in Ireland, France, Holland and the United
States.

6. DEBT:

SETTLEMENT AGREEMENT

On June 10, 1998, Lionbridge entered into an agreement with certain
companies that had previously been part of the Stream organization to settle
various outstanding amounts due between

F-14
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. DEBT: (CONTINUED)
Lionbridge and Stream, including the indemnity claim submitted by Lionbridge
(see Note 4); a note payable to Stream of $569,000, together with accrued
interest of $39,000; and the amount due to Stream on the exercise of its put
option to sell 971,654 shares of Series A convertible preferred stock to
Lionbridge (see Note 8). In settlement of all amounts due to and from Stream (or
successor companies), Lionbridge agreed to pay an interest-free amount of
$700,000 in seven equal monthly installments beginning February 1998. This note
was recorded in current liabilities at December 31, 1997 and was paid during
1998. The net effect of the settlement agreement was to reduce by $531,000 the
Company's purchase price for the European business acquired from Stream. The
effective date of this agreement was December 31, 1997, and its impact was
reflected in the consolidated financial statements as of that date.

LINE OF CREDIT

On September 26, 1997, Lionbridge entered into a line of credit agreement
with a commercial bank. The agreement was subsequently amended on May 21, 1998
and May 20, 1999 (unaudited) and expires on September 20, 1999. At the time of
the May 1998 amendment, Lionbridge issued a warrant for the purchase of 83,334
shares of common stock at an exercise price of $2.40 per share. This warrant was
exercisable immediately and expires on May 21, 2003. The value ascribed to this
warrant was immaterial. Under the amended terms of the agreement, Lionbridge may
borrow up to $8,000,000, based on the value of certain eligible current assets
worldwide.

The interest rate payable on any outstanding borrowings is prime plus 1% per
year (9.5% and 8.8% at December 31, 1997 and 1998, respectively), and Lionbridge
was required to pay a facility fee of $50,000 on the signing of the agreement.
This fee and other direct arrangement expenses were amortized over the initial
term of the agreement, which expired on May 22, 1998. Borrowings outstanding
under the line of credit agreement are collateralized by certain assets of
Lionbridge. The amount outstanding on the line of credit at December 31, 1997
and 1998 was $1,500,000 and $7,693,000, respectively, and $5,893,000 as of June
30, 1999 (unaudited).

The agreement requires Lionbridge to maintain certain financial ratios and
restricts the payment of dividends. As of December 31, 1997 and 1998, Lionbridge
was in compliance with the financial covenants as subsequently amended by the
bank.

ADDITIONAL FINANCING

On January 11, 1999, Lionbridge entered into two substantially identical
promissory note agreements with the former owners of VeriTest, Inc. in
connection with the acquisition of this business (see Note 4). The notes are for
an aggregate amount of $750,000 and are payable in one installment on January
11, 2001. Interest on the notes is due annually at a rate of 8%.

On January 8, 1999, Lionbridge entered into a bridge loan agreement with a
third party. Under the terms of the agreement, Lionbridge issued a $4,000,000,
12% senior subordinated note. On February 26, 1999, Lionbridge entered into a
new subordinated debt agreement with the same party and terminated the bridge
loan agreement. Under the terms of the new agreement, Lionbridge issued
$10,000,000, 12% senior subordinated convertible notes. The principal amounts of
the notes are repayable in quarterly installments beginning in March 2003, with
final settlement of the principal and interest due in February 2006. Interest is
due quarterly. The notes are subject to certain covenant restrictions, including
the maintenance of a defined minimum current asset to current liability ratio
and

F-15
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. DEBT: (CONTINUED)

a minimum profitability measure, and are collateralized by certain assets of
Lionbridge. In connection with the issuance of these notes, Lionbridge issued
detachable warrants to purchase 1,277,716 shares of common stock at a price of
$0.015 per share, valued at $4,972,000.

On March 9, 1999, Lionbridge entered into a subordinated debt agreement with
a stockholder. Under the terms of the agreement, Lionbridge issued $2,000,000,
12% senior subordinated convertible notes. The principal amounts of the notes
are repayable in quarterly installments beginning in March 2003, with final
settlement of the principal and interest due in March 2006. Interest is due
quarterly. The notes are collateralized by certain assets of Lionbridge and are
subject to certain covenant restrictions, including the maintenance of a defined
minimum current asset to current liability ratio and a minimum profitability
measure. In connection with the issuance of these notes, Lionbridge issued
detachable warrants to purchase 255,544 shares of common stock at a price $0.015
per share, valued at $995,000.

The detachable warrants issued in connection with these financings expire on
the later of (i) the seventh anniversary of the issuance of the warrant and (ii)
the date when each related note is paid in full. If not otherwise exercised, the
warrants will be automatically exercised in accordance with their terms
immediately prior to any expiration. The aggregate value of these warrants was
recorded as a discount on subordinated notes payable and is being amortized as
additional interest expense using the straight-line method over the period from
issuance until August 1999, based on the expected repayment of the debt upon the
initial public offering of securities by Lionbridge.

On August 19, 1999, Lionbridge entered into amendments to the subordinated
debt agreements pursuant to which the 12% senior subordinated convertible notes
were issued. As a result, Lionbridge is required to repay one-half of the
aggregate principal amount of each of the notes, together with all accrued and
unpaid interest thereon, upon the closing of certain defined liquidity events,
including the initial public offering of securities with aggregate proceeds of
at least $25,000,000. The remaining aggregate principal amount of such notes,
together with all accrued and unpaid interest thereon, is required to be repaid
upon the earlier of August 25, 2001 or an underwritten public offering by
Lionbridge subsequent to the initial public offering of securities with
aggregate proceeds of at least $10,000,000. Before amended, these notes had
required that all of the principal amount be paid upon a closing of an initial
public offering of securities with aggregate proceeds of at least $25,000,000.

As of March 31, 1999, Lionbridge was not in compliance with one of the
covenants common to each of the above notes. Lionbridge subsequently obtained
waivers from the debtholders which release it from the requirement to comply
with that covenant for the quarter ended March 31, 1999 and for the quarters
ending June 30 and September 30, 1999.

F-16
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. COMMITMENTS AND CONTINGENCIES:

LEASE COMMITMENTS

The Company leases certain equipment and office space under noncancelable
agreements and leases which expire at various dates through 2003. Future minimum
lease payments under noncancelable operating leases at December 31, 1998 were as
follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- --------------------------------------------------------------------------------
<S> <C>
1999............................................................................ $ 746,000
2000............................................................................ 564,000
2001............................................................................ 334,000
2002............................................................................ 229,000
2003............................................................................ 298,000
Thereafter...................................................................... 2,019,000
------------
$ 4,190,000
------------
------------
</TABLE>

Total rental expenses charged to operations were $697,000 and $952,000 in
1997 and 1998, respectively.

8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT:

SERIES A AND SERIES D CONVERTIBLE PREFERRED STOCK

VOTING

The holders of Series A preferred stock are entitled to one vote for each
whole share of common stock issuable upon conversion to Series C preferred stock
and thereon to common stock. The holders of Series A preferred stock vote with
the holders of common stock, and certain other outstanding preferred stock, as a
single class. The holders of Series D preferred stock have no voting rights.

DIVIDENDS

Holders of Series A and Series D preferred stock are entitled to receive
dividends or other distributions in an amount based upon, and in advance of, the
planned dividend or other distribution to holders of common stock.

LIQUIDATION

In the event of any liquidation, dissolution or winding up of Lionbridge,
the holders of Series A and Series D preferred stock are entitled to be paid out
of the assets available for distribution, in preference to any payment to the
holders of common or more junior preferred stock, but subordinated to payments
to the holders of more senior preferred stock, an amount of $1.00 per share,
plus any dividends declared but unpaid, plus a premium of $0.08 per year from
the date of issue, plus an amount per share that would have been payable had
each share of Series A and Series D preferred stock been converted into shares
of common stock immediately prior to liquidation, dissolution or winding up.

In the event of a merger or consolidation of Lionbridge with another
corporation, with certain exemptions, or the sale of substantially all the
assets of Lionbridge, holders of 66 2/3% or more of the Series A or Series D
preferred stock may elect to consider the event to be a liquidation of
Lionbridge.

F-17
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT: (CONTINUED)
EXCHANGE

Each share of Series A and Series D preferred stock is exchangeable, at the
option of the holder, into 1/100,000 of a share of Series B preferred stock and
a specified number of shares of Series C preferred stock based on an exchange
ratio, subject to adjustment under specified terms and conditions (2-for-3 at
December 31, 1998). Certain terms exist to protect the exchange rights of the
holders of Series A and Series D preferred stock in the event of further
issuances of common stock or a merger or reorganization of Lionbridge.

In the event of a public offering of the Company's common stock at a price
of at least $6.00 per share with gross proceeds of at least $15,000,000, all
shares of Series A and Series D preferred stock will automatically be exchanged
for shares of Series B and C preferred stock at the effective exchange rates.

SERIES B REDEEMABLE PREFERRED STOCK

VOTING

The holders of Series B preferred stock are not entitled to vote, except in
certain specified circumstances.

DIVIDENDS

Holders of Series B preferred stock are not entitled to receive dividends.

LIQUIDATION

In the event of any liquidation, dissolution or winding up of Lionbridge,
the holders of Series B preferred stock are entitled to be paid out of the
assets available for distribution, in preference to any payment to the holders
of common or more junior preferred stock, but subordinated to payments to the
holders of more senior preferred stock, an amount of $100,000 per share, plus
any dividends declared but unpaid, plus a premium of $8,000 per share per year.

REDEMPTION

On December 23, 2001, the Series B preferred stock becomes redeemable at the
request of 66 2/3% or more of the holders and to the extent permitted by legally
available funds. The redemption price is equal to $100,000 per share, plus any
unpaid dividends, plus a premium of $8,000 per share per year, for all shares of
Series B preferred stock issued or issuable upon conversion of the outstanding
Series A preferred stock and Series D preferred stock. In any event, to the
extent permitted by legally available funds, all outstanding shares of Series B
preferred stock must be redeemed by December 23, 2003.

In the event of a public offering of the Company's common stock at a price
of at least $6.00 per share with gross proceeds of at least $15,000,000, the
merger or consolidation of Lionbridge with another corporation, with certain
exemptions, or the sale of substantially all the assets of Lionbridge, all
shares of Series B preferred stock must be redeemed for the amount specified
above (a "Mandatory Redemption"). In connection with any Mandatory Redemption,
Lionbridge is not required to redeem a number of shares of its Series B
preferred stock that would result in it paying more than 50% of its consolidated
net income before taxes for the preceding year. The redemption of any shares not
redeemed as a result of the application of the provision described in the
preceding sentence is deferred

F-18
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT: (CONTINUED)
until the earlier of the date that Lionbridge has sufficient consolidated net
income before taxes to redeem such shares or December 23, 2003.

SERIES C CONVERTIBLE PREFERRED STOCK

VOTING

The holders of Series C preferred stock are entitled to one vote for each
whole share of common stock issuable upon conversion. The holders of Series C
preferred stock vote with the holders of common stock, and any other outstanding
preferred stock, as a single class.

DIVIDENDS

Holders of Series C preferred stock are entitled to receive dividends or
other distributions in an amount based upon, and in advance of, the planned
dividend or other distribution to holders of common stock.

LIQUIDATION

In the event of any liquidation, dissolution or winding up of Lionbridge,
the holders of Series C preferred stock are entitled to be paid out of the
assets available for distribution, in preference to any payment to the holders
of common or more junior preferred stock, but subordinated to payments to the
holders of more senior preferred stock, an amount per share that would have been
payable had each share of Series C preferred stock been converted into shares of
common stock.

In the event of a merger or consolidation of Lionbridge with another
corporation, with certain exemptions, or the sale of substantially all the
assets of Lionbridge, holders of 66 2/3% or more of the Series C preferred stock
may elect to consider the event to be a liquidation of Lionbridge.

CONVERSION

Each share of Series C preferred stock is convertible, at the option of the
holder, into a specified number of shares of common stock based on a conversion
ratio, subject to adjustment under specified terms and conditions (1-for-1 at
December 31, 1998). Certain terms exist to protect the conversion rights of the
holders of Series C preferred stock in the event of further issuances of common
stock or a merger or reorganization of Lionbridge.

In the event of a public offering of the Company's common stock at a price
of at least $6.00 per share with gross proceeds of at least $15,000,000, all
shares of Series C preferred stock will automatically be converted into shares
of common stock at the effective conversion rate.

TREASURY STOCK

In connection with the December 23, 1996 financing of Lionbridge, Stream was
granted a put option to sell 971,654 shares of Series A preferred stock to
Lionbridge.

On September 25, 1997, Stream exercised its put option and Lionbridge
acquired 971,654 shares of its Series A preferred stock at a cost of $971,654.
Settlement of this amount due to Stream was resolved through a subsequent
agreement (see Note 6). In 1998, Lionbridge retired all of the shares acquired.

F-19
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT: (CONTINUED)
STOCK OPTION PLANS

Lionbridge maintains a stock option plan (the "Plan") for the issuance of
incentive and nonqualified stock options. The number of shares of common stock
available for issuance under the Plan was 2,855,365 shares, an amount which
increased to 3,522,032 shares on April 23, 1998. Options to purchase common
stock are granted at the discretion of the Board of Directors.

Generally, stock options vest over a four-year period as follows: 25% on the
first anniversary of the date of grant and semi-annually thereafter in equal
installments over the remaining three-year period. Stock options generally
expire ten years (five years in certain cases) from the date of grant.

Under the terms of the Plan, the exercise price of incentive stock options
granted must not be less than 100% (110% in certain cases) of the fair market
value of the common stock on the date of grant, as determined by the Board of
Directors. The exercise price of nonqualified stock options may be less than the
fair market value of the common stock on the date of grant, as determined by the
Board of Directors, but in no case may the exercise price be less than the
statutory minimum. The Board of Directors, in assessing the fair market value of
Lionbridge's common stock, considers factors relevant at the time, including
recent third-party transactions, significant new customers, composition of the
management team, recent hiring results, Lionbridge's financial condition and
operating results and the lack of a public market for Lionbridge's common stock.

Transactions involving the Plan for the period from January 1, 1997 to
December 31, 1998 are summarized as follows:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
---------- -----------
<S> <C> <C>
Outstanding at January 1, 1997........................................ 1,501,529 $ 0.165
Granted............................................................... 1,472,555 0.150
Exercised............................................................. (375,385) 0.150
Canceled.............................................................. (382,363) 0.150
----------
Outstanding at December 31, 1997...................................... 2,216,336 0.165
Granted............................................................... 407,573 0.525
Exercised............................................................. (316,662) 0.135
Canceled.............................................................. (115,025) 0.195
----------
Outstanding at December 31, 1998...................................... 2,192,222 0.225
----------
----------
</TABLE>

Options for 0 and 421,380 shares were exercisable at December 31, 1997 and
1998, respectively.

There were 263,644 and 637,763 shares available for future grant under the
Plan at December 31, 1997 and 1998, respectively.

F-20
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT: (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------- ------------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
RANGE OF EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ------------------ ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$0.150 - $0.165 8.09
1,800,349 years $ 0.165 421,380 $ 0.165
0.300 - 0.450 9.13
285,797 years 0.300 -- 0.300
0.900 9.58
69,917 years 0.900 -- 0.900
1.500 9.83
36,159 years 1.500 -- 1.500
----------- -----------
2,192,222 421,380
----------- -----------
----------- -----------
</TABLE>

Had compensation cost for stock options granted to employees been determined
based on the fair value at the date of grant for awards in the period from
inception (September 11, 1996) to December 31, 1998, consistent with the
provisions of SFAS No. 123, Lionbridge's net loss for 1997 and 1998 would have
been increased to $7,668,000 and $4,283,000, and the net loss per common share
attributable to common stockholders for 1997 and 1998 would have been increased
to $8.87 and $3.00, respectively. The fair value of options granted during 1997
and 1998 was $0.02 and $0.06, respectively.

For these pro forma calculations, the fair value of each option granted was
estimated on the date of grant using the minimum value option pricing model,
utilizing the following weighted-average assumptions: (1) weighted-average risk
free interest rates of 6.11% and 5.40% for 1997 and 1998, respectively, (2)
weighted-average expected option life of 4.0 years, and (3) expected dividend
yield of 0.

The effects of applying the fair value method may be material to the pro
forma results of operations in future years because the determination of the
fair value of all options granted after Lionbridge becomes a public entity will
include an expected volatility factor, additional option grants are expected to
be made subsequent to December 31, 1998, and most options vest over several
years.

DEFERRED COMPENSATION (UNAUDITED)

During the six months ended June, 1999, Lionbridge granted stock options to
purchase 843,700 shares of its common stock at exercise prices ranging from
$1.50 to $9.75 per share. Lionbridge recorded deferred compensation relating to
these options totaling $3,761,000, representing the aggregate difference between
the estimated fair market value of Lionbridge's common stock on the date of
grant and the exercise price of each option. This deferred compensation is being
amortized over the four-year vesting period of the related options, resulting in
amortization of $232,000 in the six months ended June 30, 1999.

9. INCOME TAXES:

The provisions for income taxes for the years ended December 31, 1997 and
1998 are due to taxable income generated in foreign jurisdictions for which U.S.
tax credit utilization is currently uncertain. The benefit from the utilization
of net operating loss carryforwards in Europe during the years ended December
31, 1997 and 1998 was recorded as a reduction of goodwill of $112,000 and

F-21
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. INCOME TAXES: (CONTINUED)
$207,000, respectively, rather than a tax provision benefit, since the deferred
tax assets associated with these carryforwards had been fully reserved at the
time of the acquisition of the businesses from Stream (see Note 4). Lionbridge
recorded no tax benefit for losses generated during these periods due to the
uncertainty of realizing such benefits.

The components of the loss before income taxes were as follows for the years
ended December 31:

<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
United States....................................................................... $ (6,115,000) $ (4,636,000)
Foreign............................................................................. (1,427,000) 633,000
------------- -------------
Loss before income taxes............................................................ $ (7,542,000) $ (4,003,000)
------------- -------------
------------- -------------
</TABLE>

The consolidated deferred tax assets of the Company were as follows at
December 31:

<TABLE>
<CAPTION>
1997 1998
------------- ------------
<S> <C> <C>
U.S. net operating loss carryforwards................................................ $ 564,000 $ 1,309,000
Foreign net operating loss carryforwards............................................. 1,623,000 1,696,000
Difference in accounting for amortization and depreciation........................... 1,136,000 1,113,000
Other................................................................................ 77,000 32,000
Valuation allowance.................................................................. (3,400,000) (4,150,000)
------------- ------------
Net deferred tax asset............................................................... -- --
------------- ------------
------------- ------------
</TABLE>

Management of Lionbridge has evaluated the positive and negative evidence
bearing upon the realizability of its deferred tax assets. Under the applicable
accounting standards, management has considered Lionbridge's history of losses
and concluded that it is more likely than not that Lionbridge will not generate
future taxable income prior to the expiration of these net operating losses.
Accordingly, the deferred tax assets have been fully reserved. Management
reevaluates the positive and negative evidence periodically.

At December 31, 1998, Lionbridge had net operating loss carryforwards for
U.S. Federal and state income tax purposes of approximately $3,252,000 which may
be used to offset future taxable income, beginning to expire in 2011.
Additionally, Lionbridge has net operating loss carryforwards in France of
approximately $4,218,000 which may be used to offset future taxable income,
beginning to expire in 1999; net operating loss carryforwards in Japan of
approximately $247,000 which expire in 2003; and net operating loss
carryforwards in The Netherlands of approximately $483,000 which may be carried
forward indefinitely.

Tax benefits recognized for the utilization of foreign net operating loss
carryforwards acquired in the December 23, 1996 acquisition of businesses from
Stream (see Note 4) are recorded as a reduction to goodwill, rather than as a
tax provision benefit.

Under the provisions of the Internal Revenue Code, certain substantial
changes in Lionbridge's ownership may limit in the future the amount of net
operating loss carryforwards which could be used annually to offset future
taxable income and income tax liability.

F-22
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. RESTRUCTURING CHARGES:

During the fourth quarter of 1997, the first quarter of 1998 and the fourth
quarter of 1998, Lionbridge recorded restructuring charges of $541,000, $451,000
and $50,000, respectively, in operating expenses. These charges related to
workforce reductions in France, consisting of nine technical staff in 1997 and
five technical and administrative staff in 1998. All employees had been informed
of their termination and related benefits in the period that the corresponding
charge was recorded. Lionbridge had balances of $541,000, $0 and $0 (unaudited)
remaining at December 31, 1997 and 1998 and at June 30, 1999, respectively, in
other accrued expenses in relation to these charges. As of June 30, 1999
(unaudited), none of these employees remained with Lionbridge and management
does not anticipate any future expenditures related to these actions.

11. SIGNIFICANT CUSTOMERS:

Lionbridge's two largest customers accounted for the following percentages
of total revenues for the periods ended:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------- --------------------
1997 1998 1998 1999
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Customer A......................................... 19% 14% 16% 14%
Customer B......................................... 10% 6% 7% 2%
</TABLE>

12. OPERATING SEGMENT AND GEOGRAPHICAL INFORMATION:

In June 1998, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 requires that public
business enterprises report certain information about operating segments in
annual and interim financial statements filed with the SEC and issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Operating segments
are defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker, or decision making group, in deciding how to allocate resources
and in assessing their performance.

Lionbridge provides localization services to the information technology
industry, including language translation, cultural reformatting and testing of
applications. Lionbridge provides a full service offering to its clients on a
global basis and, although customers may utilize the results of Lionbridge's
services in a number of different formats, for example, through software manuals
or the Internet, management does not allocate resources or assess performance on
the basis of this end-use. As a result, management considers Lionbridge to have
only one operating segment.

F-23
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. OPERATING SEGMENT AND GEOGRAPHICAL INFORMATION: (CONTINUED)
A summary of Lionbridge's operations and other financial information by
geographical region follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER SIX MONTHS ENDED
31, JUNE 30,
---------------------- ----------------------
1997 1998 1998 1999
---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues:
United States........................... $ -- $4,683,000 $1,562,000 $4,846,000
Asia.................................... 1,510,000 4,801,000 1,934,000 3,451,000
France.................................. 11,070,000 9,094,000 4,634,000 6,035,000
Ireland................................. 11,157,000 14,296,000 6,889,000 7,907,000
The Netherlands......................... 3,724,000 6,799,000 3,668,000 2,835,000
Eliminations............................ (999,000) (1,261,000) (555,000) (1,291,000)
---------- ---------- ---------- ----------
$26,462,000 $38,412,000 $18,132,000 $23,783,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- JUNE 30,
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Long-lived assets:
United States....................................... $ 6,776,000 $ 7,990,000 $ 11,573,000
Asia................................................ 146,000 320,000 307,000
France.............................................. 121,000 207,000 163,000
Ireland............................................. 595,000 989,000 694,000
The Netherlands..................................... 108,000 109,000 63,000
------------- ------------- -------------
$ 7,746,000 $ 9,615,000 $ 12,800,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

Foreign revenue is presented based on the country in which projects are
managed. Long-lived assets in the United States as of December 31, 1997 and 1998
and June 30, 1999 include goodwill from acquisitions of $6,710,000, $7,370,000
and $10,325,000, respectively.

Lionbridge has an agreement with the Irish Industrial Development Agency
regarding financial grants to its Irish subsidiary from this agency. Under the
agreement, the Irish subsidiary may not pay dividends or otherwise distribute
its cash, including any distributions to Lionbridge.

F-24
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------- ------------------------
1997 1998 1998 1999
--------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Interest paid.................................................... $ 127,000 $ 648,000 $ 83,000 $ 332,000
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------

Noncash investing and financing activities:

Cancellation of note payable (Note 1).......................... $ 840,000 -- -- --

Issuance of warrants for common stock in connection with debt
(Note 6)..................................................... -- -- -- $5,967,000

Lionbridge entered into an agreement to settle various
outstanding amounts due between Lionbridge and Stream (Note
6) which reduced goodwill as follows:
Cancellation of note payable, including interest............. $ 608,000 -- -- --
Repurchase of Series A preferred stock from Stream 972,000 -- -- --
Settlement of operating accounts............................. (349,000) -- -- --
Amount payable by Lionbridge under agreement................. (700,000) -- -- --
--------- ---------- ----------- -----------
Reduction to goodwill...................................... $ 531,000 -- -- --
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
Lionbridge purchased all of the outstanding capital stock of
Japanese Language Services, Inc. for $2,323,000, effective
January 2, 1998. In conjunction with the acquisition,
liabilities were assumed as follows:
Fair value of assets acquired and goodwill................... -- $3,181,000 $3,181,000 --
Cash paid for capital stock.................................. -- (2,237,000) (2,237,000) --
Common stock issued.......................................... -- (86,000) (86,000) --
--------- ---------- ----------- -----------
Liabilities assumed........................................ -- $ 858,000 $ 858,000 --
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
Lionbridge purchased all of the outstanding capital stock of
VeriTest, Inc. for $4,354,000, effective January 11, 1999. In
conjunction with the acquisition, liabilities were assumed as
follows:
Fair value of assets acquired and goodwill................... -- -- -- $5,035,000
Cash paid for capital stock.................................. -- -- -- (3,260,000)
Common stock issued.......................................... -- -- -- (344,000)
Notes issued................................................. -- -- -- (750,000)
--------- ---------- ----------- -----------
Liabilities assumed........................................ -- -- -- $ 681,000
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
</TABLE>

14. VALUATION AND QUALIFYING ACCOUNTS:

The following table sets forth activity in Lionbridge's accounts receivable
reserve:

<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING CHARGES TO END OF
OF PERIOD OPERATIONS DEDUCTIONS PERIOD
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Year ended:
- --------------------------------------------
December 31, 1997 $ -- $ 450,000 $ (84,000) $ 366,000
December 31, 1998 $ 366,000 $ 220,000 $ (13,000) $ 573,000
</TABLE>

F-25
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:

Diluted loss per share attributable to common stockholders does not differ
from basic loss per share attributable to common stockholders since potential
common shares from the conversion of preferred stock and the exercise of stock
options and warrants are anti-dilutive for all periods presented and are
therefore excluded from the calculation. Preferred stock convertible into
8,847,649 shares of common stock, options to purchase 2,216,336, 2,192,222 and
2,621,945 (unaudited) shares of common stock, and warrants to purchase 0, 83,334
and 1,616,594 (unaudited) shares of common stock, were outstanding as of
December 31, 1997 and 1998 and June 30, 1999, respectively, but were not
included in the calculation of diluted net loss per share attributable to common
shareholders because the effect of their inclusion would have been
anti-dilutive.

16. EMPLOYEE BENEFIT PLANS:

As of December 31, 1998, the Company maintained defined benefit pension
plans for employees in The Netherlands and France, and a defined contribution
scheme for employees in Ireland. Total pension contributions charged to
operations were $154,000 and $350,000 in 1997 and 1998, respectively.

17. SUBSEQUENT EVENTS:

CORPORATE ACTIONS

On June 15, 1999, the Board of Directors of Lionbridge approved the
following matters, among other items:

- the adoption, effective upon the closing of the anticipated initial public
offering, of the Second Amended and Restated Certificate of Incorporation,
which among other matters (a) increases the number of authorized shares of
common stock of Lionbridge to 100,000,000 and (b) decreases the number of
authorized shares of preferred stock of Lionbridge to 5,000,000 and
authorizes the Board of Directors to issue up to that amount of shares of
undesignated preferred stock, for which the Board of Directors will have
the power to determine designations and preferences;

- an amendment to Lionbridge's stock option plan to increase the number of
shares of common stock issuable under the plan by 2,000,000 to 5,522,032;
and

- the adoption, effective upon the closing of the anticipated initial public
offering, of an employee stock purchase plan, under which employees may
purchase shares of common stock in semi-annual offerings at a price equal
to the lower of 85% of the average market price on the beginning or ending
date of each offering period.

REVERSE STOCK SPLIT

Effective August 13, 1999, the Company's Board of Directors declared a
2-for-3 reverse stock split. All references in the consolidated financial
statements to shares of common stock have been retroactively adjusted to reflect
this reverse stock split.

SUBORDINATED DEBT AMENDMENTS

On August 19, 1999, Lionbridge entered into amendments to the subordinated
debt agreements. The amendments modified the terms of repayment of the debt, as
described in Note 6.

F-26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To The Board of Directors and Stockholders of
Lionbridge Technologies, Inc.:

We have audited the accompanying combined statements of operations and cash
flows of the Localization Businesses of Stream International Holdings, Inc. in
Ireland, The Netherlands and France (together, the "Entities") for the year
ended December 31, 1996. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined results of operations and cash flows of
the Entities for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts
November 7, 1997

F-27
<PAGE>
THE LOCALIZATION BUSINESSES OF STREAM INTERNATIONAL
HOLDINGS, INC. IN IRELAND, THE NETHERLANDS AND FRANCE

COMBINED STATEMENT OF OPERATIONS

(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Revenue............................................................................................. $ 28,134
Cost of revenue..................................................................................... 24,977
------------
Gross profit.................................................................................. 3,157
Selling, general and administrative expenses........................................................ 3,144
------------
Income from operations.............................................................................. 13
Interest expense.................................................................................... (154)
Other income (expense), net......................................................................... (72)
------------
Net loss............................................................................................ $ (213)
------------
------------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE COMBINED FINANCIAL
STATEMENTS.

F-28
<PAGE>
THE LOCALIZATION BUSINESSES OF STREAM INTERNATIONAL
HOLDINGS, INC. IN IRELAND, THE NETHERLANDS AND FRANCE

COMBINED STATEMENT OF CASH FLOWS

(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Cash flows from operating activities:
Net loss.......................................................................................... $ (213)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of property and equipment......................................... 571
Provision for doubtful accounts................................................................. 62
Loss on disposal of equipment................................................................... 16
Changes in operating assets and liabilities:
Accounts receivable........................................................................... 1,603
Work in process............................................................................... (709)
Other current assets.......................................................................... 169
Accounts payable.............................................................................. 2,394
Accrued expenses.............................................................................. (1,457)
Deferred revenue.............................................................................. 445
------------
Net cash provided by operating activities................................................... 2,881
------------
Cash flows from investing activities:
Purchases of property and equipment............................................................... (444)
------------
Net cash used in investing activities....................................................... (444)
------------
Cash flows from financing activities:
Increase in short-term debt, net.................................................................. 890
Payment of notes payable.......................................................................... (554)
Net decrease in amounts owed to banks............................................................. (3,239)
------------
Net cash used in financing activities....................................................... (2,903)
------------
Net decrease in cash................................................................................ (466)
Effects of exchange rate changes on cash............................................................ (41)
Cash at beginning of year........................................................................... 715
------------
Cash at end of year................................................................................. $ 208
------------
------------
Supplemental disclosure of cash flow information:
Interest paid..................................................................................... $ 154
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE COMBINED FINANCIAL
STATEMENTS.

F-29
<PAGE>
THE LOCALIZATION BUSINESSES OF STREAM INTERNATIONAL
HOLDINGS, INC. IN IRELAND, THE NETHERLANDS AND FRANCE

NOTES TO COMBINED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION:

NATURE OF THE BUSINESS

The Localization Businesses of Stream International Holdings, Inc. in
Ireland, The Netherlands and France (together, the "Entities") are providers of
outsourced localization services to the information technology industry. Their
customer base includes software publishers, hardware manufacturers and
telecommunications companies that must render versions of their software and
manuals in different languages and culturally appropriate formats.

ACQUISITION OF THE ENTITIES

Lionbridge Technologies, Inc. ("Lionbridge") was incorporated on September
11, 1996 in order to effect the acquisition of certain elements of the
localization businesses of Stream International Holdings, Inc. ("Stream").
Funding for the acquisition was provided through the issuance of common and
preferred stock in Lionbridge and in a majority-owned subsidiary of Lionbridge.

On December 23, 1996, Lionbridge entered into an agreement with Stream to
acquire its localization businesses in Ireland, The Netherlands and France for
total consideration of $11,400,000, principally consisting of cash. These
businesses consisted of legal entities in Ireland and Holland, a legal entity
and divisional operation in France, and a divisional operation in Belgium.

These combined financial statements have been prepared using Stream's
historical basis in the assets and liabilities and historical results of
operations related to the Entities, since the Entities were under the common
control of Stream. These combined financial statements generally reflect the
results of operations and cash flows of the Entities as if they were separate
entities for the period presented.

Certain costs and expenses presented in the combined financial statements
were allocated by the management of Stream, based on their estimates of the cost
of services provided to the Entities by Stream. Stream management believes that
these allocations and allocation methods are reasonable. However, the financial
information included herein may not necessarily reflect the combined results of
operations and cash flows of the Entities in the future, or what they would have
been had the Entities been separate from Stream during the period presented.

2. SIGNIFICANT ACCOUNTING POLICIES:

The accompanying combined financial statements of the Entities reflect the
application of certain significant accounting policies as described below:

BASIS OF PRESENTATION

The combined financial statements present the statements of operations and
cash flows as if the Entities had operated as separate entities for the year
ended December 31, 1996. All significant inter-entity transactions have been
eliminated on combination.

Transactions with other members of the Stream group have been treated as
dealings with third-parties. Management does not believe that the cost of such
transactions would differ materially if conducted with unrelated parties.

F-30
<PAGE>
THE LOCALIZATION BUSINESSES OF STREAM INTERNATIONAL
HOLDINGS, INC. IN IRELAND, THE NETHERLANDS AND FRANCE

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
REVENUE RECOGNITION

The Entities recognize revenue from the provision of localization services
to their customers on the percentage-of-completion method of accounting, based
on management's estimates of project progress. Anticipated losses by project, if
any, are recognized in the period in which determined.

ADVERTISING COSTS

Advertising costs are included in selling, general and administrative
expenses and are expensed as incurred.

ALLOCATED COSTS

Corporate expenses incurred by Stream on behalf of the Entities were
generally charged directly to these entities during the year ended December 31,
1996. These charges were allocated using a variety of methods depending on the
nature of the expense, including specified percentages of revenue measures and
management estimates.

When corporate expenses had not been previously charged, an amount has been
allocated in these financial statements based upon estimates made by management
of Stream of the cost attributable to the entity. Methods used to make
allocations were similar to those used to determine direct charges, with the
addition of headcount equivalents.

FOREIGN CURRENCY TRANSLATION

The functional currency for each of the Entities is the local currency of
the country in which operations are based. Revenues and expenses of foreign
operations are translated into U.S. dollars at the average rates of exchange for
the period. Resulting cumulative translation adjustments are reflected as a
separate component of accumulated comprehensive income in equity. Foreign
currency transaction losses arising from exchange rate fluctuations on
transactions denominated in currencies other than the functional currencies are
included in other income (expense), net in results of operations and were
$32,000 in 1996.

INCOME TAXES

Historically, the operations of the Entities have been included in the
consolidated U.S. Federal and certain state and foreign income tax returns filed
by Stream and its subsidiaries (see Note 1). Income tax expense has been
calculated on a separate-return basis for the purpose of these financial
statements. Deferred taxes arise primarily from unutilized net operating losses,
using enacted tax rates in effect in the years in which net operating losses are
expected to be utilized or differences are expected to reverse. Valuation
allowances are provided if, based on the weight of available evidence, it is
more likely than not that some or all of the deferred tax assets will not be
realized.

F-31
<PAGE>
THE LOCALIZATION BUSINESSES OF STREAM INTERNATIONAL
HOLDINGS, INC. IN IRELAND, THE NETHERLANDS AND FRANCE

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY AND EQUIPMENT

Property and equipment is depreciated over the estimated useful lives of the
assets using the straight-line method, based upon the following asset lives:

<TABLE>
<S> <C>
Computer software and equipment..... 1 to 3 years
Furniture and office equipment...... 3 to 5 years
Leasehold improvements.............. Shorter of lease term or useful life
of asset
</TABLE>

Upon retirement or other disposition, the cost and related accumulated
depreciation of the assets are removed from the accounts and the resulting gain
or loss is reflected in the determination of net income or net loss.
Expenditures for maintenance and repairs are expensed as incurred.

LONG-LIVED ASSETS

The Entities periodically evaluate the net realizable value of long-lived
assets relying on a number of factors including operating results, business
plans, economic projections and anticipated future cash flows. An impairment in
the carrying value of an asset is assessed when the undiscounted, expected
future operating cash flows derived from the asset are less than its carrying
value.

NET LOSS PER COMMON SHARE

As these financial statements have been prepared by combining the operating
results and cash flows of several legal entities and divisional operations,
there is no historical basis of common shares outstanding. As a result, earnings
per share information is not presented.

USE OF ESTIMATES

The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and expenses during
the period presented. Actual results could differ from these estimates.
Estimates are used when accounting for the calculation of work in process,
depreciation and tax asset valuation allowances, and for the allocation of
corporate expenses from Stream.

3. RELATIONSHIP WITH STREAM:

Where corporate expenses incurred by Stream on behalf of the Entities were
not charged to the Entities during the year ended December 31, 1996, an
allocation of corporate expense has been included in operating expenses in the
combined statement of operations. The aggregate of amounts allocated to the
Entities for the year was $717,000, all relating to selling, general and
administrative expenses. No interest has been charged related to these
transactions.

4. LEASES:

The Entities leased certain equipment and office space. Total rental expense
charged to operations during the year ended December 31, 1996 was $90,000.

F-32
<PAGE>
THE LOCALIZATION BUSINESSES OF STREAM INTERNATIONAL
HOLDINGS, INC. IN IRELAND, THE NETHERLANDS AND FRANCE

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

5. EMPLOYEE BENEFIT PLANS:

During the year ended December 31, 1996, certain of the employees of the
Entities were members of defined benefit pension plans ultimately administered
by Stream. The pension contributions charged to operations during the year were
$324,000.

6. INCOME TAXES:

The Entities had no income tax expense for the year ended December 31, 1996,
as a result of incurred losses. A full valuation allowance was recorded against
the deferred tax assets generated by the 1996 losses, due to management's
uncertainty of realizing such benefits.

7. GEOGRAPHICAL INFORMATION:

Net revenue in 1996 arose entirely from activities in Europe, as follows:

<TABLE>
<S> <C>
France......................................................... $11,136,000
Ireland........................................................ 13,796,000
The Netherlands................................................ 2,514,000
Belgium........................................................ 688,000
----------
$28,134,000
----------
----------
</TABLE>

Foreign revenue is presented based on the country in which projects are
managed.

8. DONATED CAPITAL:

Immediately prior to the acquisition of the Entities by Lionbridge (see Note
1), a capital donation of $1,974,000 was made to the Dutch entities by Stream.
This donation was effected by the waiver of certain amounts payable to Stream.

9. VALUATION AND QUALIFYING ACCOUNTS:

The following table sets forth activity in the Entities' accounts receivable
reserve:

<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF CHARGES TO END OF
YEAR OPERATIONS DEDUCTIONS YEAR
------------ ----------- ------------- ----------
<S> <C> <C> <C> <C>
December 31, 1996.............................................. $ 202,000 $ 55,000 -- $ 257,000
</TABLE>

F-33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of VeriTest, Inc.:

In our opinion, the accompanying balance sheet and the related statements of
operations, shareholders' equity and cash flows present fairly, in all material
respects, the financial position of VeriTest, Inc. (the "Company") at December
31, 1998, and the results of its operations and its cash flows for the year
ended December 31, 1998 in conformity with generally accepted accounting
principles. 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 audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.

/s/ PricewaterhouseCoopers LLP

Woodland Hills, California

June 16, 1999

F-34
<PAGE>
VERITEST, INC.

BALANCE SHEET

DECEMBER 31, 1998

<TABLE>
<S> <C>
ASSETS

Current assets:
Cash and cash equivalents....................................................... $ 144,288
Accounts receivable, net of allowance for doubtful accounts of $15,000.......... 317,258
Prepaid expenses and other current assets....................................... 52,117
---------
Total current assets.......................................................... 513,663
Property and equipment, net....................................................... 174,515
Other assets...................................................................... 8,728
---------
Total assets.................................................................. $ 696,906
---------
---------
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses........................................... 300,459
Deferred revenue................................................................ 173,122
---------
Total current liabilities..................................................... 473,581
---------
Commitments (Note 6)

Shareholders' equity:
Common stock, no par value; 100,000 shares authorized; 10,000 shares issued and
outstanding................................................................... 10,000
Retained earnings............................................................... 213,325
---------
Total shareholders' equity.................................................... 223,325
---------
Total liabilities and shareholders' equity.................................... $ 696,906
---------
---------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-35
<PAGE>
VERITEST, INC.

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<S> <C>
Net revenues.................................................................... $3,735,496

Operating expenses:
Cost of services.............................................................. 1,969,810
Selling and marketing......................................................... 190,590
General and administrative.................................................... 1,566,714
---------
Total operating expenses.................................................... 3,727,114
---------

Income before income taxes.................................................. 8,382

Provision for income taxes...................................................... 130
---------
Net income.................................................................. $ 8,252
---------
---------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-36
<PAGE>
VERITEST, INC.

STATEMENT OF SHAREHOLDERS' EQUITY

FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
COMMON STOCK
----------------------
SHARES RETAINED
OUTSTANDING AMOUNT EARNINGS TOTAL
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1997....................................... 10,000 $ 10,000 $ 350,073 $ 360,073
Net income..................................................... 8,252 8,252
Cash distributions, $14.50 per share........................... -- -- (145,000) (145,000)
----------- --------- ---------- ----------
Balance, December 31, 1998....................................... 10,000 $ 10,000 $ 213,325 $ 223,325
----------- --------- ---------- ----------
----------- --------- ---------- ----------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-37
<PAGE>
VERITEST, INC.

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<S> <C>
Cash flows from operating activities:
Net income..................................................................... $ 8,252
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation................................................................. 77,632
Provision for bad debts...................................................... 6,419
Changes in assets and liabilities:
Accounts receivable........................................................ 142,583
Prepaid expenses and other current assets.................................. (22,030)
Other assets............................................................... (2,086)
Accounts payable and accrued expenses...................................... 88,619
Deferred revenue........................................................... 53,329
---------
Net cash provided by operating activities................................ 352,718
---------
Cash flows from investing activities:
Purchases of property and equipment............................................ (93,018)
---------
Net cash used in investing activities.................................... (93,018)
---------
Cash flows from financing activities:
Cash distributions............................................................. (145,000)
---------
Net cash used in financing activities.................................... (145,000)
---------
Net increase in cash and cash equivalents................................ 114,700

Cash and cash equivalents, beginning of year..................................... 29,588
---------
Cash and cash equivalents, end of year........................................... $ 144,288
---------
---------
Supplemental disclosure of cash flow information:
Income taxes paid.............................................................. $ 1,660
Interest paid.................................................................. $ 490
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

F-38
<PAGE>
VERITEST, INC.

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS:

GENERAL

VeriTest, Inc. ("VeriTest") was incorporated in California on December 21,
1987 and began operations in that month.

VeriTest offers specialized lab test verification for computer hardware and
software OEMS as well as other customers who want their product tested or
logo-certified. The areas of testing include hardware platform and peripherals,
client/server and Internet, mobile computing, software quality assurance, game
and multimedia software, logo compliance and Year 2000 compliance.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

In the normal course of preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

VeriTest considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities approximates their carrying amounts
because of the short-term maturity of these instruments.

REVENUE RECOGNITION

VeriTest's revenues are derived principally from the performance of lab
testing on computer hardware, software and software logo certification services
performed for customers under a variety of contracts, some of which provide for
reimbursement on a fixed-price basis and others on a time and materials basis.
Generally, revenues and fees on VeriTest's long-term contracts are recognized as
services are performed, using the percentage-of-completion method of accounting.
Revenues on short-term contracts (typically three months or less) are generally
recognized under the completed-contract method upon completion of the lab
testing and delivery of the final report.

Billings and customer collections received prior to the completion of the
lab tests are recorded as deferred revenue until the completion of the tests and
services under the terms of the contracts.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method based upon the estimated
useful lives of the assets, ranging from four to seven years. Leasehold
improvements are amortized over the shorter of their estimated useful life or
the term of the lease. Useful lives are evaluated regularly by management in
order to

F-39
<PAGE>
VERITEST, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
determine recoverability in light of current technological conditions.
Maintenance and repairs are charged to expense as incurred, while renewals and
improvements are capitalized. Upon the sale or retirement of property and
equipment, the accounts are relieved of the cost and the related accumulated
depreciation, with any resulting gain or loss included in the Statement of
Operations.

INCOME TAXES

VeriTest elected to be taxed under Section 1361 of the Internal Revenue Code
as an S Corporation. Under these provisions, VeriTest does not pay federal
corporate income taxes on its taxable income. Instead, the shareholders are
individually liable for federal income taxes based on VeriTest's taxable income.
This election is also valid for state income tax reporting. However, a provision
for state income taxes is required based on a 1.5% state income tax rate, and
this state tax provision is included in the provision for income taxes in the
accompanying Statement of Operations.

COMPREHENSIVE INCOME

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement established standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. Comprehensive income generally represents all changes in
shareholders' equity during the period except those resulting from investments
by, or distributions to, shareholders. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997 and requires restatement of earlier
periods presented. SFAS No. 130 defines comprehensive income as net income plus
all other changes in equity from non-owner sources. VeriTest has no other
comprehensive income items, and accordingly net income equals comprehensive
income.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 1998, the AICPA issued Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." This statement provides guidance on accounting for the costs of
computer software developed or obtained for internal use. This SOP is effective
for fiscal periods commencing after December 15, 1998. Management does not
believe that the implementation of SOP 98-1 will have a material effect on the
financial statements.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement established accounting and
reporting standards for derivative instruments and hedging activities and
requires companies to recognize all derivatives as either assets or liabilities
in the statement of financial position and measures those instruments at fair
value. This statement is expected to be effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. Management does not believe that the
implementation of SFAS No. 133 will have any impact on the financial statements
since VeriTest does not engage in derivative or hedging activities.

3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

Financial instruments which subject VeriTest to concentrations of credit
risk consist primarily of cash and cash equivalents, and trade accounts
receivable. VeriTest maintains cash and cash equivalents with various domestic
financial institutions. VeriTest performs periodic evaluations of the relative
credit

F-40
<PAGE>
VERITEST, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS (CONTINUED)
standing of these institutions. From time to time, VeriTest's cash balances with
any one financial institution may exceed Federal Deposit Insurance Corporation
insurance limits.

VeriTest's customers are primarily concentrated in the United States.
VeriTest performs ongoing credit evaluations and generally requires a deposit on
its larger customer contracts prior to commencing work. Historically, VeriTest
has not experienced any significant losses related to credit risk.

For the year ended December 31, 1998, two customers accounted for
approximately 21% and 15%, respectively, of all revenues generated by VeriTest,
and three customers accounted for approximately 33%, 16% and 12%, respectively,
of accounts receivable at December 31, 1998.

4. PROPERTY AND EQUIPMENT

Property and equipment, net is comprised of the following at December 31,
1998:

<TABLE>
<CAPTION>
USEFUL LIFE
-----------
<S> <C> <C>
Equipment............................................................ 4 years $ 412,826
Furniture and fixtures............................................... 7 years 38,256
Leasehold improvements............................................... 5 years 27,955
Automobiles.......................................................... 5 years 55,588
----------
534,625
Less: accumulated depreciation (360,110)
----------
$ 174,515
----------
----------
</TABLE>

5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses is comprised of the following at
December 31, 1998:

<TABLE>
<CAPTION>
<S> <C>
Accounts payable.................................................................. $ 8,631
Accrued payroll................................................................... 85,820
Accrued vacation.................................................................. 51,520
Accrued profit sharing............................................................ 80,000
Accrued professional fees......................................................... 30,000
Other accrued expenses............................................................ 44,488
----------
$ 300,459
----------
----------
</TABLE>

F-41
<PAGE>
VERITEST, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. COMMITMENTS

VeriTest leases its facility under a noncancelable operating lease. The
following are the minimum lease obligations under the noncancelable operating
lease at December 31, 1998:

<TABLE>
<S> <C>
1999.............................................................. $ 224,724
2000.............................................................. 226,476
2001.............................................................. 228,427
2002.............................................................. 143,884
---------
Minimum lease payments............................................ $ 823,511
---------
---------
</TABLE>

Rent expense for the year ended December 31, 1998 amounted to $180,710.

7. PROFIT SHARING PLAN

VeriTest has a profit sharing plan covering employees with more than two
years of service. All contributions are made by VeriTest, are based on
VeriTest's performance, and are at the discretion of the Board of Directors.
Total VeriTest contributions for the year ended December 31, 1998 were $80,000.

8. CAPITALIZATION

As discussed in Note 2, VeriTest is a subchapter S Corporation with two
shareholders. During 1998, VeriTest made cash distributions to its shareholders
of $145,000 in the aggregate.

9. BANK LINES OF CREDIT

VeriTest has lines of credit available totaling $350,000 at December 31,
1998. There were no borrowings outstanding on these lines of credit at December
31, 1998. The lines of credit bear interest at rates ranging from a prime rate
plus 0.5% to a prime rate plus 0.75% (8.25% to 8.50% at December 31, 1998) and
are secured primarily by VeriTest's accounts receivable and/or property and
equipment. In addition, VeriTest's president and vice-president act as
guarantors for all indebtedness under the agreements.

10. SUBSEQUENT EVENT

Effective January 11, 1999, VeriTest's owners sold all their outstanding
shares of common stock to Lionbridge in exchange for consideration of
$4,354,000, consisting of cash of $3,260,000, 66,668 shares of common stock of
Lionbridge valued at $344,000, and notes payable for $750,000. The agreement
also requires certain contingent cash payments dependent on future operating
performance through December 31, 2000. Concurrent with the sale, VeriTest
converted its tax status from an S Corporation to a C Corporation.

F-42
<PAGE>
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

On January 11, 1999, Lionbridge Technologies, Inc. ("Lionbridge") entered
into an agreement to acquire all of the stock of VeriTest, Inc. for
consideration of $4,354,000, consisting of cash of $3,260,000, 66,668 shares of
common stock valued at $344,000, and notes payable for $750,000. The agreement
also required certain contingent cash payments, limited to $1,000,000, dependent
on future operating performance through December 31, 2000. This acquisition was
accounted for using the purchase method of accounting. The net difference
between the total purchase price of $4,419,000 at the date of acquisition
(including direct costs of the acquisition) and the fair value of assets and
liabilities acquired was recognized as goodwill, totaling $4,338,000. The
initial calculation of goodwill does not include any contingent consideration.
Future payments, if any, under the contingent payment arrangement will increase
goodwill. The results of VeriTest, Inc. are included in the Lionbridge
consolidated financial statements from January 11, 1999.

The following unaudited pro forma combined statements of operations give
effect to this acquisition as if it had occurred on January 1, 1998 and include
all material pro forma adjustments necessary for this purpose. The pro forma
statement of operations for the six months ended June 30, 1999 combines the
results of VeriTest, Inc. from January 1, 1999 to the date of acquisition with
the consolidated results of Lionbridge for the six months ended June 30, 1999.
The pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results that would have actually
occurred if the acquisition had been consummated on January 1, 1998, nor is it
necessarily indicative of future operating results. This unaudited pro forma
information should be read in conjunction with the Lionbridge consolidated
financial statements and notes thereto, included elsewhere in this prospectus.
The combined financial position of Lionbridge and VeriTest, Inc. is presented in
the Lionbridge consolidated balance sheet as of June 30, 1999, included
elsewhere in this prospectus, and is therefore not presented on a pro forma
basis.

F-43
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1998

(UNAUDITED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
LIONBRIDGE
TECHNOLOGIES, VERITEST, PRO FORMA PRO FORMA
INC. INC. ADJUSTMENTS COMBINED
---------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenue............................................. $ 38,412 $ 3,735 $ 42,147
Cost of revenue..................................... 25,546 1,970 27,516
------- ------------ -----------
Gross profit.................................. 12,866 1,765 14,631
------- ------------ -----------
Operating expenses:
Sales and marketing............................... 2,735 191 2,926
General and administrative........................ 10,889 1,567 12,456
Amortization of acquisition-releated intangible
assets.......................................... 2,145 -- $ 868(a) 3,013
Restructuring charges............................. 501 -- -- 501
------- ------------ ----------- -----------
Total operating expenses...................... 16,270 1,758 868 18,896
------- ------------ ----------- -----------

(Loss) income from operations....................... (3,404) 7 (868) (4,265)

(451)
Interest expense.................................... (648) -- (b)
(1,041)
(c) (2,140)
Other income (expense), net......................... 49 -- -- 49
------- ------------ ----------- -----------
(Loss) income before income taxes................... (4,003) 7 (2,360) (6,356)
Provision for income taxes.......................... 259 -- -- 259
------- ------------ ----------- -----------
Net (loss) income................................... (4,262) $ 7 $ (2,360) (6,615)
------------ -----------
------------ -----------
Accrued dividends on preferred stock................ (1,062) (1,062)
------- -----------
Net loss attributable to common stockholders........ $ (5,324) $ (7,677)
------- -----------
------- -----------
Basic and diluted net loss per share attributable to
common stockholders............................... $ (2.99) $ (4.08)
Shares used in computing basic and diluted net loss
per share attributable to common stockholders..... 1,782 100(d) 1,882
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE COMBINED FINANCIAL
STATEMENTS.

F-44
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 1999

(UNAUDITED)

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
LIONBRIDGE
TECHNOLOGIES, PRO FORMA PRO FORMA
INC. VERITEST, INC. ADJUSTMENTS COMBINED
---------------- ----------------- ------------- -----------
<S> <C> <C> <C> <C>
Revenue........................................... $ 23,783 $ -- $ 23,783
Cost of revenue................................... 16,607 68 16,675
-------- ----- -----------
Gross profit (loss)......................... 7,176 (68) 7,108
-------- ----- -----------
Operating expenses:
Sales and marketing............................. 2,613 5 2,618
General and administrative...................... 6,894 80 6,974
Amortization of acquisition-releated intangible
assets........................................ 1,579 -- $ 24(e) 1,603
Stock-based compensation........................ 232 -- -- 232
-------- ----- ----- -----------
Total operating expenses.................... 11,318 85 24 11,427
-------- ----- ----- -----------
Loss from operations.............................. (4,142) (153) (24) (4,319)
(12)
Interest expense.................................. (4,988) -- (f)
(28)
(g) (5,028)
Other income (expense), net....................... (320) -- -- (320)
-------- ----- ----- -----------
Loss before income taxes.......................... (9,450) (153) (64) (9,667)
Provision for income taxes........................ 315 -- -- 315
-------- ----- ----- -----------
Net loss.......................................... (9,765) $ (153) $ (64) (9,982)
----- -----
----- -----
Accrued dividends on preferred stock.............. (531) (531)
-------- -----------
Net loss attributable to common stockholders...... $ (10,296) $ (10,513)
-------- -----------
-------- -----------
Basic and diluted net loss per share attributable
to common stockholders.......................... $ (4.64) $ (4.72)
Shares used in computing basic and diluted net
loss per share attributable to common
stockholders.................................... 2,218 11(h) 2,229
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE COMBINED FINANCIAL
STATEMENTS.

F-45
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

Adjustments to reflect the acquisition of VeriTest, Inc. as if it had
occurred as of January 1, 1998 are as follows:

a) To increase amortization expense due to $4,338,000 of goodwill generated
from the acquisition of VeriTest, Inc., assuming one year of a five-year
amortization period.

b) To record interest expense for one year of interest on debt of
$4,010,000, used to finance the acquisition, at rates of 8% and 12%.

c) To record accretion of discount on notes payable for the value of
warrants issued in connection with debt used to finance the acquisition,
assuming one year of a twenty-month amortization period.

d) To adjust shares used in computing basic and diluted net loss per share
attributable to common stockholders for common shares issued upon the
acquisition that would have been outstanding for the entire year had the
acquisition occurred on January 1, 1998.

e) To increase amortization expense due to $4,338,000 of goodwill generated
from the acquisition of VeriTest, Inc., assuming ten days of a five-year
amortization period.

f) To record interest expense for ten days of interest on debt of
$4,010,000, used to finance the acquisition, at rates of 8% and 12%.

g) To record accretion of discount on notes payable for the value of
warrants issued in connection with debt used to finance the acquisition,
assuming ten days of a twenty-month amortization period.

h) To adjust shares used in computing basic and diluted net loss per share
attributable to common stockholders for common shares issued that would
have been outstanding for ten days had the acquisition occurred on
January 1, 1999.

F-46
<PAGE>
- --------------------------------------------------------------------------------

Until , 1999, all dealers that effect transactions in these securities,
whether or not participating in this offering, 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]

PRUDENTIAL SECURITIES

U.S. BANCORP PIPER JAFFRAY

ADAMS, HARKNESS & HILL, INC.

- ------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the common stock offered hereby are as
follows:

<TABLE>
<S> <C>
SEC registration fee............................................ $ 17,903
NASD filing fee................................................. 10,000
Nasdaq National Market listing fee.............................. 95,000
Printing and engraving expenses................................. 150,000
Legal fees and expenses......................................... 300,000
Accounting fees and expenses.................................... 300,000
Blue Sky fees and expenses (including legal fees)............... 10,000
Transfer agent and registrar fees and expenses.................. 10,000
Miscellaneous................................................... 107,097
---------
Total....................................................... $1,000,000
---------
---------
</TABLE>

Lionbridge will bear all expenses shown above.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Delaware General Corporation Law and Lionbridge's second amended and
restated charter and amended and restated by-laws provide for indemnification of
Lionbridge's directors and officers for liabilities and expenses that they may
incur in such capacities. In general directors and officers are indemnified with
respect to actions taken in good faith in a manner reasonably believed to be in,
or not opposed to, the best interests of Lionbridge and, with respect to any
criminal action or proceeding, actions that the indemnitee had no reasonable
cause to believe were unlawful. Reference is made to Lionbridge's second amended
and restated charter and amended and restated by-laws filed as Exhibits 3.2 and
3.4 hereto, respectively.

The Underwriting Agreement provides that the Underwriters are obligated,
under certain circumstances, to indemnify directors, officers and controlling
persons of Lionbridge against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act"). Reference is made
to the form of Underwriting Agreement filed as Exhibit 1.1 hereto.

In addition, Lionbridge has an existing directors and officers liability
insurance policy.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Lionbridge Technologies, Inc. was originally incorporated in Delaware in
1996. In 1998, Lionbridge Technologies, Inc. became a wholly owned subsidiary of
the Registrant, Lionbridge Technologies Holdings, Inc. In June 1999, Lionbridge
Technologies, Inc. changed its name to Lionbridge America, Inc. and Lionbridge
Technologies Holdings, Inc. changed its name to Lionbridge Technologies, Inc.

In the three fiscal years preceding the filing of this registration
statement, Lionbridge and Lionbridge America have issued the following
securities that were not registered under the Securities Act:

(a) Issuances of Capital Stock.

In September 1996, Lionbridge America issued 2,000 shares of its common
stock, par value $0.01 per share, to Rory J. Cowan at a purchase price of $0.15
per share, for an aggregate of $30.

II-1
<PAGE>
In December 1996, Lionbridge America issued 982,610 shares of its common
stock to Rory J. Cowan pursuant to a 491.3043 to 1 stock dividend and issued to
Mr. Cowan an option to purchase 1,501,529 shares of its common stock.

In December 1996, Lionbridge America issued (i) an aggregate of 1,000 shares
of its Series AA preferred stock, par value $0.01 per share, to five limited
partnerships of Advent International Corporation, at a purchase price of $.01
per share, for an aggregate of $10.00 and (ii) an aggregate of 7,673,108 shares
of its Series A convertible preferred stock, par value $0.01 per share, to Rory
J. Cowan, Morgan Stanley Venture Capital Fund II Annex, L.P. and Morgan Stanley
Venture Investors Annex, L.P. and Stream International Holdings, Inc. at
purchase price of $1.00 per share, for an aggregate of $7,673,108.

In March 1997, Lionbridge America issued an aggregate of 395,000 shares of
its Series A convertible preferred stock to investors at purchase price of $1.00
per share, for an aggregate of $395,000.

In July 1997, Lionbridge America issued an aggregate of 175,000 shares of
its Series A convertible preferred stock to Paul Kavanagh and Kenneth Coleman at
purchase price of $1.00 per share, for an aggregate of $175,000.

In February 1998, Lionbridge issued an aggregate of 1,359,993 shares of its
common stock to the holders of common stock of Lionbridge America in exchange
for all of the 2,039,990 outstanding shares of common stock of Lionbridge
America held by these holders in connection with the creation of our holding
company corporate structure. Lionbridge also issued an aggregate of 13,271,314
shares of its Series A convertible preferred stock, par value $0.01 per share,
and an aggregate of 140 shares of its Series D nonvoting convertible preferred
stock, par value $0.01 per share, to Mr. Cowan, the Advent-sponsored limited
partnerships, the Morgan Stanley-sponsored limited partnerships and other
stockholders of Lionbridge America in exchange for all outstanding shares of
Series A convertible preferred stock of Lionbridge America and ordinary shares
of Lionbridge Technologies Holdings, B.V.

In February 1998, Lionbridge issued 259,524 shares of its common stock to
Carl J. Kay at an agreed upon value of $0.30 per share as partial consideration
for all of the 97,500 outstanding shares of common stock of Japanese Language
Services, Inc. held by Carl J. Kay and Yoko I. Kay in connection with
Lionbridge's acquisition of Japanese Language Services, Inc., a Massachusetts
corporation. Lionbridge also issued an aggregate of 27,435 shares of its common
stock to Elizabeth Draper, Coleman Yeaw and Daniel Schneider in February 1998
and an additional 24,268 shares to Ms. Draper and Mr. Yeaw in February 1999 in
satisfaction of certain obligations of Japanese Language Services to Ms. Draper,
Mr. Yeaw and Mr. Schneider.

In January 1999, Lionbridge issued an aggregate of 66,668 shares of its
common stock to Steven Nezmer and Marc Porter Zasada as partial consideration
for all of the 10,000 outstanding shares of common stock of VeriTest, Inc. held
by Messrs. Nezmer and Zasada in connection with Lionbridge's acquisition of
VeriTest, Inc., a California corporation.

In January 1999, Lionbridge entered into a Senior Subordinated Note Purchase
Agreement with Capital Resource Lenders III, L.P. pursuant to which Lionbridge
borrowed $4,000,000 from Capital Resource Lenders under a 12% senior
subordinated convertible note due January 8, 2000. In February 1999, Lionbridge
entered into a First Amended and Restated Senior Subordinated Note Purchase
Agreement with Capital Resource Lenders pursuant to which Lionbridge borrowed an
additional $2,000,000 from Capital Resource Lenders under an amended and
restated 12% senior subordinated note due February 26, 2006 in the aggregate
principal amount of $6,000,000 and issued to Capital Resource Lenders and an
affiliated entity of Capital Resource Lenders common stock purchase warrants
exercisable for an aggregate of 1,277,716 shares of common stock of Lionbridge
at an exercise price of $0.015 per share.

II-2
<PAGE>
In February 1999, Lionbridge Technologies Holdings, B.V. entered into a
Senior Subordinated Note Purchase Agreement with Capital Resource Lenders
pursuant to which it borrowed $4,000,000 from Capital Resource Lenders under a
12% senior subordinated note due February 26, 2006.

In March 1999, Lionbridge and Lionbridge Technologies Holdings, B.V. entered
into Senior Subordinated Note Purchase Agreements with the Morgan
Stanley-sponsored limited partnerships pursuant to which we borrowed an
aggregate of $2,000,000 from the Morgan Stanley-sponsored limited partnerships
under 12% senior subordinated notes due March 9, 2006 and issued to the Morgan
Stanley-sponsored limited partnerships common stock purchase warrants
exercisable for an aggregate of 255,544 shares of common stock of Lionbridge at
an exercise price of $0.015 per share.

(b) Grants and Exercises of Stock Options

As of June 30, 1999, Lionbridge has granted options to purchase an aggregate
of 2,621,945 shares of its common stock under its 1998 Stock Plan exercisable at
a weighted average exercise price of $1.69 per share. From December 1996 to June
30, 1999, Lionbridge issued 1,009,296 shares of its common stock for an
aggregate purchase price of approximately $151,000 pursuant to exercise of
employee options.

No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to sales by an
issuer not involving any public offering or the rules and regulations
thereunder, or, in the case of options to purchase Common Stock, Rule 701 under
the Securities Act. All of the foregoing securities are deemed restricted
securities for purposes of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
2.1* Stock Purchase Agreement dated as of January 2, 1998 by and among Lionbridge, Japanese Language
Services, Inc., Carl J. Kay and Yoko I. Kay.
2.2* Stock Purchase Agreement dated as of January 6, 1999 among VeriTest, Inc., the shareholders of
VeriTest listed on the signature pages thereto and Lionbridge.
3.1* Restated Certificate of Incorporation of Lionbridge.
3.2, 4.1* Form of Second Amended and Restated Certificate of Incorporation of Lionbridge (to become effective
upon the closing of this offering).
3.3* By-laws of Lionbridge.
3.4, 4.2* Form of Amended and Restated By-laws of Lionbridge (to become effective upon the closing of this
offering).
3.5* Certificate of Amendment of Restated Certificate of Incorporation.
3.6* Form of Certificate of Amendment of Restated Certificate of Incorporation of Lionbridge (effecting
reverse stock split).
4.3* Specimen Certificate for shares of Lionbridge's Common Stock.
5.1 Legal Opinion of Testa, Hurwitz & Thibeault, LLP.
10.1* 1998 Stock Plan.
10.2* 1999 Employee Stock Purchase Plan.
10.3* Lease dated as of February 13, 1997 between Shorenstein Management, Inc., as Trustee of SRI Two
Realty Trust, and Lionbridge Technologies, Inc.
10.4* Employment Agreement dated as of December 23, 1996 between Lionbridge Technologies, Inc. and Rory J.
Cowan.
</TABLE>

II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.5* Employment Agreement dated as of February 24, 1997 between Lionbridge Technologies, Inc. and Myriam
Martin-Kail.
10.6* Employment Agreement dated as of February 11, 1997 between Lionbridge Technologies, Inc. and Stephen
J. Lifshatz.
10.7* Employment Agreement dated as of February 28, 1997 between Lionbridge Technologies, Inc. and Peter
Wright.
10.8* Second Restated Registration Rights Agreement dated as of February 26, 1999 by and among Lionbridge.
Capital Resource Lenders III, L.P., Morgan Stanley Venture Capital Fund II Annex, L.P., Morgan
Stanley Venture Investors Annex, L.P and each of the other parties listed on the signature pages
thereto.
10.9* Loan Agreement dated as of September 26, 1997 by and between Silicon Valley Bank and Lionbridge
Technologies Holdings B.V. and Lionbridge Technologies B.V.
10.10* Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies, Inc. of Shares in the
Capital of Lionbridge Technologies Holdings B.V. in favor of Silicon Valley Bank.
10.11* Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies Holdings B.V. of Shares in
the Capital of Lionbridge Technologies B.V. in favor of Silicon Valley Bank.
10.12* Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies B.V. of Accounts Receivable
of Lionbridge Technologies B.V. in favor of Silicon Valley Bank.
10.13* Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies Holdings B.V. of Accounts
Receivable of Lionbridge Technologies Holdings B.V. in favor of Silicon Valley Bank.
10.14* Letter of Deposit dated as of September 26, 1997 of Lionbridge Technologies Holdings B.V. and Rory
Cowan to Silicon Valley Bank.
10.15* Security Agreement dated as of September 26, 1997 between Lionbridge Technologies, Inc. and Silicon
Valley Bank.
10.16* Guarantee dated as of September 26, 1997 made by Lionbridge Technologies Ireland in favor of Silicon
Valley Bank.
10.17* Debenture dated as of September 26, 1997 between Lionbridge Technologies Ireland and Silicon Valley
Bank.
10.18* Loan Document Modification Agreement Number 1 dated as of May 21, 1998 by and among Lionbridge
Technologies Holdings B.V., Lionbridge Technologies B.V. and Silicon Valley Bank.
10.19* Pledge Agreement dated as of May 21, 1998 between Lionbridge Technologies Holdings B.V. and Silicon
Valley Bank regarding capital stock of Lionbridge Technologies (France).
10.20* Warrant to Purchase Common Stock of Lionbridge dated as of May 21, 1998 issued to Silicon Valley
Bancshares.
10.21* Pledge Agreement dated as of May 21, 1998 between Lionbridge and Silicon Valley Bank regarding
capital stock of Lionbridge Technologies California, Inc.
10.22* Pledge Agreement dated as of May 21, 1998 between Lionbridge and Silicon Valley Bank regarding
capital stock of Japanese Language Services, Inc.
10.23* Amended and Restated Guarantee dated as of May 21, 1998 made by Lionbridge Technologies, Inc. in
favor of Silicon Valley Bank.
10.24* Guarantee dated as of May 21, 1998 made by Japanese Language Services, Inc. in favor of Silicon
Valley Bank.
10.25* Pledge Agreement dated as of May 21, 1998 between Japanese Language Services, Inc. and Silicon Valley
Bank regarding capital stock of Lionbridge Japan K.K.
10.26* Security Agreement dated as of May 21, 1998 between Japanese Language Services, Inc. and Silicon
Valley Bank.
10.27* Guarantee dated as of May 21, 1998 made by Lionbridge Japan K.K. in favor of Silicon Valley Bank.
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.28* Guarantee dated as of May 21, 1998 made by Lionbridge Technologies California, Inc. in favor of
Silicon Valley Bank.
10.29* Security Agreement dated as of May 21, 1998 between Lionbridge Technologies California, Inc. and
Silicon Valley Bank.
10.30* First Demand Guarantee dated as of May 21, 1998 made by Lionbridge Technologies (France) in favor of
Silicon Valley Bank.
10.31* Loan Document Modification Agreement Number 2 dated as of February 25, 1999 by and among Lionbridge
Technologies Holdings B.V., Lionbridge Technologies B.V., Lionbridge Technologies, Inc. and Silicon
Valley Bank.
10.32* Common Stock Purchase Warrant of Lionbridge dated as of February 27, 1999 issued to Capital Resource
Partners III, L.P.
10.33* Common Stock Purchase Warrant of Lionbridge dated as of February 27, 1999 issued to CRP Investment
Partners III, L.L.C.
10.34* Common Stock Purchase Warrant of Lionbridge dated as of March 9, 1999 issued to Morgan Stanley
Venture Capital Fund II Annex, L.P.
10.35* Common Stock Purchase Warrant of Lionbridge dated as of March 9, 1999 issued to Morgan Stanley
Venture Investors Annex, L.P.
10.36* Lease dated as of January 1, 1998 between Corke Abbey Investments Limited and Lionbridge Technologies
Ireland.
10.37* Lease dated as of March 1, 1991 between Corke Abbey Investments and Andrews Travel Consultants
Limited; Assignment to European Language Translations Limited as of March 12, 1993.
10.38* Lease dated as of September 14, 1990 between Corke Abbey Investments Limited and European Language
Translations Limited.
10.39* Agreement dated as of December 4, 1998 between the Industrial Development Agency (Ireland) and
Lionbridge.
10.40* Loan Document Modification Agreement Number 3 dated as of May 20, 1999 by and among Lionbridge
Technologies Holdings B.V., Lionbridge Technologies B.V. and Silicon Valley Bank.
10.41* Form of Non-Competition Agreement as entered into between Lionbridge and each of Rory J. Cowan,
Stephen J. Lifshatz, and Peter Wright.
10.42* Amended and Restated Promissory Note dated as of May 20, 1999 payable to Silicon Valley Bank.
10.43* Loan Document Modification Agreement Number 4 dated as of July 16, 1999 by and among Lionbridge
Technologies Holdings B.V., Lionbridge Technologies B.V., Lionbridge America, Inc., and Silicon
Valley Bank.
10.44 Senior Subordinated Note Purchase Agreement by and among Lionbridge, Morgan Stanley Venture Capital
Fund II Annex, L.P. and Morgan Stanley Venture Investors Annex, L.P. dated as of March 9, 1999.
10.45 Senior Subordinated Note Purchase Agreement by and among Lionbridge Technologies Holdings B.V.,
Morgan Stanley Venture Capital Fund II Annex, L.P. and Morgan Stanley Venture Investors Annex, L.P.
dated as of March 9, 1999.
10.46 First Amended and Restated Senior Subordinated Note Purchase Agreement by and between Lionbridge and
Capital Resource Lenders III, L.P. dated as of February 26, 1999.
10.47 Senior Subordinated Note Purchase Agreement by and between Lionbridge Technologies Holdings B.V. and
Capital Resource Lenders III, L.P. dated as of February 26, 1999.
10.48 Form of Senior Subordinated Promissory Notes issued pursuant to Senior Subordinated Note Purchase
Agreements.
10.49 Letter Agreements amending each of the Senior Subordinated Note Purchase Agreements.
21.1* Subsidiaries of Lionbridge, as amended.
</TABLE>

II-5

<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
23.1 Consent of Testa, Hurwitz & Thibeault, LLP (contained in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
24.1* Power of Attorney.
27.1 Financial Data Schedule.
</TABLE>

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

* Previously filed.

(B) FINANCIAL STATEMENT SCHEDULES.

All other schedules have been intentionally omitted because they are
either not required or the information has been included in the Notes to the
consolidated financial statements included as part of this Registration
Statement.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 above, or otherwise,
the registrant 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 registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant 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, the registrant 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 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) 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; (2) that for
purposes of determining any liability under the Securities Act, 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
registrant 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 (3) that for the purpose of determining any liability
under the Securities Act, 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-6

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 5 to the registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Waltham, Massachusetts on August 19, 1999.

LIONBRIDGE TECHNOLOGIES, INC.

By: /s/ STEPHEN J. LIFSHATZ
-----------------------------------------
Stephen J. Lifshatz
CHIEF FINANCIAL OFFICER, TREASURER AND
SECRETARY (PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 5 to the registration statement has been signed by the following persons in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------

<C> <S> <C>
President, Chief Executive
* Officer and Chairman of
- ------------------------------ the Board (Principal August 19, 1999
Rory J. Cowan Executive Officer)

Chief Financial Officer,
/s/ STEPHEN J. LIFSHATZ Treasurer and Secretary
- ------------------------------ (Principal Financial and August 19, 1999
Stephen J. Lifshatz Accounting Officer)

* Director
- ------------------------------ August 19, 1999
Guy L. de Chazal

* Director
- ------------------------------ August 19, 1999
Marcia J. Hooper

* Director
- ------------------------------ August 19, 1999
Stephen M. Jenks

* Director
- ------------------------------ August 19, 1999
Paul Kavanagh

* Director
- ------------------------------ August 19, 1999
Claude P. Sheer
</TABLE>

<TABLE>
<S> <C> <C> <C>
*By: /s/ STEPHEN J. LIFSHATZ
-------------------------
Stephen J. Lifshatz
ATTORNEY-IN-FACT
</TABLE>

II-7
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT INDEX
- ----------- -------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
2.1* Stock Purchase Agreement dated as of January 2, 1998 by and among Lionbridge,
Japanese Language Services, Inc., Carl J. Kay and Yoko I. Kay.
2.2* Stock Purchase Agreement dated as of January 6, 1999 among VeriTest, Inc., the
shareholders of VeriTest listed on the signature pages thereto and Lionbridge.
3.1* Restated Certificate of Incorporation of Lionbridge.
3.2, 4.1* Form of Second Amended and Restated Certificate of Incorporation of Lionbridge
(to become effective upon the closing of this offering).
3.3* By-laws of Lionbridge.
3.4, 4.2* Form of Amended and Restated By-laws of Lionbridge (to become effective upon
the closing of this offering).
3.5* Certificate of Amendment of Restated Certificate of Incorporation of
Lionbridge.
3.6* Form of Certificate of Amendment of Restated Certificate of Incorporation of
Lionbridge (effecting reverse stock split).
4.3* Specimen Certificate for shares of Lionbridge's Common Stock.
5.1 Legal Opinion of Testa, Hurwitz & Thibeault, LLP.
10.1* 1998 Stock Plan.
10.2* 1999 Employee Stock Purchase Plan.
10.3* Lease dated as of February 13, 1997 between Shorenstein Management, Inc., as
Trustee of SRI Two Realty Trust, and Lionbridge Technologies, Inc.
10.4* Employment Agreement dated as of December 23, 1996 between Lionbridge
Technologies, Inc. and Rory J. Cowan.
10.5* Employment Agreement dated as of January 1, 1997 between Lionbridge
Technologies, Inc. and Myriam Martin-Kail.
10.6* Employment Agreement dated as of February 11, 1997 between Lionbridge
Technologies, Inc. and Stephen J. Lifshatz.
10.7* Employment Agreement dated as of February 28, 1997 between Lionbridge
Technologies, Inc. and Peter Wright.
10.8* Second Restated Registration Rights Agreement dated as of February 26, 1999 by
and among Lionbridge, Capital Resource Lenders III, L.P., Morgan Stanley
Venture Capital Fund II Annex, L.P., Morgan Stanley Venture Investors Annex,
L.P., and each of the other parties listed on the signature pages thereto.
10.9* Loan Agreement dated as of September 26, 1997 by and between Silicon Valley
Bank and Lionbridge Technologies Holdings B.V. and Lionbridge Technologies B.V.
10.10* Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies, Inc.
of Shares in the Capital of Lionbridge Technologies Holdings B.V. in favor of
Silicon Valley Bank.
10.11* Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies
Holdings B.V. of Shares in the Capital of Lionbridge Technologies B.V. in favor
of Silicon Valley Bank.
10.12* Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies B.V.
of Accounts Receivable of Lionbridge Technologies B.V. in favor of Silicon
Valley Bank.
10.13* Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies
Holdings B.V. of Accounts Receivable of Lionbridge Technologies Holdings B.V.
in favor of Silicon Valley Bank.
10.14* Letter of Deposit dated as of September 26, 1997 of Lionbridge Technologies
Holdings B.V. and Rory Cowan to Silicon Valley Bank.
10.15* Security Agreement dated as of September 26, 1997 between Lionbridge
Technologies, Inc. and Silicon Valley Bank.
10.16* Guarantee dated as of September 26, 1997 made by Lionbridge Technologies
Ireland in favor of Silicon Valley Bank.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT INDEX
- ----------- -------------------------------------------------------------------------------
<S> <C>
10.17* Debenture dated as of September 26, 1997 between Lionbridge Technologies
Ireland and Silicon Valley Bank.
10.18* Loan Document Modification Agreement Number 1 dated as of May 21, 1998 by and
among Lionbridge Technologies Holdings B.V., Lionbridge Technologies B.V. and
Silicon Valley Bank.
10.19* Pledge Agreement dated as of May 21, 1998 between Lionbridge Technologies
Holdings B.V. and Silicon Valley Bank regarding capital stock of Lionbridge
Technologies (France).
10.20* Warrant to Purchase Common Stock of Lionbridge dated as of May 21, 1998 issued
to Silicon Valley Bancshares.
10.21* Pledge Agreement dated as of May 21, 1998 between Lionbridge and Silicon Valley
Bank regarding capital stock of Lionbridge Technologies California, Inc.
10.22* Pledge Agreement dated as of May 21, 1998 between Lionbridge and Silicon Valley
Bank regarding capital stock of Japanese Language Services, Inc.
10.23* Amended and Restated Guarantee dated as of May 21, 1998 made by Lionbridge
Technologies, Inc. in favor of Silicon Valley Bank.
10.24* Guarantee dated as of May 21, 1998 made by Japanese Language Services, Inc. in
favor of Silicon Valley Bank.
10.25* Pledge Agreement dated as of May 21, 1998 between Japanese Language Services,
Inc. and Silicon Valley Bank regarding capital stock of Lionbridge Japan K.K.
10.26* Security Agreement dated as of May 21, 1998 between Japanese Language Services,
Inc. and Silicon Valley Bank.
10.27* Guarantee dated as of May 21, 1998 made by Lionbridge Japan K.K. in favor of
Silicon Valley Bank.
10.28* Guarantee dated as of May 21, 1998 made by Lionbridge Technologies California,
Inc. in favor of Silicon Valley Bank.
10.29* Security Agreement dated as of May 21, 1998 between Lionbridge Technologies
California, Inc. and Silicon Valley Bank.
10.30* First Demand Guarantee dated as of May 21, 1998 made by Lionbridge Technologies
(France) in favor of Silicon Valley Bank.
10.31* Loan Document Modification Agreement Number 2 dated as of February 25, 1999 by
and among Lionbridge Technologies Holdings B.V., Lionbridge Technologies B.V.,
Lionbridge Technologies, Inc. and Silicon Valley Bank.
10.32* Common Stock Purchase Warrant of Lionbridge dated as of February 27, 1999
issued to Capital Resource Partners III, L.P.
10.33* Common Stock Purchase Warrant of Lionbridge dated as of February 27, 1999
issued to CRP Investment Partners III, L.L.C.
10.34* Common Stock Purchase Warrant of Lionbridge dated as of March 9, 1999 issued to
Morgan Stanley Venture Capital Fund II Annex, L.P.
10.35* Common Stock Purchase Warrant of Lionbridge dated as of March 9, 1999 issued to
Morgan Stanley Venture Investors Annex, L.P.
10.36* Lease dated as of January 1, 1998 between Corke Abbey Investments Limited and
Lionbridge Technologies Ireland.
10.37* Lease dated as of March 1, 1991 between Corke Abbey Investments and Andrews
Travel Consultants Limited; Assignment to European Language Translations
Limited as of March 12, 1993.
10.38* Lease dated as of September 14, 1990 between Corke Abbey Investments Limited
and European Language Translations Limited.
10.39* Agreement dated as of December 4, 1998 between the Industrial Development
Agency (Ireland) and Lionbridge.
10.40* Loan Document Modification Agreement Number 3 dated as of May 20, 1999 by and
among Lionbridge Technologies Holdings B.V., Lionbridge Technologies B.V. and
Silicon Valley Bank.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT INDEX
- ----------- -------------------------------------------------------------------------------
<S> <C>
10.41* Form of Non-Competition Agreement as entered into between Lionbridge and each
of Rory J. Cowan, Stephen J. Lifshatz, and Peter Wright.
10.42* Amended and Restated Promissory Note dated as of May 20, 1999 payable to
Silicon Valley Bank.
10.43* Loan Document Modification Agreement Number 4 dated as of July 16, 1999 by and
among Lionbridge Technologies Holdings B.V., Lionbridge Technologies B.V.,
Lionbridge America, Inc., and Silicon Valley Bank
10.44 Senior Subordinated Note Purchase Agreement by and among Lionbridge, Morgan
Stanley Venture Capital Fund II Annex, L.P. and Morgan Stanley Venture
Investors Annex, L.P. dated as of March 9, 1999.
10.45 Senior Subordinated Note Purchase Agreement by and among Lionbridge
Technologies Holdings B.V., Morgan Stanley Venture Capital Fund II Annex, L.P.
and Morgan Stanley Venture Investors Annex, L.P. dated as of March 9, 1999.
10.46 First Amended and Restated Senior Subordinated Note Purchase Agreement by and
between Lionbridge and Capital Resource Lenders III, L.P. dated as of February
26, 1999.
10.47 Senior Subordinated Note Purchase Agreement by and between Lionbridge
Technologies Holdings B.V. and Capital Resource Lenders III, L.P. dated as of
February 26, 1999.
10.48 Form of Senior Subordinated Promissory Notes issued pursuant to Senior
Subordinated Note Purchase Agreements.
10.49 Letter Agreements amending each of the Senior Subordinated Note Purchase
Agreements.
21.1* Subsidiaries of Lionbridge, as amended.
23.1 Consent of Testa, Hurwitz & Thibeault, LLP (contained in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
24.1* Power of Attorney.
27.1 Financial Data Schedule.
</TABLE>

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

* Previously filed.

<PAGE>

Exhibit 5.1

[ Testa, Hurwitz & Thibeault, LLP Letterhead ]

August 19, 1999

Lionbridge Technologies, Inc.
950 Winter Street
Waltham, Massachusetts 02451

RE: Registration Statement on Form S-1
(FILE NO. 333-81233)
----------------------------------

Ladies and Gentlemen:

This opinion relates to an aggregate of 4,025,000 shares of common
stock, par value $.01 per share ("common stock"), of Lionbridge Technologies,
Inc. (the "Company"), which are the subject matter of a Registration Statement
on Form S-1 as filed with the Securities and Exchange Commission (the
"Commission") on June 21, 1999, as amended (the "Registration Statement").

The 4,025,000 shares of common stock covered by the Registration
Statement consist of 3,500,000 shares being sold by the Company and 131,666
shares and 393,334 shares subject to an over-allotment option granted by the
Company and certain stockholders of the Company (the "Selling Stockholders"),
respectively, to the underwriters named in the prospectus (the "Prospectus")
incorporated by reference in the Registration Statement.

Based upon such investigation as we have deemed necessary, we are of
the opinion that when the 3,631,666 shares of common stock to be sold by the
Company pursuant to the Prospectus have been issued and paid for in accordance
with the terms described in the Prospectus, such shares of common stock will
have been validly issued and will be fully paid and nonassessable. Further, we
are of the opinion that the 393,334 shares of common stock to be sold by the
Selling Stockholders pursuant to the Prospectus are validly issued, fully paid
and nonassessable.

We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm in the Prospectus under
the caption "Legal Matters."

Very truly yours,

/s/ Testa, Hurwitz & Thibeault, LLP
TESTA, HURWITZ & THIBEAULT, LLP

<PAGE>

================================================================================

SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT

by and among

LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.

and

MORGAN STANLEY VENTURE CAPITAL FUND II ANNEX, L.P.

and

MORGAN STANLEY VENTURE INVESTORS ANNEX, L.P.

Dated as of March 9, 1999

================================================================================
<PAGE>

LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.

Senior Subordinated Note Purchase Agreement

Dated as of March 9, 1999

TABLE OF CONTENTS

Page

<S> <C> <C> <C>
ARTICLE I

DEFINITIONS............................................................................................................... 1
1.01. Definitions........................................................................... 1

ARTICLE II

PURCHASE, SALE AND TERMS OF NOTES; PAYMENTS............................................................................... 8
2.01. The Notes............................................................................. 8
2.02. Purchase and Sale of the Notes and the Warrants....................................... 8
2.03. Issue Price; Original Issue Discount.................................................. 9
2.04. Use of Proceeds....................................................................... 9
2.05. Payments and Endorsements............................................................. 9
2.06. Redemptions........................................................................... 9
2.07. Default Rate of Interest.............................................................. 10
2.08. Maximum Legal Rate of Interest........................................................ 10
2.09. Payment on Non-Business Days.......................................................... 10
2.10. Transfer and Exchange of Notes........................................................ 10
2.11. Replacement of Notes.................................................................. 11

ARTICLE III

PURCHASE, SALE AND TERMS OF WARRANTS...................................................................................... 11

3.01. The Warrants.......................................................................... 11
3.02. Purchase and Sale of Warrants......................................................... 11
3.03. Right to Purchase New Subordinated Debt............................................... 11

ARTICLE IV

CONDITIONS TO PURCHASER'S OBLIGATION...................................................................................... 12
4.01. Representations and Warranties........................................................ 12
4.02. Documentation at Closing.............................................................. 12
4.03 Closing of LTHBV Note Purchase Agreement.............................................. 13

i
<PAGE>

4.04. No Default............................................................................ 14
4.05. Waivers and Consents.................................................................. 14

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER........................................................................... 14
5.01. Representations and Warranties of the Purchaser....................................... 14

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................................. 15
6.01. Organization and Standing of the Company and Subsidiaries; Ownership.................. 15
6.02. Corporate Action...................................................................... 16
6.03. Governmental Approvals................................................................ 16
6.04. Litigation............................................................................ 16
6.05. Compliance with Law................................................................... 17
6.06. Federal Reserve Regulations........................................................... 17
6.07. Title to Assets, Patents.............................................................. 17
6.08. Financial Information................................................................. 17
6.09. Taxes................................................................................. 18
6.10. ERISA................................................................................. 18
6.11. Transactions with Affiliates.......................................................... 19
6.12. Assumptions or Guaranties of Indebtedness of Other Persons............................ 19
6.13. Loans to Other Persons................................................................ 19
6.14. Securities Act........................................................................ 19
6.15. Disclosure............................................................................ 19
6.16. No Brokers or Finders................................................................. 20
6.17. Other Agreements of Officers.......................................................... 20
6.18. Capitalization of the Company; Status of Capital Stock................................ 20
6.19. Capital Stock of Subsidiaries......................................................... 20
6.20. Labor Relations....................................................................... 20
6.21. Insurance............................................................................. 21
6.22. Books and Records..................................................................... 21
6.23. Hazardous and Toxic Materials......................................................... 21
6.24. Registration Rights................................................................... 21
6.25. Other Agreements...................................................................... 21
6.26. Customers, Vendors and Suppliers...................................................... 22
6.27. No Violations......................................................................... 23

ARTICLE VII

COVENANTS OF THE COMPANY.................................................................................................. 23
7.01. Affirmative Covenants of the Company Other Than Reporting Requirements................ 23
7.02. Negative Covenants of the Company..................................................... 26
7.03. Reporting Requirements................................................................ 30

ii
<PAGE>

ARTICLE VIII

EVENTS OF DEFAULT......................................................................................................... 31
8.01. Events of Default..................................................................... 31
8.02. Annulment of Defaults................................................................. 34

ARTICLE IX

MISCELLANEOUS............................................................................................................. 34
9.01. No Waiver; Cumulative Remedies........................................................ 34
9.02. Amendments, Waivers and Consents...................................................... 34
9.03. Addresses for Notices, Etc............................................................ 34
9.04. Costs, Expenses and Taxes............................................................. 36
9.05. Binding Effect; Assignment............................................................ 36
9.06. Payments in Respect of Notes.......................................................... 36
9.07. Payments in Respect of Warrants....................................................... 36
9.08. Indemnification....................................................................... 37
9.09. Survival of Representations and Warranties............................................ 37
9.10. Intentionally Omitted................................................................. 37
9.11. Severability.......................................................................... 37
9.12. Governing Law......................................................................... 37
9.13. Waiver of Right to Jury Trial......................................................... 37
9.14. Headings.............................................................................. 37
9.15. Sealed Instrument..................................................................... 37
9.16. Counterparts.......................................................................... 37
9.17. Further Assurances.................................................................... 37
9.18. Consent to Jurisdiction............................................................... 38
9.19. Effect of Judgment.................................................................... 38
9.20. Service of Process.................................................................... 38
9.21. No Limitation......................................................................... 38
9.22. Specific Performance.................................................................. 38
9.23. Actions by Purchaser.................................................................. 38
</TABLE>

iii
<PAGE>

EXHIBITS

2.01 Form of Initial Notes
2.04 Use of Proceeds
3.01 Warrants
4.029(c) JLSI Guaranty
4.02(d) LTCI Guaranty
4.02(e) LTI Guaranty
4.02(f) VTI Guaranty
4.02(h) Opinion of Testa, Hurwitz & Thibeault, LLP
6.01 Schedule of Subsidiaries
6.04 Schedule of Litigation
6.07 Schedule of Title Exceptions
6.08(a) Financial Statements
6.08(c) Liabilities; Guaranties; Etc.
6.08(d) Schedule of Indebtedness
6.09 Schedule of Taxes
6.11 Transactions with Affiliates
6.13 Investments in Other Persons
6.17 Schedule of Other Agreements of Officers and Key Employees
6.18 Schedule of Capital Stock, Options and Other Rights
6.19 Schedule of Capital Stock of Subsidiaries
6.21 Schedule of Insurance to be Obtained
6.23 Hazardous or Toxic Materials
6.25 Contracts, etc.
7.02(b) Indebtedness

iv
<PAGE>

Lionbridge Technologies Holdings, Inc.
950 Winter Street
Waltham, MA 02154

As of March 9, 1999

Morgan Stanley Venture Capital Fund II Annex, L.P.
Morgan Stanley Venture Investors Annex, L.P.
1221 Avenue of the Americas
New York, New York 10020

Re: 12% SENIOR SUBORDINATED NOTES DUE MARCH 9, 2006
-----------------------------------------------

Ladies and Gentlemen:

Whereas Lionbridge Technologies Holdings, Inc., a Delaware corporation
(together with its successors and assigns, the "Company"), has requested Morgan
Stanley Venture Capital Fund II Annex, L.P., a Delaware limited partnership
("MSC") and Morgan Stanley Venture Investors Annex, L.P., a Delaware limited
partnership ("MSI") to purchase from the Company a 12% Senior Subordinated Note
due March 9, 2006 in the original principal amount of $1,055,638 and a 12%
Senior Subordinated Note due March 9, 2006 in the original principal amount of
$144,362, respectively. The Company is issuing such 12% Senior Subordinated
Notes as part of a Two Million Dollar ($2,000,000) financing of the Company and
the other members of the Consolidated Group (as defined below), which financing
also includes the issuance to MSC and MSI by Lionbridge Technologies Holdings
B.V., a company with limited liability incorporated in the Netherlands (together
with its successors and assigns, "LTHBV"), of its 12% Senior Subordinated Note
due March 9, 2006 in the original principal amount of $703,758 and 12% Senior
Subordinated Note due March 9, 2006, in the original principal amount of
$96,242, respectively, pursuant to a Senior Subordinated Note Purchase Agreement
dated as of the date hereof by and among LTHBV, MSC and MSI (as from time to
time amended and in effect, the "LTHBV Note Purchase Agreement").

ARTICLE I

DEFINITIONS

1.01. DEFINITIONS. As used herein, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):

"AFFILIATE" means, as to any specified Person, any other Person
controlling, controlled by or under common control with such specified Person.

"AGREEMENT" means this Senior Subordinated Note Purchase Agreement as
from time to time amended and in effect between the parties.
<PAGE>

"APPLICABLE LAWS" shall have the meaning assigned to that term in
Section 6.05.

"BANK" means and shall include Silicon Valley Bank, a
California-chartered bank, and its successors and assigns, or such other bank or
institutional lender which may from time to time be the primary lender to the
Company and/or other members of the Consolidated Group.

"BUDGET" shall have the meaning assigned to that term in Section
7.03(b).

"BUSINESS DAY" means any day other than a Saturday, Sunday or public
holiday or the equivalent for banks under the laws of the Commonwealth of
Massachusetts.

"CHANGE OF CONTROL" means, with respect to any member of the
Consolidated Group, any transaction, series of related transactions or event as
a result of which any one or more Persons (other than the Purchaser, any other
member of the Consolidated Group, or other holders of the capital stock of the
Company or securities convertible into or exercisable for such capital stock as
of the date hereof) acquires or for the first time controls or is able to vote
(directly or through nominees or beneficial ownership) fifty percent (50%) or
more of the outstanding equity securities of such member.

"CLOSING" shall have the meaning assigned to that term in Section
2.02.

"CLOSING DATE" shall have the meaning assigned to that term in Section
2.02.

"CODE" shall have the meaning assigned to that term in Section 2.03.

"COMMISSION" means the United States Securities and Exchange
Commission (or any other federal agency at that time administering the
Securities Act).

"COMMON STOCK" includes (a) the Company's common stock, $.01 par
value, as authorized on the date of this Agreement, and (b) any other capital
stock of any class or classes (however designated) of the Company, authorized on
or after the date hereof, the holders of which shall have the right, without
limitation as to amount per share, either to all or to a share of the balance of
current dividends and liquidating distributions after the payment of dividends
and distributions on any shares entitled to preference in the payment thereof,
and the holders of which shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors of the Company
(even though the right so to vote may have been suspended by the happening of
such a contingency), and (c) any other securities into which or for which any of
the securities described in (a) or (b) above may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.

"COMPANY" shall have the meaning assigned to that term in the Preamble
hereof.

"CONSOLIDATED GROUP" means the Company, JLSI, LJKK, LTCI, LTI, VTI,
LTBV, LTHBV, LT Ireland and LTF, together with their respective successors,
assigns and Subsidiaries, existing from time to time.

"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of

2
<PAGE>

credit or other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed, co-made or discounted or
sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable; (ii) any obligations with respect to
undrawn letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; PROVIDED, HOWEVER,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business.

"CONVERTIBLE PREFERRED STOCK" shall mean the outstanding shares of the
Series A Convertible Preferred Stock, $.01 par value of the Company, the Series
C Convertible Preferred Stock, $.01 par value of the Company and Series D
Nonvoting Convertible Preferred Stock, $.01 par value of the Company.

"CRL" means Capital Resource Lenders III, L.P.

"CRL INDEBTEDNESS" means the Indebtedness of the Company to CRL.

"CURRENT LIABILITIES" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of the Company and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding advances made
under the Loan Agreement, including all Indebtedness that is payable upon demand
or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of the Company or any
Subsidiary to a date more than one year from the date of determination, but
excluding any Indebtedness incurred by the Company or any Subsidiary that is
subordinated to debt owing by the Company or any Subsidiary to the Bank on terms
acceptable to the Bank and is identified as such by the Bank.

"DISTRIBUTION" shall have the meaning assigned to that term in Section
7.02(g).

"EBITDA" means, for any applicable fiscal period, consolidated net
income (or loss) after taxes for such period of the Company and its Subsidiaries
as determined in accordance with GAAP, plus the following to the extent deducted
in computing the foregoing: (i) Interest Expense; (ii) taxes; (iii)
depreciation; and (iv) amortization of goodwill and other intangibles.

"ENVIRONMENTAL LAWS" shall have the meaning assigned to that term in
Section 6.23.

"EQUITY SECURITY" shall have the meaning assigned to that term in the
Exchange Act.

"ERISA" shall have the meaning assigned to that term in Section 6.10.

"EVENTS OF DEFAULT" shall have the meaning assigned to that term in
Section 8.01.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

3
<PAGE>

"FINANCIAL STATEMENTS" shall have the meaning assigned to that term in
Section 6.08.

"FOREIGN GUARANTIES" means the those certain guaranties executed by
LJKK, LT Ireland, LTBV and LTF in favor of MSC and MSI in connection with the
LTHBV Financing.

"FOREIGN SUBSIDIARIES" shall have the meaning assigned to that term in
Section 7.01(g).

"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time, provided, however, the Purchaser
acknowledges that with respect to the financial statements to be delivered to
Purchaser pursuant to Section 7.03(b), there may be inconsistencies with GAAP
which in the aggregate shall not be material. Unless otherwise specifically
stated herein, use of the term "GAAP" means that such principles are applied and
maintained on a consistent basis for the Company and its Subsidiaries throughout
the period indicated and consistent with the prior financial practices of the
Company and its Subsidiaries as reflected on the Financial Statements so as to
properly reflect the financial condition, and the results of operations and cash
flow of the Company and its Subsidiaries.

"GUARANTIES" means the JLSI Guaranty, the LTCI Guaranty, the LTI
Guaranty and the VTI Guaranty.

"GUARANTORS" means the Subsidiary Guarantors, including, without
limitation, JLSI, LTCI, LTI and VTI.

"HAZARDOUS DISCHARGE" shall have the meaning assigned to that term in
Section 6.23.

"HAZARDOUS MATERIALS" shall have the meaning assigned to that term in
Section 6.23.

"INDEBTEDNESS" means all (i) indebtedness for borrowed money or the
deferred purchase price of property or services, including, without limitation,
reimbursement and other obligations with respect to surety bonds, letters of
credit and similar instruments, (ii) all obligations evidenced by notes, bonds,
debentures or similar instruments, (iii) all capital lease obligations, and (iv)
Contingent Obligations.

"INITIAL NOTE" AND "INITIAL NOTES" shall have the meanings assigned to
those terms in Section 2.01.

"INTEREST EXPENSE" means, for any applicable fiscal period, the sum of
(i) the aggregate amount of interest required to be paid in cash during such
period on Indebtedness of the Company and its Subsidiaries (on a consolidated
basis), and (ii) any original issue discount resulting from the issuance of the
Notes, the LTHBV Notes and the Warrants which has accrued during such fiscal
period.

"JLSI" means Japanese Language Services, Inc., a Massachusetts
corporation, and its successors and assigns.

"JLSI GUARANTY" shall have the meaning assigned to that term in
Section 4.02(d).

4
<PAGE>

Agreement at the time it is created or incurred, and shall include all
Indebtedness between the Company or any Subsidiary and any other Subsidiary.

"LIQUIDITY IPO" means a firm commitment underwritten public offering
of securities on a major exchange pursuant to a registration statement filed
with the Commission under the Securities Act in which the aggregate proceeds to
the Company, any Subsidiary or the Consolidated Group are at least $25 million.

"LOAN AGREEMENT" means that certain Loan Agreement, dated September
26, 1997, by and among the LTHBV, LTBV and the Bank, as amended by Amendment
No.1, dated as of May 28, 1998, as it may be further amended from time to time.

"LJKK" means Lionbridge Japan K.K., a Japanese corporation, and its
successors and assigns.

"LTBV" means Lionbridge Technologies B.V., a company with limited
liability incorporated in the Netherlands, and its successors and assigns.

"LTCI" means Lionbridge Technologies California, Inc., a Delaware
corporation, and its successors and assigns.

"LTCI GUARANTY" shall have the meaning assigned to that term in
Section 4.02(e).

"LTF" means Lionbridge Technologies (France), a French company, and
its successors and assigns.

"LTHBV" shall have the meaning assigned to that term in the Preamble
hereof.

"LTHBV FINANCING" means the issuance and sale to MSC and MSI of the
LTHBV Notes pursuant to the LTHBV Note Purchase Agreement.

"LTHBV NOTES" means collectively (i) the 12% Senior Subordinated Note
due March 9, 2006 in the original principal amount of $703,758 issued by LTHBV
to MSC, as from time to time amended and in effect, (ii) the 12% Senior
Subordinated Note due March 9, 2006 in the original principal amount of $96,242
issued by LTHBV to MSI, as from time to time amended and in effect, and (iii)
any note or notes delivered in substitution, replacement or exchange for the
notes described in the foregoing clauses (i) and (ii), as such notes from time
to time are amended and in effect.

"LTHBV NOTE PURCHASE AGREEMENT" shall have the meaning assigned to
that term in the Preamble hereof.

"LTI" means Lionbridge Technologies, Inc., a Delaware corporation, and
its successors and assigns.

"LTI GUARANTY" shall have the meaning assigned to that term in Section
4.02(f).

"LT IRELAND" means Lionbridge Technologies Ireland, an unlimited
liability company duly

5
<PAGE>

incorporated under the laws of Ireland, and its successors and assigns.

"MATERIAL ADVERSE EFFECT" shall have the meaning assigned to that term
in Section 6.01.

"MSI WARRANT" shall have the meaning assigned to that term in Section
3.01.

"MSC WARRANT" shall have the meaning assigned to that term in Section
3.01.

"NEW SENIOR DEBT FOREIGN GUARANTEE" shall have the meaning assigned to
that term in Section 7.01(p).

"NEW SENIOR DEBT GUARANTEE" shall have the meaning assigned to that
term in Section 7.01(p).

"NOTES" shall have the meanings assigned to such terms in Section
2.01.

"OPERATIVE DOCUMENTS" shall mean each of this Agreement, the Notes,
the Warrants, the Guaranties, the Restated Stockholders' Agreement, and the
Restated Registration Rights Agreement.

"PERMITTED LIENS" shall have the meaning assigned to that term in
Section 7.02(a).

"PERSON" means and includes an individual, a corporation, a
partnership, a joint venture, a trust, an unincorporated organization, or a
government or any agency or political subdivision thereof.

"PREFERRED STOCK" shall mean the outstanding shares of Series B
Preferred Stock, $.01 par value of the Company.

"PURCHASER" shall mean MSC, MSI and any other holder or holders from
time to time of any of the Notes.

"QUALIFIED DISPOSITION" means (i) any merger or consolidation of the
Company with any Person, (ii) any sale, assignment, lease or other disposition
of or voluntary parting with the control of (whether in one transaction or in a
series of transactions) all or substantially all of the consolidated assets
(whether now owned or hereafter acquired) of the Company and the Subsidiaries,
(iii) any issuance of equity securities of the Company to Persons other than the
Purchaser or other holders of the capital stock of the Company or securities
convertible into or exercisable for such capital stock as of the date hereof
which, when aggregated with all issuances of equity securities of the Company
subsequent to the Closing, exceeds fifty percent (50%) of the aggregate of all
outstanding equity securities of the Company immediately after the Closing on a
fully diluted basis, and (iv) any liquidation or winding up of the Company,
except for (1) mergers, consolidations or asset transfers with or between two or
more Subsidiaries, (2) mergers or asset transfers by any Subsidiary with or to
the Company and (3) the merger of any Person into the Company or other issuance
of securities by the Company in connection with the acquisition of a Person as
long as the Company is the surviving entity, such merger or acquisition does not
result in the violation of any of the provisions of this Agreement and no such
violation exists at the time of such merger or acquisition, and the
consideration paid by the Company in connection with such merger or acquisition
has a fair market value of less than Twenty-Five Million Dollars ($25,000,000)
at the date of the closing of such transaction.

6
<PAGE>

"QUALIFYING LIQUIDITY EVENT" means any of the following events: (i) a
Qualified Disposition; (ii) a Change of Control; and (iii) a Liquidity IPO with
respect to any member of the Consolidated Group.

"QUICK ASSETS" means, as of any applicable date, the consolidated
cash, cash equivalents, accounts receivable and investments with maturities of
less than ninety (90) days of the Consolidated Group determined in accordance
with GAAP.

"RESTATED REGISTRATION RIGHTS AGREEMENT" means that certain Second
Restated Registration Rights Agreement dated as of the date hereof by and among
LTI, CRL the Company, MSC, MSI and certain other stockholders of the Company.

"RESTATED STOCKHOLDERS' AGREEMENT" means that certain Second Restated
Stockholders' Agreement dated as of the date hereof by and among LTI, CRL the
Company, MSC, MSI and certain other stockholders of the Company.

"SECURITIES" means collectively the Notes, the Warrants and the
Warrant Shares.

"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

"SENIOR DEBT" means (i) all Indebtedness of the Company and any of its
Subsidiaries for money borrowed from the Bank (including, without limitation,
money borrowed from the Bank pursuant to the Loan Agreement) or from other banks
or institutional lenders, including any extensions or renewals thereof, whether
outstanding on the date hereof or hereafter created or incurred, which is not by
its terms subordinate and junior to the Notes and which is disclosed on the
Financial Statements or is permitted by this Agreement at the time it is created
or incurred, (ii) all Indebtedness of the Company and any of its Subsidiaries
incurred to refinance any of the Indebtedness referred to in item (i) above,
where the security securing such Indebtedness is substantially the same security
as that securing the Indebtedness being refinanced, (iii) all capitalized lease
obligations of the Company and any of its Subsidiaries which are permitted by
this Agreement at the time they are incurred and (iv) all guarantees by the
Company and any of its Subsidiaries which are not by their terms subordinate and
junior to the Notes and which are permitted hereby at the time they are made of
Indebtedness of any Subsidiary if such Indebtedness would have been Senior Debt
pursuant to the provisions of clause (i), (ii) or (iii) of this sentence had it
been indebtedness of the Company.

"SUBORDINATED DEBT" means any Indebtedness of the Company and any of
its Subsidiaries that is contractually subordinated to any Senior Debt.

"SUBSIDIARY" or "SUBSIDIARIES" means (i) any corporation more than
fifty percent (50%) of whose stock or equity interests of any class or classes
having by the terms thereof ordinary voting power to elect a majority of the
directors of such corporation (irrespective of whether or not at the time stock
of any class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time owned
directly or indirectly by the Company and/or any one or more of its
Subsidiaries, and (ii) any partnership, association, joint venture, limited
liability company or other entity in which the Company and/or one or more of its
Subsidiaries has more than a fifty percent (50%) equity

7
<PAGE>

interest at the time.

"SUBSIDIARY GUARANTORS" means collectively each Subsidiary which has
executed and delivered to the Purchaser a guarantee in form and substance
satisfactory to the Purchaser pursuant to which such Subsidiary guarantees all
of the obligations of the Company to the Purchaser, including, without
limitation, the obligations of the Company hereunder and under the Notes.

"VTI" means VeriTest, Inc., a California company, together with its
successors and assigns.

"VTI GUARANTY" shall have the meaning assigned to that term in Section
4.02(g).

"VTI SELLER NOTES" means those two (2) certain promissory notes dated
January 11, 1999 issued by the Company to the VTI Sellers, respectively, each in
the original principal amount of $375,000, as each may be amended and in effect
from time to time.

"VTI SELLERS" mean Steven Nemzer and Marc Porter Zasada, and their
respective successors and assigns.

"WARRANTS" shall have the meaning assigned to such terms in Section
3.01.

"WARRANT SHARES" shall have the meaning assigned to that term in
Section 3.01.

1.02. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP, and all financial data
submitted pursuant to this Agreement and all financial tests to be calculated in
accordance with this Agreement shall be prepared and calculated in accordance
with GAAP.

ARTICLE II

PURCHASE, SALE AND TERMS OF NOTES; PAYMENTS

2.01. THE NOTES. The Company has authorized the issuance and sale to
(a) MSC of the Company's 12% Senior Subordinated Note due March 9, 2006 in the
original aggregate principal amount of $1,055,638, and (b) MSI of the Company's
12% Senior Subordinated Note due March 9, 2006 in the original aggregate
principal amount of $144,362. The 12% Senior Subordinated Notes shall be
substantially in the forms attached to EXHIBIT 2.01 hereto and are herein each
referred to individually as an "Initial Note", and collectively as the "Initial
Notes"; and, the Initial Notes together with any note or notes delivered in
substitution, replacement or exchange therefor are herein referred to
collectively as the "Notes." The Notes shall (a) be payable on March 9, 2006
(subject to the redemption thereof required pursuant to Section 2.06) and (b)
bear interest (based on a 360-day year counting actual days elapsed) on the
unpaid principal amount thereof until paid in full at the rate of twelve percent
(12%) per annum, which interest shall be payable quarterly in arrears on the
last Business Day of March, June, September and December in each year commencing
on March 31, 1999.

2.02. PURCHASE AND SALE OF THE NOTES AND THE WARRANTS. The Company
agrees to issue and sell to the Purchaser, and, subject to and in reliance upon
the representations, warranties, terms and conditions
<PAGE>

of this Agreement, the Purchaser agrees to purchase, the Initial Notes and
the Warrants. Such purchase and sale shall take place at a closing (the
"Closing") to be held at the offices of Sherburne, Powers, Holland & Knight,
at 10:00 a.m. local time, on the date on which this Agreement is executed and
delivered (the "Closing Date"). At the Closing, the Company will issue (a)
the Initial Note described in clause (a) in Section 2.01 to MSC, dated the
Closing Date and payable to the order of MSC, and the Company will issue to
MSC the MSC Warrant, against receipt of funds by wire transfer to an account
or accounts designated by the Company prior to the Closing in the amount of
$1,055,638, and (b) the Initial Note described in clause (b) in Section 2.01
to MSI dated the Closing Date and payable to the order of MSI, and the
Company will issue to MSI the MSI Warrant, against receipt of funds by wire
transfer to an account or accounts designated by the Company prior to the
Closing in the amount of $144,362. The parties hereto hereby acknowledge and
agree that the purchase and sale of the Initial Notes and the Warrants
hereunder is part of an overall financing provided by MSC and MSI to the
Consolidated Group, which financing also includes, among other things, the
issuance by LTHBV of the LTHBV Notes, the delivery of the Foreign Guaranties
and the execution and delivery of the LTHBV Note Purchase Agreement.

2.03. ISSUE PRICE; ORIGINAL ISSUE DISCOUNT. Having considered all
facts relevant to a determination of the value of the Initial Notes and the
Warrants being acquired by the Purchaser, the Company and the Purchaser have
concluded and do hereby agree that, for purposes of Section 1273 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the Regulations thereunder,
and for purposes of determining any original issue discount with respect to the
Initial Notes thereunder, the aggregate "issue price" for (a) the Initial Note
to be issued to MSC is $721,808, and (b) the Initial Note to be issued to MSI is
$98,710. The Company and the Purchaser agree not to take a position on any
income tax return, before any governmental agency charged with the collection of
any income tax or in any judicial proceeding that is inconsistent with the terms
of this Section 2.03.

2.04. USE OF PROCEEDS. The Company agrees to use the full proceeds
from the sale of the Initial Notes and the Warrants for the purposes and as set
forth on EXHIBIT 2.04 attached hereto.

2.05. PAYMENTS AND ENDORSEMENTS. Payments of principal, interest and
premium, if any, on the Notes shall be made without setoff or counterclaim
directly by check duly mailed or delivered to MSC and MSI at their addresses
referred to in Section 9.03 hereof, without any presentment or notation of
payment, except that prior to any transfer of any Note, the holder thereof shall
endorse on such Note a record of the date to which interest has been paid and
all payments made on account of principal of such Note. All payments and
prepayments of principal of and interest on the Notes shall be applied (to the
extent thereof) to all of the Notes PRO RATA based on the principal amount
outstanding and held by each holder thereof.

<PAGE>

2.06. REDEMPTIONS

(a) REQUIRED PERIODIC REDEMPTION. On the last Business Day of
March, June, September and December of each year beginning on March 31, 2003
through and including December 31, 2005, the Company agrees to redeem, without
premium or penalty, $100,000 in aggregate principal amount of the Notes, or such
lesser amount as may then be outstanding, together with all accrued and unpaid
interest and penalties, if any, then due on the amount so redeemed. On the
stated or accelerated maturity of the Notes, the Company agrees to pay the
principal amounts of the Notes then outstanding together with all accrued and
unpaid interest and penalties, if any, then due thereon. Except as set forth in
Section 2.06(b), no optional redemption of less than all of the Notes shall
affect the obligation of the Company to make the redemptions required by this
subsection.

(b) REQUIRED REDEMPTIONS IN THE EVENT OF A QUALIFYING LIQUIDITY
EVENT. In the event and upon the closing of a Qualifying Liquidity Event, the
Company agrees to redeem, without premium, all of the outstanding Notes,
together with all accrued and unpaid interest and penalties, if any, then due
thereon.

(c) OPTIONAL REDEMPTIONS. In addition to the redemptions of the
Notes required under Sections 2.06(a) and (b), the Company may, at any time and
from time to time, redeem, without premium or penalty, the Notes, in whole or in
part (in integral multiples of $1,000), together with interest due on the amount
so redeemed through the date of redemption. Partial redemptions made as provided
in this Section 2.06(c) shall, to the extent thereof, be applied first to reduce
the principal due at maturity of the Notes and next to reduce the payments
required by Section 2.06(a) in inverse order of maturity thereof.

(d) NOTICE OF REDEMPTIONS; PRO RATA REDEMPTIONS. Notice of any
required redemption pursuant to Section 2.06(a) or (b) or of any optional
redemption pursuant to Section 2.06(c) shall be given to all registered holders
of the Notes at least ten (10) Business Days prior to the date of such
redemption. Each redemption of Notes pursuant to Section 2.06(a), (b) or (c)
shall be made so that the Notes then held by each holder shall be redeemed in a
principal amount which shall bear the same ratio to the total unpaid principal
amount being redeemed on all Notes as the unpaid principal amount of Notes then
held by such holder bears to the aggregate unpaid principal amount of all of the
Notes then outstanding.

2.07. DEFAULT RATE OF INTEREST. If an Event of Default has occurred
and is continuing, from and after the date thirty (30) days after the date such
Event of Default occurred, the entire outstanding unpaid principal balance of
the Notes and any matured but unpaid interest from time to time due thereon
shall bear interest, payable on demand, at the rate of fifteen percent (15%) per
annum, or such lower rate as then may be the maximum rate permitted by
applicable law; PROVIDED, HOWEVER, that upon the cessation or cure of such Event
of Default, if no other Event of Default is then continuing, the Notes shall
again bear interest at the rates set forth in Section 2.01.

2.08. MAXIMUM LEGAL RATE OF INTEREST. Nothing in this Agreement or in
the Notes shall require the Company to pay interest at a rate in excess of the
maximum rate permitted by applicable law.

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<PAGE>

2.09. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made
shall be due on a day which is not a Business Day, such payment may be made on
the next succeeding Business Day, and such extension of time shall in such case
be included in the computation of payment of interest due.

2.10. TRANSFER AND EXCHANGE OF NOTES. The holder of any Note or Notes
may, prior to maturity or prepayment thereof, surrender such Note or Notes at
the principal office of the Company for transfer or exchange to any Affiliate of
such holder. Any holder desiring to transfer or exchange any Note shall first
notify the Company in writing at least five (5) days in advance of such transfer
or exchange. Within a reasonable time after such notice to the Company from a
holder of its intention to make such exchange and without expense (other than
transfer taxes, if any) to such holder, the Company shall issue in exchange
therefor another Note or Notes, in such denominations as requested by the
holder, for the same aggregate principal amount, as of the date of such
issuance, as the unpaid principal amount of the Note or Notes so surrendered and
having the same maturity and rate of interest, containing the same provisions
and subject to the same terms and conditions as the Note or Notes so
surrendered. Each new Note shall be made payable to such Affiliate or Affiliates
of the holder, Person or Persons, or assigns, as the holder of such surrendered
Note or Notes may designate (subject to Section 9.05), and such transfer or
exchange shall be made in such a manner that no gain or loss of principal or
interest shall result therefrom.

2.11. REPLACEMENT OF NOTES. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Note, the Company will issue a new Note, of like tenor and amount and
dated the date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated Note; PROVIDED, HOWEVER, if any Note of which a
Purchaser, its nominee, or any of its partners is the holder is lost, stolen or
destroyed, the affidavit of an authorized partner or officer of the holder
setting forth the circumstances with respect to such loss, theft or destruction
shall be accepted as satisfactory evidence thereof, and no indemnification bond
or other security shall be required as a condition to the execution and delivery
by the Company of a new Note in replacement of such lost, stolen or destroyed
Note other than the holder's written agreement to indemnify the Company.

ARTICLE III

PURCHASE, SALE AND TERMS OF WARRANTS

3.01. THE WARRANTS. The Company has authorized the issuance and sale
to MSC and MSI of Common Stock Purchase Warrants (the "Warrants") for the
purchase (subject to adjustment as provided therein) of 337,202 (the "MSC
Warrant") and 46,113 (the "MSI Warrant") shares of Common Stock (the "Warrant
Shares"), respectively. The Warrants shall be substantially in the forms
attached to EXHIBIT 3.01 hereto. The term Warrants shall also include any
warrants delivered in exchange or replacement therefor. The Warrants shall be
exercisable at a purchase price, subject to adjustment, equal to $.01 per
Warrant Share.

3.02. PURCHASE AND SALE OF WARRANTS. The Company agrees to issue and
sell to the Purchaser, and, subject to and in reliance upon the representations,
warranties, terms and conditions of this

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Agreement, the Purchaser agrees to purchase, Warrants to purchase the Warrant
Shares as set forth in Section 3.01 above. Such purchase and sale shall take
place at the Closing, and at the Closing the Company will initially issue to MSC
and MSI the MSC Warrant and the MSI Warrant, respectively, to purchase (subject
to adjustment as provided therein) the number of Warrant Shares set forth in
Section 3.01 above.

3.03. RIGHT TO PURCHASE NEW SUBORDINATED DEBT. Prior to issuing any
Subordinated Debt of the Company or any of its Subsidiaries to any Person after
the date hereof (other than any such Subordinated Debt issued to a seller in
connection with an acquisition by any member of the Consolidated Group involving
such seller), the Company will give, or cause such Subsidiary to give, to each
holder of any Note or Notes the right to purchase, on the same terms and subject
to the same conditions, the same proportion of the Subordinated Debt proposed to
be sold by the Company or such Subsidiary as the original principal amount of
the Notes and the LTHBV Notes held by each such holder bears to the aggregate
principal amount of Subordinated Debt outstanding at that time. Any such right
of purchase shall be exercisable for a period of thirty (30) days after all of
the holders have received written notice of a proposed issuance of Subordinated
Debt (and any such notice by the Company or any Subsidiary shall be given not
less than thirty (30) nor more than ninety (90) days prior to any such
issuance). The Company shall be entitled to sell to any Person any Subordinated
Debt not purchased by the holders of the Notes pursuant to this Section 3.03:
(i) during the period ending six (6) months after the date of the Company's or
its Subsidiary's notice to such holders and (ii) at not less than the same price
and upon terms not materially less favorable to the Company or its Subsidiary
than those offered to the holders of the Notes, but may not otherwise sell such
Subordinated Debt without renewed compliance with this Section 3.03.

ARTICLE IV

CONDITIONS TO PURCHASER'S OBLIGATION

The obligation of the Purchaser to purchase and pay for the Notes and
Warrants at the Closing is subject to the following conditions, all or any of
which may be waived in writing by the Purchaser:

4.01. REPRESENTATIONS AND WARRANTIES. Each of the representations of
the Company set forth in Article VI hereof shall be true and correct in all
respects at the time of, and immediately after giving effect to, the sale of the
Notes and the Warrants.

4.02. DOCUMENTATION AT CLOSING. The Purchaser shall have received
prior to or at the Closing all of the following, each in form and substance
satisfactory to the Purchaser and its counsel:

(a) The Initial Notes duly executed and delivered by the Company.

(b) The Warrants duly executed and delivered by the Company.

(c) An executed amended and restated guaranty from JLSI in
substantially the form attached hereto as EXHIBIT 4.02(c) (the "JLSI Guaranty").

(d) An executed amended and restated guaranty from LTCI in
substantially the form

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attached hereto as EXHIBIT 4.02(d) (the "LTCI Guaranty").

(e) An executed amended and restated guaranty from LTI in
substantially the form attached hereto as EXHIBIT 4.02(e) (the "LTI Guaranty").

(f) An executed amended and restated guaranty from VTI in
substantially the form attached hereto as EXHIBIT 4.02(f) (the "VTI Guaranty").

(g) A certified copy of all charter documents of the Company and
each of the Guarantors; a certified copy of the resolutions of the Board of
Directors and, to the extent required, the stockholders of the Company and each
of the Guarantors evidencing approval, as applicable, of this Agreement, the
Operative Documents and all other matters contemplated hereby and thereby,
including, without limitation, the consent of the stockholders of the Company to
the transactions contemplated hereby pursuant to the terms of the Restated
Stockholders' Agreement; a certified copy of the By-laws of the Company and each
of the Guarantors and certified copies of all documents evidencing other
necessary corporate or other action and governmental approvals, if any, with
respect to this Agreement, the Operative Documents and all other matters
contemplated hereby or thereby.

(h) A favorable opinion of Testa, Hurwitz & Thibeault, LLP,
counsel for the Company and Guarantors, in substantially the form attached
hereto as EXHIBIT 4.02(h).

(i) Certificates of the Secretaries or Assistant Secretaries of
the Company and each of the Guarantors which shall certify the names of the
officers of the Company authorized to sign this Agreement, the Operative
Documents and any other documents or certificates to be delivered pursuant
hereto or thereto by the Company and each of the Guarantors or any of its
officers, together with the true signatures of such officers. The Purchaser may
conclusively rely on such certificates until it shall receive further
certificates of the Secretaries or Assistant Secretaries of the Company and each
of the Guarantors canceling or amending the prior certificate and submitting the
signatures of the officers named in such further certificate.

(j) A certificate from a duly authorized officer of the Company
stating that the representations and warranties contained in Article VI hereof
and otherwise made by the Company in writing in connection with the transactions
contemplated hereby are true and correct and that no condition or event has
occurred or is continuing or will result from the execution and delivery of this
Agreement or the Operative Documents which constitutes an Event of Default or
would constitute an Event of Default but for the requirement that notice be
given or time elapse or both.

(k) Intentionally omitted.

(l) Payment for the costs, expenses, taxes and filing fees
identified in Section 9.04 as to which the Purchaser gives the Company notice
prior to the Closing.

(m) A certificate from a duly authorized officer of the Company
stating that all the conditions set forth in this Article IV have been
satisfied, other than those, if any, waived by the Purchaser in writing.

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(n) An fully-executed Restated Stockholders' Agreement together
with executed waivers of the rights of first offer referenced in Section 6.02.

(o) A fully-executed Restated Registration Rights Agreement.

(p) Such other documents referenced in any Exhibit hereto or
relating to the transactions contemplated by this Agreement as the Purchaser or
its counsel may reasonably request.

4.03. CLOSING OF LTHBV NOTE PURCHASE AGREEMENT. All documents in
connection with the LTHBV Financing, including, without limitation the LTHBV
Note Purchase Agreement, the LTHBV Notes, the Foreign Guaranties and such other
documents referenced in any exhibit thereto or otherwise relating to the
transactions contemplated by the LTHBV Note Purchase Agreement shall have been
executed and delivered to the Purchaser.

4.04. NO DEFAULT. At the time of and immediately after giving effect
to the sale of the Notes there shall exist no Event of Default and no condition,
event or act that, with the giving of notice or lapse of time, or both, would
constitute such an Event of Default.

4.05. WAIVERS AND CONSENTS. The Company shall have obtained any
waivers or consents that may be required under the Loan Agreement and any other
agreement to which the Company or any of its Subsidiaries is a party in order to
enter into this Agreement and the Operative Documents and to consummate the
transactions contemplated hereby and thereby and such waiver or consents shall
have been delivered to the Purchaser.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

5.01. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Each of MSC and
MSI hereby represents and warrants as follows:

(a) It has duly authorized, executed and delivered this Agreement
and such of the Operative Documents as require execution by it.

(b) Its present intention is to acquire the Securities to be
issued to it for its own account.

(c) The Securities to be issued to it are being and will be
acquired for the purpose of investment and not with a view to distribution or
resale thereof; subject, nevertheless, to the condition that, except as
otherwise provided herein, the disposition of its property shall at all times be
within its control.

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such further inquiries of officers of the Company and others as it has deemed
appropriate or desirable in connection with such transactions, PROVIDED,
HOWEVER, no investigation made heretofore or hereafter by it or on its behalf
shall have any effect whatsoever on the representations and warranties of the
Company hereunder, each of which will survive any such investigation.

(e) It understands that it must bear the economic risk of its
investment in the Securities to be issued to it for an indefinite period of time
because such Securities are not, and will not be, registered under the
Securities Act or any applicable state securities laws, except as may be
provided in this Agreement, and may not be resold unless subsequently registered
under the Securities Act and such other laws or unless an exemption from such
registration is available. It also understands that it is not contemplated by
the Company that any registration will be made under the Securities Act or any
state securities laws, or that the Company will take steps which will make the
provisions of Rule 144 under the Securities Act available to permit resale of
the Securities to be issued to it.

(f) It represents that it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of its investment in the Securities. It further represents that it is an
"accredited investor" as such term is defined in Rule 501 of Regulation D of the
Commission under the Securities Act with respect to the purchase of the Notes.

(g) No Person has or will have, as a result of the transactions
contemplated by this Agreement, any rights, interest or valid claim against or
upon the Company or any of its Subsidiaries for any commission, fee or other
compensation as a finder or broker because of any act or omission by it or any
of its agents.

(h) It hereby acknowledges that the Securities to be issued to it
(and each certificate representing the Warrant Shares issued to it and any other
securities issued in respect of such shares upon any stock split, stock
dividend, recapitalization, merger or similar event (unless no longer required
in the opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company, it being agreed that Holland & Knight LLP shall be
satisfactory)) shall bear a legend substantially in the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY
NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL
AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.

The acquisition by it of the Warrant Shares which are the subject of the Warrant
to be issued to it shall constitute a confirmation by it of the foregoing
representations.

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ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Purchaser as follows:

6.01. ORGANIZATION AND STANDING OF THE COMPANY AND SUBSIDIARIES;
OWNERSHIP. The Company and each of its Subsidiaries is a corporation duly
organized (to the extent applicable), duly incorporated (to the extent
applicable), validly existing and in good standing (to the extent applicable)
under the laws of the jurisdiction of its organization or incorporation and has
all requisite corporate power and authority for the ownership and operation of
its properties and for the carrying on of its business as now conducted and as
now proposed to be conducted. The Company and each of its Subsidiaries is duly
licensed or qualified and in good standing as a foreign corporation authorized
to do business in all jurisdictions wherein the character of the property owned
or leased, or the nature of the activities conducted by it makes such licensing
or qualification necessary, except where the failure to be so licensed or
qualified, either individually or in the aggregate, would not have a material
adverse effect on the business, assets, liabilities, financial condition, or on
the results of operations of the Company and its Subsidiaries taken as a whole
(a "Material Adverse Effect"). Except as set forth on EXHIBIT 6.01 attached
hereto, neither the Company nor any of its Subsidiaries owns, directly or
indirectly, any capital stock or other equity or ownership or proprietary
interest in any corporation, partnership, association, trust, joint venture or
other entity.

6.02. CORPORATE ACTION. The Company and each of the Guarantors has all
necessary corporate power and has taken all corporate, stockholder and other
action required to make, as applicable, all the provisions of this Agreement,
the Operative Documents and any other agreements and instruments executed in
connection herewith and therewith the valid and enforceable obligations they
purport to be. The Company and each of the Guarantors has duly executed and
delivered, as applicable, this Agreement, each of the Operative Documents and
each other agreement and instrument executed by it in connection herewith and
therewith and each is a legal, valid and binding obligation of the Company and
the Guarantors as applicable, enforceable against the Company and the Guarantors
as applicable, in accordance with its terms, except as enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally and by general
principles of equity. The Company has authorized the issuance and sale to the
Purchaser of the Warrants for the purchase (subject to adjustment as provided
therein) of 383,315 shares of Common Stock. Sufficient shares of authorized but
unissued Common Stock of the Company have been reserved by appropriate corporate
action in connection with the prospective exercise of the Warrants. While
certain stockholders of the Company are entitled to rights of first offer
pursuant to the Restated Stockholders' Agreement in connection with the issuance
of the Warrants hereunder and in connection with the issuance of the Warrant
Shares upon the exercise of the Warrants, such stockholders have waived such
rights with respect to the issuance of the Warrants and the issuance of the
Warrant Shares upon the exercise of the Warrants. Accordingly, neither the
issuance of the Notes or Warrants, nor the issuance of the Warrant Shares upon
the exercise of the Warrants, is subject to any preemptive or other similar
statutory or contractual rights.

6.03. GOVERNMENTAL APPROVALS. No authorization, consent, approval,
license, exemption of or

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filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary for, or in connection with, the offer, issuance, sale, execution or
delivery by the Company or any of the Subsidiaries of, or for the performance by
the Company or any of the Subsidiaries of their respective obligations under,
this Agreement or any of the Operative Documents or the Warrant Shares.

6.04. LITIGATION. Except as set forth on EXHIBIT 6.04 attached hereto,
there is no litigation, action or governmental proceeding or investigation
pending or, to the best knowledge of the Company, threatened against the Company
or any of its Subsidiaries, affecting any of their respective properties or
assets, or against any officer, key employee or principal stockholder of the
Company or any of its Subsidiaries where such litigation, proceeding or
investigation (i) either individually or in the aggregate would have a Material
Adverse Effect, (ii) might call into question the validity of this Agreement,
any Operative Document or any action taken by the Company or any of its
Subsidiaries or to be taken pursuant hereto or thereto or (iii) seeks to prevent
the consummation by the Company or any of its Subsidiaries of the transactions
contemplated by this Agreement, nor, to the best knowledge of the Company, has
there occurred any event on the basis of which any litigation, proceeding or
investigation meeting the criteria of (i), (ii) or (iii) above might properly be
instituted. Except as set forth on EXHIBIT 6.04, neither the Company nor any of
its Subsidiaries nor, to the best knowledge of the Company, any of their
respective officers, key employees or principal stockholders (in their
capacities as such), is in default with respect to any order, writ, injunction,
decree, ruling or decision of any court, commission, board or other government
agency affecting the Company or any of its Subsidiaries.

6.05. COMPLIANCE WITH LAW. The Company and each of its Subsidiaries is
in compliance in all respects with the terms and provisions of this Agreement
and of its charter documents and by-laws and in all material respects with the
terms and provisions of all judgments, decrees, governmental orders, statutes,
rules and regulations to which it and its properties and assets are subject
(collectively, the "Applicable Laws"). Neither the execution and delivery of
this Agreement and the Operative Documents, nor the consummation of any
transactions contemplated hereby or thereby, has constituted or resulted in, or
will constitute or result in, a violation of any provision of any Applicable
Law.

6.06. FEDERAL RESERVE REGULATIONS. Neither the Company nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System), and no part of the proceeds
of the Notes or Warrants will be used to purchase or carry any margin security
or to extend credit to others for the purpose of purchasing or carrying any
margin security or in any other manner which would involve a violation of any of
the regulations of the Board of Governors of the Federal Reserve System.

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<PAGE>

all of said leases are valid and subsisting and in full force and effect. Except
as set forth on EXHIBIT 6.07, the Company and each of its Subsidiaries owns or
has a valid right to use the patents, patent rights, licenses, permits, trade
secrets, trademarks, trademark rights, trade names or trade name rights or
franchises, copyrights, inventions and intellectual property rights being used
to conduct its business as now operated and as now proposed to be operated; and
the conduct of its business as now operated and as now proposed to be operated
does not and will not conflict with valid patents, patent rights, licenses,
permits, trade secrets, trademarks, trademark rights, trade names or trade name
rights or franchises, copyrights, inventions and intellectual property rights of
others. Except as set forth on EXHIBIT 6.07, neither the Company nor any of its
Subsidiaries has any obligation to compensate any Person for the use of any such
intellectual property rights nor has the Company or any of its Subsidiaries
granted to any Person any license or other rights to use in any manner any of
such intellectual property rights.

6.08. FINANCIAL INFORMATION. (a) Attached hereto as EXHIBIT 6.08(a)
are true, correct and complete copies of (i) the audited balance sheet of the
Company and its Subsidiaries as of December 31, 1997 and the related statements
of income and retained earnings and of cash flows for the fiscal year then
ended, certified by PricewaterhouseCoopers, the Company's independent public
accountants (including the notes thereto) and (ii) the unaudited balance sheet
of the Company and its Subsidiaries as of December 31, 1998, and the related
statements of income and retained earnings for the 12-month period then ended
((i) and (ii) collectively the "Financial Statements"). All Financial Statements
have been prepared in accordance with GAAP, subject to normal year-end audit
adjustments, and consistent with prudent business management practices, are
complete in all material respects and fairly present the financial position of
the Company and its Subsidiaries as of the respective dates thereof and results
of operations and changes in financial position of the Company and its
Subsidiaries for each of the periods then ended.

(b) Since December 31, 1998, there has been no material adverse
change in the business, assets, liabilities, condition (financial or other), or
in the results of operations or prospects of the Company and its Subsidiaries
taken as a whole.

(c) Except as disclosed on EXHIBIT 6.08(c) attached hereto,
neither the Company nor any of its Subsidiaries has any liability, contingent or
otherwise, not disclosed in the Financial Statements or in the notes thereto
that could, together with all such other liabilities, have a Material Adverse
Effect, nor does the Company have any reasonable grounds to know of any such
liability.

(d) A schedule of Indebtedness of the Company and its
Subsidiaries as of December 31, 1998 (including lease obligations required to be
capitalized in accordance with GAAP) is attached hereto as EXHIBIT 6.08(d).

6.09. TAXES. Except as described on EXHIBIT 6.09 attached hereto, the
Company and each of its Subsidiaries has accurately prepared and timely filed
all federal, state and other tax returns required by law to be filed by it, and
all taxes shown to be due and all additional assessments have been paid or
provision made therefor. The Company does not know of any material additional
assessments or adjustments pending or threatened against the Company or any of
its Subsidiaries for any period, nor of any basis for any such assessment or
adjustment. The charges, accruals and reserves on the books of the Company and
its Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Company, adequate.

<PAGE>

6.10. ERISA

(a) The Company and each of the Guarantors is in compliance in
all material respects with the currently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the applicable
provisions of Section 401(a) of the Code. No employee benefit plan established
or maintained, or to which contributions have been made, by the Company or any
of its Subsidiaries, which is subject to part 3 of Subtitle B of Title I of
ERISA, had an accumulated funding deficiency (as such term is defined in Section
302 of ERISA) as of the last day of the most recent fiscal year of such plan
ended prior to the date hereof, and no material liability to the Pension Benefit
Guaranty Corporation has been incurred with respect to any such plan by the
Company or any of its Subsidiaries.

(b) The execution and delivery of this Agreement and the other
Operative Documents and the issuance and sale of the Notes and the Warrants
hereunder will not involve any transaction that is subject to the prohibitions
of section 406 of ERISA or in connection with which a tax could be imposed
pursuant to section 4975(c)(1)(A) through section 4975(c)(1)(D), inclusive, of
the Code.

6.11. TRANSACTIONS WITH AFFILIATES. Except as set forth on EXHIBIT
6.11 attached hereto, there are no loans, leases, royalty agreements or other
continuing transactions between the Company or any of its Subsidiaries, on the
one hand, and any Person owning, or who did own at any time within the two-year
period preceding the date of this Agreement, five percent (5%) or more of any
class of capital stock of the Company or other entity controlled by such
stockholder or a member of such stockholder's family, on the other hand.

6.12. ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER PERSONS.
Except as disclosed on EXHIBIT 6.08(c) hereto, neither the Company nor any of
its Subsidiaries has assumed, guaranteed, endorsed or otherwise become directly
or contingently liable on (including, without limitation, liability by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to or otherwise invest in the debtor or otherwise to assure the
creditor against loss) any Indebtedness of any other Person.

6.13. LOANS TO OTHER PERSONS. Except as set forth on EXHIBIT 6.13
attached hereto, neither the Company nor any of its Subsidiaries has made any
loan or advance to any Person which is outstanding on the date of this
Agreement, nor is the Company or any of its Subsidiaries obligated or committed
to make any such loan or advance.

6.14. SECURITIES ACT. Neither the Company nor anyone acting on its
behalf has offered any of the Notes, Warrants or similar securities, or
solicited any offers to purchase or made any attempt by preliminary conversation
or negotiations to dispose of the Notes, Warrants or similar securities, within
the meaning of all applicable federal and state securities laws, to any Person
other than (i) the Purchaser, and (ii) no more than twenty-five (25) other
Persons, each of which is an "accredited investor" (as such term is defined in
Rule 501 of Regulation D promulgated pursuant to the Securities Act), and no
Person other than the Purchaser will purchase any Notes, Warrants or similar
securities. Neither the Company nor anyone acting on its behalf has offered or
will offer to sell the Notes or similar securities to, or solicit

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<PAGE>

offers with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any Person, so as to bring the issuance and
sale of the Note, Warrants under the registration provisions of the Securities
Act.

6.15. DISCLOSURE. Neither this Agreement, the Financial Statements,
the Operative Documents, nor any other agreement, document, certificate or
written statement furnished to the Purchaser or the Purchaser's counsel by or on
behalf of the Company or any of its Subsidiaries in connection with the
transactions contemplated hereby or thereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. There is no fact within the knowledge
of the Company or any of its executive officers which has not been disclosed
herein or otherwise by them to the Purchaser and which has a Material Adverse
Effect, or in the future in their opinion could reasonably be expected to have a
Material Adverse Effect. Without limiting the foregoing, the Company has no
knowledge of any specific existing, pending or planned patent, invention or
device which would have a Material Adverse Effect.

6.16. NO BROKERS OR FINDERS. As of the Closing, no Person had, has or
will have, as a result of the transactions contemplated by this Agreement, any
right, interest or valid claim against or upon the Purchaser for any commission,
fee or other compensation as a finder or broker because of any act or omission
by the Company, any of its Subsidiaries or any or its or their agents.

6.17. OTHER AGREEMENTS OF OFFICERS. Except as set forth on EXHIBIT
6.17 attached hereto, no officer or key employee of the Company or any of its
Subsidiaries is a party to or bound by any agreement, contract or commitment, or
subject to any restrictions, particularly but without limitation in connection
with any previous employment of any such person, which has a Material Adverse
Effect, or in the future may (so far as the Company can reasonably foresee) have
a Material Adverse Effect. To the best knowledge of the Company, no officer or
key employee of the Company or any of its Subsidiaries has any present intention
of terminating his employment with the Company or any of its Subsidiaries and
neither the Company nor any of its Subsidiaries has any present intention of
terminating any such employment.

6.18. CAPITALIZATION OF THE COMPANY; STATUS OF CAPITAL STOCK. The
Company has a total authorized capitalization consisting of 25,950,867 shares of
Common Stock. A complete list of the outstanding capital stock of the Company
and the names in which such capital stock of the Company is registered is set
forth on EXHIBIT 6.18 attached hereto. All the outstanding shares of capital
stock of the Company have been duly authorized, are validly issued and are fully
paid and nonassessable. Except as otherwise set forth on EXHIBIT 6.18 and except
for the Warrants, there are no options, warrants or rights to purchase shares of
capital stock or other securities of the Company authorized, issued or
outstanding, nor is the Company obligated in any other manner to issue shares of
its capital stock or other securities. The shares of Common Stock issuable upon
exercise of the Warrants, when issued in accordance with the terms of the
Warrants, will be duly authorized, validly issued and fully paid and
nonassessable. Except as otherwise set forth on EXHIBIT 6.18, there are no
restrictions on the transfer of shares of capital stock of the Company other
than those imposed by relevant state and federal securities laws. Except as set
forth in this Agreement or as otherwise set forth on EXHIBIT 6.18, no holder of
any security of the Company is entitled to preemptive or similar statutory or
contractual rights, either arising pursuant to any agreement or instrument to
which the Company is a party, or which are otherwise binding upon the Company.

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Neither the issuance of the Notes or Warrants, nor the issuance of shares of
Common Stock upon the exercise of the Warrants, will trigger any preemptive or
similar right on the part of any party. The offer and sale of all shares of
capital stock and other securities of the Company issued before the Closing
complied with or were exempt from all federal and state securities laws.

6.19. CAPITAL STOCK OF SUBSIDIARIES. Except as set forth on EXHIBIT
6.19 attached hereto, the Company owns all of the outstanding capital stock of
each of the Subsidiaries, beneficially and of record, free and clear of all
liens, encumbrances, restrictions and claims of every kind. All the outstanding
shares of capital stock of each of the Subsidiaries have been duly authorized,
are validly issued and are fully paid and nonassessable. There are no options,
warrants or rights to purchase shares of capital stock or other securities of
any of the Subsidiaries authorized, issued or outstanding, nor is any Subsidiary
obligated in any other manner to issue shares of its capital stock or other
securities.

6.20. LABOR RELATIONS. To the best knowledge of the Company, no labor
union or any representative thereof has made any attempt to organize or
represent employees of the Company or any of its Subsidiaries. There are no
unfair labor practice charges, pending trials with respect to unfair labor
practice charges, pending material grievance proceedings or adverse decisions of
a Trial Examiner of the National Labor Relations Board or similar board against
the Company or any of its Subsidiaries. Furthermore, to the best knowledge of
the Company, relations with employees of the Company and its Subsidiaries are
good and there is no reason to believe that any material labor difficulties will
arise in the foreseeable future.

6.21. INSURANCE. Except as set forth on EXHIBIT 6.21 attached hereto,
the Company and each of its Subsidiaries has insurance covering its properties
and business adequate and customary for the type and scope of its properties and
business.

6.22. BOOKS AND RECORDS. The books of account, ledgers, order books,
records and documents of the Company and its Subsidiaries accurately and
completely reflect all material information relating to the business of the
Company and its Subsidiaries, the nature, acquisition, maintenance, location and
collection of the assets of the Company and its Subsidiaries, and the nature of
all transactions giving rise to the obligations or accounts receivable of the
Company and its Subsidiaries.

6.23. HAZARDOUS AND TOXIC MATERIALS. Except as set forth in EXHIBIT
6.23 attached hereto, (a) to the best knowledge of the Company and each of its
Subsidiaries, no hazardous or toxic waste or substance or any other contaminant
or pollutant including without limitation any oil or pesticide ("Hazardous
Materials") have been generated, used, treated or stored on, or transported to
or from, any of the property owned, leased or operated by the Company or any of
its Subsidiaries except in compliance with all applicable Environmental Laws,
(b) to the best knowledge of the Company and its Subsidiaries, there have been
no spills, discharges, releases or cleanups of any Hazardous Materials
("Hazardous Discharges") on any of the property owned, leased or operated by the
Company or any of its Subsidiaries, except such Hazardous Discharges which do
not violate any federal, state or local laws, ordinances, rules, regulations, or
policies existing or enacted relating to the environment, health and safety, any
Hazardous Discharges or to industrial hygiene or environmental conditions
(collectively "Environmental Laws"), (c) the Company and its Subsidiaries are in
compliance in all material respects with all applicable Environmental Laws and
the requirements of any permits issued under such Environmental Laws with
respect to any property owned, leased or operated by the Company or any of its
Subsidiaries, and (d)

21
<PAGE>

there are no pending or, to the best knowledge of the Company and its
Subsidiaries, threatened claims relating to the foregoing against the Company,
any of its Subsidiaries or the property owned, leased or operated by the Company
or its Subsidiaries.

6.24. REGISTRATION RIGHTS. Other than pursuant to the terms of the
Restated Registration Rights Agreement, no Person has demand or other rights to
cause the Company to file any registration statement under the Securities Act
relating to any securities of the Company or any right to participate in any
such registration statement.

6.25. OTHER AGREEMENTS. Except as explicitly disclosed and described
in the Financial Statements or as set forth on EXHIBIT 6.25 attached hereto,
neither the Company nor any of its Subsidiaries is a party to any written or
oral contract or instrument or other corporate restriction the due performance
of which individually or in the aggregate could have a Material Adverse Effect.
Except as specifically contemplated by this Agreement or as set forth on said
EXHIBIT 6.25, neither the Company nor any of its Subsidiaries is a party to any
written or oral:

(a) contract for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of its normal
operating requirements;

(b) agreement or indenture relating to the borrowing of money or
to the mortgaging or pledging of, or otherwise placing a lien or security
interest on, any asset of the Company or any of its Subsidiaries;

(d) voting trust, stockholders agreement, pledge agreement or
buy-sell agreement relating to any securities of the Company which shall be in
effect after the Closing except to the extent contemplated hereunder;

(e) agreement or obligation (contingent or otherwise) to issue or
sell or to repurchase or otherwise acquire or retire any share of its capital
stock or any of its other equity securities, other than the repurchase of shares
of Common Stock held by any employee or consultant of the Company at cost upon
the termination of such employee's or consultant's services to the Company; or

(f) other contract or group of related contracts with the same
party involving more than $2,000,000 (or its equivalent in any other currency)
and continuing over a period of more than six (6) months from the date or dates
thereof (including renewals or extensions optional with another party), which
contract or group of contracts is not terminable by the Company or any of its
Subsidiaries without penalty upon notice of thirty (30) days, or less, but
excluding any contract or group of contracts with a vendor to, or customer of,
the Company or any of its Subsidiaries for the sale, lease or rental of their
respective products or services if such contract or group of contracts was
entered into in the ordinary course of business.

22
<PAGE>

in effect to which the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries or its property may be bound. The Company
and the Subsidiaries currently have no expectation or intention of not fully
performing all their obligations under each such lease, contract or other
agreement, and the Company has no knowledge of any material breach or
anticipated material breach by the other party to any contract or commitment to
which the Company or any of its Subsidiaries is a party.

6.26. CUSTOMERS, VENDORS AND SUPPLIERS. None of the customers of the
Company and the Subsidiaries or vendors or suppliers of merchandise or supplies
to the Company and the Subsidiaries has canceled or otherwise terminated or made
any threat to cancel or otherwise terminate its relationship with the Company or
any Subsidiary, nor has any such customer, vendor or supplier indicated an
intent or desire to materially decrease its sales volume or purchase volume, as
the case may be, with the Company or any Subsidiary, except where any such
cancellation, termination, threat to cancel or terminate or intent or desire to
decrease its sales volume or purchase volume would not have a Material Adverse
Effect.

6.27. NO VIOLATIONS. Neither the execution and delivery of this
Agreement and the Operative Documents, nor the consummation of any of the
transactions contemplated hereby or thereby, by the Company, will (a) violate,
conflict with, or result in a breach or default under any provision of the
Certificate of Incorporation or Bylaws of the Company, (b) violate any provision
of any Applicable Laws, or (c) result in a violation or breach by the Company
of, conflict with, constitute (with or without due notice or lapse of time or
both) a default by the Company (or give rise to any right of termination,
cancellation, payment or acceleration) under, or result in the creation of any
Lien upon any of the properties or assets of the Company under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease, franchise agreement or other instrument or
obligation to which the Company is a party, or by which it or any of its
properties or assets may be bound.

ARTICLE VII

COVENANTS OF THE COMPANY

7.01. AFFIRMATIVE COVENANTS OF THE COMPANY OTHER THAN REPORTING
REQUIREMENTS. Without limiting any other covenants and provisions hereof, the
Company covenants and agrees that, until the later of the repayment in full of
(i) the aggregate outstanding principal balance of the Notes, together with all
interest and penalties, if any, due thereon, or (ii) the aggregate outstanding
principal balance of the LTHBV Notes, together with all interest and penalties,
if any due thereon, it will perform and observe the following covenants and
provisions and will cause each Subsidiary to perform and observe such of the
following covenants and provisions as are applicable to such Subsidiary:

(a) PUNCTUAL PAYMENT. Pay the principal of, premium, if any, and
interest on each of the Notes at the times and place and in the manner provided
in the Notes and herein.

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<PAGE>

any properties of the Company or any Subsidiary, provided that neither the
Company nor any Subsidiary shall be required to pay any such tax, assessment,
charge, levy or claim which is being contested in good faith and by appropriate
proceedings if the Company or the Subsidiary concerned shall have set aside on
its books adequate reserves with respect thereto. Pay and cause each Subsidiary
to pay, when due, or in conformity with customary trade terms, all material
lease obligations, all trade debt, and all other Indebtedness incident to the
operations of the Company or the Subsidiaries, except such as are being
contested in good faith and by appropriate proceedings if the Company or the
Subsidiary concerned shall have set aside on its books adequate reserves with
respect thereto.

(c) MAINTENANCE OF INSURANCE. Maintain, and cause each Subsidiary
to maintain, insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company or such Subsidiary operates.

(d) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain,
and cause each Subsidiary to preserve and maintain, its corporate existence,
rights, franchises and privileges in the jurisdiction of its incorporation, and
qualify and remain qualified, and cause each Subsidiary to qualify and remain
qualified, as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable in view of its business and operations
or the ownership of its properties, except where the failure to remain so
qualified would not, either individually or in the aggregate, have a Material
Adverse Effect; provided, however, that nothing herein contained shall prevent
any merger, consolidation or transfer of assets permitted by subsection 7.02(e).
Preserve and maintain, and cause each Subsidiary to preserve and maintain, all
licenses and other rights to use patents, processes, licenses, trademarks, trade
names, inventions, intellectual property rights or copyrights owned or possessed
by it and necessary to the conduct of its business, except such licenses, other
rights and copyrights which are part of a transfer of assets permitted by
Section 7.02(e).

(e) COMPLIANCE WITH LAWS. Comply, and cause each Subsidiary to
comply, with all applicable laws, rules, regulations and orders of any
governmental authority, noncompliance with which could have a Material Adverse
Effect.

(f) INSPECTION RIGHTS. At any reasonable time and from time to
time, but not more frequently than twice in any 12-month period unless an Event
of Default shall have occurred and is continuing, permit the Purchaser or any of
its agents or representatives, to examine and make copies of and extracts from
the records and books of account of, and visit and inspect the properties of,
the Company and any Subsidiary, and to discuss the affairs, finances and
accounts of the Company and any Subsidiary with any of their officers or
directors and independent accountants. All reasonable out-of-pocket expenses of
the Purchaser (or its agents or representatives), the Company or any Subsidiary
incurred in connection with such inspection rights shall be borne by the
Company, such amount not to exceed $10,000 per annum.

24
<PAGE>

shall be made; PROVIDED, HOWEVER, that with respect to Subsidiaries which are
not incorporated or organized under the laws of any State of the United States
or the District of Columbia (collectively, the "Foreign Subsidiaries"), the
Company shall cause each such Subsidiary to make entries in its records and
books of account in accordance with the generally accepted accounting principles
recognized in the country in which such Subsidiary was organized or
incorporated.

(h) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and
cause each Subsidiary to maintain and preserve, all of its properties, necessary
or useful in the proper conduct of its business, in good repair, working order
and condition, ordinary wear and tear excepted, except such properties which are
part of a transfer of assets permitted by Section 7.02(e).

(i) COMPLIANCE WITH ERISA. Comply, and cause each Guarantor to
comply, with all minimum funding requirements applicable to any pension or other
employee benefit plans which are subject to ERISA or to the Code, and comply,
and cause each Guarantor to comply, in all other material respects with the
provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. Neither the Company nor any United States
Subsidiary will permit any event or condition to exist which could permit any
such plan to be terminated under circumstances which would cause the lien
provided for in Section 4068 of ERISA to attach to the assets of the Company or
any Subsidiary.

(j) ATTENDANCE AT BOARD MEETINGS. At any time at which a nominee
of the Purchaser is not a member of the board of directors or any committee of
the Company as provided in this Agreement and the Restated Stockholders'
Agreement, permit the Purchaser or its designee to have one observer attend each
meeting of the board of directors of the Company. The Company will send to the
Purchaser and its designee the notice of the time and place of any such meeting
in the same manner and at the same time as notice is sent to the directors;
PROVIDED, HOWEVER, that the Purchaser and its designee shall always receive at
least five (5) Business Days prior notice of any meeting which is not an
emergency meeting and at least three (3) Business Days' notice of any emergency
meeting. The Company shall also provide to the Purchaser copies of all notices,
reports, minutes, consents and other documents at the time and in the manner as
they are provided to the board of directors. The Purchaser shall have the right,
upon request and with reasonable notice, to consult with and advise the Company
regarding the Company's business. The Company shall reimburse each the Purchaser
or its designee for all reasonable costs incurred by the Purchaser or its
designee in connection with traveling to and from and attending meetings of the
Company's board of directors. The Purchaser and its designee hereby agree to
maintain the confidentiality of all confidential information of the Company to
which it obtains access pursuant to Section 7.01(f), this Section 7.01(j) or
Section 7.03(g); provided, however, that nothing herein shall limit the
disclosure of any such information (i) to the extent required by statute, rule,
regulation or judicial process, (ii) to counsel to, or auditors, accountants or
consultants for, the Purchaser, (iii) in connection with any litigation to which
the Purchaser is a party, or (iv) to any assignee or prospective assignee of any
of the Notes.

(k) BOARD OF DIRECTORS AND COMMITTEES. The board of directors of
the Company shall consist of no more than six (6) members, as provided for in
the Restated Stockholders' Agreement. The Company shall at all times maintain a
Compensation Committee and an Audit Committee of its board of directors.

25
<PAGE>

(l) NOTICE OF DEFAULT OF SENIOR DEBT. The Company shall provide
the holders of the Notes with written notice promptly upon an event of default
under the Senior Debt or upon the occurrence of an event which, with the giving
of notice or passage of time or both, would result in an event of default under
the Senior Debt.

(m) KEY MAN LIFE INSURANCE. The Company will maintain a "key man"
life insurance policy in the amount of Two Million Dollars ($2,000,000.00) on
Rory J. Cowan. Proceeds of such policy will be payable to the Company.

(n) QUICK RATIO. Commencing with the fiscal quarter ending
December 31, 1999, the Company shall cause the Consolidated Group to maintain at
the end of each fiscal quarter a ratio of Quick Assets to Current Liabilities of
not less than 0.50 to 1.0.

(o) MINIMUM EBITDA. The Company shall cause the Consolidated
Group to have at the end of each of the following fiscal quarters minimum EBITDA
of not less than the respective amounts set forth below opposite each such
fiscal quarter:

<TABLE>
<CAPTION>
FISCAL QUARTER MINIMUM EBITDA
<S> <C>
Quarter Ending 3/31/99 ($500,000)

Quarter Ending 6/30/99 $500,000

Quarter Ending 9/30/99 $1,000,000

Quarter Ending 12/31/99 and $750,000
each fiscal quarter thereafter
</TABLE>

(p) SUBSIDIARY GUARANTORS. Within five (5) Business Days after
any Subsidiary which (i) is not (x) a Subsidiary Guarantor on the date hereof
and (y) a Foreign Subsidiary guarantees any Senior Debt (each a "New Senior Debt
Guarantee"), the Company shall cause such Subsidiary to execute and deliver to
the Purchaser a guarantee in form and substance satisfactory to the Purchaser
pursuant to which such Subsidiary guarantees all of the obligations of the
Company to the Purchaser, including, without limitation, the obligations of the
Company hereunder and under the Notes, together with any other documents as the
Purchaser may reasonably request, and (ii) is a Foreign Subsidiary, but not a
Subsidiary Guarantor under the LTHBV Note Purchase Agreement on the date hereof,
guarantees any Senior Debt (each a "New Senior Debt Foreign Guarantee") of any
other Foreign Subsidiary, the Company shall cause such Subsidiary to execute and
deliver to the Purchaser under the LTHBV Note Purchase Agreement a guarantee in
form and substance satisfactory to such Purchaser pursuant to which such
Subsidiary guarantees all of the obligations of LTHBV to such Purchaser
including, without limitation, the obligations of LTHBV under the LTHBV Note
Purchase Agreement and the LTHBV Notes.

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<PAGE>

due thereon, or (ii) the aggregate outstanding principal balance of the LTHBV
Notes, together with all interest and penalties, if any due thereon, it will
comply with and observe the following covenants and provisions, and will cause
each Subsidiary to comply with and observe such of the following covenants and
provisions as are applicable to such Subsidiary, and will not:

(a) LIENS. Create, incur, assume or suffer to exist, or permit
any Subsidiary to create, incur, assume or suffer to exist, any mortgage, deed
of trust, pledge, lien, security interest or other charge or encumbrance
(including the lien or retained security title of a conditional vendor) of any
nature, upon or with respect to any of its properties, now owned or hereafter
acquired, or assign or otherwise convey any right to receive income, except that
the foregoing restrictions shall not apply to mortgages, deeds of trust,
pledges, liens, security interests or other charges or encumbrances
(collectively, "Permitted Liens"):

(i) for taxes, assessments or governmental charges or levies
on property of the Company or any Subsidiary if the same shall
not at the time be delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by appropriate
proceedings;

(ii) imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary
course of business;

(iii) arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or
other social security or retirement benefits, or similar
legislation;

(iv) securing the performance of bids, tenders, contracts
(other than for the repayment of borrowed money), statutory
obligations and surety bonds;

(v) in the nature of zoning restrictions, easements and
rights or restrictions of record on the use of real property
which do not materially detract from its value or impair its use;

(vi) arising by operation of law in favor of the owner or
sublessor of leased premises and confined to the property rented;

(vii) arising from any litigation or proceeding which is
being contested in good faith by appropriate proceedings,
provided, however, that no execution or levy has been made;

(viii) described on EXHIBIT 6.07 which secure the
Indebtedness set forth on EXHIBIT 6.08(d), provided that no such
lien is extended to cover other or different property of the
Company or any Subsidiary;

(ix) liens which secure Indebtedness permitted by Section
7.02(b); and

(x) other liens or encumbrances arising in the ordinary
course of business

27
<PAGE>

not incurred in connection with the borrowing of money which do
not interfere in any material respect with the conduct of the
business of the Company and its Subsidiaries.

(b) INDEBTEDNESS. Without the prior written consent of the
Purchaser, create, incur, assume or suffer to exist, or permit any Subsidiary to
create, incur, assume or suffer to exist, any Indebtedness other than (1) up to
$15,000,000 (or its equivalent in any other currency) in Senior Debt; (2) an
unlimited amount of Junior Subordinated Debt outstanding at any time on a
consolidated basis, PROVIDED that the incurrence and maintenance of all such
Indebtedness will not result in the Company's or any Subsidiary's failure to
comply with any of the provisions of Article VII hereof; and (3) Indebtedness
described in EXHIBIT 7.02(b), PROVIDED, HOWEVER, that neither the Company, nor
any Subsidiary shall make an intercompany loan to a Subsidiary that is not a
Subsidiary Guarantor (as such term is defined under this Agreement and as such
term is defined under the LTHBV Note Purchase Agreement). In addition, without
the prior written consent of the Purchaser, (i) the Company shall make no
payments whatsoever on the VTI Seller Notes during the existence of an Event of
Default, and (ii) the Company shall not agree to any amendment or modification
to the VTI Seller Notes, which would have a material adverse impact upon the
interests of the Purchaser.

(c) LEASE OBLIGATIONS. Become obligated to pay rent under any
leases or other rental arrangements (excluding capitalized leases) under which
the amount of the aggregate lease or other payments for all such agreements or
arrangements exceeds $5,000,000 on a consolidated basis for any twelve-month
period.

(d) ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER PERSONS.
Assume, guarantee, endorse or otherwise become directly or contingently liable
on, or permit any Subsidiary to assume, guarantee, endorse or otherwise become
directly or contingently liable on (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss) any Indebtedness of any other Person, except
for guarantees by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business and except by the Company or any
Subsidiary with respect to any Indebtedness of the Company or any Subsidiary
which is permitted by this Agreement; provided, however, in no event shall (i)
the Company guarantee any Senior Debt of any of the Company's Subsidiaries
without the prior written consent of the Purchaser, and (ii) any Foreign
Subsidiary guarantee any Senior Debt of the Company or any Subsidiary of the
Company that is not a Foreign Subsidiary without the prior written consent of
the Purchaser.

(e) MERGERS, SALE OF ASSETS, ETC. Without the prior written
consent of the Purchaser, merge or consolidate with any Person, or sell, assign,
lease or otherwise dispose of or voluntarily part with the control of (whether
in one transaction or in a series of transactions) all or substantially all of
its assets (whether now owned or hereinafter acquired) or permit any Subsidiary
to do so, except that (1) any Subsidiary may merge into or consolidate with or
transfer assets to any Subsidiary Guarantor; (2) any Subsidiary may merge into
or transfer assets to the Company (3) the Company may merge with any Person or
issue securities in connection with the acquisition of a Person, provided that
the Company is the surviving entity and the stockholders of the Company as of
the Closing own or are able to vote or control at least 50% of the aggregate of
all outstanding equity securities of the Company at that time, such merger or
acquisition does not result in the violation of any of the provisions of this
Agreement, and no Event of Default exists at the time of such merger or
acquisition, and (4) the Company may merge or consolidate

28
<PAGE>

with any Person or shall, assign, lease or otherwise dispose of or voluntarily
part with control of any of its assets or permit any Subsidiary to do so in
connection with any transaction which results in net cash proceeds to the
holders of the outstanding Common Stock of the Company at such time of at least
$50,000,000.

(f) INVESTMENTS IN OTHER PERSONS. Without the prior written
consent of the Purchaser, make or permit any Subsidiary to make, any loan or
advance to any Person, or purchase, otherwise acquire, or permit any Subsidiary
to purchase or otherwise acquire, any capital stock, assets or other property
of, obligations of, or any interest in, any Person, except:

(i) investments by the Company or any Subsidiary in
evidences of indebtedness issued or fully guaranteed by the
United States of America or any U.S. government agency having a
maturity of not more than one year from the date of acquisition;

(ii) investments by the Company or any Subsidiary in
certificates of deposit, money market accounts, notes,
acceptances and repurchase agreements having a maturity of not
more than one year from the date of acquisition issued by a bank
organized in the United States having capital, surplus and
undivided profits of at least $100,000,000 and whose parent
holding company has long-term debt rated Aal or higher, and whose
commercial paper (if rated) is rated Prime 1 by Moody's Investors
Service, Inc.;

(iii) loans from a Subsidiary to the Company or another
Subsidiary or from the Company to a Subsidiary;

(iv) investments by the Company or any Subsidiary in the
highest-rated commercial paper having a maturity of not more than
one year from the date of acquisition;

(v) reasonable advances to employees for travel, relocation
or other business expenses in accordance with the ordinary course
of business;

(vi) loans or advances to employees to enable employees to
exercise vested stock options; and

(vii) acquisitions of assets, capital stock or other
property which individually and in the aggregate are not material
to the Company or such Subsidiary (assets, capital stock and
other property with a fair market value of less than $3,000,000
(or its equivalent in any other currency) acquired in any
one-year period in the aggregate shall not be deemed "material");
PROVIDED, HOWEVER, that each such acquisition can be made in
compliance with the other terms of this Agreement, including,
without limitation, Section 7.02(l).

(g) DISTRIBUTIONS. Without the prior written consent of the
Purchaser, declare or pay any dividends, purchase, redeem, retire, or otherwise
acquire for value any of its capital stock (or rights, options or warrants to
purchase such shares) now or hereafter outstanding, return any capital to its
stockholders as such, or make any distribution of assets to its stockholders as
such, or permit any Subsidiary to do any of the foregoing (such transactions
being hereinafter referred to as "Distributions"); provided, however, that
nothing herein contained shall prevent:

29
<PAGE>

(i) the Company from effecting a stock split or declaring or
paying any dividend consisting of shares of any class of Common
Stock to the holders of shares of such class of Common Stock,
provided that such stock split or dividend is effected equally
across all classes of Common Stock;

(ii) any Subsidiary from declaring or making payment of cash
or stock dividends, returns of capital or distributions of assets
to the Company or another Subsidiary; or

(iii) the repurchase of shares of Common Stock held by any
employee or consultant of the Company at cost upon the
termination of such employee's or consultant's services to the
Company;

if in the case of any such transaction the Distribution can be made in
compliance with the other terms of this Agreement.

(h) DEALINGS WITH AFFILIATES. Without the prior written consent
of the Purchaser, enter or permit any Subsidiary to enter into any transaction
with any holder of five percent (5%) or more of any class of capital stock of
the Company, or any member of their families or any corporation or other entity
in which any one or more of such stockholders or members of their immediate
families directly or indirectly holds five percent (5%) or more of any class of
capital stock, except on an arms-length basis on terms no less favorable to the
Company or Subsidiary as it could obtain from an unrelated party.

(i) MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES. Sell or otherwise
dispose of any shares of capital stock of any Subsidiary, except to the Company
or another Subsidiary, or permit any Subsidiary to issue, sell or otherwise
dispose of any shares of its capital stock or the capital stock of any
Subsidiary, except (i) to the Company or another Subsidiary, or (ii) to any
director of any Foreign Subsidiary to the extent the issuance to any such
director of any such capital stock is required under applicable law; PROVIDED,
HOWEVER, that nothing herein contained shall prevent any merger, consolidation
or transfer of assets permitted by Section 7.02(e).

(j) CHANGE IN NATURE OF BUSINESS. Without the prior written
consent of the Purchaser, make, or permit any Subsidiary to make, any material
change in the nature of its business as carried on at the date hereof.

(k) NO AMENDMENT OF CERTIFICATE OF INCORPORATION OR BYLAWS.
Without the prior written consent of the Purchaser, amend or alter its
Certificate of Incorporation or Bylaws in any manner which would have an adverse
impact upon the interests of the Purchaser. Prior to making any amendment or
alteration to its Certificate of Incorporation or Bylaws, the Company shall give
the Purchaser five (5) days prior written notice thereof. In the event the
Purchaser reasonably believes that such amendment or alteration would have an
adverse effect upon its interests and the Purchaser so notifies the Company
prior to the expiration of such five (5) day period, the Company shall not so
amend or alter its Certificate of Incorporation or Bylaws (as applicable).

(l) CAPITAL EXPENDITURES. Make, or permit any Subsidiary to make,
any capital

30
<PAGE>

expenditure during any fiscal year of the Company which exceeds $3,000,000 (or
its equivalent in any other currency) in the aggregate on a consolidated basis.

7.03. REPORTING REQUIREMENTS. The Company will furnish to each holder
of any Note, Warrant or Warrant Share:

(a) as soon as possible and in any event within five (5) days
after the occurrence of each Event of Default or each event which, with the
giving of notice or lapse of time or both, would constitute an Event of Default,
the statement of the chief financial officer of the Company setting forth
details of such Event of Default or event and the action which the Company
proposes to take with respect thereto;

(b) as soon as available and in any event within thirty (30) days
after the end of each month, consolidated and consolidating balance sheets of
the Company and its Subsidiaries as of the end of such month and consolidated
and consolidating statements of income and retained earnings and of cash flows
of the Company and its Subsidiaries for such month and for the periods
commencing at the end of the previous fiscal year and ending with the end of
such month, and with respect to each quarter, setting forth in each case in
comparative form the corresponding figures for the corresponding period of the
preceding fiscal year and the operating Budget for the current year (the
"Budget"), all in reasonable detail, in a format reasonably satisfactory to the
Purchaser, and duly certified (subject to normal year-end adjustments) by the
chief financial officer of the Company as having been prepared in accordance
with GAAP, subject to normal year-end audit adjustments, and including a
discussion by the Company's management of any variance from the Budget;

(c) at the time of delivery of each monthly statement, a
certificate, executed by the chief financial officer of the Company, stating
that such officer has caused this Agreement, the Notes and the Warrants to be
reviewed and has no knowledge of any Event of Default or default by the Company
or any Subsidiary in the performance or observance of any of the provisions of
this Agreement, the Notes or the Warrants or, if such officer has such
knowledge, specifying such Event of Default or default and the nature thereof,
and setting forth computations in reasonable detail demonstrating compliance
with the provisions of subsections 7.02(b) and (d);

(d) promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company or any Subsidiary of the type described in Section 6.04;

(e) simultaneously as they are sent to the Bank, copies of all
financial statements, and upon written request, reports and other information
delivered by the Company to the Bank;

(f) promptly after sending, making available, or filing the same,
such reports and financial statements as the Company or any Subsidiary shall
send or make available to the stockholders of the Company or the Commission;

(g) such other information respecting the business, assets,
liabilities, financial condition, results of operations or prospects of the
Company or any of its Subsidiaries as the Purchaser

31
<PAGE>

may from time to time reasonably request, and to make available to the Purchaser
and its representatives, members of management and employees with significant
responsibilities for the purposes of updating the Purchaser as to the condition
of the Company and its Subsidiaries;

(h) within thirty (30) days of the end of each calendar quarter,
a certificate signed by the President or Chief Financial Officer of the Company
which shall contain a detailed computation of the Company's compliance with the
financial covenants in Sections 7.01(n) and 7.01(o); and

(i) simultaneously with any Subsidiary entering into a New Senior
Debt Guarantee or a New Senior Debt Foreign Guarantee, a copy of such guarantee,
together with all other documents executed in connection therewith.

ARTICLE VIII

EVENTS OF DEFAULT

8.01. EVENTS OF DEFAULT. If any of the following events ("Events of
Default") shall occur and be continuing:

(a) The Company or LTHBV shall fail to pay any installment of
principal of any of the Notes or any of the LTHBV Notes, respectively, when due;
or

(b) The Company or LTHBV shall fail to pay any interest or
premium, if any, on any of the Notes or any of the LTHBV Notes, respectively,
when due and such failure shall continue for five (5) days; or

(c) The Company shall default in the performance of any covenant
contained in Section 7.02 which default shall remain uncured for twenty (20)
days or more; or

(d) There shall be an Event of Default under the LTHBV Loan
Agreement or any documents or agreements executed in connection therewith;

(e) Any representation or warranty made by the Company in this
Agreement or by the Company (or any of its officers) in any certificate,
instrument or written statement contemplated by or made or delivered pursuant to
or in connection with this Agreement, shall prove to have been incorrect when
made in any material respect; or

(f) The Company or any Subsidiary shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement, the
Notes or the Warrants on its part to be performed or observed and any such
failure remains unremedied for twenty (20) days after written notice thereof
shall have been given to the Company by any registered holder of the Notes, or
the Warrants; or

32
<PAGE>

terms of the relevant document, within any applicable grace period), whether
such Indebtedness shall become due by scheduled maturity, by required
prepayment, by acceleration, by demand or otherwise, or shall fail to perform
any term, covenant or agreement on its part to be performed under any agreement
or instrument (other than this Agreement or the Notes) evidencing or securing or
relating to any Indebtedness owing by the Company or any Subsidiary, as the case
may be, when required to be performed (or, if permitted by the terms of the
relevant document, within any applicable grace period), if the effect of such
failure to pay or perform is to accelerate, or to permit the holder or holders
of such Indebtedness, or the trustee or trustees under any such agreement or
instrument to accelerate the maturity of such Indebtedness, unless such failure
to pay or perform shall be waived by the holder or holders of such Indebtedness
or such trustee or trustees; or

(h) The occurrence of an event of default or default under any
document, instrument, note or agreement evidencing or relating to any Senior
Debt, including, without limitation, Indebtedness of the Company and any of its
Subsidiaries for money borrowed from the Bank pursuant to the Loan Agreement.

(i) The occurrence of an event of default or default under (1)
the VTI Notes or any document or agreement relating thereto or (2) any document,
instrument, note or agreement relating or evidencing the CRL Indebtedness.

(j) The Company, any of the Guarantors or LTHBV shall be involved
in financial difficulties evidenced (i) by its admitting in writing its
inability to pay its debts generally as they become due; (ii) by its
commencement of a voluntary proceeding under Title 11 of the United States Code
as from time to time in effect, or foreign bankruptcy, insolvency, receivership,
examination or similar law, or by its authorizing, by appropriate proceedings of
its board of directors or other governing body, the commencement of such a
voluntary proceeding; (iii) by its filing an answer or other pleading admitting
or failing to deny the material allegations of a petition filed against it
commencing an involuntary proceeding under said Title 11, or foreign bankruptcy,
insolvency, receivership or similar law, or seeking, consenting to or
acquiescing in the relief therein provided, or by its failing to timely
controvert any such proceeding or the material allegations of any such petition;
(iv) by the entry of an order for relief in any involuntary proceeding commenced
under said Title 11, or foreign bankruptcy, insolvency, receivership,
examination or similar law; (v) by its seeking relief as a debtor under any
applicable law, other than said Title 11, or similar bankruptcy, insolvency,
receivership, examination or similar law, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors, or by its consenting to or acquiescing in such relief;
(vi) by the entry of an order by a court of competent jurisdiction (a) finding
it to be bankrupt or insolvent, (b) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its creditors,
or (c) assuming custody of, or appointing a receiver, examiner, trustee,
custodian, sequestrator or similar official for, all or a substantial part of
its property; or (vii) by its making an assignment for the benefit of, or
entering into a composition with, its creditors, or appointing or consenting to
the appointment of a receiver, examiner, trustee, custodian, sequestrator or
similar official for all or a substantial part of its property;

(k) A Change of Control occurs with respect to the Company or any
material Subsidiary which is not consented to by the holders of at least a
majority of the principal amount of the Notes then outstanding; or

33
<PAGE>

(l) Any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against a substantial part of the
property of the Company or any Subsidiary and such judgment, writ, or similar
process shall not be released, vacated or fully bonded within sixty (60) days
after its issue or levy;

then, and in any such event listed in Section 8.01(a) through
(l),

(1) the Purchaser may, by notice to the Company, declare the entire
unpaid principal amount of the Notes, all interest accrued and unpaid thereon
and all other amounts payable under this Agreement to be forthwith due and
payable, whereupon the Notes, all such accrued interest and all such amounts
shall become and be forthwith due and payable (unless there shall have occurred
an Event of Default under subsections 8.01(j) in which case all such amounts
shall automatically become due and payable), without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Company, and

(2) the holders of the Notes may proceed to protect and enforce their
respective rights against the Company in such manner as they may elect,
including without limitation, proceeding to protect and enforce their respective
rights by suit in equity (including without limitation a suit for rescission),
action at law and/or other appropriate proceeding either for specific
performance of any covenant, provision or condition contained or incorporated by
reference in this Agreement or any term of the Certificate of Incorporation of
the Company.

Without in any way limiting the rights of the holders of the Notes,
the Company hereby agrees that the holders of the Warrants or the Warrant Shares
would have no adequate remedy at law, for monetary compensation or otherwise,
for the damages that would be suffered if the Company were to fail to comply
with its obligations under Articles VII and VIII, and that the Company therefore
agrees that the holders of the Warrants and the Warrant Shares shall be entitled
to obtain specific performance of the Company's obligations under Articles VII
and VIII of this Agreement.

8.02. ANNULMENT OF DEFAULTS. Section 8.01 is subject to the condition
that, if at any time after the principal of any of the Notes shall have become
due and payable, and before any judgment or decree for the payment of the moneys
so due, or any thereof, shall have been entered, then and in every such case the
holders of at least a majority of the principal amount of all Notes then
outstanding may, by written instrument filed with the Company, rescind and annul
such declaration and its consequences; but no such rescission or annulment shall
extend to or affect any subsequent default or Event of Default or impair any
right consequent thereon.

ARTICLE IX

MISCELLANEOUS

9.01. NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part
of any holder of any Notes, Warrants or Warrant Shares in exercising any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy
hereunder. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.

34
<PAGE>

9.02. AMENDMENTS, WAIVERS AND CONSENTS. Any provision in this
Agreement, the Notes, the Warrants or the other Operative Documents to the
contrary notwithstanding, changes in or additions to this Agreement may be made,
and compliance with any covenant or provision herein set forth may be omitted or
waived, if the Company (x) shall obtain consent thereto in writing from the
holder or holders of (i) if any Notes are outstanding, at least a majority in
principal amount of all Notes then outstanding, and (ii) if no Notes are then
outstanding, at least a majority of the Warrant Shares (whether issued or
issuable), and (y) shall deliver copies of such consent in writing to any
holders who did not execute the same; PROVIDED that no such consent shall be
effective to reduce the principal or interest payable on any Note or extend the
maturity of the Notes without the consent of the holder thereof or to reduce the
percentage of the Notes and Warrants the consent of the holders of which is
required under this Section 9.02; AND PROVIDED FURTHER, that no covenant or
provision set forth in the Warrants may be omitted or waived without the written
consent of the holder or holders of at least a majority of the Warrant Shares.
Any waiver or consent may be given subject to satisfaction of conditions stated
therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. Written notice of any
waiver or consent effected under this subsection shall promptly be delivered by
the Company to any holders who did not execute the same.

9.03. ADDRESSES FOR NOTICES, ETC. All notices, requests, demands and
other communications provided for hereunder shall be in writing and mailed (by
first class registered or certified mail, postage prepaid), telegraphed, sent by
express overnight courier service or electronic facsimile transmission with a
copy by mail, or delivered to the applicable party at the addresses indicated
below:

IF TO THE COMPANY:

Lionbridge Technologies Holdings, Inc.
950 Winter Street
Waltham, MA 02154
Attention: Chief Financial Officer
Telecopy No.: (781) 890-3122

WITH A COPY TO:

Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
Attention: George W. Lloyd, Esq.
Telecopy No.: (617) 248-7100

35
<PAGE>

IF TO MSC
AND MSI:

Morgan Stanley Venture Capital Fund II Annex, L.P.
Morgan Stanley Venture Investors Annex, L.P.
1221 Avenue of the Americas
New York, NY 10020
Attention: Debra Abramovitz
Telecopy No.: (212) 762-8424

WITH A COPY TO:

Holland & Knight LLP
One Beacon Street
Boston, MA 02108
Attention: Lawrence D. Bradley, Esq.
Telecopy No.: (617) 523-6850

IF TO ANY OTHER HOLDER OF THE NOTES OR WARRANTS:

at such holder's address for notice as set
forth in the transfer records of the
Company

or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall, when mailed, telegraphed or sent, respectively, be
effective (i) two days after being deposited in the mails or (ii) one day after
being delivered to the telegraph company, deposited with the express overnight
courier service or sent by electronic facsimile transmission (with receipt
confirmed), respectively, addressed as aforesaid.

9.04. COSTS, EXPENSES AND TAXES. The Company agrees to pay on demand
all reasonable costs and expenses of the Purchaser in connection with the
preparation, execution and delivery of this Agreement, the Notes, the Warrants,
the other Operative Documents and other instruments and documents to be
delivered hereunder, and in connection with the consummation of the transactions
contemplated hereby and thereby, as well as all costs and expenses of the
Purchaser in connection with the amendment, waiver (whether or not such
amendment or waiver becomes effective) or enforcement of this Agreement, the
Notes, the Warrants, the other Operative Documents, and other instruments and
documents to be delivered hereunder and thereunder. Notwithstanding the
preceding sentence, and in addition to the provisions of such sentence, the
Company agrees to pay on demand all reasonable fees and out-of-pocket expenses
of Holland & Knight LLP, counsel to the Purchaser, in connection with the
transactions contemplated by this Agreement, including any amendment, waiver
(whether or not such amendment or waiver becomes effective) or enforcement of
this Agreement, the Notes, the Warrants, the Operative Documents, and other
instruments and documents to be delivered hereunder and thereunder. In addition,
the Company agrees to pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of this
Agreement, the Notes, the Warrants, the

36
<PAGE>

other Operative Documents, and the other instruments and documents to be
delivered hereunder or thereunder and the Company agrees to save each Purchaser
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and filing fees.

9.05. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Company and the Purchaser and their respective
successors and assigns, except that (i) the Company shall not have the right to
assign its rights hereunder or any interest therein without the prior written
consent of the Purchaser and (ii) the Purchaser shall not have the right to
assign its rights under this Agreement, the Notes or the Warrants or any
interest therein to any Person not an Affiliate of the Purchaser without the
prior written consent of the Company, and the Purchaser shall not have the right
to assign fewer than 40,000 Warrant Shares (or Warrants exercisable therefor)
without the prior written consent of the Company. The Purchaser shall notify the
Company of any assignment that it makes of its rights hereunder, at such time as
it makes such assignment. Except as expressly set forth herein, nothing in this
Agreement shall confer any claim, right, interest or remedy on any third party
or inure to the benefit of any third party.

9.06. PAYMENTS IN RESPECT OF NOTES. The Purchaser and any successor
holder of the Notes, by their acceptance thereof, agree that, with respect to
all sums received by them applicable to the payment of principal of or interest
on the Notes, equitable adjustment will be made among them so that, in effect,
all such sums shall be shared ratably by all of the holders of the Notes whether
received by voluntary payment, by realization upon security, by the exercise of
the right of setoff, by counterclaim or cross-action or by the enforcement of
any or all of the Notes. If any holder of the Notes receives any payment on its
Notes in excess of its pro rata portion, then such holder receiving such excess
payment shall purchase for cash from the other holders an interest in their
Notes in such amounts as shall result in a ratable participation by all of the
holders in the aggregate unpaid amount of Notes then outstanding.

9.07. PAYMENTS IN RESPECT OF WARRANTS. The Purchaser and any successor
holder of the Warrants, by their acceptance thereof, agree that, with respect to
the sale to, or repurchase by, the Company or any Person directly or indirectly
affiliated with the Company or any of its directors, officers, or shareholders,
of the Warrants, equitable adjustment will be made among the holders of the
Warrants so that in effect all sums so received shall be shared ratably in
proportion to their respective holdings of Warrants. If any holder of the
Warrants receives any such sum in respect of its Warrants in excess of its pro
rata portion, then such holder receiving such excess shall purchase for cash
from the other holders of the Warrants an interest in their Warrants in such
amount as shall result in a ratable participation of all of the holders in the
aggregate of all Warrants then outstanding.

9.08. INDEMNIFICATION. The Company agrees to indemnify and hold
harmless the Purchaser, its subsidiaries, directors, officers, partners, counsel
and employees, from and against any and all liability (including, without
limitation, reasonable legal fees incurred in defending against any such
liability) under, arising out of or relating to this Agreement, the Notes, the
Warrants, the Warrant Shares, the transactions contemplated hereby or thereby or
in connection herewith or therewith, including (to the maximum extent permitted
by law) any liability arising under federal or state securities laws, except to
the extent such liability shall result from any act or omission on the part of
the Purchaser or its employees, agents, brokers or other representatives. The
obligations of the Company under this Section 9.08 shall survive and continue to
be in full force and effect notwithstanding (a) the repayment of

37
<PAGE>

the Notes and (b) the termination of this Agreement.

9.09. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made in this Agreement, the Notes, the Warrants, the Operative
Documents or any other instrument or document delivered in connection herewith
or therewith, shall survive the execution and delivery hereof and thereof,
regardless of any investigation made by the Purchaser or on behalf of the
Purchaser.

9.10. INTENTIONALLY OMITTED.

9.11. SEVERABILITY. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.

9.12. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the Commonwealth of
Massachusetts.

9.13. WAIVER OF RIGHT TO JURY TRIAL. The parties hereby waive all
rights to a trial by jury for all legal proceedings concerning this Agreement or
the Notes.

9.14. HEADINGS. Article, Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.

9.15. SEALED INSTRUMENT. This Agreement is executed as an instrument
under seal.

9.16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties hereto may execute this Agreement by signing
any such counterpart.

9.17. FURTHER ASSURANCES. From and after the date of this Agreement,
upon the request of the Purchaser, the Company and each Subsidiary shall execute
and deliver such instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement, the Notes and the Warrants.

9.18. CONSENT TO JURISDICTION. The Company irrevocably submits to the
non-exclusive jurisdiction of any state or federal court sitting in the
Commonwealth of Massachusetts over any suit, action or proceeding arising out of
or relating to this Agreement or any of the Notes, the Warrants or the Warrant
Shares. To the fullest extent it may effectively do so under applicable law, the
Company irrevocably waives and agrees not to assert, by way of motion, as a
defense or otherwise, any claim that it is not subject to the jurisdiction of
any such court, any objection that it may now or hereafter have to the laying of
the venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.

38
<PAGE>

be enforced in the courts of the United States of America or the Commonwealth
of Massachusetts (or any other courts to the jurisdiction of which the
Company is or may be subject) by a suit upon such judgment.

9.20. SERVICE OF PROCESS. The Company consents to service of process
in any suit, action or proceeding of the nature referred to in Section 9.18 by
actual receipt of a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to the address of the Company specified in or
designated pursuant to Section 9.03. The Company agrees that such service (i)
shall be deemed in every respect effective service of process upon the Company
in any such suit, action or proceeding and (ii) shall, to the fullest extent
permitted by law, be taken and held to be valid personal service upon and
personal delivery to the Company.

9.21. NO LIMITATION. Nothing in Sections 9.18, 9.19, 9.20 or 9.22
shall affect the right of the Purchaser to serve process in any manner permitted
by law, or limit any right that the Purchaser may have to bring proceedings
against the Company in the courts of any jurisdiction or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.

9.22. SPECIFIC PERFORMANCE. Upon breach or default by the Company with
respect to any obligation hereunder or under the Notes, the holders of the Notes
shall be entitled to protect and enforce their rights at law, or in equity or by
other appropriate proceedings for specific performance of such obligation, or
for an injunction against such breach or default, or in aid of the exercise of
any power or remedy granted hereby or thereby or by law.

9.23. ACTIONS BY PURCHASER. Wherever in this Agreement action is
required or permitted to be taken by, or consent is required of, or a matter
requires the satisfaction of, the Purchaser, unless the context otherwise
requires, such action may be taken by, and/or such consent may be obtained from,
and/or such satisfaction may be expressed by, (i) for as long as any of the
Notes remain outstanding, the holders of at least a majority of the principal
amount of all Notes then outstanding, or (ii) if no Notes are then outstanding,
the holders of at least a majority of the Common Stock issued and issuable upon
exercise of the Warrants; PROVIDED, HOWEVER, that the provisions of this Section
9.23 shall not limit in any manner any action which may be taken by the
Purchaser pursuant to the provisions of Section 8.01 hereof.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

39
<PAGE>

IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands as of the date first above written.

COMPANY: LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.

By: ___________________________________
Name:
Title:

PURCHASER: MORGAN STANLEY VENTURE CAPITAL FUND II ANNEX, L.P.

By: Morgan Stanley Venture Partners II, L.P.,
its General Partner

By: Morgan Stanley Venture Capital II, Inc.,
its Managing General Partner

By: ___________________________________
Name:
Title:

MORGAN STANLEY VENTURE INVESTORS ANNEX, L.P.

By: Morgan Stanley Venture Partners II, L.P.,
its General Partner

By: Morgan Stanley Venture Capital II, Inc.,
its Managing General Partner

By: ___________________________________
Name:
Title:

<PAGE>

SENIOR SUBORDINATED
NOTE PURCHASE AGREEMENT

by and among

LIONBRIDGE TECHNOLOGIES HOLDINGS B.V.

and

MORGAN STANLEY VENTURE CAPITAL FUND II ANNEX, L.P.

and

MORGAN STANLEY VENTURE INVESTORS ANNEX, L.P.

Dated as of March 9, 1999
<PAGE>

LIONBRIDGE TECHNOLOGIES HOLDINGS B.V.

Senior Subordinated Note Purchase Agreement

Dated as of March 9, 1999

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page

<S> <C> <C>
ARTICLE I

DEFINITIONS 1
1.01. Definitions 1

ARTICLE II

PURCHASE, SALE AND TERMS OF NOTES; PAYMENTS 6
2.01. The Notes 6
2.02. Purchase and Sale of the Note 7
2.03. Intentionally Omitted. 7
2.04. Use of Proceeds 7
2.05. Payments and Endorsements 7
2.06. Redemptions 7
2.07. Default Rate of Interest 8
2.08. Maximum Legal Rate of Interest 8
2.09. Payment on Non-Business Days 8
2.10. Transfer and Exchange of Notes 8
2.11. Replacement of Notes 9
2.12. Taxes 9

ARTICLE III

PRO RATA PARTICIPATION IN NEW SUBORDINATED DEBT 9
3.01. Right to Purchase New Subordinated Debt 9

ARTICLE IV

CONDITIONS TO PURCHASER'S OBLIGATION 10
4.01. Representations and Warranties 10
4.02. Documentation at Closing 10
4.03 Closing of LTHI Financing 11
4.04. No Default 12
4.05. Waivers and Consents 12

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 12
<PAGE>

5.01. Representations and Warranties
of the Purchaser 12

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE COMPANY 13
6.01. Organization and Standing of the
Company and Subsidiaries; Ownership 13
6.02. Corporate Action 13
6.03. Governmental Approvals 14
6.04. Litigation 14
6.05. Compliance with Law 14
6.06. Federal Reserve Regulations 14
6.07. Title to Assets, Patents 15
6.08. Financial Information 15
6.09. Taxes 16
6.10. Intentionally Omitted 16
6.11. Transactions with Affiliates 16
6.12. Assumptions or Guaranties of
Indebtedness of Other Persons 16
6.13. Loans to Other Persons 16
6.14. Securities Act 16
6.15. Disclosure 16
6.16. No Brokers or Finders 17
6.17. Other Agreements of Officers 17
6.18. Capitalization of the Company;
Status of Capital Stock 17
6.19. Capital Stock of Subsidiaries 17
6.20. Labor Relations 18
6.21. Insurance 18
6.22. Books and Records 18
6.23. Hazardous and Toxic Materials 18
6.24. Registration Rights 18
6.25. Other Agreements 18
6.26. Customers, Vendors and Suppliers 19
6.27. No Violations 19

ARTICLE VII

COVENANTS OF THE COMPANY 20

7.01. Affirmative Covenants of the Company
Other Than Reporting Requirements 20
7.02. Negative Covenants of the Company 22
7.03. Reporting Requirements 25

ARTICLE VIII

EVENTS OF DEFAULT 26
8.01. Events of Default 26
8.02. Annulment of Defaults 28

ARTICLE IX

MISCELLANEOUS 28
9.01. No Waiver; Cumulative Remedies 28
<PAGE>

9.02. Amendments, Waivers and Consents 28
9.03. Addresses for Notices, Etc 29
9.04. Costs, Expenses and Taxes 30
9.05. Binding Effect; Assignment 30
9.06. Payments in Respect of Notes 31
9.07. Intentionally Omitted 31
9.08. Indemnification 31
9.09. Survival of Representations and
Warranties 31
9.10. Intentionally Omitted 31
9.11. Severability 31
9.12. Governing Law 31
9.13. Waiver of Right to Jury Trial 31
9.14. Headings 31
9.15. Sealed Instrument 32
9.16. Counterparts 32
9.17. Further Assurances 32
9.18. Consent to Jurisdiction 32
9.19. Effect of Judgment 32
9.20. Service of Process 32
9.21. No Limitation 32
9.22. Specific Performance 32
9.23. Actions by Purchaser 33
9.24. Judgment Currency 33
</TABLE>
<PAGE>

EXHIBITS

2.01 Form of 12% Senior Subordinated Note
2.04 Use of Proceeds
4.02(b) LTBV Guaranty
4.02(c) LTF Guaranty
4.02(d) LT Ireland Guaranty
4.02(e) LJKK Guaranty
4.02(g) Opinion of Testa, Hurwitz & Thibeault, LLP
4.02(m) Opinion of Loeff Claeys Verbeke
4.02(n) Opinion of A&L Goodbody
6.01 Schedule of Subsidiaries
6.04 Schedule of Litigation
6.07 Schedule of Title Exceptions
6.08(a) Financial Statements
6.08(c) Liabilities; Guaranties; Etc.
6.08(d) Schedule of Indebtedness
6.09 Schedule of Taxes
6.11 Transactions with Affiliates
6.13 Investments in Other Persons
6.17 Schedule of Other Agreements of Officers and Key Employees
6.18 Schedule of Capital Stock, Options and Other Rights
6.19 Schedule of Capital Stock of Subsidiaries
6.21 Schedule of Insurance to be Obtained
6.23 Hazardous or Toxic Materials
6.25 Contracts, etc.
7.02(b) Indebtedness

<PAGE>

Lionbridge Technologies Holdings B.V.
The Sinus Building
Overschiestraat 55
1062 HN, Amsterdam
The Netherlands

As of March 9, 1999

Morgan Stanley Venture Capital Fund II Annex, L.P.
Morgan Stanley Venture Investors Annex, L.P.
1221 Avenue of the Americas

New York, New York 10020

Re: 12% SENIOR SUBORDINATED NOTES DUE MARCH 9, 2006
------------------------------------------------

Ladies and Gentlemen:

Whereas Lionbridge Technologies Holdings B.V., a company with limited
liability incorporated in The Netherlands (together with its successors and
assigns, the "Company") has requested Morgan Stanley Venture Capital Fund II
Annex, L.P., a Delaware limited partnership ("MSC") and Morgan Stanley Venture
Investors Annex, L.P., a Delaware limited partnership ("MSI") to purchase from
the Company a 12% Senior Subordinated Note due March 9, 2006 in the original
principal amount of $703,758 and a 12% Senior Subordinated Note due March 9,
2006 in the original principal amount of $96,242, respectively. The issuance of
such Senior Subordinated Notes are a part of a Two Million Dollar ($2,000,000)
financing of Lionbridge Technologies Holdings, Inc., a Delaware corporation
(together with its successors and assigns, "LTHI") and certain of its
subsidiaries, which financing also includes the issuance to MSC and MSI of
LTHI's 12% Senior Subordinated Notes due March 9, 2006 in the original principal
amount of $1,055,638 and $144,362, respectively, pursuant to a Senior
Subordinated Note Purchase Agreement dated as of the date hereof by and among
LTHI, MSC and MSI (as from time to time amended and in effect, the "LTHI Note
Purchase Agreement").

ARTICLE I

DEFINITIONS

1.01. DEFINITIONS. As used herein, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):

"AFFILIATE" means, as to any specified Person, any other Person
controlling, controlled by or under common control with such specified Person.

"AGREEMENT" means this Senior Subordinated Note Purchase Agreement as from
time to time amended and in effect between the parties.

"APPLICABLE LAWS" shall have the meaning assigned to that term in Section
6.05.
<PAGE>

"BANK" means and shall include Silicon Valley Bank, a California-chartered
bank, and its successors and assigns, or such other bank or institutional lender
which may from time to time be the primary lender to the Company and the
Subsidiaries.

"BUDGET" shall have the meaning assigned to that term in Section 7.03(b).

"BUSINESS DAY" means any day other than a Saturday, Sunday or public
holiday or the equivalent for banks under the laws of the Commonwealth of
Massachusetts, United States of America.

"CHANGE OF CONTROL" shall have the meaning assigned to that term in the
LTHI Note Purchase Agreement.

"CLOSING" shall have the meaning assigned to that term in Section 2.02.

"CLOSING DATE" shall have the meaning assigned to that term in Section
2.02.

"COMMISSION" means the United States Securities and Exchange Commission (or
any other federal agency at that time administering the Securities Act).

"COMPANY" shall have the meaning assigned to that term in the Preamble
hereof.

"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; PROVIDED, HOWEVER, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business.

"CURRENT LIABILITIES" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of the Company and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding advances made
under the Loan Agreement, including all Indebtedness that is payable upon demand
or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of the Company or any
Subsidiary to a date more than one year from the date of determination, but
excluding any Indebtedness incurred by the Company or any Subsidiary that is
subordinated to debt owing by the Company or any Subsidiary to the Bank on terms
acceptable to the Bank and is identified as such by the Bank.

"DISTRIBUTION" shall have the meaning assigned to that term in Section
7.02(g).

"ENVIRONMENTAL LAWS" shall have the meaning assigned to that term in
Section 6.23.

"EVENTS OF DEFAULT" shall have the meaning assigned to that term in Section
8.01.

"FINANCIAL STATEMENTS" shall have the meaning assigned to that term in
Section 6.08.

to be delivered to Purchaser pursuant to Section 7.03(b), there may be
inconsistencies with GAAP which in the aggregate shall not be material. Unless
otherwise specifically stated herein, use of the term "GAAP" means that such
principles are applied and maintained on a consistent basis for the Company and
its Subsidiaries throughout the period indicated and consistent with the prior
financial practices of the Company and its Subsidiaries as reflected on the
Financial Statements so as to properly reflect the financial condition, and the
results of operations and cash flow of the Company and its Subsidiaries.

"GUARANTIES" means the LTBV Guaranty, the LTF Guaranty, the LT Ireland
Guaranty and the LJKK Guaranty.

"GUARANTORS" means LJKK and the Subsidiary Guarantors, including, without
limitation, LTBV, LTF, LT Ireland and LJKK.

"HAZARDOUS DISCHARGE" shall have the meaning assigned to that term in
Section 6.23.

"HAZARDOUS MATERIALS" shall have the meaning assigned to that term in
Section 6.23.

"INITIAL NOTE" and "INITIAL NOTES" shall have the meaning assigned to those
terms in Section 2.01.

"JLSI" means Japanese Language Services, Inc., a Massachusetts corporation,
and its successors and assigns.

"JUDGMENT CURRENCY" shall have the meaning assigned to that term in Section
9.24.

"JUDGMENT CURRENCY CONVERSION DATE" shall have the meaning assigned to that
term in Section 9.24.

"JUNIOR SUBORDINATED DEBT" means all Indebtedness of the Company and its
Subsidiaries, whether outstanding on the date hereof or hereafter created or
incurred, which is by its terms subordinate and junior to the Notes on terms
acceptable to the holders of the Notes and which is permitted by this Agreement
at the time it is created or incurred, and shall include all Indebtedness
between the Company or any Subsidiary and any other Subsidiary.

"LJKK" means Lionbridge Japan K.K., a Japanese corporation, and its
successors and assigns.

"LJKK GUARANTY" shall have the meaning assigned to that term in Section
4.02(e).

"LOAN AGREEMENT" means that certain Loan Agreement, dated September 26,
1997, by and among the LTHBV, LTBV and the Bank, as amended by Amendment No.1,
dated as of May 28, 1998, as it may be further amended from time to time.

"LTBV" means Lionbridge Technologies B.V., a company with limited liability
incorporated in the Netherlands, and its successors and assigns.

"LTBV GUARANTY" shall have the meaning assigned to that term in Section
4.02(b).
<PAGE>

"LTCI" means Lionbridge Technologies California, Inc., a Delaware
corporation, and its successors and assigns.

"LTF" means Lionbridge Technologies (France), a French company, and its
successors and assigns.

"LTF GUARANTY" shall have the meaning assigned to that term in Section
4.02(c).

"LTHI" shall have the meaning assigned to that term in the Preamble hereof.

"LTHI FINANCING" means the issuance and sale to MSC and MSI of the LTHI
Notes and the Warrants (as such term is defined in the LTHI Note Purchase
Agreement) pursuant to the LTHI Note Purchase Agreement.

"LTHI NOTES" means collectively (i) the 12% Senior Subordinated Note due
March 9, 2006 in the original principal amount of $1,055,638 issued by LTHI to
MSC, as from time to time amended and in effect, (ii) the 12% Senior
Subordinated Note due March 9, 2006 in the original principal amount of $144,362
issued by LTHI to MSI, as from time to time amended and in effect, and (iii) any
note or notes delivered in substitution, replacement or exchange for the notes
described in the foregoing clauses (i) and (ii), as such notes from time to time
are amended and in effect.

"LTHI NOTE PURCHASE AGREEMENT" shall have the meaning assigned to that term
in the Preamble hereof.

"LTHI SUBSIDIARY" shall mean any Person that is a Subsidiary (as such term
is defined in the LTHI Note Purchase Agreement).

"LTI" means Lionbridge Technologies, Inc., a Delaware corporation, and its
successors and assigns.

"LT IRELAND" means Lionbridge Technologies Ireland, an unlimited liability
company duly incorporated under the laws of Ireland, and its successors and
assigns.

"LT IRELAND GUARANTY" shall have the meaning assigned to that term in
Section 4.02(d). "MATERIAL ADVERSE EFFECT" shall have the meaning assigned to
that term in Section 6.01.

"NEW SENIOR DEBT GUARANTEE" shall have the meaning assigned to that term in
Section 7.01(o).

"NOTE" or "NOTES" shall have the meanings assigned to such terms in Section
2.01.

"OBLIGATION CURRENCY" shall have the meaning assigned to that term in
Section 9.24.

"OPERATIVE DOCUMENTS" shall mean each of this Agreement, the Notes and the
Guaranties.

"PERMITTED LIENS" shall have the meaning assigned to that term in Section
7.02(a).

"PERSON" means and includes an individual, a corporation, a partnership, a
joint venture, a trust, an unincorporated organization, or a government or any
agency or political subdivision thereof.

"PURCHASER" shall mean MSC, MSI and any other holder or holders from time
to time of any of the Notes.
<PAGE>

"QUALIFYING LIQUIDITY EVENT" shall have the meaning assigned to that term
in the LTHI Note Purchase Agreement.

"SECURITIES" means the Notes.

"SUBORDINATED DEBT"shall have the meaning assigned to that term in the LTHI
Note Purchase Agreement.

"SUBORDINATION AGREEMENT" shall mean the Subordination and Intercreditor
Agreement, dated as of the date hereof, by and among CRL, the Bank and the
Company.

"SUBSIDIARY" or "SUBSIDIARIES" means (i) any corporation more than fifty
percent (50%) of whose stock or equity interests of any class or classes having
by the terms thereof ordinary voting power to elect a majority of the directors
of such corporation (irrespective of whether or not at the time stock of any
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned directly or
indirectly by the Company and/or any one or more of its Subsidiaries, and (ii)
any partnership, association, joint venture, limited liability company or other
entity in which the Company and/or one or more of its Subsidiaries has more than
a fifty percent (50%) equity interest at the time.

"SUBSIDIARY GUARANTORS" means collectively (i) each Subsidiary which has
executed and delivered to the Purchaser a guarantee in form and substance
satisfactory to the Purchaser pursuant to which such Subsidiary guarantees all
of the obligations of the Company to the Purchaser, including, without
limitation, the obligations of the Company hereunder and under the Notes, and
(ii) any LTHI Subsidiary that is a not a Subsidiary hereunder which has executed
and delivered a guarantee to the Purchaser pursuant to Section 7.01(p) of the
LTHI Note Purchase Agreement.

"TAXES" shall have the meaning assigned to that term in Section 2.12.

"TRANSFEREE" shall have the meaning assigned to that term in Section 2.12.

"US GUARANTIES" means the those certain guaranties executed by JLSI, LTCI,
LTI and VTI in favor of MSC and MSI in connection with the LTHI Financing.
<PAGE>

"VTI" means VeriTest, Inc., a California corporation, together with its
successors and assigns.

ARTICLE II

PURCHASE, SALE AND TERMS OF NOTES; PAYMENTS

2.01. THE NOTES. The Company has authorized the issuance and sale of (a)
the Company's 12% Senior Subordinated Note due March 9, 2006 in the original
aggregate principal amount of $703,758 to MSC, and (b) the Company's 12% Senior
Subordinated Note due March 9, 2006 in the original aggregate principal amount
of $96,242 to MSI. The 12% Senior Subordinated Notes shall be substantially in
the form attached to EXHIBIT 2.01 hereto and are herein each referred to
individually as an "Initial Note", and collectively the "Initial Notes"; the
Initial Notes together with any note or notes delivered in substitution,
replacement or exchange therefor are herein referred to collectively as the
"Notes." The Notes shall (a) be payable on March 9, 2006 (subject to the
redemption thereof required pursuant to Section 2.06) and (b) bear interest
(based on a 360-day year counting actual days elapsed) on the unpaid principal
amount thereof until paid in full at the rate of twelve percent (12%) per annum,
which interest shall be payable quarterly in arrears on the last Business Day of
March, June, September and December in each year commencing on March 31, 1999.

2.02. PURCHASE AND SALE OF THE NOTE. The Company agrees to issue and sell
to the Purchaser, and, subject to and in reliance upon the representations,
warranties, terms and conditions of this Agreement, the Purchaser agrees to
purchase, the Initial Notes. Such purchase and sale shall take place at a
closing (the "Closing") to be held at the offices of Sherburne, Powers, Holland
& Knight, at 10:00 a.m. local time, on the date on which this Agreement is
executed and delivered (the "Closing Date"). At the Closing, the Company will
issue (a) the Initial Note described in clause (a) in Section 2.01 to MSC, dated
the Closing Date and payable to the order of MSC, against receipt of funds by
wire transfer to an account or accounts designated by the Company prior to the
Closing in the amount of $703,758 and (b) the Initial Note described in clause
(b) in Section 2.01 to MSI, dated the Closing Date and payable to the order of
MSI, against receipt of funds by wire transfer to an account or accounts
designated by the Company prior to the Closing in the amount of $96,242. The
parties hereto hereby acknowledge and agree that the purchase and sale of the
Initial Notes hereunder is part of an overall financing provided by MSC and MSI
to LTHI and its subsidiaries, which financing also includes, among other things,
the issuance by LTHI of the LTHI Notes, the delivery of the US Guaranties and
the execution and delivery of the LTHI Note Purchase Agreement.

2.03. INTENTIONALLY OMITTED.

2.04. USE OF PROCEEDS. The Company agrees to use the full proceeds from the
sale of the Note for the purposes and as set forth on EXHIBIT 2.04 attached
hereto.

2.05. PAYMENTS AND ENDORSEMENTS. Payments of principal, interest and
premium, if any, on the Notes (and all payments hereunder and under any other
Operative Document) shall be made in United States Dollars without setoff or
counterclaim directly by check duly mailed or delivered to the Purchaser at its
address referred to in Section 9.03 hereof, without any presentment or notation
of payment, except that prior to any transfer of any Note, the holder thereof
shall endorse on such Note a record of the date to
<PAGE>

which interest has been paid and all payments made on account of principal of
such Note. All payments and prepayments of principal of and interest on the
Notes shall be applied (to the extent thereof) to all of the Notes PRO RATA
based on the principal amount outstanding and held by each holder thereof.

2.06. REDEMPTIONS.

(a) REQUIRED PERIODIC REDEMPTION. On the last Business Day of March,
June, September and December of each year beginning on March 31, 2003 through
and including December 31, 2005, the Company agrees to redeem, without premium
or penalty, $66,666.66 in aggregate principal amount of the Notes, or such
lesser amount as may then be outstanding, together with all accrued and unpaid
interest and penalties, if any, then due on the amount so redeemed. On the
stated or accelerated maturity of the Notes, the Company agrees to pay the
principal amounts of the Notes then outstanding together with all accrued and
unpaid interest and penalties, if any, then due thereon. Except as set forth in
Section 2.06(b), no optional redemption of less than all of the Notes shall
affect the obligation of the Company to make the redemptions required by this
subsection.

(b) REQUIRED REDEMPTIONS IN THE EVENT OF A QUALIFYING LIQUIDITY EVENT.
In the event and upon the closing of a Qualifying Liquidity Event, the Company
agrees to redeem, without premium, all of the outstanding Notes, together with
all accrued and unpaid interest and penalties, if any, then due thereon.

(c) OPTIONAL REDEMPTIONS. In addition to the redemptions of the Notes
required under Sections 2.06(a) and (b), the Company may, at any time and from
time to time, redeem, without premium or penalty, the Notes, in whole or in part
(in integral multiples of $1,000), together with interest due on the amount so
redeemed through the date of redemption. Partial redemptions made as provided in
this Section 2.06(c) shall, to the extent thereof, be applied first to reduce
the principal due at maturity of the Notes and next to reduce the payments
required by Section 2.06(a) in inverse order of maturity thereof.

2.07. DEFAULT RATE OF INTEREST. If an Event of Default has occurred and is
continuing, from and after the date thirty (30) days after the date such Event
of Default occurred, the entire outstanding unpaid principal balance of the
Notes and any matured but unpaid interest from time to time due thereon shall
bear interest, payable on demand, at the rate of fifteen percent (15%) per
annum, or such lower rate as then may be the maximum rate permitted by
applicable law; PROVIDED, HOWEVER, that upon the cessation or cure of such Event
of Default, if no other Event of Default is then continuing, the Notes shall
again bear interest at the rates set forth in Section 2.01.

2.08. MAXIMUM LEGAL RATE OF INTEREST. Nothing in this Agreement or in the
Notes shall require the Company to pay interest at a rate in excess of the
maximum rate permitted by applicable law.

2.09. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made shall
be due on a day which is not a Business Day, such payment may be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest due.
<PAGE>

2.10. TRANSFER AND EXCHANGE OF NOTES. The holder of any Note or Notes may,
prior to maturity or prepayment thereof, surrender such Note or Notes at the
principal office of the Company for transfer or exchange to any Affiliate of
such holder. Any holder desiring to transfer or exchange any Note shall first
notify the Company in writing at least five (5) days in advance of such transfer
or exchange. Within a reasonable time after such notice to the Company from a
holder of its intention to make such exchange and without expense (other than
transfer taxes, if any) to such holder, the Company shall issue in exchange
therefor another Note or Notes, in such denominations as requested by the
holder, for the same aggregate principal amount, as of the date of such
issuance, as the unpaid principal amount of the Note or Notes so surrendered and
having the same maturity and rate of interest, containing the same provisions
and subject to the same terms and conditions as the Note or Notes so
surrendered. Each new Note shall be made payable to such Affiliate or Affiliates
of the holder, Person or Persons, or assigns, as the holder of such surrendered
Note or Notes may designate (subject to Section 9.05), and such transfer or
exchange shall be made in such a manner that no gain or loss of principal or
interest shall result therefrom.

2.11. REPLACEMENT OF NOTES. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Note, the Company will issue a new Note, of like tenor and amount and
dated the date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated Note; PROVIDED, HOWEVER, if any Note of which a
Purchaser, its nominee, or any of its partners is the holder is lost, stolen or
destroyed, the affidavit of an authorized partner or officer of the holder
setting forth the circumstances with respect to such loss, theft or destruction
shall be accepted as satisfactory evidence thereof, and no indemnification bond
or other security shall be required as a condition to the execution and delivery
by the Company of a new Note in replacement of such lost, stolen or destroyed
Note other than the holder's written agreement to indemnify the Company.

2.12. TAXES. Any and all payments by the Company hereunder and under any
other Operative Document shall be made free and clear of, and without deduction
for any and all past, current or future taxes, levies, imposts, deductions,
charges, penalties, costs or withholdings, and all liabilities with respect
thereto, EXCLUDING income or franchise taxes imposed on the net income of MSC
and MSI (or any transferee or assignee thereof permitted under Section 9.05 (any
such entity a "Transferee")) by the jurisdictions in which MSC and MSI (or any
Transferee) are organized or any political subdivision thereof (all such
nonexcluded taxes, levies, imposts, deductions, charges, penalties, costs,
withholdings and liabilities, collectively or individually, being called
"Taxes"). If the Company shall be required to deduct any Taxes from or in
respect of any sum payable hereunder or under any other Operative Document to
MSC and MSI (or any Transferee), (i) the sum payable shall be increased by the
amount (an "additional amount") necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.12) MSC or MSI (or any Transferee), as the case may be, shall
receive an amount equal to the sum it would have received had no such deductions
for Taxes been made, (ii) the Company shall make such deductions and (iii) the
Company shall pay the full amount deducted to the relevant governmental
authority in accordance with applicable law. In addition, the Company agrees to
pay to the relevant governmental authority in accordance with applicable law any
past, current or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies (including, without limitation,
mortgage recording taxes and similar fees) that arise from any payment made
hereunder or under any other Operative Document or from the execution, delivery,
enforcement or registration of, or otherwise with respect to, this Agreement or
any other Operative Document.

ARTICLE III
<PAGE>

PRO RATA PARTICIPATION IN NEW SUBORDINATED DEBT

3.01. RIGHT TO PURCHASE NEW SUBORDINATED DEBT. Prior to issuing any
Subordinated Debt of the Company or any of its Subsidiaries to any Person after
the date hereof (other than any such Subordinated Debt issued to a seller in
connection with an acquisition by the Company or any of its Subsidiaries
involving such seller), the Company will give, or cause such Subsidiary to give,
to each holder of any Note or Notes the right to purchase, on the same terms and
subject to the same conditions, the same proportion of the Subordinated Debt
proposed to be sold by the Company or such Subsidiary as the original principal
amount of the Notes and LTHI Notes held by each such holder bears to the
aggregate principal amount of Subordinated Debt outstanding at that time. Any
such right of purchase shall be exercisable for a period of thirty (30) days
after all of the holders have received written notice of a proposed issuance of
Subordinated Debt (and any such notice by the Company or any Subsidiary shall be
given not less than thirty (30) nor more than ninety (90) days prior to any such
issuance). The Company shall be entitled to sell to any Person any Subordinated
Debt not purchased by the holders of the Notes pursuant to this Section 3.01:
(i) during the period ending six (6) months after the date of the Company's or
its Subsidiary's notice to such holders and (ii) at not less than the same price
and upon terms not materially less favorable to the Company or its Subsidiary
than those offered to the holders of the Notes, but may not otherwise sell such
Subordinated Debt without renewed compliance with this Section 3.01.

ARTICLE IV

CONDITIONS TO PURCHASER'S OBLIGATION

The obligation of the Purchaser to purchase and pay for the Note at the
Closing is subject to the following conditions, all or any of which may be
waived in writing by the Purchaser:

4.01. REPRESENTATIONS AND WARRANTIES. Each of the representations of the
Company set forth in Article VI hereof shall be true and correct in all respects
at the time of, and immediately after giving effect to, the sale of the Notes.

4.02. DOCUMENTATION AT CLOSING. The Purchaser shall have received prior to
or at the Closing all of the following, each in form and substance satisfactory
to the Purchaser and its counsel:

(a) The Initial Notes duly executed and delivered by the Company.

(b) A guaranty from LTBV in substantially the form attached hereto as
EXHIBIT 4.02(b) (the "LTBV Guaranty").

(d) A guaranty from LT Ireland in substantially the form attached
hereto as EXHIBIT 4.02(d) (the "LT Ireland Guaranty").

(e) A guaranty from LJKK in substantially the form attached hereto as
EXHIBIT 4.02(e) (the "LJKK Guaranty").

Agreement, the Operative Documents and all other matters contemplated hereby and
thereby; a certified copy of all documents evidencing other necessary corporate
or other action and governmental approvals, if any, with respect to this
Agreement, the Operative Documents and all other matters contemplated hereby or
thereby.

(g) A favorable opinion of Testa, Hurwitz & Thibeault, LLP, counsel
for the Company and Guarantors, in substantially the form attached hereto as
EXHIBIT 4.02(g).

(h) Certificates from duly authorized representatives of the Company
and each of the Guarantors acceptable to the Purchaser which shall certify the
names and titles of the persons authorized to sign this Agreement, the Operative
Documents and any other documents or certificates to be delivered pursuant
hereto or thereto by the Company and each of the Guarantors, together with the
true signatures thereof. The Purchaser may conclusively rely on such
certificates until it shall receive further certificates from a duly authorized
representative of the Company and each of the Guarantors canceling or amending
the prior certificate and submitting the signatures of the persons and their
respective titles named in such further certificate.

(i) A certificate from a duly authorized officer of the Company
stating that the representations and warranties contained in Article VI hereof
and otherwise made by the Company in writing in connection with the transactions
contemplated hereby are true and correct and that no condition or event has
occurred or is continuing or will result from the execution and delivery of this
Agreement or the Operative Documents which constitutes an Event of Default or
would constitute an Event of Default but for the requirement that notice be
given or time elapse or both.

(j) An executed Subordination Agreement, which shall be in form and
substance satisfactory to the Purchaser and its counsel.

(k) Payment for the costs, expenses, taxes and filing fees identified
in Section 9.04 as to which the Purchaser gives the Company notice prior to the
Closing.

(l) A certificate from a duly authorized officer of the Company
stating that all the conditions set forth in this Article IV have been
satisfied, other than those, if any, waived by the Purchaser in writing.

(m) A favorable opinion of Loeff Claeys Verbeke, counsel to the
Purchaser, in substantially the form attached hereto as EXHIBIT 4.02(m).

(n) A favorable opinion of A&L Goodbody, counsel to the Purchaser, in
substantially the form attached hereto as EXHIBIT 4.02(n).

(o) Such other documents referenced in any Exhibit hereto or relating
to the transactions contemplated by this Agreement as the Purchaser or its
counsel may reasonably request.

4.03 CLOSING OF LTHI FINANCING. All documents in connection with the LTHI
Financing, including, without limitation the LTHI Note Purchase Agreement, the
LTHI Notes, the Warrants (as such term is defined in the LTHI Purchase
Agreement), the US Guaranties and such other documents referenced in any exhibit
thereto or otherwise relating to the transactions contemplated by the LTHI Note
Purchase Agreement shall have been executed and delivered to the Purchaser.
<PAGE>

4.04. NO DEFAULT. At the time of and immediately after giving effect to the
sale of the Notes there shall exist no Event of Default and no condition, event
or act that, with the giving of notice or lapse of time, or both, would
constitute such an Event of Default.

4.05. WAIVERS AND CONSENTS. The Company shall have obtained any waivers or
consents that may be required under the Loan Agreement and any other agreement
to which the Company or any of its Subsidiaries is a party in order to enter
into this Agreement and the Operative Documents and to consummate the
transactions contemplated hereby and thereby and such waiver or consents shall
have been delivered to the Purchaser.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

5.01. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants as follows:

(a) It has duly authorized, executed and delivered this Agreement and
such of the Operative Documents as require execution by it.

(b) Its present intention is to acquire the Securities to be issued to
it for its own account.

(c) The Securities to be issued to it are being and will be acquired
for the purpose of investment and not with a view to distribution or resale
thereof; subject, nevertheless, to the condition that, except as otherwise
provided herein, the disposition of its property shall at all times be within
its control.

(d) It acknowledges that it has reviewed and discussed the Company's
business, affairs and current prospects with such officers of the Company and
others as it has deemed appropriate or desirable in connection with the
transactions contemplated by this Agreement. It further acknowledges that it has
requested, received and reviewed such information, undertaken such investigation
and made such further inquiries of officers of the Company and others as it has
deemed appropriate or desirable in connection with such transactions, PROVIDED,
HOWEVER, no investigation made heretofore or hereafter by it or on its behalf
shall have any effect whatsoever on the representations and warranties of the
Company hereunder, each of which will survive any such investigation.

(e) It understands that it must bear the economic risk of its
investment in the Securities issued to it for an indefinite period of time
because such Securities are not, and will not be, registered under the
Securities Act or any applicable state securities laws, except as may be
provided in this Agreement, and may not be resold unless subsequently registered
under the Securities Act and such other laws or unless an exemption from such
registration is available. It also understands that it is not contemplated by
the Company that any registration will be made under the Securities Act or any
state securities laws, or that the Company will take steps which will make the
provisions of Rule 144 under the Securities Act available to permit resale of
the Securities to be issued to it.

(h) It hereby acknowledges that the Initial Note to be issued to it
shall bear a legend substantially in the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT
BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES
LAWS OR APPLICABLE EXEMPTIONS THEREFROM.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Purchaser as follows:

6.01. ORGANIZATION AND STANDING OF THE COMPANY AND SUBSIDIARIES; OWNERSHIP.
The Company and each of its Subsidiaries is a corporation duly organized (to the
extent applicable), duly incorporated (to the extent applicable), validly
existing and in good standing (to the extent applicable) under the laws of the
jurisdiction of its organization or incorporation and has all requisite
corporate power and authority for the ownership and operation of its properties
and for the carrying on of its business as now conducted and as now proposed to
be conducted. The Company and each of its Subsidiaries is duly licensed or
qualified and in good standing as a foreign corporation authorized to do
business in all jurisdictions wherein the character of the property owned or
leased, or the nature of the activities conducted by it makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified, either individually or in the aggregate, would not have a material
adverse effect on the business, assets, liabilities, financial condition, or on
the results of operations of the Company and its Subsidiaries taken as a whole
(a "Material Adverse Effect"). Except as set forth on EXHIBIT 6.01 attached
hereto, neither the Company nor any of its Subsidiaries owns, directly or
indirectly, any capital stock or other equity or ownership or proprietary
interest in any corporation, partnership, association, trust, joint venture or
other entity.

6.03. GOVERNMENTAL APPROVALS. No authorization, consent, approval, license,
exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary for, or in connection with, the offer,
issuance, sale, execution or delivery by the Company or any of the Subsidiaries
of, or for the performance by the Company or any of the Subsidiaries of their
respective obligations under, this Agreement or any of the Operative Documents.

6.05. COMPLIANCE WITH LAW. The Company and each of its Subsidiaries is in
compliance in all respects with the terms and provisions of this Agreement and
of its charter documents and by-laws and in all material respects with the terms
and provisions of all judgments, decrees, governmental orders, statutes, rules
and regulations to which it and its properties and assets are subject
(collectively, the "Applicable Laws"). Neither the execution and delivery of
this Agreement and the Operative Documents, nor the consummation of any
transactions contemplated hereby or thereby, has constituted or resulted in, or
will constitute or result in, a violation of any provision of any Applicable
Law.

6.06. FEDERAL RESERVE REGULATIONS. Neither the Company nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System), and no part of the proceeds
of the Notes will be used to purchase or carry any margin security or to extend
credit to others for the purpose of purchasing or carrying any margin security
or in any other manner which would involve a violation of any of the regulations
of the Board of Governors of the Federal Reserve System.

6.07. TITLE TO ASSETS, PATENTS. Except as set forth on EXHIBIT 6.07
attached hereto, the Company and each of its Subsidiaries has good and
marketable title in fee to such of its fixed assets as are real property, and
good and merchantable title to all of its other assets, now carried on its books
including those reflected in the most recent balance sheet of the Company
included in the Financial Statements, or acquired since the date of such balance
sheet (except personal property disposed of since said date in the ordinary
course of business), free of any mortgages, pledges, charges, liens, security
interests or other encumbrances. Except as set forth on EXHIBIT 6.07, the
Company and each of its Subsidiaries enjoys peaceful and undisturbed possession
under all leases under which it is operating, and all of said leases are valid
and subsisting and in full force and effect. Except as set forth on EXHIBIT
6.07, the Company and each of its Subsidiaries owns or has a valid right to use
the patents, patent rights, licenses, permits, trade secrets, trademarks,
trademark rights, trade names or trade name rights or franchises, copyrights,
inventions and intellectual property rights being used to conduct its business
as now operated and as now proposed to be operated; and the conduct of its
business as now operated and as now proposed to be operated does not and will
not conflict with valid patents, patent rights, licenses, permits, trade
secrets,
<PAGE>

trademarks, trademark rights, trade names or trade name rights or franchises,
copyrights, inventions and intellectual property rights of others. Except as set
forth on EXHIBIT 6.07, neither the Company nor any of its Subsidiaries has any
obligation to compensate any Person for the use of any such intellectual
property rights nor has the Company or any of its Subsidiaries granted to any
Person any license or other rights to use in any manner any of such intellectual
property rights.

6.08. FINANCIAL INFORMATION. (a) Attached hereto as EXHIBIT 6.08(a) are
true, correct and complete copies of (i) the audited balance sheet of LTHI and
its subsidiaries as of December 31, 1997 and the related statements of income
and retained earnings and of cash flows for the fiscal year then ended,
certified by PricewaterhouseCoopers, LTHI's independent public accountants
(including the notes thereto) and (ii) the unaudited balance sheet of LTHI and
its subsidiaries as of December 31, 1998, and the related statements of income
and retained earnings for the 12-month period then ended ((i) and (ii)
collectively the "Financial Statements"). All Financial Statements have been
prepared in accordance with GAAP, subject to normal year-end audit adjustments,
and consistent with prudent business management practices, are complete in all
material respects and fairly present the financial position of LTHI and its
subsidiaries as of the respective dates thereof and results of operations and
changes in financial position of LTHI and its subsidiaries for each of the
periods then ended.

(b) Since December 31, 1998, there has been no material adverse change
in the business, assets, liabilities, condition (financial or other), or in the
results of operations or prospects of the Company and its Subsidiaries taken as
a whole.

(c) Except as disclosed on EXHIBIT 6.08(c) attached hereto, neither
the Company nor any of its Subsidiaries has any liability, contingent or
otherwise, not disclosed in the Financial Statements or in the notes thereto
that could, together with all such other liabilities, have a Material Adverse
Effect, nor does the Company have any reasonable grounds to know of any such
liability.

(d) A schedule of Indebtedness of the Company and its Subsidiaries as
of December 31, 1998 (including lease obligations required to be capitalized in
accordance with GAAP) is attached hereto as EXHIBIT 6.08(d).

6.10. INTENTIONALLY OMITTED.

6.11. TRANSACTIONS WITH AFFILIATES. Except as set forth on EXHIBIT 6.11
attached hereto, there are no loans, leases, royalty agreements or other
continuing transactions between the Company or any of its Subsidiaries, on the
one hand, and any Person owning, or who did own at any time within the two-year
period preceding the date of this Agreement, five percent (5%) or more of any
class of capital stock of the Company or other entity controlled by such
stockholder or a member of such stockholder's family, on the other hand.

6.12. ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER PERSONS. Except as
disclosed on EXHIBIT 6.08(c) hereto, neither the Company nor any of its
Subsidiaries has assumed, guaranteed,
<PAGE>

endorsed or otherwise become directly or contingently liable on (including,
without limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest
in the debtor or otherwise to assure the creditor against loss) any Indebtedness
of any other Person.

6.13. LOANS TO OTHER PERSONS. Except as set forth on EXHIBIT 6.13 attached
hereto, neither the Company nor any of its Subsidiaries has made any loan or
advance to any Person which is outstanding on the date of this Agreement, nor is
the Company or any of its Subsidiaries obligated or committed to make any such
loan or advance.

6.14. SECURITIES ACT. Neither the Company nor anyone acting on its behalf
has offered any of the Notes or similar securities, or solicited any offers to
purchase or made any attempt by preliminary conversation or negotiations to
dispose of the Notes or similar securities, within the meaning of all applicable
federal and state securities laws, to any Person other than (i) the Purchaser,
and (ii) no more than twenty-five (25) other Persons, each of which is an
"accredited investor" (as such term is defined in Rule 501 of Regulation D
promulgated pursuant to the Securities Act), and no Person other than the
Purchaser will purchase any Notes or similar securities. Neither the Company nor
anyone acting on its behalf has offered or will offer to sell the Notes or
similar securities to, or solicit offers with respect thereto from, or enter
into any preliminary conversations or negotiations relating thereto with, any
Person, so as to bring the issuance and sale of the Note under the registration
provisions of the Securities Act.

6.15. DISCLOSURE. Neither this Agreement, the Financial Statements, the
Operative Documents, nor any other agreement, document, certificate or written
statement furnished to the Purchaser or the Purchaser's counsel by or on behalf
of the Company or any of its Subsidiaries in connection with the transactions
contemplated hereby or thereby contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made. There is no fact within the knowledge of the Company or
any of its executive officers which has not been disclosed herein or otherwise
by them to the Purchaser and which has a Material Adverse Effect, or in the
future in their opinion could reasonably be expected to have a Material Adverse
Effect. Without limiting the foregoing, the Company has no knowledge of any
specific existing, pending or planned patent, invention or device which would
have a Material Adverse Effect.

6.16. NO BROKERS OR FINDERS. As of the Closing, no Person had, has or will
have, as a result of the transactions contemplated by this Agreement, any right,
interest or valid claim against or upon the Purchaser for any commission, fee or
other compensation as a finder or broker because of any act or omission by the
Company, any of its Subsidiaries or any or its or their agents.

6.17. OTHER AGREEMENTS OF OFFICERS. Except as set forth on EXHIBIT 6.17
attached hereto, no officer or key employee of the Company or any of its
Subsidiaries is a party to or bound by any agreement, contract or commitment, or
subject to any restrictions, particularly but without limitation in connection
with any previous employment of any such person, which has a Material Adverse
Effect, or in the future may (so far as the Company can reasonably foresee) have
a Material Adverse Effect. To the best knowledge of the Company, no officer or
key employee of the Company or any of its Subsidiaries has any present intention
of terminating his employment with the Company or any of its Subsidiaries and
neither the Company nor any of its Subsidiaries has any present intention of
terminating any such employment.

of the Company is registered is set forth on EXHIBIT 6.18 attached hereto. All
the outstanding shares of capital stock of the Company have been duly
authorized, are validly issued and are fully paid and nonassessable. Except as
otherwise set forth on EXHIBIT 6.18, there are no options, warrants or rights to
purchase shares of capital stock or other securities of the Company authorized,
issued or outstanding, nor is the Company obligated in any other manner to issue
shares of its capital stock or other securities. Except as otherwise set forth
on EXHIBIT 6.18, there are no restrictions on the transfer of shares of capital
stock of the Company other than those imposed by relevant state and federal
securities laws. Except as set forth in this Agreement or as otherwise set forth
on EXHIBIT 6.18, no holder of any security of the Company is entitled to
preemptive or similar statutory or contractual rights, either arising pursuant
to any agreement or instrument to which the Company is a party, or which are
otherwise binding upon the Company. The issuance of the Notes will not trigger
any preemptive or similar right on the part of any party.

6.19. CAPITAL STOCK OF SUBSIDIARIES. Except as set forth on EXHIBIT 6.19
attached hereto, the Company owns all of the outstanding capital stock of each
of the Subsidiaries, beneficially and of record, free and clear of all liens,
encumbrances, restrictions and claims of every kind. All the outstanding shares
of capital stock of each of the Subsidiaries have been duly authorized, are
validly issued and are fully paid and nonassessable. There are no options,
warrants or rights to purchase shares of capital stock or other securities of
any of the Subsidiaries authorized, issued or outstanding, nor is any Subsidiary
obligated in any other manner to issue shares of its capital stock or other
securities.

6.20. LABOR RELATIONS. To the best knowledge of the Company, no labor union
or any representative thereof has made any attempt to organize or represent
employees of the Company or any of its Subsidiaries. There are no unfair labor
practice charges, pending trials with respect to unfair labor practice charges,
pending material grievance proceedings or adverse decisions of a Trial Examiner
of the National Labor Relations Board or similar board against the Company or
any of its Subsidiaries. Furthermore, to the best knowledge of the Company,
relations with employees of the Company and its Subsidiaries are good and there
is no reason to believe that any material labor difficulties will arise in the
foreseeable future.

6.21. INSURANCE. Except as set forth on EXHIBIT 6.21 attached hereto, the
Company and each of its Subsidiaries has insurance covering its properties and
business adequate and customary for the type and scope of its properties and
business.

the Company and its Subsidiaries are in compliance in all material respects with
all applicable Environmental Laws and the requirements of any permits issued
under such Environmental Laws with respect to any property owned, leased or
operated by the Company or any of its Subsidiaries, and (d) there are no pending
or, to the best knowledge of the Company and its Subsidiaries, threatened claims
relating to the foregoing against the Company, any of its Subsidiaries or the
property owned, leased or operated by the Company or its Subsidiaries.

6.24. REGISTRATION RIGHTS. No Person has demand or other rights to cause
the Company to file any registration statement under the Securities Act or any
other statute or law relating to any securities of the Company or any right to
participate in any such registration statement.

6.25. OTHER AGREEMENTS. Except as explicitly disclosed and described in the
Financial Statements or as set forth on EXHIBIT 6.25 attached hereto, neither
the Company nor any of its Subsidiaries is a party to any written or oral
contract or instrument or other corporate restriction the due performance of
which individually or in the aggregate could have a Material Adverse Effect.
Except as specifically contemplated by this Agreement or as set forth on said
EXHIBIT 6.25, neither the Company nor any of its Subsidiaries is a party to any
written or oral:

(a) contract for the future purchase of fixed assets or for the future
purchase of materials, supplies or equipment in excess of its normal operating
requirements;

(b) agreement or indenture relating to the borrowing of money or to
the mortgaging or pledging of, or otherwise placing a lien or security interest
on, any asset of the Company or any of its Subsidiaries;

(d) voting trust, stockholders agreement, pledge agreement or buy-sell
agreement relating to any securities of the Company which shall be in effect
after the Closing except to the extent contemplated hereunder; or

(e) agreement or obligation (contingent or otherwise) to issue or sell
or to repurchase or otherwise acquire or retire any share of its capital stock
or any of its other equity securities.

The Company, each Subsidiary, and, to the best knowledge of the Company, each
other party thereto have in all material respects performed all the obligations
required to be performed by them to date, have received no notice of default and
are not in material default under, any lease, agreement or contract now in
effect to which the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries or its property may be bound. The Company
and the Subsidiaries currently have no expectation or intention of not fully
performing all their obligations under each such lease, contract or other
agreement, and the Company has no knowledge of any material breach or
anticipated material breach by the other party to any contract or commitment to
which the Company or any of its Subsidiaries is a party.

6.27. NO VIOLATIONS. Neither the execution and delivery of this Agreement
and the Operative Documents, nor the consummation of any of the transactions
contemplated hereby or thereby, by the Company, will (a) violate, conflict with,
or result in a breach or default under any provision of the charter documents of
the Company, (b) violate any provision of any Applicable Laws, or (c) result in
a violation or breach by the Company of, conflict with, constitute (with or
without due notice or lapse of time or both) a default by the Company (or give
rise to any right of termination, cancellation, payment or acceleration) under,
or result in the creation of any Lien upon any of the properties or assets of
the Company under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, franchise, permit, agreement, lease, franchise
agreement or other instrument or obligation to which the Company is a party, or
by which it or any of its properties or assets may be bound.

ARTICLE VII

COVENANTS OF THE COMPANY

7.01. AFFIRMATIVE COVENANTS OF THE COMPANY OTHER THAN REPORTING
REQUIREMENTS. Without limiting any other covenants and provisions hereof, the
Company covenants and agrees that, until the later of the repayment in full of
(i) the aggregate outstanding principal balance of the Notes, together with all
interest and penalties, if any, due thereon, or (ii) the aggregate outstanding
principal balance of the LTHI Notes, together with all interest and penalties,
if any due thereon, it will perform and observe the following covenants and
provisions and will cause each Subsidiary to perform and observe such of the
following covenants and provisions as are applicable to such Subsidiary:

(a) PUNCTUAL PAYMENT. Pay the principal of, premium, if any, and
interest on each of the Notes at the times and place and in the manner provided
in the Notes and herein.

(b) PAYMENT OF TAXES AND TRADE DEBT. Pay and discharge, and cause each
Subsidiary to pay and discharge, all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits or business, or upon any
properties belonging to it, prior to the date on which penalties attach thereto,
and all lawful claims which, if unpaid, might become a lien or charge upon any
properties of the Company or any Subsidiary, provided that neither the Company
nor any Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by appropriate
proceedings if the Company or the Subsidiary concerned shall have set aside on
its books adequate reserves with respect thereto. Pay and cause each Subsidiary
to pay, when due, or in conformity with customary trade terms, all material
lease obligations, all trade debt, and all other Indebtedness incident to the
operations of the Company or the Subsidiaries, except such as are being
contested in good faith and by appropriate proceedings if the Company or the
Subsidiary concerned shall have set aside on its books adequate reserves with
respect thereto.

(c) MAINTENANCE OF INSURANCE. Maintain, and cause each Subsidiary to
maintain, insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company or such Subsidiary operates.

Effect; provided, however, that nothing herein contained shall prevent any
merger, consolidation or transfer of assets permitted by subsection 7.02(e).
Preserve and maintain, and cause each Subsidiary to preserve and maintain, all
licenses and other rights to use patents, processes, licenses, trademarks, trade
names, inventions, intellectual property rights or copyrights owned or possessed
by it and necessary to the conduct of its business, except such licenses, other
rights and copyrights which are part of a transfer of assets permitted by
Section 7.02(e).

(e) COMPLIANCE WITH LAWS. Comply, and cause each Subsidiary to comply,
with all applicable laws, rules, regulations and orders of any governmental
authority, noncompliance with which could have a Material Adverse Effect.

(f) INSPECTION RIGHTS. At any reasonable time and from time to time,
but not more frequently than twice in any 12-month period unless an Event of
Default shall have occurred and is continuing, permit the Purchaser or any of
its agents or representatives, to examine and make copies of and extracts from
the records and books of account of, and visit and inspect the properties of,
the Company and any Subsidiary, and to discuss the affairs, finances and
accounts of the Company and any Subsidiary with any of their officers or
directors and independent accountants. All reasonable out-of-pocket expenses of
the Purchaser (or its agents or representatives), the Company or any Subsidiary
incurred in connection with such inspection rights shall be borne by the
Company, such amount not to exceed $10,000 (or its equivalent in any other
currency) per annum.

(g) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep, and cause each
Subsidiary to keep, adequate records and books of account, in which complete
entries will be made in accordance with the generally accepted accounting
principles recognized in the country in which the Company and each Subsidiary
was organized or incorporated, respectively.

(h) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and cause
each Subsidiary to maintain and preserve, all of its properties, necessary or
useful in the proper conduct of its business, in good repair, working order and
condition, ordinary wear and tear excepted, except such properties which are
part of a transfer of assets permitted by Section 7.02(e).

(i) INTENTIONALLY OMITTED.

(j) INTENTIONALLY OMITTED.

(k) INTENTIONALLY OMITTED.

(l) NOTICE OF DEFAULT OF SENIOR DEBT. The Company shall provide the
holders of the Notes with written notice promptly upon an event of default under
the Senior Debt or upon the occurrence of an event which, with the giving of
notice or passage of time or both, would result in an event of default under the
Senior Debt.

(m) INTENTIONALLY OMITTED.

(n) INTENTIONALLY OMITTED.

(o) SUBSIDIARY GUARANTORS. Within five (5) Business Days after any
Subsidiary which is not a Subsidiary Guarantor on the date hereof guarantees any
Senior Debt (each a "New Senior Debt Guarantee"), the Company shall cause such
Subsidiary to execute and deliver to the Purchaser a guarantee in form and
substance satisfactory to the Purchaser pursuant to which such Subsidiary
guarantees all of the obligations of the Company to the Purchaser, including,
without limitation, the
<PAGE>

obligations of the Company hereunder and under the Notes, together with any
other documents as the Purchaser may reasonably request.

7.02. NEGATIVE COVENANTS OF THE COMPANY. Without limiting any other
covenants and provisions hereof, the Company covenants and agrees that, until
the later of the repayment in full of (i) the aggregate outstanding principal
balance of the Notes, together with all interest and penalties, if any, due
thereon, or (ii) the aggregate outstanding principal balance of the LTHI Notes,
together with all interest and penalties, if any due, thereon, it will comply
with and observe the following covenants and provisions, and will cause each
Subsidiary to comply with and observe such of the following covenants and
provisions as are applicable to such Subsidiary, and will not:

(a) LIENS. Create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any mortgage, deed of
trust, pledge, lien, security interest or other charge or encumbrance (including
the lien or retained security title of a conditional vendor) of any nature, upon
or with respect to any of its properties, now owned or hereafter acquired, or
assign or otherwise convey any right to receive income, except that the
foregoing restrictions shall not apply to mortgages, deeds of trust, pledges,
liens, security interests or other charges or encumbrances (collectively,
"Permitted Liens"):

(i) for taxes, assessments or governmental charges or levies on
property of the Company or any Subsidiary if the same shall not at the time
be delinquent or thereafter can be paid without penalty, or are being
contested in good faith and by appropriate proceedings;

(ii) imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business;

(iii) arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation;

(iv) securing the performance of bids, tenders, contracts (other
than for the repayment of borrowed money), statutory obligations and surety
bonds;

(v) in the nature of zoning restrictions, easements and rights or
restrictions of record on the use of real property which do not materially
detract from its value or impair its use;

(vi) arising by operation of law in favor of the owner or
sublessor of leased premises and confined to the property rented;

(vii) arising from any litigation or proceeding which is being
contested in good faith by appropriate proceedings, provided, however, that
no execution or levy has been made;

(viii) described on EXHIBIT 6.07 which secure the Indebtedness
set forth on EXHIBIT 6.08(d), provided that no such lien is extended to
cover other or different property of the Company or any Subsidiary;

(ix) liens which secure Indebtedness permitted by Section
7.02(b); and
<PAGE>

(x) other liens or encumbrances arising in the ordinary course of
business not incurred in connection with the borrowing of money which do
not interfere in any material respect with the conduct of the business of
the Company and its Subsidiaries.

(b) INDEBTEDNESS. Without the prior written consent of the Purchaser,
create, incur, assume or suffer to exist, or permit any Subsidiary to create,
incur, assume or suffer to exist, any Indebtedness other than (1) Senior Debt,
provided that the provisions of Section 7.02(b) of the LTHI Note Purchase
Agreement are not violated; (2) an unlimited amount of Junior Subordinated Debt
outstanding at any time on a consolidated basis, PROVIDED that the incurrence
and maintenance of all such Indebtedness will not result in the Company's or any
Subsidiary's failure to comply with any of the provisions of Article VII hereof;
(3) Indebtedness described in EXHIBIT 7.02(b), PROVIDED, HOWEVER, that neither
the Company, nor any Subsidiary shall make an intercompany loan to a Subsidiary
that is not a Subsidiary Guarantor (as such term is defined under this Agreement
and as such term is defined under the LTHI Note Purchase Agreement).

(e) INTENTIONALLY OMITTED.

(f) INVESTMENTS IN OTHER PERSONS. Without the prior written consent of
the Purchaser, make or permit any Subsidiary to make, any loan or advance to any
Person, or purchase, otherwise acquire, or permit any Subsidiary to purchase or
otherwise acquire, any capital stock, assets or other property of, obligations
of, or any interest in, any Person, except:

(i) investments by the Company or any Subsidiary in evidences of
indebtedness issued or fully guaranteed by the United States of America or
any U.S. government agency having a maturity of not more than one year from
the date of acquisition;

(ii) investments by the Company or any Subsidiary in certificates
of deposit, money market accounts, notes, acceptances and repurchase
agreements having a maturity of not more than one year from the date of
acquisition issued by a bank organized in the United States having capital,
surplus and undivided profits of at least $100,000,000 and whose parent
holding company has long-term debt rated Aal or higher, and whose
commercial paper (if rated) is rated Prime 1 by Moody's Investors Service,
Inc.;

(iii) loans from a Subsidiary to the Company or another
Subsidiary or from the Company to a Subsidiary;

(iv) investments by the Company or any Subsidiary in the
highest-rated commercial paper having a maturity of not more than one year
from the date of acquisition;
<PAGE>

(v) reasonable advances to employees for travel, relocation or
other business expenses in accordance with the ordinary course of business;
and

(vi) loans or advances to employees to enable employees to
exercise vested stock options.

(g) DISTRIBUTIONS. Without the prior written consent of the Purchaser,
declare or pay any dividends, purchase, redeem, retire, or otherwise acquire for
value any of its capital stock (or rights, options or warrants to purchase such
shares) now or hereafter outstanding, return any capital to its stockholders as
such, or make any distribution of assets to its stockholders as such, or permit
any Subsidiary to do any of the foregoing (such transactions being hereinafter
referred to as "Distributions"); provided, however, that nothing herein
contained shall prevent:

(i) the Company from delivering or making payments of cash or
stock dividends to the holders of its capital stock; or

(ii) any Subsidiary from declaring or making payment of cash or
stock dividends, returns of capital or distributions of assets to the
Company or another Subsidiary;

if in the case of any such transaction the Distribution can be made in
compliance with the other terms of this Agreement.

(h) DEALINGS WITH AFFILIATES. Without the prior written consent of the
Purchaser, enter or permit any Subsidiary to enter into any transaction with any
holder of five percent (5%) or more of any class of capital stock of LTHI, or
any member of their families or any corporation or other entity in which any one
or more of such stockholders or members of their immediate families directly or
indirectly holds five percent (5%) or more of any class of capital stock, except
on an arms-length basis on terms no less favorable to the Company or Subsidiary
as it could obtain from an unrelated party.

(i) MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES. Sell or otherwise
dispose of any shares of capital stock of any Subsidiary, except to the Company
or another Subsidiary, or permit any Subsidiary to issue, sell or otherwise
dispose of any shares of its capital stock or the capital stock of any
Subsidiary, except (i) to the Company or another Subsidiary, or (ii) to any
director of a Subsidiary to the extent the issuance to any such director of any
such capital stock is required under applicable law; PROVIDED, HOWEVER, that
nothing herein contained shall prevent any merger, consolidation or transfer of
assets permitted by Section 7.02(e).

(j) CHANGE IN NATURE OF BUSINESS. Without the prior written consent of
the Purchaser, make, or permit any Subsidiary to make, any material change in
the nature of its business as carried on at the date hereof.

(k) NO AMENDMENT OF CHARTER DOCUMENTS OR BYLAWS. Without the prior
written consent of the Purchaser, amend or alter its charter documents or bylaws
in any manner which would have an adverse impact upon the interests of the
Purchaser. Prior to making any amendment or alteration to its charter documents
or bylaws, the Company shall give the Purchaser five (5) days prior written
notice thereof. In the event the Purchaser reasonably believes that such
amendment or alteration would have an adverse effect upon its interests and the
Purchaser so notifies the Company prior to the expiration of such five (5) day
period, the Company shall not so amend or alter its charter documents or bylaws.

(l) INTENTIONALLY OMITTED.
<PAGE>

7.03. REPORTING REQUIREMENTS. The Company will furnish to the holders of
the Notes:

(a) as soon as possible and in any event within five (5) days after
the occurrence of each Event of Default or each event which, with the giving of
notice or lapse of time or both, would constitute an Event of Default, the
statement of the chief financial officer of the Company setting forth details of
such Event of Default or event and the action which the Company proposes to take
with respect thereto;

(b) as soon as available and in any event within thirty (30) days
after the end of each month, consolidated and consolidating balance sheets of
LTHI and its subsidiaries as of the end of such month and consolidated and
consolidating statements of income and retained earnings and of cash flows of
LTHI and its subsidiaries for such month and for the periods commencing at the
end of the previous fiscal year and ending with the end of such month, and with
respect to each quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year
and the operating Budget for the current year (the "Budget"), all in reasonable
detail, in a format reasonably satisfactory to the Purchaser, and duly certified
(subject to normal year-end adjustments) by the chief financial officer of the
Company as having been prepared in accordance with GAAP, subject to normal
year-end audit adjustments, and including a discussion by the Company's
management of any variance from the Budget;

(c) at the time of delivery of each monthly statement, a certificate,
executed by the chief financial officer of the Company, stating that such
officer has caused this Agreement and the Notes to be reviewed and has no
knowledge of any Event of Default or default by the Company or any Subsidiary in
the performance or observance of any of the provisions of this Agreement or the
Notes or, if such officer has such knowledge, specifying such Event of Default
or default and the nature thereof, and setting forth computations in reasonable
detail demonstrating compliance with the provisions of subsections 7.02(b) and
(d);

(d) promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, affecting the
Company or any Subsidiary of the type described in Section 6.04;

(e) simultaneously as they are sent to the Bank, copies of all
financial statements, and upon written request, reports and other information
delivered by the Company to the Bank;

(f) promptly after sending, making available, or filing the same, such
reports and financial statements as the Company or any Subsidiary shall send or
make available to the stockholders of the Company or the Commission;

(g) such other information respecting the business, assets,
liabilities, financial condition, results of operations or prospects of the
Company or any of its Subsidiaries as the Purchaser may from time to time
reasonably request, and to make available to the Purchaser and its
representatives, members of management and employees with significant
responsibilities for the purposes of updating the Purchaser as to the condition
of the Company and its Subsidiaries; and

(h) simultaneously with any Subsidiary entering into a New Senior Debt
Guarantee, a copy of such guarantee, together with all other documents executed
in connection therewith.

ARTICLE VIII
<PAGE>

EVENTS OF DEFAULT

8.01. EVENTS OF DEFAULT. If any of the following events ("Events of
Default") shall occur and be continuing:

(a) The Company or LTHI shall fail to pay any installment of principal
of any of the Notes or any of the LTHI Notes, respectively, when due; or

(b) The Company or LTHI shall fail to pay any interest or premium, if
any, on any of the Notes or any of the LTHI Notes, respectively, when due and
such failure shall continue for five (5) days; or

(c) The Company shall default in the performance of any covenant
contained in Section 7.02 which default shall remain uncured for twenty (20)
days or more; or

(d) There shall be an Event of Default under the LTHI Loan Agreement
or any documents or agreements executed in connection therewith;

(f) The Company or any Subsidiary shall fail to perform or observe any
other term, covenant or agreement contained in this Agreement or the Notes on
its part to be performed or observed and any such failure remains unremedied for
twenty (20) days after written notice thereof shall have been given to the
Company by any registered holder of the Notes; or

(g) The Company or any Subsidiary shall fail to pay any Indebtedness
for borrowed money exceeding $1,000,000 (or its equivalent in any other
currency) owing by the Company or such Subsidiary (as the case may be), or any
interest or premium thereon, when due (or, if permitted by the terms of the
relevant document, within any applicable grace period), whether such
Indebtedness shall become due by scheduled maturity, by required prepayment, by
acceleration, by demand or otherwise, or shall fail to perform any term,
covenant or agreement on its part to be performed under any agreement or
instrument (other than this Agreement or the Notes) evidencing or securing or
relating to any Indebtedness owing by the Company or any Subsidiary, as the case
may be, when required to be performed (or, if permitted by the terms of the
relevant document, within any applicable grace period), if the effect of such
failure to pay or perform is to accelerate, or to permit the holder or holders
of such Indebtedness, or the trustee or trustees under any such agreement or
instrument to accelerate the maturity of such Indebtedness, unless such failure
to pay or perform shall be waived by the holder or holders of such Indebtedness
or such trustee or trustees; or

time to time in effect, or foreign bankruptcy, insolvency, receivership,
examination or similar law, or by its authorizing, by appropriate proceedings of
its board of directors or other governing body, the commencement of such a
voluntary proceeding; (iii) by its filing an answer or other pleading admitting
or failing to deny the material allegations of a petition filed against it
commencing an involuntary proceeding under said Title 11, or foreign bankruptcy,
insolvency, receivership or similar law, or seeking, consenting to or
acquiescing in the relief therein provided, or by its failing to timely
controvert any such proceeding or the material allegations of any such petition;
(iv) by the entry of an order for relief in any involuntary proceeding commenced
under said Title 11, or foreign bankruptcy, insolvency, receivership,
examination or similar law; (v) by its seeking relief as a debtor under any
applicable law, other than said Title 11, or similar bankruptcy, insolvency,
receivership, examination or similar law, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors, or by its consenting to or acquiescing in such relief;
(vi) by the entry of an order by a court of competent jurisdiction (a) finding
it to be bankrupt or insolvent, (b) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its creditors,
or (c) assuming custody of, or appointing a receiver, examiner, trustee,
custodian, sequestrator or similar official for, all or a substantial part of
its property; or (vii) by its making an assignment for the benefit of, or
entering into a composition with, its creditors, or appointing or consenting to
the appointment of a receiver, examiner, trustee, custodian, sequestrator or
similar official for all or a substantial part of its property;

(j) A Change of Control occurs with respect to the Company or any of
its material direct or indirect subsidiaries which is not consented to by the
holders of at least a majority of the principal amount of the Notes then
outstanding; or

(k) Any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against a substantial part of the property of
the Company or any Subsidiary and such judgment, writ, or similar process shall
not be released, vacated or fully bonded within sixty (60) days after its issue
or levy;

then, and in any such event listed in Section 8.01(a) through (k),

(1) the Purchaser may, by notice to the Company, declare the entire unpaid
principal amount of the Notes, all interest accrued and unpaid thereon and all
other amounts payable under this Agreement to be forthwith due and payable,
whereupon the Notes, all such accrued interest and all such amounts shall become
and be forthwith due and payable (unless there shall have occurred an Event of
Default under subsections 8.01(i) in which case all such amounts shall
automatically become due and payable), without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Company, and

8.02. ANNULMENT OF DEFAULTS. Section 8.01 is subject to the condition that,
if at any time after the principal of any of the Notes shall have become due and
payable, and before any judgment or decree for the payment of the moneys so due,
or any thereof, shall have been entered, then and in every such case the holders
of at least a majority of the principal amount of all Notes then outstanding
may, by written instrument filed with the Company, rescind and annul such
declaration and its consequences; but no such rescission or annulment shall
extend to or affect any subsequent default or Event of Default or impair any
right consequent thereon.
<PAGE>

ARTICLE IX

MISCELLANEOUS

9.01. NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of
any holder of any Notes in exercising any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

9.02. AMENDMENTS, WAIVERS AND CONSENTS. Any provision in this Agreement,
the Notes or the other Operative Documents to the contrary notwithstanding,
changes in or additions to this Agreement may be made, and compliance with any
covenant or provision herein set forth may be omitted or waived, if the Company
(x) shall obtain consent thereto in writing from the holder or holders of at
least a majority in principal amount of all Notes then outstanding, and (y)
shall deliver copies of such consent in writing to any holders who did not
execute the same; PROVIDED that no such consent shall be effective to reduce the
principal or interest payable on any Note or extend the maturity of the Notes
without the consent of the holder thereof or to reduce the percentage of the
Notes the consent of the holders of which is required under this Section 9.02.
Any waiver or consent may be given subject to satisfaction of conditions stated
therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. Written notice of any
waiver or consent effected under this subsection shall promptly be delivered by
the Company to any holders who did not execute the same.

9.03. ADDRESSES FOR NOTICES, ETC. All notices, requests, demands and other
communications provided for hereunder shall be in writing and mailed (by first
class registered or certified mail, postage prepaid), telegraphed, sent by
express overnight courier service or electronic facsimile transmission with a
copy by mail, or delivered to the applicable party at the addresses indicated
below:

IF TO THE COMPANY:

c/o Lionbridge Technologies Holdings, Inc.
950 Winter Street
Waltham, MA 02154
Attention: Chief Financial Officer
Telecopy No.: (781) 890-3122

WITH A COPY TO:

Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
Attention: George W. Lloyd, Esq.
Telecopy No.: (617) 248-7100

IF TO MSC AND
MSI:

Morgan Stanley Venture Capital Fund II, Annex, L.P.
Morgan Stanley Venture Investors Annex, L.P.
1221 Avenue of the Americas
<PAGE>

New York, NY 10020
Attention: Debra Abramovitz
Telecopy No.: (212) 762-8424

WITH A COPY TO:

Holland & Knight LLP
One Beacon Street
Boston, MA 02108
Attention: Lawrence D. Bradley, Esq.
Telecopy No.: (617) 523-6850

IF TO ANY OTHER HOLDER OF THE NOTES:

at such holder's address for notice as set
forth in the transfer records of the
Company

9.04. COSTS, EXPENSES AND TAXES. The Company agrees to pay on demand all
reasonable costs and expenses of the Purchaser in connection with the
preparation, execution and delivery of this Agreement, the Notes, the other
Operative Documents and other instruments and documents to be delivered
hereunder, and in connection with the consummation of the transactions
contemplated hereby and thereby, as well as all costs and expenses of the
Purchaser in connection with the amendment, waiver (whether or not such
amendment or waiver becomes effective) or enforcement of this Agreement, the
Notes, the other Operative Documents, and other instruments and documents to be
delivered hereunder and thereunder. Notwithstanding the preceding sentence, and
in addition to the provisions of such sentence, the Company agrees to pay on
demand all reasonable fees and out-of-pocket expenses of Holland & Knight LLP,
counsel to the Purchaser, in connection with the transactions contemplated by
this Agreement, including any amendment, waiver (whether or not such amendment
or waiver becomes effective) or enforcement of this Agreement, the Notes, the
Operative Documents, and other instruments and documents to be delivered
hereunder and thereunder. In addition, the Company agrees to pay any and all
stamp and other taxes payable or determined to be payable in connection with the
execution and delivery of this Agreement, the Notes, the other Operative
Documents, and the other instruments and documents to be delivered hereunder or
thereunder and the Company agrees to save each Purchaser harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and filing fees.

forth herein, nothing in this Agreement shall confer any claim, right, interest
or remedy on any third party or inure to the benefit of any third party.

9.06. PAYMENTS IN RESPECT OF NOTES. The Purchaser and any successor holder
of the Notes, by their acceptance thereof, agree that, with respect to all sums
received by them applicable to the payment of principal of or interest on the
Notes, equitable adjustment will be made among them so that, in effect, all such
sums shall be shared ratably by all of the holders of the Notes whether received
by voluntary payment, by realization upon security, by the exercise of the right
of setoff, by counterclaim or cross-action or by the enforcement of any or all
of the Notes. If any holder of the Notes receives any payment on its Notes in
excess of its pro rata portion, then such holder receiving such excess payment
shall purchase for cash from the other holders an interest in their Notes in
such amounts as shall result in a ratable participation by all of the holders in
the aggregate unpaid amount of Notes then outstanding.

9.07. INTENTIONALLY OMITTED.

9.08. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
the Purchaser, its subsidiaries, directors, officers, partners, counsel and
employees, from and against any and all liability (including, without
limitation, reasonable legal fees incurred in defending against any such
liability) under, arising out of or relating to this Agreement, the Notes, the
transactions contemplated hereby or thereby or in connection herewith or
therewith, including (to the maximum extent permitted by law) any liability
arising under federal or state securities laws, except to the extent such
liability shall result from any act or omission on the part of the Purchaser or
its employees, agents, brokers or other representatives. The obligations of the
Company under this Section 9.08 shall survive and continue to be in full force
and effect notwithstanding (a) the repayment of the Notes and (b) the
termination of this Agreement.

9.09. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in this Agreement, the Notes, the Operative Documents or any
other instrument or document delivered in connection herewith or therewith,
shall survive the execution and delivery hereof and thereof, regardless of any
investigation made by the Purchaser or on behalf of the Purchaser.

9.10. INTENTIONALLY OMITTED.

9.11. SEVERABILITY. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.

9.12. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the Commonwealth of Massachusetts.

9.13. WAIVER OF RIGHT TO JURY TRIAL. The parties hereby waive all rights to
a trial by jury for all legal proceedings concerning this Agreement or the
Notes.

9.14. HEADINGS. Article, Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.

9.15. SEALED INSTRUMENT. This Agreement is executed as an instrument under
seal.

9.17. FURTHER ASSURANCES. From and after the date of this Agreement, upon
the request of the Purchaser, the Company and each Subsidiary shall execute and
deliver such instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement, the Notes and the Warrants.

9.18. CONSENT TO JURISDICTION. The Company irrevocably submits to the
non-exclusive jurisdiction of any state or federal court sitting in the
Commonwealth of Massachusetts, United States of America, over any suit, action
or proceeding arising out of or relating to this Agreement or any of the Notes.
To the fullest extent it may effectively do so under applicable law, the Company
irrevocably waives and agrees not to assert, by way of motion, as a defense or
otherwise, any claim that it is not subject to the jurisdiction of any such
court, any objection that it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding brought in any such court and any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.

9.19. EFFECT OF JUDGMENT. The Company agrees, to the fullest extent it may
effectively do so under applicable law, that a judgment in any suit, action or
proceeding of the nature referred to in Section 9.18 brought in any such court
shall, subject to such rights of appeal on issues other than jurisdiction as may
be available to the Company, be conclusive and binding upon the Company and may
be enforced in the courts of the United States of America or the Commonwealth of
Massachusetts (or any other courts to the jurisdiction of which the Company is
or may be subject) by a suit upon such judgment.

9.20. SERVICE OF PROCESS. The Company consents to service of process in any
suit, action or proceeding of the nature referred to in Section 9.18 by actual
receipt of a copy thereof by registered or certified mail, postage prepaid,
return receipt requested, to the address of the Company specified in or
designated pursuant to Section 9.03. The Company agrees that such service (i)
shall be deemed in every respect effective service of process upon the Company
in any such suit, action or proceeding and (ii) shall, to the fullest extent
permitted by law, be taken and held to be valid personal service upon and
personal delivery to the Company.

9.21. NO LIMITATION. Nothing in Sections 9.18, 9.19, 9.20 or 9.22 shall
affect the right of the Purchaser to serve process in any manner permitted by
law, or limit any right that the Purchaser may have to bring proceedings against
the Company in the courts of any jurisdiction or to enforce in any lawful manner
a judgment obtained in one jurisdiction in any other jurisdiction.

9.23. ACTIONS BY PURCHASER. Wherever in this Agreement action is required
or permitted to be taken by, or consent is required of, or a matter requires the
satisfaction of, the Purchaser, unless the context otherwise requires, such
action may be taken by, and/or such consent may be obtained from, and/or such
satisfaction may be expressed by, the holders of at least a majority of the
principal amount of all Notes then outstanding; PROVIDED, HOWEVER, that the
provisions of this Section 9.23 shall not limit in any manner any action which
may be taken by the Purchaser pursuant to the provisions of Section 8.01 hereof.

9.24. JUDGMENT CURRENCY.

(a) The obligations of the Company hereunder and under the other
Operative Documents to make payments in United States Dollars (the "Obligation
Currency") shall not be
<PAGE>

discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any currency other than the Obligation Currency,
except to the extent that such tender or recovery results in the effective
receipt by the holders of the Notes of the full amount of the Obligation
Currency expressed to be payable to such holders under this Agreement or the
other Operative Documents. If, for the purpose of obtaining or enforcing
judgment against the Company or in any court or in any jurisdiction, it becomes
necessary to convert into or from any currency other than the Obligation
Currency (such other currency being hereinafter referred to as the "Judgment
Currency") an amount due in the Obligation Currency, the conversion shall be
made at the rate of exchange (as quoted by a known dealer in such currency
designated by the holders of the Notes) determined, in each case, as of the date
immediately preceding the day on which the judgment is given (such Business Day
being hereinafter referred to as the "Judgment Currency Conversion Date").

(b) If there is a change in the rate of exchange prevailing between
the Judgment Currency Conversion Date and the date of actual payment of the
amount due, the Company covenants and agrees to pay, or cause to be paid, as a
separate obligation and notwithstanding any judgment, such additional amounts,
if any (but in any event not a lesser amount) as may be necessary to ensure that
the amount paid in the Judgment Currency, when converted at the rate of exchange
prevailing on the date of payment, will produce the amount of the Obligation
Currency which could have been purchased with the amount of Judgment Currency
stipulated in the judgment or judicial award at the rate of exchange prevailing
on the Judgment Currency Conversion Date.

(c) For purposes of determining the rate of exchange for this Section
9.24, such amounts shall include any premium and costs payable in connection
with the purchase of the Obligation Currency.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>

IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
the date first above written.

COMPANY: LIONBRIDGE TECHNOLOGIES HOLDINGS, B.V.

By: ___________________________________
Name:
Title:

PURCHASER: MORGAN STANLEY VENTURE CAPITAL FUND II ANNEX, L.P.

By: Morgan Stanley Venture Partners II, L.P.,
its General Partner

By: Morgan Stanley Venture Capital II, Inc.,
Managing General Partner

By: ___________________________________
Name:
Title:

MORGAN STANLEY VENTURE INVESTORS ANNEX, L.P.

By: Morgan Stanley Venture Partners II, L.P.,
its General Partner

By: Morgan Stanley Venture Capital II, Inc., its
Managing General Partner

By: ___________________________________
Name:
Title:

<PAGE>

================================================================================

FIRST AMENDED AND RESTATED SENIOR SUBORDINATED
NOTE PURCHASE AGREEMENT

by and between

LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.

and

CAPITAL RESOURCE LENDERS III, L.P.,

Dated as of February 26, 1999

================================================================================
<PAGE>

LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.

First Amended and Restated Senior Subordinated Note Purchase Agreement

Dated as of February 26, 1999

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page

<S> <C> <C> <C>
ARTICLE I

DEFINITIONS................................................................................................... 1
1.01. Definitions............................................................... 1

ARTICLE II

PURCHASE, SALE AND TERMS OF NOTES; PAYMENTS................................................................... 8
2.01. The Note.................................................................. 8
2.02. Purchase and Sale of the Note and the Warrant............................. 9
2.03. Issue Price; Original Issue Discount...................................... 9
2.04. Use of Proceeds........................................................... 9
2.05. Payments and Endorsements................................................. 9
2.06. Redemptions............................................................... 9
2.07. Default Rate of Interest.................................................. 10
2.08. Maximum Legal Rate of Interest............................................ 10
2.09. Payment on Non-Business Days.............................................. 10
2.10. Transfer and Exchange of Notes............................................ 11
2.11. Replacement of Notes...................................................... 11

ARTICLE III

PURCHASE, SALE AND TERMS OF WARRANTS.......................................................................... 11
3.01. The Warrants.............................................................. 11
3.02. Purchase and Sale of Warrants............................................. 11
3.03. Right to Purchase New Subordinated Debt................................... 12

ARTICLE IV

CONDITIONS TO PURCHASER'S OBLIGATION.......................................................................... 12
4.01. Representations and Warranties............................................ 12
4.02. Documentation at Closing.................................................. 12
4.03 Closing of LTHBV Note Purchase Agreement.................................. 14
<PAGE>

4.04. No Default................................................................ 14
4.05. Waivers and Consents...................................................... 14

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............................................................... 14
5.01. Representations and Warranties of the Purchaser........................... 14

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................................. 15
6.01. Organization and Standing of the Company and Subsidiaries; Ownership...... 15
6.02. Corporate Action.......................................................... 16
6.03. Governmental Approvals.................................................... 16
6.04. Litigation................................................................ 16
6.05. Compliance with Law....................................................... 17
6.06. Federal Reserve Regulations............................................... 17
6.07. Title to Assets, Patents.................................................. 17
6.08. Financial Information..................................................... 18
6.09. Taxes..................................................................... 18
6.10. ERISA..................................................................... 18
6.11. Transactions with Affiliates.............................................. 19
6.12. Assumptions or Guaranties of Indebtedness of Other Persons................ 19
6.13. Loans to Other Persons.................................................... 19
6.14. Securities Act............................................................ 19
6.15. Disclosure................................................................ 19
6.16. No Brokers or Finders..................................................... 20
6.17. Other Agreements of Officers.............................................. 20
6.18. Capitalization of the Company; Status of Capital Stock.................... 20
6.19. Capital Stock of Subsidiaries............................................. 20
6.20. Labor Relations........................................................... 21
6.21. Insurance................................................................. 21
6.22. Books and Records......................................................... 21
6.23. Hazardous and Toxic Materials............................................. 21
6.24. Registration Rights....................................................... 21
6.25. Other Agreements.......................................................... 22
6.26. Customers, Vendors and Suppliers.......................................... 22
6.27. No Violations............................................................. 23

ARTICLE VII

COVENANTS OF THE COMPANY...................................................................................... 23
7.01. Affirmative Covenants of the Company Other Than Reporting Requirements.... 23
7.02. Negative Covenants of the Company......................................... 26
7.03. Reporting Requirements.................................................... 31

ii
<PAGE>

ARTICLE VIII

EVENTS OF DEFAULT............................................................................................. 32
8.01. Events of Default......................................................... 32
8.02. Annulment of Defaults..................................................... 34

ARTICLE IX

MISCELLANEOUS................................................................................................. 34
9.01. No Waiver; Cumulative Remedies............................................ 34
9.02. Amendments, Waivers and Consents.......................................... 35
9.03. Addresses for Notices, Etc................................................ 35
9.04. Costs, Expenses and Taxes................................................. 36
9.05. Binding Effect; Assignment................................................ 36
9.06. Payments in Respect of Notes.............................................. 37
9.07. Payments in Respect of Warrants........................................... 37
9.08. Indemnification........................................................... 37
9.09. Survival of Representations and Warranties................................ 37
9.10. Amendment and Restatement of Bridge Note Agreements....................... 37
9.11. Severability.............................................................. 38
9.12. Governing Law............................................................. 38
9.13. Waiver of Right to Jury Trial............................................. 38
9.14. Headings.................................................................. 38
9.15. Sealed Instrument......................................................... 38
9.16. Counterparts.............................................................. 38
9.17. Further Assurances........................................................ 38
9.18. Consent to Jurisdiction................................................... 38
9.19. Effect of Judgment........................................................ 38
9.20. Service of Process........................................................ 38
9.21. No Limitation............................................................. 39
9.22. Specific Performance...................................................... 39
9.23. Actions by Purchaser...................................................... 39
</TABLE>

iii
<PAGE>

EXHIBITS

2.01 Form of 12% Senior Subordinated Note
2.04 Use of Proceeds
3.01 Warrant
4.02(d) JLSI Guaranty
4.02(e) LTCI Guaranty
4.02(f) LTI Guaranty
4.02(g) VTI Guaranty
4.02(i) Opinion of Testa, Hurwitz & Thibeault, LLP
4.02(o) Restated Stockholders' Agreement
4.02(p) Restated Registration Rights Agreement
6.01 Schedule of Subsidiaries
6.04 Schedule of Litigation
6.07 Schedule of Title Exceptions
6.08(a) Financial Statements
6.08(c) Liabilities; Guaranties; Etc.
6.08(d) Schedule of Indebtedness
6.09 Schedule of Taxes
6.11 Transactions with Affiliates
6.13 Investments in Other Persons
6.17 Schedule of Other Agreements of Officers and Key Employees
6.18 Schedule of Capital Stock, Options and Other Rights
6.19 Schedule of Capital Stock of Subsidiaries
6.21 Schedule of Insurance to be Obtained
6.23 Hazardous or Toxic Materials
6.25 Contracts, etc.
7.02(b) Indebtedness

iv
<PAGE>

Lionbridge Technologies Holdings, Inc.
950 Winter Street
Waltham, MA 02154

As of February 26, 1999

Capital Resource Lenders III, L.P.
85 Merrimac Street
Suite 200
Boston, MA 02114

Re: SIX MILLION DOLLAR FIRST AMENDED AND RESTATED 12% SENIOR SUBORDINATED
NOTE DUE FEBRUARY 26, 2006

Ladies and Gentlemen:

Whereas Lionbridge Technologies Holdings, Inc., a Delaware corporation
(together with its successors and assigns, the "Company"), has issued to Capital
Resource Lenders III, L.P., a Delaware limited partnership ("CRL"), its 12%
Senior Subordinated Convertible Note, due January 8, 2000, in the original
principal amount of Four Million Dollars ($4,000,000.00) (the "Bridge Note"),
pursuant to a Senior Subordinated Note Purchase Agreement between the Company
and CRL dated as of January 8, 1999 (the "Bridge Note Purchase Agreement") in
connection with a bridge financing (the "Bridge Loan") which funded the
Company's acquisition of the capital stock of VeriTest, Inc., a California
corporation (together with its successors and assigns, "VTI"). The Company now
has requested CRL to (a) amend and restate the Bridge Note Purchase Agreement
and the Bridge Note and (b) purchase from the Company a First Amended and
Restated 12% Senior Subordinated Note due February 26, 2006 in the original
principal amount of Six Million Dollars ($6,000,000.00). The Company is issuing
such Amended and Restated Senior Subordinated Note as part of a Ten Million
Dollar ($10,000,000) financing of the Company and the other members of the
Consolidated Group (as defined below), which financing also includes the
issuance to CRL by Lionbridge Technologies Holdings B.V., a company with limited
liability incorporated in the Netherlands (together with its successors and
assigns, "LTHBV"), of its Four Million Dollar ($4,000,000.00) Senior
Subordinated Note due February 26, 2006 pursuant to a Senior Subordinated Note
Purchase Agreement dated as of the date hereof by and between LTHBV and CRL (as
from time to time amended and in effect, the "LTHBV Note Purchase Agreement").

ARTICLE I

DEFINITIONS

1.01. DEFINITIONS. As used herein, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):

"AFFILIATE" means, as to any specified Person, any other Person
controlling, controlled by or under common control with such specified Person.
<PAGE>

"AGREEMENT" means this First Amended and Restated Senior Subordinated Note
Purchase Agreement as from time to time amended and in effect between the
parties.

"APPLICABLE LAWS" shall have the meaning assigned to that term in Section
6.05.

"BANK" means and shall include Silicon Valley Bank, a California-chartered
bank, and its successors and assigns, or such other bank or institutional lender
which may from time to time be the primary lender to the Company and/or other
members of the Consolidated Group.

"BRIDGE LOAN" shall have the meaning set forth in the Preamble hereof.

"BRIDGE NOTE" shall have the meaning set forth in the Preamble hereof.

"BRIDGE NOTE PURCHASE AGREEMENT" shall have the meaning assigned to that
term in the Preamble hereof.

"BUDGET" shall have the meaning assigned to that term in Section 7.03(b).

"BUSINESS DAY" means any day other than a Saturday, Sunday or public
holiday or the equivalent for banks under the laws of the Commonwealth of
Massachusetts.

"CHANGE OF CONTROL" means, with respect to any member of the Consolidated
Group, any transaction, series of related transactions or event as a result of
which any one or more Persons (other than the Purchaser, any other member of the
Consolidated Group, or other holders of the capital stock of the Company or
securities convertible into or exercisable for such capital stock as of the date
hereof) acquires or for the first time controls or is able to vote (directly or
through nominees or beneficial ownership) fifty percent (50%) or more of the
outstanding equity securities of such member.

"CLOSING" shall have the meaning assigned to that term in Section 2.02.

"CLOSING DATE" shall have the meaning assigned to that term in Section
2.02.

"CODE" shall have the meaning assigned to that term in Section 2.03.

"COMMISSION" means the United States Securities and Exchange Commission (or
any other federal agency at that time administering the Securities Act).

"COMMON STOCK" includes (a) the Company's common stock, $.01 par value, as
authorized on the date of this Agreement, and (b) any other capital stock of any
class or classes (however designated) of the Company, authorized on or after the
date hereof, the holders of which shall have the right, without limitation as to
amount per share, either to all or to a share of the balance of current
dividends and liquidating distributions after the payment of dividends and
distributions on any shares entitled to preference in the payment thereof, and
the holders of which shall ordinarily, in the absence of contingencies, be
entitled to vote for the election of a majority of directors of the Company
(even though the right so to vote may have been suspended by the happening of
such a contingency), and (c) any other

2
<PAGE>

securities into which or for which any of the securities described in (a) or (b)
above may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.

"COMPANY" shall have the meaning assigned to that term in the Preamble
hereof.

"CONSOLIDATED GROUP" means the Company, JLSI, LJKK, LTCI, LTI, VTI, LTBV,
LTHBV, LT Ireland and LTF, together with their respective successors, assigns
and Subsidiaries, existing from time to time.

"CRL" shall have the meaning assigned to that term in the Preamble hereof.

"CURRENT LIABILITIES" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of the Company and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding advances made
under the Loan Agreement, including all Indebtedness that is payable upon demand
or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of the Company or any
Subsidiary to a date more than one year from the date of determination, but
excluding any Indebtedness incurred by the Company or any Subsidiary that is
subordinated to debt owing by the Company or any Subsidiary to the Bank on terms
acceptable to the Bank and is identified as such by the Bank.

"DISTRIBUTION" shall have the meaning assigned to that term in Section
7.02(g).

"EBITDA" means, for any applicable fiscal period, consolidated net income
(or loss) after taxes for such period of the Company and its Subsidiaries as
determined in accordance with GAAP, plus the following to the extent deducted in
computing the foregoing: (i) Interest Expense; (ii) taxes; (iii) depreciation;
and (iv) amortization of goodwill and other intangibles.

"ENVIRONMENTAL LAWS" shall have the meaning assigned to that term in
Section 6.23.

"EQUITY SECURITY" shall have the meaning assigned to that term in the
Exchange Act.

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<PAGE>

"ERISA" shall have the meaning assigned to that term in Section 6.10.

"EVENTS OF DEFAULT" shall have the meaning assigned to that term in Section
8.01.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

"FINANCIAL STATEMENTS" shall have the meaning assigned to that term in
Section 6.08.

"FOREIGN GUARANTIES" means the those certain guaranties executed by LJKK,
LT Ireland, LTBV and LTF in favor of CRL in connection with the LTHBV Financing.

"FOREIGN SUBSIDIARIES" shall have the meaning assigned to that term in
Section 7.01(g).

"GAAP" means generally accepted accounting principles as in effect in the
United States from time to time, provided, however, the Purchaser acknowledges
that with respect to the financial statements to be delivered to Purchaser
pursuant to Section 7.03(b), there may be inconsistencies with GAAP which in the
aggregate shall not be material. Unless otherwise specifically stated herein,
use of the term "GAAP" means that such principles are applied and maintained on
a consistent basis for the Company and its Subsidiaries throughout the period
indicated and consistent with the prior financial practices of the Company and
its Subsidiaries as reflected on the Financial Statements so as to properly
reflect the financial condition, and the results of operations and cash flow of
the Company and its Subsidiaries.

"GUARANTIES" means the JLSI Guaranty, the LTCI Guaranty, the LTI Guaranty
and the VTI Guaranty.

"GUARANTORS" means the Subsidiary Guarantors, including, without
limitation, JLSI, LTCI, LTI and VTI.

"HAZARDOUS DISCHARGE" shall have the meaning assigned to that term in
Section 6.23.

"HAZARDOUS MATERIALS" shall have the meaning assigned to that term in
Section 6.23.

"INTEREST EXPENSE" means, for any applicable fiscal period, the sum of (i)
the aggregate amount of interest required to be paid in cash during such period
on Indebtedness of the Company and its Subsidiaries (on a consolidated basis),
and (ii) any original issue discount resulting from the issuance of the Notes,
the LTHBV Notes of the Warrants which has accrued during such fiscal period.

4
<PAGE>

"JLSI" means Japanese Language Services, Inc., a Massachusetts corporation,
and its successors and assigns.

"JLSI GUARANTY" shall have the meaning assigned to that term in Section
4.02(d).

"LIQUIDITY IPO" means a firm commitment underwritten public offering of
securities on a major exchange pursuant to a registration statement filed with
the Commission under the Securities Act in which the aggregate proceeds to the
Company, any Subsidiary or the Consolidated Group are at least $25 million.

"LOAN AGREEMENT" means that certain Loan Agreement, dated September 26,
1997, by and among the LTHBV, LTBV and the Bank, as amended by Amendment No.1,
dated as of May 28, 1998, as it may be further amended from time to time.

"LJKK" means Lionbridge Japan K.K., a Japanese corporation, and its
successors and assigns.

"LTBV" means Lionbridge Technologies B.V., a company with limited liability
incorporated in the Netherlands, and its successors and assigns.

"LTCI" means Lionbridge Technologies California, Inc., a Delaware
corporation, and its successors and assigns.

"LTCI GUARANTY" shall have the meaning assigned to that term in Section
4.02(e).

"LTF" means Lionbridge Technologies (France), a French company, and its
successors and assigns.

"LTHBV" shall have the meaning assigned to that term in the Preamble
hereof.

"LTHBV FINANCING" means the issuance and sale to CRL of the LTHBV Note
pursuant to the LTHBV Note Purchase Agreement.

"LTHBV NOTE" means the 12% Senior Subordinated Note due February __, 2006
in the original principal amount of Four Million Dollars ($4,000,000) issued by
LTHBV to CRL pursuant to the LTHBV Note Purchase Agreement, as from time to time
amended and in effect.

"LTHBV NOTES" means collectively the LTHBV Note and any note or notes
delivered in substitution, replacement or exchange therefor, as such notes from
time to time are amended and in effect.

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<PAGE>

"LTHBV NOTE PURCHASE AGREEMENT" shall have the meaning assigned to that
term in the Preamble hereof.

"LTI" means Lionbridge Technologies, Inc., a Delaware corporation, and its
successors and assigns.

"LTI GUARANTY" shall have the meaning assigned to that term in Section
4.02(f).

"LT IRELAND" means Lionbridge Technologies Ireland, an unlimited liability
company duly incorporated under the laws of Ireland, and its successors and
assigns.

"MATERIAL ADVERSE EFFECT" shall have the meaning assigned to that term in
Section 6.01.

"MORGAN STANLEY DEBT" shall have the meaning set forth in Section 7.02(b)

"NEW SENIOR DEBT FOREIGN GUARANTEE" shall have the meaning ascribed to that
term in Section 7.01(p).

"NEW SENIOR DEBT GUARANTEE" shall have the meaning assigned to that term in
Section 7.01(p).

"NOTE" or "NOTES" shall have the meanings assigned to such terms in Section
2.01.

"OPERATIVE DOCUMENTS" shall mean each of this Agreement, the Notes, the
Warrants, the Guaranties, the Restated Stockholders' Agreement, and the Restated
Registration Rights Agreement.

"PERMITTED LIENS" shall have the meaning assigned to that term in Section
7.02(a).

"PERSON" means and includes an individual, a corporation, a partnership, a
joint venture, a trust, an unincorporated organization, or a government or any
agency or political subdivision thereof.

"PREFERRED STOCK" shall mean the outstanding shares of Series B Preferred
Stock, $.01 par value of the Company.

"PURCHASER" shall mean CRL and any other holder or holders from time to
time of any of the Notes.

6
<PAGE>

Subsidiaries, (2) mergers or asset transfers by any Subsidiary with or to the
Company and (3) the merger of any Person into the Company or other issuance of
securities by the Company in connection with the acquisition of a Person as long
as the Company is the surviving entity, such merger or acquisition does not
result in the violation of any of the provisions of this Agreement and no such
violation exists at the time of such merger or acquisition, and the
consideration paid by the Company in connection with such merger or acquisition
has a fair market value of less than Twenty-Five Million Dollars ($25,000,000)
at the date of the closing of such transaction.

"QUALIFYING LIQUIDITY EVENT" means any of the following events: (i) a
Qualified Disposition; (ii) a Change of Control; and (iii) a Liquidity IPO with
respect to any member of the Consolidated Group.

"QUICK ASSETS" means, as of any applicable date, the consolidated cash,
cash equivalents, accounts receivable and investments with maturities of less
than ninety (90) days of the Consolidated Group determined in accordance with
GAAP.

"RESTATED REGISTRATION RIGHTS AGREEMENT" means that certain Second Restated
Registration Rights Agreement dated as of the date hereof by and among LTI, the
Company, certain stockholders of the Company and CRL.

"RESTATED STOCKHOLDERS' AGREEMENT" means that certain Second Restated
Stockholders' Agreement dated as of the date hereof by and among LTI, the
Company, certain stockholders of the Company and CRL.

"SECURITIES" means collectively the Notes, the Warrants and the Warrant
Shares.

"SUBORDINATED DEBT" means any or all Indebtedness of the Company and any of
its Subsidiaries that is subordinated to Senior Debt, whether structurally or
contractually.

7
<PAGE>

"SUBSIDIARY" or "SUBSIDIARIES" means (i) any corporation more than fifty
percent (50%) of whose stock or equity interests of any class or classes having
by the terms thereof ordinary voting power to elect a majority of the directors
of such corporation (irrespective of whether or not at the time stock of any
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned directly or
indirectly by the Company and/or any one or more of its Subsidiaries, and (ii)
any partnership, association, joint venture, limited liability company or other
entity in which the Company and/or one or more of its Subsidiaries has more than
a fifty percent (50%) equity interest at the time.

"VTI" shall have the meaning assigned to that term in the Preamble hereof.

"VTI GUARANTY" shall have the meaning assigned to that term in Section
4.02(g).

"VTI SELLERS" mean Steven Nemzer and Marc Porter Zasada, and their
respective successors and assigns.

"WARRANT" or "WARRANTS" shall have the meaning assigned to such terms in
Section 3.01.

"WARRANT SHARES" shall have the meaning assigned to that term in Section
3.01.

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<PAGE>

ARTICLE II

PURCHASE, SALE AND TERMS OF NOTES; PAYMENTS

2.01. THE NOTE. The Company has authorized the issuance and sale to the
Purchaser of the Company's First Amended and Restated 12% Senior Subordinated
Note, due February 26, 2006, in the original aggregate principal amount of Six
Million Dollars ($6,000,000.00). The First Amended and Restated 12% Senior
Subordinated Note, which amends and restates the Bridge Note and increases the
amount thereof by $2,000,000.00, shall be substantially in the form set forth as
EXHIBIT 2.01 attached hereto and is herein referred to individually as a "Note,"
and, together with any note or notes delivered in substitution, replacement or
exchange therefor, collectively as the "Notes." The Notes shall (a) be payable
on February 26, 2006 (subject to the redemption thereof required pursuant to
Section 2.06) and (b) bear interest (based on a 360-day year counting actual
days elapsed) on the unpaid principal amount thereof until paid in full at the
rate of twelve percent (12%) per annum, which interest shall be payable
quarterly in arrears on the last Business Day of March, June, September and
December in each year commencing on March 31, 1999.

2.02. PURCHASE AND SALE OF THE NOTE AND THE WARRANT. The Company agrees to
issue and sell to the Purchaser, and, subject to and in reliance upon the
representations, warranties, terms and conditions of this Agreement, the
Purchaser agrees to purchase, the Note and the Warrant. Such purchase and sale
shall take place at a closing (the "Closing") to be held at the offices of
Sherburne, Powers, Holland & Knight, at 10:00 a.m. local time, on the date on
which this Agreement is executed and delivered (the "Closing Date"). At the
Closing, the Company will issue the Note to the Purchaser, dated the Closing
Date and payable to the order of Purchaser, and the Company will issue to the
Purchaser the Warrant, against (i) receipt of funds by wire transfer to an
account or accounts designated by the Company prior to the Closing in the amount
of Two Million Dollars ($2,000,000.00), and (ii) delivery of the Bridge Note to
the Company, provided, however, all accrued but unpaid interest on the Bridge
Note shall be paid in full by the Company to the Purchaser at the Closing. The
parties hereto hereby acknowledge and agree that the purchase and sale of the
Note and the Warrant hereunder and is part of an overall financing provided by
CRL to the Consolidated Group, which financing also includes, among other
things, the issuance by LTHBV of the LTHBV Note, the delivery of the Foreign
Guaranties and the execution and delivery of the LTHBV Note Purchase Agreement.

2.03. ISSUE PRICE; ORIGINAL ISSUE DISCOUNT. Having considered all facts
relevant to a determination of the value of the Note and the Warrants being
acquired by the Purchaser, the Company and the Purchaser have concluded and do
hereby agree that, for purposes of Section 1273 of the Internal Revenue Code of
1986, as amended (the "Code"), and the Regulations thereunder, and for purposes
of determining any original issue discount with respect to the Notes thereunder,
the aggregate "issue price" for the Notes is $3,984,182. The Company and the
Purchaser agree not to take a position on any income tax return, before any
governmental agency charged with the collection of any income tax or in any
judicial proceeding that is inconsistent with the terms of this Section 2.03.

2.04. USE OF PROCEEDS. The Company agrees to use the full proceeds from the
sale of the Note and the Warrants for the purposes and as set forth on EXHIBIT
2.04 attached hereto.

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<PAGE>

2.05. PAYMENTS AND ENDORSEMENTS. Payments of principal, interest and
premium, if any, on the Note shall be made without setoff or counterclaim
directly by check duly mailed or delivered to the Purchaser at its address
referred to in Section 9.03 hereof, without any presentment or notation of
payment, except that prior to any transfer of any Note, the holder thereof shall
endorse on such Note a record of the date to which interest has been paid and
all payments made on account of principal of such Note. All payments and
prepayments of principal of and interest on the Notes shall be applied (to the
extent thereof) to all of the Notes PRO RATA based on the principal amount
outstanding and held by each holder thereof.

2.06. REDEMPTIONS

(a) REQUIRED PERIODIC REDEMPTION. On the last Business Day of March,
June, September and December of each year beginning on March 31, 2003 through
and including December 31, 2005, the Company agrees to redeem, without premium
or penalty, Five Hundred Thousand Dollars ($500,000.00) in aggregate principal
amount of the Notes, or such lesser amount as may then be outstanding, together
with all accrued and unpaid interest and penalties, if any, then due on the
amount so redeemed. On the stated or accelerated maturity of the Notes, the
Company agrees to pay the principal amounts of the Notes then outstanding
together with all accrued and unpaid interest and penalties, if any, then due
thereon. Except as set forth in Section 2.06(b), no optional redemption of less
than all of the Notes shall affect the obligation of the Company to make the
redemptions required by this subsection.

(b) REQUIRED REDEMPTIONS IN THE EVENT OF A QUALIFYING LIQUIDITY EVENT.
In the event and upon the closing of a Qualifying Liquidity Event, the Company
agrees to redeem, without premium, all of the outstanding Notes, together with
all accrued and unpaid interest and penalties, if any, then due thereon.

(c) OPTIONAL REDEMPTIONS. In addition to the redemptions of the Notes
required under Sections 2.06(a) and (b), the Company may, at any time and from
time to time, redeem, without premium or penalty, the Notes, in whole or in part
(in integral multiples of $1,000), together with interest due on the amount so
redeemed through the date of redemption. Partial redemptions made as provided in
this Section 2.06(c) shall, to the extent thereof, be applied first to reduce
the principal due at maturity of the Notes and next to reduce the payments
required by Section 2.06(a) in inverse order of maturity thereof.

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<PAGE>

principal balance of the Notes and any matured but unpaid interest from time to
time due thereon shall bear interest, payable on demand, at the rate of fifteen
percent (15%) per annum, or such lower rate as then may be the maximum rate
permitted by applicable law; PROVIDED, HOWEVER, that upon the cessation or cure
of such Event of Default, if no other Event of Default is then continuing, the
Notes shall again bear interest at the rates set forth in Section 2.01.

2.08. MAXIMUM LEGAL RATE OF INTEREST. Nothing in this Agreement or in the
Notes shall require the Company to pay interest at a rate in excess of the
maximum rate permitted by applicable law.

2.09. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made shall
be due on a day which is not a Business Day, such payment may be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest due.

2.10. TRANSFER AND EXCHANGE OF NOTES. The holder of any Note or Notes may,
prior to maturity or prepayment thereof, surrender such Note or Notes at the
principal office of the Company for transfer or exchange to any Affiliate of
such holder. Any holder desiring to transfer or exchange any Note shall first
notify the Company in writing at least five (5) days in advance of such transfer
or exchange. Within a reasonable time after such notice to the Company from a
holder of its intention to make such exchange and without expense (other than
transfer taxes, if any) to such holder, the Company shall issue in exchange
therefor another Note or Notes, in such denominations as requested by the
holder, for the same aggregate principal amount, as of the date of such
issuance, as the unpaid principal amount of the Note or Notes so surrendered and
having the same maturity and rate of interest, containing the same provisions
and subject to the same terms and conditions as the Note or Notes so
surrendered. Each new Note shall be made payable to such Affiliate or Affiliates
of the holder, Person or Persons, or assigns, as the holder of such surrendered
Note or Notes may designate (subject to Section 9.05), and such transfer or
exchange shall be made in such a manner that no gain or loss of principal or
interest shall result therefrom.

2.11. REPLACEMENT OF NOTES. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Note, the Company will issue a new Note, of like tenor and amount and
dated the date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated Note; PROVIDED, HOWEVER, if any Note of which a
Purchaser, its nominee, or any of its partners is the holder is lost, stolen or
destroyed, the affidavit of an authorized partner or officer of the holder
setting forth the circumstances with respect to such loss, theft or destruction
shall be accepted as satisfactory evidence thereof, and no indemnification bond
or other security shall be required as a condition to the execution and delivery
by the Company of a new Note in replacement of such lost, stolen or destroyed
Note other than the holder's written agreement to indemnify the Company.

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<PAGE>

ARTICLE III

PURCHASE, SALE AND TERMS OF WARRANTS

3.01. THE WARRANTS. The Company has authorized the issuance and sale to the
Purchaser of a Common Stock Purchase Warrant (the "Warrant") for the purchase
(subject to adjustment as provided therein) of 1,916,574 shares of Common Stock
(the "Warrant Shares"). The Warrant shall be substantially in the form set forth
as EXHIBIT 3.01. The terms Warrant and Warrants shall also include any warrants
delivered in exchange or replacement therefor. The Warrants shall be exercisable
at a purchase price, subject to adjustment, equal to $.01 per Warrant Share.

3.02. PURCHASE AND SALE OF WARRANTS. The Company agrees to issue and sell
to the Purchaser, and, subject to and in reliance upon the representations,
warranties, terms and conditions of this Agreement, the Purchaser agrees to
purchase, Warrants to purchase the Warrant Shares. Such purchase and sale shall
take place at the Closing, and at the Closing the Company will initially issue
to the Purchaser one Warrant to purchase (subject to adjustment as provided
therein) the number of Warrant Shares set forth in Section 3.01 above.

3.03. RIGHT TO PURCHASE NEW SUBORDINATED DEBT. Prior to issuing any
Subordinated Debt of the Company or any of its Subsidiaries to any Person after
the date hereof (other than any such Subordinated Debt issued to a seller in
connection with an acquisition by any member of the Consolidated Group involving
such seller), the Company will first give, or cause such Subsidiary to give, to
each holder of any Note or Notes the right to purchase, on the same terms and
subject to the same conditions, the same proportion of the Subordinated Debt
proposed to be sold by the Company or such Subsidiary as the original principal
amount of the Notes held by each such holder bears to the aggregate principal
amount of Subordinated Debt outstanding at that time. Any such right of purchase
shall be exercisable for a period of thirty (30) days after all of the holders
have received written notice of a proposed issuance of Subordinated Debt (and
any such notice by the Company or any Subsidiary shall be given not less than
thirty (30) nor more than ninety (90) days prior to any such issuance). The
Company shall be entitled to sell to any Person any Subordinated Debt not
purchased by the holders of the Notes pursuant to this Section 3.08: (i) during
the period ending six (6) months after the date of the Company's or its
Subsidiary's notice to such holders and (ii) at not less than the same price and
upon terms not materially less favorable to the Company or its Subsidiary than
those offered to the holders of the Notes, but may not otherwise sell such
Subordinated Debt without renewed compliance with this Section 3.03.

ARTICLE IV

CONDITIONS TO PURCHASER'S OBLIGATION

The obligation of the Purchaser to purchase and pay for the Note and
Warrant at the Closing is subject to the following conditions, all or any of
which may be waived in writing by the Purchaser:

4.01. REPRESENTATIONS AND WARRANTIES. Each of the representations of the
Company set forth in Article VI hereof shall be true and correct in all respects
at the time of, and immediately after giving effect to, the sale of the Note and
the Warrant.

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4.02. DOCUMENTATION AT CLOSING. The Purchaser shall have received prior to
or at the Closing all of the following, each in form and substance satisfactory
to the Purchaser and its counsel:

(a) The Note duly executed and delivered by the Company.

(b) The Warrant duly executed and delivered by the Company.

(d) An executed amended and restated guaranty from JLSI in
substantially the form attached hereto as EXHIBIT 4.02(d) (the "JLSI Guaranty").

(e) An executed amended and restated guaranty from LTCI in
substantially the form attached hereto as EXHIBIT 4.02(e) (the "LTCI Guaranty").

(f) An executed amended and restated guaranty from LTI in
substantially the form attached hereto as EXHIBIT 4.02(f) (the "LTI Guaranty").

(g) An executed amended and restated guaranty from VTI in
substantially the form attached hereto as EXHIBIT 4.02(g) (the "VTI Guaranty").

(h) A certified copy of all charter documents of the Company and each
of the Guarantors; a certified copy of the resolutions of the Board of Directors
and, to the extent required, the stockholders of the Company and each of the
Guarantors evidencing approval, as applicable, of this Agreement, the Operative
Documents and all other matters contemplated hereby and thereby, including,
without limitation, the consent of the stockholders of the Company to the
transactions contemplated hereby pursuant to the terms of the Restated
Stockholders' Agreement; a certified copy of the By-laws of the Company and each
of the Guarantors and certified copies of all documents evidencing other
necessary corporate or other action and governmental approvals, if any, with
respect to this Agreement, the Operative Documents and all other matters
contemplated hereby or thereby.

(i) A favorable opinion of Testa, Hurwitz & Thibeault, LLP, counsel
for the Company and Guarantors, in substantially the form attached hereto as
EXHIBIT 4.02(i).

(j) Certificates of the Secretaries or Assistant Secretaries of the
Company and each of the Guarantors which shall certify the names of the officers
of the Company authorized to sign this Agreement, the Operative Documents and
any other documents or certificates to be delivered pursuant hereto or thereto
by the Company and each of the Guarantors or any of its officers, together with
the true signatures of such officers. The Purchaser may conclusively rely on
such certificate until it shall receive a further certificate of the Secretaries
or Assistant Secretaries of the Company and each of the Guarantors canceling or
amending the prior certificate and submitting the signatures of the officers
named in such further certificate.

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(k) A certificate from a duly authorized officer of the Company
stating that the representations and warranties contained in Article VI hereof
and otherwise made by the Company in writing in connection with the transactions
contemplated hereby are true and correct and that no condition or event has
occurred or is continuing or will result from the execution and delivery of this
Agreement or the Operative Documents which constitutes an Event of Default or
would constitute an Event of Default but for the requirement that notice be
given or time elapse or both.

(l) Intentionally omitted.

(m) Payment for the costs, expenses, taxes and filing fees identified
in Section 9.04 as to which the Purchaser gives the Company notice prior to the
Closing.

(n) A certificate from a duly authorized officer of the Company
stating that all the conditions set forth in this Article IV have been
satisfied, other than those, if any, waived by the Purchaser in writing.

(o) An executed Restated Stockholders' Agreement, which shall be
substantially in the form of EXHIBIT 4.02(o) attached hereto, together with
executed waivers of the rights of first offer referenced in Section 6.02.

(p) An executed Restated Registration Rights Agreement substantially
in the form of Exhibit 4.02(p) attached hereto.

(q) Such other documents referenced in any Exhibit hereto or relating
to the transactions contemplated by this Agreement as the Purchaser or its
counsel may reasonably request.

4.03. CLOSING OF LTHBV NOTE PURCHASE AGREEMENT. All documents in connection
with the LTHBV Financing, including, without limitation the LTHBV Note Purchase
Agreement, the LTHBV Note, the Foreign Guaranties and such other documents
referenced in any exhibit thereto or otherwise relating to the transactions
contemplated by the LTHBV Note Purchase Agreement shall have been executed and
delivered to the Purchaser.

4.04. NO DEFAULT. At the time of and immediately after giving effect to the
sale of the Notes there shall exist no Event of Default and no condition, event
or act that, with the giving of notice or lapse of time, or both, would
constitute such an Event of Default.

4.05. WAIVERS AND CONSENTS. The Company shall have obtained any waivers or
consents that may be required under the Loan Agreement and any other agreement
to which the Company or any of its Subsidiaries is a party in order to enter
into this Agreement and the Operative Documents and to consummate the
transactions contemplated hereby and thereby and such waiver or consents shall
have been delivered to the Purchaser.

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

5.01. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants as follows:

(a) The Purchaser has duly authorized, executed and delivered this
Agreement and such of the Operative Documents as require execution by the
Purchaser.

(b) It is the Purchaser's present intention to acquire the Securities
for its own account.

(c) The Securities are being and will be acquired for the purpose of
investment and not with a view to distribution or resale thereof; subject,
nevertheless, to the condition that, except as otherwise provided herein, the
disposition of the property of the Purchaser shall at all times be within its
control.

(d) The Purchaser acknowledges that it has reviewed and discussed the
Company's business, affairs and current prospects with such officers of the
Company and others as it has deemed appropriate or desirable in connection with
the transactions contemplated by this Agreement. The Purchaser further
acknowledges that it has requested, received and reviewed such information,
undertaken such investigation and made such further inquiries of officers of the
Company and others as it has deemed appropriate or desirable in connection with
such transactions, PROVIDED, HOWEVER, no investigation made heretofore or
hereafter by or on behalf of the Purchaser shall have any effect whatsoever on
the representations and warranties of the Company hereunder, each of which will
survive any such investigation.

(e) The Purchaser understands that it must bear the economic risk of
its investment in the Securities for an indefinite period of time because the
Securities are not, and will not be, registered under the Securities Act or any
applicable state securities laws, except as may be provided in this Agreement,
and may not be resold unless subsequently registered under the Securities Act
and such other laws or unless an exemption from such registration is available.
The Purchaser also understands that it is not contemplated that any registration
will be made under the Securities Act or any state securities laws, or that the
Company will take steps which will make the provisions of Rule 144 under the
Securities Act available to permit resale of the Securities.

(f) The Purchaser represents that it has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of its investment in the Securities. The Purchaser further represents
that it is an "accredited investor" as such term is defined in Rule 501 of
Regulation D of the Commission under the Securities Act with respect to the
purchase of the Notes.

(g) No Person has or will have, as a result of the transactions
contemplated by this Agreement, any rights, interest or valid claim against or
upon the Company or any of its Subsidiaries for

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any commission, fee or other compensation as a finder or broker because of any
act or omission by such Purchaser or any agent of such Purchaser.

(h) The Purchaser hereby acknowledges that the Note, the Warrant and
each certificate representing the Warrant Shares and any other securities issued
in respect of such shares upon any stock split, stock dividend,
recapitalization, merger or similar event (unless no longer required in the
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to the Company, it being agreed that Holland & Knight LLP shall be satisfactory)
shall bear a legend substantially in the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT
BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES
LAWS OR APPLICABLE EXEMPTIONS THEREFROM.

The acquisition by the Purchaser of the Warrant Shares shall constitute a
confirmation by it of the foregoing representations.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Purchaser as follows:

6.01. ORGANIZATION AND STANDING OF THE COMPANY AND SUBSIDIARIES; OWNERSHIP.
The Company and each of its Subsidiaries is a corporation duly organized (to the
extent applicable), duly incorporated (to the extent applicable), validly
existing and in good standing (to the extent applicable) under the laws of the
jurisdiction of its organization or incorporation and has all requisite
corporate power and authority for the ownership and operation of its properties
and for the carrying on of its business as now conducted and as now proposed to
be conducted. The Company and each of its Subsidiaries is duly licensed or
qualified and in good standing as a foreign corporation authorized to do
business in all jurisdictions wherein the character of the property owned or
leased, or the nature of the activities conducted by it makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified, either individually or in the aggregate, would not have a material
adverse effect on the business, assets, liabilities, financial condition, or on
the results of operations of the Company and its Subsidiaries taken as a whole
(a "Material Adverse Effect"). Except as set forth on EXHIBIT 6.01 attached
hereto, neither the Company nor any of its Subsidiaries owns, directly or
indirectly, any capital stock or other equity or ownership or proprietary
interest in any corporation, partnership, association, trust, joint venture or
other entity.

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executed in connection herewith and therewith the valid and enforceable
obligations they purport to be. The Company and each of the Guarantors has duly
executed and delivered, as applicable, this Agreement, each of the Operative
Documents and each other agreement and instrument executed by it in connection
herewith and therewith and each is a legal, valid and binding obligation of the
Company and the Guarantors as applicable, enforceable against the Company and
the Guarantors as applicable, in accordance with its terms, except as
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally and by general principles of equity. The Company has authorized
the issuance and sale to the Purchaser of the Warrant for the purchase (subject
to adjustment as provided therein) of 2,015,818 shares of Common Stock.
Sufficient shares of authorized but unissued Common Stock of the Company have
been reserved by appropriate corporate action in connection with the prospective
exercise of the Warrants. While certain stockholders of the Company are entitled
to rights of first offer pursuant to the Restated Stockholders' Agreement in
connection with the issuance of the Warrants hereunder and in connection with
the issuance of the Warrant Shares upon the exercise of the Warrants, such
stockholders have waived such rights with respect to the issuance of the
Warrants and the issuance of the Warrant Shares upon the exercise of the
Warrants. Accordingly, neither the issuance of the Notes or Warrants, nor the
issuance of the Warrant Shares upon the exercise of the Warrants, is subject to
any preemptive or other similar statutory or contractual rights.

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"Applicable Laws"). Neither the execution and delivery of this Agreement and the
Operative Documents, nor the consummation of any transactions contemplated
hereby or thereby, has constituted or resulted in, or will constitute or result
in, a violation of any provision of any Applicable Law.

6.08. FINANCIAL INFORMATION. (a) Attached hereto as EXHIBIT 6.08(a) are
true, correct and complete copies of (i) the audited balance sheet of the
Company and its Subsidiaries as of December 31, 1997 and the related statements
of income and retained earnings and of cash flows for the fiscal year then
ended, certified by PricewaterhouseCoopers, the Company's independent public
accountants (including the notes thereto) and (ii) the unaudited balance sheet
of the Company and its Subsidiaries as of December 31, 1998, and the related
statements of income and retained earnings for the 12-month period then ended
((i) and (ii) collectively the "Financial Statements"). All Financial Statements
have been prepared in accordance with GAAP, subject to normal year-end audit
adjustments, and consistent with prudent business management practices, are
complete in all material respects and fairly present the financial position of
the Company and its Subsidiaries as of the respective dates thereof and results
of operations and changes in financial position of the Company and its
Subsidiaries for each of the periods then ended.

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(b) Since December 31, 1998, there has been no material adverse change
in the business, assets, liabilities, condition (financial or other), or in the
results of operations or prospects of the Company and its Subsidiaries taken as
a whole.

(c) Except as disclosed on EXHIBIT 6.08(c) attached hereto, neither
the Company nor any of its Subsidiaries has any liability, contingent or
otherwise, not disclosed in the Financial Statements or in the notes thereto
that could, together with all such other liabilities, have a Material Adverse
Effect, nor does the Company have any reasonable grounds to know of any such
liability.

(d) A schedule of Indebtedness of the Company and its Subsidiaries as
of December 31, 1998 (including lease obligations required to be capitalized in
accordance with GAAP) is attached hereto as EXHIBIT 6.08(d).

6.10. ERISA

(a) The Company and each of the Guarantors is in compliance in all
material respects with the currently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the applicable
provisions of Section 401(a) of the Code. No employee benefit plan established
or maintained, or to which contributions have been made, by the Company or any
of its Subsidiaries, which is subject to part 3 of Subtitle B of Title I of
ERISA, had an accumulated funding deficiency (as such term is defined in Section
302 of ERISA) as of the last day of the most recent fiscal year of such plan
ended prior to the date hereof, and no material liability to the Pension Benefit
Guaranty Corporation has been incurred with respect to any such plan by the
Company or any of its Subsidiaries.

6.11. TRANSACTIONS WITH AFFILIATES. Except as set forth on EXHIBIT 6.11
attached hereto, there are no loans, leases, royalty agreements or other
continuing transactions between the Company or any of its Subsidiaries, on the
one hand, and any Person owning, or who did own at any time within the two-year
period preceding the date of this Agreement, five percent (5%) or more of any
class of capital stock of the Company or other entity controlled by such
stockholder or a member of such stockholder's family, on the other hand.

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<PAGE>

6.12. ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER PERSONS. Except as
disclosed on EXHIBIT 6.08(c) hereto, neither the Company nor any of its
Subsidiaries has assumed, guaranteed, endorsed or otherwise become directly or
contingently liable on (including, without limitation, liability by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to or otherwise invest in the debtor or otherwise to assure the
creditor against loss) any Indebtedness of any other Person.

6.13. LOANS TO OTHER PERSONS. Except as set forth on EXHIBIT 6.13 attached
hereto, neither the Company nor any of its Subsidiaries has made any loan or
advance to any Person which is outstanding on the date of this Agreement, nor is
the Company or any of its Subsidiaries obligated or committed to make any such
loan or advance.

6.14. SECURITIES ACT. Neither the Company nor anyone acting on its behalf
has offered any of the Notes, Warrants or similar securities, or solicited any
offers to purchase or made any attempt by preliminary conversation or
negotiations to dispose of the Notes, Warrants or similar securities, within the
meaning of all applicable federal and state securities laws, to any Person other
than (i) the Purchaser, and (ii) no more than twenty-five (25) other Persons,
each of which is an "accredited investor" (as such term is defined in Rule 501
of Regulation D promulgated pursuant to the Securities Act), and no Person other
than the Purchaser will purchase any Notes, Warrants or similar securities.
Neither the Company nor anyone acting on its behalf has offered or will offer to
sell the Notes or similar securities to, or solicit offers with respect thereto
from, or enter into any preliminary conversations or negotiations relating
thereto with, any Person, so as to bring the issuance and sale of the Note,
Warrants under the registration provisions of the Securities Act.

6.15. DISCLOSURE. Neither this Agreement, the Financial Statements, the
Operative Documents, nor any other agreement, document, certificate or written
statement furnished to the Purchaser or the Purchaser's counsel by or on behalf
of the Company or any of its Subsidiaries in connection with the transactions
contemplated hereby or thereby contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made. There is no fact within the knowledge of the Company or
any of its executive officers which has not been disclosed herein or otherwise
by them to the Purchaser and which has a Material Adverse Effect, or in the
future in their opinion could reasonably be expected to have a Material Adverse
Effect. Without limiting the foregoing, the Company has no knowledge of any
specific existing, pending or planned patent, invention or device which would
have a Material Adverse Effect.

6.16. NO BROKERS OR FINDERS. As of the Closing, no Person had, has or will
have, as a result of the transactions contemplated by this Agreement, any right,
interest or valid claim against or upon the Purchaser for any commission, fee or
other compensation as a finder or broker because of any act or omission by the
Company, any of its Subsidiaries or any or its or their agents.

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<PAGE>

the future may (so far as the Company can reasonably foresee) have a Material
Adverse Effect. To the best knowledge of the Company, no officer or key employee
of the Company or any of its Subsidiaries has any present intention of
terminating his employment with the Company or any of its Subsidiaries and
neither the Company nor any of its Subsidiaries has any present intention of
terminating any such employment.

6.18. CAPITALIZATION OF THE COMPANY; STATUS OF CAPITAL STOCK. The Company
has a total authorized capitalization consisting of 25,950,867 shares of Common
Stock. A complete list of the outstanding capital stock of the Company and the
names in which such capital stock of the Company is registered is set forth on
EXHIBIT 6.18 attached hereto. All the outstanding shares of capital stock of the
Company have been duly authorized, are validly issued and are fully paid and
nonassessable. Except as otherwise set forth on EXHIBIT 6.18 and except for the
Warrants, there are no options, warrants or rights to purchase shares of capital
stock or other securities of the Company authorized, issued or outstanding, nor
is the Company obligated in any other manner to issue shares of its capital
stock or other securities. The shares of Common Stock issuable upon exercise of
the Warrants, when issued in accordance with the terms of the Warrants, will be
duly authorized, validly issued and fully paid and nonassessable. Except as
otherwise set forth on EXHIBIT 6.18, there are no restrictions on the transfer
of shares of capital stock of the Company other than those imposed by relevant
state and federal securities laws. Except as set forth in this Agreement or as
otherwise set forth on EXHIBIT 6.18, no holder of any security of the Company is
entitled to preemptive or similar statutory or contractual rights, either
arising pursuant to any agreement or instrument to which the Company is a party,
or which are otherwise binding upon the Company. Neither the issuance of the
Notes or Warrants, nor the issuance of shares of Common Stock upon the exercise
of the Warrants, will trigger any preemptive or similar right on the part of any
party. The offer and sale of all shares of capital stock and other securities of
the Company issued before the Closing complied with or were exempt from all
federal and state securities laws.

6.19. CAPITAL STOCK OF SUBSIDIARIES. Except as set forth on EXHIBIT 6.19
attached hereto, the Company owns all of the outstanding capital stock of each
of the Subsidiaries, beneficially and of record, free and clear of all liens,
encumbrances, restrictions and claims of every kind. All the outstanding shares
of capital stock of each of the Subsidiaries have been duly authorized, are
validly issued and are fully paid and nonassessable. There are no options,
warrants or rights to purchase shares of capital stock or other securities of
any of the Subsidiaries authorized, issued or outstanding, nor is any Subsidiary
obligated in any other manner to issue shares of its capital stock or other
securities.

6.20. LABOR RELATIONS. To the best knowledge of the Company, no labor union
or any representative thereof has made any attempt to organize or represent
employees of the Company or any of its Subsidiaries. There are no unfair labor
practice charges, pending trials with respect to unfair labor practice charges,
pending material grievance proceedings or adverse decisions of a Trial Examiner
of the National Labor Relations Board or similar board against the Company or
any of its Subsidiaries. Furthermore, to the best knowledge of the Company,
relations with employees of the Company and its Subsidiaries are good and there
is no reason to believe that any material labor difficulties will arise in the
foreseeable future.

6.21. INSURANCE. Except as set forth on EXHIBIT 6.21 attached hereto, the
Company and each of its Subsidiaries has insurance covering its properties and
business adequate and customary for the type and scope of its properties and
business.

<PAGE>

6.23. HAZARDOUS AND TOXIC MATERIALS. Except as set forth in EXHIBIT 6.23
attached hereto, (a) to the best knowledge of the Company and each of its
Subsidiaries, no hazardous or toxic waste or substance or any other contaminant
or pollutant including without limitation any oil or pesticide ("Hazardous
Materials") have been generated, used, treated or stored on, or transported to
or from, any of the property owned, leased or operated by the Company or any of
its Subsidiaries except in compliance with all applicable Environmental Laws,
(b) to the best knowledge of the Company and its Subsidiaries, there have been
no spills, discharges, releases or cleanups of any Hazardous Materials
("Hazardous Discharges") on any of the property owned, leased or operated by the
Company or any of its Subsidiaries, except such Hazardous Discharges which do
not violate any federal, state or local laws, ordinances, rules, regulations, or
policies existing or enacted relating to the environment, health and safety, any
Hazardous Discharges or to industrial hygiene or environmental conditions
(collectively "Environmental Laws"), (c) the Company and its Subsidiaries are in
compliance in all material respects with all applicable Environmental Laws and
the requirements of any permits issued under such Environmental Laws with
respect to any property owned, leased or operated by the Company or any of its
Subsidiaries, and (d) there are no pending or, to the best knowledge of the
Company and its Subsidiaries, threatened claims relating to the foregoing
against the Company, any of its Subsidiaries or the property owned, leased or
operated by the Company or its Subsidiaries.

6.24. REGISTRATION RIGHTS. Other than pursuant to the terms of the Restated
Registration Rights Agreement, no Person has demand or other rights to cause the
Company to file any registration statement under the Securities Act relating to
any securities of the Company or any right to participate in any such
registration statement.

6.25. OTHER AGREEMENTS. Except as explicitly disclosed and described in the
Financial Statements or as set forth on EXHIBIT 6.25 attached hereto, neither
the Company nor any of its Subsidiaries is a party to any written or oral
contract or instrument or other corporate restriction the due performance of
which individually or in the aggregate could have a Material Adverse Effect.
Except as specifically contemplated by this Agreement or as set forth on said
EXHIBIT 6.25, neither the Company nor any of its Subsidiaries is a party to any
written or oral:

(a) contract for the future purchase of fixed assets or for the future
purchase of materials, supplies or equipment in excess of its normal operating
requirements;

(b) agreement or indenture relating to the borrowing of money or to
the mortgaging or pledging of, or otherwise placing a lien or security interest
on, any asset of the Company or any of its Subsidiaries;

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<PAGE>

(d) voting trust, stockholders agreement, pledge agreement or buy-sell
agreement relating to any securities of the Company which shall be in effect
after the Closing except to the extent contemplated hereunder;

(e) agreement or obligation (contingent or otherwise) to issue or sell
or to repurchase or otherwise acquire or retire any share of its capital stock
or any of its other equity securities, other than the repurchase of shares of
Common Stock held by any employee or consultant of the Company at cost upon the
termination of such employee's or consultant's services to the Company; or

(f) other contract or group of related contracts with the same party
involving more than $2,000,000 (or its equivalent in any other currency) and
continuing over a period of more than six (6) months from the date or dates
thereof (including renewals or extensions optional with another party), which
contract or group of contracts is not terminable by the Company or any of its
Subsidiaries without penalty upon notice of thirty (30) days, or less, but
excluding any contract or group of contracts with a vendor to, or customer of,
the Company or any of its Subsidiaries for the sale, lease or rental of their
respective products or services if such contract or group of contracts was
entered into in the ordinary course of business.

6.27. NO VIOLATIONS. Neither the execution and delivery of this Agreement
and the Operative Documents, nor the consummation of any of the transactions
contemplated hereby or thereby, by the Company, will (a) violate, conflict with,
or result in a breach or default under any provision of the Certificate of
Incorporation or Bylaws of the Company, (b) violate any provision of any
Applicable Laws, or (c) result in a violation or breach by the Company of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default by the Company (or give rise to any right of termination,
cancellation, payment or acceleration) under, or result in the creation of any
Lien upon any of the properties or assets of the Company under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease, franchise agreement or other instrument

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or obligation to which the Company is a party, or by which it or any of its
properties or assets may be bound.

ARTICLE VII

COVENANTS OF THE COMPANY

(a) PUNCTUAL PAYMENT. Pay the principal of, premium, if any, and
interest on each of the Notes at the times and place and in the manner provided
in the Notes and herein.

(c) MAINTENANCE OF INSURANCE. Maintain, and cause each Subsidiary to
maintain, insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company or such Subsidiary operates.

(d) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain, and
cause each Subsidiary to preserve and maintain, its corporate existence, rights,
franchises and privileges in the jurisdiction of its incorporation, and qualify
and remain qualified, and cause each Subsidiary to qualify and remain qualified,
as a foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the ownership
of its properties, except where the failure to remain so qualified would not,
either individually or in the aggregate, have a Material Adverse Effect;
provided, however, that nothing herein contained shall prevent any merger,
consolidation or transfer of assets permitted by subsection 7.02(e). Preserve
and maintain, and cause each Subsidiary to preserve and maintain, all licenses
and other rights to use patents, processes, licenses, trademarks, trade names,
inventions, intellectual property rights or copyrights owned or possessed by it
and necessary to

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<PAGE>

the conduct of its business, except such licenses, other rights and copyrights
which are part of a transfer of assets permitted by Section 7.02(e).

(e) COMPLIANCE WITH LAWS. Comply, and cause each Subsidiary to comply,
with all applicable laws, rules, regulations and orders of any governmental
authority, noncompliance with which could have a Material Adverse Effect.

(f) INSPECTION RIGHTS. At any reasonable time and from time to time,
but not more frequently than twice in any 12-month period unless an Event of
Default shall have occurred and is continuing, permit the Purchaser or any of
its agents or representatives, to examine and make copies of and extracts from
the records and books of account of, and visit and inspect the properties of,
the Company and any Subsidiary, and to discuss the affairs, finances and
accounts of the Company and any Subsidiary with any of their officers or
directors and independent accountants. All reasonable out-of-pocket expenses of
the Purchaser (or its agents or representatives), the Company or any Subsidiary
incurred in connection with such inspection rights shall be borne by the
Company, such amount not to exceed $10,000 per annum.

(g) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep, and cause each
Subsidiary to keep, adequate records and books of account, in which complete
entries will be made in accordance with GAAP, but subject to normal year-end
audit adjustments, reflecting all financial transactions of the Company and each
Subsidiary, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made; PROVIDED, HOWEVER, that
with respect to Subsidiaries which are not incorporated or organized under the
laws of any State of the United States or the District of Columbia
(collectively, the "Foreign Subsidiaries"), the Company shall cause each such
Subsidiary to make entries in its records and books of account in accordance
with the generally accepted accounting principles recognized in the country in
which such Subsidiary was organized or incorporated.

(h) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and cause
each Subsidiary to maintain and preserve, all of its properties, necessary or
useful in the proper conduct of its business, in good repair, working order and
condition, ordinary wear and tear excepted, except such properties which are
part of a transfer of assets permitted by Section 7.02(e).

(i) COMPLIANCE WITH ERISA. Comply, and cause each Guarantor to comply,
with all minimum funding requirements applicable to any pension or other
employee benefit plans which are subject to ERISA or to the Code, and comply,
and cause each Guarantor to comply, in all other material respects with the
provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. Neither the Company nor any United States
Subsidiary will permit any event or condition to exist which could permit any
such plan to be terminated under circumstances which would cause the lien
provided for in Section 4068 of ERISA to attach to the assets of the Company or
any Subsidiary.

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<PAGE>

Purchaser and its designee the notice of the time and place of any such meeting
in the same manner and at the same time as notice is sent to the directors;
PROVIDED, HOWEVER, that the Purchaser and its designee shall always receive at
least five (5) Business Days prior notice of any meeting which is not an
emergency meeting and at least three (3) Business Days' notice of any emergency
meeting. The Company shall also provide to the Purchaser copies of all notices,
reports, minutes, consents and other documents at the time and in the manner as
they are provided to the board of directors. The Purchaser shall have the right,
upon request and with reasonable notice, to consult with and advise the Company
regarding the Company's business. The Company shall reimburse each the Purchaser
or its designee for all reasonable costs incurred by the Purchaser or its
designee in connection with traveling to and from and attending meetings of the
Company's board of directors. The Purchaser and its designee hereby agree to
maintain the confidentiality of all confidential information of the Company to
which it obtains access pursuant to Section 7.01(f), this Section 7.01(j) or
Section 7.03(g); provided, however, that nothing herein shall limit the
disclosure of any such information (i) to the extent required by statute, rule,
regulation or judicial process, (ii) to counsel to, or auditors, accountants or
consultants for, the Purchaser, (iii) in connection with any litigation to which
the Purchaser is a party, or (iv) to any assignee or prospective assignee of any
of the Notes.

(k) BOARD OF DIRECTORS AND COMMITTEES. The board of directors of the
Company shall consist of no more than six (6) members, one (1) member of which
may be nominated by CRL in its sole discretion and as provided for in the
Restated Stockholders' Agreement. The Company shall at all times maintain a
Compensation Committee and an Audit Committee of its board of directors. The
Company shall reimburse CRL for all reasonable costs incurred by its appointees
in connection with traveling to and from and attending meetings of the board of
directors and committees of the board of directors of the Company, in addition
to any directors fees regularly paid to all non-employee members of the
Company's board of directors.

(l) NOTICE OF DEFAULT OF SENIOR DEBT. The Company shall provide the
holders of the Notes with written notice promptly upon an event of default under
the Senior Debt or upon the occurrence of an event which, with the giving of
notice or passage of time or both, would result in an event of default under the
Senior Debt.

(m) KEY MAN LIFE INSURANCE. The Company will maintain a "key man" life
insurance policy in the amount of Two Million Dollars ($2,000,000.00) on Rory J.
Cowan. Proceeds of such policy will be payable to the Company.

(n) QUICK RATIO. Commencing with the fiscal quarter ending December
31, 1999, the Company shall cause the Consolidated Group to maintain at the end
of each fiscal quarter a ratio of Quick Assets to Current Liabilities of not
less than 0.50 to 1.0.

(o) MINIMUM EBITDA. The Company shall cause the Consolidated Group to
have at the end of each of the following fiscal quarters minimum EBITDA of not
less than the respective amounts set forth below opposite each such fiscal
quarter:

26
<PAGE>

<TABLE>
<CAPTION>
FISCAL QUARTER MINIMUM EBITDA

<S> <C>
Quarter Ending 3/31/99 ($500,000)

Quarter Ending 6/30/99 $500,000

Quarter Ending 9/30/99 $1,000,000

Quarter Ending 12/31/99 and $750,000
each fiscal quarter thereafter
</TABLE>

(p) SUBSIDIARY GUARANTORS. Within five (5) Business Days after any
Subsidiary which (i) is not (x) a Subsidiary Guarantor on the date hereof and
(y) a Foreign Subsidiary guarantees any Senior Debt (each a "New Senior Debt
Guarantee"), the Company shall cause such Subsidiary to execute and deliver to
the Purchaser a guarantee in form and substance satisfactory to the Purchaser
pursuant to which such Subsidiary guarantees all of the obligations of the
Company to the Purchaser, including, without limitation, the obligations of the
Company hereunder and under the Notes, together with any other documents as the
Purchaser may reasonably request, and (ii) is a Foreign Subsidiary, but not a
Subsidiary Guarantor under the LTHBV Note Purchase Agreement on the date hereof,
guarantees any Senior Debt (each a "New Senior Debt Foreign Gurantee") of any
other Foreign Subsidiary, the Company shall cause such Subsidiary to execute and
deliver to the Purchaser under the LTHBV Note Purchase Agreement a guarantee in
form and substance satisfactory to such Purchaser pursuant to which such
Subsidiary guarantees all of the obligations of LTHBV to such Purchaser
including, without limitation, the obligations of LTHBV under the LTHBV Note
Purchase Agreement and the LTHBV Notes.

7.02. NEGATIVE COVENANTS OF THE COMPANY. Without limiting any other
covenants and provisions hereof, the Company covenants and agrees that, until
the later of the repayment in full of (i) the aggregate outstanding principal
balance of the Notes, together with all interest and penalties, if any due
thereon, or (ii) the aggregate outstanding principal balance of the LTHBV Notes,
together with all interest and penalties, if any due thereon, it will comply
with and observe the following covenants and provisions, and will cause each
Subsidiary to comply with and observe such of the following covenants and
provisions as are applicable to such Subsidiary, and will not: