SONUS NETWORKS INC, S-1, 2000-03-10

SONUS NETWORKS INC
S-1, 2000-03-10

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 2000

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
--------------------------

SONUS NETWORKS, INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 3342 04-3387074
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

5 CARLISLE ROAD, WESTFORD, MASSACHUSETTS 01886
(978) 692-8999
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------

HASSAN M. AHMED
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SONUS NETWORKS, INC.
5 CARLISLE ROAD
WESTFORD, MASSACHUSETTS 01886
(978) 692-8999
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------

COPIES TO:

<TABLE>
<S> <C>
DAVID L. ENGEL, ESQ. DAVID C. CHAPIN, ESQ.
JOHAN V. BRIGHAM, ESQ. ROPES & GRAY
BINGHAM DANA LLP ONE INTERNATIONAL PLACE
150 FEDERAL STREET BOSTON, MASSACHUSETTS 02110
BOSTON, MASSACHUSETTS 02110 TELEPHONE (617) 951-7000
TELEPHONE (617) 951-8000 TELECOPY (617) 951-7050
TELECOPY (617) 951-8736
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date hereof.

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,
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 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 number of the earlier effective registration statement for the same
offering. / / _________________________________________________________________

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(2)
<S> <C> <C>
Common Stock, $0.001 par value per share.................... $115,000,000 $30,360
</TABLE>

(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933,
as amended.

(2) Calculated pursuant to Rule 457(a) based on an estimate of the proposed
maximum aggregate offering price.
--------------------------

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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
\ SUBJECT TO COMPLETION, DATED MARCH 10, 2000.

THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SHARES

[LOGO]

COMMON STOCK
------------------

This is an initial public offering of shares of common stock of Sonus
Networks, Inc. All of the shares of common stock are being sold by
Sonus Networks.

Prior to this offering, there has been no public market for the common
stock. We have applied to list our common stock on the Nasdaq National Market
under the symbol "SONS". It is currently estimated that the initial public
offering price per share will be between $ and $ .

SEE "RISK FACTORS" BEGINNING ON PAGE 4 TO READ ABOUT FACTORS YOU SHOULD
CONSIDER BEFORE BUYING SHARES OF THE COMMON STOCK.

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
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.

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

<TABLE>
<CAPTION>
Per Share Total
--------- --------
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to Sonus Networks................ $ $
</TABLE>

To the extent that the underwriters sell more than shares of
common stock, the underwriters have the option to purchase up to an additional
shares from Sonus Networks at the initial public offering price
less the underwriting discount.

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

The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.

GOLDMAN, SACHS & CO.

DAIN RAUSCHER WESSELS

J.P. MORGAN & CO.

ROBERTSON STEPHENS

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

Prospectus dated , 2000.
<PAGE>
PROSPECTUS SUMMARY

YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING US, THE COMMON STOCK BEING SOLD IN THIS OFFERING AND OUR
FINANCIAL STATEMENTS, INCLUDING THE NOTES TO THOSE STATEMENTS, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THIS PROSPECTUS
ASSUMES:

- THE CONVERSION OF OUR OUTSTANDING SHARES OF REDEEMABLE CONVERTIBLE
PREFERRED STOCK INTO AN AGGREGATE OF 32,319,074 SHARES OF COMMON STOCK
UPON THE CLOSING OF THIS OFFERING; AND

- THAT THE UNDERWRITERS DO NOT EXERCISE THEIR OPTION GRANTED BY US TO
PURCHASE ADDITIONAL SHARES IN THIS OFFERING.

ABOUT SONUS NETWORKS

We are a leading provider of voice infrastructure products for the new
public network. Our hardware and software enable customers to deploy an
integrated, packet-based network carrying both voice and data traffic. Our
products combine the superior voice quality and high reliability characteristic
of the traditional telephone network and the dramatically improved scalability,
density and ease of deployment enabled by a packet architecture. Additionally,
our products, which are interoperable with the global installed base of
circuit-switched voice networks, provide a powerful and open software platform
upon which next generation voice and data services can be designed.

We market and sell our products to service providers, including long
distance carriers, wholesale carriers, competitive local exchange carriers,
incumbent local exchange carriers, Internet service providers, cable operators
and international telephone companies. Our customers include Global Crossing and
Williams Communications, two of the world's leading service providers.

Two global forces--deregulation and the Internet--are expected to
revolutionize the public telephone network worldwide. Deregulation has fueled
intense competition among service providers and is driving them to seek new and
innovative service offerings and the means to reduce their costs. The rise in
Internet use has caused dramatic growth in data traffic. The traditional
circuit-switched telephone network was not designed to carry data traffic,
leading service providers to invest heavily in parallel, high-capacity,
packet-based networks. With voice traffic carried over the vast installed base
of traditional circuit-switched networks, and data traffic carried over rapidly
expanding packet networks, service providers are faced with the expense and
complexity of building and maintaining parallel networks. A significant
opportunity exists to create a new packet-based public network capable of
transporting both voice and data. Synergy Research Group projects that the
market for voice infrastructure to enable just two applications for the new
public network, voice over Internet protocol and Internet offload, will exceed
$19 billion in 2003, up from virtually zero in 1999.

Our objective is to capitalize on our early technology and market lead and
to build the premier franchise in voice infrastructure solutions for the new
public network. The following are key elements of our strategy:

- leverage technology leadership to achieve key service provider design
wins;

- expand and broaden our customer base by targeting specific market
segments;

- expand our global sales, marketing, support and distribution capabilities;

- grow our base of software applications and development partners;

- leverage our technology platform from the core of the network out to the
access edge;

- actively contribute to the standards definition and adoption process; and

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- expand through investments in complementary products, technologies and
businesses.

We sell our products through a direct sales force and resellers. In
addition, we intend to establish relationships with selected original equipment
manufacturers and other marketing partners to serve particular markets or
geographies. We also collaborate with our customers to identify and develop new
advanced services and applications that they can offer to their customers.

Our principal executive offices are located at 5 Carlisle Road, Westford,
Massachusetts 01886, and our telephone number is (978) 692-8999. Sonus is a
trademark and service mark of Sonus Networks. Each trademark, trade name or
service mark of any other company appearing in this prospectus belongs to its
holder. Information contained on our Web site WWW.SONUSNET.COM does not
constitute part of this prospectus. We were incorporated as a Delaware
corporation in August 1997.

THE OFFERING

<TABLE>
<S> <C>
Shares offered by Sonus Networks........................... shares

Shares to be outstanding after the offering (1)............ shares

Use of proceeds............................................ For general corporate purposes, including
working capital and capital expenditures.

Proposed Nasdaq National Market symbol..................... "SONS"
</TABLE>

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(1) Based on the number of shares outstanding as of February 29, 2000. Excludes
1,692,099 shares of common stock issuable upon exercise of outstanding stock
options. Includes 14,294,936 shares of restricted common stock, which are
subject to our right to repurchase upon termination of employment.

2
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following table contains summary financial data which should be read
together with our financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
INCEPTION YEAR ENDED INCEPTION
(AUGUST 7, 1997) TO DECEMBER 31, (AUGUST 7, 1997) TO
DECEMBER 31, ------------------------- DECEMBER 31,
1997 1998 1999 1999
------------------- ---------- ----------- -------------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................ $ -- $ -- $ -- $ --
Loss from operations............ (486) (7,228) (24,374) (32,088)
Net loss........................ (461) (6,914) (23,887) (31,262)
Net loss applicable to common
stockholders.................. (461) (6,914) (26,387) (33,762)
Net loss per share (1):
Basic and diluted............. $ -- $ (4.27) (5.53) --
Pro forma basic and diluted... (0.75) --
Shares used in computing net
loss per share (1):
Basic and diluted............. -- 1,619,289 4,774,763
Pro forma basic and diluted... 32,062,786
</TABLE>

The following table is a summary of our balance sheet as of December 31,
1999:

- on an actual basis;

- on a pro forma basis to reflect the sale in March 2000 of 1,509,154 shares
of Series D redeemable convertible preferred stock at $16.40 per share and
the conversion of all outstanding shares of our redeemable convertible
preferred stock into 32,319,074 shares of common stock upon the closing of
this offering; and

- on a pro forma as adjusted basis to give effect to the sale of the
shares of common stock offered by this prospectus at an assumed initial
public offering price of $ per share, the mid-point of the range
set forth on the cover of this prospectus and after deducting underwriting
discounts and estimated offering expenses.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
---------------------------------
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
-------- -------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............ $ 23,566 $48,276
Working capital............................................. 19,604 44,314
Total assets................................................ 30,782 55,492
Long term obligations, less current portion................. 3,402 3,402
Redeemable convertible preferred stock...................... 46,109 --
Total stockholders' equity (deficit)........................ (25,199) 45,620
</TABLE>

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

(1) See note (1)(n) to our financial statements for an explanation of the method
of calculation. Pro forma per share calculation reflects the conversion upon
the closing of the offering of all the outstanding shares of Series A,
Series B and Series C redeemable convertible preferred stock into shares of
common stock, as if the conversion occurred at the date of original issue.

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<PAGE>
RISK FACTORS

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER
THE RISKS DESCRIBED BELOW BEFORE BUYING OUR COMMON STOCK. IF ANY OF THE
FOLLOWING RISKS ACTUALLY OCCUR, THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.

RISKS RELATING TO OUR BUSINESS AND FINANCIAL PERFORMANCE

WE EXPECT THAT A MAJORITY OF OUR REVENUES WILL BE GENERATED FROM A LIMITED
NUMBER OF CUSTOMERS, AND OUR REVENUES WILL NOT GROW IF WE DO NOT SUCCESSFULLY
SELL PRODUCTS TO THESE CUSTOMERS

To date, we have shipped our products to a limited number of customers and,
as of December 31, 1999, we had not recognized any revenues. We expect that in
the foreseeable future, substantially all of our revenues will depend on sales
of our products to a limited number of customers. Our customers are not
contractually committed to purchase any minimum quantities of products from us.
The customers to whom we have shipped are currently using our products in
laboratory testing and preliminary trials. Our customers may not deploy our
products in their networks on a timely basis, or at all, and any delay or
failure by our customers to introduce commercial services based on our products,
or a downturn in their business, would seriously harm our ability to sell
products and generate revenues.

WE WILL NOT BE SUCCESSFUL IF WE DO NOT GROW OUR CUSTOMER BASE BEYOND OUR INITIAL
FEW CUSTOMERS

Our future success will depend on our ability to attract additional
customers beyond our current limited number. The growth of our customer base
could be adversely affected by:

- customer unwillingness to implement our new voice infrastructure products;

- any delays or difficulties that we may incur in completing the development
and introduction of our planned products or product enhancements;

- new product introductions by our competitors;

- any failure of our products to perform as expected; or

- any difficulty we may incur in meeting customers' delivery requirements.

If we do not expand our customer base to include additional customers that
deploy our products in operational, commercial networks, our revenues will not
grow significantly, or at all.

THE MARKET FOR VOICE INFRASTRUCTURE FOR THE NEW PUBLIC NETWORK IS NEW AND
EVOLVING AND OUR BUSINESS WILL SUFFER IF IT DOES NOT DEVELOP AS WE EXPECT

The market for our products is rapidly evolving. Packet-based technology may
not be widely accepted as a platform for voice and a viable market for our
products may not develop or be sustainable. If this market does not develop, or
develops more slowly than we expect, we may not be able to sell our products in
significant volumes, or at all.

WE ARE ENTIRELY DEPENDENT UPON OUR VOICE INFRASTRUCTURE PRODUCTS AND OUR FUTURE
REVENUES DEPEND UPON THEIR COMMERCIAL SUCCESS

Our future growth depends upon the commercial success of our voice
infrastructure products, particularly the GSX9000 Open Services Switch and the
System 9200 Internet offload solution. We intend to develop and introduce new
products and enhancements to existing products in the future. We may not
successfully complete the development or introduction of these products. If our
target

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customers do not adopt, purchase and successfully deploy our current or planned
products, our revenues will not grow.

BECAUSE OUR PRODUCTS ARE SOPHISTICATED AND DESIGNED TO BE DEPLOYED IN COMPLEX
ENVIRONMENTS, THEY MAY HAVE ERRORS OR DEFECTS THAT WE FIND ONLY AFTER FULL
DEPLOYMENT, WHICH COULD SERIOUSLY HARM OUR BUSINESS

Our products are sophisticated and are designed to be deployed in large and
complex networks. Because of the nature of our products, they can only be fully
tested when completely deployed in very large networks with high volumes of
traffic. Our customers have not yet commercially deployed our products and they
may discover errors or defects in the software or hardware, or the products may
not operate as expected, after full deployment.

If we are unable to fix errors or other performance problems that may be
identified after full deployment of our products, we could experience:

- loss of, or delay in, revenues;

- loss of customers and market share;

- a failure to attract new customers or achieve market acceptance for our
products;

- increased service, support and warranty costs and a diversion of
development resources; and

- costly and time-consuming legal actions by our customers.

IF WE DO NOT RESPOND RAPIDLY TO TECHNOLOGICAL CHANGES OR TO CHANGES IN INDUSTRY
STANDARDS, OUR PRODUCTS COULD BECOME OBSOLETE

The market for voice infrastructure products for the new public network is
likely to be characterized by rapid technological change and frequent new
product introductions. We may be unable to respond quickly or effectively to
these developments. We may experience software development, hardware design,
manufacturing or marketing difficulties that could delay or prevent our
development, introduction or marketing of new products and enhancements. The
introduction of new products by competitors, the market acceptance of products
based on new or alternative technologies or the emergence of new industry
standards could render our existing or future products obsolete. If the
standards adopted are different from those that we have chosen to support,
market acceptance of our products may be significantly reduced or delayed. If
our products become technologically obsolete, we may be unable to sell our
products in the marketplace and generate revenues.

WE HAVE BEEN IN BUSINESS FOR A SHORT PERIOD OF TIME AND YOUR BASIS FOR
EVALUATING US IS LIMITED

We were founded in August 1997, and as of the end of the last fiscal year
had not recognized any product or service revenues. We have a limited meaningful
operating history upon which you may evaluate us and our prospects. Moreover, we
cannot be sure that we have accurately identified all of the risks to our
business. Also, our assessment of the prospects for our success may prove
inaccurate.

WE MAY NOT BECOME PROFITABLE

We have incurred significant losses since inception and expect to continue
to incur losses in the future. As of December 31, 1999, we had an accumulated
deficit of $33.9 million and had not recognized any revenues for our product
shipments. We have not achieved profitability on a

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quarterly or annual basis. Our revenues may not grow and we may never generate
sufficient revenues to achieve or sustain profitability. We expect to continue
to incur significant and increasing sales and marketing, product development,
administrative and other expenses. As a result, we will need to generate
significant revenues to achieve and maintain profitability.

WE WILL NOT RETAIN CUSTOMERS OR ATTRACT NEW CUSTOMERS IF WE DO NOT ANTICIPATE
AND MEET SPECIFIC CUSTOMER REQUIREMENTS AND IF OUR PRODUCTS DO NOT INTEROPERATE
WITH OUR CUSTOMERS' EXISTING NETWORKS

To achieve market acceptance for our products, we must effectively
anticipate, and adapt in a timely manner to, customer requirements and offer
products and services that meet changing customer demands. Prospective customers
may require product features and capabilities that our current products do not
have. The introduction of new or enhanced products also requires that we
carefully manage the transition from older products in order to minimize
disruption in customer ordering patterns and ensure that adequate supplies of
new products can be delivered to meet anticipated customer demand. If we fail to
develop products and offer services that satisfy customer requirements, or to
effectively manage the transition from older products, our ability to create or
increase demand for our products would be seriously harmed and we may lose
current and prospective customers.

Many of our customers will require that our products be designed to
interface with their existing networks, each of which may have different
specifications. Issues caused by an unanticipated lack of interoperability
requirements may result in significant warranty, support and repair costs,
divert the attention of our engineering personnel from our product and software
development efforts and cause significant customer relations problems. If our
products do not interoperate with those of our customers' networks,
installations could be delayed or orders for our products could be cancelled,
which would seriously harm our gross margins and result in loss of revenues or
customers.

IF WE FAIL TO COMPETE SUCCESSFULLY, OUR ABILITY TO INCREASE OUR REVENUES OR
ACHIEVE PROFITABILITY WILL BE IMPAIRED

Competition in the telecommunications market is intense. This market has
historically been dominated by large companies, such as Lucent Technologies and
Nortel Networks, both of whom are direct competitors. We also face competition
from other large telecommunications and networking companies, including Cisco
Systems, Siemens and Tellabs, that have entered our market by acquiring
companies that design competing products. In addition, a number of private
companies have announced plans for new products that address the same market
opportunity that we address. Because this market is rapidly evolving, additional
competitors with significant financial resources may enter these markets and
further intensify competition.

Many of our current and potential competitors have significantly greater
selling and marketing, technical, manufacturing, financial and other resources,
including the ability to offer vendor-sponsored financing programs. If we are
unable or unwilling to offer vendor-sponsored financing, prospective customers
may decide to purchase products from one of our competitors who offers this type
of financing. Furthermore, some of our competitors are currently selling
significant amounts of other products to our current and prospective customers.
Our competitors' broad product portfolios coupled with already existing
relationships may cause our customers to buy our competitors' products.

To compete effectively, we must deliver products that:

- provide extremely high reliability and voice quality;

- scale easily and efficiently;

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- interoperate with existing network designs and other vendors' equipment;

- provide effective network management;

- are accompanied by comprehensive customer support and professional
services; and

- provide a cost-effective and space-efficient solution for service
providers.

If we are unable to compete successfully against our current and future
competitors, we could experience price reductions, order cancellations, loss of
revenues and reduced gross margins.

THE UNPREDICTABILITY OF OUR QUARTERLY RESULTS MAY ADVERSELY AFFECT THE TRADING
PRICE OF OUR COMMON STOCK

Our revenues and operating results will vary significantly from quarter to
quarter due to a number of factors, many of which are outside of our control and
any of which may cause our stock price to fluctuate. Generally, purchases by
service providers of telecommunications equipment from manufacturers have been
unpredictable and clustered, rather than steady, as the providers build out
their networks. The primary factors that may affect our revenues and results
include the following:

- fluctuation in demand for our voice infrastructure products and the timing
and size of revenues;

- the length and variability of the sales cycle for our products and the
corresponding timing of recognizing revenues and deferred revenues;

- new product introductions and enhancements by our competitors and us;

- changes in our pricing policies, the pricing policies of our competitors
and the prices of the components of our products;

- our ability to develop, introduce and ship new products and product
enhancements that meet customer requirements in a timely manner;

- our ability to obtain sufficient supplies of sole or limited source
components;

- our ability to attain and maintain production volumes and quality levels
for our products;

- costs related to acquisitions of complementary products, technologies or
businesses; and

- general economic conditions, as well as those specific to the
telecommunications, networking and related industries.

Our operating expenses are largely based on anticipated organizational
growth and revenue trends. As a result, a delay in generating or recognizing
revenues for the reasons set forth above, or for any other reason, could cause
significant variations in our operating results. We believe that
quarter-to-quarter comparisons of our operating results are not a good
indication of our future performance. It is likely that in some future quarters,
our operating results may be below the expectations of public market analysts
and investors. In this event, the price of our common stock will probably
substantially decrease.

WE DEPEND UPON CONTRACT MANUFACTURERS AND ANY DISRUPTION IN THESE RELATIONSHIPS
MAY CAUSE US TO FAIL TO MEET THE DEMANDS OF OUR CUSTOMERS AND DAMAGE OUR
CUSTOMER RELATIONSHIPS

We rely on a small number of contract manufacturers to manufacture our
products according to our specifications and to fill orders on a timely basis.
Our contract manufacturers provide comprehensive manufacturing services,
including assembly of our products and procurement of materials. Each of our
contract manufacturers also builds products for other companies and may

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not always have sufficient quantities of inventory available to fill our orders,
or may not allocate their internal resources to fill these orders on a timely
basis. We do not have long-term supply contracts with our manufacturers and they
are not required to manufacture products for any specified period. We do not
have internal manufacturing capabilities to meet our customers' demands.
Qualifying a new contract manufacturer and commencing commercial-scale
production is expensive and time consuming and could result in a significant
interruption in the supply of our products. If a change in contract
manufacturers results delays our fulfillment of customer orders, we may lose
revenues and suffer damage to our customer relationships.

WE AND OUR CONTRACTOR MANUFACTURERS RELY ON SINGLE OR LIMITED SOURCES FOR SUPPLY
OF SOME COMPONENTS OF OUR PRODUCTS AND IF WE FAIL TO ADEQUATELY PREDICT OUR
MANUFACTURING REQUIREMENTS OR IF OUR SUPPLY OF ANY OF THESE COMPONENTS IS
DISRUPTED, WE WILL BE UNABLE TO SHIP OUR PRODUCTS

We and our contractor manufacturers currently purchase several key
components of our products, including commercial digital signal processors, from
single or limited sources. We purchase these components on a purchase order
basis. If we overestimate our component requirements, we could have excess
inventory, which would increase our costs. If we underestimate our requirements,
we may not have adequate supply, which could interrupt manufacturing of our
products and result in delays in shipments and revenues.

We currently do not have long-term supply contracts with our component
suppliers and they are not required to supply us with products for any specified
periods, in any specified quantities or at any set price, except as may be
specified in a particular purchase order. In the event of a disruption or delay
in supply, or inability to obtain products, we may not be able to develop an
alternate source in a timely manner or at favorable prices, or at all. A failure
to find acceptable alternative sources could hurt our ability to deliver
high-quality products to our customers and negatively affect our operating
margins. In addition, our reliance on our suppliers exposes us to potential
supplier production difficulties or quality variations. Our customers rely upon
our ability to meet committed delivery dates, and any disruption in the supply
of key components would seriously impact our ability to meet these dates and
could result in legal action by our customers, loss of customers or harm to our
ability to attract new customers.

IF WE ARE NOT ABLE TO OBTAIN NECESSARY LICENSES OF THIRD-PARTY TECHNOLOGY AT
ACCEPTABLE PRICES, OR AT ALL, OUR PRODUCTS COULD BECOME OBSOLETE

We have incorporated third-party licensed technology into our current
products. From time to time, we may be required to license additional technology
from third parties to develop new products or product enhancements. Third-party
licenses may not be available or continue to be available to us on commercially
reasonable terms. The inability to maintain or re-license any third-party
licenses required in our current products, or to obtain any new third-party
licenses to develop new products and product enhancements could require us to
obtain substitute technology of lower quality or performance standards or at
greater cost, and delay or prevent us from making these products or
enhancements, any of which could seriously harm the competitiveness of our
products.

OUR FAILURE TO MANAGE OUR EXPANSION EFFECTIVELY IN A RAPIDLY CHANGING MARKET
COULD INCREASE OUR COSTS, HARM OUR ABILITY TO SELL FUTURE PRODUCTS AND IMPAIR
OUR FUTURE GROWTH

We intend to expand our operations rapidly and plan to hire a significant
number of employees during 2000. Our growth has placed, and our anticipated
growth will continue to place, a significant strain on our management systems
and resources. Our ability to successfully offer our products and implement our
business plan in a rapidly evolving market requires an effective planning and
management process. We expect that we will need to continue to improve our
financial, managerial

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and manufacturing controls and reporting systems, and will need to continue to
expand, train and manage our work force worldwide. If we fail to implement
adequate control systems in an efficient and timely manner, our costs may be
increased and our growth could be impaired and we may not be able to accurately
anticipate and fulfill market demand, the result of which will be a loss of
revenues and customers.

IF WE FAIL TO HIRE AND RETAIN NEEDED PERSONNEL, THE IMPLEMENTATION OF OUR
BUSINESS PLAN COULD SLOW OR OUR FUTURE GROWTH COULD HALT

Competition for highly skilled engineering, sales, marketing and support
personnel is intense because there are a limited number of people available with
the necessary technical skills and understanding of our market. Any failure to
attract, assimilate or retain qualified personnel to fulfill our current or
future needs could impair our growth. The support of our products requires
highly trained customer support and professional services personnel. Once we
hire them, they may require extensive training in our voice infrastructure
products. If we are unable to hire, train and retain our customer support and
professional services personnel, we may not be able to increase sales of our
products.

Our future success depends upon the continued services of our executive
officers who have critical industry experience and relationships that we rely on
to implement our business plan. None of our officers or key employees is bound
by an employment agreement for any specific term. The loss of the services of
any of our officers or key employees could delay the development and
introduction of, and negatively impact our ability to sell, our products.

OUR ABILITY TO COMPETE AND OUR BUSINESS COULD BE JEOPARDIZED IF WE ARE UNABLE TO
PROTECT OUR INTELLECTUAL PROPERTY OR BECOME SUBJECT TO INTELLECTUAL PROPERTY
RIGHTS LITIGATION, WHICH COULD REQUIRE US TO INCUR SIGNIFICANT COSTS

We rely on a combination of patent, copyright, trademark and trade secret
laws and restrictions on disclosure to protect our intellectual property rights.
Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy or otherwise obtain and use our products or technology.
Monitoring unauthorized use of our products is difficult and we cannot be
certain that the steps we have taken will prevent unauthorized use of our
technology, particularly in foreign countries where the laws may not protect our
proprietary rights as fully as in the United States. If competitors are able to
use our technology, our ability to compete effectively could be harmed.

In addition, we may also become involved in litigation as a result of
allegations that we infringe intellectual property rights of others. Any parties
asserting that our products infringe upon their proprietary rights would force
us to defend ourselves and possibly our customers or contract manufacturers
against the alleged infringement. These claims and any resulting lawsuit, if
successful, could subject us to significant liability for damages and
invalidation of our proprietary rights. Any potential intellectual property
litigation also could force us to do one or more of the following:

- stop selling, incorporating or using our products that use the challenged
intellectual property;

- obtain from the owner of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not be
available on reasonable terms, or at all; or

- redesign those products that use any allegedly infringing technology.

Any lawsuits regarding intellectual property rights, regardless of their
success, would be time-consuming, expensive to resolve and would divert our
management's time and attention.

9
<PAGE>
IF WE ARE SUBJECT TO UNFAIR HIRING CLAIMS, WE COULD INCUR SUBSTANTIAL COSTS IN
DEFENDING OURSELVES

Companies in our industry whose employees accept positions with competitors
frequently claim that their competitors have engaged in unfair hiring practices.
We may be subject to claims of this kind in the future as we seek to hire
qualified personnel. Those claims may result in material litigation. We could
incur substantial costs defending ourselves or our employees against those
claims, regardless of their merits. In addition, defending ourselves from those
types of claims could divert our management's attention from our operations. If
we are found to have engaged in unfair hiring practices, or our employees are
found to have violated agreements with previous employers, we may suffer a
significant disruption in our operations.

WE MAY FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL EXPANSION THAT COULD IMPAIR
OUR ABILITY TO GROW OUR REVENUES ABROAD

We intend to expand into international markets. This expansion will require
significant management attention and financial resources to successfully develop
direct and indirect international sales and support channels. In addition, we
may not be able to develop international market demand for our products, which
could impair our ability to grow our revenues.

We have limited experience marketing and distributing our products
internationally and, to do so, we expect that we will need to develop versions
of our products that comply with local standards. Furthermore, international
operations are subject to other inherent risks, including:

- greater difficulty collecting accounts receivable and longer collection
periods;

- difficulties and costs of staffing and managing foreign operations;

- the impact of differing technical standards outside the United States;

- the impact of recessions in economies outside the United States;

- unexpected changes in regulatory requirements and currency exchange rates;

- certification requirements;

- reduced protection for intellectual property rights in some countries; and

- potentially adverse tax consequences.

ANY INVESTMENTS OR ACQUISITIONS WE MAKE COULD DISRUPT OUR BUSINESS AND SERIOUSLY
HARM OUR FINANCIAL CONDITION

Although we have no current agreements to do so, we intend to consider
investing in, or acquiring, complementary products, technologies or businesses.
In the event of any future investments or acquisitions, we could:

- issue stock that would dilute our current stockholders' percentage
ownership;

- incur debt or assume liabilities;

- incur significant amortization expenses related to goodwill and other
intangible assets; or

- incur large and immediate write-offs.

Our integration of any acquired products, technologies or businesses will
also involve numerous risks, including:

- problems and unanticipated costs associated with combining the purchased
products, technologies or businesses;

10
<PAGE>
- diversion of management's attention from our core business;

- adverse effects on existing business relationships with suppliers and
customers;

- risks associated with entering markets in which we have limited or no
prior experience; and

- potential loss of key employees, particularly those of the acquired
organizations.

We may be unable to successfully integrate any products, technologies,
businesses or personnel that we might acquire in the future without significant
costs or disruption to our business.

WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE, WHICH MAY NOT BE AVAILABLE TO US,
AND IF IT IS AVAILABLE, MAY DILUTE YOUR OWNERSHIP OF OUR COMMON STOCK

We may need to raise additional funds through public or private debt or
equity financings in order to:

- fund ongoing operations;

- take advantage of opportunities, including more rapid expansion or
acquisition of complementary products, technologies or businesses;

- develop new products; or

- respond to competitive pressures.

Any additional capital raised through the sale of equity may dilute your
percentage ownership of our common stock. Furthermore, additional financings may
not be available on terms favorable to us, or at all.

RISKS RELATING TO THIS OFFERING

OUR STOCK PRICE MAY BE VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT
OR ABOVE THE INITIAL OFFERING PRICE

The market for technology stocks has been extremely volatile. The following
factors could cause the market price of our common stock to fluctuate
significantly from the price you pay in this offering:

- loss of any of our major customers;

- the addition or departure of key personnel;

- variations in our quarterly operating results;

- announcements by us or our competitors of significant contracts, new
products or product enhancements, acquisitions, distribution partnerships,
joint ventures or capital commitments;

- changes in financial estimates by securities analysts;

- sales of common stock or other securities by us in the future;

- changes in market valuations of telecommunications and networking
companies; and

- fluctuations in stock market prices and volumes.

In addition, the stock market in general, and the Nasdaq National Market and
technology companies in particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating
performance of these companies. The trading prices of many technology companies'
stocks are at or near historical highs and these trading prices and multiples
are substantially above historical levels and may not be sustained. These

11
<PAGE>
broad market and industry trends may materially and adversely affect the market
price of our common stock, regardless of our actual operating performance. In
the past, following periods of volatility in the market price of a company's
securities, securities class-action litigation has often been initiated against
these companies. Class-action litigation, if initiated, could result in
substantial costs and a diversion of management's attention and resources. All
of these factors could cause the market price of our stock to drop and you may
not be able to sell your shares at or above the initial offering price.

AN ACTIVE TRADING MARKET FOR OUR COMMON STOCK MAY NOT DEVELOP

Prior to this offering, you could not buy or sell our common stock publicly.
Although we expect our common stock to be quoted on the Nasdaq National Market,
an active trading market for our shares may not develop or be sustained
following this offering. You may not be able to resell your shares at prices
equal to or greater than the initial public offering price. The initial public
offering price will be determined through negotiations between us and our
underwriters and may not be indicative of the market price for these shares
following this offering. You should read "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.

OUR MANAGEMENT MAY APPLY THE PROCEEDS OF THIS OFFERING TO USES THAT DO NOT
PRODUCE PROFITABILITY OR INCREASE MARKET VALUE

Our management will have considerable discretion in applying the net
proceeds of this offering, and you will not have the opportunity, as part of
your investment decision, to assess whether the proceeds are being used
appropriately. The net proceeds may be used for corporate purposes that do not
generate revenues or increase our market value. Pending application of the
proceeds, they may be placed in investments that do not produce income or that
lose value.

INSIDERS WILL CONTINUE TO HAVE SUBSTANTIAL CONTROL OVER US AFTER THIS OFFERING
AND COULD LIMIT YOUR ABILITY TO INFLUENCE THE OUTCOME OF KEY TRANSACTIONS,
INCLUDING CHANGES OF CONTROL

We anticipate that our executive officers, directors and entities affiliated
with them will, in the aggregate, beneficially own approximately % of our
outstanding common stock following the completion of this offering, assuming the
underwriters do not exercise their over-allotment option. These stockholders, if
acting together, would be able to influence significantly all matters requiring
approval by our stockholders, including the election of directors and the
approval of mergers or other business combination transactions. See "Principal
Stockholders."

PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY HAVE ANTI-TAKEOVER
EFFECTS THAT COULD PREVENT A CHANGE OF CONTROL

Provisions of our amended and restated certificate of incorporation, amended
and restated by-laws, and Delaware law could make it more difficult for a third
party to acquire us, even if doing so would be beneficial to our stockholders.
See "Description of Capital Stock."

THERE MAY BE SALES OF A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK AFTER THIS
OFFERING THAT COULD CAUSE OUR STOCK PRICE TO FALL

Our current stockholders hold a substantial number of shares, which they
will be able to sell in the public market in the near future. Sales of a
substantial number of shares of our common stock within a short period of time
after this offering could cause our stock price to fall. In addition, the sale
of these shares could impair our ability to raise capital through the sale of
additional stock. See "Shares Eligible for Future Sale."

12
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about ourselves and our
industry. These forward-looking statements involve risks and uncertainties. Our
actual results could differ materially from those anticipated in these
forward-looking statements, as more fully described in the "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" sections and elsewhere in this prospectus. We undertake no
obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.

USE OF PROCEEDS

Our net proceeds from the sale of the shares of common stock in this
offering will be approximately $ million, assuming an initial public
offering price of $ per share, the mid-point of the range set forth on the
cover of this prospectus, after deducting the underwriting discounts and
estimated offering expenses payable by us. If the underwriters' over-allotment
option is exercised in full, we estimate that the net proceeds will be $
million.

The principal purposes of this offering are to fund our operations, to
obtain additional working capital, to establish a public market for our common
stock, to increase our visibility in the marketplace, to facilitate future
access to public capital markets and to provide currency for potential
acquisitions.

We expect to use the net proceeds from this offering for general corporate
purposes, including the funding of operations, the expansion of sales, marketing
and product development activities working capital, capital expenditures and the
repayment of outstanding amounts under our equipment line of credit. In
addition, we may use a portion of the net proceeds to acquire complementary
products, technologies or businesses; however, we currently have no plans,
commitments or agreements with respect to any of these types of transactions.
Pending their use, we plan to invest the net proceeds in investment-grade,
interest-bearing securities.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock or
other securities. We currently expect to retain future earnings, if any, for use
in the operation and expansion of our business and do not anticipate paying any
cash dividends in the foreseeable future. Our credit agreement with a commercial
bank prohibits the payment of dividends without prior approval.

13
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1999:

- on an actual basis;

- on a pro forma basis to reflect the sale in March 2000 of 1,509,154 shares
of Series D redeemable convertible preferred stock at $16.40 per share and
the conversion of all outstanding redeemable convertible preferred stock
into 32,319,074 shares of common stock upon the closing of this offering;
and

- on a pro forma as adjusted basis to give effect to the sale of the
shares of common stock offered in this offering after deducting the
underwriting discounts and estimated offering expenses payable by us
assuming an initial public offering price of $ per share, the
mid-point of the range set forth on the cover of this prospectus.

This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and the notes to those statements included elsewhere in this
prospectus.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
---------------------------------
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
-------- -------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term obligations, less current portion................. $ 3,402 $ 3,402

Redeemable convertible preferred stock, $0.01 par value;
15,000,000 shares authorized, 12,323,968 shares issued and
outstanding, actual; no shares authorized, issued and
outstanding, on a pro forma and pro forma as adjusted
basis..................................................... 46,109 --

Stockholders' equity (deficit):
Preferred stock, $0.01 par value; no shares authorized,
issued and outstanding on an actual basis; 5,000,000
shares authorized, no shares issued and outstanding, on a
pro forma and pro forma as adjusted basis................. --
Common stock, $0.001 par value; 70,000,000 shares
authorized, 21,836,974 shares issued and outstanding,
actual; 300,000,000 shares authorized, 54,156,048 shares
issued and outstanding, on a pro forma basis; 300,000,000
shares authorized, and shares issued and
outstanding, on a pro forma as adjusted basis (1)......... 22 54
Capital in excess of par value.............................. 25,611 96,438
Deficit accumulated during the development stage............ (33,882) (33,922)
Stock subscriptions receivable.............................. (346) (346)
Deferred compensation....................................... (16,604) (16,604)
-------- -------- ------
Total stockholders' equity (deficit)...................... (25,199) 45,620
-------- -------- ------
Total capitalization.................................... $ 24,312 $ 49,022
======== ======== ======
</TABLE>

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

(1) Based on shares outstanding as of December 31, 1999. Excludes 1,017,581
shares of common stock issuable upon exercise of outstanding stock options
at a weighted average exercise price of $0.32 per share. Includes
14,621,755 shares of restricted common stock which are subject to our right
to repurchase upon termination of employment of the holder at a weighted
average repurchase price of $0.13 per share.

14
<PAGE>
DILUTION

Our pro forma net tangible book value as of December 31, 1999 was
approximately $45.2 million, or $0.83 per share of common stock outstanding. Pro
forma net tangible book value per share represents the amount of total tangible
assets less total liabilities, divided by the pro forma shares of common stock
outstanding as of December 31, 1999, after giving effect to the sale in
March 2000 of 1,509,154 shares of Series D redeemable convertible preferred
stock at $16.40 per share and the conversion of all shares of redeemable
convertible preferred stock into 32,319,074 shares of common stock. After giving
effect to the issuance and sale of the shares of common stock offered in
this offering and after deducting the underwriting discounts and estimated
offering expenses payable by us, assuming an initial public offering price of
$ per share, the mid-point of the range set forth on the cover of this
prospectus, our pro forma net tangible book value as of December 31, 1999 would
have been $ million, or $ per share. This represents an immediate
increase in pro forma net tangible book value of $ per share to existing
stockholders and an immediate dilution of $ per share to new investors. The
following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share at December
31, 1999................................................ $ 0.83
Increase in pro forma net tangible book value per share
attributable to new investors...........................
------
Pro forma net tangible book value per share after this
offering..................................................
------
Dilution per share to new investors......................... $
======
</TABLE>

The following table summarizes, on a pro forma basis, as of December 31,
1999, the differences between the number of shares of common stock purchased
from us, the total consideration provided to us, and the average price per share
paid by existing stockholders and by new investors purchasing stock in this
offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders..................... 54,156,048 % $72,923,000 % $ 1.35
New investors.............................
----------- ------ ----------- ------ ------
Total................................. % %
=========== ====== =========== ====== ======
</TABLE>

The discussion and table above excludes as of December 31, 1999,
1,017,581 shares of common stock issuable upon exercise of outstanding stock
options at a weighted average exercise price of $0.32 per share under our 1997
Stock Incentive Plan. To the extent any of these options are exercised, there
will be further dilution to new investors. If the underwriters' over-allotment
option is exercised in full, the number of shares held by new investors will
increase to shares, or % of the total number of shares of common stock
outstanding after this offering. See "Management--Benefit Plans" and notes 9 and
11 to our financial statements. The outstanding share information also includes
1,509,154 shares of common stock issuable upon conversion of the Series D
redeemable convertible preferred stock that were issued in March 2000.

15
<PAGE>
SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and notes to those statements included
elsewhere in this prospectus. The statement of operations data for the period
from our inception on August 7, 1997 to December 31, 1997 and the years ended
December 31, 1998 and 1999 and the balance sheet data as of December 31, 1998
and 1999 are derived from our financial statements, audited by Arthur Andersen
LLP, independent public accountants, which are included elsewhere in this
prospectus. The balance sheet data as of December 31, 1997 have been derived
from our financial statements audited by Arthur Andersen LLP, independent public
accountants, not included in this prospectus.

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION
(AUGUST 7, 1997) (AUGUST 7, 1999)
TO YEAR ENDED DECEMBER 31, TO
DECEMBER 31, ------------------------ DECEMBER 31,
1997 1998 1999 1999
---------------- ---------- ----------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................ $ -- $ -- $ -- $ --

Operating expenses:
Manufacturing................................. -- -- 1,861 1,861
Research and development...................... 299 5,853 10,863 17,015
Sales and marketing........................... -- 438 5,610 6,048
General and administrative.................... 187 937 1,785 2,909
Amortization of stock compensation............ -- -- 4,255 4,255
----- ---------- ----------- ----------
Total operating expenses........................ 486 7,228 24,374 32,088
----- ---------- ----------- ----------
Loss from operations............................ (486) (7,228) (24,374) (32,088)
Interest income (expense), net.................. 25 314 487 826
----- ---------- ----------- ----------
Net loss........................................ (461) (6,914) (23,887) (31,262)
Beneficial conversion feature of Series C
preferred stock............................... -- -- (2,500) (2,500)
----- ---------- ----------- ----------
Net loss applicable to common stockholders...... $(461) $ (6,914) $ (26,387) $ (33,762)
===== ========== =========== ==========
Net loss per share (1):
Basic and diluted............................. $ -- $ (4.27) $ (5.53)
Pro forma basic and diluted................... (0.75)

Shares used in computing net loss per share (1):
Basic and diluted............................. -- 1,619,289 4,774,763
Pro forma basic and diluted................... 32,062,786
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............ $6,606 $16,501 $23,566
Working capital............................................. 6,308 15,321 19,604
Total assets................................................ 6,987 18,416 30,782
Long term obligations, less current portion................. 6 1,220 3,402
Redeemable convertible preferred stock...................... 7,100 22,951 46,109
Total stockholders' deficit................................. (447) (7,097) (25,199)
</TABLE>

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

16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND NOTES TO THOSE STATEMENTS AND OTHER FINANCIAL INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS. THE FOLLOWING DISCUSSION CONTAINS
FORWARD-LOOKING INFORMATION THAT INVOLVES RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THE RISKS DISCUSSED IN
"RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

We are a leading provider of voice infrastructure products for the new
public network. Our hardware and software enable customers to deploy an
integrated, packet-based network carrying both voice and data traffic. From our
inception in August 1997 through December 31, 1999, our operating activities
consisted primarily of research and development, product design, development and
testing. We also staffed and trained our administrative, marketing and sales
organizations and began sales and marketing activities.

Since our inception, we have incurred significant losses and, as of
December 31, 1999, had a deficit accumulated during the development stage of
$33.9 million. We have not achieved profitability on a quarterly or an annual
basis, and anticipate that we will continue to incur net losses. We have a
lengthy sales cycle for our products and, accordingly, we expect to incur sales
and other expenses before we realize the related revenues. We expect to incur
significant sales and marketing, research and development and general and
administrative expenses and, as a result, we will need to generate significant
revenues to achieve and maintain profitability.

We sell our products through a direct sales force and resellers, including
Lucent Technologies, who represents us as a sales agent for one of our
customers, Global Crossing. In the future, we anticipate expanding our sales
efforts to include overseas distribution partners. Customers' decisions to
purchase our products to deploy in commercial networks involve a significant
commitment of resources and a lengthy evaluation, testing and product
qualification process. We believe these long sales cycles, as well as our
expectation that customers will tend to sporadically place large orders with
short lead times, will cause our revenues and results of operations to vary
significantly and unexpectedly from quarter to quarter. We expect to recognize
revenues from a limited number of customers for the foreseeable future.

We recognize revenue from product sales to end users and resellers upon
shipment, provided there are no uncertainties regarding acceptance, persuasive
evidence of an arrangement exists, the sales price is fixed or determinable and
collection of the related receivable is probable. If uncertainties exist, we
recognize revenue when those uncertainties are resolved. Service revenue is
recognized as the services are performed or ratably over the terms of the
service contracts. Amounts collected prior to satisfying our revenue recognition
criteria are reflected as deferred revenue. We estimate and record warranty
costs at the time of product revenue recognition. In November 1999, we began
shipping our products. As of December 31, 1999, we had not recognized any
revenues from our product shipments and had a total of $1.0 million in deferred
revenue that we expect will be recognized in 2000.

GROSS PROFIT MARGINS. We believe that our gross profit margins will be
affected primarily by the following factors:

- demand for our products and services;

- new product introductions both by us and by our competitors;

17
<PAGE>
- product service and support costs associated with initial deployment of
our products in customers' networks;

- changes in our pricing policies and those of our competitors;

- the mix of product configurations sold;

- the mix of sales channels through which our products and services are
sold; and

- the volume of manufacturing and costs of manufacturing and components.

MANUFACTURING EXPENSES. Our manufacturing expenses consist primarily of
amounts paid to third-party manufacturers, manufacturing start-up expenses,
manufacturing personnel and related costs. Commencing in 1999, we outsourced our
manufacturing to third-parties. Manufacturing engineering, documentation
control, final testing and assembly are performed at our facility in Westford,
Massachusetts.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
consist primarily of salaries and related personnel costs, recruiting expenses
and prototype costs related to the design, development, testing and enhancement
of our products. We have expensed our research and development costs as
incurred. Some aspects of our research and development effort require
significant short-term expenditures, the timing of which can cause significant
quarterly variability in our expenses. We believe that research and development
is critical to our strategic product development objectives and we intend to
enhance our technology to meet the changing requirements of our customers. As a
result, we expect our research and development expenses to increase in absolute
dollars in the future.

SALES AND MARKETING EXPENSES. Sales and marketing expenses consist
primarily of salaries and related personnel expenses, commissions, promotions,
customer evaluations and other marketing expenses and recruiting expenses. We
expect that sales and marketing expenses will increase substantially in absolute
dollars in the future as we increase our direct sales efforts, expand our
operations internationally, hire additional sales and marketing personnel,
initiate additional marketing programs and establish sales offices in new
locations.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of salaries and related expenses for executive, finance, and
accounting personnel, recruiting expenses and professional fees. We expect that
general and administrative expenses will increase in absolute dollars as we add
personnel and incur additional costs related to the growth of our business and
our operation as a public company.

STOCK-BASED COMPENSATION. In connection with our grant of stock options and
issuance of restricted common stock during the year ended December 31, 1999, we
recorded deferred compensation of $20.9 million. Stock-based compensation
includes primarily the amortization of stock compensation charges resulting from
the granting of stock options and the sales of restricted shares to employees
with exercise or sales prices that may be deemed for accounting purposes to be
below the fair value of our common stock on the date of grant. These amounts are
being amortized over the vesting periods of the applicable options or restricted
stock, which are approximately four years. See note 9(d) to our financial
statements. During the quarter ending March 31, 2000, we expect to record an
additional $26.0 million in deferred compensation.

BENEFICIAL CONVERSION OF PREFERRED STOCK. In 1999, we recorded a charge to
accumulated deficit of $2.5 million representing the beneficial conversion
feature of our Series C redeemable convertible preferred stock that was sold in
November and December 1999. This charge is accounted for as a dividend to
preferred stockholders and, as a result, will increase the net loss available to
common stockholders and the related net loss per share.

18
<PAGE>
RESULTS OF OPERATIONS

Because we were incorporated in August 1997 and commenced our principal
operations in November 1997 after obtaining our initial funding, management
believes that a discussion of the period from inception to December 31, 1997
would not be meaningful.

MANUFACTURING EXPENSES. Manufacturing expenses were $1.9 million in 1999,
compared to no expense in 1998. The increase was due to the commencement of
manufacturing operations.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$10.9 million in 1999, an increase of $5.0 million, or 86%, from $5.9 million in
1998. The increase reflects costs primarily associated with a significant
increase in personnel and personnel-related expenses and, to a lesser extent,
recruiting expenses and prototype expenses for the development of our products.

SALES AND MARKETING EXPENSES. Sales and marketing expenses were
$5.6 million in 1999, an increase of $5.2 million from $438,000 in 1998. The
increase reflects costs primarily associated with the hiring of additional sales
and marketing personnel and, to a lesser extent, marketing program costs,
including Web development, trade shows and product launch activities.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $1.8 million in 1999, an increase of $848,000, or 91%, from $937,000 in
1998. The increase reflects costs primarily associated with the hiring of
additional general and administrative personnel and, to a lesser extent,
expenses necessary to support and scale our operations.

AMORTIZATION OF STOCK-BASED COMPENSATION. Amortization of stock-based
compensation expense was $4.3 million for 1999. The amortization of deferred
stock compensation results from the granting of stock options and selling of
restricted common stock to employees with the exercise or sales prices below the
deemed fair value of our common stock on the date of grant or sale for
accounting purposes. Based on the grant of stock options and sale of restricted
common stock to employees through March 10, 2000, we expect to incur future
amortization of stock-based compensation of at least $20.3 million in 2000,
$12.0 million in 2001, $6.7 million in 2002, $3.1 million in 2003 and $500,000
in 2004.

INTEREST INCOME (EXPENSE), NET. Interest income consists of interest earned
on our cash balances and marketable securities. Interest expense consists of
interest incurred on equipment debt. Interest income, net of interest expense
was $487,000 and $314,000 for 1999 and 1998, respectively. This increase
reflects higher invested balances partially offset by an increase in interest
expense from incurred borrowings.

NET OPERATING LOSS CARRYFORWARDS. As of December 31, 1999, we had
approximately $23.0 million of state and federal net operating loss
carryforwards for tax reporting purposes available to offset future taxable
income. These net operating loss carryforwards expire at dates through 2019, to
the extent that they are not used. We have not recognized any benefit from the
future use of loss carryforwards for these periods, or for any other periods
since inception. Use of the net operating loss carryforwards may be limited in
future years if there is a significant change in our ownership. Management has
recorded a full valuation allowance for the related net deferred tax asset due
to the uncertainty of realizing the benefit of this asset.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our operations primarily through private
sales of redeemable convertible preferred stock totaling $46.1 million in net
proceeds through December 31, 1999. In March 2000, we sold additional redeemable
convertible preferred stock for approximately

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<PAGE>
$24.7 million in net proceeds. Upon the closing of this offering, all of our
redeemable convertible preferred stock will convert into 32,319,074 shares of
common stock. We have also financed our operations through net long-term
borrowings of $4.7 million for the purchase of fixed assets. At December 31,
1999, cash, cash equivalents and marketable securities totaled $23.6 million.

Net cash used in operating activities was $16.0 million for 1999 and
$5.9 million for 1998. Net cash flows from operating activities in each period
reflect increasing net losses and, to a lesser extent, inventory purchases in
1999 offset in part by increases in accounts payable, accrued expenses and
deferred revenue.

Net cash used in investing activities was $6.4 million for 1999 and
$14.8 million for 1998. Net cash used for investing activities in each year
reflects increasing purchases of property and equipment, primarily computers and
test equipment for our development and manufacturing activities and net
purchases and maturities of marketable securities. We used amounts invested in
marketable securities in 1998 to fund operations in 1999. We expect capital
expenditures to continue to increase in the year 2000 to approximately
$11.0 million, due to our expansion and expenditures for software licenses,
computers and test equipment.

Net cash provided by financing activities was $27.6 million for 1999 and
$17.7 million for 1998. Net cash provided by financing activities for these
years was derived primarily from private sales of redeemable convertible
preferred stock and long-term borrowings. We also have a $7.0 million bank
equipment line of credit with available borrowings of $1.7 million as of
December 31, 1999. This line of credit is collateralized by all of our assets,
except intellectual property, and bears interest at the bank's prime rate plus
1/2% per year. At December 31, 1999, an aggregate of approximately $4.7 million
was outstanding under this line of credit. We are required to comply with
various financial and restrictive covenants.

We believe that the net proceeds from this offering, together with our
current cash, cash equivalents and marketable securities and available line of
credit, will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least 12 months. If our existing
resources, proceeds from this offering and cash generated from operations are
insufficient to satisfy our liquidity requirements, we may seek to sell
additional equity or debt securities. The sale of additional equity or
convertible debt securities could result in additional dilution to our
stockholders, and we cannot be certain that additional financing will be
available in amounts or on terms acceptable to us, if at all. If we are unable
to obtain this additional financing, we may be required to reduce the scope of
our planned product development and sales and marketing efforts, which could
harm our business, financial condition and operating results.

MARKET RISK

We do not currently use derivative financial instruments. We generally place
our marketable security investments in high-quality credit instruments,
primarily U.S. Government obligations and corporate obligations with contractual
maturities of less than one year. We do not expect any material loss from our
marketable security investments and therefore believe that our potential
interest rate exposure is not material.

RECENT ACCOUNTING PRONOUNCEMENT

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition." This bulletin established
guidelines for revenue recognition. We have not recognized any revenues to date.
We will recognize revenues in accordance with this recent pronouncement. We do
not expect the adoption of this methodology to have a material impact on our
financial condition or results of operations.

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<PAGE>
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging
Activities," which establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts, and
for hedging activities. We do not currently engage in trading market risk
sensitive instruments or purchasing hedging instruments or "other than trading"
instruments that are likely to expose us to market risk, whether interest rate,
foreign currency exchange, commodity price or equity price risk. We may do so in
the future as our operations expand domestically and abroad. We will evaluate
the impact of foreign currency exchange risk and other derivative instrument
risk on our results of operations when appropriate. We will adopt SFAS No. 133
as required by SFAS No. 137, "Deferral of the effective date of the FASB
Statement No. 133," in fiscal year 2001. The adoption of SFAS No. 133 is not
expected to have a material impact on our financial condition or results of
operations.

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<PAGE>
BUSINESS

OVERVIEW

We expect two global forces--deregulation and the expansion of the
Internet--to revolutionize the public telephone network worldwide. Packet
networks more efficiently use available network bandwidth as compared to
traditional circuit-switched telephone networks, which were designed for voice
traffic and built long before the advent of the Internet. Our GSX9000 Open
Services Switch, PSX6000 SoftSwitch, SGX2000 SS7 signaling gateway and System
9200 Internet offload solution are designed to offer high-reliability,
toll-quality voice, improved economics, interoperability, rapid deployment and
an open architecture enabling the design and implementation of new services and
applications.

Our objective is to be the primary supplier of voice infrastructure products
for the new public network. We intend to capitalize on our early technology and
market lead to build the premier franchise in voice infrastructure solutions for
the new public network.

INDUSTRY BACKGROUND

The public telephone network is an integral part of our everyday lives. For
most of its 100-year history, the telephone industry has been heavily regulated,
which has slowed the evolution of its underlying circuit-switching technologies
and limited innovation in service offerings and the pricing of telephone
services. We expect two global forces--deregulation and the expansion of the
Internet--to revolutionize the public telephone network worldwide.

Deregulation of the telephone industry accelerated with the passage of the
Telecommunications Act of 1996. The barriers that once restricted service
providers to a specific geography or service offering, such as access or long
distance, are disappearing. The opportunity created by opening up the
$750 billion telephone services market has been attracting thousands of new
service providers. Intense competition between new players and incumbents is
driving down prices. With limited ability to reduce the cost structure of the
public telephone network, profit margins for traditional telephone services are
eroding. In response, service providers are seeking both new, creative and
differentiated service offerings and the means to reduce their costs.

Simultaneously, the rapid adoption of the Internet is driving dramatic
growth of data traffic. Today, a significant portion of this data traffic is
carried over the traditional circuit-switched telephone network. However, the
circuit-switched network, designed for voice traffic and built long before the
advent of the Internet, is not suited to efficiently transport data traffic. In
a circuit-switched network, a dedicated path, or circuit, is established for
each call, reserving a fixed amount of capacity or bandwidth in each direction.
The dedicated circuit is maintained for the duration of the call across all of
the circuit switches spanning the path from origination to the destination of
the call, even when no traffic is being sent. As a result, a circuit-switched
architecture is highly inefficient for Internet applications, which tend to
create large bursts of data traffic followed by long periods of silence.

In contrast, a packet network divides traffic into distinct units called
packets, and routes each packet independently. By combining traffic from users
with differing capacity demands at different times, packet networks more
efficiently fill available network bandwidth with packets of data from many
users, thereby reducing the bandwidth wasted due to silence from any single
user. The volume of data traffic continues to increase as use of the Internet
and the number of connected users grow, driving service providers to build
large-scale, more efficient packet networks.

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<PAGE>
With voice traffic carried over the vast installed base of traditional
circuit-switched networks, and data traffic carried over rapidly expanding
packet networks, service providers are faced with the expense and complexity of
building and maintaining parallel networks.

The following diagrams depict these parallel voice and data networks.

[Two diagrams appear: the first diagram is symmetric and depicts a
circuit-switched network. A large, rectangular box labeled "Circuit Switched
Network" is in the center. The box contains a series of small shapes aligned
linearly and connected by a straight bold line. From left to right, the shapes
are a small circle labeled "End Office," two small hexagons labeled
"Tandem/Toll" and a small circle labeled "End Office." Outside of the
rectangular box on each side is an icon representing a telephone connected to
the outer circle labeled "End Office" by a bold line. Also on each side and
connected to the outer "End Office" circle by dotted lines are icons
representing a fax machine and second telephone. Above the rectangular box and
connected by dotted lines to each of the small shapes inside of the large
rectangle is a shaded oval labeled "SS7."

Lower diagram is symmetric and depicts a generic packet-switched network.
Shaded cloud labeled "Packet Network" is aligned directly below the rectangular
box of the upper diagram. On left and right side of the cloud, aligned linearly,
is an icon representing a computer, connected to the cloud by a dotted line.
Connected to the bottom of the cloud by dotted lines are three additional
computers.]

THE NEED FOR, AND BENEFITS OF, COMBINING VOICE AND DATA NETWORKS

We believe significant opportunities exist in uniting these separate,
parallel networks into a new integrated public network capable of transporting
both voice and data traffic. Enormous potential savings can be realized by
eliminating redundant or overlapping equipment purchases and reducing network
operating costs. Also, combining traditional voice services with Internet or
Web-based services in a single network is expected to enable new and powerful
high-margin, revenue-generating service offerings such as single-number dialing,
unified messaging, Internet click-to-talk, sophisticated call centers and other
services.

The packet network is the platform for the new public network. The volume of
data traffic has already eclipsed voice traffic and is growing much faster than
voice. Packet architectures are more efficient at moving data more flexible, and
reduce equipment and operating costs. The key to realizing the full potential of
a converged, packet-based network is to enable the world's voice traffic to run
over those networks.

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<PAGE>
Early attempts to develop new technologies to carry voice traffic over
packet networks have included voice over Internet protocol, or VoIP, systems
using a personal computer platform and devices that added VoIP capability to
existing data devices such as remote access servers. While demonstrating the
viability of transmitting voice over packet technology, these approaches have
fallen far short of the quality, reliability and scalability required by the
public telephone network.

These early VoIP systems have also lacked the ability to interoperate with
the signaling infrastructure of the circuit-switched network. Without this
signaling capability, VoIP applications cannot provide the consistent "look,
sound and feel" of traditional telephone calls and are not well-suited to more
complex applications such as voicemail, unified messaging and other value-added
services.

The public telephone network is large, highly complex and generates
significant revenues. According to International Data Corporation, a market
research firm, service providers derive 90% of their revenues from voice
services and only 10% from data services. Given service providers' substantial
investment in, and dependence upon, traditional circuit-switched technology,
their transition to the new public network will be gradual. During this
transition, an immediate opportunity exists to reduce the burden on overloaded
and expensive circuit-switched resources. Internet offload will allow
modem-connected Internet calls to be identified and diverted from the circuit-
switched network to the packet network, thus optimizing use of valuable network
bandwidth.

With $45 billion spent on traditional circuit switches in 1999, according to
Synergy Research Group, a market research firm, the market opportunity for
providers of voice infrastructure is significant. For example, spending on
infrastructure to enable just two applications in the new public network, VoIP
and Internet offload, is projected to exceed $19 billion in 2003, up from
virtually zero in 1999.

REQUIREMENTS FOR VOICE INFRASTRUCTURE PRODUCTS FOR THE NEW PUBLIC NETWORK

Users demand high levels of quality and reliability from the public
telephone network, and service providers require a cost-efficient network that
enables new revenue-generating services. As a result, voice infrastructure
products for the new public network must satisfy the following requirements:

CARRIER-CLASS PERFORMANCE. Because they operate complex, mission-critical
networks, service providers have clear infrastructure requirements. These
include extremely high reliability, quality and interoperability. For example,
service providers typically require equipment that complies with their 99.999%
availability standard.

SCALABILITY AND DENSITY. Infrastructure solutions for the new public
network face challenging scalability requirements. Service providers' central
offices typically support tens or even hundreds of thousands of simultaneous
calls. In order to be economically attractive, the new infrastructure must
compare favorably with existing networks in terms of cost per port, space
occupied, power consumption and cooling requirements.

COMPATIBILITY WITH STANDARDS AND EXISTING INFRASTRUCTURE. New
infrastructure equipment and software must support the full range of telephone
network standards, including signaling protocols such as SS7 and various
physical interfaces such as ISDN, primary rate interface, or PRI, and T1. It
must also support data networking protocols such as Internet protocol, or IP,
and asynchronous transfer mode, or ATM, as well as newer protocols such as
H.323, IPDC and SIP. When operating, the new equipment and software cannot
hinder, and ideally should enhance, the capabilities of the existing
infrastructure, for example, by alleviating Internet access bottlenecks.

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<PAGE>
INTELLIGENT SOFTWARE IN AN OPEN AND FLEXIBLE PLATFORM. The architecture for
the new public network will decouple the capabilities of traditional
circuit-switching equipment into robust hardware elements and highly intelligent
software platforms that provide control, signaling and service creation
capabilities. This approach will transform the closed, proprietary
circuit-switched public telephone network into a flexible, open environment
accessible to a wide range of software developers. Service providers and
third-party vendors will be able to develop and implement new applications
independent of switch vendors. Moreover, the proliferation of independent
software providers promises to drive the creation of innovative voice and data
services that could expand service provider revenues.

SIMPLE AND RAPID INSTALLATION, DEPLOYMENT AND SUPPORT. Infrastructure
solutions must be easy to install, deploy, configure and manage. These
attributes will enable rapid growth and effective management of dynamic and
complex service provider networks.

THE SONUS SOLUTION

We develop, market and sell what we believe to be the first comprehensive
suite of voice infrastructure products purpose-built for the deployment and
management of voice and data services over the new public network. Our solution
consists of four carrier-class products:

- the GSX9000 Open Services Switch;

- the PSX6000 SoftSwitch;

- the SGX2000 SS7 Signaling Gateway; and

- the System 9200 Internet offload solution.

These products are designed to offer high reliability, toll-quality voice,
improved economics, interoperability, rapid deployment and an open architecture
enabling the design and implementation of new services and applications. Our
solution has been specifically designed to meet the requirements of the new
public network. As shown in the following diagram, our products unite the voice
and data networks, unleashing the potential of the new public network.

[Symmetric diagram with shaded cloud labeled "Packet Network" at the center.
Aligned on the horizontal axis extending from each of the left and right sides
of the "Packet Network" cloud is a box with caption reading "Sonus GSX9000 Open
Services Switch" and a small cloud labeled "Public Telephone Network." Connected
to the small cloud by bold lines are icons representing telephones and fax
machines. Below the center "Packet Network" cloud and connected by bold lines
are a stacked figure labeled "3rd Party Application Servers" and an icon
representing a computer. Above the center "Packet Network" cloud on the left
side is a small box labeled "Sonus SGX2000 SS7 Signaling Gateway" connected by a
bold line. Above that box to the left, connected by a dotted line, is an oval
labeled "SS7." Above the center "Packet Network" cloud on the right side is a
small box labeled "Sonus PSX6000 SoftSwitch."]

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<PAGE>
CARRIER-CLASS PERFORMANCE. Our products are designed to offer the highest
levels of quality, reliability and interoperability, including:

- full redundancy, enabling 99.999% availability;

- voice quality as good as, or superior to, today's circuit-switched
network;

- system hardware designed for network equipment building standards, or
NEBS, Level 3 compliance;

- a complete set of service features, addressing those found in the existing
voice network and extending them to offer greater flexibility; and

- sophisticated network management and configuration capabilities.

COMPATIBILITY WITH STANDARDS AND EXISTING INFRASTRUCTURE. Our products are
designed to be compatible with all applicable voice and data networking
standards and interfaces, including:

- SS7 and other telephone network signaling protocols, including advanced
services as well as simple call management and routing;

- IP, ATM, Ethernet and optical data networking standards;

- encoding, compression and call management standards including H.323, IPDC,
SIP and others;

- voice coding standards such as G.711, and echo cancellation standard
G.168; and

- all common interfaces, including T1, T3, E1 and PRI, and optical
interfaces.

Our solution is designed to interface with legacy circuit-switching
equipment, supporting the transparent flow of calls and other information
between the circuit and packet networks. As a result, our products allow service
providers to migrate to the new public network, while preserving their
significant legacy infrastructure investments.

COST EFFECTIVENESS AND HIGH SCALABILITY. Our solution can be used to
cost-effectively build packet-based switch configurations supporting a range
from a few hundred calls to hundreds of thousands of simultaneous calls. In
addition, the capital cost of our equipment is typically half that of
traditional circuit-switched equipment. At the same time, our GSX9000 Open
Services Switch offers unparalleled density, requires less than one-tenth of the
space needed by circuit-switching implementations and requires significantly
less power and cooling. This enables a significant reduction in expensive
central office facilities' cost and allows service providers to deploy our
equipment in locations where traditional circuit switches are not even an option
given the limited space and environmental services.

The GSX9000 Open Services Switch can create central office space savings as
shown below.

[Three dimensional diagram with a set of four rectangular bars parallel to
one another and lined up evenly with caption reading "Traditional Circuit Switch
(50,000 calls)." Depicted in front of the rectangular bars is a single, small,
upright rectangular box labeled "Sonus GSX9000 Open Services Switch (50,000
calls)." Extending from each of the left and right sides of the small
rectangular box back to the sides of the first of the four larger bars is a thin
line.]

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OPEN SOFTWARE ARCHITECTURE AND FLEXIBLE PLATFORM. Our Open Services
Architecture, or OSA, is based on a software-centric design and a flexible
platform, allowing rapid development of new products and services. For example,
software intelligence in our System 9200 can detect Internet modem calls as they
enter the network and divert them to remote access servers to be routed directly
to a packet network. New services may be developed by us, by service providers
or by any number of third parties including software developers and systems
integrators. The OSA also facilitates the creation of services that were
previously not possible on the circuit-switched network. In addition, we have
partnered with a number of third-party application software developers to
stimulate the growth of new applications available for our platform.

EASE OF INSTALLATION AND DEPLOYMENT. Our equipment and software can be
installed and placed in service by our customers much more quickly than
circuit-switching equipment. By offering comprehensive testing, configuration
and management software, we expedite the deployment process as well as the
ongoing management and operation of our products. We believe that typical
installations of our solution require just weeks of time from product arrival to
final testing, thereby reducing the cost of deployment and speeding the time to
market for new services.

THE SONUS STRATEGY

Our objective is to be the primary supplier of voice infrastructure for the
new public network. We intend to capitalize on our early technology and market
lead to build the premier franchise in voice infrastructure solutions for the
new public network. Principal elements of our strategy include:

LEVERAGE TECHNOLOGY LEADERSHIP TO ACHIEVE KEY SERVICE PROVIDER DESIGN
WINS. As the first company to provide voice infrastructure for the new public
network, we plan to achieve key design wins with market-leading service
providers as they develop the architecture for their new voice networks. We
expect service providers to select vendors that provide leading technology and
the ability to maintain that technology leadership. Our equipment is an integral
part of the network architecture, and achieving design wins will enable us to
rapidly grow our business as these networks are deployed. We have already been
awarded contracts by two major service providers: Global Crossing and Williams
Communications. Furthermore, by working closely with our customers as they
deploy these networks, we will gain valuable knowledge regarding their
requirements, positioning us to develop product enhancements and extensions that
address evolving service provider needs.

EXPAND AND BROADEN THE CUSTOMER BASE BY TARGETING SPECIFIC MARKET
SEGMENTS. We plan to leverage our early success to penetrate new customer
segments. We believe new and incumbent service providers will build the new
public network at different rates. Initially, the new service providers, also
called greenfield carriers, who are relatively unencumbered by legacy equipment,
will be the most likely first purchasers of our equipment and software, as they
compete aggressively with the incumbent service providers. Other newer entrants,
such as competitive local exchange carriers, or CLECs, and Internet service
providers, or ISPs, are also likely to be early adopters of our products. As
competitive service providers achieve greater market presence and leverage the
lower costs and advanced services inherent in packet-switching technology, we
believe incumbents will face further competitive pressure, increasing the
likelihood that, and pace at which, they will adopt our products.

EXPAND OUR GLOBAL SALES, MARKETING, SUPPORT AND DISTRIBUTION
CAPABILITIES. Becoming the primary supplier of voice infrastructure for the new
public network will require a strong worldwide presence. We are rapidly
expanding our sales, marketing, support and distribution capabilities to address
this need. We have recently opened regional sales offices in the United States
and a European headquarters in the United Kingdom. In addition, we plan to
augment our global direct

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<PAGE>
sales effort with international distribution partners. As a carrier-class
solution provider, we are making a significant investment in professional
services and customer support.

GROW OUR BASE OF SOFTWARE APPLICATIONS AND DEVELOPMENT PARTNERS. We have
established and promote the Open Services Partner Alliance, or OSPA, which
brings together a broad range of development partners to provide our customers
with a variety of advanced services and application options. This alliance
includes more than twenty members that are enabling new IP-based enhanced
services, call processing, billing, provisioning, network management and
operations systems. We plan to expand this program to maximize the services
available to our customers, and speed their time to market.

LEVERAGE OUR TECHNOLOGY PLATFORM FROM THE CORE OF THE NETWORK OUT TO THE
ACCESS EDGE. Our robust and sophisticated technology platform has been designed
to operate at the heart of the largest networks in the world. From a fundamental
position in this trunking infrastructure, we plan to extend our reach by moving
outward to the access segments of the network. For example, we have already
announced our System 9200 Internet offload solution, a turnkey product that
gives service providers a cost effective means to manage Internet data traffic.
Over time, we plan to expand our product offerings into other high-growth areas,
such as business and residential access. This approach will allow our customers
to design and execute a coordinated migration and expansion strategy as they
build entirely new networks or transition from their legacy circuit-switched
infrastructure.

ACTIVELY CONTRIBUTE TO THE STANDARDS DEFINITION AND ADOPTION PROCESS. To
advance our technology and market leadership, we will continue to actively lead
and contribute to standards bodies such as the International Softswitch
Consortium, the Internet Engineering Task Force and the International
Telecommunications Union. The definition of standards for the new public network
is in an early stage and we intend to drive these standards to meet the
requirements for an open, accessible, scalable and powerful new public network
infrastructure.

PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. We intend to expand our
products and services through selected acquisitions and alliances. These may
include acquisitions of complementary products, technologies and businesses that
further enhance our technology leadership or product breadth. We also believe
that allying with companies providing complementary products or services for the
new public network will enable us to bring greater value to our customers and
extend our lead over potential competitors.

PRODUCTS

GSX9000 OPEN SERVICES SWITCH

Our GSX9000 Open Services Switch enables voice traffic to be transported
over packet networks. Its carrier-class hardware is designed to be NEBS Level 3
compliant and provide 99.999% availability, with no single point of failure, and
offers optional full redundancy and full hot-swap capability. It is powered from
- -48VDC sources standard in central offices and attaches to the central office
timing network. The basic building block of a GSX9000 is a shelf. Each shelf is
28" high, mounts in a standard 19" or 23" rack, and provides 16 slots for server
and adapter modules. The first 2 slots are reserved for management modules,
while the other 14 slots may be used for any mix of other module types. It
supports the following interfaces:

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<PAGE>

<TABLE>
<S> <C>
- - T1;
- - T3; [LOGO]
- - E1; [Diagram depicting a large box with caption reading "GSX9000 Open
- - OC3; Services Switch." Detail on the face includes the Sonus logo in the upper
- - 100BaseT; and left corner and a set of vertical slots.]
- - OC12c/STM-4.
</TABLE>

The GSX9000 is designed to deliver voice quality equal, or superior, to that
of the public network. It is designed to support the G.711 approach used in
circuit switches, and will deliver a number of other voice compression
algorithms. It also is designed to provide world-class echo cancellation,
conforming to the latest G.168 standard, on every circuit port. It automatically
disables echo cancellation when it detects a modem signal. The GSX9000 is also
designed to minimize delay, further enhancing perceived voice quality. The
GSX9000 scales to the very large configurations required by major carriers. A
single GSX9000 shelf can support up to 8,064 simultaneous calls. A single
GSX9000 consisting of multiple shelves, can support 100,000 or more simultaneous
calls. The GSX9000 is designed to operate with our PSX6000 SoftSwitch and with
softswitches and network products offered by other vendors.

PSX6000 SOFTSWITCH

The PSX6000 SoftSwitch controls the operation of the GSX9000. It contains
the service provider's specifications of the features to be used for each
subscriber or group of subscribers, the available services and when to provide
them, and the policies for routing calls across the packet core. The PSX6000
does not handle voice calls directly; instead, it controls a GSX9000 to
implement the necessary services. The PSX6000 supports a broad range of carrier
switching requirements and provides a platform upon which new services can be
easily and quickly created and implemented. It allows carriers to deploy a
circuit-switched, packet, or converged circuit/packet infrastructure with the
capacity, reliability and intelligence that they require. Functions such as
provisioning, service selection and routing can be centralized in a small number
of PSX6000 Soft Switches.

The PSX6000 can reside in a wide range of standard hardware platforms to fit
any size network. It may be replicated as required for high availability or to
support very high call processing requirements. The service provider can
designate a primary softswitch to control each GSX9000 gateway. In case of a
failure of the primary PSX6000, the GSX9000 will transparently transfer control
to another PSX6000 without affecting calls.

We believe the PSX6000 has the flexibility to support the requirements of
the full range of service providers. Typical applications include Internet
offload, PRI switching, domestic and international direct dial, business direct
access, virtual private networks, and toll/tandem switching. The PSX6000 also
facilitates new applications and services, integrating enhanced applications on
IP-based platforms similar to Internet Web servers.

SGX2000 SS7 SIGNALING GATEWAY

The Sonus SGX2000 SS7 Signaling Gateway offers carriers a comprehensive and
cost-effective SS7 signaling solution that provides interconnection between the
traditional public telephone

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<PAGE>
network and elements of our Open Services Architecture. With the SGX2000,
existing public telephone network voice switches can interact with the Sonus
GSX9000 using the same signaling methods they would use with other circuit
switches. This compatibility means that carriers can preserve their existing
investment in infrastructure, and can offer their customers the full range of
normal public telephone network services, such as 800 services and 1+ dialing in
the new public network.

The SGX2000 also supports full access to SS7 service control points. Using
the SGX2000, our products gain access to signal control processor-based
applications such as 800 number translation and local number portability. This
support allows service providers to preserve their application investment and
ensure compatibility between applications common to both circuit and packet
voice services. The SGX2000 supports up to 64 A-links to the SS7 network, and
transports the SS7 messages to other network devices using IP protocols. The
SGX2000 can be deployed in a redundant configuration, providing the performance
and high availability required of a carrier-class SS7 solution.

SYSTEM 9200

Our System 9200 Internet offload solution is a turnkey product that allows
local service providers, including CLECs, to more effectively handle the rapidly
increasing amount of modem-originated Internet traffic traversing voice
networks. The System 9200 is designed to divert Internet traffic from expensive
circuit switches as calls enter the network, enabling service providers to
improve network performance and significantly reduce network operating costs.

The System 9200 utilizes the technology delivered in the GSX9000, PSX6000
and SGX2000 to provide a smooth migration to packetized voice and data
transport.

CUSTOMER SUPPORT AND PROFESSIONAL SERVICES

We believe our comprehensive technical customer support and professional
services capabilities are an important element of our solution for customers.
These services cover the full network lifecycle: planning; design; installation;
and operations. We help our customers create or revise their business plans and
design their networks and also provide the following:

- turnkey network installation services;

- 24-hour technical support; and

- educational services to customer personnel on the installation, operation
and maintenance of our equipment.

We have established a technical assistance center at our headquarters in
Westford, Massachusetts. The technical assistance center provides customers with
periodic updates to our software and product documentation. We offer our
customers a variety of service plans.

A key differentiator of our support activities is our professional services
group, many members of which hold advanced technical degrees in electrical
engineering or related disciplines. We offer a broad range of professional
services, including sophisticated network deployment, assistance with logistics
and project management support.

We also maintain a customer support laboratory in which customers can test
the utility of our products for their specific applications and in which they
can gain an understanding of the applications enabled by the converged network.

30
<PAGE>
CUSTOMERS

Our target customer base includes competitive local exchange carriers,
incumbent local exchange carriers, long distance carriers, Internet service
providers, cable operators, wholesale carriers and PTTs, or international
telephone companies. We have shipped products to several customers, including
Global Crossing and Williams Communications.

SALES AND MARKETING

We sell our products through a direct sales force and resellers, including
Lucent Technologies, who represents us as a sales agent for one of our
customers, Global Crossing. In addition, we intend to establish relationships
with selected original equipment manufacturers and other marketing partners in
order to serve particular markets or geographies and provide our customers with
opportunities to purchase our products in combination with related services and
products. As of February 29, 2000, our sales and marketing organization
consisted of 33 employees, of which 14 are located in our headquarters in
Westford, Massachusetts, and 19 are located in sales and support offices around
the United States and in the United Kingdom.

RESEARCH AND DEVELOPMENT

We believe that strong product development capabilities are essential to our
strategy of enhancing our core technology, developing additional applications,
incorporating that technology into new products and maintaining the
comprehensiveness of our product and service offerings. Our research and
development process is driven by the availability of new technology, market data
and customer feedback. We have invested significant time and resources in
creating a structured process for undertaking all product development projects.

We have assembled a team of highly skilled engineers with significant
telecommunications and networking industry experience. Our engineers have
experience in, and have been drawn, from leading computer data networking,
telecommunications and multimedia companies. As of February 29, 2000, we had 100
employees responsible for research and development, of which 77 were software
and quality assurance engineers and 23 were hardware engineers. Our engineering
effort is focused on new applications and network access features, new network
interfaces, improved scalability, quality, reliability and next generation
technologies.

We have made, and intend to continue to make, a substantial investment in
research and development. Research and development expenses were $299,000 for
the period from inception on August 7, 1997 to December 31, 1997, $5.9 million
for the year ended December 31, 1998 and $10.9 million for the year ended
December 31, 1999.

COMPETITION

The market for voice infrastructure products for the new public network is
intensely competitive, subject to rapid technological change and significantly
affected by new product introductions and other market activities of industry
participants. We expect competition to persist and intensify in the future. Our
primary sources of competition include vendors of networking and
telecommunications equipment, such as Cisco Systems, Lucent Technologies, Nortel
Networks, Siemens and Tellabs, and private companies that have focused on our
target market. In addition, Lucent Technologies, who represents us as a sales
agent for one of our customers, Global Crossing, is also a direct competitor.
Many of our competitors have significantly greater financial resources than we
do and are able to devote greater resources to the development, promotion, sale
and support of their products. In addition, many of our competitors have more
extensive customer bases and broader customer relationships than we do,
including relationships with our potential customers.

31
<PAGE>
In order to compete effectively, we must deliver products that:

- provide extremely high network reliability and voice quality;

- scale easily and efficiently;

- interoperate with existing network designs and other vendors' equipment;

- provide effective network management;

- are accompanied by comprehensive customer support and professional
services; and

- provide a cost-effective and space-efficient solution for service
providers.

In addition, we believe that the ability to provide vendor-sponsored
financing, which some of our competitors currently offer, is an important
competitive factor in our market.

INTELLECTUAL PROPERTY

Our success and ability to compete are dependent on our ability to develop
and maintain our technology and operate without infringing on the proprietary
rights of others. We rely on a combination of patent, trademark, trade secret
and copyright law and contractual restrictions to protect the proprietary
aspects of our technology. These legal protections afford only limited
protection for our technology. We presently have two patent applications pending
in the United States and abroad and we cannot be certain that patents will be
granted based on these or any other applications. We seek to protect our
intellectual property by:

- protecting our source code for our software, documentation and other
written materials under trade secret and copyright laws;

- licensing our software pursuant to signed license agreements, which impose
restrictions on others' ability to use our software; and

- seeking to limit disclosure of our intellectual property by requiring
employees and consultants with access to our proprietary information to
execute confidentiality agreements.

Due to rapid technological change, we believe that factors such as the
technological and creative skills of our personnel, new product developments and
enhancements to existing products are more important than the various legal
protections of our technology to establishing and maintaining technology
leadership.

We have incorporated third-party licensed technology into our current
products. From time to time, we may be required to license additional technology
from third parties to develop new products or product enhancements. Third-party
licenses may not be available or continue to be available to us on commercially
reasonable terms. The inability to maintain any third-party licenses required in
our current products, or to obtain any new third-party licenses to develop new
products and product enhancements could require us to obtain substitute
technology of lower quality or performance standards or at greater cost, and
prevent us from making these products or enhancements, either of which could
seriously harm the competitiveness of our products.

MANUFACTURING

Currently, we outsource the manufacturing of our products. Our contract
manufacturers provide comprehensive manufacturing services, including assembly
of our products and procurement of materials on our behalf. We perform final
test and assembly at our Westford headquarters to ensure that we meet our
internal and external quality standards. We believe that outsourcing our
manufacturing will enable us to conserve working capital, better adjust
manufacturing volumes to meet changes in demand and more quickly deliver
products. At present, we purchase products

32
<PAGE>
from our outside contract manufacturers on a purchase order basis. We may not be
able to enter into long-term contracts on terms acceptable to us, if at all.

EMPLOYEES

As of February 29, 2000, we had a total of 176 employees, including 100 in
research and development, 33 in sales and marketing, 21 in customer support and
professional services, 15 in manufacturing and seven in finance and
administration. Our employees are not represented by any collective bargaining
unit. We believe our relations with our employees are good.

PROPERTIES

Our headquarters are currently located in a leased facility in Westford,
Massachusetts, consisting of approximately 40,000 square feet under a lease that
expires in 2004. We also lease short-term office space in Colorado and New
Jersey. We believe that during 2000 we will need additional space to accommodate
our growth and that this space will be available.

LEGAL PROCEEDINGS

We are not currently a party to any material litigation.

33
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth our executive officers and directors, their
respective ages and positions as of December 31, 1999.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ------------------------------------------
<S> <C> <C>
Rubin Gruber.............................. 55 Chairman of the Board of Directors
Hassan M. Ahmed........................... 42 President, Chief Executive Officer and
Director
Michael G. Hluchyj........................ 45 Chief Technology Officer, Vice President
and Secretary
Jeffrey Mayersohn......................... 48 Vice President of Customer Support and
Professional Services
Stephen J. Nill........................... 48 Chief Financial Officer, Vice President of
Finance and Administration and Treasurer
Gary A. Rogers............................ 44 Vice President of Sales and Marketing
Frank T. Winiarski........................ 57 Vice President of Manufacturing
Kwok P. Wong.............................. 42 Vice President of Engineering
Edward T. Anderson (1).................... 50 Director
Paul J. Ferri (1) (2)..................... 61 Director
Paul J. Severino (1) (2).................. 53 Director
</TABLE>

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

(1) Member of audit committee.

(2) Member of compensation committee.

RUBIN GRUBER is one of our founders and has been a Director since
November 1997 and Chairman of our Board of Directors since November 1998. From
November 1997 until November 1998, Mr. Gruber was our President. Before founding
Sonus, Mr. Gruber was a founder of VideoServer, Inc., now Ezenia!, Inc., a
manufacturer of videoconference network equipment and from February 1992 until
September 1996 served as Vice President of Business Development. Previously,
Mr. Gruber was a founder and served as President of both Cambridge
Telecommunications, Inc., a manufacturer of networking equipment, and Davox
Corporation, a developer of terminals supporting voice and data applications,
and served as a Senior Vice President of Bolt, Beranek and Newman Communications
Corporation, a manufacturer of data communications equipment. Mr. Gruber also
serves on the board of directors of the International SoftSwitch Consortium.
Mr. Gruber holds a B.Sc. in mathematics from McGill University and a M.A. in
mathematics from Wayne State University.

HASSAN M. AHMED is our President and Chief Executive Officer and has been a
member of our Board of Directors since November 1998. From July 1998 to
November 1998, Mr. Ahmed was Executive Vice President and General Manager of the
Core Switching Division of Ascend Communications, Inc., a provider of wide area
network switches and access data networking equipment, and from July 1997 until
July 1998 was a Vice President and General Manager of the Core Switching
Division. From June 1995 to July 1997, Mr. Ahmed was Chief Technology Officer
and Vice President of Engineering for Cascade Communications Corp., a provider
of wide area network switches. From 1993 until June 1995, Mr. Ahmed was a
founder and President of WaveAccess, Inc., a supplier of wireless
communications. Prior to that, he was an Associate Professor at Boston
University, Engineering Manager at Analog Devices, a chip manufacturer, and
director of VSLI Systems at Motorola Codex, a supplier of communications
equipment. Mr. Ahmed

34
<PAGE>
holds a B.S. and M.S. in engineering from Carleton University and a Ph.D. in
engineering from Stanford University.

MICHAEL G. HLUCHYJ is one of our founders and has been our Chief Technology
Officer and Vice President since November 1997. He also has been our Secretary
since our inception, our President from August 1997 to November 1997, our
Treasurer from inception until March 2000 and a Director from our inception
until November 1998. From July 1994 until July 1997, he was Vice President and
Chief Technology Officer at Summa Four, Inc., a supplier of switches for carrier
networks. Previously, he was Director of Networking Research at Motorola Codex
and on the technical staff at AT&T Bell Laboratories. Mr. Hluchyj holds a B.S.
degree in engineering from the University of Massachusetts, and M.S. and Ph.D.
degrees in engineering from the Massachusetts Institute of Technology.

JEFFREY MAYERSOHN has been our Vice President of Customer Support and
Professional Services since July 1999. From March 1998 until July 1999, he was
our Vice President of Carrier Relations. From June 1997 to March 1998,
Mr. Mayersohn was a Senior Vice President at GTE Internetworking, an Internet
service provider. From January 1995 to June 1997, he was with BBN Corporation,
formerly Bolt, Beranek and Newman, Inc., and was a Vice President at the BBN
Planet division, an Internet service provider. From 1978 to January 1995, he
held a number of positions at Bolt, Beranek and Newman, Inc., including Senior
Vice President of Engineering, Senior Vice President responsible for U.S.
Government Networks and Vice President of Professional Services for BBN
Communications Corporation, a wholly owned subsidiary. Mr. Mayersohn holds an
A.B. in physics from Harvard College and a M.Phil. in physics from Yale
University.

STEPHEN J. NILL has been our Chief Financial Officer and Vice President of
Finance and Administration since September 1999 and our Treasurer since
March 2000. From June 1994 until August 1999, he was Vice President of Finance
and Chief Financial Officer of VideoServer, Inc., now Ezenia!, Inc. Previously
he served at Lotus Development Corporation, a software supplier, as Corporate
Controller and Chief Accounting Officer. Prior to that, Mr. Nill held various
financial positions with Computervision, Inc., a supplier of workstation-based
software, International Business Machines Corporation and Arthur Andersen LLP.
Mr. Nill has a B.A. in accounting from New Mexico State University and a M.B.A.
from Harvard University.

GARY A. ROGERS has been our Vice President of Sales and Marketing since
March 1999. From February 1997 to March 1999, Mr. Rogers was Senior Vice
President of Worldwide Sales and Operations at Security Dynamics, Inc., now RSA
Security, Inc., a supplier of network security products. Previously, he served
at Bay Networks, Inc., a provider of Internetworking communications products, as
Vice President of International Sales from July 1996 to February 1997 and as
Vice President of Europe, Middle East and Africa from 1994 until July 1996.
Prior to that, he held sales and marketing positions with International Business
Machines Corporation. Mr. Rogers holds a B.S. degree in mathematics from
Dartmouth College and a M.B.A. from the University of Chicago.

FRANK T. WINIARSKI has been our Vice President of Manufacturing since
July 1998. From June 1997 until June 1998, he was Vice President of
Manufacturing at Net2Net, Inc., a supplier of network analyzers. From June 1992
until June 1997, he was Vice President of Manufacturing at VideoServer, Inc.,
now Ezenia!, Inc. Previously, Mr. Winiarski was Vice President of Manufacturing
at Synernetics, a supplier of local area networks, Vice President of Operations
at Ashton-Tate Corporation, a software supplier, and held various positions with
Digital Equipment Corporation, a computer equipment manufacturer. He holds a
B.S. in engineering from the University of Idaho and a M.B.A. from Boston
University.

KWOK P. WONG is one of our founders and has been our Vice President of
Engineering since November 1997. From 1991 to November 1997, he was director of
software development at

35
<PAGE>
VideoServer, Inc., now Ezenia!, Inc. Previously, Mr. Wong was Manager of Systems
Networks Architecture at Bolt, Beranek and Newman Communications Corporation and
was a software engineer at Davox Corporation. Mr. Wong has a B.S. in engineering
and a M.S. in computer science from Northeastern University.

EDWARD T. ANDERSON has been a Director since November 1997. Mr. Anderson has
been managing general partner of North Bridge Venture Partners, a venture
capital firm, since 1994. Previously, he was a general partner for ABS Ventures,
the venture capital affiliate of Alex Brown & Sons. He has a M.F.A. from the
University of Denver and a M.B.A. from Columbia University.

PAUL J. FERRI has been a Director since November 1997. Mr. Ferri has been a
general partner of Matrix Partners, a venture capital firm, since 1982. He also
serves on the board of directors of Applix, Inc. and Sycamore Networks, Inc.
Mr. Ferri has a B.S. in engineering from Cornell University, a M.S. in
engineering from Polytechnic Institute of New York and a M.B.A. from Columbia
University.

PAUL J. SEVERINO has been a Director since March 1999. Mr. Severino is a
private investor. He has been Chairman of NetCentric Corporation, a provider of
Internet telephony applications since January 1998 and was Acting Chief
Executive Officer from January 1998 to March 1999. From November 1996 until
January 1998, Mr. Severino was a private investor. From 1994 to October 1996, he
was Chairman of Bay Networks, Inc. after its formation from the merger of
Wellfleet Communications, Inc. and Synoptics Communications, Inc. Prior to that,
he was a founder, President and Chief Executive Officer of Wellfleet
Communications, Inc. He also serves on the board of directors of
Interspeed, Inc., MCK Communications, Inc., Media 100, Inc., and Silverstream
Software, Inc. Mr. Severino has a B.S. in engineering from Rensselaer
Polytechnic Institute.

Each executive officer serves at the discretion of the board of directors
and holds office until his or her successor is elected and qualified or until
his or her earlier resignation or removal. There are no family relationships
among any of our directors or executive officers. Each of the directors serves
on the board of directors pursuant to the terms of an agreement that will
terminate upon the closing of this offering.

ELECTION OF DIRECTORS

Following this offering, the board of directors will be divided into three
classes, with members of each class serving for a staggered three-year term.
Messrs. Ferri and Gruber will serve in the class whose term expires in 2001;
Messrs. Ahmed and Severino will serve in the class whose term expires in 2002;
and Mr. Anderson will serve in the class whose term expires in 2003. Upon the
expiration of the term of a class of directors, directors in that class will be
elected for three-year terms at the annual meeting of stockholders in the year
in which their term expires.

COMPENSATION OF DIRECTORS

We reimburse directors for reasonable out-of-pocket expenses incurred in
attending meetings of the board of directors. In March 2000, our board of
directors granted to each of our non-employee directors an option exercisable
for 10,000 shares of common stock, subject to vesting over a four-year period
pursuant to our own 1997 Stock Incentive Plan. See "Certain Transactions--
Common Stock Issuances" and "--Benefit Plans; 1997 Stock Incentive Plan."

BOARD COMMITTEES

The board of directors has established a compensation committee and an audit
committee. The compensation committee, which consists of Messrs. Ferri and
Severino, reviews executive salaries, administers bonuses, incentive
compensation and stock plans, and approves the salaries

36
<PAGE>
and other benefits of our executive officers. In addition, the compensation
committee consults with our management regarding our benefit plans and
compensation policies and practices.

The audit committee, which consists of Messrs. Anderson, Ferri and Severino,
reviews the professional services provided by our independent accountants, the
independence of our accountants from our management, our annual financial
statements and our system of internal accounting 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.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to the appointment of the compensation committee, our full board of
directors, which includes Messrs. Gruber and Ahmed, was responsible for the
functions of a compensation committee. Messrs. Gruber and Ahmed did not
participate in deliberations regarding their own compensation. No interlocking
relationship exists between any member of our board of directors or our
compensation committee and any member of the board of directors or compensation
committee of any other company, and none of these interlocking relationships
have existed in the past.

EXECUTIVE COMPENSATION

The table below sets forth, for the year ended December 31, 1999, the
compensation earned by:

- our Chairman of the Board of Directors;

- our Chief Executive Officer; and

- the other three most highly compensated executive officers who received
annual compensation in excess of $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------
-------------------- ALL OTHER RESTRICTED STOCK
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION AWARDS (3)
- --------------------------- --------- -------- ------------ -------------------
<S> <C> <C> <C> <C>
Rubin Gruber
Chairman of the Board of
Directors........................... $150,000 $ -- $ -- $ --
Hassan M. Ahmed
President and Chief Executive
Officer............................. 186,417 75,000 -- --
Michael G. Hluchyj
Chief Technology Officer,
Vice President and Secretary........ 150,000 -- -- --
Jeffrey Mayersohn
Vice President of Customer Support
and Professional Services........... 150,000 -- -- --
Gary A. Rogers
Vice President of Sales and
Marketing........................... 111,371(1) -- 99,107(2) 0(4)
</TABLE>

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

(1) Represents the total amount of compensation Mr. Rogers received in fiscal
1999 for the portion of the year during which he was one of our executive
officers. Mr. Rogers joined us in March 1999.

37
<PAGE>
(2) Represents commission income.

(3) On December 31, 1999, the remaining number of shares of restricted common
stock held by the above executive officers that had not vested and the value
of this stock as of December 31, 1999, was as follows: Mr. Gruber: 908,124
shares, $ ; Mr. Ahmed: 2,031,804 shares, $ ; Mr. Hluchyj:
1,084,219 shares, $ ; Mr. Mayersohn: 487,500 shares, $ ; and
Mr. Rogers: 625,000 shares, $ . The value is based on the mid-point of
the estimated public offering price range set forth on the cover page of
this prospectus less the purchase price paid. The holders of these shares of
restricted common stock will be entitled to receive any dividends we pay on
our common stock.

(4) In April 1999, we sold 625,000 shares of restricted common stock to
Mr. Rogers, subject to our right to repurchase at $0.20 per share, the then
current fair market value of the common stock as determined by our board of
directors. Our repurchase right lapses 20% one year from the date
Mr. Rogers commenced employment and thereafter lapses an additional 1.6667%
of the shares for each month of employment. There was no public trading
market for the common stock in April 1999. Our board of directors determined
the market value of the common stock based on various factors including the
illiquid nature of an investment in our common stock, our historical
performance, the preferences, including liquidation and redemption of our
outstanding redeemable convertible preferred stock, our future prospects and
the price for securities sold in arms' length issuances to third parties.

BENEFIT PLANS

1997 STOCK INCENTIVE PLAN

Our 1997 Stock Incentive Plan provides for the grant of incentive stock
options, nonqualified stock options, restricted stock awards and stock grants to
our employees, directors and consultants.

In March 2000, our board of directors approved, subject to stockholder
approval, an amendment to increase the maximum number of shares of common stock
reserved for issuance under our 1997 plan to 27,000,000. This maximum number of
shares will increase, effective as of January 1, 2001 and each January 1
thereafter during the term of the plan, by an additional number of shares of
common stock in an amount equal to the lesser of (1) 5% of the total number of
shares of common stock issued and outstanding as of the close of business on
December 31 of the preceding year or (2) a number of shares determined by our
board of directors. As of December 31, 1999, we had 1,688,175 shares available
for future grant under the 1997 Plan and have 13,307,494 shares outstanding,
consisting of shares of restricted common stock and options for the purchase of
1,017,581 shares of common stock.

Our board of directors has authorized the compensation committee to
administer our 1997 plan, including the granting of options and restricted stock
to our executive officers. Subject to any applicable limitations contained in
our 1997 plan, our board of directors, our compensation committee or executive
officers to whom our board of directors delegates authority, as the case may be,
selects the recipients of awards and determines:

- the number of shares of common stock covered by options and the dates upon
which any option grants vest and become exercisable;

- the exercise price of options;

- the duration of options; and

38
<PAGE>
- the number of shares of common stock subject to any restricted stock or
other stock awards and the terms and conditions of these awards, including
the conditions for repurchase, issue price and repurchase price.

Generally, options and restricted stock under the 1997 plan vest over four
to five year periods from the date of grant. In the event of a merger,
consolidation or other acquisition event resulting in a change in control of
Sonus, outstanding options and restricted stock will accelerate in vesting by
12 months. Our board of directors may in its discretion accelerate the vesting
of any options or restricted grant at any time. The restrictions on restricted
stock granted to some of our executive officers lapse in full upon a change in
control. Upon a change in control, the acquiring or successor corporation may
assume or make substitutions for options or stock outstanding under our 1997
plan.

The board of directors may amend, modify, suspend or terminate our 1997 plan
at any time, subject to applicable law and the rights of holders of outstanding
options and restricted stock awards. Our 1997 plan will terminate in
November 2007, unless the board of directors terminates it prior to that time.

2000 EMPLOYEE STOCK PURCHASE PLAN

Our 2000 Employee Stock Purchase Plan was adopted by our board of directors
in March 2000, subject to stockholder approval. The purchase plan authorizes the
issuance of up to a total of 1,200,000 shares of our common stock to
participating employees. This number of shares will increase, effective as of
January 1, 2001 and each January 1 thereafter during the term of the plan, by an
additional number of shares of common stock in an amount equal to the lesser of
(1) 2% of the total number of shares of common stock issued and outstanding as
of the close of business on December 31 of the preceding year or (2) a number of
shares determined by our board of directors. Unless terminated earlier by our
board of directors, the purchase plan shall terminate in March 2010.

The employee stock purchase plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, will be implemented by a series of
overlapping 24-month offering periods. New offering periods, other then the
first offering period, will commence on March 1 and September 1 of each year.
Each offering period will generally consist of four consecutive six-month
purchase periods, and at the end of each six-month period an automatic purchase
will be made for participants. The initial offering and initial purchase periods
are expected to commence on the date of this offering. The 2000 employee stock
purchase plan will be administered by the board of directors or by a committee
appointed by the board. Employees of ours, or of any majority-owned subsidiary
designated by the board, are eligible to participate if we or any subsidiary
employs them for at least 20 hours per week and more than five months per year.
Eligible employees may purchase common stock through payroll deductions, which
in any event may not exceed 20% of an employee's compensation, at a price equal
to the lower of 85% of the fair market value of the common stock at the
beginning of each offering period or at the end of each purchase period.
Employees may end their participation in the 2000 employee stock purchase plan
at any time during an offering period and participation ends automatically on
termination of employment.

Under the 2000 employee stock purchase plan, no employee shall be granted an
option under the plan if immediately after the grant the employee would own
stock and/or hold outstanding options to purchase stock equaling 5% or more of
the total voting power or value of all classes of our stock. In addition, no
employee shall be granted an option under the 2000 employee stock purchase plan
if the option would permit the employee to purchase stock under all of our
employee stock purchase plans in an amount that exceeds $25,000 of fair market
value for each calendar year in which the option is outstanding at any time. In
addition, no employee may purchase more

39
<PAGE>
than 2,500 shares of common stock under the 2000 employee stock purchase plan in
any one purchase period. If the fair market value of the common stock on a
purchase date other than the final purchase date of an offering is less than the
fair market value at the beginning of the offering period, each participant
shall automatically be withdrawn from the offering period as of the purchase
date and re-enrolled in a new 24 month offering period beginning on the first
business day following the purchase date.

In the event of a merger, consolidation or other acquisition event resulting
in any change of control of Sonus, each right to purchase stock under the 2000
employee stock purchase plan will be assumed or an equivalent right will be
substituted by the successor corporation. Our board of directors will shorten
any ongoing offering period, however, so that employees' rights to purchase
stock under the 2000 employee stock purchase plan are exercised prior to the
transaction in the event that the successor corporation refuses to assume each
purchase right or to substitute an equivalent right. The board of directors has
the power to amend or terminate the 2000 employee stock purchase plan and to
change or terminate offering periods as long as any action does not adversely
affect any outstanding rights to purchase stock. Our board of directors may
amend or terminate the 2000 employee stock purchase plan or an offering period
even if it would adversely affect outstanding options in order to avoid us
incurring adverse accounting charges. We have not issued any shares under the
2000 employee stock purchase plan to date.

401(K) PLAN

On February 27, 1998, we adopted an employee savings and retirement plan,
qualified under Section 401(k) of the Internal Revenue Code, covering all of our
employees. Pursuant to the 401(k) plan, employees may elect to reduce their
current compensation by up to the statutorily prescribed annual limit and have
the amount of the reduction contributed to the 401(k) plan. We may make matching
or additional contributions to the 401(k) plan in amounts to be determined
annually by our board of directors. We have made no contributions to the 401(k)
plan to date.

40
<PAGE>
CERTAIN TRANSACTIONS

PREFERRED STOCK ISSUANCES

Since November 1997, we have issued and sold shares of Series A, Series B
and Series C redeemable convertible preferred stock to the following persons and
entities who are our executive officers, directors or 5% or greater
stockholders. Upon the closing of this offering, each share of Series A,
Series B and Series C redeemable convertible preferred stock will automatically
convert into 2.5 shares of common stock. For more detail on shares to be held by
these purchasers after conversion, see "Principal Stockholders."

<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
INVESTOR PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
- -------- --------------- --------------- ---------------
<S> <C> <C> <C>
Matrix Partners and affiliated entities (1)..... 2,100,000 600,000 230,266
North Bridge Venture Partners and affiliated
entities (2).................................. 2,100,000 600,000 230,266
Charles River Ventures and affiliated
entities...................................... 2,100,000 600,000 230,265
Bedrock Capital Partners and affiliated
entities...................................... 275,000 1,180,000 124,088
Paul J. Severino................................ -- 50,000 4,264
Rubin Gruber.................................... 25,000 -- --
Kwok P. Wong.................................... 25,000 -- --
Michael G. Hluchyj.............................. 20,000 -- --
Frank T. Winiarski.............................. -- 10,000 853
</TABLE>

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

(1) Composed of Matrix Partners V, L.P. and Matrix V Entrepreneurs Fund, L.P.
with the general partner being Matrix V Management Co., L.L.C. Paul J.
Ferri, one of our directors, is a general partner of Matrix V Management
Co., L.L.C.

(2) Composed of North Bridge Venture Partners II, L.P. and North Bridge Venture
Partners III, L.P. with the general partners being North Bridge Venture
Management II, L.P. and North Bridge Venture Management III, L.P. Edward T.
Anderson one of our directors, is a general partner of North Bridge Venture
Management II and III, L.P.

SERIES A FINANCING. In November 1997 and July 1998, we issued an aggregate
of 7,180,000 shares of Series A preferred stock to investors, including Rubin
Gruber, Kwok P. Wong, Michael G. Hluchyj, and entities affiliated with Matrix
Partners, North Bridge Venture Partners, Charles River Ventures and Bedrock
Capital Partners. The per share purchase price for our Series A preferred stock
was $1.00.

SERIES B FINANCING. In September 1998, December 1998, and May 1999, we
issued an aggregate of 3,204,287 shares of Series B preferred stock to
investors, including Paul J. Severino, Frank T. Winiarski, and entities
affiliated with Matrix Partners, North Bridge Venture Partners, Charles River
Ventures and Bedrock Capital Partners. The per share purchase price for our
Series B preferred stock was $5.00.

SERIES C FINANCING. In September 1999, November 1999 and December 1999, we
issued an aggregate of 1,939,681 shares of Series C preferred stock to
investors, including Paul J. Severino, Frank T. Winiarski, and entities
affiliated with Matrix Partners, North Bridge Venture Partners, Charles River
Ventures and Bedrock Capital Partners. The per share purchase price for our
Series C preferred stock was $11.81.

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<PAGE>
COMMON STOCK ISSUANCES

The following table presents information regarding our issuances of common
stock to some of our executive officers. We issued the shares of common stock
set forth below in the table pursuant to stock restriction agreements with each
of the executive officers that give us rights to repurchase all or a portion of
the shares at their original purchase price in the event the officer ceases to
be our employee. Some of these stock restriction agreements prohibit us from
repurchasing some or all of the shares following a change in control of Sonus.

<TABLE>
<CAPTION>
DATE OF NUMBER OF AGGREGATE
NAME ISSUANCE SHARES PURCHASE PRICE
- ---- -------- --------- --------------
<S> <C> <C> <C>
Rubin Gruber............................................ 11/10/97 3,212,499 $ 12,850
Hassan M. Ahmed......................................... 11/4/98 3,212,499 321,250
Michael G. Hluchyj...................................... 8/26/97 2,409,375 1,000
Jeffrey Mayersohn....................................... 4/14/98 749,999 15,000
Gary A. Rogers.......................................... 4/30/99 625,000 125,000
Stephen J. Nill......................................... 9/1/99 562,500 112,500
</TABLE>

Other executive officers have purchased shares of common stock pursuant to
similar stock restriction agreements for aggregate purchase prices that did not
exceed $60,000 for any one executive officer. The repurchase right generally
lapses as to 20% of the shares approximately one year from the hire date of the
executive officer and thereafter lapses as to an additional 1.6667% of the
shares for each month of employment completed by the executive officer.

In April 1999, we issued 87,500 shares of common stock for $17,500 to Paul
J. Severino, one of our directors. See "Certain Transactions-Preferred Stock
Issuances" herein for additional issuances of stock to Mr. Severino.

AGREEMENTS WITH EXECUTIVE OFFICERS

On November 4, 1998, in connection with the issuance of restricted common
stock, we loaned $257,000 to Hassan M. Ahmed, our President and Chief Executive
Officer. The loan is secured by 2,570,000 shares of our restricted common stock
and bears interest at 8% per year. The loan is due upon the earlier of
November 4, 2003 or 180 days after his shares are eligible for public sale.

The Company has agreed to pay Mr. Ahmed a $275,000 bonus upon the closing of
this offering or upon a merger, consolidation or other acquisition event
resulting in any change of control of Sonus for a minimum purchase price of
$100 million.

On September 1, 1999, in connection with the issuance of restricted common
stock, we loaned $110,250 to Stephen J. Nill, our Chief Financial Officer, Vice
President of Finance and Administration and Treasurer. The loan is secured by
562,500 shares of his common stock and is a full recourse note, which bears
interest at 8% per year. The loan is due upon the earlier of September 1, 2004
or 180 days after his shares are eligible for public sale.

We believe that all of the transactions set forth above were made on terms
no less favorable to us than could have been obtained from unaffiliated third
parties. All future transactions, including loans between us and our officers,
directors, principal stockholders and their affiliates will be approved by a
majority of the board of directors, including a majority of the independent and
disinterested directors on the board of directors, and will be on terms no less
favorable to us than could be obtained from unaffiliated third parties.

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<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership of
our common stock as of January 31, 2000 and as adjusted to reflect the sale of
our common stock offered in this prospectus by:

- each person who beneficially owns more than 5% of the outstanding shares
of our common stock;

- each of our executive officers listed in the Summary Compensation Table;

- each of our directors; and

- all of our executive officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes voting and investment power
with respect to shares. Unless otherwise indicated below, to our knowledge, all
persons named in the table have sole voting and investment power with respect to
their shares of common stock, except to the extent authority is shared by
spouses under applicable law.

The number of shares of common stock deemed outstanding prior to this
offering includes shares of common stock outstanding as of January 31,
2000, after giving effect to the sale in March 2000 of shares of Series D
redeemable convertible preferred stock and assuming conversion of all
outstanding shares of redeemable convertible preferred stock into common stock.
The number of shares of common stock deemed outstanding after this offering
includes the shares that are being offered for sale by us in this
offering. Unless otherwise indicated below, the address of each listed
stockholder is care of Sonus Networks, Inc., 5 Carlisle Road, Westford,
Massachusetts 01886.

<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF COMMON STOCK
SHARES ----------------------
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------------ ------------------ -------- --------
<S> <C> <C> <C>
Paul J. Ferri (1)........................................ 7,325,664 13.5%
Matrix Partners and affiliated entities (1).............. 7,325,664 13.5%
Edward T. Anderson (2)................................... 7,325,664 13.5%
North Bridge Venture Partners and affiliated entities
(2).................................................... 7,325,664 13.5%
Charles River Ventures and affiliated entities (3)....... 7,325,661 13.5%
Bedrock Capital Partners and affiliated entities (4)..... 3,947,718 7.3%
Hassan M. Ahmed (5)...................................... 3,182,499 5.9%
Michael G. Hluchyj (6)................................... 2,384,375 4.4%
Rubin Gruber (7)......................................... 1,355,916 2.5%
Jeffrey Mayersohn (8).................................... 699,999 1.3%
Gary A. Rogers (9)....................................... 625,000 1.2%
Paul J. Severino (10).................................... 153,160 *
All executive officers and directors
as a group (11 persons)(11)............................ 25,431,515 46.9%
</TABLE>

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

* Less than 1% of the outstanding common stock.

(1) Composed of 6,593,097 shares held by Matrix Partners V, L.P. and 732,567
shares held by Matrix V Entrepreneurs Fund, L.P. Matrix V Management Co.,
L.L.C. is the general partner of the aforementioned entities. Paul J. Ferri
is a director of Sonus and is a general partner of Matrix V Management Co.,
L.L.C. Mr. Ferri disclaims beneficial ownership of the shares held by these

43
<PAGE>
entities except to the extent of his proportionate pecuniary interest
therein. The address of Mr. Ferri and Matrix Partners and its affiliated
entities is in care of Matrix V Management Co., L.L.C., 1000 Winter Street,
Suite 4500, Waltham, MA 02154.

(2) Composed of 6,300,017 shares held by North Bridge Venture Partners II, L.P.
and 1,025,647 shares held by North Bridge Venture Partners III, L.P. The
general partner for North Bridge Venture Partners II, L.P is North Bridge
Venture Management II, L.P., and for North Bridge Venture Partners III, L.P.
is North Bridge Venture Management III, L.P. Edward T. Anderson is a
director of Sonus, and is a general partner of both North Bridge Venture
Management II and III, L.P. Mr. Anderson disclaims beneficial ownership of
the shares held by these entities except to the extent of his proportionate
pecuniary interest therein. The address of Mr. Anderson and North Bridge
Venture Partners and its affiliated entities is in care of North Bridge
Venture Management II and III, L.P., 950 Winter Street, Suite 4600, Waltham,
MA 02451.

(3) Composed of 7,193,032 shares held by Charles River Partnership VIII, L.P.
and 132,629 shares held by Charles River VIII-A LLC. Charles River
Partnership VIII GP Limited Partnership is the general partner of the
Charles River Partnership VIII, L.P. and Charles River Friends VIII, Inc. is
the manager of Charles River VIII-A LLC. The address of Charles River
Ventures and its affiliated entities is in care of Charles River VIII GP
Limited Partnership, 1000 Winter Street, Suite 3300, Waltham, MA 02154.

(4) Composed of 3,657,832 shares held by Bedrock Capital Partners I, L.P.,
127,464 shares held by VBW Employee Bedrock Fund, and 162,422 shares held by
Credit Suisse First Boston Bedrock Fund, L.P. Bedrock General Partner I, LLC
is the general partner for these entities. The address of Bedrock Capital
Partners and its affiliated entities is in care of Bedrock General Partner,
I, L.L.C., One Boston Place, Suite 3310, Boston, MA 02108.

(5) Includes 2,570,000 shares subject to a stock pledge agreement in favor of
Sonus. Includes 2,379,374 shares which are subject to our right to
repurchase at cost upon cessation of employment, includes 400,000 shares
held by the Hassan and Aliya Family Trust on behalf of his minor children,
and 566,666 shares held by the 1999 Hassan M. Ahmed Generation Skipping
Family Trust on behalf of his family. Mr. Ahmed disclaims beneficial
ownership of the shares held by these trusts.

(6) Includes 1,044,063 shares which are subject to our right to repurchase at
cost upon cessation of employment and includes an aggregate of 705,000
shares held by the Michael G. and Theresa M. Hluchyj Family Trust and by his
minor children. Mr. Hluchyj disclaims beneficial ownership of the shares
held by the Michael G. and Theresa M. Hluchyj Family Trust and his minor
children.

(7) Includes 875,226 shares which are subject to our right to repurchase at cost
upon cessation of employment.

(8) Includes 474,999 shares which are subject to our right to repurchase at cost
upon cessation of employment and includes 181,817 shares held by the
Mayersohn Seamonson Family Irrevocable Trust-1999 on behalf of his minor
children. Mr. Mayersohn disclaims beneficial ownership of the shares held by
the Mayersohn Seamonson Family Irrevocable Trust-1999.

(9) All of the shares are subject to our right to repurchase at cost upon
cessation of employment.

(10) Includes 17,000 shares for the benefit of Mr. Severino's minor child under
the Massachusetts Uniform Transfer to Minors Act.

(11) Includes 6,763,771 shares which are subject to our right to repurchase at
cost upon cessation of employment by executive officers.

44
<PAGE>
DESCRIPTION OF CAPITAL STOCK

GENERAL

After this offering, we will be authorized to issue 300,000,000 shares of
common stock, $0.001 par value, per share, and 5,000,000 shares of undesignated
preferred stock, $0.01 par value per share. As of , 2000, there were
shares of common stock outstanding held by stockholders of record,
assuming conversion of all shares of the redeemable convertible preferred stock
into common stock. Based on the number of shares outstanding as of that date and
giving effect to the issuance of the shares of common stock offered by us
in this offering, there will be shares of common stock outstanding upon
the closing of the offering.

COMMON STOCK

Holders of our common stock are entitled to one vote for each share held on
all matters submitted to a vote of the stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares voted can elect
all of the directors then standing for election. Holders of common stock are
entitled to receive ratably any dividends that may be declared by the board of
directors out of legally available funds, subject to any preferential dividend
rights of any outstanding preferred stock. Upon our liquidation, dissolution or
winding up, the holders of common stock are entitled to receive ratably our net
assets available after the payment of all debts and other liabilities and
subject to the prior rights of any outstanding preferred stock. Holders of
common stock have no preemptive, subscription, redemption or conversion rights.
The outstanding shares of common stock are, and the shares offered by us in this
offering will be upon receipt of payment for such shares, fully paid and
non-assessable. The rights, preferences and privileges of holders of common
stock are subject to, and may be adversely affected by, the rights of holders of
shares of any series of preferred stock that we may designate and issue in the
future without further stockholder approval. Upon the closing of this offering,
there will be no shares of preferred stock outstanding.

PREFERRED STOCK

Upon the closing of this offering, our board of directors will be authorized
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 has discretion to fix or alter the designations, preferences,
rights, qualifications, limitations or restrictions of the shares of each
series, including the dividend rights, dividend rates, conversion rights, voting
rights, term of redemption including sinking fund provisions, redemption price
or prices, liquidation preferences and the number of shares constituting any
series or designations of such series without further vote or action by the
stockholders.

The purpose of authorizing the board of directors to issue preferred stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could make it more difficult for a third party to
acquire, or could discourage a third party from acquiring, a majority of our
outstanding voting stock. We have no current plans to issue any shares of
preferred stock.

DELAWARE LAW AND CHARTER AND BY-LAW PROVISIONS; ANTI-TAKEOVER EFFECTS

We are subject to the provisions of Section 203 of the General Corporation
Law of Delaware. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination

45
<PAGE>
is approved in a prescribed manner. A "business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
interested stockholder. Subject to some exceptions, an "interested stockholder"
is a person who, together with affiliates and associates, owns, or within three
years did own, 15% or more of the corporation's voting stock.

Our amended and restated certificate of incorporation and amended and
restated by-laws to be effective on the closing of this offering provide:

- that the board of directors be divided into three classes, as nearly equal
in size as possible, with staggered three-year terms;

- that directors may be removed only for cause by the affirmative vote of
the holders of at least 66 2/3% of the shares of our capital stock
entitled to vote; and

- that any vacancy on the board of directors, however occurring, including a
vacancy resulting from an enlargement of the board, may only be filled by
vote of a majority of the directors then in office.

The classification of the board of directors and the limitations on the
removal of directors and filling of vacancies could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from acquiring, Sonus.

Our amended and restated certificate of incorporation and amended and
restated by-laws also provide that, after the closing of this offering:

- any action required or permitted to be taken by the stockholders at an
annual meeting or special meeting of stockholders may only be taken if it
is properly brought before the meeting and may not be taken by written
action in lieu of a meeting; and

- special meetings of the stockholders may only be called by the chairman of
the board of directors, the president or by the board of directors.

Our amended and restated by-laws provide that, in order for any matter to be
considered "properly brought" before a meeting, a stockholder must comply with
requirements regarding advance notice to us. These provisions could delay until
the next stockholders' meeting stockholder actions that are favored by the
holders of a majority of our outstanding voting securities. These provisions may
also discourage another person or entity from making a tender offer for our
common stock, because the person or entity, even if it acquired a majority of
our outstanding voting securities, would be able to take action as a
stockholder, such as electing new directors or approving a merger, only at a
duly called stockholders meeting, and not by written consent.

Delaware's corporation law provides generally that the affirmative vote of a
majority of the shares entitled to vote on any matter 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. Our amended and restated certificate of incorporation requires the
affirmative vote of the holders of at least 66 2/3% of the shares of our capital
stock entitled to vote to amend or repeal any of the provisions of our amended
and restated certificate of incorporation described in the preceding paragraphs.
Generally, our amended and restated by-laws may be amended or repealed by a
majority vote of the board of directors or the holders of a majority of the
shares of our capital stock issued and outstanding and entitled to vote. To
amend our amended and restated by-laws regarding special meetings of
stockholders, written actions of stockholders in lieu of a meeting and the
election, removal and classification of members of the board of directors
requires the affirmative vote of the holders of at least 66 2/3% of the shares
of our capital stock entitled to vote. The stockholder vote would be in addition
to any separate class vote that might in the future be required pursuant to the
terms of any series of preferred stock that might be outstanding at the time any
of these amendments are submitted to stockholders.

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<PAGE>
LIMITATION OF LIABILITY AND INDEMNIFICATION

Our amended and restated certificate of incorporation provides that our
directors and officers shall be indemnified by us to the fullest extent
authorized by Delaware law. This indemnification would cover all expenses and
liabilities reasonably incurred in connection with their services for or on
behalf of us. In addition, our amended and restated certificate of incorporation
provides that our directors will not be personally liable for monetary damages
to us for breaches of their fiduciary duty as directors, unless they violated
their duty of loyalty to us or our stockholders, acted in bad faith, knowingly
or intentionally violated the law, authorized illegal dividends or redemptions
or derived an improper personal benefit from their action as directors.

REGISTRATION RIGHTS

After this offering, the holders of approximately shares of common
stock will be entitled to rights with respect to the registration of such shares
under the Securities Act. Set forth below is a summary of the registration
rights of the holders of our Series A preferred stock, Series B preferred stock,
Series C preferred stock and Series D preferred stock, each of which will
convert into common stock upon the closing of this offering.

DEMAND REGISTRATION RIGHTS. At any time after the earlier of November 18,
2000, or the closing of our initial public offering, the holders of 35% or more
of the shares having registration rights may request that we register shares of
common stock. We will be obligated to effect only two registrations pursuant to
a demand request by holders of registrable shares.

We are not obligated to effect a registration 90 days prior to, and
extending up to three months from the effective date of, the anticipated filing
of the most recent company-initiated registration. We are also not required to
effect a stockholder requested registration, if the requested registration of
shares would adversely affect, to our material harm, any other activity in which
we are then engaged. We may only delay stockholder initiated registrations once
every twelve months.

PIGGYBACK REGISTRATION RIGHTS. Stockholders with registration rights have
unlimited rights to request that shares be included in any company-initiated
registration of common stock other than registrations of shares issued in
connection with employee benefit plans, shares issued in connection with
business combinations subject to Rule 145 under the Securities Act, convertible
debt or other specified registrations. If the registration that we initiate
involves an underwriting, however, we will not be obligated to register any
shares unless the holders agree to the terms of the underwriting agreement. It
may also be necessary, at the discretion of the lead underwriter, to limit the
number of selling stockholders in the offering, as a result of which
stockholders may only be able to register a pro rata number of registrable
shares, if any.

FORM S-3 REGISTRATION RIGHTS. Once we have become eligible, under
applicable securities laws, to file a registration statement on Form S-3, which
will not be until at least 12 months after the closing of this offering, one or
more stockholders may request that we file a registration statement on
Form S-3, so long as the shares offered have an aggregate offering price of at
least $1,000,000 based on the public market price at the time of the request. We
will be obligated to effect no more than three registrations pursuant to an S-3
request by holders of registration rights.

FUTURE GRANTS OF REGISTRATION RIGHTS. Without the consent of current
stockholders owning at least 66 2/3% of the then outstanding registrable shares,
we may not grant further registration rights that would be on more favorable
terms than the existing registration rights.

TRANSFERABILITY. The registration rights are transferable upon transfer of
registrable securities and notice by the holder to us of the transfer, provided
that, in most cases, a minimum of

47
<PAGE>
shares, as adjusted for splits, dividends, recapitalizations and similar events,
are transferred and the transferee or assignee assumes the rights and
obligations of the transferor of the shares.

TERMINATION. The registration rights will terminate as to any particular
registrable securities on the date on which the shares are sold pursuant to a
registration statement and are no longer subject to Rule 144 under the
Securities Act. The piggyback registration rights will expire upon the third
anniversary of this offering.

WAIVER. The holders of shares of common stock entitled to the
registration rights described above have agreed not to exercise such rights for
a period of 180 days after the date of this prospectus.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for our common stock will be .

LISTING

We have filed an application for our common stock to be quoted on the Nasdaq
National Market under the symbol "SONS".

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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the offering, we will have shares of common stock
outstanding, or shares if the underwriters' over-allotment option is
exercised in full, in each case, assuming no exercise of options after
, 2000. Of this amount, the shares offered by this prospectus
will be available for immediate sale in the public market as of the date of this
prospectus. Approximately additional shares will be available for sale in
the public market following the expiration of lock-up agreements with the
representatives of our underwriters, subject in some cases to compliance with
the volume and other limitations of Rule 144. If the underwriters waive the
lock-up agreements within the first 90 days after the date of this prospectus,
an additional shares will be available for sale in the public market
90 days following the date of this prospectus, subject in some cases to
compliance with the volume and other limitations of Rule 144.

In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares, including shares attributed to them, for at least one
year is entitled to sell within any three-month period commencing 90 days after
the date of this prospectus a number of shares that does not exceed the greater
of

- 1% of the then outstanding shares of common stock, which will be equal to
approximately shares immediately after the offering; or

- the average weekly trading volume during the four calendar weeks preceding
the sale, subject to the filing of a Form 144 with respect to the sale.

A person, or persons whose shares are aggregated, who is not deemed to have
been an affiliate of Sonus at any time during the 90 days immediately preceding
the sale and who has beneficially owned his or her shares for at least two years
is entitled to sell such shares pursuant to Rule 144(k) without regard to the
limitations described above. Persons deemed to be affiliates must always sell
pursuant to Rule 144, even after the applicable holding periods have been
satisfied.

We are unable to estimate the number of shares that will be sold under
Rule 144, since this will depend on the market price for our common stock, the
personal circumstances of the sellers and other factors. Any future sale of
substantial amounts of the common stock in the open market may adversely affect
the market price of the common stock we are offering.

We have also agreed not to issue any shares during the 180-day lock-up
period without the consent of the representatives of the underwriters, except
that we may, without such consent, issue or sell shares under our 1997 Stock
Incentive Plan and 2000 Employee Stock Purchase Plan.

Any of our employees, consultants or advisors who purchased shares pursuant
to a written compensatory plan or other agreement is entitled to rely on the
resale previsions of Rule 701, which permits non-affiliates to sell their
Rule 701 shares without having to comply with the public information, holding
period, volume limitation or notice provisions of Rule 144 and permits
affiliates to sell their Rule 701 shares without having to comply with the
Rule 144 holding period restrictions, in each case commencing 90 days after the
date of this prospectus.

We intend to file a registration statement on Form S-8 under the Securities
Act within days after the completion of the offering to register the shares
of common stock issued or reserved for future issuance under our 1997 Stock
Incentive Plan, thus permitting the resale of such shares by non-affiliates in
the public market without restriction under the Securities Act. As of
February 29, 2000, there were a total of approximately shares of
outstanding common stock and options to purchase shares of common stock under
our 1997 Stock Incentive Plan.

In addition, some of our stockholders have registration rights with respect
to approximately shares of common stock and common stock equivalents.
Registration of these registrable

49
<PAGE>
shares under the Securities Act would result in those shares becoming freely
tradeable without restriction under the Securities Act. See "Description of
Capital Stock-Registration Rights."

LOCK-UP AGREEMENTS

Our officers, directors, stockholders and optionholders holding or having
the right to acquire an aggregate of approximately shares of our common
stock have entered into lock-up agreements in connection with this offering.
These lock-up agreements provide that these persons will not offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of our
common stock or any securities exercisable for or convertible into our common
stock owned by them for a period of 180 days after the date of this prospectus
without the prior written consent of Goldman, Sachs & Co. These lock-up
agreements do not restrict the transfer of shares of our common stock purchased
under the directed share program in connection with this offering or in the open
market following the date of this prospectus.

However, if the reported last sale price of our common stock on the Nasdaq
National Market is greater than twice the initial public offering price per
share for 20 of the 30 consecutive trading days ending on the last trading day
preceding the 90(th) day after the date of this prospectus, then 15% of the
securities subject to lock-up agreements as of the date of this prospectus will
be released from the transfer restrictions of the lock-up agreements. The
release of these securities will occur on the 90(th) day after the date of this
prospectus or, if the 90(th) day after the date of this prospectus would fall
within the period beginning on September 12, 2000 and continuing until and
including the second trading day after the release of our operating results for
the quarter ending on September 30, 2000, the release will occur on the 20(th)
trading day after the end of the preceding period if the reported last sale
price of our common stock on the Nasdaq National Market is greater than twice
the initial public offering price per share for the 20 of the 30 consecutive
trading days ending on the trading day preceding the 20(th) trading day.

In addition, if the reported last sale price of our common stock on the
Nasdaq National Market is greater than twice the initial public offering price
per share for 20 of the 30 consecutive trading days ending on the second trading
day after the date of the public release of our operating results for the
quarter ending September 30, 2000, an additional 25% of the securities subject
to lock-up agreements as of the date of this prospectus will be released from
the transfer restrictions of the lock-up agreements. The release of these
securities will occur on the third trading day after the date of the public
release of our operating results for the quarter ending September 30, 2000.

LEGAL MATTERS

The validity of the shares of common stock we are offering will be passed
upon for us by Bingham Dana LLP, Boston, Massachusetts. As of February 29, 2000,
partners at Bingham Dana LLP owned shares of Series A, Series B and Series C
redeemable convertible preferred stock, which will convert into an aggregate of
87,210 shares of common stock upon the completion of this offering. Some legal
matters in connection with this offering will be passed upon for the
underwriters by Ropes & Gray, Boston, Massachusetts.

EXPERTS

The financial statements of Sonus Networks, Inc. as of December 31, 1998 and
1999 and for the period from inception (August 7, 1997) through December 31,
1997, for the years ended December 31, 1998 and 1999 and for the period from
inception to December 31, 1999 included in this prospectus and elsewhere in this
registration statement have been audited by Arthur Anderson LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included in reliance upon the authority of said firm as experts in giving said
report.

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<PAGE>
ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including exhibits and schedules, under the Securities
Act with respect to the shares to be sold in the offering. This prospectus does
not contain all the information set forth in the registration statement. For
further information with respect to us and the shares to be sold in the
offering, reference is made to the registration statement and the exhibits and
schedules attached to the registration statement. Statements contained in this
prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. As a result of this offering, we will
become subject to the information and reporting requirements of the Securities
Exchange Act of 1934, as amended and will file annual, quarterly and current
reports, proxy statements and other information with the Commission.

You may read and copy all or any portion of the registration statement or
any reports, statements or other information that we file at the Commission's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing
to the Commission. Please call the Commission at 1-800-SEC-0330 for further
information on the operation of the Public Reference Room. Our Commission
filings, including the registration statement, are also available to you on the
Commission's Web site http://WWW.SEC.GOV.

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<PAGE>
UNDERWRITING

Sonus and the underwriters named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to certain
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs & Co., Dain Rauscher
Incorporated, FleetBoston Robertson Stephens Inc. and J.P. Morgan
Securities Inc. are the representatives of the underwriters.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------ -----------
<S> <C>
Goldman, Sachs & Co. .......................................
Dain Rauscher Incorporated..................................
FleetBoston Robertson Stephens Inc. ........................
J.P. Morgan Securities Inc. ................................
-----------
Total.......................................................
===========
</TABLE>

If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from us to cover these sales. They may exercise that option for 30 days.
If any shares are purchased pursuant to this option, the underwriters will
severally purchase shares in approximately the same proportion as set forth in
the table above.

The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by Sonus. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.

<TABLE>
<CAPTION>
PAID BY SONUS
----------------------------
NO EXERCISE FULL EXERCISE
------------ -------------
<S> <C> <C>
Per Share...................................... $ $
Total.......................................... $ $
</TABLE>

Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any of these
securities dealers may resell any shares purchased from the underwriters to
other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
public offering price, the representatives may change the offering price and the
other selling terms.

Sonus has agreed with the underwriters not to dispose of or hedge any of its
common stock or securities convertible into or exchangeable for shares of common
stock during the period from the date of this prospectus continuing through the
date 180 days after the date of this prospectus, except with the prior written
consent of the representatives. See "Shares Eligible for Future Sale" for a
discussion of transfer restrictions.

52
<PAGE>
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be negotiated among Sonus and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be our historical performance, estimates of our business
potential and earnings prospects, an assessment of our management and the
consideration of the above factors in relation to market valuation of companies
in related businesses.

We have applied to have common stock approved for quotation on the Nasdaq
National Market under the symbol "SONS".

In connection with this offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in this offering.
Stabilizing transactions consist of some bids or purchases made for the purpose
of preventing or retarding a decline in the market price of the common stock
while this offering is in progress.

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discounts received by it because the representatives have repurchased shares
sold by or for the account of that particular underwriter in stabilizing or
short covering transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on The Nasdaq
National Market, in the over-the-counter market or elsewhere.

The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.

At the request of Sonus, the underwriters are reserving up to
shares of common stock for sale at the initial public offering price under a
directed share program. Sonus currently expects that shares under the
directed share program will be offered for sale to some of our directors,
officers, employees and associates. In addition, under the directed share
program, the underwriters have reserved up to approximately shares of
common stock for sale to Williams Communications, one of our stockholders and
customers. The number of shares available for sale to the general public will be
reduced by the number of reserved shares sold. Any reserved shares not so
purchased will be offered by the underwriters to the general public on the same
basis as other shares offered hereby.

Sonus estimates that its share of the total expenses of this offering,
excluding underwriting discounts and commissions, will be approximately $
million.

Sonus has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

53
<PAGE>
SONUS NETWORKS, INC.
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2

Balance Sheets as of December 31, 1998 and 1999, and Pro
Forma December 31, 1999 (unaudited)....................... F-3

Statements of Operations for the Period from Inception
(August 7, 1997) to December 31, 1997, for the Years
Ended December 31, 1998 and 1999 and for the period from
Inception (August 7, 1997) to December 31, 1999........... F-4

Statements of Redeemable Convertible Preferred Stock and
Stockholders' Equity (Deficit) for the Period from
Inception (August 7, 1997) to December 31, 1999, and Pro
Forma December 31, 1999 (unaudited)....................... F-5

Statements of Cash Flows for the Period from Inception
(August 7, 1997) to December 31, 1997, for the years
ended December 31, 1998 and 1999 and for the period from
Inception (August 7, 1997) to December 31, 1999........... F-6

Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Sonus Networks, Inc.:

We have audited the accompanying balance sheets of Sonus Networks, Inc. (a
Delaware corporation in the development stage) as of December 31, 1998 and 1999,
and the related statements of operations, redeemable convertible preferred stock
and stockholders' equity (deficit) and cash flows for the period from inception
(August 7, 1997) to December 31, 1997, for the years ended December 31, 1998 and
1999 and for the period from inception to December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sonus Networks, Inc. as of
December 31, 1998 and 1999, and the results of its operations and its cash flows
for the period from inception (August 7, 1997) to December 31, 1997, for the
years ended December 31, 1998 and 1999, and for the period from inception to
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.

Arthur Andersen LLP

Boston, Massachusetts
March 10, 2000

F-2
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------- DECEMBER 31,
1998 1999 1999
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 3,584 $ 8,885 $33,595
Marketable securities..................................... 12,917 14,681 14,681
Inventories............................................... -- 2,210 2,210
Other current assets...................................... 162 298 298
------- ------- -------
Total current assets.................................. 16,663 26,074 50,784

PROPERTY AND EQUIPMENT, net of accumulated depreciation and
amortization.............................................. 1,506 4,269 4,269

OTHER ASSETS, net of accumulated amortization of $57 and
$301 at December 31, 1998 and 1999, respectively.......... 247 439 439
------- ------- -------
$18,416 $30,782 $55,492
======= ======= =======

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term obligations.................. $ 430 $ 1,336 $ 1,336
Accounts payable.......................................... 422 1,412 1,412
Accrued expenses.......................................... 490 2,691 2,691
Deferred revenue.......................................... -- 1,031 1,031
------- ------- -------
Total current liabilities............................. 1,342 6,470 6,470

LONG-TERM OBLIGATIONS, less current portion................. 1,220 3,402 3,402

COMMITMENTS (NOTE 7)

REDEEMABLE CONVERTIBLE PREFERRED STOCK, $0.01 par value;
15,000,000 shares authorized; 10,334,287 and 12,323,968
shares issued and outstanding at December 31, 1998 and
1999, respectively; no shares authorized, issued and
outstanding, pro forma.................................... 22,951 46,109 --

STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $0.01 par value; 5,000,000 shares
authorized, pro forma; none issued and outstanding, pro
forma ............................................ -- -- --
Common stock, $0.001 par value; 70,000,000 shares
authorized; 16,523,353 and 21,836,974 shares issued and
outstanding at December 31, 1998 and 1999, respectively;
54,156,048 shares issued and outstanding, pro forma..... 17 22 54
Capital in excess of par value............................ 589 25,611 96,438
Deficit accumulated during the development stage.......... (7,446) (33,882) (33,922)
Stock subscriptions receivable............................ (257) (346) (346)
Deferred compensation..................................... -- (16,604) (16,604)
------- ------- -------
Total stockholders' equity (deficit).................. (7,097) (25,199) 45,620
------- ------- -------
$18,416 $30,782 $55,492
======= ======= =======
</TABLE>

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

F-3
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION
(AUGUST 7, (AUGUST 7,
1997) YEAR ENDED 1997)
TO DECEMBER 31, TO
DECEMBER 31, ---------------------- DECEMBER 31,
1997 1998 1999 1999
-------------- --------- ---------- --------------
<S> <C> <C> <C> <C>
OPERATING EXPENSES:
Manufacturing...................................... $ -- $ -- $ 1,861 $ 1,861
Research and development........................... 299 5,853 10,863 17,015
Sales and marketing................................ -- 438 5,610 6,048
General and administrative......................... 187 937 1,785 2,909
Amortization of deferred compensation (Note
8(d))............................................ -- -- 4,255 4,255
----- --------- ---------- --------
Total operating expenses......................... 486 7,228 24,374 32,088
----- --------- ---------- --------
LOSS FROM OPERATIONS................................. (486) (7,228) (24,374) (32,088)
Interest expense..................................... -- (78) (224) (302)
Interest income...................................... 25 392 711 1,128
----- --------- ---------- --------
NET LOSS............................................. (461) (6,914) (23,887) (31,262)
Beneficial conversion feature of Series C preferred
stock.............................................. -- -- (2,500) (2,500)
----- --------- ---------- --------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS........... $(461) $ (6,914) $ (26,387) $(33,762)
===== ========= ========== ========
NET LOSS PER SHARE (NOTE 1(N)):
Basic and diluted.................................. $ -- $ (4.27) $ 5.53
===== ========= ==========
Pro forma basic and diluted........................ $ (0.75)
==========
SHARES USED IN COMPUTING NET LOSS PER SHARE (NOTE
1(N)):
Basic and diluted.................................. -- 1,619,289 4,774,763
===== ========= ==========
Pro forma basic and diluted........................ 32,062,786
==========
</TABLE>

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

F-4
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(DEFICIT)
FOR THE PERIOD FROM INCEPTION (AUGUST 7, 1997) TO DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
REDEEMABLE CONVERTIBLE
PREFERRED STOCK COMMON STOCK CAPITAL IN
---------------------- ---------------------- EXCESS OF PAR
SHARES VALUE SHARES PAR VALUE VALUE
----------- -------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, INCEPTION (AUGUST 7, 1997).................. -- $ -- -- $ -- $ --
Issuance of common stock to founders for cash...... -- -- 8,205,231 8 18
Issuance of Series A preferred stock for cash and
conversion of notes payable, net of issuance
costs
of $28........................................... 7,100,000 7,100 -- -- --
Issuance of common stock to employees for cash and
subscription receivable.......................... -- -- 1,031,875 1 20
Net loss........................................... -- -- -- -- --
----------- ------- ---------- ---- -------
BALANCE, DECEMBER 31, 1997........................... 7,100,000 7,100 9,237,106 9 38
Payments on subscription receivable................ -- -- -- -- --
Issuance of Series A preferred stock for cash and
issuance costs of $2............................. 80,000 80 -- -- --
Issuance of Series B preferred stock for cash and
issuance costs of $40............................ 3,154,287 15,771 -- -- --
Issuance of common stock to officer for cash and
stock subscriptions receivable................... -- -- 3,212,499 4 317
Issuance of common stock to employees for cash..... -- -- 4,073,748 4 175
Compensation associated with the granting of stock
options and sale of restricted common stock...... -- -- -- -- 59
Net loss........................................... -- -- -- -- --
----------- ------- ---------- ---- -------
BALANCE, DECEMBER 31, 1998........................... 10,334,287 22,951 16,523,353 17 589
Issuance of Series B preferred stock to a director
for cash and issuance costs of $9................ 50,000 250 -- -- --
Issuance of Series C preferred stock for cash and
issuance costs of $40............................ 1,939,681 22,908 -- -- --
Beneficial conversion feature of Series C preferred
stock............................................ -- -- -- -- 2,500
Payments on subscriptions receivable............... -- -- -- -- --
Issuance of common stock to employees, officers and
a director for cash and stock subscriptions
receivable....................................... -- -- 5,076,871 5 1,498
Exercise of stock options.......................... -- -- 236,750 -- 16
Compensation associated with the grant of stock
options and sale of restricted common stock...... -- -- -- -- 149
Deferred compensation related to stock option
grants and sale of restricted common stock....... -- -- -- -- 20,859
Amortization of deferred compensation.............. -- -- -- -- --
Net loss........................................... -- -- -- -- --
----------- ------- ---------- ---- -------
BALANCE, DECEMBER 31, 1999........................... 12,323,968 46,109 21,836,974 22 25,611
Issuance of Series D preferred stock for cash and
issuance costs of $40 (unaudited)................ 1,509,154 24,750 -- -- --
Pro forma conversion of preferred stock to common
stock (unaudited)................................ (13,833,122) (70,859) 32,319,074 32 70,827
----------- ------- ---------- ---- -------
PRO FORMA BALANCE, DECEMBER 31, 1999 (UNAUDITED)..... -- $ -- 54,156,048 $ 54 96,438
=========== ======= ========== ==== =======

<S> <C> <C> <C> <C>
DEFICIT
ACCUMULATED TOTAL
DURING THE STOCK STOCKHOLDERS'
DEVELOPMENT SUBSCRIPTIONS DEFERRED EQUITY
STAGE RECEIVABLE COMPENSATION (DEFICIT)
------------ ------------- ------------- -------------
BALANCE, INCEPTION (AUGUST 7, 1997).................. $ -- $ -- $ -- $ --
Issuance of common stock to founders for cash...... (1) -- -- 25
Issuance of Series A preferred stock for cash and
conversion of notes payable, net of issuance
costs
of $28........................................... (28) -- -- (28)
Issuance of common stock to employees for cash and
subscription receivable.......................... -- (4) -- 17
Net loss........................................... (461) -- -- (461)
-------- ----- -------- --------
BALANCE, DECEMBER 31, 1997........................... (490) (4) -- (447)
Payments on subscription receivable................ -- 4 -- 4
Issuance of Series A preferred stock for cash and
issuance costs of $2............................. (2) -- -- (2)
Issuance of Series B preferred stock for cash and
issuance costs of $40............................ (40) -- -- (40)
Issuance of common stock to officer for cash and
stock subscriptions receivable................... -- (257) -- 64
Issuance of common stock to employees for cash..... -- -- -- 179
Compensation associated with the granting of stock
options and sale of restricted common stock...... -- -- -- 59
Net loss........................................... (6,914) -- -- (6,914)
-------- ----- -------- --------
BALANCE, DECEMBER 31, 1998........................... (7,446) (257) -- (7,097)
Issuance of Series B preferred stock to a director
for cash and issuance costs of $9................ (9) -- -- (9)
Issuance of Series C preferred stock for cash and
issuance costs of $40............................ (40) -- -- (40)
Beneficial conversion feature of Series C preferred
stock............................................ (2,500) -- -- --
Payments on subscriptions receivable............... -- 21 -- 21
Issuance of common stock to employees, officers and
a director for cash and stock subscriptions
receivable....................................... -- (110) -- 1,393
Exercise of stock options.......................... -- -- -- 16
Compensation associated with the grant of stock
options and sale of restricted common stock...... -- -- -- 149
Deferred compensation related to stock option
grants and sale of restricted common stock....... -- -- (20,859) --
Amortization of deferred compensation.............. -- -- 4,255 4,255
Net loss........................................... (23,887) -- (23,887)
-------- ----- -------- --------
BALANCE, DECEMBER 31, 1999........................... (33,882) (346) (16,604) (25,199)
Issuance of Series D preferred stock for cash and
issuance costs of $40 (unaudited)................ (40) -- -- (40)
Pro forma conversion of preferred stock to common
stock (unaudited)................................ -- -- -- 70,859
-------- ----- -------- --------
PRO FORMA BALANCE, DECEMBER 31, 1999 (UNAUDITED)..... $(33,922) $(346) $(16,604) $ 45,620
======== ===== ======== ========
</TABLE>

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

F-5
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION
(AUGUST 7, YEAR ENDED (AUGUST 7,
1997) TO DECEMBER 31, 1997) TO
DECEMBER 31, ------------------- DECEMBER 31,
1997 1998 1999 1999
-------------- -------- -------- --------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (461) $(6,914) $(23,887) $(31,262)
Adjustment to reconcile net loss to net cash used in
operating activities--
Depreciation and amortization........................... 11 466 1,632 2,109
Compensation expense associated with the grant of stock
options and issuance of restricted common stock....... -- 59 149 208
Amortization of deferred compensation................... -- -- 4,255 4,255
Changes in current assets and liabilities--
Inventories........................................... -- -- (2,210) (2,210)
Other current assets.................................. (30) (132) (136) (298)
Accounts payable...................................... 229 193 990 1,412
Accrued expenses...................................... 96 394 2,201 2,691
Deferred revenue...................................... -- -- 1,031 1,031
------ ------- -------- --------
Net cash used in operating activities............... (155) (5,934) (15,975) (22,064)
------ ------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (347) (1,577) (4,151) (6,075)
Maturities of marketable securities....................... -- 7,295 22,020 29,315
Purchases of marketable securities........................ -- (20,212) (23,784) (43,996)
Other assets.............................................. (14) (292) (436) (742)
------ ------- -------- --------
Net cash used in investing activities............... (361) (14,786) (6,351) (21,498)
------ ------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock........................ 42 243 1,393 1,678
Proceeds from exercise of stock options................... -- -- 16 16
Net proceeds from issuance of preferred stock............. 6,847 15,809 23,109 45,765
Payment of stock subscriptions receivable................. -- 4 21 25
Proceeds from long-term obligations....................... 8 1,749 3,609 5,366
Payments on long-term obligations......................... -- (107) (521) (628)
Proceeds from notes payable............................... 225 -- -- 225
------ ------- -------- --------
Net cash provided by financing activities........... 7,122 17,698 27,627 52,447
------ ------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 6,606 (3,022) 5,301 8,885
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. -- 6,606 3,584 --
------ ------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $6,606 $ 3,584 $ 8,885 $ 8,885
====== ======= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest.................. $ -- $ 78 $ 208 $ 286
====== ======= ======== ========
SUPPLEMENTARY DISCLOSURE OF NONCASH TRANSACTIONS:
Conversion of notes payable to preferred stock............ $ 225 $ -- $ -- $ 225
====== ======= ======== ========
Issuance of common stock for subscriptions receivable..... $ 4 $ 257 $ 110 $ 371
====== ======= ======== ========
</TABLE>

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

F-6
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1999

(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Sonus Networks, Inc. (Sonus), a company in the development stage, was
incorporated on August 7, 1997 and is the leading provider of voice
infrastructure products to the new public network. Our hardware and software
enable customers to deploy an integrated packet based network carrying voice and
data traffic.

Sonus is subject to risks common to technology-based companies including,
but not limited to, the development of new technology, development of markets
and distribution channels, dependence on key personnel, and the ability to
obtain additional capital as needed to meet its product plans. Sonus has a
limited operating history and, due to Sonus' stage of development, it has
incurred significant operating losses since inception. To date Sonus has been
funded principally by private equity financings. Sonus' ultimate success is
dependent upon its ability to raise additional capital and to successfully
develop and market its products. In March 2000, Sonus issued 1,509,154 shares of
Series D redeemable convertible preferred stock resulting in net proceeds of
approximately $24,710,000 and filed for an initial public offering (IPO) of its
common stock (see Note 11).

The accompanying financial statements reflect the application of certain
significant accounting policies as described in this note and elsewhere in the
accompanying financial statements and notes.

(A) PRO FORMA PRESENTATION (UNAUDITED)

The unaudited pro forma balance sheet and statement of redeemable
convertible preferred stock and stockholders' equity (deficit) as of
December 31, 1999 reflects (i) the sale of 1,509,154 shares of Series D
redeemable convertible preferred stock in March 2000 and the receipt of
$24,710,000 in net proceeds (see Note 11) and (ii) the automatic conversion of
all outstanding shares of Series A, B, C and D redeemable convertible preferred
stock into an aggregate of 32,319,074 shares of common stock which will occur
upon the closing of Sonus' proposed IPO.

(B) CASH EQUIVALENTS AND MARKETABLE SECURITIES

Cash equivalents are stated at cost plus accrued interest, which
approximates market value, and have maturities of three months or less at the
date of purchase.

Marketable securities are classified as held-to-maturity, as Sonus has the
intent and ability to hold to maturity. Marketable securities are reported at
amortized cost. Cash equivalents and marketable securities are invested in
highly rated government securities. There have been no gains or losses to date.

The financial instruments that potentially subject Sonus to concentrations
of credit risk are cash and marketable securities. Sonus has no significant
off-balance-sheet concentrations such as foreign exchange contracts, options
contracts or other foreign hedging arrangements. The majority of Sonus' cash is
maintained with a commercial bank.

F-7
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999

Certain components and software licenses from third-parties used in Sonus'
products are procured from a single source. The failure of a supplier, including
a subcontractor, to deliver on schedule could delay or interrupt Sonus' delivery
of products and thereby adversely affect Sonus' revenues and operating results.

(D) INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out basis) or
market.

(E) PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Expenditures for maintenance and repairs are charged to
expense as incurred, whereas major betterments are capitalized as additions to
property and equipment. Sonus provides for depreciation and amortization using
the straight-line method and charges to operations amounts estimated to allocate
the cost of the assets over their estimated useful lives.

(F) OTHER ASSETS

Other assets include licenses for certain technology embedded in Sonus'
products. These licenses are amortized over the lesser of their useful lives or
the term of the license.

(G) REVENUE RECOGNITION

Sonus recognizes revenue from product sales to end users and resellers upon
shipment, provided there are no uncertainties regarding acceptance, persuasive
evidence of an arrangement exists, the sales price is fixed or determinable and
collection of the related receivable is probable. If uncertainties exist, Sonus
recognizes revenue when those uncertainties are resolved. Service revenue is
recognized as the services are performed or ratably over the terms of the
service contracts. Amounts collected prior to satisfying the above revenue
recognition criteria are reflected as deferred revenue. Warranty costs are
estimated and recorded by Sonus at the time of product revenue recognition.

(H) SOFTWARE DEVELOPMENT COSTS

Sonus accounts for its software development costs in accordance with
Statement of Financial Accounting Standards (SFAS) No. 86, ACCOUNTING FOR THE
COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE MARKETED.
Accordingly, the costs for the development of new software and substantial
enhancements to existing software are expensed as incurred until technological
feasibility has been established, at which time any additional costs would be
capitalized. Sonus has determined that technological feasibility is established
at the time a working model of the software is completed. Because Sonus believes
its current process for developing software is essentially completed
concurrently with the establishment of technological feasibility, no costs have
been capitalized to date.

F-8
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999

(I) STOCK-BASED COMPENSATION

Sonus uses the intrinsic value-based method of Accounting Principles Board
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, to account for all of
its employee stock-based compensation plans and uses the fair value method to
account for all non-employee stock-based compensation.

(J) COMPREHENSIVE LOSS

Sonus applies Financial Accounting Standards Board (FASB) SFAS No. 130,
REPORTING COMPREHENSIVE INCOME. The comprehensive loss for the period from
inception (August 7, 1997) to December 31, 1997 and for the years ended
December 31, 1998 and 1999 does not differ from the reported loss.

(K) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of Sonus' financial instruments, which include cash
equivalents, marketable securities, stock subscriptions receivable, accounts
payable, accrued expenses and long-term obligations, approximate their fair
value.

(L) 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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.

(M) NEW PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. Pursuant to SFAS No. 137,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--DEFERRAL OF THE
EFFECTIVE DATE OF FASB NO. 133, SFAS No. 133 is effective in fiscal year 2001.
SFAS No. 133 is not expected to have a material impact on Sonus' financial
condition or results of operations.

(N) NET LOSS PER SHARE

Basic net loss per share is computed by dividing the net loss for the period
by the weighted average number of unrestricted common shares outstanding during
the period. Diluted net loss per share is computed by dividing the net loss for
the period by the weighted average number of unrestricted common shares and
potential common stock outstanding during the period, if dilutive. Potential
common stock is comprised of restricted shares of common stock and the
incremental common shares issuable upon the exercise of stock options. Shares of
common stock issuable upon the conversion of Sonus' redeemable convertible
preferred stock have also been excluded

F-9
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999

from the date of issuance. In accordance with Securities and Exchange Commission
(SEC) Staff Accounting Bulletin No. 98, Earnings Per Share in an Initial Public
Offering, Sonus determined there were no nominal issuances of Sonus' stock prior
to Sonus' initial public offering. For the period from inception through
December 31, 1999 there were no unrestricted outstanding shares of common stock.

Pro forma basic and diluted net loss per share for the year ended
December 31, 1999 is computed using the weighted average number of unrestricted
common shares outstanding, including the pro forma effects of the automatic
conversion of Sonus' Series A, B and C redeemable convertible preferred stock
into shares of Sonus' common stock which will occur upon the closing of Sonus'
proposed IPO, as if such conversion occurred at the date of original issuance.
There were no dilutive shares of potential common stock for this period.

The following table sets forth the computation of basic and diluted net loss
per share and pro forma basic and diluted net loss per share:

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 7,
1997) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------
1997 1998 1999
-------------- -------------- --------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
Net loss applicable to common stockholders......... $ (461) $ (6,914) $ (26,387)
=========== ============ ============

Historical--
Weighted average common shares outstanding....... 3,900,329 11,800,382 19,153,503
Less weighted average restricted common shares
outstanding.................................... (3,900,329) (10,181,093) (14,378,740)
----------- ------------ ------------
Shares used in computing basic and diluted net
loss per share............................... -- 1,619,289 4,774,763
=========== ============ ============

Basic and diluted net loss per share............... $ -- $ (4.27) $ (5.53)
=========== ============ ============
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
(IN THOUSANDS,
EXCEPT SHARE AND
PER SHARE DATA)
<S> <C>
Net loss.................................................... $ (23,887)
============
Pro forma--
Shares used in computing basic and diluted net loss per
share................................................... 4,774,763
Weighted average number of shares assumed upon conversion
of redeemable convertible common stock.................. 27,288,023
------------
Shares used in computing pro forma basic and diluted net
loss per share........................................ 32,062,768
============

Pro forma basic and diluted net loss per share.............. $ (0.75)
============
</TABLE>

F-10
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999

Restricted shares of common stock and options to purchase 125,000, 557,500
and 1,017,581 shares of common stock at a weighted average exercise price of
$0.004, $0.13 and $0.32 per share have not been included in the computation of
diluted net loss per share for the period from inception to December 31, 1997
and the years ended December 31, 1998 and 1999, respectively, as their effects
would have been anti-dilutive.

(O) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE

SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION establishes standards for reporting information regarding operating
segments and establishes standards for related disclosures about products and
services and geographic areas. Operating segments are identified as components
of an enterprise about which separate discrete financial information is
available for evaluation by the chief operating decision maker, or decision
making group, in making decisions how to allocate resources and assess
performance. To date, the Company has viewed its operations and manages its
business as principally one operating segment.

(2) INVENTORIES

Inventories as of December 31, 1999 consist of the following, in thousands:

<TABLE>
<S> <C>
Raw materials and subassemblies............................. $ 541
Work in progress............................................ 855
Finished goods.............................................. 814
------
$2,210
======
</TABLE>

(3) PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 1998 and 1999 consist of the
following, in thousands:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1998 1999
------------- -------- --------
<S> <C> <C> <C>
Computer equipment and software............. 2-3 years $ 1,836 $ 5,956
Furniture and fixtures...................... 3-5 years 88 50
Leasehold improvements...................... Life of lease -- 69
------- -------
1,924 6,075
Less accumulated depreciation and
amortization.............................. (418) (1,806)
------- -------
$ 1,506 $ 4,269
======= =======
</TABLE>

(4) LONG-TERM OBLIGATIONS

Sonus has a $7,000,000 equipment line of credit with a bank, bearing
interest at the bank's prime rate (8.5% at December 31, 1999) plus 0.5%,
available through June 30, 2000. Amounts

F-11
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999

(4) LONG-TERM OBLIGATIONS (CONTINUED)
borrowed under the line shall be repaid over a 42- or 48-month period. Under the
agreement, all of Sonus' assets, except intellectual property, have been pledged
as collateral and Sonus must maintain a certain minimum tangible stockholders'
equity and quick ratio, as defined. As of December 31, 1998 and 1999, Sonus had
outstanding balances of $1,650,000 and $4,738,000, respectively. As of
December 31, 1999, Sonus had additional borrowings available under the equipment
line of credit of $1,652,000.

The aggregate principal payments on long-term obligations as of
December 31, 1999 are as follows: $1,336,000 in 2000; $1,399,000 in 2001;
$1,201,000 in 2002; $763,000 in 2003; and $39,000 in 2004.

Sonus also has $200,000 letter of credit with a bank available through
June 30, 2000. As of December 31, 1999, Sonus has committed approximately
$166,000 against the letter of credit, representing the security deposit for
Sonus' leased property.

(5) ACCRUED EXPENSES

Accrued expenses as of December 31, 1998 and 1999 consist of the following,
in thousands:

<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Employee compensation and related costs..................... $195 $1,381
Professional fees........................................... 132 609
Facilities.................................................. 100 137
Other....................................................... 63 564
---- ------
$490 $2,691
==== ======
</TABLE>

(6) INCOME TAXES

Sonus provides for income taxes in accordance with SFAS No. 109, ACCOUNTING
FOR INCOME TAXES. Deferred tax assets and liabilities are determined based on
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts for income tax purposes. A valuation allowance has been
recorded for the net deferred tax asset due to the uncertainty of realizing the
benefit of this asset.

F-12
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999

(6) INCOME TAXES (CONTINUED)
The following is a summary of the significant components of Sonus' deferred
tax assets and liabilities as of December 31, 1998 and 1999, in thousands:

<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Net operating loss carryforwards.......................... $2,230 $ 9,204
Tax credit carryforwards.................................. 308 761
Start-up costs............................................ 625 485
Deferred revenue.......................................... -- 412
Other temporary differences............................... 44 560
Valuation allowance....................................... (3,207) (11,422)
------ -------
$ -- $ --
====== =======
</TABLE>

As of December 31, 1999, Sonus has net operating loss carryforwards for
income tax purposes of approximately $23,000,000, which expire through 2019.
Sonus also has available research and development credit carryforwards of
approximately $761,000 that expire through 2019. The Internal Revenue Code
contains provisions that limit the net operating loss and tax credit
carryforwards available to be used in any given year in the event of certain
circumstances, including significant changes in ownership interests. Sonus has
completed several financings since inception and has incurred ownership changes
and may incur an ownership change upon completion of the IPO. Sonus does not
believe that these changes will have a material impact on its ability to use its
net operating loss and tax credit carryforwards.

(7) LEASE COMMITMENTS

Sonus leases its administrative and development facility under an operating
lease, which expires in March 2004. Rent expense was approximately $20,000 from
inception to December 31, 1997 and $150,000 and $537,000, for the years ended
December 31, 1998 and 1999, respectively. Sonus is responsible for certain real
estate taxes, utilities and maintenance costs. The future minimum payments under
operating lease payments as of December 31, 1999, are as follows: $709,000 in
2000; $701,000 in 2001; $722,000 in 2002; $743,000 in 2003; and $187,000 in
2004.

F-13
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999

(8) REDEEMABLE CONVERTIBLE PREFERRED STOCK

Sonus has authorized 15,000,000 shares of preferred stock, $.01 par value,
and designated three series of redeemable convertible preferred stock as of
December 31, 1999: 7,220,000 shares of Series A preferred stock; 3,247,857
shares of Series B preferred stock; and 2,153,072 shares of Series C preferred
stock. A summary of the redeemable convertible preferred stock issuances as of
December 31, 1999 are as follows:

<TABLE>
<CAPTION>
NUMBER OF PRICE PER REDEMPTION
DESCRIPTION DATE SHARES SHARE VALUE
- --------------------- ------------------------------------------------- ---------- --------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Series A November 1997 and July 1998 7,180,000 $ 1.00 $ 7,180
Series B September and December 1998, May 1999 3,204,287 5.00 16,021
Series C September, November and December 1999 1,939,681 11.81 22,908
---------- -------
12,323,968 $46,109
========== =======
</TABLE>

In March 2000, Sonus issued 1,509,154 shares of Series D redeemable
convertible preferred stock at $16.40 per share resulting in net proceeds of
approximately $24,710,000. (Note 11(a))

The rights, preferences and privileges of the Series A, Series B and
Series C redeemable convertible preferred stock are as follows:

REDEMPTION

If requested prior to the redemption dates specified below by holders of
66 2/3% of the then outstanding Series A, B and C preferred stock, Sonus is
required to redeem such stock at $1.00, $5.00 and $11.81 per share,
respectively, as adjusted in the event of future dilution, plus declared but
unpaid dividends as follows:

<TABLE>
<CAPTION>
PERCENTAGE OF THEN
OUTSTANDING
PREFERRED SHARES TO
REDEMPTION DATE BE REDEEMED
- --------------------- --------------------
<S> <C>
November 18, 2002 33.33%
November 18, 2003 50.00%
November 18, 2004 All shares then held
</TABLE>

DIVIDENDS

Series A, B and C preferred stockholders are entitled to receive any cash
dividend declared on common stock equal to the amount they would be entitled to
if such preferred stock had been converted into common stock. In connection with
the sale of an aggregate of 211,688 shares of Series C preferred stock in
November and December 1999, Sonus recorded a charge to accumulated deficit of
$2.5 million. This amount represents the beneficial conversion feature of the
Series C preferred stock. This amount has been accounted for as a dividend to
preferred stockholders and as a result, increased Sonus' additional paid in
capital, net loss available to common stockholders and the related net loss per
share.

F-14
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999

LIQUIDATION PREFERENCE

In the event of liquidation of Sonus and before any distribution to common
stockholders, the Series A, B and C preferred stockholders are entitled to share
pro rata, $1.00, $5.00 and $11.81 per share, respectively, plus all declared but
unpaid dividends.

VOTING RIGHTS

Series A, B and C preferred stockholders are entitled to one vote per common
share equivalent on all matters voted on by holders of common stock. In
addition, the Series A preferred stockholders are entitled to elect 40% of the
board members as long as 1,775,000 shares of such preferred stock are
outstanding.

CONVERSION

Each share of Series A, B and C preferred stock is convertible into 2.5
shares of common stock, adjustable for certain dilutive events. Conversion is at
the option of the holder, but becomes automatic upon the closing of an IPO for
the Series A, B and C preferred stock in which at least $10,000,000 of net
proceeds shall be received by Sonus at a price of at least $8.00 per share.

(9) STOCKHOLDERS' EQUITY (DEFICIT)

(A) STOCK SUBSCRIPTIONS RECEIVABLE

On November 4, 1998, Sonus entered into a stock subscription agreement for
$257,000 from an officer that bears interest at 8%. The note is secured by
2,570,000 shares of Sonus' restricted common stock and is due upon the earlier
of November 4, 2003 or 180 days after such shares are eligible for public sale.
The interest payments on the note are unconditional and are not limited to the
aforementioned stock. As of December 31, 1999, this note due Sonus had a
remaining balance of $236,000.

On September 1, 1999, Sonus entered into a stock subscription agreement for
$110,250 from an officer that bears interest at 8%. The full recourse note is
secured by 562,500 shares of Sonus' restricted common stock and is due upon the
earlier of September 1, 2004 or 180 days after such shares are eligible for
public sale.

(B) COMMON STOCK PURCHASE RIGHT

In November 1999, Sonus signed a definitive purchase and license agreement
(the Agreement) with a customer to provide certain Sonus products. Under the
terms of the Agreement, the customer also has the right to purchase shares of
common stock in Sonus' IPO at the IPO price. The number of shares subject to
this right equals 5% of the dollar value of the customer's accumulated purchases
of Sonus' products and services as of the date of the IPO divided by the IPO per
share price, but in no event more than 5% of the shares offered in the IPO. The
ability of the customer to exercise its right to purchase such shares is
contingent upon a closing of an IPO on a national exchange.

F-15
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999

Sonus issued 8,205,231 and 87,500 shares of restricted common stock outside
of the 1997 Stock Incentive Plan (the Plan) in the period ended December 31,
1997 and in the year ended December 31, 1999, respectively. These shares are
subject to repurchase agreements which expire over a five-year period. Sonus may
repurchase any remaining restricted shares of common stock held by these
individuals upon termination of employment at their original purchase price
ranging from $.0004 to $.004 per share. As of December 31, 1999, 3,793,916
shares of this common stock were restricted and subject to Sonus' repurchase.

(D) 1997 STOCK INCENTIVE PLAN

The Plan, which is administered by the Board of Directors, permits Sonus to
sell or award restricted common stock or to grant incentive and nonqualified
stock options for the purchase of common stock to employees, directors and
consultants. At December 31, 1999, of the 16,250,000 shares authorized under the
Plan, 1,688,175 shares are available for future sale of restricted common stock
or grant of stock options.

Sonus issued shares of restricted common stock to employees and consultants
which are subject to repurchase agreements and vest over a four or five-year
period. If the employee leaves or if the services are not performed, Sonus may
repurchase any restricted shares of common stock held by these individuals at
their original purchase prices ranging from $0.02 to $0.66 per share. At
December 31, 1999, 10,827,839 shares of the outstanding common stock issued
under the Plan were restricted and subject to Sonus' repurchase.

A summary of activity under Sonus' Plan for the period from inception to
December 31, 1999, is as follows:

RESTRICTED STOCK AWARDS

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF PURCHASE PURCHASE
SHARES PRICE PRICE
---------- ---------------- --------
<S> <C> <C> <C>
Outstanding, August 7, 1997 (inception)..................... -- $ -- $ --
Issued.................................................... 1,031,875 .02 .02
----------
Outstanding, December 31, 1997.............................. 1,031,875 .02 .02
Issued.................................................... 7,286,247 .02-.20 .07
----------
Outstanding, December 31, 1998.............................. 8,318,122 .02-.20 .06
Issued.................................................... 4,989,372 .02-.66 .30
----------
Outstanding, December 31, 1999.............................. 13,307,494 $ .02-.66 $.15
========== ================ ====
Unrestricted common stock, December 31, 1999................ 2,479,655 $ .02-.66 $.06
========== ================ ====
</TABLE>

F-16
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999

STOCK OPTION AWARDS

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF PURCHASE EXERCISE
SHARES PRICE PRICE
--------- ----------------- --------
<S> <C> <C> <C>
Outstanding, August 7, 1997 (inception)..................... -- $ -- $ --
Granted................................................... 125,000 .004 .004
---------
Outstanding, December 31, 1997.............................. 125,000 .004 .004
Granted................................................... 445,000 .02-.20 .16
Canceled.................................................. (12,500) .20 .20
---------
Outstanding, December 31, 1998.............................. 557,500 .004-.20 .13
Granted................................................... 696,831 .20-.66 .39
Exercised................................................. (236,750) .004-.20 .07
---------
Outstanding, December 31, 1999.............................. 1,017,581 $ .02-.66 $ .32
========= ================= =====
Exercisable, December 31, 1999.............................. 124,793 $ .02-.48 $ .17
========= ================= =====
</TABLE>

The following table summarizes information relating to currently outstanding
and exercisable options as of December 31, 1999:

<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
--------------------------------------- --------------------
WEIGHTED AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE
PRICE SHARES LIFE(YEARS) PRICE SHARES PRICE
- --------------------- --------- ---------------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$0.02 50,000 9.43 $0.02 25,000 $0.02
0.20 578,250 8.78 0.20 95,293 0.20
0.48 245,750 9.74 0.48 4,500 0.48
0.66 143,581 9.88 0.66 -- --
--------- -------
1,017,581 $ .32 124,793 $ .17
========= ===== ======= =====
</TABLE>

DEFERRED COMPENSATION

In connection with certain stock option grants and the issuance of
restricted common stock during the year ended December 31, 1999, and the
issuance of an aggregate of 3,057,330 shares of restricted common stock and
options to purchase common stock in the first quarter of 2000 through the date
of this filing, Sonus recorded deferred compensation of approximately
$20,859,000 and $26,050,000, respectively. This represents the aggregate
difference between the exercise price or purchase price and the fair value of
the common stock on the date of grant or sale for accounting purposes. The
deferred compensation will be recognized as an expense over the vesting period
of the underlying stock options and restricted common stock. Sonus recorded
compensation expense of $4,255,000 in the year ended December 31, 1999, related
to these options and restricted common stock. Sonus expects to record
$20,314,000, $11,985,000, $6,661,000, $3,146,000 and $548,000 in compensation
expense in the years ended December 31, 2000, 2001, 2002, 2003 and 2004,
respectively.

F-17
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999

The amortization of deferred compensation in the statement of operations for
the year ended December 31, 1999 by expense classification is as follows, in
thousands:

<TABLE>
<S> <C>
Manufacturing...................................... $ 92
Research and development........................... 1,454
Sales and marketing................................ 2,102
General and administrative......................... 607
------
$4,255
======
</TABLE>

STOCK-BASED COMPENSATION

Sonus granted 417,500 nonqualified stock options to nonemployees for
services rendered in the period from inception to December 31, 1999. In 1998 and
1999, Sonus sold 125,000 shares of restricted common stock and 10,000 shares of
Series B preferred stock to consultants at their then current fair market value,
subject to repurchase provisions, in the event consulting services are no longer
provided.

Sonus has valued the stock options and the issuances of restricted common
and Series B preferred stock based upon the fair market value of the services
rendered where Sonus believes the value of these services is more readily
determinable than the value of the options or restricted stock. All other grants
of options and issuances of restricted stock to nonemployees are valued based
upon the Black-Scholes option pricing. As of December 31, 1999, 135,000 stock
options, 80,000 shares of restricted common stock, and 6,000 shares of Series B
preferred stock are restricted. In accordance with Emerging Issues Task Force
96-18, Sonus will record the value of these services as earned.

The value of the options granted to employees as calculated under SFAS
No. 123 for the period from inception to December 31, 1997 and during the year
ended December 31, 1998 was immaterial to the financial statements. Sonus has
computed the pro forma disclosures required under SFAS No. 123 for options
granted to employees for the year ended December 31, 1999, using the
Black-Scholes option pricing model with an assumed risk-free interest rate of
5%, 60% volatility and an expected life ranging from 2-5 years with the
assumption that no dividends will be paid. Had compensation expense for Sonus'
stock option plan been determined consistent with SFAS No. 123 for the year
ended December 31, 1999, the pro forma net loss and pro forma net loss per share
would have been as follows, in thousands, except per share data:

<TABLE>
<S> <C>
Net loss--
As reported.................................... $(26,387)
Pro forma...................................... (26,400)

Basic and diluted net loss per share--
As reported.................................... $ 5.53
Pro forma...................................... 5.53
</TABLE>

F-18
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999

(E) COMMON STOCK RESERVED

Common stock reserved for future issuance at December 31, 1999 consisted of
the following:

<TABLE>
<S> <C>
Conversion of:
Series A preferred stock..................... 17,950,000
Series B preferred stock..................... 8,010,718
Series C preferred stock..................... 4,849,202
----------
Total preferred stock...................... 30,809,920
Stock incentive plan........................... 2,705,753
----------
33,515,673
==========
</TABLE>

(10) EMPLOYEE BENEFIT PLAN

In 1998, Sonus adopted a savings plan for its employees, which has been
qualified under Section 401(k) of the Internal Revenue Code. Eligible employees
are permitted to contribute to the 401(k) plan through payroll deductions within
statutory and plan limits. Contributions from Sonus are made at the discretion
of the Board of Directors. Sonus has made no contributions to the 401(k) plan to
date.

(11) SUBSEQUENT EVENTS

(A) SALE OF SERIES D REDEEMABLE CONVERTIBLE PREFERRED STOCK

In March 2000, Sonus issued 1,509,154 shares of Series D redeemable
convertible preferred stock at $16.40 per share resulting in net proceeds of
$24,710,000. Each share of Series D redeemable convertible preferred stock is
convertible into 1.0 share of common stock, adjustable for certain dilutive
events.

(B) PROPOSED INITIAL PUBLIC OFFERING

In March 2000, Sonus filed for an IPO of its common stock with the SEC. If
the offering is consummated as presently anticipated all of the outstanding
redeemable convertible preferred stock will automatically convert into
32,319,074 shares of common stock.

In March 2000, the Board of Directors authorized, subject to stockholder
approval, an increase in the authorized shares of Sonus' common stock from
70,000,000 to 300,000,000 shares and authorized and approved 5,000,000 shares of
$.01 par value undesignated preferred stock that may be issued by the Board of
Directors from time to time in one or more series. This amendment is to be
effective upon the closing of Sonus' IPO.

(D) AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN

In March 2000, the Board of Directors approved, subject to stockholder
approval, an amendment to the Plan to increase the amount of shares available
under the plan to 27,000,000. On January 1 of each year, commencing with January
2001 the aggregate number of shares of

F-19
<PAGE>
SONUS NETWORKS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1999

common stock available for purchase under the Plan shall increase by the lesser
of (i) 5% of the outstanding shares on December 31 of the preceding year or
(ii) an amount determined by the Board of Directors.

(E) 2000 EMPLOYEE STOCK PURCHASE PLAN

In March 2000, the Board of Directors approved, subject to stockholder
approval, the Employee Stock Purchase Plan. A total of 1,200,000 shares of
common stock have been reserved for issuance under this plan. Eligible employees
may purchase common stock at a price equal to 85% of the lower of the fair
market value of the common stock at the beginning or end of each offering
period. Participation is limited to 20% of an employee's eligible compensation
not to exceed amounts allowed by the Internal Revenue Code. On January 1 of each
year, commencing with January 2001, the aggregate number of shares of common
stock available for purchase under the Employee Stock Purchase Plan shall
increase by the lesser of (i) 2% of the outstanding shares on December 31 of the
preceding year or (ii) an amount determined by the Board of Directors.

F-20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

No dealer, salesperson, or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 4
Special Note Regarding Forward-
Looking Statements.................. 13
Use of Proceeds....................... 13
Dividend Policy....................... 13
Capitalization........................ 14
Dilution.............................. 15
Selected Financial Data............... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 22
Management............................ 34
Certain Transactions.................. 41
Principal Stockholders................ 43
Description of Capital Stock.......... 45
Shares Eligible for Future Sale....... 49
Legal Matters......................... 50
Experts............................... 50
Additional Information................ 51
Underwriting.......................... 52
Index to Financial Statements......... F-1
</TABLE>

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

Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to a dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to an unsold allotment or subscription.

SONUS NETWORKS, INC.

COMMON STOCK

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

[LOGO]

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

GOLDMAN, SACHS & CO.
DAIN RAUSCHER WESSELS
J.P. MORGAN & CO.
ROBERTSON STEPHENS

Representatives of the Underwriters

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Expenses of the Registrant in connection with the issuance and distribution
of the securities being registered, other than the underwriting discounts, are
estimated as follows:

<TABLE>
<CAPTION>
TOTAL
---------
<S> <C>
SEC Registration Fee........................................ $ 30,360
NASD Fees................................................... 12,000
NASDAQ Listing Fees......................................... *
Printing and Engraving Expenses............................. *
Legal Fees and Expenses..................................... *
Accountants' Fees and Expenses.............................. *
Blue Sky Fees and Expenses (including legal fees)........... 15,000
Transfer Agent and Registrar's Fees......................... *
Miscellaneous Costs......................................... *
--------
Total................................................... $ *
========
</TABLE>

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

* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES

Section 145 of the Delaware General Corporation law empowers a Delaware
corporation to indemnify its officers and directors and certain other persons to
the extent under the circumstances set forth therein.

The form of the Fourth Amended and Restated Certificate of Incorporation of
the Registrant and the Amended and Restated By-laws of the Registrant, copies of
the forms of which are filed as Exhibits 3.1 and 3.2, provide for
indemnification of officers and directors of the Registrant and certain other
persons against liabilities and expenses incurred by any of them in certain
stated proceedings and under certain stated conditions.

The above discussion of the Registrant's Fourth Amended and Restated
Certificate of Incorporation, Amended and Restated By-Laws and Section 145 of
the Delaware General Corporation Law is not intended to be exhaustive and is
qualified in its entirety by the forms of such Fourth Amended and Restated
Certificate of Incorporation, Amended and Restated By-Laws and statute.

The Registrant will agree to indemnify the Underwriters and their
controlling persons, and the Underwriters will agree to indemnify the Registrant
and its controlling persons, including directors and executive officers of the
Registrant, against certain liabilities, including liabilities under the
Securities Act. Reference is made to the form of the Underwriting Agreement that
will be filed as part of the Exhibits hereto.

In addition, the Registrant intends to purchase a directors and officers
liability insurance policy.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On November 18, 1997, the Registrant issued and sold 7,100,000 shares of
Series A Convertible Preferred Stock to 18 investors for an aggregate purchase
price of $7,100,000. On July 7, 1998, the Registrant issued and sold 80,000
shares of Series A Convertible Preferred Stock

II-1
<PAGE>
to two investors for an aggregate purchase price of $80,000. Upon completion of
this offering, the Series A Convertible Preferred Stock will convert into
17,950,000 shares of common stock, $0.001 par value (the "Common Stock"), which
reflects a 1.5-for-1 split of the Common Stock in October 1999, and a 5-for-3
split of the Common Stock in December 1999. These sales were made in reliance
upon Rule 506 of Regulation D, promulgated under the Securities Act and
Section 4(2) of the Securities Act, as transactions to accredited investors by
an issuer not involving a public offering.

On September 23, 1998, the Registrant issued and sold an aggregate of
3,144,287 shares of Series B Convertible Preferred Stock to a total of 20
investors for an aggregate purchase price of $15,721,435. On December 10, 1998,
the Registrant issued and sold an aggregate of 10,000 shares of Series B
Convertible Preferred Stock to one investor for a purchase price of $50,000. On
May 24, 1999, the Registrant issued and sold 50,000 shares of Series B
Convertible Preferred Stock to one investor for a purchase price of $250,000.
Upon completion of this offering, the Series B Convertible Preferred Stock will
convert into 8,010,718 shares of Common Stock, which reflects a 1.5-for-1 split
of the Common Stock in October 1999, and a 5-for-3 split of the Common Stock in
December 1999. These sales were made in reliance upon Rule 506 of Regulation D,
promulgated under the Securities Act and Section 4(2) of the Securities Act, as
transactions to accredited investors by an issuer not involving a public
offering.

On September 10, 1999, the Registrant issued and sold 1,727,993 shares of
Series C Convertible Preferred Stock to a total of 49 investors for an aggregate
purchase price of $20,407,597. On November 15, 1999, November 30, 1999 and
December 9, 1999, the Registrant issued and sold an aggregate of 211,688 shares
of Series C Convertible Preferred Stock to a total of three investors for an
aggregate purchase price of $2,500,035. Upon completion of this offering, the
Series C Convertible Preferred Stock will convert into 4,849,202 shares of
Common Stock, which reflects a 1.5-for-1 split of the Common Stock in
October 1999, and a 5-for-3 split of the Common Stock in December 1999. These
transactions were made in reliance upon Rule 506 of Regulation D, promulgated
under the Securities Act and Section 4(2) of the Securities Act, as transactions
to accredited investors by an issuer not involving a public offering.

On March 9, 2000, the Registrant issued and sold 1,509,154 shares of
Series D Convertible Preferred Stock to a total of 20 investors for an aggregate
purchase price of $24,750,126. Upon completion of this offering the Series D
Convertible Preferred Stock will convert into 1,509,154 shares of Common Stock.

As of February 29, 2000, the Registrant has issued options to certain
employees, officers and consultants of the Registrant, to purchase an aggregate
of 1,945,929 shares of Common Stock under the Registrant's Amended and Restated
1997 Stock Incentive Plan. The purchase price under the options ranges from
$0.004 to $2.00 based on the fair market value of the stock on the date of
grant. As of February 29, 2000, the Registrant has issued grants of restricted
stock to certain employees, officers and consultants of the Registrant, and as
of February 29, 2000 there were 13,786,993 shares of restricted stock
outstanding under the Registrant's Amended and Restated 1997 Stock Incentive
Plan. The purchase price of the restricted stock ranged from $0.02 to $2.00
based on the fair market value of the stock on the date of issuance. These
grants of options, and sales of restricted stock were made in reliance upon
Rule 701 promulgated under the Securities Act and are deemed to be exempt
transactions as sales of an issuer's securities pursuant to a written plan or
contract relating to the compensation of such individuals and upon Section 4(2)
of the Securities Act as transactions not involving any public offering.

II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

The following is a list of exhibits filed as a part of this registration
statement:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1* Form of Fourth Amended and Restated Certificate of
Incorporation of the Registrant.
3.2* Form of Amended and Restated By-Laws of the Registrant.
4.1* Specimen Certificate for shares of the Registrant's common
stock.
5.1* Opinion of Bingham Dana LLP, counsel to the Registrant,
regarding the legality of the shares of common stock
registered hereunder.
10.1 Lease, dated January 21, 1999, as amended, between the
Registrant and Glenborough Fund V, Limited Partnership with
respect to property located at 5 Carlisle Road, Westford,
Massachusetts.
10.2* Amended and Restated 1997 Stock Incentive Plan of the
Registrant.
10.3* 2000 Employee Stock Purchase Plan.
10.4 Series A Preferred Stock Purchase Agreement, dated as of
November 18, 1997, by and among the Registrant and the
"Purchaser" parties thereto.
10.5 Series B Preferred Stock Purchase Agreement, dated as of
September 23, 1998, by and among the Registrant and the
"Purchaser" parties thereto.
10.6 Series C Preferred Stock Purchase Agreement, dated as of
September 10, 1999, by and among the Registrant and the
"Purchaser" parties thereto.
10.7 Series D Preferred Stock Purchase Agreement, dated as of
March 9, 2000, by and among the Registrant and the
"Purchaser" parties thereto.
10.8 Third Amended and Restated Investor Rights Agreement, dated
as of March 9, 2000 by and among the Registrant and the
"Purchaser" parties thereto.
10.9 Third Amended and Restated Right of First Refusal and
Co-Sale Agreement, dated as of March 9, 2000, among the
Registrant and the persons and entities listed on the
signature pages thereto.
10.10 Loan and Security Agreement, dated as of March 6, 1998, by
and between the Registrant and Silicon Valley Bank.
10.11 Modification Agreement, dated as of November 31, 1998, by
and between the Registrant and Silicon Valley Bank.
10.12 Modification Agreement, dated as of November 29, 1999, by
and between the Registrant and Silicon Valley Bank.
23.1 Consent of Arthur Andersen LLP.
23.2* Consent of Bingham Dana LLP, counsel to the Registrant
(included in Exhibit 5.1).
24.1 Power of Attorney (included in signature page to
Registration Statement).
27.1 Financial Data Schedule.
</TABLE>

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

* To be filed by amendment.

All schedules have been omitted because either they are not required, are
not applicable or the information is otherwise set forth in the Financial
Statements and notes thereto.

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 hereof, or otherwise,
the Registrant has been advised that in the opinion of the

II-3
<PAGE>
Securities and Exchange Commission such indemnification is against public policy
as expressed in the 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 Act and
will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes:

(1) To provide 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
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the 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.

(3) That for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and this offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Westford, Commonwealth of Massachusetts, on this 10th
day of March, 2000.

<TABLE>
<S> <C> <C>
SONUS NETWORKS, INC.

BY: /S/ HASSAN M. AHMED
-----------------------------------------
Hassan M. Ahmed
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

POWER OF ATTORNEY

Each person whose signature appears below hereby appoints Rubin Gruber,
Hassan M. Ahmed and Stephen J. Nill, and each of them severally, acting alone
and without the other, his/her true and lawful attorney-in-fact with full power
of substitution or resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign on such person's behalf,
individually and in each capacity stated below, any and all amendments,
including post-effective amendments to this Registration Statement, and to sign
any and all additional registration statements relating to the same offering of
securities of the Registration Statement that are filed pursuant to Rule 462(b)
of the Securities Act of 1933, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as such person
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
President, Chief Executive March 10, 2000
/s/ HASSAN M. AHMED Officer and Director
------------------------------------------- (Principal Executive
Hassan M. Ahmed Officer)
Vice President of Finance March 10, 2000
/s/ STEPHEN J. NILL and Administration and
------------------------------------------- Chief Financial Officer
Stephen J. Nill (Principal Financial and
Accounting Officer)
/s/ RUBIN GRUBER Chairman of the Board of March 10, 2000
------------------------------------------- Directors and Director
Rubin Gruber
/s/ EDWARD T. ANDERSON Director March 10, 2000
-------------------------------------------
Edward T. Anderson
/s/ PAUL J. FERRI Director March 10, 2000
-------------------------------------------
Paul J. Ferri
/s/ PAUL J. SEVERINO Director March 10, 2000
-------------------------------------------
Paul J. Severino
</TABLE>

II-5
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Form of Fourth Amended and Restated Certificate of
Incorporation of the Registrant.
3.2* Form of Amended and Restated By-Laws of the Registrant.
4.1* Specimen Certificate for shares of the Registrant's common
stock.
5.1* Opinion of Bingham Dana LLP, counsel to the Registrant,
regarding the legality of the shares of common stock
registered hereunder.
10.1 Lease, dated January 21, 1999, as amended, between the
Registrant and Glenborough Fund V, Limited Partnership with
respect to property located at 5 Carlisle Road, Westford,
Massachusetts.
10.2* Amended and Restated 1997 Stock Incentive Plan of the
Registrant.
10.3* 2000 Employee Stock Purchase Plan.
10.4 Series A Preferred Stock Purchase Agreement, dated as of
November 18, 1997, by and among the Registrant and the
"Purchaser" parties thereto.
10.5 Series B Preferred Stock Purchase Agreement, dated as of
September 23, 1998, by and among the Registrant and the
"Purchaser" parties thereto.
10.6 Series C Preferred Stock Purchase Agreement, dated as of
September 10, 1999, by and among the Registrant and the
"Purchaser" parties thereto.
10.7 Series D Preferred Stock Purchase Agreement, dated as of
March 9, 2000, by and among the Registrant and the
"Purchaser" parties thereto.
10.8 Third Amended and Restated Investor Rights Agreement, dated
as of March 9, 2000 by and among the Registrant and the
"Purchaser" parties thereto.
10.9 Third Amended and Restated Right of First Refusal and
Co-Sale Agreement, dated as of March 9, 2000, among the
Registrant and the persons and entities listed on the
signature pages thereto.
10.10 Loan and Security Agreement, dated as of March 6, 1998, by
and between the Registrant and Silicon Valley Bank.
10.11 Modification Agreement, dated as of November 31, 1998, by
and between the Registrant and Silicon Valley Bank.
10.12 Modification Agreement, dated as of November 29, 1999, by
and between the Registrant and Silicon Valley Bank.
23.1 Consent of Arthur Andersen LLP.
23.2* Consent of Bingham Dana LLP, counsel to the Registrant
(included in Exhibit 5.1).
24.1 Power of Attorney (included in signature page to
Registration Statement).
27.1 Financial Data Schedule.
</TABLE>

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

* To be filed by amendment.

<PAGE>

1999 LEASE

TABLE OF CONTENTS

1. LEASE OF PREMISES ............................................. 1

2. DEFINITIONS ................................................... 1

3. EXHIBITS AND ADDENDA .......................................... 3

4. DELIVERY OF POSSESSION ........................................ 3

5. INTENDED USE OF THE PREMISES .................................. 3

6. RENT .......................................................... 3
6.1. Payment of Rent ....................................... 3
6.2. Adjusted Base Rent .................................... 3
6.3. Additional Rent for Increases in Tax Costs and
Operating Expenses .................................... 4
6.4. Definition of Rent .................................... 6
6.5. Taxes on Tenant's Use and Occupancy ................... 6

7. LATE CHARGES .................................................. 6

8. SECURITY DEPOSIT .............................................. 6

9. TENANT'S USE OF THE PREMISES .................................. 7
9.1. Use ................................................... 7
9.2. Observance of Law ..................................... 7
9.3. Insurance ............................................. 7
9.4. Nuisance and Waste .................................... 8
9.5. Load and Equipment Limits ............................. 8
9.6. Hazardous Material .................................... 8

10. SERVICES AND UTILITIES ........................................ 8

11. REPAIRS AND MAINTENANCE ....................................... 9
11.1. Landlord's Obligations ................................ 9
11.2. Tenant's Obligations .................................. 9
11.3. Compliance with Law ................................... 10
11.4. Notice of Defect ...................................... 10
11.5. Landlord's Liability .................................. 10

12. CONSTRUCTION, ALTERATIONS AND ADDITIONS ....................... 10
12.1. Landlord's Construction Obligations ................... 10
12.2. Tenant's Construction Obligations ..................... 10
12.3. Tenant's Alterations and Additions .................... 10
12.4. Payment ............................................... 11
12.5. Property of Landlord .................................. 11

13. LEASEHOLD IMPROVEMENTS; TENANT'S PROPERTY ..................... 11
13.1. Leasehold Improvements ................................ 11
13.2. Tenant's Property ..................................... 11

14. INDEMNIFICATION ............................................... 11
14.1. Tenant Indemnification ................................ 11
14.2. Landlord Not Liable ................................... 11

15. TENANT'S INSURANCE ............................................ 12
15.1. Insurance Requirement ................................. 12
15.2. Minimum Scope of Coverage ............................. 12
15.3. Minimum Limits of Insurance ........................... 13
15.4. Deductible and Self-Insured Retention ................. 13
15.5. Increases in Insurance Policy Limits .................. 13
15.6. Waiver of Subrogation ................................. 13
15.7. Landlord's Right to Obtain Insurance for Tenant ....... 13

16. DAMAGE OR DESTRUCTION ......................................... 13
16.1. Damage ................................................ 13
16.2. Repair of Premises in Excess of One Hundred
Eighty Days ........................................... 13
16.3. Repair Outside Premises ............................... 14
16.4. Tenant Repair ......................................... 14
16.5. Election Not to Perform Landlord's Work ............... 14
16.6. Express Agreement ..................................... 14

17. EMINENT DOMAIN ................................................ 14
17.1. Whole Taking .......................................... 14
17.2. Partial Taking ........................................ 14
17.3. Proceeds .............................................. 14
17.4. Landlord's Restoration ................................ 14

i
<PAGE>

18. ASSIGNMENT AND SUBLETTING ....................................... 15
18.1. No Assignment or Subletting ........................... 15
18.2. Landlord's Consent .................................... 15
18.3. Tenant Remains Responsible ............................ 16
18.4. Conversion to a Limited Liability Entity .............. 16
18.5. Payment of Fees ....................................... 16

19. DEFAULT ....................................................... 16
19.1. Tenant's Default ...................................... 16
19.2. Landlord Remedies ..................................... 17
19.3. Damages Recoverable ................................... 18
19.4. Landlord's Right to Cure Tenant's Default ............. 18
19.5. Landlord's Default .................................... 18
19.6. Mortgagee Protection .................................. 18
19.7. Tenant's Right to Cure Landlord's Default ............. 18

20. WAIVER ........................................................ 18

21. SUBORDINATION AND ATTORNMENT .................................. 19

22. TENANT ESTOPPEL CERTIFICATES .................................. 19
22.1. Landlord Request for Estoppel Certificate ............. 19
22.2. Failure to Execute .................................... 19

23. NOTICE ........................................................ 19

24. TRANSFER OF LANDLORD'S INTEREST ............................... 20

25. SURRENDER OF PREMISES ......................................... 20
25.1. Clean and Same Condition .............................. 20
25.2. Failure to Deliver Possession ......................... 20
25.3. Property Abandoned .................................... 20

26. HOLDING OVER .................................................. 20

27. RULES AND REGULATIONS ......................................... 20

28. CERTAIN RIGHTS RESERVED BY LANDLORD ........................... 21

29. ADVERTISEMENTS AND SIGNS ...................................... 21

30. RELOCATION OF PREMISES ........................................ 21

31. GOVERNMENT ENERGY OR UTILITY CONTROLS ......................... 21

32. FORCE MAJEURE ................................................. 22

33. BROKERAGE FEES ................................................ 22

34. QUIET ENJOYMENT ............................................... 22

35. TELECOMMUNICATIONS ............................................ 22
35.1. Telecommunications Companies .......................... 22
35.2. Tenant's Obligations .................................. 22
35.3. Landlord's Consent .................................... 23
35.4. Indemnification ....................................... 23
35.5. Landlord's Operation of Building Telecommunications
Lines and Systems ..................................... 23

36. MISCELLANEOUS ................................................. 23
36.1. Accord and Satisfaction; Allocation of Payments ....... 23
36.2. Addenda ............................................... 23
36.3. Attorneys' Fees ....................................... 24
36.4. Captions and Section Numbers .......................... 24
36.5. Changes Requested by Lender ........................... 24
36.6. Choice of Law ......................................... 24
36.7. Consent ............................................... 24
36.8. Authority ............................................. 24
36.9. Waver of Right to Jury Trial .......................... 24
36.10. Counterparts .......................................... 24
36.11. Execution of Lease; No Option ......................... 24
36.12. Furnishing of Financial Statements; Tenant's
Representations ....................................... 24
36.13. Further Assurances .................................... 24
36.14. Prior Agreements; Amendments .......................... 24
36.15. Recording ............................................. 25
36.16. Severability .......................................... 25
36.17. Successors and Assigns ................................ 25
36.18. Time of the Essence ................................... 25

ii
<PAGE>

LEASE

This lease (the Lease) between Glenborough Fund V, Limited Partnership, a
Delaware limited partnership (herein Landlord), and Sonus Networks, Inc., a
Delaware Corporation (herein Tenant), is dated for reference purposes only as of
this 21st day of January, 1999.

1. LEASE OF PREMISES.

In consideration of the Rent (as defined in Section 6.) and the provisions of
this Lease, Landlord leases to Tenant and Tenant leases from Landlord the
Premises shown by diagonal lines on the floor plan attached hereto as Exhibit
"A", and further described in Section 2.13. The Premises are located within the
Building and Project (as described in Sections 2.13. and 2.14.). Tenant shall
have the nonexclusive right (unless otherwise provided herein) in common with
Landlord, other tenants, subtenants and invitees, to use the Common Area (as
defined in Section 2.5.).

2. DEFINITIONS.

As used in this Lease the following terms shall have the following meanings:

2.2. ANNUAL BASE RENT:

$664,640.00 beginning April 1, 1999 ending March 31, 2000
$685,410.00 beginning April 1, 2000 ending March 31, 2001
$706,180.00 beginning April 1, 2001 ending March 31, 2002
$726,950.00 beginning April 1, 2002 ending March 31, 2003
$747,720.00 beginning April 1, 2003 ending March 31, 2004

2.3. BASE YEAR (Section 6.3.): operating expenses calendar year 1999
Real Estate taxes fiscal year 1999.

2.4. COMMENCEMENT DATE: April 1, 1999. If the Commencement Date is other
than the first day of a month, then the Expiration Date of the Lease
shall be extended to the last day of the month in which the Lease
expires.

2.5. COMMON AREA: The building lobbies, common corridors and hallways,
rest rooms, parking areas and other generally understood public or
common areas.

2.6. EXPIRATION DATE: March 31, 2004, unless otherwise sooner terminated
in accordance with the provisions of this Lease.

2.8. LANDLORD'S ADDRESS FOR NOTICE:

Glenborough Properties, L.P.
c/o Glenborough Realty Trust Incorporated
400 South El Camino Real, Suite 1100
San Mateo, CA 94402-1708
Attn: Legal Department

RENT PAYMENT ADDRESS:

Glenborough Fund V, L.P. c/o
Glenborough Realty Trust, Inc.
300 Nickerson Road
Marlborough, MA 01752

TENANT'S MAILING ADDRESS:

Sonus Networks, Inc.
5 Carlisle Road
Westford, MA 01886

1
<PAGE>

2.9. LISTING AND LEASING AGENT(S): Boston Real Estate Partners

2.10. MONTHLY INSTALLMENTS OF BASE RENT:

$55,386.67 beginning April 1, 1999 ending March 31, 2000
$57,117.50 beginning April 1, 2000 ending March 31, 2001
$58,848.33 beginning April 1, 2001 ending March 31, 2002
$60,579.17 beginning April 1, 2002 ending March 31, 2003
$62,310.00 beginning April 1, 2003 ending March 31, 2004

2.11. NOTICE: Except as otherwise provided herein, Notice shall mean any
notices, approvals and demands permitted or required to be given
under this Lease. Notice shall be given in the form and manner set
forth in Section 23.

2.12. PARKING: Tenant shall be entitled to the nonexclusive use of 125
parking spaces. The charge for parking shall be 0 per month per
parking space. Landlord may permit Tenant to rent additional spaces,
if available, at the then current parking rate. Each such additional
parking space, however, shall not be a part of this Lease, and
Landlord reserves the right to adjust the parking rate for each
additional parking space at any time and to terminate the rental of
such additional parking spaces at any time.

2.13. PREMISES: That portion of the 2nd floor(s) of the Building located
at 5 Carlisle Road, Westford, MA, commonly referred to as Suite(s)
2E-01 & 2W-01, as shown by diagonal lines on Exhibit "A". For
purposes of this Lease, the Premises is deemed to contain
approximately 41,540.00 square feet of Rentable Area.

2.14. PROJECT: The building of which the Premises are a part (the
Building) and any other buildings or improvements on the real
property (the Property) located at 5 Carlisle Road, Westford, MA
01886 and further described in Exhibit "B". The Project is commonly
known as Phase 1, Westford Corporate Center.

2.15. RENTABLE AREA: As to both the Premises and the Project, the
respective measurements of floor area as may from time to time be
subject to lease by Tenant and all tenants of the Project,
respectively, as determined by Landlord and applied on a consistent
basis throughout the Project.

2.16. SECURITY DEPOSIT (Section 8.): $166,160.01.

2.17. STATE: The Commonwealth of Massachusetts.

2.19. TENANT'S PROPORTIONATE SHARE: 50.89%. Such share is a fraction, the
numerator of which is the Rentable Area of the Premises, and the
denominator of which is the Rentable Area of the Project, as
determined by Landlord from time to time. The Project consists of 1
Building(s), and, for purposes of this Lease, the Building(s) are
deemed to contain approximately 81,615 square feet of Rentable Area.

2.20. TENANT'S USE (Section 9.): General Office and Light Manufacturing,
final test, assembly and distribution of Telecommunications
Equipment.

2.21. TERM: The period commencing on the Commencement Date and expiring at
midnight on the Expiration Date.

2
<PAGE>

3. EXHIBITS AND ADDENDA.

The exhibits and addenda listed below (unless lined out) are attached hereto and
incorporated by reference in this Lease:

3.1. Exhibit A - Floor Plan showing the Premises.
3.2. Exhibit B - Site Plan of the Project.
3.3. Exhibit C - Building Standard Tenant Improvements.
3.4. Exhibit D - Work Letter and Drawings.
3.5. Exhibit E - Rules and Regulations.
3.6. Addenda: Attached hereto and made a part of this Lease by reference
are Sections 37-42.

4. DELIVERY OF POSSESSION.

If for any reason Landlord does not deliver possession of the Premises to Tenant
on the Commencement Date, and such failure is not caused by an act or omission
of Tenant, the Expiration Date shall be extended by the number of days the
Commencement Date has been delayed and the validity of this Lease shall not be
impaired nor shall Landlord be subject to any liability for such failure; but
Rent shall be abated until delivery of possession. Provided, however, if the
Commencement Date has been delayed by an act or omission of Tenant then Rent
shall not be abated until delivery of possession and the Expiration Date shall
not be extended. Delivery of possession shall be deemed to occur on the earlier
of the date Landlord receives a Certificate of Occupancy or upon substantial
completion of the Premises (as certified by Landlord's architect). If Landlord
permits Tenant to enter into possession of the Premises before the Commencement
Date, such possession shall be subject to the provisions of this Lease,
including, without limitation, the payment of Rent (unless otherwise agreed in
writing).

Within ten (10) days of delivery of possession Landlord shall deliver to Tenant
and Tenant shall execute an Acceptance of Premises in which Tenant shall
certify, among other things, that (a) Landlord has satisfactorily completed
Landlord's Work to the Premises pursuant to Exhibit "D", unless written
exception is set forth thereon, and (b) that Tenant accepts the Premises.
Tenant's failure to execute and deliver the Acceptance of Premises shall be
conclusive evidence, as against Tenant, that Landlord has satisfactorily
completed Landlord's Work to the Premises pursuant to Exhibit "D".

In the event Tenant fails to take possession of the Premises following execution
of this Lease, Tenant shall reimburse Landlord promptly upon demand for all
costs incurred by Landlord in connection with entering into this Lease
including, but not limited to, broker fees and commissions, sums paid for the
preparation of a floor and/or space plan for the Premises, costs incurred in
performing Landlord's Work pursuant to Exhibit "D", loss of rental income,
attorneys' fees and costs, and any other damages for breach of this Lease
established by Landlord.

5. INTENDED USE OF THE PREMISES.

The statement in this Lease of the nature of the business to be conducted by
Tenant in the Premises does not constitute a representation or guaranty by
Landlord as to the present or future suitability of the Premises for the conduct
of such business in the Premises, or that it is lawful or permissible under the
certificate of occupancy issued for the Building, or is otherwise permitted by
law. Tenant's taking possession of the Premises shall be conclusive evidence, as
against Tenant, that, at the time such possession was taken, the Premises were
satisfactory for Tenant's intended use.

6. RENT.

6.1. Payment of Rent. Tenant shall pay Rent for the Premises. Monthly
Installments of Rent shall be payable in advance on the first day of each
calendar month of the Term. If the Term begins (or ends) on other than the first
(or last) day of a calendar month, Rent for the partial month shall be prorated
based on the number of days in that month. Rent shall be paid to Landlord at the
Rent Payment Address set forth in Section 2.8., or to such other person at such
place as Landlord may from time to time designate in writing, without any prior
demand therefor and without deduction or offset, in lawful money of the United
States of America. Tenant shall pay Landlord the first Monthly Installment of
Base Rent upon execution of this Lease.

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6.3. Additional Rent for Increases in Tax Costs and Operating Expenses.
If, in any calendar year during the Term of this Lease, Landlord's Tax Costs and
Operating Expenses (as hereinafter defined) for the Project (hereinafter
sometimes together referred to as Direct Costs) shall be higher than in the Base
Year specified in Section 2.3., Additional Rent for such Direct Costs payable
hereunder shall be increased by an amount equal to Tenant's Proportionate Share
of the difference between Landlord's actual Direct Costs for such calendar year
and the actual Direct Costs of the Base Year. However, if during any calendar
year of the Term the occupancy of the Project is less than ninety-five percent
(95%), then Landlord shall make an appropriate adjustment of the variable
components of Operating Expenses, as reasonably determined by Landlord, to
determine the amount of Operating Expenses that would have been incurred had the
Project been ninety-five percent (95%) occupied during that calendar year. This
estimated amount shall be deemed the amount of Operating Expenses for that
calendar year. For purposes hereof, "variable components" shall include only
those Operating Expenses that are affected by variations in occupancy levels.

6.3.1. Definitions. As used in this Section 6.3., the following
terms shall have the following meanings:

6.3.1.1. Tax Costs shall mean any and all real estate taxes,
other similar charges on real property or improvements, assessments,
and all other charges (but in no event Landlord's income or estate
taxes) assessed, levied, imposed or becoming a lien upon part or all
of the Project or the appurtenances thereto, or attributable
thereto, or on the rents, issues, profits or income received or
derived therefrom which may be imposed, levied, assessed or charged
by the United States or the state, county or city in which the
Project is located, or any other local government authority or
agency or political subdivision thereof. Tax Costs for each tax year
shall be apportioned to determine the Tax Costs for the subject
calendar years.

Landlord, at Landlord's reasonable discretion, may
contest any taxes levied or assessed against the Building or Project
during the Term. If Landlord contests any taxes levied or assessed
during the Term, Tenant shall pay Landlord Tenant's Proportionate
Share of all reasonable costs incurred by Landlord in connection
with the contest.

6.3.1.2. Operating Expenses shall mean any and all expenses
incurred by Landlord in connection with the management, maintenance,
operation, and repair of the Project, the equipment, adjacent walks,
Common Area, parking areas, the roof, landscaped areas, including,
but not limited to, salaries, wages, benefits, pension payments,
payroll taxes, worker's compensation, and other costs related to
employees engaged in the management, operation, maintenance and/or
repair of the Project; any and all assessments or costs incurred
with respect to Covenants, Conditions and/or Restrictions,
Reciprocal Easement Agreements or similar documents affecting the
Building or Project, if any; the cost of all charges to Landlord for
electricity, natural gas, air conditioning, steam, water, and sewer,
and other utilities furnished to the Project including any taxes
thereon; reasonable attorneys' fees and/or consultant fees incurred
by Landlord in contracting with a company or companies to provide
electricity (or any other utility) to the Project, any fees for the
installation, maintenance, repair or removal of related equipment,
and any exit fees or stranded cost charges mandated by the State;
the cost and expense for third-party consultants, accountants and
attorneys; a management fee; energy studies and the amortized cost
of any energy or other cost saving equipment used by Landlord to
provide services pursuant to the terms of the Lease (including the
amortized cost to upgrade the efficiency or capacity of Building
telecommunication lines and systems if responsibility therefor is
assumed by Landlord as discussed in Section 35. hereof); the cost of
license fees related to the Project; the cost of all charges for
property (all risk), liability, rent loss and all other insurance
for the Project to the extent that such insurance is required to be
carried by Landlord under any lease, mortgage or deed of trust
covering the whole or a substantial part of the Project or the
Building, or, if not required under any such lease, mortgage or deed
of trust, then to the extent such insurance is carried by owners of
properties comparable to the Project; the cost of all building and
cleaning supplies and materials; the cost of all charges for
security services, cleaning, maintenance and service contracts and
other services with independent contractors, including but not
limited to the maintenance, operation and repair of all electrical,
plumbing and mechanical systems of the Project and maintenance,
repair and replacement of any intrabuilding cabling

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network (ICN), if any; and the cost of any janitorial, utility or
other services to be provided by Landlord.

Notwithstanding the foregoing, the following shall not be
included within Operating Expenses: (i) costs of capital
improvements (except any improvements that might be deemed "capital
improvements" related to the enhancement or upgrade of the ICN and
related equipment) and costs of curing design or construction
defects; (ii) depreciation; (iii) interest and principal payments on
mortgages and other debt costs and ground lease payments, if any,
and any penalties assessed as a result of Landlord's late payments
of such amounts; (iv) real estate broker leasing commissions or
compensation; (v) any cost or expenditure (or portion thereof) for
which Landlord is reimbursed, whether by insurance proceeds or
otherwise; (vi) attorneys' fees, costs, disbursements, advertising
and marketing and other expenses incurred in connection with the
negotiation of leases with prospective tenants of the Building;
(vii) rent for space which is not actually used by Landlord in
connection with the management and operation of the Building; (viii)
all costs or expenses (including fines, penalties and legal fees)
incurred due to the violation by Landlord, its employees, agents,
contractors or assigns of the terms and conditions of the Lease, or
any valid, applicable building code, governmental rule, regulation
or law; (ix) except for the referenced management compensation, any
overhead or profit increments to any subsidiary or affiliate of
Landlord for services on or to the Building, to the extent that the
costs of such services exceed competitive costs for such services;
(x) the cost of constructing tenant improvements for Tenant or any
other tenant of the Building or Project; (xi) Operating Expenses
specially charged to and paid by any other tenant of the Building or
Project; and (xii) the cost of special services, goods or materials
provided to any other tenant of the Building or Project.

6.3.2. Determination and Payment of Tax Costs and Operating
Expenses.

6.3.2.1. On or before the last day of each December during the
Term of this Lease, Landlord shall furnish to Tenant a written
statement showing in reasonable detail Landlord's projected Direct
Costs for the succeeding calendar year. If such statement of
projected Direct Costs indicates the Direct Costs will be higher
than in the Base Year, then the Rent due from Tenant hereunder for
the next succeeding year shall be increased by an amount equal to
Tenant's Proportionate Share of the difference between the projected
Direct Costs for the calendar year and the Base Year. If during the
course of the calendar year Landlord determines that actual Direct
Costs will vary from its estimate by more than five percent (5%),
Landlord may deliver to Tenant a written statement showing
Landlord's revised estimate of Direct Costs. On the next payment
date for Monthly Installments of Rent following Tenant's receipt of
either such statement, Tenant shall pay to Landlord an additional
amount equal to such monthly Rent increase adjustment or a reduced
amount if Landlord estimates of direct costs is lower (as set forth
on Landlord's statement). Thereafter, the monthly Rent adjustment
payments becoming due shall be in the amount set forth in such
projected Rent adjustment statement from Landlord. Neither
Landlord's failure to deliver nor late delivery of such statement
shall constitute a default by Landlord or a waiver of Landlord's
right to any Rent adjustment provided for herein.

6.3.2.2. On or before the first day of each April during the
Term of this Lease, Landlord shall furnish to Tenant a written
statement of reconciliation (the Reconciliation) showing in
reasonable detail Landlord's actual Direct Costs for the prior year,
together with a full statement of any adjustments necessary to
reconcile any sums paid as estimated Rent adjustments during the
prior year with those sums actually payable for such prior year. In
the event such Reconciliation shows that additional sums are due
from Tenant, Tenant shall pay such sums to Landlord within ten (10)
days of receipt of such Reconciliation. In the event such
Reconciliation shows that a credit is due Tenant, such credit shall
be credited against the sums next becoming due from Tenant, unless
this Lease has expired or been terminated pursuant to the terms
hereof (and all sums due Landlord have been paid), in which event
such sums shall be refunded to Tenant. Neither Landlord's failure to
deliver nor late delivery of such Reconciliation to Tenant by April
first shall constitute a default by Landlord or operate as a waiver
of Landlord's right to collect all Rent due hereunder.

6.3.2.3. So long as Tenant is not in default under the terms
of the Lease and provided Notice of Tenant's request is given to
Landlord within thirty (30) days after Tenant's receipt of the
Reconciliation, Tenant may inspect Landlord's Reconciliation
accounting records relating to Direct Costs at Landlord's corporate
office, during normal business hours, for the purpose of verifying
the charges contained in such statement. The audit must be completed
within sixty (60) days of Landlord's receipt of Tenant's Notice,
unless such period is extended by Landlord (in Landlord's reasonable
discretion). Before conducting any audit however, Tenant must pay in
full the amount of Direct Costs billed.

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Tenant may only review those records that specifically relate to
Direct Costs. Tenant may not review any other leases or Landlord's
tax returns or financial statements. In conducting an audit, Tenant
must utilize an independent certified public accountant experienced
in auditing records related to property operations. The proposed
accountant is subject to Landlord's reasonable prior approval. The
audit shall be conducted in accordance with generally accepted rules
of auditing practices. Tenant may not conduct an audit more often
than once each calendar year. Tenant may audit records relating to a
calendar year only one time. No audit shall cover a period of time
other than the calendar year from which Landlord's Reconciliation
was generated. Upon receipt thereof, Tenant shall deliver to
Landlord a copy of the audit report and all accompanying data.
Tenant and Tenant's auditor shall keep confidential any agreements
involving the rights provided in this section and the results of any
audit conducted hereunder. As a condition precedent to Tenant's
right to conduct an audit, Tenant's auditor shall sign a
confidentiality agreement in a form reasonably acceptable to
Landlord. However, Tenant shall be permitted to furnish information
to its attorneys, accountants and auditors to the extent necessary
to perform their respective services for Tenant. Notwithstanding
anything herein to the contrary, if the results of Tenant's audit
show that Tenant was overcharged, then, there shall be a credit for
such amounts against the next installments of Operating Expenses due
from Tenant. Also, if the overcharge is greater than 5% of total
Operating Expenses then, Landlord shall pay Tenant reasonable costs
of such audit, excluding travel expenses.

6.4. Definition of Rent. All costs and expenses which Tenant assumes or
agrees or is obligated to pay to Landlord under this Lease shall be deemed
Additional Rent (which, together with the Base Rent is sometimes referred to as
Rent).

6.5. Taxes on Tenant's Use and Occupancy. In addition to Rent and other
charges to be paid by Tenant hereunder, Tenant shall pay Landlord upon demand
any and all taxes payable by Landlord (other than net income taxes) which are
not otherwise reimbursable under this Lease, whether or not now customary or
within the contemplation of the parties, where such taxes are upon, measured by
or reasonably attributable to (a) the cost or value of Tenant's equipment,
furniture, fixtures and other personal property located in the Premises, or the
cost or value of any leasehold improvements made in or to the Premises by or for
Tenant, other than Building Standard Tenant Improvements made by Landlord,
regardless of whether title to such improvements is held by Tenant or Landlord;
(b) the gross or net Rent payable under this Lease, including, without
limitation, any rental or gross receipts tax levied by any taxing authority with
respect to the receipt of Rent hereunder; (c) the possession, leasing,
operation, management, maintenance, alteration, repair, use or occupancy by
Tenant of the Premises or any portion thereof; or (d) this transaction or any
document to which Tenant is a party creating or transferring an interest or an
estate in the Premises. If it becomes unlawful for Tenant to reimburse Landlord
for any costs as required under this Lease, Base Rent shall be revised to net
Landlord the same net Rent after imposition of any tax or other charge upon
Landlord as would have been payable to Landlord but for the reimbursement being
unlawful.

7. LATE CHARGES.

If Tenant fails to pay when due any Rent or other amounts or charges which
Tenant is obligated to pay under the terms of this Lease, then Tenant shall pay
Landlord a late charge equal to ten percent (10%) of each such installment if
any such installment is not received by Landlord within five (5) days from the
date it is due. Tenant acknowledges that the late payment of any Rent will cause
Landlord to lose the use of that money and incur costs and expenses not
contemplated under this Lease including, without limitation, administrative
costs and processing and accounting expenses, the exact amount of which is
extremely difficult to ascertain. Landlord and Tenant agree that this late
charge represents a reasonable estimate of such costs and expenses and is fair
compensation to Landlord for the loss suffered from such nonpayment by Tenant.
However, the late charge is not intended to cover Landlord's attorneys' fees and
costs relating to delinquent Rent. Acceptance of any late charge shall not
constitute a waiver of Tenant's default with respect to such nonpayment by
Tenant nor prevent Landlord from exercising any other rights or remedies
available to Landlord under this Lease. Late charges are deemed Additional Rent.

In no event shall this provision for the imposition of a late charge be deemed
to grant to Tenant a grace period or an extension of time within which to pay
any Rent due hereunder or prevent Landlord from exercising any right or remedy
available to Landlord upon Tenant's failure to pay such Rent when due.

8. SECURITY DEPOSIT.

Upon execution of this Lease, Tenant agrees to deposit with Landlord a Security
Deposit in the amount set forth in Section 2.16. as security for Tenant's
performance of its obligations under this Lease. Landlord and Tenant agree that
the Security Deposit may be commingled with funds of Landlord and Landlord shall
have no obligation or liability for payment of interest on such deposit. Tenant
shall not mortgage, assign, transfer or encumber the Security Deposit without
the prior written consent of Landlord and any attempt by Tenant to do so shall
be void, without force or effect and shall not be binding upon Landlord.

Notwithstanding anything herein to the contrary, in the event that Tenant has
not been in default under the Lease at such time, Landlord will refund one-third
1/3 of Tenant's Security Deposit ($55,386.67) after the twelth (12th) full month
of the Lease Term. Further, if Tenant has still not been in default at such
time, then Landlord will refund another one-third (1/3) of Tenant's Security
Deposit ($55,386.67) after the twenty fourth (24th) month of the Lease Term.

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If Tenant fails to timely pay any Rent or other amount due under this Lease,
or fails to perform any of the terms hereof after the expiration of notice
and grace period per paragraph 19, Landlord may, at its option and without
prejudice to any other remedy which Landlord may have, appropriate and apply
or use all or any portion of the Security Deposit for Rent payments or any
other amount then due and unpaid, for payment of any amount for which
Landlord has become obligated as a result of Tenant's default or breach, and
for any loss or damage sustained by Landlord as a result of Tenant's default
or breach. If Landlord so uses any of the Security Deposit, Tenant shall,
within ten (10) days after written demand therefor, restore the Security
Deposit to the full amount originally deposited. Tenant's failure to do so
shall constitute an act of default hereunder and Landlord shall have the
right to exercise any remedy provided for in Section 19. hereof.

If Tenant defaults under this Lease more than two (2) times during any calendar
year, irrespective of whether such default is cured, then, without limiting
Landlord's other rights and remedies, Landlord may, in Landlord's sole
discretion, modify the amount of the required Security Deposit. Within ten (10)
days after Notice of such modification, Tenant shall submit to Landlord the
required additional sums. Tenant's failure to do so shall constitute an act of
default, and Landlord shall have the right to exercise any remedy provided for
in Section 19. hereof. Notwithstanding the foregoing, Tenant's secutirity
deposit may be increased by a maximum of two (2) months additional rent.

If Tenant complies with all of the terms and conditions of this Lease, and
Tenant is not in default on any of its obligations hereunder, then within the
time period statutorily prescribed after Tenant vacates the Premises, Landlord
shall promptly return to Tenant (or, at Landlord's option, to the last subtenant
or assignee of Tenant's interest hereunder) the Security Deposit less any
expenditures made by Landlord to repair damages to the Premises caused by Tenant
and to clean the Premises upon expiration or earlier termination of this Lease.

In the event of bankruptcy or other debtor-creditor proceedings against Tenant,
such Security Deposit shall be deemed to be applied first to the payment of Rent
and other sums due Landlord for all periods prior to the filing of such
proceedings.

9. TENANT'S USE OF THE PREMISES.

The provisions of this Section are for the benefit of the Landlord and are not
nor shall they be construed to be for the benefit of any tenant of the Building
or Project.

9.1. Use. Tenant shall use the Premises solely for the purposes set forth
in Section 2.20. No change in the Use of the Premises shall be permitted, except
as provided in this Section 9.

9.1.1. If, at any time during the Term hereof, Tenant desires to
change the Use of the Premises, including any change in Use associated
with a proposed assignment or sublet of the Premises, Tenant shall provide
Notice to Landlord of its request for approval of such proposed change in
Use. Tenant shall promptly supply Landlord with such information
concerning the proposed change in Use as Landlord may reasonably request.
Landlord shall have the right to approve such proposed change in Use,
which approval shall not be unreasonably withheld. Landlord's consent to
any change in Use shall not be construed as a consent to any subsequent
change in Use.

9.2. Observance of Law. Tenant shall not use or occupy the Premises or
permit anything to be done in or about the Premises in violation of any
declarations, covenant, condition or restriction, or law, statute, ordinance or
governmental rules, regulations or requirements now in force or which may
hereafter be enacted or promulgated. Tenant shall, at its sole cost and expense,
upon Notice from Landlord, immediately discontinue any use of the Premises which
is declared by any governmental authority having jurisdiction to be a violation
of law or of the Certificate of Occupancy. Tenant shall promptly comply, at its
sole cost and expense, with all laws, statutes, ordinances and governmental
rules, regulations or requirements now in force or which may hereafter be
imposed which shall by reason of Tenant's Use or occupancy of the Premises,
impose any duty upon Tenant or Landlord with respect to Tenant's Use or
occupation. Further, Tenant shall, at Tenant's sole cost and expense, bring the
Premises into compliance with all such laws, including the Americans With
Disabilities Act of 1990, as amended (ADA), whether or not the necessity for
compliance is triggered by Tenant's Use, and Tenant shall make, at its sole cost
and expense, any changes to the Premises required to accommodate Tenant's
employees with disabilities (any work performed pursuant to this Section shall
be subject to the terms of Section 12. hereof). The judgment of any court of
competent jurisdiction or the admission by Tenant in any action or proceeding
against Tenant, whether Landlord is a party thereto or not, that Tenant has
violated any such law, statute, ordinance, or governmental regulation, rule or
requirement in the use or occupancy of the Premises, Building or Project shall
be conclusive of that fact as between Landlord and Tenant. Notwithstanding the
foregoing, Tenant shall not be responsible for bringing into complance existing
doors with the Tenant's premises.

9.3. Insurance. Tenant shall not do or permit to be done anything which
will contravene, invalidate or increase the cost of any insurance policy
covering the Building or Project and/or property located therein, and shall
comply with all rules, orders, regulations, requirements and recommendations of
Landlord's Insurance carrier(s) or any board of fire insurance underwriters or
other similar body now or hereafter constituted, relating to or affecting the
condition, use or occupancy of the Premises, excluding structural changes not

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related to or affected by Tenant's improvements or acts. Tenant shall promptly
upon demand reimburse Landlord for any additional premium charged for violation
of this Section.

9.4. Nuisance and Waste. Tenant shall not do or permit anything to be done
in or about the Premises which will in any way obstruct or interfere with the
rights of other tenants or occupants of the Building or Project, or injure them,
or use or allow the Premises to be used for any improper, unlawful or
objectionable purpose. Tenant shall not cause, maintain or permit any nuisance
in, on or about the Premises. Tenant shall not commit or suffer to be committed
any waste in or upon the Premises.

9.5. Load and Equipment Limits. Tenant shall not place a load upon any
floor of the Premises which exceeds the load per square foot which such floor
was designed to carry as determined by Landlord or Landlord's structural
engineer. The cost of any such determination made by Landlord's structural
engineer in connection with Tenant's occupancy shall be paid by Tenant upon
Landlord's demand. Tenant shall not install business machines or mechanical
equipment which will in any manner cause noise objectionable to other tenants or
injure, vibrate or shake the Premises or Building.

9.6. Hazardous Material. Tenant shall not create, generate, use, bring,
allow, emit, dispose, or permit on the Premises, Building or Project any toxic
or hazardous gaseous, liquid, or solid material or waste, or any other hazardous
material defined or listed in any applicable federal, state or local law, rule,
regulation or ordinance except for de minimis amounts of hazardous materials
contained in ordinary office products or use an ordinary course of tenant's
business provided that such usage shall be in compliance with all laws, and
shall be subject to Tenant's indemnity obligations hereunder. Tenant shall
comply with all applicable laws with respect to such hazardous material,
including all laws affecting the use, storage and disposal thereof. If the
presence of any hazardous material brought to the Premises, Building or Project
by Tenant or Tenant's employees, agent or contractors results in contamination,
Tenant shall promptly take all actions necessary, at Tenant's sole cost and
expense, to remediate the contamination and restore the Premises, Building or
Project to the condition that existed before introduction of such hazardous
material. Tenant shall first obtain Landlord's approval of the proposed remedial
action and shall keep Landlord informed during the process of remediation.

Tenant shall indemnify, defend and hold Landlord harmless from any claims,
liabilities, costs or expenses incurred or suffered by Landlord arising from
such bringing, allowing, using, permitting, generating, creating, emitting, or
disposing of toxic or hazardous material whether or not consent to same has been
granted by Landlord. Tenant's duty to defend, hold-harmless and indemnify
Landlord hereunder shall survive the expiration or termination of this Lease.
The consent requirement contained herein shall not apply to ordinary office
products that may contain de minimis quantities of hazardous material; however,
Tenant's indemnification obligations are not diminished with respect to the
presence of such products. Tenant acknowledges that Tenant has an affirmative
duty to immediately notify Landlord of any release or suspected release of
hazardous material in the Premises or on or about the Project.

Medical waste and any other waste, the removal of which is regulated, shall be
contracted for and disposed of by Tenant, at Tenant's expense, in accordance
with all applicable laws and regulations. No material shall be placed in Project
trash boxes, receptacles or Common Areas if the material is of such a nature
that it cannot be disposed of in the ordinary and customary manner of removing
and disposing of trash and garbage in the State without being in violation of
any law or ordinance.

10. SERVICES AND UTILITIES.

Landlord agrees to furnish services and utilities to the Premises during
normal business hours on generally recognized business days subject to the
Rules and Regulations of the Building or Project. Services and utilities
shall include reasonable quantities of heating, ventilation and air
conditioning (HVAC) as required in Landlord's reasonable judgment for the
comfortable use and occupancy of the Premises; lighting replacement for
building standard lights; window washing and janitor services in a manner
that such services are customarily furnished to comparable office buildings
in the area. Landlord shall supply common area water for drinking, cleaning
and restroom purposes only. Tenant, at Tenant's sole cost and expense, shall
supply all paper and other products used within the Premises. During normal
business hours on generally recognized business days, Landlord shall also
maintain and keep lighted the common stairs, common entries and restrooms in
the Building and shall furnish elevator service and restroom supplies.
Further, Landlord shall also be responsible for snow and ice removal. If
Tenant desires HVAC or other services at any other time, Landlord shall use
reasonable efforts to furnish such service upon reasonable notice from
Tenant, and Tenant shall pay Landlord's charges therefor on demand. Landlord
may provide telecommunications lines and systems as discussed in Section 35.
hereof. Notwithstanding the foregoing, the Premises will be seperately
metered for lighting, plugs and HVAC. Further, Landlord shall also be
responsible for snow and ice removal.

Notwithstanding the foregoing, Tenant shall obtain from Landlord at Tenant's
sole cost and expense all electric utilities used at the Premises.

If permitted by law, Landlord shall have the right, in Landlord's reasonable
discretion, at any time and from time to time during the Term, to contract for
the provision of electricity (or any other utility) with, and to switch from,
any company providing such utility. Tenant shall cooperate with Landlord and any
such utility provider at all times, and, as reasonably

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necessary, Tenant shall allow such parties access to the electric (or other
utility) lines, feeders, risers, wiring and other machinery located within the
Premises.

Landlord shall not be in default hereunder or be liable for any damages directly
or indirectly resulting from, nor shall Rent be abated by reason of (a) the
installation, use or interruption of use of any equipment in connection with the
furnishing of any of the foregoing services, or (b) failure to furnish or delay
in furnishing any such services where such failure or delay is caused by
accident or any condition or event beyond the reasonable control of Landlord, or
by the making of necessary repairs or improvements to the Premises, Building or
Project, or (c) any change, failure, interruption, disruption or defect in the
quantity or character of the electricity (or other utility) supplied to the
Premises or Project, or (d) the limitation, curtailment or rationing of, or
restrictions on, use of water, electricity, gas or any other form of energy
serving the Premises, Building or Project. Landlord shall not be liable under
any circumstances for a loss of or injury to property or business, however
occurring, through, in connection with or incidental to the failure to furnish
any such services. Notwithstanding the foregoing, Landlord shall use reasonable
efforts to remedy the cause of interruption of services set forth herein.

Tenant shall not, without the prior written consent of Landlord, use any
apparatus or device in the Premises, including, without limitation, electronic
data processing machines, punch card machines, word processing equipment,
personal computers, or machines using in excess of 120 volts, which consumes
more electricity than is usually furnished or supplied for the use of desk top
office equipment and photocopy equipment ordinarily in use in premises
designated as general office space, as determined by Landlord. Tenant shall not
connect any apparatus to electric current except through existing electrical
outlets in the Premises.

Tenant shall not consume electric current in excess of that usually furnished or
supplied for the use of premises as office space (as determined by Landlord),
without first procuring the written consent of Landlord, which Landlord may
refuse. In the event of consent, electrical current shall be separately metered
in Tenant's name and paid for by Tenant. The cost or any such meter and its
installation, maintenance and repair shall be paid by Tenant.

Notwithstanding anything contained herein to the contrary, if Tenant is granted
the right to purchase electricity from a provider other than the company or
companies used by Landlord, Tenant shall indemnify, defend, and hold harmless
Landlord from and against all losses, claims, demands, expenses and judgments
caused by, or directly or indirectly arising from, the acts or omissions of
Tenant's electricity provider (including, but not limited to, expenses and/or
fines incurred by Landlord in the event Tenant's electricity provider fails to
provide sufficient power to the Premises, as well as damages resulting from the
improper or faulty installation or construction of facilities or equipment in or
on the Premises by Tenant or Tenant's electricity provider.

Nothing contained in this Section shall restrict Landlord's right to require at
any time separate metering of utilities furnished to the Premises. If the
separate metering of utilities furnished to the Premises is due to Tenant's
excessive use of electric current, then the cost of any such meter and its
installation, maintenance and repair shall be paid by Tenant. If Landlord
requires separate metering for reasons other than Tenant's excessive consumption
of electric current, then the cost of any such meter and its installation,
maintenance and repair shall be paid by Landlord. In either event, accounts for
all such separately metered utilities shall be in Tenant's name and paid for by
Tenant. Notwithstanding the foregoing, the premise are currently seperately
metered.

If Tenant uses heat generating machines or equipment in the Premises which
effect the temperature otherwise maintained by the HVAC system, Landlord
reserves the right to install supplementary air conditioning units in the
Premises and the cost thereof, including the cost of installation, operation and
maintenance thereof, shall be paid by Tenant to Landlord upon demand therefor.

11. REPAIRS AND MAINTENANCE.

11.1. Landlord's Obligations. Landlord shall make, at Landlord's sole
expense, all structural repairs except as specified herein and shall maintain in
good order, condition and repair the Building and all other portions of the
Premises not the obligation of Tenant or of any other tenant in the Building. If
applicable, Landlord shall also maintain in good order, condition and repair the
ICN, the cost of which is reimbursable pursuant to Section 6.3.1.2. unless
responsibility therefor is assigned to a particular tenant.

11.2. Tenant's Obligations.

11.2.1. Tenant shall, at Tenant's sole expense and except for
services furnished by Landlord pursuant to Section 10. hereof, maintain
the Premises in good order, condition and repair. For the purposes of this
Section 11.2.1., the term Premises shall be deemed to include all items
and equipment installed by or for the benefit of or at the expense of
Tenant, including without limitation the interior surfaces of the
ceilings, walls and floors; all doors; all interior windows; dedicated
heating, ventilating and air conditioning equipment; all plumbing, pipes
and fixtures; electrical switches and fixtures; internal wiring as it
connects to the ICN (if applicable); and Building Standard Tenant
Improvements. Notwithstanding the foregoing, Landlord represents that all
HVAC systems shall be in good working order as of the Lease Commencement
Date.

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11.2.2. Tenant shall be responsible for all repairs and alterations
in and to the Premises, Building and Project and the facilities and
systems thereof to the satisfaction of Landlord, the need for which arises
out of (a) Tenant's use or occupancy of the Premises, (b) the
installation, removal, use or operation of Tenant's Property (as defined
in Section 13.) in the Premises, (c) the moving of Tenant's Property into
or out of the Building, or (d) the act, omission, misuse or negligence of
Tenant, its agents, contractors, employees or invitees.

11.2.3. If Tenant fails to maintain the Premises in good order,
condition and repair, Landlord shall give Notice to Tenant to do such acts
as are reasonably required to so maintain the Premises. If Tenant fails to
promptly commence such work and diligently prosecute it to completion,
then Landlord shall have the right to do such acts and expend such funds
at the expense of Tenant as are reasonably required to perform such work.

11.3. Compliance with Law. Landlord and Tenant shall each do all acts
necessary to comply with all applicable laws, statutes, ordinances, and rules of
any public authority relating to their respective maintenance obligations as set
forth herein. The provisions of Section 9.2. are deemed restated here.

11.4. Notice of Defect. If it is Landlord's obligation to repair, Tenant
shall give Landlord prompt Notice, regardless of the nature or cause, of any
damage to or defective condition in any part or appurtenance of the Building's
mechanical, electrical, plumbing, HVAC or other systems serving, located in, or
passing through the Premises.

11.5. Landlord's Liability. Except as otherwise expressly provided in this
Lease, Landlord shall have no liability to Tenant nor shall Tenant's obligations
under this Lease be reduced or abated in any manner by reason of any
inconvenience, annoyance, interruption or injury to business arising from
Landlord's making any repairs or changes which Landlord is required or permitted
by this Lease or by any other tenant's lease or required by law to make in or to
any portion of the Project, Building or Premises. Landlord shall nevertheless
use reasonable efforts to minimize any interference with Tenant's conduct of its
business in the Premises.

12. CONSTRUCTION, ALTERATIONS AND ADDITIONS.

12.1. Landlord's Construction Obligations. Landlord shall perform
Landlord's Work to the Premises as described in Exhibit "D".

12.2. Tenant's Construction Obligations. Tenant shall perform Tenant's
Work to the Premises as described in Exhibit "D" and shall comply with all of
the provisions of this Section 12.

12.3. Tenant's Alterations and Additions. Except as provided in Section
12.2. above, and except for alterations which cost is less than $10,000 and
which do not effect the HVAC, electrical, plumbing, structural or mechanical
systems, Tenant shall not make any other additions, alterations or improvements
to the Premises without obtaining the prior written consent of Landlord.
Landlord's consent may be conditioned, without limitation, on Tenant removing
any such additions, alterations or improvements upon the expiration of the Term
and restoring the Premises to the same condition as on the date Tenant took
possession. All work with respect to Tenant's Work described in Exhibit "D", as
well as any addition, alteration or improvement, shall comply with all
applicable laws, ordinances, codes and rules of any public authority (including,
but not limited to the ADA) and shall be done in a good and professional manner
by properly qualified and licensed personnel approved by Landlord. All work
shall be diligently prosecuted to completion. Upon completion, Tenant shall
furnish Landlord "as-built" plans. Prior to commencing any such work, Tenant
shall furnish Landlord with plans and specifications; names and addresses of
contractors; copies of all contracts; copies of all necessary permits; evidence
of contractor's and subcontractor's insurance coverage for Builder's Risk at
least as broad as Insurance Services Office (ISO) special causes of loss form CP
10 30, Commercial General Liability at least as broad as ISO CG 00 01, workers'
compensation, employer's liability and auto liability, all in amounts reasonably
satisfactory to Landlord; and indemnification in a form reasonably satisfactory
to Landlord. The work shall be performed in a manner that will not interfere
with the quiet enjoyment of the other tenants in the Building in which the
Premises is located.

Landlord may require, in Landlord's sole discretion and at Tenant's sole cost
and expense, that Tenant provide Landlord with a lien and completion bond in an
amount equal to at least one and one-half (1-1/2) times the total estimated cost
of any additions, alterations or improvements to be made in or to the Premises
if alterations will exceed $10,000. Nothing contained in this Section 12.3.
shall relieve Tenant of its obligation under Section 12.4. to keep the Premises,
Building and Project free of all liens.

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12.4. Payment. Subject to the Tenant Improvement Allowance set forth in
Section 37 hereof. Tenant shall pay the costs of any work done on the Premises
pursuant to Sections 12.2. and 12.3., and shall keep the Premises, Building and
Project free and clear of liens of any kind. Tenant hereby indemnifies, and
agrees to defend against and keep Landlord free and harmless from all liability,
loss, damage, costs, attorneys' fees and any other expense incurred on account
of claims by any person performing work or furnishing materials or supplies for
Tenant or any person claiming under Tenant.

Tenant shall give Notice to Landlord at least ten (10) business days prior to
the expected date of commencement of any work relating to alterations, additions
or improvements to the Premises. Landlord retains the right to enter the
Premises and post such notices as Landlord deems proper at any reasonable time.

12.5. Property of Landlord. Except as otherwise set forth herein, all
additions, alterations and improvements made to the Premises shall become the
property of Landlord and shall be surrendered with the Premises upon the
expiration of the Term unless their removal is required by Landlord as provided
in Section 12.3.; provided, however, Tenant's equipment, machinery and trade
fixtures shall remain the Property of Tenant and shall be removed, subject to
the provisions of Section 13.2.

13. LEASEHOLD IMPROVEMENTS; TENANT'S PROPERTY.

13.l. Leasehold Improvements. All fixtures, equipment (including
air-conditioning or heating systems), improvements and appurtenances attached to
or built into the Premises and/or Building at the commencement or during the
Term of the Lease (Leasehold Improvements), whether or not by or at the expense
of Tenant, shall be and remain a part of the Premises, shall be the property of
Landlord and shall not be removed by Tenant, except as expressly provided in
Section 13.2., unless Landlord, by Notice to Tenant not later than thirty (30)
days prior to the expiration of the Term, elects to have Tenant remove any
Leasehold Improvements installed by Tenant. In such case, Tenant, at Tenant's
sole cost and expense and prior to the expiration of the Term, shall remove the
Leasehold Improvements and repair any damage caused by such removal.

13.2. Tenant's Property. All signs, notices, displays, movable partitions,
business and trade fixtures, machinery and equipment (excluding air-conditioning
or heating systems, whether installed by Tenant or not), Tenant's personal
telecommunications equipment and office equipment located in the Premises and
acquired by or for the account of Tenant, without expense to Landlord, which can
be removed without structural damage to the Building, and all furniture,
furnishings and other articles of movable personal property owned by Tenant and
located in the Premises (collectively, Tenant's Property) shall be and shall
remain the property of Tenant and may be removed by Tenant at any time during
the Term; provided that if any of Tenant's Property is removed, Tenant shall
promptly repair any damage to the Premises or to the Building resulting from
such removal, including without limitation repairing the flooring and patching
and painting the walls where required by Landlord to Landlord's reasonable
satisfaction, all at Tenant's sole cost and expense.

14. INDEMNIFICATION.

14.1. Tenant Indemnification. Tenant shall indemnify and hold Landlord
harmless from and against any and all liability and claims of any kind for loss
or damage to any person or property arising out of: (a) Tenant's use and
occupancy of the Premises, or the Building or Project, or any work, activity or
thing done, allowed or suffered by Tenant in, on or about the Premises, the
Building or the Project; (b) any breach or default by Tenant of any of Tenant's
obligations under this Lease; or (c) any negligent or otherwise tortious act or
omission of Tenant, its agents, employees, subtenants, licensees, customers,
guests, invitees or contractors (including agents or contractors who perform
services or work outside of the Premises for Tenant). At Landlord's request,
Tenant shall, at Tenant's expense, and by counsel satisfactory to Landlord,
defend Landlord in any action or proceeding arising from any such claim. Tenant
shall indemnify Landlord against all costs, attorneys' fees, expert witness fees
and any other expenses or liabilities incurred in such action or proceeding. As
a material part of the consideration for Landlord's execution of this Lease,
Tenant hereby assumes all risk of damage or injury to any person or property in,
on or about the Premises from any cause and Tenant hereby waives all claims in
respect thereof against Landlord, except in connection with damage or injury
resulting solely from the gross negligence or willful misconduct of Landlord or
its authorized agents.

14.2. Landlord Not Liable. Landlord shall not be liable for injury or
damage which may be sustained by the person or property of Tenant, its
employees, invitees or customers, or any other person in or about the Premises,
caused by or resulting from fire, steam, electricity, gas, water or rain which
may leak or flow from or into any part of the Premises, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning, lighting fixtures or mechanical or electrical
systems, whether such damage or injury results from conditions arising upon the
Premises or upon other portions of the Building or Project or from other
sources, unless the condition was the result of Landlord's negligence or willful
misconduct. Landlord shall not be liable for any damages arising from any act or
omission of any other tenant of the Building or Project or for

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the acts of persons in, on or about the Premises, Building or the Project who
are not the authorized agents of Landlord or for losses due to theft, vandalism
or like causes.

Tenant acknowledges that Landlord's election to provide mechanical surveillance
or to post security personnel in the Building or on the Project is solely within
Landlord's discretion. Landlord shall have no liability in connection with the
decision whether or not to provide such services, and, to the extent permitted
by law, Tenant hereby waives all claims based thereon.

15. TENANT'S INSURANCE.

15.1. Insurance Requirement. Tenant shall procure and maintain insurance
coverage in accordance with the terms hereof, either as specific policies or
within blanket policies. Coverage shall begin on the date Tenant is given access
to the Premises for any purpose and shall continue until expiration of the Term,
except as otherwise set forth in the Lease. The cost of such insurance shall be
borne by Tenant.

Insurance shall be with insurers licensed to do business in the State, and
reasonably acceptable [ILLEGIBLE] Landlord. The insurers must have a current
A.M. Best's rating of not less than A:VII, or equivalent (as reasonably
determined by Landlord) if the Best's rating system is discontinued.

Tenant shall furnish Landlord with original certificates and amendatory
endorsements effecting coverage required by this Section 15. before the date
Tenant is first given access to the Premises. All certificates and endorsements
are to be received and approved by Landlord before any work commences. Landlord
reserves the right to inspect and/or copy any insurance policy required to be
maintained by Tenant hereunder, or to require complete, certified copies of all
required insurance policies, including endorsements effecting the coverage
require herein at any time. Tenant shall comply with such requirement within
thirty (30) days of demand therefor by Landlord. Tenant shall furnish Landlord
with renewal certificates and amendments or a "binder" of any such policy at
least twenty (20) days prior to the expiration thereof. Each insurance policy
required herein shall be endorsed to state that coverage shall not be canceled,
except after thirty (30) days' prior written notice to Landlord and Landlord's
lender (if such lender's address is provided).

The Commercial General Liability policy, as hereinafter required, shall contain,
or be endorsed to contain, the following provisions: (a) Landlord and any
parties designated by Landlord shall be covered as additional insureds as their
respective interests may appear; and (b) Tenant's insurance coverage shall be
primary insurance as to any insurance carried by the parties designated as
additional insureds. Any insurance or self-insurance maintained by Landlord
shall be excess of Tenant's insurance and shall not contribute with it.

15.2. Minimum Scope of Coverage. Coverage shall be at least as broad as
set forth herein. However, if, because of Tenant's Use or occupancy of the
Premises, Landlord determines, in Landlord's reasonable judgment, that
additional insurance coverage or different types of insurance are necessary,
then Tenant shall obtain such insurance at Tenant's expense in accordance with
the terms of this Section 15.

15.2.1. Commercial General Liability (ISO occurrence form CG 00 01)
which shall cover liability arising from Tenant's Use and occupancy of the
Premises, its operations therefrom, Tenant's independent contractors,
products-completed operations, personal injury and advertising injury, and
liability assumed under an insured contract.

15.2.2. Workers' Compensation insurance as required by law, and
Employers Liability insurance.

15.2.3. Commercial Property Insurance (ISO special causes of loss
form CP 10 30) against all risk of direct physical loss or damage
(including flood, if applicable), earthquake excepted, for: (a) all
leasehold improvements (including any alterations, additions or
improvements made by Tenant pursuant to the provisions of Section 12.
hereof) in, on or about the Premises; and (b) trade fixtures, merchandise
and Tenant's Property from time to time in, on or about the Premises. The
proceeds of such property insurance shall be used for the repair or
replacement of the property so insured. Upon termination of this Lease
following a casualty as set forth herein, the proceeds under (a) shall be
paid to Landlord, and the proceeds under (b) above shall be paid to
Tenant.

15.2.4. Business Auto Liability.

Landlord shall, during the term hereof, maintain in effect similar insurance on
the Building and Common Area.

15.2.5. Business Interruption and Extra Expense Insurance.

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15.3. Minimum Limits of Insurance. Tenant shall maintain limits not
less than:

15.3.1. Commercial General Liability: $1,000,000 per
occurrence. If the insurance contains a general aggregate limit,
either the general aggregate limit shall apply separately to this
location or the general aggregate limit shall be at least twice the
required occurrence limit.

15.3.2. Employer's Liability: $1,000,000 per accident for
bodily injury or disease.

15.3.3. Commercial Property Insurance: 100% replacement cost
with no coinsurance penalty provision.

15.3.4. Business Auto Liability: $1,000,000 per accident.

15.3.5. Business Interruption and Extra Expense Insurance: In
a reasonable amount and comparable to amounts carried by comparable
tenants in comparable projects.

15.4. Deductible and Self-Insured Retention. Any deductible or
self-insured retention in excess of $5,000 per occurrence must be declared to
and approved by Landlord. At the option of Landlord, either the insurer shall
reduce or eliminate such deductible or self-insured retention or Tenant shall
provide separate insurance conforming to this requirement.

15.5. Increases in Insurance Policy Limits. If the coverage limits set
forth in this Section 15. are deemed inadequate by Landlord or Landlord's
lender, then Tenant shall increase the coverage limits to the amounts reasonably
recommended by either Landlord or Landlord's lender. Landlord agrees that any
such required increases in coverage limits shall not occur more frequently than
once every three (3) years.

15.6. Waiver of Subrogation. Landlord and Tenant each hereby waive all
rights of recovery against the other and against the officers, employees, agents
and representatives, contractors and invitees of the other, on account of loss
by or damage to the waiving party or its property or the property of others
under its control, to the extent that such loss or damage is insured against
under any insurance policy which may have been in force at the time of such loss
or damage.

15.7. Landlord's Right to Obtain Insurance for Tenant. If Tenant fails to
obtain the insurance coverage or fails to provide certificates and endorsements
as required by this Lease, Landlord may, at its option, obtain such insurance
for Tenant. Tenant shall pay, as Additional Rent, the reasonable cost thereof
together with a twenty-five percent (25%) service charge.

16. DAMAGE OR DESTRUCTION.

16.1. Damage. If, during the term of this Lease, the Premises or the
portion of the Building necessary for Tenant's occupancy is damaged by fire or
other casualty covered by fire and extended coverage insurance carried by
Landlord, Landlord shall promptly repair the damage provided (a) such repairs
can, in Landlord's opinion, be completed, under applicable laws and regulations,
within one hundred eighty (180) days of the date a permit for such construction
is issued by the governing authority, (b) insurance proceeds are available to
pay eighty percent (80%) or more of the cost of restoration, and (c) Tenant
performs its obligations pursuant to Section 16.4. hereof. In such event, this
Lease shall continue in full force and effect, except that Tenant shall be
entitled to a proportionate reduction of Rent to the extent Tenant's use at the
Premises is impaired, commencing with the date of damage and continuing until
completion of the repairs required of Landlord under Section 16.4.

Notwithstanding anything contained in the Lease to the contrary, in the event of
partial or total damage or destruction of the Premises during the last twelve
(12) months of the Term, either party shall have the option to terminate this
Lease upon thirty (30) days prior Notice to the other party provided such Notice
is served within thirty (30) days after the damage or destruction. For purposes
of this Section 16.1., "partial damage or destruction" shall mean the damage or
destruction of at least thirty-three and one-third percent (33 and 1/3%) of the
Premises, as determined by Landlord in Landlord's reasonable discretion.

16.2. Repair of Premises in Excess of One Hundred Eighty Days. If in
Landlord's opinion, such repairs to the Premises or portion of the Building
necessary for Tenant's occupancy cannot be completed under applicable laws and
regulations within one hundred eighty (180) days of the date a permit for such
construction is issued by the governing authority, Landlord may elect, upon
Notice to Tenant given within thirty (30) days after the date of such fire or
other casualty, to repair such damage and to diligently prosecute repair to
completion, in which event this Lease shall continue in full force and effect,
but the Rent shall be partially abated as provided in Section 16.1. If Landlord
does not so elect to make such repairs, this Lease shall terminate as of the
date of such fire or other casualty.

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16.3. Repair Outside Premises. If any other portion of the Building or
Project is totally destroyed or damaged to the extent that in Landlord's opinion
repair thereof cannot be completed under applicable laws and regulations within
one hundred eighty (180) days of the date a permit for such construction is
issued by the governing authority, Landlord may elect upon Notice to Tenant
given within thirty (30) days after the date of such fire or other casualty, to
repair such damage, in which event this Lease shall continue in full force and
effect, but the Rent shall be partially abated as provided in Section 16.1. If
Landlord does not elect to make such repairs, this Lease shall terminate as of
the date of such fire or other casualty.

16.4. Tenant Repair. If the Premises are to be repaired under this Section
16., Landlord shall repair at its cost any injury or damage to the Building and
Building Standard Tenant Improvements, if any. Notwithstanding anything
contained herein to the contrary, Landlord shall not be obligated to perform
work other than Landlord's Work performed previously pursuant to Section 12.1.
hereof. Tenant shall be responsible at its sole cost and expense for the repair,
restoration and replacement of any other Leasehold Improvements and Tenant's
Property (as well as reconstructing and reconnecting Tenant's internal
telecommunication wiring and related equipment). Landlord shall not be liable
for any loss of business, inconvenience or annoyance arising from any repair or
restoration of any portion of the Premises, Building or Project as a result of
any damage from fire or other casualty.

16.5. Election Not to Perform Landlord's Work. Notwithstanding anything to
the contrary contained herein, Landlord shall provide Notice to Tenant of its
intent to repair or replace the Premises (if Landlord elects to perform such
work), and, within ten (10) days of its receipt of such Notice, Tenant shall
provide Notice to Landlord of its intent to reoccupy the Premises. Should Tenant
fail to provide such Notice to Landlord, then such failure shall be deemed an
election by Tenant not to re-occupy the Premises and Landlord may elect not to
perform the repair or replacement of the Premises. Such election shall not
result in a termination of this Lease and all obligations of Tenant hereunder
shall remain in full force and effect, including the obligation to pay Rent.

16.6. Express Agreement. This Lease shall be considered an express
agreement governing any case of damage to or destruction of the Premises,
Building or Project by fire or other casualty, and any present or future law
which purports to govern the rights of Landlord and Tenant in such circumstances
in the absence of express agreement shall have no application.

17. EMINENT DOMAIN.

17.1. Whole Taking. If the whole of the Building or Premises is lawfully
taken by condemnation or in any other manner for any public or quasi-public
purpose, this Lease shall terminate as of the date of such taking, and Rent
shall be prorated to such date.

l7.2. Partial Taking. If less than the whole of the Building or Premises
is so taken, this Lease shall be unaffected by such taking, provided that (a)
Tenant shall have the right to terminate this Lease by Notice to Landlord given
within ninety (90) days after the date of such taking if twenty percent (20%) or
more of the Premises is taken and the remaining area of the Premises is not
reasonably sufficient for Tenant to continue operation of its business, and (b)
Landlord shall have the right to terminate this Lease by Notice to Tenant given
within ninety (90) days after the date of such taking. If either Landlord or
Tenant so elects to terminate this Lease, the Lease shall terminate on the
thirtieth (30th) calendar day after either such Notice. Rent shall be prorated
to the date of termination. If this Lease continues in force upon such partial
taking, Rent and Tenant's Proportionate Share shall be equitably adjusted
according to the remaining Rentable Area of the Premises and Project.

17.3. Proceeds. In the event of any taking, partial or whole, all of the
proceeds of any award, judgment or settlement payable by the condemning
authority shall be the exclusive property of Landlord, and Tenant hereby assigns
to Landlord all of its right, title and interest in any award, judgment or
settlement from the condemning authority; however, Tenant shall have the right,
to the extent that Landlord's award is not reduced or prejudiced, to claim from
the condemning authority (but not from Landlord) such compensation as may be
recoverable by Tenant in its own right for relocation expenses and damage to
Tenant's Property and damage to Leasehold Improvements installed at the sole
expense of Tenant.

17.4. Landlord's Restoration. In the event of a partial taking of the
Premises which does not result in a termination of this Lease, Landlord shall
restore the remaining portion of the Premises as nearly as practicable to its
condition prior to the condemnation or taking; provided however, Landlord shall
not be obligated to perform work other than Landlord's Work performed previously
pursuant to Section 12.1. hereof. Tenant shall be responsible at its sole cost
and expense for the repair, restoration and replacement of Tenant's Property and
any other Leasehold Improvements.

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18. ASSIGNMENT AND SUBLETTING.

No assignment of this Lease or sublease of all or any part of the Premises shall
be permitted, except as provided in this Section 18.

18.1. No Assignment or Subletting. Tenant shall not, without the prior
written consent of Landlord, assign or hypothecate this Lease or any interest
herein or sublet the Premises or any part thereof, or permit the use of the
Premises or any part thereof by any party other than Tenant. Any of the
foregoing acts without such consent shall be voidable and shall, at the option
of Landlord, constitute a default hereunder. This Lease shall not, nor shall any
interest of Tenant herein, be assignable by operation of law without the prior
written consent of Landlord.

18.1.1. For purposes of this Section 18., the following shall be
deemed an assignment:

18.1.1.1. If Tenant is a partnership, any withdrawal or
substitution (whether voluntary, involuntary, or by operation of
law, and whether occurring at one time or over a period of time) of
any partner(s) owning twenty-five (25%) or more (cumulatively) of
any interest in the capital or profits of the partnership, or the
dissolution of the partnership;

18.1.1.2. If Tenant is a corporation, any dissolution, merger,
consolidation, or other reorganization of Tenant, any sale or
transfer (or cumulative sales or transfers) of the capital stock of
Tenant in excess of twenty-five percent (25%), or any sale (or
cumulative sales) or transfer of fifty-one (51%) or more of the
value of the assets of Tenant provided, however, the foregoing shall
not apply to corporations the capital stock of which is publicly
traded.

18.2. Landlord's Consent. If, at any time or from time to time during the
Term hereof, Tenant desires to assign this Lease or sublet all or any part of
the Premises, and if Tenant is not then in default under the terms of the Lease,
Tenant shall submit to Landlord a written request for approval setting forth the
terms and provisions of the proposed assignment or sublease, the Identity of the
proposed assignee or subtenant, and a copy of the proposed form of assignment or
sublease. Tenant's request for consent shall be submitted to Landlord at least
thirty (30) days prior to the intended date of such transfer. Tenant shall
promptly supply Landlord with such information concerning the business
background and financial condition of such proposed assignee or subtenant as
Landlord may reasonably request. Landlord shall have the right to approve such
proposed assignee or subtenant, which approval shall not be unreasonably
withheld or delayed. Landlord's consent to any assignment shall not be construed
as a consent to any subsequent assignment, subletting, transfer of partnership
interest or stock, occupancy or use.

18.2.1. Landlord's approval shall be conditioned, among other
things, on Landlord's receiving adequate assurances of future performance
under this Lease and any sublease or assignment. In determining the
adequacy of such assurances, Landlord may base its decision on such
factors as it deems appropriate, including but not limited to:

18.2.1.1. that the source of rent and other consideration due
under this Lease, and, in the case of assignment, that the financial
condition and operating performance and business experience of the
proposed assignee and its guarantors, if any, shall be equal to or
greater than the financial condition and operating performance and
experience of Tenant and its guarantors, if any, as of the time
Tenant became the lessee under this Lease;

18.2.1.2. that any assumption or assignment of this Lease will
not result in increased cost or expense, wear and tear, greater
traffic or demand for services and utilities provided by Landlord
pursuant to Section 10. hereof and will not disturb or be
detrimental to other tenants of Landlord;

18.2.1.3. whether the proposed assignee's use of the Premises
will include the use of Hazardous Material, or will in any way
increase any risk to Landlord relating to Hazardous Material; and

18.2.1.4. that assumption or assignment of such lease will not
disrupt any tenant mix or balance in the Project.

18.2.2. Thc assignment or sublease shall be on the same terms and
conditions set forth in the written request for approval given to
Landlord, or, if different, upon terms and conditions consented to by
Landlord;

18.2.3. No assignment or sublease shall be valid and no assignee or
sublessee shall take possession of the Premises or any part thereof until
an executed counterpart of such assignment or sublease has been delivered
to Landlord;

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18.2.4. No assignee or sublessee shall have a further right to
assign or sublet except on the terms herein contained;

18.2.5. Any sums or other economic considerations received by Tenant
as a result of such assignment or subletting, however denominated under
the assignment or sublease, which exceed, in the aggregate (a) the total
sums which Tenant is obligated to pay Landlord under this Lease (prorated
to reflect obligations allocable to any portion of the Premises
subleased), plus (b) any real estate brokerage commissions or fees payable
to third parties in connection with such assignment or subletting, shall
be shared equally by Tenant and Landlord as Additional Rent under this
Lease without effecting or reducing any other obligations of Tenant
hereunder.

If Landlord consents to the proposed transfer, Tenant shall deliver to Landlord
three (3) fully executed original documents (in the form previously approved by
Landlord) and Landlord shall attach its consent thereto. Landlord shall retain
one (1) fully executed original document. No transfer of Tenant's interest in
this Lease shall be deemed effective until the terms and conditions of this
Section 18. have been fulfilled.

18.3. Tenant Remains Responsible. No subletting or assignment shall
release Tenant of Tenant's obligations under this Lease or alter the primary
liability of Tenant to pay the Rent and to perform all other obligations to be
performed by Tenant hereunder. The acceptance of Rent by Landlord from any other
person shall not be deemed to be a waiver by Landlord of any provision hereof.
Consent to one assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting. In the event of default by an assignee or
subtenant of Tenant or any successor of Tenant in the performance of any of the
terms hereof, Landlord may proceed directly against Tenant without the necessity
of exhausting remedies against such assignee, subtenant or successor. Landlord
may consent to subsequent assignments or sublets of the Lease or amendments or
modifications to the Lease with assignees of Tenant, without notifying Tenant,
or any successor of Tenant, and without obtaining its or their consent thereto
and any such actions shall not relieve Tenant of liability under this Lease.

18.4. Conversion to a Limited Liability Entity. Notwithstanding anything
contained herein to the contrary, if Tenant is a limited or general partnership
(or is comprised of two (2) or more persons, individually or as co-partners, or
entities), the change or conversion of Tenant to (a) a limited liability
company, (b) a limited liability partnership, or (c) any other entity which
possesses the characteristics of limited liability (any such limited liability
entity is collectively referred to herein as a "Successor Entity") shall be
prohibited unless the prior written consent of Landlord is obtained, which
consent may be withheld in Landlord's sole discretion.

18.4.1. Notwithstanding Section 18.4., Landlord agrees not to
unreasonably withhold or delay such consent provided that:

18.4.1.1. The Successor Entity succeeds to all or
substantially all of Tenant's business and assets;

18.4.1.2. The Successor Entity shall have a tangible net worth
(Tangible Net Worth), determined in accordance with generally
accepted accounting principles, consistently applied, of not less
than the greater of the Tangible Net Worth of Tenant on (a) the date
of execution of the Lease, or (b) the day immediately preceding the
proposed effective date of such conversion; and

18.4.1.3. Tenant is not in default of any of the terms,
covenants, or conditions of this Lease on the propose effective date
of such conversion.

18.5. Payment of Fees. If Tenant assigns the Lease or sublets the Premises
or requests the consent of Landlord to any assignment, subletting or conversion
to a limited liability entity, then Tenant shall, upon demand, pay Landlord,
whether or not consent is ultimately given, an administrative fee of Three
Hundred and 00/100 Dollars ($300.00) plus costs and other reasonable expenses
incurred by Landlord in connection with each such act or request.

19. DEFAULT.

19.1. Tenant's Default. The occurrence of any one or more of the following
events shall constitute a default and breach of this Lease by Tenant.

19.1.1. If Tenant abandons or vacates the Premises, and fails to pay
rent therefor.

19.1.2. If Tenant fails to pay any Rent or Additional Rent or any
other charges required to be paid by Tenant under this Lease and such
failure continues for three (3) days after receipt of Notice thereof from
Landlord to Tenant.

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19.1.3. If Tenant fails to promptly and fully perform any other
covenant, condition or agreement contained in this Lease and such failure
continues for thirty (30) days after Notice thereof from Landlord to
Tenant, or, if such default cannot reasonably be cured within thirty (30)
days, if Tenant fails to commence to cure within that thirty (30) day
period and diligently prosecute to completion.

19.1.4. Tenant's failure to occupy the Premises within ten (10) days
after delivery of possession (as defined in Section 4. hereof).

19.1.5. Tenant's failure to provide any document, instrument or
assurance as required by Sections 12., 15., 18. and/or 35. if the failure
continues for ten (10) days after receipt of Notice from Landlord to
Tenant.

19.1.6. To the extent provided by law:

19.1.6.1. If a writ of attachment or execution is levied on
this Lease or on substantially all of Tenant's Property; or

19.1.6.2. If Tenant or Tenant's Guarantor makes a general
assignment for the benefit of creditors; or

19.1.6.3. If Tenant files a voluntary petition for relief or
if a petition against Tenant in a proceeding under the federal
bankruptcy laws or other insolvency laws is filed and not withdrawn
or dismissed within sixty (60) days thereafter, or if under the
provisions of any law providing for reorganization or winding up of
corporations, any court of competent jurisdiction assumes
jurisdiction, custody or control of Tenant or any substantial part
of its property and such jurisdiction, custody or control remains in
force unrelinquished, unstayed or unterminated for a period of sixty
(60) days; or

19.1.6.4. If in any proceeding or action in which Tenant is a
party, a trustee, receiver, agent or custodian is appointed to take
charge of the Premises or Tenant's Property (or has the authority to
do so); or

19.1.6.5. If Tenant is a partnership or consists of more than
one (1) person or entity, if any partner of the partnership or other
person or entity is involved in any of the acts or events described
in Sections 19.1.6.1. through 19.1.6.4. above.

19.2. Landlord Remedies. In the event of Tenant's default hereunder, then,
in addition to any other rights or remedies Landlord may have under any law or
at equity, Landlord shall have the right to collect interest on all past due
sums (at the maximum rate permitted by law to be charged by an individual), and,
at Landlord's option and without further notice or demand of any kind, to do the
following:

19.2.1. Terminate this Lease and Tenant's right to possession of the
Premises and reenter the Premises and take possession thereof, and Tenant
shall have no further claim to the Premises or under this Lease; or

19.2.2. Continue this Lease in effect, reenter and occupy the
Premises for the account of Tenant, and collect any unpaid Rent or other
charges which have or thereafter become due and payable; or

l9.2.3. Reenter the Premises under the provisions of Section
19.2.2., and thereafter elect to terminate this Lease and Tenant's right
to possession of the Premises.

If Landlord reenters the Premises under the provisions of Sections 19.2.2. or
19.2.3. above, Landlord shall not be deemed to have terminated this Lease or the
obligation of Tenant to pay any Rent or other charges thereafter accruing unless
Landlord notifies Tenant in writing of Landlord's election to terminate this
Lease. Acts of maintenance, efforts to relet the Premises or the appointment of
a receiver on Landlord's initiative to protect Landlord's interest under this
Lease shall not constitute a termination of Tenant's obligations under the
Lease. In the event of any reentry or retaking of possession by Landlord,
Landlord shall have the right, but not the obligation, to remove all or any part
of Tenant's Property in the Premises and to place such property in storage at a
public warehouse at the expense and risk of Tenant. Landlord shall use
reasonable efforts to relet the Premises. If Landlord relets the Premises for
the account of Tenant, the rent received by Landlord from such reletting shall
be applied as follows: first, to the payment of any indebtedness other than Rent
due hereunder from Tenant to Landlord; second, to the payment of reasonable any
costs of such reletting; third, to the payment of the cost of any alterations or
repairs to the Premises; fourth to the payment of Rent due and unpaid hereunder;
and the balance, if any, shall be held by Landlord and applied in payment of
future Rent as it becomes due. If that portion of Rent received from the
reletting which is applied against the Rent due hereunder is less than the
amount of the Rent due, Tenant shall pay the deficiency to Landlord promptly
upon demand by Landlord. Such deficiency shall be calculated and paid monthly.
Tenant shall also pay to Landlord, as soon as determined, any costs and expenses
incurred by Landlord in connection with such reletting or in making alterations
and repairs to the Premises which are not covered by the rent received from the
reletting.

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19.3. Damages Recoverable. Should Landlord elect to terminate this Lease
under the provisions of Section 19.2., Landlord may recover as damages from
Tenant the following:

19.3.1. Past Rent. The worth at the time of the award of any unpaid
Rent that had been earned at the time of termination including the value
of any Rent that was abated during the Term of the Lease (except Rent that
was abated as a result of damage or destruction or condemnation); plus

19.3.2. Rent Prior to Award. The worth at the time of the award of
the amount by which the unpaid Rent that would have been earned between
the time of the termination and the time of the award exceeds the amount
of unpaid Rent that Tenant proves could reasonably have been avoided; plus

19.3.3. Rent After Award. The worth at the time of the award of the
amount by which the unpaid Rent for the balance of the Term after the time
of award exceeds the amount of the unpaid Rent that Tenant proves could be
reasonably avoided; plus

19.3.4. Proximately Caused Damages. Any other amount necessary to
compensate Landlord for all detriment proximately caused by Tenant's
failure to perform its obligations under this Lease or which in the
ordinary course of things would be likely to result therefrom, including,
but not limited to, any costs or expenses (including attorneys' fees),
incurred by Landlord in (a) retaking possession of the Premises, (b)
maintaining the Premises after Tenant's default, (e) preparing the
Premises for reletting to a new tenant, including any repairs or
alterations, and (d) reletting the Premises, including brokers'
commissions.

"The worth at the time of the award" as used in Sections 19.3.1. and 19.3.2.
above, is to be computed by allowing interest at the maximum rate permitted by
law to be charged by an individual. "The worth at the time of the award" as used
in Section 19.3.3. above, is to be computed by discounting the amount at the
discount rate of the Federal Reserve Bank situated nearest to the Premises at
the time of the award plus one percent (1%).

19.4. Landlord's Right to Cure Tenant's Default. If Tenant defaults in the
performance of any of its obligations under this Lease and Tenant has not timely
cured the default after Notice, Landlord may (but shall not be obligated to),
without waiving such default, perform the same for the account and at the
expense of Tenant. Tenant shall pay Landlord all costs of such performance
immediately upon written demand therefor, and if paid at a later date these
costs shall bear interest at the maximum rate permitted by law to be charged by
an individual.

19.5. Landlord's Default. If Landlord fails to perform any covenant,
condition or agreement contained in this Lease within thirty (30) days after
receipt of Notice from Tenant specifying such default, or, if such default
cannot reasonably be cured within thirty (30) days if Landlord fails to commence
to cure within that thirty (30) day period and diligently prosecute to
completion, then Landlord shall be liable to Tenant for any damages sustained by
Tenant as a result of Landlord's breach; provided, however, it is expressly
understood and agreed that if Tenant obtains a money judgment against Landlord
resulting from any default or other claim arising under this Lease, that
judgment shall be satisfied only out of the rents, issues, profits, and other
income actually received on account of Landlord's right, title and interest in
the Premises, Building or Project, and no other real, personal or mixed property
of Landlord (or of any of the partners which comprise Landlord, if any),
wherever situated, shall be subject to levy to satisfy such judgment.

19.6. Mortgagee Protection. Tenant agrees to send by certified or
registered mail to any first mortgagee or first deed of trust beneficiary of
Landlord whose address has been furnished to Tenant, a copy of any notice of
default served by Tenant on Landlord. If Landlord fails to cure such default
within the time provided for in this Lease, then such mortgagee or beneficiary
shall have such additional time to cure the default as is reasonably necessary
under the circumstances.

19.7. Tenant's Right to Cure Landlord's Default. If, after Notice to
Landlord of default, Landlord (or any first mortgagee or first deed of trust
beneficiary of Landlord) fails to cure the default as provided herein, then
Tenant shall have the right to cure that default at Landlord's expense. Tenant
shall not have the right to terminate this Lease or to withhold, reduce or
offset any amount against any payments of Rent or any other charges due and
payable under this Lease except as otherwise specifically provided herein.
Tenant expressly waives the benefits of any statute now or hereafter in effect
which would otherwise afford Tenant the right to make repairs at Landlord's
expense or to terminate this Lease because of Landlord's failure to keep the
Premises in good order, condition and repair. Notwithstanding anything herein to
the contrary, Landlord shall use reasonable efforts to relet the Premises and to
otherwise mitigate its damages following a Tenants default.

20. WAIVER.

No delay or omission in the exercise of any right or remedy of Landlord upon any
default by Tenant shall impair such right or remedy or be construed as a waiver
of such default. The receipt and acceptance by Landlord of delinquent Rent shall
not constitute a waiver of any

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other default; it shall constitute only a waiver of timely payment for the
particular Rent payment involved (excluding the collection of a late charge or
interest).

No act or conduct of Landlord, including, without limitation, the acceptance of
keys to the Premises, shall constitute an acceptance of the surrender of the
Premises by Tenant before the expiration of the Term. Only written
acknowledgement from Landlord to Tenant shall constitute acceptance of the
surrender of the Premises and accomplish a termination of this Lease.

Landlord's consent to or approval of any act by Tenant requiring Landlord's
consent or approval shall not be deemed to waive or render unnecessary
Landlord's consent to or approval of any subsequent act by Tenant.

Any waiver by Landlord of any default must be in writing and shall not be a
waiver of any other default concerning the same or any other provision of this
Lease.

21. SUBORDINATION AND ATTORNMENT.

This Lease is and shall be subject and subordinate to all ground or underlying
leases (including renewals, extensions, modifications, consolidations and
replacements thereof) which now exist or may hereafter be executed affecting the
Building or the land upon which the Building is situated, or both, and to the
lien of any mortgages or deeds of trust in any amount or amounts whatsoever
(including renewals, extensions, modifications, consolidations and replacements
thereof) now or hereafter placed on or against the Building or on or against
Landlord's interest or estate therein, or on or against any ground or underlying
lease, without the necessity of the execution and delivery of any further
instruments on the part of Tenant to effectuate such subordination.
Nevertheless, Tenant covenants and agrees to execute and deliver upon demand,
without charge therefor, such further instruments evidencing such subordination
of this Lease to such ground or underlying leases, and to the lien of any such
mortgages or deeds of trust as may be required by Landlord. Notwithstanding the
foregoing, Landlord will use reasonable efforts to help Tenant obtain a
Subordination and Non-Disturbance Agreement, at no cost to Landlord.

Notwithstanding anything contained herein to the contrary, if any mortgagee,
trustee or ground lessor shall elect that this Lease is senior to the lien of
its mortgage, deed of trust or ground lease, and shall give written notice
thereof to Tenant, this Lease shall be deemed prior to such mortgage, deed of
trust or ground lease, whether this Lease is dated prior or subsequent to the
date of said mortgage, deed of trust, or ground lease, or the date of the
recording thereof.

In the event of any foreclosure sale, transfer in lieu of foreclosure or
termination of the lease in which Landlord is lessee, Tenant shall attorn to the
purchaser, transferee or lessor as the case may be, and recognize that party as
Landlord under this Lease, provided such party acquires and accepts the Premises
subject to this Lease.

22. TENANT ESTOPPEL CERTIFICATES.

22.1. Landlord Request for Estoppel Certificate. Within fifteen (15) days
after written request from Landlord, Tenant shall execute and deliver to
Landlord or Landlord's designee, in the form requested by Landlord, a written
statement certifying, among other things, (a) that this Lease is unmodified and
in full force and effect, or that it is in full force and effect as modified and
stating the modifications; (b) the amount of Base Rent and the date to which
Base Rent and Additional Rent have been paid in advance; (c) the amount of any
security deposited with Landlord; and (d) that Landlord is not in default
hereunder or, if Landlord is claimed to be in default, stating the nature of any
claimed default. Any such statement may be conclusively relied upon by a
prospective purchaser, assignee or encumbrancer of the Premises.

22.2. Failure to Execute. Tenant's failure to execute and deliver such
statement within the time required shall at Landlord's election be a default
under this Lease (within five (5) days of Landlord giving Tenant a Notice of
Default and an opportunity to cure) and shall also be conclusive upon Tenant
that: (a) this Lease is in full force and effect and has not been modified
except as represented by Landlord; (b) there are no uncured defaults in
Landlord's performance and that Tenant has no right of offset, counter-claim or
deduction against Rent and (c) not more than one month's Rent has been paid in
advance.

23. NOTICE.

Notice shall be in writing and shall be deemed duly served or given if
personally delivered, sent by certified or registered U.S. Mail, postage prepaid
with a return receipt requested, or sent by overnight courier service, fee
prepaid with a return receipt requested, as follows: (a) if to Landlord, to
Landlord's Address for Notice with a copy to the Building manager, and (b) if to
Tenant, to Tenant's Mailing Address; provided, however, Notices to Tenant shall
be deemed duly served or given if delivered or sent to Tenant at the Premises.
Landlord and Tenant may from time to time by Notice to the other designate
another place for receipt of future Notice. Notwithstanding anything contained
herein to the contrary, when an applicable

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State statute requires service of Notice in a particular manner, service of that
Notice in accordance with those particular requirements shall replace rather
than supplement any Notice requirement set forth in the Lease.

24. TRANSFER OF LANDLORD'S INTEREST.

In the event of any sale or transfer by Landlord of the Premises, Building or
Project, and assignment of this Lease by Landlord, Landlord shall be and is
hereby entirely freed and relieved of any and all liability and obligations
contained in or derived from this Lease arising out of any act, occurrence or
omission relating to the Premises, Building, Project or Lease occurring after
the consummation of such sale or transfer, provided the purchaser shall
expressly assume all of the covenants and obligations of Landlord under this
Lease. This Lease shall not be affected by any such sale and Tenant agrees to
attorn to the purchaser or assignee provided all Landlord's obligation hereunder
are assumed by such transferee. If any security deposit or prepaid Rent has been
paid by Tenant, Landlord shall transfer the security deposit or prepaid Rent to
Landlord's successor and upon such transfer, Landlord shall be relieved of any
and all further liability with respect thereto.

25. SURRENDER OF PREMISES.

25.1. Clean and Same Condition. Upon the Expiration Date or earlier
termination of this Lease, Tenant shall peaceably surrender the Premises to
Landlord clean and in the same condition as when received, except for (a)
reasonable wear and tear, (b) loss by fire or other casualty, and (c) loss by
condemnation. Tenant shall remove Tenant's Property no later than the Expiration
Date. If Tenant is required by Landlord to remove any additions, alterations, or
improvements under Section 12.3., Tenant shall complete such removal no later
than the Expiration Date. Any damage to the Premises, including any structural
damage, resulting from removal of any addition, alteration, or improvement made
pursuant to Section 12.3. and/or from Tenant's use or from the removal of
Tenant's Property pursuant to Section 13.2. shall be repaired (in accordance
with Landlord's reasonable direction) no later than the Expiration Date by
Tenant at Tenant's sole cost and expense. On the Expiration Date Tenant shall
surrender all keys to the Premises.

25.2. Failure to Deliver Possession. If Tenant fails to vacate and deliver
possession of the Premises to Landlord on the expiration or sooner termination
of this Lease as required by Section 25.1., Tenant shall indemnify, defend and
hold Landlord harmless from all claims, liabilities and damages resulting from
Tenant's failure to vacate and deliver possession of the Premises, including,
without limitation, claims made by a succeeding tenant resulting from Tenant's
failure to vacate and deliver possession of the Premises and rental loss which
Landlord suffers.

25.3. Property Abandoned. If Tenant abandons or surrenders the Premises,
or is dispossessed by process of law or otherwise, any of Tenant's Property left
on the Premises shall be deemed to be abandoned, and, at Landlord's option,
title shall pass to Landlord under this Lease as by a bill of sale. If Landlord
elects to remove all or any part of such Tenant's Property, the cost of removal,
including repairing any damage to the Premises or Building caused by such
removal, shall be paid by Tenant.

26. HOLDING OVER.

Tenant shall not occupy the Premises after the Expiration Date without
Landlord's consent. If after expiration of the Term, Tenant remains in
possession of the Premises with Landlord's permission (express or implied),
Tenant shall become a tenant from month to month only upon all the provisions of
this Lease (except as to the term and Base Rent). Monthly installments of Base
Rent payable by Tenant during this period shall be increased to one hundred
fifty percent (150%) of the Monthly Installments of Base Rent payable by Tenant
in the final month of the Term. Such monthly rent shall be payable in advance on
or before the first day of each month. The tenancy may be terminated by either
party by delivering a thirty (30) day Notice to the other party. Nothing
contained in this Section 26. shall be construed to limit or constitute a waiver
of any other rights or remedies available to Landlord pursuant to this Lease or
at law.

27. RULES AND REGULATIONS.

Tenant agrees to comply with (and cause its agents, contractors, employees and
invitees to comply with) the rules and regulations attached hereto as Exhibit
"E" and with such reasonable modifications thereof and additions thereto as
Landlord may from time to time make. Landlord agrees to enforce the rules and
regulations uniformly against all tenants of the Project. Landlord shall not be
liable, however, for any violation of said rules and regulations by other
tenants or occupants of the Building or Project.

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28. CERTAIN RIGHTS RESERVED BY LANDLORD.

Landlord reserves the following rights, exercisable without (a) liability to
Tenant for damage or injury to property, person or business; (b) being found to
have caused an actual or constructive eviction from the Premises; or (c) being
found to have disturbed Tenant's use or possession of the Premises.

28.1. To name the Building and Project and to change the name or street
address of the Building or Project.

28.2. To install and maintain all signs on the exterior and interior of
the Building and Project.

28.3. To have pass keys to the Premises and all doors within the Premises,
excluding Tenant's files, vaults and safes.

28.4. To stripe or re-stripe, re-surface, enlarge, change the grade or
drainage of and control access to the parking lot; to assign and reassign spaces
for the exclusive or nonexclusive use of tenants (including Tenant); and to
locate or relocate parking spaces assigned to Tenant.

28.5. At any time during the Term, and on prior telephonic notice to
Tenant, to inspect the Premises, and to show the Premises to any person having
an existing or prospective interest in the Project or Landlord, and during the
last six months of the Term, to show the Premises to prospective tenants
thereof.

28.6. To enter the Premises for the purpose of making inspections,
repairs, alterations, additions or improvements to the Premises or the Building
(including, without limitation, checking, calibrating, adjusting or balancing
controls and other parts of the HVAC system), and to take all steps as may be
necessary or desirable for the safety, protection, maintenance or preservation
of the Premises or the Building or Landlord's interest therein, or as may be
necessary or desirable for the operation or improvement of the Building or in
order to comply with laws, orders or requirements of governmental or other
authority. Landlord agrees to use its best efforts (except in an emergency) to
minimize interference with Tenant's business in the Premises in the course of
any such entry.

28.7. To exclusively regulate and control use of the Common Area.

29. ADVERTISEMENTS AND SIGNS.

Tenant shall not affix, paint, erect or inscribe any sign, projection, awning,
signal or advertisement of any kind to any part of the Premises, Building or
Project, including without limitation the inside or outside of windows or doors,
without the prior written consent of Landlord. Landlord shall have the right to
remove any signs or other matter installed without Landlord's permission,
without being liable to Tenant by reason of such removal, and to charge the cost
of removal to Tenant as Additional Rent hereunder, payable within ten (10) days
of written demand by Landlord. Landlord shall remove the existing outside sign
on the property. Tenant shall have the right to place a sign on the outside of
the Building, at no cost to the Landlord, subject to the rules and regulations
of the Town of Westford and the State of Massachusetts if applicable.

31. GOVERNMENT ENERGY OR UTILITY CONTROLS.

In the event of imposition of federal, state or local government controls,
rules, regulations, or restrictions on the use or consumption of energy or other
utilities (including telecommunications) during the Term, both Landlord and
Tenant shall be bound thereby. In the event of a difference in interpretation by
Landlord and Tenant of any such controls, the interpretation of Landlord shall
prevail and Landlord shall have the right to enforce compliance therewith,
including the right of entry into the Premises to effect compliance.

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32. FORCE MAJEURE.

Any prevention, delay or stoppage of work to be performed by Landlord or Tenant
which is due to strikes, labor disputes, inability to obtain labor, materials,
equipment or reasonable substitutes therefor, acts of God, governmental
restrictions or regulations or controls, judicial orders, enemy or hostile
government actions, civil commotion, fire or other casualty, or other causes
beyond the reasonable control of the party obligated to perform hereunder, shall
excuse performance of the work by that party for a period equal to the duration
of that prevention, delay or stoppage. Nothing in this Section 32. shall excuse
or delay Tenant's obligation to pay Rent or other charges under this Lease.

33. BROKERAGE FEES.

Tenant warrants and represents that it has not dealt with any real estate broker
or agent in connection with this Lease or its negotiation except the Listing and
Leasing Agent(s) set forth in Section 2.9. of this Lease. Tenant shall
indemnify, defend and hold Landlord harmless from any cost, expense or liability
(including costs of suit and reasonable attorneys' fees) for any compensation,
commission or fees claimed by any other real estate broker or agent in
connection with this Lease or its negotiation by reason of any act of Tenant.

34. QUIET ENJOYMENT.

Tenant shall, upon payment of Rent and performance of all of its obligations
under this Lease, peaceably, quietly and exclusively enjoy possession of the
Premises without unwarranted interference by Landlord or anyone acting or
claiming through Landlord, subject to the terms of this Lease and to any
mortgage, lease, or other agreement to which this Lease may be subordinate.

35. TELECOMMUNICATIONS.

35.1. Telecommunications Companies. Tenant and Tenant's telecommunications
companies, including but not limited to local exchange telecommunications
companies and alternative access vendor services companies ("Telecommunications
Companies"), shall have no right of access to and within the lands or Buildings
comprising the Project for the installation and operation of telecommunications
lines and systems including but not limited to voice, video, data, and any other
telecommunications services provided over wire, fiber optic, microwave, wireless
and any other transmission systems, for part or all of Tenant's
telecommunications within the Building and from the Building to any other
location (hereinafter collectively referred to as "Telecommunications Lines"),
without Landlord's prior written consent, which Landlord may withhold in its
sole and absolute discretion. Notwithstanding the foregoing, Tenant may perform
any installation, repair and maintenance to its Telecommunications Lines without
Landlord's consent where the equipment being installed, repaired or maintained
is not located in an area in which the Telecommunications Lines or any part
thereof of any other tenant or of Landlord are located.

35.2. Tenant's Obligations. If at any time, Tenant's Telecommunications
Companies or appropriate governmental authorities relocate the point of
demarcation from the location of Tenant's telecommunications equipment in
Tenant's telephone equipment room or other location, to some other point, or in
any other manner transfer any obligations or liabilities for telecommunications
to Landlord or Tenant, whether by operation of law or otherwise, upon Landlord's
election, Tenant shall, at Tenant's sole expense and cost: (1) within thirty
(30) days after notice is first given to Tenant of Landlord's election, cause to
be completed by an appropriate telecommunications engineering entity approved in
advance in writing by Landlord, all details of the Telecommunications Lines
serving Tenant in the Building which details shall include all appropriate
plans, schematics, and specifications; and (2) if Landlord so elects,
immediately undertake the operation, repair and maintenance of the
Telecommunications Lines serving Tenant in the Building; and (3) upon the
termination of the Lease for any reason, or upon expiration of the Lease,
immediately effect the complete removal of all or any portion or portions of the
Telecommunications Lines serving Tenant in the Building and repair any damage
caused thereby (to Landlord's reasonable satisfaction).

Prior to the commencement of any alterations, additions, or modifications
to the Telecommunications Lines serving Tenant in the Building, except for minor
changes, Tenant shall first obtain Landlord's prior written consent by written
request accompanied by detailed plans, schematics, and specifications showing
all alterations, additions and modifications to be performed, with the time
schedule for completion of the work, and the identity of the entity which will
perform the work, for which, except as otherwise provided in Section 35.3.
below, Landlord may withhold consent in its sole and absolute discretion.

22
<PAGE>

35.3. Landlord's Consent. Without in any way limiting Landlord's right to
withhold its consent to a proposed request for access, or for alterations,
additions or modifications of the Telecommunications Lines serving Tenant in the
Building, Landlord shall consider the following factors in making its
determination:

35.3.1. If the proposed actions of Tenant and its Telecommunications
Companies will impose new obligations on Landlord, or expose Landlord to
liability of any nature or description, or increase Landlord's insurance
costs for the Building, or create liabilities for which Landlord is unable
to obtain insurance protection, or imperil Landlord's insurance coverage;

35.3.2. If Tenant's Telecommunications Companies are unwilling to
pay reasonable monetary compensation for the use and occupation of the
Building for the Telecommunications Lines;

35.3.3. If Tenant and its Telecommunications Companies would cause
any work to be performed that would adversely affect the land and Building
or any space in the Building in any manner;

35.3.4. If Tenant encumbers or mortgages its interest in any
telecommunications wiring or cabling; or

35.3.5. If Tenant is in default under this Lease.

35.4. Indemnification. Tenant shall indemnify, defend and hold harmless
Landlord and its employees, agents, officers, and directors from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs, or
expenses of any kind or nature, known or unknown, contingent or otherwise,
arising out of or in any way related to the acts and omissions of Tenant,
Tenant's officers, directors, employees, agents, contractors, subcontractors,
subtenants, and invitees with respect to (1) any Telecommunications Lines
serving Tenant in the Building which are on, from, or affecting the Project and
Building; (2) any bodily injury (including wrongful death) or property damage
(real or personal) arising out of or related to any Telecommunications Lines
serving Tenant in the Building which are on, from, or affecting the Building;
(3) any lawsuit brought or threatened, settlement reached, or governmental order
relating to such Telecommunications Lines; (4) any violations of laws, orders,
regulations, requirements, or demands of governmental authorities, or any
reasonable policies or requirements of Landlord, which are based upon or in any
way related to such Telecommunications Lines, including, without limitation,
attorney and consultant fees, court costs, and litigation expenses. This
indemnification and hold harmless agreement will survive this Lease. Under no
circumstances shall Landlord be required to maintain, repair or replace any
Building systems or any portions thereof, when such maintenance, repair or
replacement is caused in whole or in part by the failure of any such system or
any portions thereof, and/or the requirements of any governmental authorities.
Under no circumstances shall Landlord be liable for interruption in
telecommunications services to Tenant or any other entity affected, for
electrical spikes or surges, or for any other cause whatsoever, whether by Act
of God or otherwise, even if the same is caused by the ordinary negligence of
Landlord, Landlord's contractors, subcontractors, or agents or other tenants,
subtenants, or their contractors, subcontractors, or agents.

35.5. Landlord's Operation of Building Telecommunications Lines and
Systems. Notwithstanding anything contained herein to the contrary, if the point
of demarcation is relocated, Landlord may, but shall not be obligated to,
undertake the operation, repair and maintenance of telecommunications lines and
systems in the Building. If Landlord so elects, Landlord shall give Notice of
its intent to do so, and Landlord shall, based on Landlord's sole business
discretion, make such lines and systems available to tenants of the Building
(including Tenant) in the manner it deems most prudent. Landlord may include in
Operating Expenses all or a portion of the expenses related to the operation,
repair and maintenance of the telecommunications lines and systems.

36. MISCELLANEOUS.

36.1. Accord and Satisfaction; Allocation of Payments. No payment by
Tenant or receipt by Landlord of a lesser amount than the Rent provided for in
this Lease shall be deemed to be other than on account of the earliest due Rent,
nor shall any endorsement or statement on any check or letter accompanying any
check or payment as Rent be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance of the Rent or pursue any other remedy provided for in this Lease.
In connection with the foregoing, Landlord shall have the absolute right in its
sole discretion to apply any payment received from Tenant to any account or
other payment of Tenant then not current and due or delinquent.

36.2. Addenda. If any provision contained in an addendum to this Lease is
inconsistent with any other provision herein, the provision contained in the
addendum shall control, unless otherwise provided in the addendum.

23
<PAGE>

36.3. Captions and Section Numbers. The captions appearing in the body of
this Lease have been inserted as a matter of convenience and for reference only
and in no way define, limit or enlarge the scope or meaning of this Lease. All
references to Section numbers refer to Sections in this Lease.

36.4. Changes Requested by Lender. Neither Landlord nor Tenant shall
unreasonably withhold its consent to changes or amendments to this Lease
requested by the lender on Landlord's interest, so long as such changes do not
alter the basic business terms of this Lease or otherwise materially diminish
any rights or materially increase any obligations of the party from whom consent
to such change or amendment is requested.

36.5. Choice of Law. This Lease shall be construed and enforced in
accordance with the Laws of the State.

36.6. Consent. Notwithstanding anything contained in this Lease to the
contrary, Tenant shall have no claim, and hereby waives the right to any claim
against Landlord for money damages, by reason of any refusal, withholding or
delay by Landlord of any consent, approval or statement of satisfaction, and, in
such event, Tenant's only remedies therefor shall be an action for specific
performance, injunction or declaratory judgment to enforce any right to such
consent, approval or statement of satisfaction.

36.7. Authority. If Tenant is not an individual signing on his or her own
behalf, then each individual signing this Lease on behalf of the business entity
that constitutes Tenant represents and warrants that the individual is duly
authorized to execute and deliver this Lease on behalf of the business entity,
and that this Lease is binding on Tenant in accordance with its terms. Tenant
shall, at Landlord's request, deliver a certified copy of a resolution of its
board of directors, if Tenant is a corporation, or other memorandum of
resolution if Tenant is a limited partnership, general partnership or limited
liability entity, authorizing such execution.

36.8. Waiver of Right to Jury Trial. Landlord and Tenant hereby waive
their respective rights to a trial by jury of any claim, action, proceeding or
counterclaim by either party against the other on any matters arising out of or
in any way connected with this Lease, the relationship of Landlord and Tenant,
and/or Tenant's Use or occupancy of the Premises, Building or Project (including
any claim of injury or damage or the enforcement of any remedy under any current
or future laws, statutes, regulations, codes or ordinances).

36.9. Counterparts. This Lease may be executed in multiple counterparts,
all of which shall constitute one and the same Lease.

36.10. Execution of Lease; No Option. The submission of this Lease to
Tenant shall be for examination purposes only and does not and shall not
constitute a reservation of or option for Tenant to Lease, or otherwise create
any interest of Tenant in the Premises or any other premises within the Building
or Project. Execution of this Lease by Tenant and its return to Landlord shall
not be binding on Landlord, notwithstanding any time interval, until Landlord
has in fact signed and delivered this Lease to Tenant.

36.11. Furnishing of Financial Statements; Tenant's Representations. In
order to induce Landlord to enter into this Lease, Tenant agrees that it shall
promptly furnish Landlord, from time to time, upon Landlord's written request,
with financial statements reflecting Tenant's current financial condition.
Tenant represents and warrants that all financial statements, records and
information furnished by Tenant to Landlord in connection with this Lease are
true, correct and complete in all respects. Notwithstanding anything in this
section of 36.11 to the contrary, Tenant shall only be required to provide
financial statements to Landlord if (i) Tenant is in default under the Lease, or
(ii) such financial statements are requested by a prospective lender or
purchaser of the Project or Building.

36.12. Further Assurances. The parties agree to promptly sign all
documents reasonably requested to give effect to the provisions of this Lease.

36.13. Prior Agreements; Amendments. This Lease and the schedules and
addenda attached, if any, form a part of this Lease together with the rules and
regulations set forth on Exhibit "E" attached hereto, and set forth all the
covenants, promises, assurances, agreements, representations, conditions,
warranties, statements, and understandings (Representations) between Landlord
and Tenant concerning the Premises and the Building and Project, and there are
no Representations, either oral or written, between them other than those in
this Lease.

This Lease supersedes and revokes all previous negotiations, arrangements,
letters of intent, offers to lease, lease proposals, brochures, representations,
and information conveyed, whether oral or in writing, between the parties hereto
or their respective representatives or any other person purporting to represent
Landlord or Tenant. Tenant acknowledges that it has not been induced to enter
into this Lease by any Representations not set forth in this Lease, and that it
has not relied on any such Representations. Tenant further acknowledges that no
such Representations shall be used in the interpretation or construction of this
Lease, and that Landlord shall have no liability for any consequences arising as
a result of any such Representations.

Except as otherwise provided herein, no subsequent alteration, amendment,
change, or addition to this Lease shall be binding upon Landlord or Tenant
unless it is in writing and signed by each party.

24
<PAGE>

36.14. Recording. Tenant shall not record this Lease without the prior
written consent of Landlord. Tenant, upon the request of Landlord, shall execute
and acknowledge a short form memorandum of this Lease for recording purposes.

36.15. Severability. A final determination by a court of competent
jurisdiction that any provision of this Lease is invalid shall not affect the
validity of any other provision, and any provision so determined to be invalid
shall, to the extent possible, be construed to accomplish its intended effect.

36.16. Successors and Assigns. This Lease shall apply to and bind the
heirs, personal representatives, and successors and assigns of the parties.

36.17. Time of the Essence. Time is of the essence of this Lease.

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
date first set forth on Page 1.

LANDLORD:

GLENBOROUGH FUND V, LIMITED PARTNERSHIP,
a Delaware limited partnership

By: GRTV, Inc.,
a Delaware corporation
Its General Partner

By: ____________________________
Its ________________________

TENANT:

Sonus Networks, Inc.
a Delaware Corp.

By: /s/ Harris Fishman
---------------------------------
Its Chief Financial Officer

By: /s/ [Illegible]
---------------------------------
Its _____________________________

25
<PAGE>

ADDENDUM TO LEASE BETWEEN
GLENBOROUGH FUND V, LIMITED PARTNERSHIP,
a Delaware limited partnership ("Landlord"), and
SONUS NETWORKS, INC.,
a Delaware corporation ("Tenant")

DATED January 21, 1999

37. TENANT IMPROVEMENTS

Section 37. adds to and amends the Lease as follows:

a. Landlord shall construct Tenant Improvements to the Premises in
accordance with Exhibit D attached hereto and made a part hereof.

b. Landlord shall contribute a total maximum amount of $83,080.00
("Tenant Improvement Allowance") toward the cost of constructing
such Tenant Improvements. Landlord shall pay the Tenant Improvement
Allowance directly to any contractors and/or subcontractors
performing the Tenant Improvements in the Premises on behalf of
Landlord.

c. If the actual cost of completing the Tenant Improvements is less
than the Tenant Improvement Allowance, then Landlord shall retain
the difference and no credit shall be due Tenant. Notwithstanding
the foregoing, however, Tenant shall have until December 31, 1999 to
request payment of all or part of the Tenant Improvement Allowance.

d. If the cost of completing the Tenant Improvements exceeds the Tenant
Improvement Allowance, any such excess shall be Tenant's
responsibility and Tenant shall reimburse Landlord (as "Additional
Rent") within twenty (20) days after Tenant's receipt of Landlord's
invoice.

e. Notwithstanding anything herein to the contrary, Landlord and Tenant
may agree in the future that Tenant shall construct all or a portion
of the Tenant Improvements set forth in Exhibit D. In such event,
Landlord shall pay the portion of the Tenant Improvement Allowance
attributable to such Tenant Improvements constructed by Tenant
directly to Tenant. Such payment will be made by Landlord within
(30) days of Landlord's receipt of paid receipts for such work,
together with final lien releases therefor.

38. RIGHT OF FIRST OFFER

Section 38. adds to and amends the Lease as follows:

During the initial Term of the Lease, Landlord hereby grants to Tenant the right
to receive Landlord's first offer to lease any available space on the first
(1st) floor of 5 Carlisle Road or in the entire building located at 3 Carlisle
Road. The term "available space" means all such space, the lease term (including
renewal options) of which expires, and all such space vacated by any tenant. As
to any such available space, Landlord shall promptly deliver to Tenant Notice of
availability and an offer to Tenant to lease the space as part of the Premises
coterminously with the Term of this Lease at the then current market rental rate
(subject to adjustment in accordance with the terms of the Lease). Other
significant terms and conditions shall be included in the notice. Within fifteen
(15) days after receipt of Landlord's Notice, Tenant shall provide Landlord
Notice of its acceptance or rejection of the offer. If Tenant indicates by
Notice to Landlord of its agreement to lease the available space, the parties
shall immediately execute an amendment to this Lease stating the addition of the
space to the Premises. If Tenant does not accept the offer within the allotted
time, Tenant shall be deemed to have rejected the offer. With respect to any
rejection by Tenant, the right to receive an offer to lease shall be of no
further force or effect as to the space in question, provided that Landlord then
proceeds within six (6) months of Landlord's Notice to Tenant to lease such
available space to a third party on substantially similar terms as offered to
Tenant [ILLEGIBLE]
<PAGE>

This Right of First Offer is granted by Landlord to Sonus Networks, Inc., a
Delaware corporation (or to any entity which is duly assigned the Lease
hereunder after having purchased all or substantially all of the capital stock
of Tenant), and is personal as to such party(ies) and shall not be exercised or
assigned, voluntarily or involuntarily, by or to anyone other than such
party(ies). Any assignment of this Right of First Offer without Landlord's prior
written consent shall be void and, at Landlord's election, shall be a default on
the Lease.

39. PARKING

Section 39. adds to and amends Section 2.12. of the Lease as follows:

Notwithstanding anything in Section 2.12. of the Lease to the contrary, subject
to Section 6.3. of the Lease, Landlord shall use reasonable efforts to increase
the parking ratio of the Building to a minimum of four (4) parking spaces per
thousand square feet of net rentable area of the Building. Such efforts may
include, but shall not be limited to, (i) exploring expanding the Building
parking by contacting the Town of Westford to seek authorization for additional
parking, (ii) re-lining the existing parking spaces and/or negotiating with
Sentry Insurance for a reduction in its current parking ratio. Any parking
spaces which are not allocated to a particular tenant or tenants shall be made
available on a first come, first served basis.

Landlord agrees to commence its efforts to obtain the above-referenced
additional parking promptly upon the execution of this Lease, and to diligently
pursue such efforts. Landlord shall be responsible for all costs and expenses
incurred in attempting to obtain the additional parking (collectively, the
"Parking Expenses"). The term "reasonable efforts" shall require Landlord to pay
all necessary Parking Expenses, but in no event shall Landlord be required to
spend in excess of $45,000.00 therefor. All Parking Expenses shall be included
in Operating Expenses for calendar year 1999, regardless of when such expenses
are incurred.

Upon obtaining additional parking, Tenant shall be entitled to the nonexclusive
use of a total of up to 166 parking spaces located at the Project at no charge.

40. LANDLORD'S INDEMNIFICATION OBLIGATIONS

Section 40. adds to and amends Section 14.1. of the Lease as follows:

Notwithstanding anything in Section 14.1. of the lease to the contrary, and
subject to any sections of the Lease specifically limiting Landlord's liability,
Landlord shall indemnify and hold harmless Tenant from and against all losses,
claims, costs, damage, liability or expenses, including but not limited to
reasonable attorneys' fees, to the extent such losses, claims, costs, damage,
liability or expenses arise out of the negligence or willful misconduct of
Landlord, its agents, employees or contractors.

41. PERMITTED TRANSFERS

This Section 41. adds to and amends Section 18.1. of the Lease as follows:

Tenant shall be permitted to assign or sublet the Premises, or any portion
thereof, without Landlord's consent, if such assignment or sublease is to any
corporation or other entity which (i) is a parent or subsidiary of Tenant, (ii)
controls, is controlled by, or is under common control with Tenant, (iii) is the
product of a merger with Tenant (provided that such entity maintains a net worth
at least equal to that of Tenant just prior to such merger), or (iv) is the
purchaser of substantially all of Tenant's assets and/or capital stock,
provided, however, that upon any such assignment or sublease, Tenant shall
promptly provide notice to Landlord as to the name of the assignee or sublessee,
as well as a copy of the document effectuating such assignment or sublet.

2
<PAGE>

42. DAMAGE AND DESTRUCTION

This Section 42. adds to and amends Section 16.2. of the Lease as follows:

Notwithstanding anything in Section 16.2. of the Lease to the contrary, in the
event that Landlord determines that repairs to the Premises or portion of the
Building necessary for Tenant's occupancy cannot be completed under applicable
laws and regulations within three hundred sixty (360) days of the date a permit
for such construction is issued by the governing authority, then Tenant may
elect, upon Notice to Landlord given within thirty (30) days after the date of
such fire or other casualty, to terminate the Lease. Such termination shall be
effective as of the date of damage or destruction.

IN WITNESS WHEREOF, the parties have executed this Addendum to Lease as of
the date first above written.

LANDLORD:

GLENBOROUGH FUND V, Limited Partnership,
a Delaware limited partnership

By: GRTV, Inc.,
a Delaware corporation
Its General Partner

By:__________________________
Its_______________________

TENANT:

SONUS NETWORKS, INC.,
a Delaware corporation

By: /s/ Harris Fishman
---------------------------
Its Chief Financial Officer

By: /s/ [Illegible]
---------------------------
Its
------------------------

3
<PAGE>

EXHIBIT C
BUILDING STANDARD TENANT IMPROVEMENTS

1. Partitions

Ceiling height partitions consisting of 3 5/8" 20-gauge metal studs at 16"
O.C. with 5/8" gypsum board each side, taped and sanded to receive paint.
Maximum: One (1) lineal foot per 16 square feet of area.

2. Doors and Frames

Tenant entry door shall be solid core with lockset and door closer. Tenant
is allowed one (1) entry door per suite up to 15,000 square feet of area,
and an additional entry door is allowed for suites greater than 15,000
square feet.

Tenant is allowed one (1) interior passage door for every 300 square feet
of area. All interior passage doors to be given standard latchset
hardware, and shall be 1 3/4" solid core oak veneer door 7'0" x 3'0" with
metal welded frame.

3. Ceiling

Suspended Building Standard 24" x 24" grid configuration with Armstrong
705 acoustical lay-in panels will be used throughout the premises.

4. Lighting

24" x 48" Building Standard four (4) tube 40 watt recessed fluorescent
fixtures with lenses. One (1) fixture per 80 square feet of area.

Any alterations or additions to said existing Building Standard pattern
required to accommodate Tenant Improvements shall be at Tenant's sole
expense.

Elevator lobbies and common toilet facilities will have lighting selected
by Landlord.

5. Light Switches

One (1) Building Standard single pole wall mounted light switch per 300
square feet of area.

6. Electrical Outlets

One (1) Building Standard 120V Duplex electrical wall mounted outlet for
each 175 square feet of area. Each outlet is 120 volts and is circuited
with similar outlets on a 20 amp circuit.

7. Lighted Exit Lights

Building Standard exit signs are provided in the Premises to meet any
requirements by code.

8. Floor Covering and Base

Carpeting in elevator lobbies and common corridors on all multiple-tenancy
office floors in color and type as selected by Landlord; carpeting within
office space as required and selected by Tenant from Building Standard
selection of 28oz. loop carpeting.

Maximum: Two Hundred(200) lineal feet of base per twelve hundred(1200)
square feet of space.
<PAGE>

9. Paint

All wall surfaces except doors finished with one (1) coat primer sealer
and one (1) coat flat latex paint in colors to be selected by Tenant from
Building Standard selection, with not more than one (1) color to be in
premises.

10. Window Covering

Building Standard vertical blinds on all exterior windows. No deletions or
substitutions allowed.

11. HVAC

A complete year-round HVAC system engineered to handle normal office
usage, with ducted supply air through ceiling diffusers, zoned and located
in existing Building Standard pattern. Return air through exhaust vents.
Any alterations or additions to said system required to accommodate Tenant
Improvements shall be at Tenant's sole expense and must be done by
Landlord-Approved Contractor.

12. Tenant Signage

One (1) Building Standard tenant identification sign at Tenant's entry
door and inclusion in building lobby directory.
<PAGE>

[PLAN OMITTED]

Westford Corporate Center

Building One - 5 Carlisle Road
SECOND FLOOR PLAN

B-2
<PAGE>

Exhibit B

[AREA PLAN OMITTED]
<PAGE>

Exhibit D

Work Letter and Drawing

1. Demolish approx. 146 linear feet of drywall partitioning, including removal
of five 3' x 7' doors.

2. Fix suspended acoustical ceiling where walls penetrated.

3. Remove carpet/tile and replace with ESD conductive tile, approx. 4300 square
feet.

4. Construct approx. 80 linear feet of new drywall partitioning, to underside of
acoustical ceiling. Cove base included.

5. Install approx. 128 square feet of clear, laminated glass in new wall.
Approx. 4 panes, 4' high by 8' long.

6. Install five new 3' x 7' and one 6' x 7' double solid core doors with hollow
metal frames and hardware.

7. Paint new walls, and existing walls affected by construction, as required.

8. Misc. mechanical: Adjust sprinkler heads to conform to new layout. Adjust
supply and return diffusers and move thermostats for even distribution. Adjust
general outlets, lighting fixtures and switches.

9. Install approx. 375 feet of cable tray, similar to what exists in the current
Sonus lab areas.

10. Electrical: Install 40 quad 20 amp ceiling drops distributed over the 2500
sq. ft. production floor area, including required distribution panels, etc.
Install 20 duplex outlets in new walls.

11. Security: Install card access control on one new door (at end of hallway
leading to the freight elevator) and on the freight elevator at the first floor.
We want it so that only Sonus employees can access the freight elevator from the
first floor. When you step out of the freight elevator on the second floor you
will be in the Sonus space (the shipping/receiving area).

12. Voice/data wiring for the area.
<PAGE>

NOTES: (A) - IF ELEVATOR (C) TRAVEL FROM FLOOR 1 TO FLOOR 2 CAN BE CARD-ACCESS
CONTROLLED BY SONUS (DESIRED), THEN DOOR (A) NEEDS TO BE ADDED WITH
CARD ACCESS. IF NOT, DOUBLE DOORS (B) NEED TO BE ADDED.

(D) ALL WALLS TO BE DEMOLISHED [as indicated in Floor Plan].

(E) ADD WALLS - POSSIBLE GLASS WINDOWS TO LET LIGHT IN.

(F) DOOR(S) AS REQUIRED FOR FIRE CODE.

(G) FLOORS TO BE ESD TILE THRUOUT ENCLOSED [ILLEGIBLE] AREA

[FLOOR PLAN OMITTED]
<PAGE>

EXHIBIT E

RULES AND REGULATIONS

1. The entrances, lobbies, passages, corridors, elevators, halls, courts,
sidewalks, vestibules, and stairways shall not be encumbered or obstructed
by Tenant, Tenant's agents, servants, employees, licensees or visitors or
used by them for any purposes other than ingress or egress to and from the
Premises.

2. The moving in or out of all safes, freight, furniture, or bulky matter of
any description shall take place during the hours which Landlord may
determine from time to time. Landlord reserves the right to inspect all
freight and bulky matter to be brought into the Building and to exclude
from the Building all freight and bulky matter which violates any of these
Rules and Regulations or the Lease of which these Rules and Regulations
are a part.

3. Tenant, or the employees, agents, servants, visitors or licensees of
Tenant shall not at any time place, lease or discard any rubbish, paper,
articles, or objects of any kind whatsoever outside the doors of the
Premises or in the corridors or passageways of the Building. No animals or
birds shall be brought or kept in or about the Building. Bicycles shall
not be permitted in the Building.

4. Tenant shall not place objects against glass partitions or doors or
windows or adjacent to any common space which would be unsightly from the
Building corridors or from the exterior of the Building and will promptly
remove the same upon notice from Landlord.

5. Tenant shall not make noises, cause disturbances, create vibrations, odors
or noxious fumes or use or operate any electric or electrical devices or
other devices that emit sound waves or are dangerous to other tenants and
occupants of the Building or that would interfere with the operation of
any device or equipment or radio or television broadcasting or reception
from or within the Building or elsewhere, or with the operation of roads
or highways in the vicinity of the Building, and shall not place or
install any projections, antennae, aerials, or similar devices inside or
outside of the Premises, without the prior written approval of Landlord.

6. Tenant shall not: (a) use the Premises for lodging, manufacturing or for
any immoral or illegal purposes; (b) use
<PAGE>

the Premises to engage in the manufacture or sale of, or permit the use of
spirituous, fermented, intoxicating or alcoholic beverages on the
Premises; (c) use the Premises to engage in the manufacture or sale of, or
permit the use of, any illegal drugs on the Premises.

7. No awning or other projections shall be attached to the outside walls or
windows. No curtains, blinds, shades, screens or signs other than those
furnished by Landlord shall be attached to, hung in, or used in connection
with any window or door of the Premises without prior written consent of
Landlord.

8. No signs, advertisement, object, notice or other lettering shall be
exhibited, inscribed, painted or affixed on any part of the outside or
inside of the Premises if visible from outside of the Premises. Interior
signs on doors shall be painted or affixed for Tenant by Landlord or by
sign painters first approved by Landlord at the expense of Tenant and
shall be of a size, color and style acceptable to Landlord.

9. Tenant shall not use the name of the Building or use pictures or
illustrations of the Building in advertising or other publicity without
prior written consent of Landlord. Landlord shall have the right to
prohibit any advertising by Tenant which, in Landlord's reasonable
opinion, tends to impair the reputation of the Building or its
desirability for offices, and, upon written notice from Landlord, Tenant
will refrain from or discontinue such advertising.

10. Door keys for doors in the Premises will be furnished at the Commencement
of the Lease by Landlord. Tenant shall not affix additional locks on doors
and shall purchase duplicate keys only from Landlord and will provide to
Landlord, prior to termination, the means of opening of safes, cabinets,
or vaults to be left on the Premises after termination. In the event of
the loss of any keys so furnished by Landlord, Tenant shall pay to
Landlord the cost thereof.

11. Tenant shall cooperate and participate in all security programs affecting
the Building.

12. Tenant assumes full responsibility for protecting its space from theft,
robbery and pilferage, which includes keeping doors locked and other means
of entry to the Premises closed and secured.

13. Tenant shall not make any room-to-room canvass to solicit business from
other tenants in the Building, and shall not exhibit, sell or offer to
sell, use, rent or exchange any item or services in or from the Premises
unless ordinarily embraced within Tenant's use of the Premises as
specified in

2
<PAGE>

its Lease. Canvassing, soliciting and peddling in the Building are
prohibited and Tenant shall cooperate to prevent the same. Peddlers,
solicitors and beggars shall be reported to the Management Office.

14. Tenant shall not waste electricity or water and agrees to cooperate fully
with Landlord to assure the most effective operation of the Building's
heating and air conditioning and shall refrain from attempting to adjust
controls. Tenant shall keep corridor doors closed except when being used
for access.

15. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein.

16. Building employees shall not be required to perform, and shall not be
requested by any tenant or occupant to perform, any work outside of their
regular duties, unless under specific instructions from the office of the
Managing Agent of the Building.

17. Tenant may request heating and/or air conditioning during other periods in
addition to normal working hours by submitting its request in writing to
the office of the Managing Agent of the Building no later than 2:00 p.m.
the preceding work day (Monday through Friday). The request shall clearly
state the start and stop hours of the "off-hour" service. Tenant shall
submit to the Building Manager a list of personnel authorized to make such
request. When applicable, Tenant shall be charged for such operation in
the form of additional rent.

18. Tenant covenants and agrees that its use of the Premises shall not cause a
discharge of sanitary (non-industrial) sewage which will result in a
violation of the sewage discharge permit(s) for the Building. Discharges
in excess of that amount, and any discharge of industrial sewage, shall
only be permitted if Tenant, at its sole expense, shall have obtained all
necessary permits and licenses therefor, including without limitation
permits from state and local authorities having jurisdiction thereof.
Tenant shall submit to Landlord on December 31 of each year of the Term of
this Lease a statement, certified by an authorized officer of Tenant,
which contains the following information: name of all chemicals, gases,
and hazardous substances, used, generated, or stored on the Premises; type
of substance (liquid, gas or granular); quantity used, stored or generated
per year; method of disposal; permit number, if any, attributable to each
substance, together with copies of all permits for such substance; and
permit expiration date for each substance.

<PAGE>

Exhibit 10.4

SERIES A PREFERRED STOCK PURCHASE AGREEMENT

This Agreement dated as of November 18, 1997 is entered into by and among
Sonus Networks, Inc., a Delaware corporation (the "Company"), Rubin Gruber,
Michael G. Hluchyj and Kwok P. Wong (individually, a "Founder" and,
collectively, the "Founders"), and the persons and entities listed on Schedule I
attached hereto (individually, a "Purchaser" and, collectively, the
"Purchasers")

In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:

1. Authorization and Sale of Shares.

1.1 Authorization. The Company has duly authorized the sale and
issuance, pursuant to the terms of this Agreement, of 7,100,000 shares of its
Series A Preferred Stock, $0.01 par value per share (the "Series A Preferred
Stock"), having the rights, restrictions, privileges and preferences set forth
in the Certificate of Designations attached hereto as Exhibit A (the
"Certificate of Designations"). The Company has adopted and filed the
Certificate of Designations with the Secretary of State of the State of
Delaware.

1.2 Sale of Shares. Subject to the terms and conditions of this
Agreement the Company will issue and sell to each Purchaser, and each Purchaser
will purchase, for a purchase price of $1.00 per share, such number of shares of
Series A Preferred Stock as is set forth opposite such Purchaser's name on
Schedule I attached hereto. The shares of Series A Preferred Stock being sold
under this Agreement are referred to as the "Shares." The Company's agreement
with each of the Purchasers is a separate agreement, and the sale of Shares to
each of the Purchasers is a separate sale.

1.3 Use of Proceeds. The Company will use the proceeds from the sale
of the Shares for working capital purposes.

2. The Closing. The closing (the "Closing") of the sale and purchase of
the Shares under this Agreement shall take place at the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts at 9:00 a.m. on the date of this
Agreement, or at such, other time, date and place as are mutually agreeable to
the Company and the Purchasers. The date of the Closing is hereinafter referred
to as the "Closing Date." At the Closing:

(a) the Company shall deliver to the Purchasers a certificate,
as of the most recent practicable date, as to the corporate good standing of the
Company issued by the Secretary of State of the State of Delaware;

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<PAGE>

(b) the Company shall deliver to the Purchasers the
Certificate of Incorporation of the Company, as amended and in effect as of the
Closing Date (including the Certificate of Designations), certified by the
Secretary of State of the State of Delaware;

(c) the Company shall deliver to the Purchasers a Certificate
of the Secretary of the Company attesting as to (i) the By-laws of the Company,
and (ii) resolutions of the Board of Directors of the Company authorizing and
approving all matters in connection with this Agreement and the transactions
contemplated hereby;

(d) Bingham Dana LLP, counsel for the Company, shall deliver
to the Purchasers an opinion, dated the Closing Date, in the form attached
hereto as Exhibit B;

(e) the Company, the Founders and the Purchasers shall execute
and deliver the Investor Rights Agreement in the form attached hereto as Exhibit
C (the "Investor Agreement");

(f) the Company; the Founders and the Purchasers shall execute
and deliver the Right of First Refusal and Co-Sale Agreement in the form
attached hereto as Exhibit D (the "Right of First Refusal Agreement");

(g) the Company shall deliver to each Purchaser a certificate
for the number of Shares being purchased by such Purchaser, registered in the
name of such Purchaser;

(h) each Purchaser shall pay to the Company the purchase price
for the Shares being purchased by such Purchaser, by wire transfer or certified
check; and

(i) the Company and the Purchasers shall execute and deliver a
Cross-Receipt.

3. Representations of the Company. Subject to and except as disclosed by
the Company in the Disclosure Schedule attached hereto (the "Disclosure
Schedule"), the Company hereby represents and warrants to the Purchasers as
follows:

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<PAGE>

and is in good standing in the Commonwealth of Massachusetts and in any other
jurisdiction in which the failure to so qualify would have a material adverse
effect on the operations or financial condition of the Company. The Company has
furnished to special counsel to the Purchasers true and complete copies of its
Certificate of Incorporation and By-laws, each as amended to date and presently
in effect.

3.2 Capitalization. The authorized capital stock of the Company
(immediately prior to the Closing) consists of (i) 15,000,000 shares of common
stock, $0.001 par value per share (the "Common Stock"), of which 3,282,093
shares are issued and outstanding, 2,467,907 shares have been reserved for
issuance pursuant to the Company's 1997 Stock Incentive Plan and 7,100,000
shares have been reserved for issuance upon the conversion of the Shares, and
(b) 10,000,000 shares of preferred stock, $0.01 par value per share (of which
7,100,000 shares have been designated as Series A Preferred Stock), none of
which are issued or outstanding. At the Closing, the Common Stock and the Series
A Preferred Stock will have the voting powers, designations, preferences, rights
and qualifications, and limitations or restrictions set forth in the Certificate
of Incorporation, as amended by the Certificate of Designations. All of the
issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. Except as contemplated by
this Agreement, (i) no subscription, warrant, option, convertible security or
other right (contingent or otherwise) to purchase or acquire any shares of
capital stock of the Company is authorized or outstanding, (ii) the Company has
no obligation (contingent or otherwise) to issue any subscription, warrant,
option, convertible security or other such right or to issue or distribute to
holders of any shares of its capital stock any evidences of indebtedness or
assets of the Company, and (iii) the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof. All of the issued and outstanding shares of
capital stock of the Company have been offered, issued and sold by the Company
in compliance with applicable Federal and state securities laws.

3.3 Subsidiaries, Etc. The Company has no subsidiaries and does not
own or control, directly or indirectly, any shares of capital stock of any other
corporation or any interest in any partnership, joint venture or other
non-corporate business enterprise.

3.4 Stockholder List and Agreements. Section 3.4 of the Disclosure
Schedule sets forth a true and complete list of the stockholders of the Company,
showing the number of shares of Common Stock or other securities of the Company
held by each stockholder immediately prior to the execution of this Agreement
and the consideration paid to the Company therefor. Except as listed in Section
3.4 of the Disclosure Schedule or as contemplated by this Agreement, there are
no agreements, written or oral, between the Company and any holder of its
capital stock, or, to the

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<PAGE>

best of the Company's knowledge, among any holders of its capital stock,
relating to the acquisition (including without limitation rights of first
refusal or pre-emptive rights), disposition, registration under the Securities
Act of 1933, as amended (the "Securities Act"), or voting of the capital stock
of the Company.

3.5 Issuance of Shares. The issuance, sale and delivery of the
Shares in accordance with this Agreement, and the issuance and delivery of the
shares of Common Stock issuable upon conversion of the Shares, have been duly
authorized by all necessary corporate action on the part of the Company, and all
such shares have been duly reserved for issuance. The Shares when so issued,
sold and delivered against payment therefor in accordance with the provisions of
this Agreement, and the shares of Common Stock issuable upon conversion of the
Shares, when issued upon such conversion, will be duly and validly issued, fully
paid and non-assessable.

3.6 Authority for Agreement. The execution, delivery and performance
by the Company of this Agreement and all other agreements required to be
executed by the Company at the Closing pursuant to Section 2 (the "Ancillary
Agreements"), and the consummation by the Company of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action. This Agreement and the Ancillary Agreements have been duly
executed and delivered by the Company and constitute valid and binding
obligations of the Company enforceable in accordance with their respective
terms. The execution of and performance of the transactions contemplated by this
Agreement and the Ancillary Agreements and compliance with their provisions by
the Company will not violate any provision of applicable law and will not
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or require a consent or waiver
under, its Certificate of Incorporation or By-laws (each as amended to date) or
any material indenture, lease, agreement or other instrument to which the
Company is a party or by which it or any of its properties is bound, or any
decree, judgment, order, statute, rule or regulation applicable to the Company
which would have a material adverse effect on the business, properties or
results of operations of the Company (a "Material Adverse Effect").

3.7 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required on the part of the Company
in connection with the execution and delivery of this Agreement, the offer,
issuance, sale and delivery of the Shares, or the other transactions to be
consummated at the Closing, as contemplated by this Agreement, except such
filings as shall have been made prior to and shall be effective on and as of the
Closing. Based on the representations made by the Purchasers in Section 5 of
this Agreement, the offer and sale of the Shares to the Purchasers will be
exempt from the registration requirements of applicable Federal and state
securities laws.

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<PAGE>

3.8 Litigation. Except as set forth in the Disclosure Schedule,
there is no action, suit or proceeding, or governmental inquiry or
investigation, pending, or, to the best of the Company's knowledge, any basis
therefor or threat thereof, against the Company or any of the Founders, which
questions the validity of this Agreement or the right of the Company or the
Founders to enter into it, or which might result, either individually or in the
aggregate, in any material adverse change in the business, assets or condition,
financial or otherwise, of the Company, nor is there any litigation pending, or,
to the best of the Company's knowledge, any basis therefor or threat thereof,
against the Company or the Founders by reason of the past employment
relationships of the Founders, the proposed activities of the Company, or
negotiations by the Company and/or the Founders with possible investors in the
Company.

3.9 Financial Statements. The Company has not prepared and does not
otherwise have available any financial statements.

3.10 Absence of Liabilities. Except as set forth in Section 3.10 of
the Disclosure Schedule, the Company does not have any liabilities of any type,
whether absolute or contingent, which in the aggregate exceed $1,000.

3.11 Taxes. The Company has not been obligated to file any Federal,
state, county, local and foreign tax returns. Neither the Company nor any of its
stockholders has ever filed (a) an election pursuant to Section 1362 of the
Internal Revenue Code of 1986, as amended (the "Code"), that the Company be
taxed as an S Corporation, or (b) consent pursuant to Section 341(f) of the Code
relating to collapsible corporations.

3.12 Property and Assets. The Company does not own any material
properties or assets.

3.13 Intellectual Property.

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<PAGE>

documentation proprietary to any former employer, and to the best of the
Company's knowledge, no person employed by or affiliated with the Company has
violated any confidential relationship which such person may have had with any
third party, in connection with the development, manufacture or sale or any
product or proposed product or the development or sale of any service or
proposed service of the Company, and the Company has no reason to believe there
will be any such employment or violation. To the best of the Company's
knowledge, none of the execution or delivery of this Agreement, or the carrying
on of business of the Company as officers, employees or agents by any officer,
director or key employee of the Company, or the conduct or proposed conduct of
the business of the Company, will conflict with or result in a breach of the
terms, conditions or provisions of or constitute a default under any contract,
covenant or instrument under which any such person is obligated which would have
a Material Adverse Effect.

(b) Set forth in Section 3.13 of the Disclosure Schedule is a
list of all domestic and foreign patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service mark applications,
trade names and copyrights, and all applications for such which are currently in
the process of being prepared, owned by or registered in the name of the
Company, or of which the Company is a licensor or licensee or in which the
Company has any right, and in each case a brief description of the nature of
such right. Except as set forth in Section 3.13(b) of the Disclosure Schedule,
the Company owns or possesses adequate licenses or other rights to use all
patents, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names, copyrights, manufacturing processes,
formulae, trade secrets, customer lists and know-how (collectively,
"Intellectual Property") necessary for the conduct of its business as conducted
and as proposed to be conducted. Except as otherwise provided in the Disclosure
Schedule, no claim is pending or, to the best of the Company's knowledge,
threatened to the effect that the operations of the Company infringe upon or
conflict with the asserted rights of any other person under any Intellectual
Property, and, to the best of the Company's knowledge, there is no basis for any
such claim (whether or not pending or threatened). No claim is pending or, to
the knowledge of the Company, threatened to the effect that any such
Intellectual Property owned or licensed by the Company, or which the Company
otherwise has the right to use, is invalid or unenforceable by the Company, and,
to the best of the Company's knowledge, there is no basis for any such claim
(whether or not pending or threatened). To the best of the Company's knowledge,
all technical information developed by and belonging to the Company which has
not been patented has been kept confidential. The Company has not granted or
assigned to any other person or entity any right to manufacture, have
manufactured, assemble or sell the products or proposed products or to provide
the services or proposed services of the Company.

3.14 Material Contracts and Obligations. Except as contemplated by
this Agreement or as listed in Section 3.14 of the Disclosure Schedule, the
Company

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<PAGE>

is not a party to any material agreement or commitment of any nature, including
without limitation (a) any agreement which requires future expenditures by the
Company in excess of $20,000, (b) any employment or consulting agreement,
employee benefit, bonus, pension, profit-sharing, stock option, stock purchase
or similar plan or arrangement, or distributor or sales representative
agreement, (c) any agreement with any stockholder, officer or director of the
Company, or any "affiliate" or "associate" of such persons (as such terms are
defined in the rules and regulations promulgated under the Securities Act),
including without limitation any agreement or other arrangement providing for
the furnishing of services by, rental of real or personal property from, or
otherwise requiring payments to, any such person or entity or (d) any agreement
relating to the intellectual property rights of the Company.

3.15 Compliance. The Company has, to its knowledge, in all material
respects, complied with all laws, regulations and orders applicable to its
present and proposed business and has all material permits and governmental
licenses required thereby. There is no term or provision of any mortgage,
indenture, contract, agreement or instrument to which the Company is a party or
by which it is bound, or, to the best of the Company's knowledge, of any
provision of any state or Federal judgment, decree, order, statute, rule or
regulation applicable to or binding upon the Company, which materially adversely
affects or, so far as the Company may now foresee, in the future is reasonably
likely to materially adversely affect, the business, assets or condition,
financial or otherwise, of the Company. To the best of the Company's knowledge,
neither the Founders nor any other employee of the Company is in violation of
any term of any contract or covenant (either with the Company or with another
entity) relating to employment, patents, proprietary information disclosure,
non-competition or non-solicitation.

3.16 Employees and Founders.

(a) The Founders and the other holders of Common Stock have
executed and delivered to the Company a Stock Repurchase Agreement in
substantially the form attached hereto as Exhibit E and Exhibit F, respectively,
and all of such agreements are in full force and effect.

(b) Each employee of the Company (including the Founders) has
executed and delivered to the Company a Noncompetition and Confidentiality
Agreement covering a period of one year following the termination of such
employee's employment with the Company, in substantially the form attached
hereto as Exhibit G, and all of such agreements are in full force and effect.

(c) None of the employees of the Company is represented by any
labor union, and there is no labor strike or other labor trouble pending with

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<PAGE>

respect to the Company (including, without limitation, any organizational drive)
or, to the best of the Company's knowledge, threatened.

3.17 ERISA. The Company does not have or otherwise contribute to or
participate in any employee benefit plan subject to the Employee Retirement
Income Security Act of 1974.

3.18 Books and Records. The minute books of the Company contain
complete and accurate records of all meetings and other corporate actions of its
stockholders and its Board of Directors and committees thereof. The stock ledger
of the Company is complete and reflects all issuances, transfers, repurchases
and cancellations of shares of capital stock of the Company.

3.19 Board of Directors. Effective upon the Closing, the Board of
Directors shall be comprised of up to five members, and consist of (a) the Chief
Executive Officer of the Company, (b) one additional designee of the Company,
(c) one director designated by North Bridge Venture Partners, (d) one director
designed by Matrix Partners, and (e) one outside Director designated by mutual
agreement of the other four directors.

3.20 U.S. Real Property Holding Corporation. The Company is not now
and has never been a "United States Real Property Holding Corporation" as
defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service.

3.21 Disclosures. Neither this Agreement nor any Schedule or Exhibit
hereto, nor any certificate or instrument furnished to the Purchasers at the
Closing or as required by the terms of this Agreement, when read together,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.

4. Representations of Founders. Each Founder represents and warrants to
the Purchasers as follows:

4.1 Conflicting Agreements. Except as set forth in the Disclosure
Schedule, such Founder is not, as a result of the nature of the business
conducted or proposed to be conducted by the Company, in violation of (i) any
fiduciary or confidential relationship, (ii) any term of any contract or
covenant (either with the Company or with another entity) relating to
employment, patents, proprietary information disclosure, non-competition or
non-solicitation, or (iii) any other contract or agreement, or any judgment,
decree or order of any court or administrative agency relating to or affecting
the right of such Founder to be employed by the Company, which violation would
have a Material Adverse Effect.

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<PAGE>

4.2 Litigation. Except as set forth in the Disclosure Schedule,
there is no action, suit or proceeding, or governmental inquiry or
investigation, pending or, to the knowledge of such Founder, threatened against
such Founder.

4.3 Stockholder Agreements. Except as contemplated by or disclosed
in this Agreement, such Founder is not a party to any agreements, written or
oral, relating to the acquisition, disposition, registration under the
Securities Act, or voting of the capital stock of the Company.

4.4 Representations. To the best knowledge of such Founder, the
Representations of the Company in Sections 3.8 (Litigation) and 3.13
(Intellectual Property) are true and correct.

4.5 Disclosure. To the knowledge of such Founder, neither this
Agreement nor any Schedule or Exhibit hereto, nor any certificate or instrument
furnished to the Purchasers at the Closing or as required by the terms of this
Agreement, when read together, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.

5. Representations of the Purchasers. Each Purchaser represents and
warrants to the Company as follows:

5.1 Investment. Such Purchaser is acquiring the Shares, and the
shares of Common Stock into which the Shares may be converted, for its or his
own account for investment and not with a view to, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling the same; and such Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof. Such Purchaser acknowledges that the
Shares are restricted securities as defined under the Securities Act and shall
bear the legends set forth in Section 7.3 hereof.

5.2 Authority. Such Purchaser has full power and authority to enter
into and to perform this Agreement in accordance with its terms. Such Purchaser
represents that it has not been organized, reorganized or recapitalized
specifically for the purpose of investing in the Company. This Agreement and the
Ancillary Agreement to be executed by such Purchaser have been duly executed and
delivered by such Purchaser and constitute valid and binding obligations of such
Purchaser enforceable in accordance with their respective terms. The execution
of and performance of the transactions contemplated by this Agreement and the
Ancillary Agreements to be executed by such Purchaser and compliance with their
provisions by such Purchaser will not violate any provision of law and will not
conflict with or

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<PAGE>

result in any breach of any of the terms, conditions or provisions of, or
constitute a default under, or require a consent or waiver under, its
organizational documents (each as amended to date) or any indenture, lease,
agreement or other instrument to which the Purchaser is a party or by which it
or any of its properties is bound, or any decree, judgment, order, statute, rule
or regulation applicable to such Purchaser.

5.3 Experience. Such Purchaser has carefully reviewed the
representations concerning the Company contained in this Agreement and has made
detailed inquiry concerning the Company, its business and its personnel; the
officers of the Company have made available to such Purchaser any and all
written information which it has requested and have answered to such Purchaser's
satisfaction all inquiries made by such Purchaser; and such Purchaser has
sufficient knowledge and experience in investing in companies similar to the
Company so as to be able to evaluate the risks and merits of its investment in
the Company and is able financially to bear the risks thereof, including a
complete loss of its investment. Such Purchaser understands that an investment
in the Company involves a high degree of risk in view of the fact that the
Company is a start-up enterprise with no operating history, and there may never
be an established market for the Company's capital stock.

5.4 Status. Such Purchaser is an "accredited Investor" as that term
is defined in Rule 501 of Regulation D promulgated under the Securities Act.

6. Covenants of the Company.

6.1 Inspection. The Company shall permit each Purchaser, or any
authorized representative thereof, to visit and inspect the properties of the
Company, including its corporate and financial records, and to discuss its
business and finances with officers of the Company, during normal business hours
following reasonable notice and as often as may be reasonably requested, without
interruption of the business of the Company and subject to the confidentiality
obligations of Section 8.2 hereof.

6.2 Financial Statements and Other Information.

(a) So long as a Purchaser (or any of its affiliates) holds at
least 355,000 shares of Series A Preferred Stock, the Company shall deliver to
such Purchaser:

(i) within 90 days after the end of each fiscal year of
the Company, an audited balance sheet of the Company as at the end of such year,
and audited statements of income and of cash flows of the Company for such year,
certified by certified public accountants of established national reputation
selected by

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<PAGE>

the Company, and prepared in accordance with generally accepted accounting
principles; and

(ii) within 45 days after the end of each fiscal quarter
of the Company, an unaudited balance sheet of the Company as at the end of such
quarter, and unaudited statements of income and of cash flows of the Company for
such fiscal quarter and for the current fiscal year to the end of such fiscal
quarter.

(b) So long as a Purchaser (or any of its affiliates) holds at
least 355,000 shares of Series A Preferred Stock (as adjusted for stock splits,
stock dividends, recapitalizations and similar events), the Company shall
deliver to such Purchaser:

(i) within 30 days after the end of each month, an
unaudited balance sheet of the Company as at the end of such month and unaudited
statements of income and of cash flows of the Company for such month and for the
current fiscal year to the end of such month, setting forth in comparative form
the Company's projected financial statements for the corresponding periods for
the current fiscal year;

(ii) as soon as available, but in any event within 30
days after commencement of each new fiscal year, a budget, consisting of a
business plan and projected financial statements for such fiscal year; and

(iii) with reasonable promptness, such other notices,
information and data with respect to the Company as the Company delivers to the
holders of its Common Stock, and such other information and data as such
Purchaser may from time to time reasonably request.

(c) The foregoing financial statements shall be prepared on a
consolidated basis if the Company then has any subsidiaries. The financial
statements delivered pursuant to clause (ii) of paragraph (a) and clause (i) of
paragraph (b) shall be accompanied by a certificate of the chief financial
officer of the Company stating that such statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as noted) and fairly present the financial condition and results of
operations of the Company at the date thereof and for the periods covered
thereby.

6.3 Material Changes and Litigation. The Company shall promptly
notify the Purchasers of any material adverse change in the business, assets or
condition, financial or otherwise, of the Company and of any litigation or
governmental proceeding or investigation brought or, to the best of the
Company's knowledge, threatened against the Company, or against the Founders or
an officer, director, key employee or principal stockholder of the Company
materially adversely

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<PAGE>

affecting or which, if adversely determined, would materially adversely affect
its business, prospects, assets or condition, financial or otherwise.

6.4 Insurance.

(a) The Company shall procure, within a reasonable period of
time following the Closing, and shall maintain for a period of at least three
years, term life insurance upon the lives of each of the Founders, in the amount
of $1,000,000, with the proceeds payable to the Company.

(b) The Company shall procure, promptly following the Closing,
and shall maintain in effect, policies of workers' compensation insurance and of
insurance with respect to its properties and business of the kinds and in the
amounts not less than is customarily obtained by corporations engaged in the
same or similar business and similarly situated, including, without limitation,
insurance against loss, damage, fire, theft, public liability and other risks.

6.5 Employee Agreements. The Company shall require all employees
hereafter employed or engaged by the Company who are at or above the director
level or other key employees to enter into a Noncompetition and Confidentiality
Agreement covering a period of one year following the termination of such
employee's employment with the Company, substantially in the form attached
hereto as Exhibit G or in such other form as may be approved by the Board of
Directors. The Company shall require all employees not covered by the foregoing
sentence to enter into a Confidentiality Agreement substantially in the form
attached hereto as Exhibit H or in such other form as may be approved by the
Board of Directors.

6.6 Related Party Transactions. The Company shall not enter into
any agreement with any stockholder, officer or director of the Company, or any
"affiliate" or "associate" of such persons (as such terms are defined in the
rules and regulations promulgated under the Securities Act), including without
limitation any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, any such person or entity, without the consent of at least a
majority of the members of the Company's Board of Directors having no interest
in such agreement or arrangement.

6.7 Directors.

(a) The Company shall use reasonable efforts to cause the
election to the Board of Directors, as soon as practicable following the
Closing, of one independent director mutually agreeable to the other directors,
as set forth in Section 3.19.

- 12 -
<PAGE>

(b) The Company shall promptly reimburse in full each director
of the Company who is not an employee of the Company and who was elected as a
director solely by the holders of the Series A Preferred Stock for all of his
reasonable out-of-pocket expenses incurred in attending each meeting of the
Board of Directors of the Company or any committee thereof.

6.8 Option Shares and Restricted Stock. The Company has reserved an
aggregate of 2,467,907 shares of Common Stock for issuance to employees and
consultants of the Company pursuant to the 1997 Stock Incentive Plan of the
Company.

(a) Unless otherwise agreed by the Board of Directors, all
options granted under the 1997 Stock Incentive Plan shall become exercisable at
the rate of 20% on the first anniversary of grant and 1.6667% per month
thereafter over the subsequent four years so long as the optionee continues to
be an employee or consultant of the Company, subject to acceleration by one year
of the unvested portion of such options in the event of (i) as to all optionees,
an Acquisition Event (as defined in the standard form of stock option agreements
for the grant of options under such Plan), and (ii) in the case of the Founders
only, also in the event of the death or disability of a Founder.

(b) Restricted stock awards under the 1997 Stock Option Plan
shall be issued pursuant to a Stock Repurchase Agreement in the form of Exhibit
F attached hereto, or such other form as may be approved by the Board of
Directors of the Company.

6.9 Reservation of Common Stock. The Company shall reserve and
maintain a sufficient number of shares of Common Stock for issuance upon
conversion of all of the outstanding Shares.

6.10 Termination of Covenants. The covenants of the Company
contained in Sections 6.1 through 6.9 shall terminate, and be of no further
force or effect, upon the closing of the Company's first offering of Common
Stock, resulting in net proceeds to the Company of at least $10,000,000, and at
a price per share of at least $5.00 (as adjusted for stock splits, stock
dividends, recapitalizations and similar events) or, at such time as the
Purchasers (together with any affiliated entities to whom Shares have been
transferred) own less than an aggregate of 1,775,000 shares of Series A
Preferred Stock (as adjusted for stock splits, stock dividends,
recapitalizations and similar events), unless the Company has, prior to such
time, failed to redeem shares of Series A Preferred Stock when such redemption
was due in accordance with Section 6 of Article III of the Company's Certificate
of Incorporation, which failure continues.

- 13 -
<PAGE>

6.11 Qualified Small Business Stock. The Company shall submit to its
stockholders (including the Purchasers) and to the Internal Revenue Service any
reports that may be required under Section 1202(d)(1)(C) of the Code and the
Regulations promulgated thereunder. In addition, within ten days after a
Purchaser's written request therefor, the Company shall deliver to such
Purchaser a written statement indicating whether such Purchaser's interest in
the Company constitutes "qualified small business stock" as defined in Section
1202(c) of the Code.

7. Transfer of Shares.

7.1 Restricted Shares. "Restricted Shares" means (i) the Shares,
(ii) the shares of Common Stock issued or issuable upon conversion of the
Shares, (iii) any shares of capital stock of the Company acquired by a Purchaser
pursuant to the Investor Agreement or the Right of First Refusal Agreement, and
(iv) any other shares of capital stock of the Company issued in respect of such
shares (as a result of stock splits, stock dividends, reclassifications,
recapitalizations, or similar events); provided, however, that shares of Common
Stock which are Restricted Shares shall cease to be Restricted Shares (i) upon
any sale pursuant to a registration statement under the Securities Act, or under
Section 4(1) of the Securities Act or Rule 144 under the Securities Act, or (ii)
at such time as they become eligible for sale under Rule 144(k) under the
Securities Act.

7.2 Requirements for Transfer.

(a) Restricted Shares shall not be sold or transferred unless
(1) either (i) they first shall have been registered under the Securities Act,
or (ii) the Company first shall have been furnished with an opinion of legal
counsel, reasonably satisfactory to the Company, to the effect that such sale or
transfer is exempt from the registration requirements of the Securities Act and
(2) such actions are in compliance with applicable state securities laws.

(b) Notwithstanding the foregoing, no registration or opinion
of counsel shall be required for (i) a transfer by a Purchaser which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner, if the transferee agrees in writing to be subject to
the terms of this Section 7 to the same extent as if he were an original
Purchaser hereunder, or (ii) a transfer made in accordance with Rule 144 under
the Securities Act.

7.3 Legend. Each certificate representing Restricted Shares shall
bear a legend substantially in the following form:

"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, and may not be offered, sold or
otherwise

- 14 -
<PAGE>

transferred, pledged or hypothecated unless and until such shares are
registered under such Act or an opinion of counsel satisfactory to the
Company is obtained to the effect that such registration is not required."

The foregoing legend shall be removed from the certificates representing
any Restricted Shares, at the request of the holder thereof, at such time as
they become eligible for resale pursuant to Rule 144(k) under the Securities
Act.

7.4 Rule 144A Information. The Company shall, at all times during
which it is neither subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor
exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, upon
the written request of a Purchaser, provide in writing to such Purchaser, and to
any prospective transferee of any Restricted Shares of such Purchaser, the
information concerning the Company described in Rule 144A(d)(4) under the
Securities Act ("Rule 144A Information"). The Company also shall, upon the
written request of a Purchaser, cooperate with and assist such Purchaser or any
member of the National Association of Securities Dealers, Inc. PORTAL system in
applying to designate and thereafter maintain the eligibility of the Restricted
Shares for trading through PORTAL. The Company's obligations under this Section
7.4 shall at all times be contingent upon receipt from the prospective
transferee of Restricted Shares of a written agreement to take all reasonable
precautions to safeguard the Rule 144A Information from disclosure to anyone
other than persons who will assist such transferee in evaluating the purchase of
any Restricted Shares and to use such Rule 144A Information only for such
evaluation purposes.

8. Miscellaneous.

8.1 Successors and Assigns. This Agreement, and the rights and
obligations of a Purchaser hereunder, may be assigned by such Purchaser to any
person or entity to which at least 355,000 Shares, as adjusted for stock splits,
stock dividends, recapitalizations and similar events (or 100% of the Shares
originally purchased hereunder by such Purchaser, if less than 355,000 Shares),
are transferred by such Purchaser, and such transferee shall be deemed a
"Purchaser" for purposes of this Agreement; provided that the transferee
provides written notice of such assignment to the Company and agrees to be bound
by the terms and conditions set forth herein.

8.2 Confidentiality. The Purchasers agree that they will keep
confidential and will not disclose or divulge any confidential, proprietary or
secret information which they may obtain from the Company pursuant to financial
statements, reports and other materials submitted by the Company to the
Purchasers pursuant to this Agreement, or pursuant to visitation or inspection
rights granted hereunder, unless such information is known, or until such
information becomes

- 15 -
<PAGE>

known, to the public; provided, however, that a Purchaser may disclose such
information (i) to its attorneys, accountants, consultants, and other
professionals to the extent necessary to obtain their services in connection
with its investment in the Company, (ii) to any prospective purchaser of any
Shares from such Purchaser as long as such prospective purchaser agrees in
writing to be bound by the provisions of this Section, or (iii) to any affiliate
of such Purchaser or to a partner, shareholder or subsidiary of such Purchaser;
subject to the agreement of such party to keep such information confidential as
set forth herein.

8.3 Survival of Representations and Warranties. All agreements,
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby.

8.4 Expenses. The Company shall pay, at the Closing, the reasonable
costs and expenses of Hale and Dorr LLP, counsel to the Purchasers, not to
exceed $15,000, in connection with the preparation of this Agreement and the
other agreements and documents contemplated hereby and the closing of the
transactions contemplated hereby.

8.5 Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
by hand, sent via a reputable nationwide overnight courier service or mailed by
first class certified or registered mail, return receipt requested, postage
prepaid:

If to the Company, at Sonus Networks, Inc., 5 Carlisle Road, Westford, MA
01886, Attn: President, or at such other address or addresses as may have been
furnished in writing by the Company to the Purchasers, with a copy to Bingham
Dana LLP, 150 Federal Street, Boston, MA 02110, Attn: David L. Engel, Esq.

If to a Purchaser, at its address as set forth on Schedule I attached
hereto, or at such other address or addresses as may have been furnished to the
Company in writing by such Purchaser, with a copy to Hale and Dorr LLP, 60 State
Street, Boston, MA 02109, Attn: John M. Westcott, Jr., Esq.

If to a Founder, at his address as set forth on Schedule II attached
hereto, or at such other address or addresses as may have been furnished in
writing by such Founder to the Company and the Purchasers.

Notices provided in accordance with this Section 8.5 shall be deemed
delivered upon personal delivery, one business day after being sent via a
reputable nationwide overnight courier service, or five business days after
deposit in the mail.

8.6 Brokers. The Company, the Founders and the Purchasers each (i)
represents and warrants to the other parties hereto that he, she or it has
retained

- 16 -
<PAGE>

no finder or broker in connection with the transactions contemplated by this
Agreement, and (ii) will indemnify and save the other parties harmless from and
against any and all claims, liabilities or obligations with respect to brokerage
or finders' fees or commissions in connection with the transactions contemplated
by this Agreement asserted by any person on the basis of any agreement,
statement or representation alleged to have been made by such indemnifying
party.

8.7 Entire Agreement. This Agreement and the Ancillary Agreements
embody the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter.

8.8 Amendments and Waivers. Except as otherwise expressly set forth
in this Agreement, any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and the holders of at least 66 2/3% of the shares of Common Stock
issued or issuable upon conversion of the Shares, provided, however, that no
consent shall be required in order to add additional Purchasers pursuant to
Section 1.2(b) hereof, or to revise Schedule I in connection therewith. Any
amendment or waiver effected in accordance with this Section 8.8 shall be
binding upon each holder of any Shares (including shares of Common Stock into
which such Shares have been converted), each future holder of all such
securities and the Company. No amendment shall increase any obligation of a
Founder hereunder without the express written consent of such Founder. No
waivers of or exceptions to any term, condition or provision of this Agreement,
in any one or more instances, shall be deemed to be, or construed as, a further
or continuing waiver of any such term, condition or provision.

8.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.

8.10 Section Headings. The section headings are for the convenience
of the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.

8.11 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.

8.12 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.

- 17 -
<PAGE>

Executed as of the date first written above.

SONUS NETWORKS, INC.

By: /s/ Rubin Gruber
-------------------------------------
Rubin Gruber
President

FOUNDERS:

/s/ Rubin Gruber
- -----------------------------------------
Rubin Gruber

/s/ M. G. Hluchyj
- -----------------------------------------
Michael G. Hluchyj

/s/ Kwok P. Wong
- -----------------------------------------
Kwok P. Wong

PURCHASERS:

North Bridge Venture Partners II, L.P.

By: North Bridge Venture Management II, L.P.,
its General Partner

By: /s/ Edward T. Anderson
---------------------------------
Edward T. Anderson
General Partner

Matrix Partners IV, L.P.

By: Matrix IV Management Co., L.P., its General Partner

By: /s/ Paul J. Ferri
---------------------------------
Paul J. Ferri
General Partner

[Signature Page 1 of 3 to Series A Preferred Stock Purchase Agreement]

- 18 -
<PAGE>

Charles River Partnership VIII,
A Limited Partnership

By: Charles River VIII GP Limited Partnership,
its General Partner

By:
---------------------------------
Richard M. Burnes
General Partner

Bessemer Venture Venture Partners BESSEMER VENTURE PARTNERS IV L.P.
By: Deer IV & Co. LLC, General Partner
By: /s/ Robert H. Buescher Manager

By: Robert H. Buescher
---------------------------------

Bedrock Capital I, L.P.

By: /s/ Thomas S. Volpe
---------------------------------

Bedrock Capital Side-by-Side, L.P.

By: /s/ Thomas S. Volpe
---------------------------------

/s/ James Dolce Jr.
- ----------------------------------
Jim Dolce

/s/ Derek M. James
- ----------------------------------
Derek James

[Signature Page 2 of 3 to Series A Preferred Stock Purchase Agreement]

- 19 -

<PAGE>

- ----------------------------------
Rubin Gruber

/s/ Kwok P. Wong
- ----------------------------------
Kwok P. Wong

/s/ David L. Engel
- ----------------------------------
David L. Engel

/s/ David Rokoff
- ----------------------------------
David Rokoff

/s/ Anthony J. Risica
- ----------------------------------
Anthony J. Risica

- ----------------------------------
Cheng Wu

/s/ Mike G. Hluchyj
- ----------------------------------
Mike G. Hluchyj

/s/ Robert G. Gallager
- ----------------------------------
Robert G. Gallager

/s/ Barry Ross
- ----------------------------------
Barry Ross

/s/ Anthony S. Acampora
- ----------------------------------
Anthony S. Acampora

[Signature Page 3 of 3 to Series A Preferred Stock Purchase Agreement]

- 20 -

<PAGE>

SONUS NETWORKS, INC.

SERIES B PREFERRED STOCK
PURCHASE AGREEMENT

September 23, 1998

<PAGE>

SONUS NETWORKS, INC.

SERIES B PREFERRED STOCK
PURCHASE AGREEMENT

Table of Contents
-----------------

Page
----

1. Authorization and Sale of Shares...............................1
1.1 Authorization............................................1
1.2 Sale of Shares...........................................1
1.3 Use of Proceeds..........................................1

2. The Closing....................................................1

3. Representations of the Company.................................2
3.1 Organization and Standing................................3
3.2 Capitalization...........................................3
3.3 Subsidiaries, Etc........................................4
3.4 Issuance of Shares; Agreements...........................4
3.5 Authority for Agreement..................................4
3.6 Governmental Consents....................................4
3.7 Litigation...............................................5
3.8 Financial Statements.....................................5
3.9 Absence of Certain Changes...............................5
3.10 Taxes....................................................5
3.11 Title to Properties......................................6
3.12 Leasehold Interests......................................6
3.13 Intellectual Property....................................7
3.14 Material Contracts and Obligations.......................8
3.15 Compliance...............................................8
3.16 Employees................................................9
3.17 ERISA....................................................9
3.18 Books and Records........................................10
3.19 U.S. Real Property Holding Corporation...................10
3.20 Disclosures..............................................10

4. Representations of the Purchasers..............................10
4.1 Investment...............................................10
4.2 Authority................................................10
4.3 Experience...............................................11

<PAGE>

-ii-

4.4 Status...................................................11

5. Covenants of the Company.......................................11
5.1 Inspection...............................................11
5.2 Financial Statements and Other Information...............11
5.3 Material Changes and Litigation..........................12
5.4 Insurance................................................13
5.5 Employee Agreements......................................13
5.6 Related Party Transactions...............................13
5.7 Reservation of Common Stock..............................13
5.8 Board of Directors.......................................13
5.9 Termination of Covenants.................................14
5.10 Qualified Small Business Stock...........................14

6. Transfer of Shares.............................................14
6.1 Restricted Shares........................................14
6.2 Requirements for Transfer................................15
6.3 Legend...................................................15
6.4 Rule 144A Information....................................15

7. Miscellaneous..................................................16
7.1 Successors and Assigns...................................16
7.2 Confidentiality..........................................16
7.3 Survival of Representations and Warranties...............16
7.4 Expenses.................................................16
7.5 Notices..................................................16
7.6 Brokers..................................................17
7.7 Entire Agreement.........................................17
7.8 Amendments and Waivers...................................17
7.9 Counterparts.............................................18
7.10 Section Headings.........................................18
7.11 Severability.............................................18
7.12 Governing Law............................................18

Schedule I
Disclosure Schedule

Exhibit A Form of Restated Certificate
Exhibit B Form of Opinion of Bingham Dana LLP
Exhibit C Form of Investor Agreement
Exhibit D Form of Right of First Refusal Agreement
Exhibit E Form of representation letter described in Section 2(j)
Exhibit F Form of Stock Repurchase Agreement
Exhibit G Form of Noncompetition and Confidentiality Agreement

<PAGE>

-iii-

Exhibit H Form of Confidentiality Agreement

<PAGE>

SERIES B PREFERRED STOCK PURCHASE AGREEMENT

This Series B Preferred Stock Purchase Agreement (this "Agreement"), dated
as of September 23, 1998, is entered into by and among Sonus Networks, Inc., a
Delaware corporation (the "Company"), and the persons and entities listed on
Schedule I attached hereto (individually, a "Purchaser" and, collectively, the
"Purchasers").

In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:

1. Authorization and Sale of Shares.

1.1 Authorization. The Company has duly authorized the sale and
issuance, pursuant to the terms of this Agreement, of 3,144,287 shares of its
Series B Convertible Preferred Stock, $0.01 par value per share (the "Series B
Preferred Stock"), having the rights, restrictions, privileges and preferences
set forth in the Amended and Restated Certificate of Incorporation of the
Company attached hereto as Exhibit A (the "Restated Certificate"). The Company
has adopted and filed the Restated Certificate with the Secretary of State of
the State of Delaware.

1.2 Sale of Shares. Subject to the terms and conditions of this
Agreement the Company will issue and sell to each Purchaser, and each Purchaser
will purchase, for a purchase price of $5.00 per share, such number of shares of
Series B Preferred Stock as is set forth opposite such Purchaser's name on
Schedule I attached hereto. The shares of Series B Preferred Stock being sold
under this Agreement are referred to as the "Shares." The Company's agreement
with each of the Purchasers is a separate agreement, and the sale of Shares to
each of the Purchasers is a separate sale.

1.3 Use of Proceeds. The Company will use the proceeds from the sale
of the Shares for working capital purposes and the repayment of certain
indebtedness.

2. The Closing. The closing (the "Closing") of the sale and purchase of
the Shares under this Agreement shall take place at the offices of Bingham Dana
LLP, 150 Federal Street, Boston, Massachusetts at 9:00 a.m. on the date of this
Agreement, or at such other time, date and place as are mutually agreeable to
the Company and the Purchasers. The date of the Closing is hereinafter referred
to as the "Closing Date." At the Closing:

<PAGE>

-2-

(b) the Company shall deliver to the Purchasers the Restated
Certificate of Incorporation, as in effect as of the Closing Date, certified by
the Secretary of State of the State of Delaware;

(c) the Company shall deliver to the Purchasers a Certificate
of the Secretary of the Company attesting to (i) the By-laws of the Company, and
(ii) resolutions of the Board of Directors of the Company authorizing and
approving all matters in connection with this Agreement and the transactions
contemplated hereby;

(d) Bingham Dana LLP, counsel for the Company, shall deliver
to the Purchasers an opinion, dated the Closing Date, in the form attached
hereto as Exhibit B;

(e) the Company and the Purchasers shall execute and deliver
the Amended and Restated Investor Rights Agreement in the form attached hereto
as Exhibit C (the "Investor Agreement");

(f) the Company, the Purchasers and the other parties thereto
shall execute and deliver the Amended and Restated Right of First Refusal and
Co-Sale Agreement in the form attached hereto as Exhibit D (the "Right of First
Refusal Agreement");

(g) the Company shall deliver to each Purchaser a certificate
for the number of Shares being purchased by such Purchaser, registered in the
name of such Purchaser;

(h) each Purchaser shall pay to the Company the purchase price
for the Shares being purchased by such Purchaser, by wire transfer or certified
check; and

(i) the Company and each of the Purchasers shall execute and
deliver a cross-receipt.

(j) a representation letter executed by the President of the
Company as to interests of "disqualified persons" in the form of Exhibit E.

3. Representations of the Company. The Company hereby represents and
warrants to the Purchasers as follows, subject in each case to such exceptions
as are specifically contemplated by this Agreement or as are set forth in the
Disclosure Schedule attached hereto (the "Disclosure Schedule"). Notwithstanding
any other provision of this Agreement or the Disclosure Schedule, each exception
set forth in the Disclosure Schedule will be deemed to qualify each
representation and warranty set forth

<PAGE>
-3-

in this Agreement that is specifically identified (by cross-reference or
otherwise) in the Disclosure Schedule as being qualified by such exception.

3.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted by it and to enter into and
perform this Agreement and to carry out the transactions contemplated by this
Agreement. The Company is duly qualified to do business as a foreign corporation
and is in good standing in the Commonwealth of Massachusetts and in any other
jurisdiction in which the failure to so qualify would have a material adverse
effect on the operations or financial condition of the Company. The Company has
furnished to special counsel to the Purchasers true and complete copies of its
Restated Certificate and By-laws, each as amended to date and presently in
effect.

3.2 Capitalization. The authorized capital stock of the Company
(immediately prior to the Closing) consists of (a) 12,000,000 shares of
preferred stock, $0.01 par value per share (of which 7,220,000 shares have been
designated as Series A Convertible Preferred Stock (the "Series A Preferred
Stock") and 3,197,857 shares have been designated as Series B Convertible
Preferred Stock), of which 7,180,000 shares of Series A Preferred Stock and no
shares of Series B Preferred Stock are issued or outstanding and (b) 20,000,000
shares of common stock, $0.001 par value per share (the "Common Stock"), of
which 4,866,843 shares are issued and outstanding, 2,467,907 shares have been
reserved for issuance pursuant to the Company's 1997 Stock Incentive Plan, of
which 1,584,750 shares have been issued in the form of restricted shares of
Common Stock pursuant to the terms of such Plan, and 10,364,287 shares have been
reserved for issuance upon the conversion of the Shares and shares of Series A
Preferred Stock. At the Closing, the Common Stock, the Series A Preferred Stock
and the Series B Preferred Stock will have the voting powers, designations,
preferences, rights and qualifications, and limitations or restrictions set
forth in the Restated Certificate. All of the issued and outstanding shares of
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable. Except for the Series A Preferred Stock or as set forth in
Section 3.2 of the Disclosure Schedule or as contemplated by this Agreement, (i)
no subscription, warrant, option, convertible security or other right
(contingent or otherwise) to purchase or acquire any shares of capital stock of
the Company is authorized or outstanding, (ii) the Company has no obligation
(contingent or otherwise) to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidences of indebtedness or assets of the
Company, and (iii) the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. All of the issued and outstanding shares of capital stock of
the Company have been offered, issued and sold by the Company in compliance with
applicable Federal and state securities laws.

<PAGE>
-4-

3.4 Issuance of Shares; Agreements. The issuance, sale and delivery
of the Shares in accordance with this Agreement, and the issuance and delivery
of the shares of Common Stock issuable upon conversion of the Shares, have been
duly authorized by all necessary corporate action on the part of the Company,
and all such shares have been duly reserved for issuance. The Shares when so
issued, sold and delivered against payment therefor in accordance with the
provisions of this Agreement, and the shares of Common Stock issuable upon
conversion of the Shares, when issued upon such conversion, will be duly and
validly issued, fully paid and non-assessable. Except as set forth in Section
3.4 of the Disclosure Schedule or as contemplated by this Agreement, there are
no agreements, written or oral, between the Company and any holder of its
capital stock, or, to the best of the Company's knowledge, among any holders of
its capital stock, relating to the acquisition (including without limitation
rights of first refusal or pre-emptive rights), disposition, registration under
the Securities Act of 1933, as amended (the "Securities Act")), or voting of the
capital stock of the Company.

3.5 Authority for Agreement. The execution, delivery and performance
by the Company of this Agreement and all other agreements required to be
executed by the Company at the Closing pursuant to Section 2 (the "Ancillary
Agreements"), and the consummation by the Company of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action. This Agreement and the Ancillary Agreements have been, or as
of the Closing will have been, duly executed and delivered by the Company and
constitute, or as of the Closing will constitute, valid and binding obligations
of the Company enforceable in accordance with their respective terms. Except as
set forth in Section 3.5 of the Disclosure Schedule, the execution of and
performance of the transactions contemplated by this Agreement and the Ancillary
Agreements and compliance with their provisions by the Company will not violate
any provision of applicable law and will not conflict with or result in any
breach of any of the terms, conditions or provisions of, or constitute a default
under, or require a consent or waiver under, its Restated Certificate or By-laws
(each as amended to date) or any material indenture, lease, agreement or other
instrument to which the Company is a party or by which it or any of its
properties is bound, or any decree, judgment, order, statute, rule or regulation
applicable to the Company which would have a material adverse effect on the
business, properties or results of operations of the Company (a "Material
Adverse Effect").

<PAGE>
-5-

required on the part of the Company in connection with the execution and
delivery of this Agreement, the offer, issuance, sale and delivery of the
Shares, or the other transactions to be consummated at the Closing, as
contemplated by this Agreement, other than such filings as shall have been made
prior to and shall be effective on and as of the Closing. Based on the
representations made by the Purchasers in Section 4 of this Agreement, the offer
and sale of the Shares to the Purchasers will be exempt from the registration
requirements of applicable Federal and state securities laws.

3.7 Litigation. Except as set forth in Section 3.7 of Disclosure
Schedule, there is no action, suit or proceeding, or governmental inquiry or
investigation, pending, or, to the best of the Company's knowledge, any basis
therefor or threat thereof, against the Company, which questions the validity of
this Agreement or the right of the Company to enter into it, or which might
result, either individually or in the aggregate, in any material adverse change
in the business, assets or condition, financial or otherwise, of the Company,
nor is there any litigation pending, or, to the best of the Company's knowledge,
any basis therefor or threat thereof, against the Company by reason of the
activities of the Company, or negotiations by the Company with possible
investors in the Company.

3.8 Financial Statements. The Company has delivered to the
Purchasers copies of (i) its audited balance sheet as of December 31, 1997, and
the related audited statements of operations, stockholders' equity, and cash
flows for the period from August 7, 1997 to December 31, 1997, as audited by
Ernst & Young, LLP, together with the report of Ernst & Young, LLP thereon, and
(ii) its unaudited balance sheet as of August 31, 1998 (the "Most Recent Balance
Sheet"), and the related unaudited statements of operations, stockholders'
equity, and cash flows for the eight (8) month period then ended and for the
period August 7, 1997 to August 31, 1998 (the "Interim Financials"). Each of
such balance sheets fairly presents, in all material respects, the financial
condition of the Company as of its respective date, and each of such statements
of operations, stockholders' equity, and cash flows fairly presents, in all
material respects, the results of operations, stockholders' equity, or cash
flows, as the case may be, of the Company for the period covered thereby; in
each case in accordance with generally accepted accounting principles, subject,
in the case of Interim Financials, to the absence of footnotes and normal
year-end adjustments.

3.9 Absence of Certain Changes. Since the date of the Most Recent
Balance Sheet, there have not been any changes in the business, assets,
financial condition, or operating results of the Company that, either
individually or in the aggregate, have had a Material Adverse Effect (as defined
in Section 3.5 hereof).

3.10 Taxes. The Company has timely filed all tax returns required to
be filed by it on or prior to the date hereof, each such tax return has been
prepared in compliance with all applicable laws and regulations, and, to the
best of the Company's knowledge, all such tax returns are true and accurate in
all material respects. All taxes

<PAGE>
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due and payable by the Company with respect to any periods ending on or before
the Closing Date have been paid. No claim has ever been made by a taxing
authority in a jurisdiction where the Company does not pay tax or file tax
returns that the Company is or may be subject to taxes assessed by such
jurisdiction. There are no liens for taxes (other than current taxes not yet due
and payable) on the assets of the Company. No action, suit, taxing authority
proceeding, or audit with respect to any tax is pending or, to the best of the
Company's knowledge, threatened, against or with respect to the Company. No
deficiency or proposed adjustment in respect of taxes that has not been settled
or otherwise resolved has been asserted or assessed by any taxing authority
against the Company. The Company has withheld and paid all taxes required to
have been withheld and paid by it in connection with amounts paid or owing to
any employee, creditor, independent contractor, or other person. Neither the
Company nor any of its stockholders has ever filed (a) an election pursuant to
Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"), that
the Company be taxed as an S Corporation, or (b) consent pursuant to Section
341(f) of the Code relating to collapsible corporations.

3.11 Title to Properties. Except as set forth in Section 3.11 of the
Disclosure Schedule, the Company has good and valid title to its properties and
assets reflected in the Most Recent Balance Sheet or acquired by it since the
date of the Most Recent Balance Sheet (other than properties and assets disposed
of in the ordinary course of business since the date of the Most Recent Balance
Sheet), and, except as set forth in Section 3.11 of the Disclosure Schedule, all
such properties and assets are free and clear of mortgages, pledges, security
interests, liens, charges, claims, restrictions and other encumbrances
(including without limitation, easements and licenses), except for liens for or
current taxes not yet due and payable and minor imperfections of title, if any,
not material in nature or amount and not materially detracting from the value or
impairing the use of the property subject thereto or impairing the ability or
operations of the Company, including without limitation, the ability of the
Company to secure financing using such properties and assets as collateral. To
the best of the Company's knowledge, there are no condemnation, environmental,
zoning or other land use regulation proceedings, either instituted or planned to
be instituted, which would adversely affect the use or operation of the
Company's properties and assets for their intended uses and purposes, or the
value of such properties, and the Company has not received notice of any special
assessment proceedings which would affect such properties and assets.

3.12 Leasehold Interests. Each lease or agreement to which the
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement, duly authorized and entered into by the
Company, without any default of the Company thereunder and, to the best of the
Company's knowledge, without any default thereunder of any other party thereto.
No event has occurred and is continuing which, with due notice of lapse of time
or both, would constitute a default or event of default by the Company under any
such lease or agreement or, to the best of the Company's knowledge, by any other
party thereto. The Company's possession of such

<PAGE>
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property has not been disturbed and, to the best of the Company's knowledge, no
claim has been asserted against the Company adverse to its rights in such
leasehold interests.

3.13 Intellectual Property.

(a) To the best of the Company's knowledge, no third party has
claimed or has reason to claim that any person employed by or affiliated with
the Company, in connection with his or her employment by or affiliation with the
Company, (i) has violated or is violating any of the terms or conditions of his
or her employment, non-competition or non-disclosure agreement with such third
party, (ii) has disclosed or is disclosing or has utilized or is utilizing any
trade secret or proprietary information or documentation of such third party or
(iii) has interfered or is interfering in the employment relationship between
such third party and any of its present or former employees. No third party has
requested information from the Company which suggests that such a claim might be
contemplated. To the best of the Company's knowledge, no person employed by or
affiliated with the Company has employed or proposes to employ any trade secret
or any information or documentation proprietary to any former employer, and to
the best of the Company's knowledge, no person employed by or affiliated with
the Company has violated any confidential relationship which such person may
have had with any third party, in connection with the development, manufacture
or sale or any product or proposed product or the development or sale of any
service or proposed service of the Company, and the Company has no reason to
believe there will be any such employment or violation. To the best of the
Company's knowledge, none of the execution or delivery of this Agreement, or the
carrying on of business of the Company by any officer, director or key employee
of the Company, or the conduct or proposed conduct of the business of the
Company, will conflict with or result in a breach of the terms, conditions or
provisions of or constitute a default under any contract, covenant or instrument
under which any such person is obligated which would have a Material Adverse
Effect.

<PAGE>
-8-

operations of the Company infringe upon or conflict with the asserted rights of
any other person under any Intellectual Property, and, to the best of the
Company's knowledge, there is no basis for any such claim (whether or not
pending or threatened). No claim is pending or, to the knowledge of the Company,
threatened to the effect that any such Intellectual Property owned or licensed
by the Company, or which the Company otherwise has the right to use, is invalid
or unenforceable by the Company, and, to the best of the Company's knowledge,
there is no basis for any such claim (whether or not pending or threatened). To
the best of the Company's knowledge, all technical information developed by and
belonging to the Company which has not been patented has been kept confidential.
The Company has not granted or assigned to any other person or entity any right
to manufacture, have manufactured, assemble or sell the products or proposed
products or to provide the services or proposed services of the Company.

3.14 Material Contracts and Obligations. Except as contemplated by
this Agreement or as listed in Section 3.14 of the Disclosure Schedule, the
Company is not a party to any material agreement or commitment of any nature,
including without limitation (a) any agreement which requires future
expenditures by the Company in excess of $50,000, (b) any employment or
consulting agreement, employee benefit, bonus, pension, profit-sharing, stock
option, stock purchase or similar plan or arrangement, or distributor or sales
representative agreement, (c) any agreement with any stockholder, officer or
director of the Company, or any "affiliate" or "associate" of such persons (as
such terms are defined in the rules and regulations promulgated under the
Securities Act, including without limitation any agreement or other arrangement
providing for the furnishing of services by, rental of real or personal property
from, or otherwise requiring payments to, any such person or entity or (d) any
agreement relating to the intellectual property rights of the Company.

3.15 Compliance. The Company has, to its knowledge, in all material
respects, complied with all laws, regulations and orders applicable to its
present and proposed business and has all material permits and governmental
licenses required thereby. There is no term or provision of any mortgage,
indenture, contract, agreement or instrument to which the Company is a party or
by which it is bound, or, to the best of the Company's knowledge, of any
provision of any state or Federal judgment, decree, order, statute, rule or
regulation applicable to or binding upon the Company, which materially adversely
affects or, so far as the Company may now foresee, in the future is reasonably
likely to materially adversely affect, the business, assets or condition,
financial or otherwise, of the Company. To the best of the Company's knowledge,
no employee of the Company is in violation of any term of any contract or
covenant (either with the Company or with another entity) relating to
employment, patents, proprietary information disclosure, non-competition or
non-solicitation.

<PAGE>
-9-

3.16 Employees.

(a) Each holder of Common Stock has executed and delivered to
the Company a Stock Repurchase Agreement in substantially the form attached
hereto as Exhibit F, and all of such agreements are in full force and effect.

(b) Each employee of the Company has executed and delivered to
the Company a Noncompetition and Confidentiality Agreement covering a period of
one year following the termination of such employee's employment with the
Company, in substantially the form attached hereto as Exhibit G, and all of such
agreements are in full force and effect.

(c) None of the employees of the Company is represented by any
labor union, and there is no labor strike or other labor trouble pending with
respect to the Company (including, without limitation, any organizational drive)
or, to the best of the Company's knowledge, threatened.

3.17 ERISA. (i) Except as set forth on Schedule 3.17 hereto, the
Company does not maintain and has no obligation to make contributions to, any
employee benefit plan (an "ERISA Plan") within the meaning of Section 3(3) of
the United States Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any other retirement, profit sharing, stock option, stock bonus or
employee benefit plan (a "Non-ERISA Plan"). The Company has heretofore delivered
to the Purchasers true, correct and complete copies of each ERISA Plan and each
Non-ERISA Plan. All such ERISA Plans and Non-ERISA Plans have been maintained
and operated in all material respects in accordance with all federal, state and
local laws applicable to such plans, and the terms and conditions of the
respective plan documents, except where the failure to so maintain or operate
such ERISA Plans and Non-ERISA Plans would not have a Material Adverse Effect.

(ii) No material liability to the United States Pension Benefit Guaranty
Corporation ("PBGC"), or to any multi-employer pension plan within the meaning
of section 3(35) of ERISA, or to any other governmental authority, pension or
retirement board, or other agency, under any federal, state or local law, has
been or is expected to be incurred by the Company with respect to any ERISA or
Non-ERISA Plan. There has been no "reportable event" within the meaning of
Section 4043(b) of ERISA with respect to any ERISA Plan, and no event or
condition that presents a material risk of termination of any ERISA Plan by the
PBGC.

(iii) Full payment has been made of all material amounts that the
Company is required under the terms of each ERISA Plan and Non-ERISA Plan, or
pursuant to applicable federal, state or local law, to have paid as
contributions to such ERISA Plan or Non-ERISA Plan as of the last day of the
most recent fiscal year of such ERISA Plan or Non-ERISA Plan ended prior to the
date hereof, and no accumulated

<PAGE>
-10-

funding deficiency (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, exists with respect to any ERISA Plan.

3.19 U.S. Real Property Holding Corporation. The Company is not now
and has never been a "United States Real Property Holding Corporation" as
defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service.

3.20 Disclosures. Neither this Agreement nor any Schedule or Exhibit
hereto, nor any certificate or instrument furnished to the Purchasers at the
Closing or as required by the terms of this Agreement, when read together,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.

4. Representations of the Purchasers. Each Purchaser represents and
warrants to the Company as follows:

4.1 Investment. Such Purchaser is acquiring the Shares, and the
shares of Common Stock into which the Shares may be converted, for its or his
own account for investment and not with a view to, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling the same; and such Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof. Such Purchaser acknowledges that the
Shares are restricted securities as defined under the Securities Act and shall
bear the legends set forth in Section 6.3 hereof.

4.2 Authority. Such Purchaser has full power and authority to enter
into and to perform this Agreement in accordance with its terms. Such Purchaser
represents that it has not been organized, reorganized or recapitalized
specifically for the purpose of investing in the Company. This Agreement and the
Ancillary Agreement to be executed by such Purchaser have been duly executed and
delivered by such Purchaser and constitute valid and binding obligations of such
Purchaser enforceable in accordance with their respective terms. The execution
of and performance of the transactions contemplated by this Agreement and the
Ancillary Agreements to be executed by such Purchaser and compliance with their
provisions by such Purchaser will not violate any provision of law and will not
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or require a consent or waiver

<PAGE>
-11-

under, its organizational documents (each as amended to date) or any indenture,
lease, agreement or other instrument to which the Purchaser is a party or by
which it or any of its properties is bound, or any decree, judgment, order,
statute, rule or regulation applicable to such Purchaser.

4.3 Experience. Such Purchaser has carefully reviewed the
representations concerning the Company contained in this Agreement and has made
detailed inquiry concerning the Company, its business and its personnel; the
officers of the Company have made available to such Purchaser any and all
written information which it has requested and have answered to such Purchaser's
satisfaction all inquiries made by such Purchaser; and such Purchaser has
sufficient knowledge and experience in investing in companies similar to the
Company so as to be able to evaluate the risks and merits of its investment in
the Company and is able financially to bear the risks thereof, including a
complete loss of its investment. Such Purchaser understands that an investment
in the Company involves a high degree of risk in view of the fact that the
Company is a start-up enterprise with no operating history, and there may never
be an established market for the Company's capital stock.

4.4 Status. Such Purchaser is an "accredited investor" as that term
is defined in Rule 501 of Regulation D promulgated under the Securities Act.

5. Covenants of the Company.

5.1 Inspection. The Company shall permit each Purchaser (or any of
its affiliates) holding not less than 157,214 shares of Series B Stock at the
relevant time (as adjusted for stock splits, stock dividends, recapitalizations
and similar events), or any authorized representative thereof, to visit and
inspect the properties of the Company, including its corporate and financial
records, and to discuss its business and finances with officers of the Company,
during normal business hours following reasonable notice and as often as may be
reasonably requested, without interruption of the business of the Company and
subject to the confidentiality obligations of Section 7.2 hereof.

5.2 Financial Statements and Other Information.

(a) So long as a Purchaser (or any of its affiliates) holds at
least 157,214 shares of Series B Preferred Stock (as adjusted for stock splits,
stock dividends, recapitalizations and similar events), the Company shall
deliver to such Purchaser:

(i) within 90 days after the end of each fiscal year of
the Company, an audited balance sheet of the Company as at the end of such year,
and audited statements of operations, stockholders' equity and cash flows of the
Company for such year, certified by certified public accountants of established
national reputation selected by the Company, and prepared in accordance with
generally accepted accounting principles; and

<PAGE>
-12-

(ii) within 45 days after the end of each fiscal quarter
of the Company, an unaudited balance sheet of the Company as at the end of such
quarter, and unaudited statements of operations and cash flows of the Company
for such fiscal quarter and for the current fiscal year to the end of such
fiscal quarter.

(b) So long as a Purchaser (or any of its affiliates) holds at
least 157,214 shares of Series B Preferred Stock (as adjusted for stock splits,
stock dividends, recapitalizations and similar events), the Company shall
deliver to such Purchaser:

(i) within 30 days after the end of each month, an
unaudited balance sheet of the Company as at the end of such month and unaudited
statements of operations and cash flows of the Company for such month and for
the current fiscal year to the end of such month, setting forth in comparative
form the Company's projected financial statements for the corresponding periods
for the current fiscal year;

(ii) as soon as available, but in any event within 30
days after commencement of each new fiscal year, a budget, consisting of
projected financial statements for such fiscal year; and

(c) The foregoing financial statements shall be prepared on a
consolidated basis if the Company then has any subsidiaries. The financial
statements delivered pursuant to clause (ii) of paragraph (a) and clause (i) of
paragraph (b) shall be accompanied by a certificate of the chief financial
officer of the Company stating that such statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as noted) and fairly present, in all material respects, the financial
condition and results of operations of the Company at the date thereof and for
the periods covered thereby (subject, in the case of any such unaudited
financial statements to the absence of footnotes and to year-end adjustments).

5.3 Material Changes and Litigation. The Company shall promptly
notify the Purchasers of any material adverse change in the business, assets or
condition, financial or otherwise, of the Company and of any litigation or
governmental proceeding or investigation brought or, to the best of the
Company's knowledge, threatened against the Company, or against Rubin Gruber,
Michael G. Hluchyj or Kwok P. Wong (the "Founders") or any officer, director,
key employee or principal stockholder of the Company materially adversely
affecting or which, if adversely determined, would

<PAGE>
-13-

materially adversely affect the Company's business, prospects, assets or
condition, financial or otherwise.

5.4 Insurance.

(a) The Company shall maintain for a period of at least three
years from the procurement thereof, term life insurance upon the lives of each
of the Founders, in the amount of $1,000,000, with the proceeds payable to the
Company.

(b) The Company shall maintain in effect, policies of workers'
compensation insurance and of insurance with respect to its properties and
business, including, without limitation, insurance against loss, damage, fire,
theft, public liability and other risks, which is adequate for the maintenance
and preservation of the Company's properties and business.

5.5 Employee Agreements. The Company shall require all employees
hereafter employed or engaged by the Company who are at or above the director
level or other key employees to enter into a Noncompetition and Confidentiality
Agreement covering a period of one year following the termination of such
employee's employment with the Company, substantially in the form attached
hereto as Exhibit G or in such other form as may be approved by the Board of
Directors. The Company shall require all employees not covered by the foregoing
sentence to enter into a Confidentiality Agreement substantially in the form
attached hereto as Exhibit H or in such other form as may be approved by the
Board of Directors.

5.6 Related Party Transactions. The Company shall not enter into any
agreement with any stockholder, officer or director of the Company, or any
"affiliate" or "associate" of such persons (as such terms are defined in the
rules and regulations promulgated under the Securities Act), including without
limitation any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, any such person or entity, without the consent of at least a
majority of the members of the Company's Board of Directors having no interest
in such agreement or arrangement.

5.7 Reservation of Common Stock. The Company shall reserve and
maintain a sufficient number of shares of Common Stock for issuance upon
conversion of all of the outstanding Shares.

5.8 Board of Directors. So long as Bedrock Capital Partners I, L.P.
and its affiliates continue to hold in the aggregate no less than 598,800 (as
adjusted for stock splits, stock dividends, recapitalizations and similar
events), the Company will permit any authorized representative of Bedrock
Capital Partners I, L.P., who is approved in advance by the Company (which
consent shall not be unreasonably withheld), to attend (or participate by
telephone in) all meetings of the Board of Directors as a non-voting

<PAGE>
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observer (unless such individual is otherwise a director), but with the right to
participate in all discussions of the Board of Directors, and shall provide
Bedrock Capital Partners I, L.P. with such notice, minutes, consents (including
actions by written consent in lieu of a meeting), written materials and other
information with respect to such meetings as are delivered to the directors of
the Company; provided, however, that the Company may exclude such Purchaser from
access to any material or portion thereof if the Company believes, upon the
advice of counsel, that such exclusion is reasonably necessary to preserve the
attorney-client privilege or to protect highly confidential proprietary
information of the Company or a third party to which the Company has a
contractual obligation of confidentiality.

5.9 Termination of Covenants. The covenants of the Company contained
in Sections 5.1 through 5.8 shall terminate, and be of no further force or
effect, upon the closing of the Company's first offering of Common Stock to the
public, resulting in net proceeds to the Company of at least $10,000,000, and at
a price per share of at least $10.00 (as adjusted for stock splits, stock
dividends, recapitalizations and similar events) or, at such time as the
Purchasers (together with any affiliated entities to whom Shares have been
transferred) own less than an aggregate of 786,072 shares of Series B Preferred
Stock (as adjusted for stock splits, stock dividends, recapitalizations and
similar events), unless the Company has, prior to such time, failed to redeem
any shares of Series B Preferred Stock when such redemption was due in
accordance with Section 6 of Article IV of the Restated Certificate, which
failure continues and has not been cured.

5.10 Qualified Small Business Stock. The Company shall submit to its
stockholders (including the Purchasers) and to the Internal Revenue Service any
reports that may be required under Section 1202(d)(1)(C) of the Code and the
Regulations promulgated thereunder. In addition, within ten days after a
Purchaser's written request therefor, the Company shall deliver to such
Purchaser a written statement indicating whether such Purchaser's interest in
the Company constitutes "qualified small business stock" as defined in Section
1202(c) of the Code.

6. Transfer of Shares.

6.1 Restricted Shares. "Restricted Shares" means (i) the Shares,
(ii) the shares of Common Stock issued or issuable upon conversion of the
Shares, (iii) any shares of capital stock of the Company acquired by a Purchaser
pursuant to the Investor Agreement or the Right of First Refusal Agreement, and
(iv) any other shares of capital stock of the Company issued in respect of such
shares (as a result of stock splits, stock dividends, reclassifications,
recapitalizations, or similar events); provided, however, that shares of Common
Stock which are Restricted Shares shall cease to be Restricted Shares (i) upon
any sale pursuant to a registration statement under the Securities Act, or under
Section 4(1) of the Securities Act or Rule 144 under the Securities Act, or (ii)
at such time as they become eligible for sale under Rule 144(k) under the
Securities Act.

<PAGE>
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6.2 Requirements for Transfer.

(b) Notwithstanding the foregoing, no registration or opinion
of counsel shall be required for (i) a transfer by a Purchaser which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner, if the transferee agrees in writing to be subject to
the terms of this Section 6 to the same extent as if he were an original
Purchaser hereunder, or (ii) a transfer made in accordance with Rule 144 under
the Securities Act.

6.3 Legend. Each certificate representing Restricted Shares shall
bear a legend substantially in the following form:

"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, and may not be offered, sold or
otherwise transferred, pledged or hypothecated unless and until such
shares are registered under such Act or an opinion of counsel satisfactory
to the Company is obtained to the effect that such registration is not
required."

6.4 Rule 144A Information. The Company shall, at all times during
which it is neither subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor
exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, upon
the written request of a Purchaser, provide in writing to such Purchaser, and to
any prospective transferee of any Restricted Shares of such Purchaser, the
information concerning the Company described in Rule 144A(d)(4) under the
Securities Act ("Rule 144A Information"). The Company also shall, upon the
written request of a Purchaser, cooperate with and assist such Purchaser or any
member of the National Association of Securities Dealers, Inc. PORTAL system in
applying to designate and thereafter maintain the eligibility of the Restricted
Shares for trading through PORTAL. The Company's obligations under this Section
6.4 shall at all times be contingent upon receipt from the prospective
transferee of Restricted Shares of a written agreement to take all reasonable
precautions to safeguard

<PAGE>
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the Rule 144A Information from disclosure to anyone other than persons who will
assist such transferee in evaluating the purchase of any Restricted Shares and
to use such Rule 144A Information only for such evaluation purposes.

7. Miscellaneous.

7.1 Successors and Assigns. This Agreement, and the rights and
obligations of each Purchaser hereunder, may be assigned by such Purchaser to
any person or entity to which at least 157,214 Shares, as adjusted for stock
splits, stock dividends, recapitalizations and similar events (or 100% of the
Shares originally purchased hereunder by such Purchaser, if less than 157,214
Shares), are transferred by such Purchaser, and such transferee shall be deemed
a "Purchaser" for purposes of this Agreement; provided that the transferee
provides written notice of such assignment to the Company and agrees to be bound
by the terms and conditions set forth herein.

7.2 Confidentiality. The Purchasers agree that they will keep
confidential and will not disclose or divulge any confidential, proprietary or
secret information which they may obtain from the Company pursuant to financial
statements, reports and other materials submitted by the Company to the
Purchasers pursuant to this Agreement or any rights granted hereunder, unless
such information is known, or until such information becomes known, to the
public; provided, however, that a Purchaser may disclose such information (i) to
its attorneys, accountants, consultants, and other professionals to the extent
necessary to obtain their services in connection with its investment in the
Company, (ii) to any prospective purchaser of any Shares from such Purchaser as
long as such prospective purchaser agrees in writing to be bound by the
provisions of this Section, or (iii) to any affiliate of such Purchaser or to a
partner, shareholder or subsidiary of such Purchaser; subject to the agreement
of such party to keep such information confidential as set forth herein.

7.3 Survival of Representations and Warranties. All agreements,
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby.

7.4 Expenses. The Company shall pay, at the Closing, the reasonable
costs and expenses of Testa, Hurwitz & Thibeault, LLP, counsel to the
Purchasers, not to exceed $15,000 in the aggregate, in connection with the
preparation of this Agreement and the other agreements and documents
contemplated hereby and the closing of the transactions contemplated hereby.

7.5 Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
by hand, sent via a reputable nationwide overnight courier service or mailed by
first class certified or registered mail, return receipt requested, postage
prepaid:

<PAGE>
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If to a Purchaser, at its address as set forth on Schedule I attached
hereto, or at such other address or addresses as may have been furnished to the
Company in writing by such Purchaser, with a copy to Testa, Hurwitz & Thibeault,
LLP, 125 High Street, Boston, MA 02110, Attn: Mitchell S. Bloom, Esq.

Notices provided in accordance with this Section 7.5 shall be deemed
delivered upon personal delivery, one business day after being sent via a
reputable nationwide overnight courier service, or five business days after
deposit in the mail.

7.6 Brokers. The Company and the Purchasers each (i) represents and
warrants to the other parties hereto that he, she or it has retained no finder
or broker in connection with the transactions contemplated by this Agreement,
and (ii) will indemnify and save the other parties harmless from and against any
and all claims, liabilities or obligations with respect to brokerage or finders'
fees or commissions in connection with the transactions contemplated by this
Agreement asserted by any person on the basis of any agreement, statement or
representation alleged to have been made by such indemnifying party.

7.7 Entire Agreement. This Agreement and the Ancillary Agreements
embody the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter.

7.8 Amendments and Waivers. Except as otherwise expressly set forth
in this Agreement, any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and the holders of at least 66 2/3% of the shares of Common Stock
issued or issuable upon conversion of the Shares. Any amendment or waiver
effected in accordance with this Section 7.8 shall be binding upon each holder
of any Shares (including shares of Common Stock into which such Shares have been
converted) and each future holder of all such securities and the Company. No
waivers of or exceptions to any term, condition or provision of this Agreement,
in any one or more instances, shall be deemed to be, or construed as, a further
or continuing waiver of any such term, condition or provision.

7.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.

<PAGE>
-18-

7.10 Section Headings. The section headings are for the convenience
of the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.

7.11 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.

7.12 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.

[remainder of page intentionally left blank]

<PAGE>

S-1

Executed as an instrument under seal as of the date first written above.

COMPANY:

SONUS NETWORKS, INC.

By: /s/ Rubin Gruber
-------------------------------
Rubin Gruber
President

PURCHASERS:

North Bridge Venture Partners II, L.P. North Bridge Venture Partners III, L.P.
404 Wyman Street 404 Wyman Street
Waltham, MA 02154 Waltham, MA 02154

By: North Bridge Venture Management By: North Bridge Venture Management
II, L.P., its General Partner III, L.P., its General Partner

By: /s/ Edward T. Anderson By: /s/ Edward T. Anderson
---------------------------- ----------------------------
Edward T. Anderson Name:
General Partner Title:

Matrix Partners V, L.P.
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154

By: Matrix V Management Co., LLC,
its General Partner

By: Paul J. Ferri
---------------------------
Name:
Title:

Charles River Partnership VIII, Charles River VIII-A LLC
A Limited Partnership 1000 Winter Street, Suite 3300
1000 Winter Street, Suite 3300 Waltham, MA 02154
Waltham, MA 02154

By: Charles River VIII GP Limited By: Charles River Friends VII, Inc.,
Partnership, its General Partner its Manager

By: /s/ Richard M. Burnes By: /s/ Richard M. Burnes
---------------------------- ----------------------------
Richard M. Burnes Name:
General Partner Title: Officer

<PAGE>

S-2

Bessemer Venture Partners IV L.P.
Suite 407
1400 Old Country Road
Westbury, NY 11590

By: Deer IV & Co. LLC, General Partner

By: /s/ Robert H. Buescher
----------------------------
Name: Robert H. Buescher
Title: Manager

Bessec Ventures IV L.P.
c/o Bessemer Venture Partners
1400 Old Country Road
Suite 407
Westbury, NY 11590

By: Deer IV & Co. LLC, its General Partner

By: /s/ Robert H. Buescher
------------------------------
Name: Robert H. Buescher
Title: Manager

Bedrock Capital Partners I, L.P.
c/o Volpe Brown Whelan & Company LLC
One Boston Place
Suite 3310
Boston, MA 02108

By: Bedrock General Partner I, LLC, General Partner

By: /s/ David J. Duval
-------------------------------
Name: David J. Duval
Title: Managing Member

VBW Employee Bedrock Fund, L.P.
c/o Volpe Brown Whelan & Company LLC
One Boston Place
Suite 3310
Boston, MA 02108

By: Bedrock General Partner I, LLC, General Partner

By: /s/ David J. Duval
---------------------------------
Name: David J. Duval
Title: Managing Member

<PAGE>

S-3

Credit Suisse First Boston Bedrock Fund, L.P.
c/o Volpe Brown Whelan & Company LLC
One Boston Place
Suite 3310
Boston, MA 02108

By: Bedrock General Partner I, LLC
Title: Attorney-in-Fact

By: /s/ David J. Duval
--------------------------
Name: David J. Duval
Title: Managing Member

/s/ Thomas S. Volpe
- ----------------------------------------
Thomas S. Volpe
c/o Volpe Brown Whelan & Company LLC
One Maritime Plaza
San Francisco, CA 94111

/s/ James Dolce Jr.
- ----------------------------------------
James Dolce
9 Stonegate Road
Hopkinton, MA 01748

- ----------------------------------------
Derek James
960 Crescent Beach Road
Vero Beach, FL 32963

- ----------------------------------------
Rubin Gruber
709 Sudbury Road
Concord, MA 01742

/s/ David L. Engel
- ----------------------------------------
David L. Engel
45 Juniper Road
Belmont, MA 02178

/s/ ILLEGIBLE
- ----------------------------------------
David Rokoff
30 Greylock Road
Wellesley, MA 02481

<PAGE>

S-4

- ----------------------------------------
Robert G. Gallager
3 Hawthorne Lane
Gloucester, MA 01930

/s/ Barry Ross
- ----------------------------------------
Barry Ross
33 Ash Street
Weston, MA 02193

- ----------------------------------------
Anthony S. Acampora
6473 Avenida Cresta
La Jolla, CA 92037

/s/ Howard Anderson
- ----------------------------------------
Howard Anderson
65 Commonwealth Avenue
Boston, MA 02166

/s/ Carol Anderson
- ----------------------------------------
Carol Anderson
65 Commonwealth Avenue
Boston, MA 02166

Telinnovation General Partnership
c/o Charles Davis
415 Clyde Avenue
Mountain View, CA 94043

By: [ILLEGIBLE]
------------------------------
Title: General Partner

By: /s/ David Shvarts
-------------------------------
Name: David Shvarts
Title: GP

/s/ Harris Fishman
- ----------------------------------------
Harris Fishman
271 Canton Street
Stoughton, MA 02072

<PAGE>

S-5

/s/ Frank Winiarski
- ----------------------------------------
Frank Winiarski
c/o Sonus Networks
5 Carlisle Road
Westford, MA 01886

/s/ Sheryl R. Schultz
- ----------------------------------------
Sheryl R. Schultz
220 N. Main Street
Suite 102
Natick, MA 01760

<PAGE>

SONUS NETWORKS, INC.

SERIES C PREFERRED STOCK
PURCHASE AGREEMENT

September 10, 1999
<PAGE>

SONUS NETWORKS, INC.

SERIES C PREFERRED STOCK
PURCHASE AGREEMENT

Table of Contents

Page
----

1. Authorization and Sale of Shares............................... 1
1.1 Authorization............................................ 1
1.2 Sale of Shares........................................... 1
1.3 Use of Proceeds.......................................... 1

2. The Closing.................................................... 1

3. Representations of the Company................................. 3
3.1 Organization and Standing................................ 3
3.2 Capitalization........................................... 3
3.3 Subsidiaries, Etc........................................ 4
3.4 Issuance of Shares; Agreements........................... 4
3.5 Authority for Agreement.................................. 4
3.6 Governmental Consents.................................... 5
3.7 Litigation............................................... 5
3.8 Financial Statements..................................... 5
3.9 Absence of Certain Changes............................... 6
3.10 Taxes.................................................... 6
3.11 Title to Properties...................................... 6
3.12 Leasehold Interests...................................... 7
3.13 Intellectual Property.................................... 7
3.14 Material Contracts and Obligations....................... 8
3.15 Compliance............................................... 9
3.16 Employees................................................ 9
3.17 ERISA.................................................... 9
3.18 Books and Records........................................ 10
3.19 U.S. Real Property Holding Corporation................... 10
3.20 Disclosures.............................................. 10
3.21 Year 2000 Compatibility.................................. 10

4. Representations of the Purchasers.............................. 11
4.1 Investment............................................... 11
4.2 Authority................................................ 11
4.3 Experience............................................... 11
4.4 Status................................................... 12
<PAGE>

5. Covenants of the Company....................................... 12
5.1 Inspection............................................... 12
5.2 Financial Statements and Other Information............... 12
5.3 Material Changes and Litigation.......................... 13
5.4 Insurance................................................ 14
5.5 Employee Agreements...................................... 14
5.6 Related Party Transactions............................... 14
5.7 Reservation of Common Stock.............................. 14
5.8 Board of Directors....................................... 14
5.9 Termination of Covenants................................. 14
5.10 Qualified Small Business Stock........................... 15

6. Transfer of Shares............................................. 15
6.1 Restricted Shares........................................ 15
6.2 Requirements for Transfer................................ 15
6.3 Legend................................................... 15
6.4 Rule 144A Information.................................... 16

7. Miscellaneous.................................................. 16
7.1 Successors and Assigns................................... 16
7.2 Confidentiality.......................................... 16
7.3 Survival of Representations and Warranties............... 17
7.4 Expenses................................................. 17
7.5 Notices.................................................. 17
7.6 Brokers.................................................. 17
7.7 Entire Agreement......................................... 18
7.8 Amendments and Waivers................................... 18
7.9 Counterparts............................................. 18
7.10 Section Headings......................................... 18
7.11 Severability............................................. 18
7.12 Governing Law............................................ 18

Schedule I
Disclosure Schedule

Exhibit A Form of Restated Certificate
Exhibit B Form of Opinion of Bingham Dana LLP
Exhibit C Form of Investor Agreement
Exhibit D Form of Right of First Refusal Agreement
Exhibit E Form of Stock Repurchase Agreement
Exhibit F Form of Noncompetition and Confidentiality Agreement
Exhibit G Form of Confidentiality Agreement
<PAGE>

SERIES C PREFERRED STOCK PURCHASE AGREEMENT

This Series C Preferred Stock Purchase Agreement (this "Agreement"), dated
as of September 10, 1999, is entered into by and among Sonus Networks, Inc., a
Delaware corporation (the "Company"), and the persons and entities listed on
Schedule I attached hereto (individually, a "Purchaser" and, collectively, the
"Purchasers").

In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:

1. Authorization and Sale of Shares.

1.1 Authorization. The Company has duly authorized the sale and
issuance, pursuant to the terms of this Agreement, of 2,153,072 shares of its
Series C Convertible Preferred Stock, $0.01 par value per share (the "Series C
Preferred Stock"), having the rights, restrictions, privileges and preferences
set forth in the Second Amended and Restated Certificate of Incorporation of the
Company attached hereto as Exhibit A (the "Restated Certificate"). The Company
has adopted and filed the Restated Certificate with the Secretary of State of
the State of Delaware.

1.2 Sale of Shares. Subject to the terms and conditions of this
Agreement the Company will issue and sell to each Purchaser, and each Purchaser
will purchase, for a purchase price of $11.81 per share, such number of shares
of Series C Preferred Stock as is set forth opposite such Purchaser's name on
Schedule I attached hereto. The shares of Series C Preferred Stock being sold
under this Agreement are referred to as the "Shares." The Company's agreement
with each of the Purchasers is a separate agreement, and the sale of Shares to
each of the Purchasers is a separate sale.

1.3 Use of Proceeds. The Company will use the proceeds from the sale
of the Shares for working capital purposes, the purchase of fixed assets, the
acquisition of other businesses and/or technologies and the repayment of certain
indebtedness.

2. The Closing. (a) The closing (the "Closing") of the sale and purchase
of the Shares under this Agreement shall take place at the offices of Bingham
Dana LLP, 150 Federal Street, Boston, Massachusetts at 9:00 a.m. on the date of
this Agreement, or at such other time, date and place as are mutually agreeable
to the Company and the Purchasers. The date of the Closing is hereinafter
referred to as the "Closing Date."

(b) At the Closing:
<PAGE>
-2-

(i) the Company shall deliver to the Purchasers a certificate,
as of the most recent practicable date, as to the corporate good standing of the
Company issued by the Secretary of State of the State of Delaware;

(ii) the Company shall deliver to the Purchasers the Restated
Certificate of Incorporation, as in effect as of the Closing Date, certified by
the Secretary of State of the State of Delaware;

(iii) the Company shall deliver to the Purchasers a
Certificate of the Secretary of the Company attesting to (i) the By-laws of the
Company, and (ii) resolutions of the Board of Directors of the Company
authorizing and approving all matters in connection with this Agreement and the
transactions contemplated hereby;

(iv) Bingham Dana LLP, counsel for the Company, shall deliver
to the Purchasers an opinion, dated the Closing Date, in the form attached
hereto as Exhibit B;

(v) the Company and the Purchasers shall execute and deliver
the Second Amended and Restated Investor Rights Agreement in the form attached
hereto as Exhibit C (the "Investor Agreement");

(vi) the Company, the Purchasers and the other parties thereto
shall execute and deliver the Second Amended and Restated Right of First Refusal
and Co-Sale Agreement in the form attached hereto as Exhibit D (the "Right of
First Refusal Agreement");

(vii) the Company shall deliver to each Purchaser a
certificate for the number of Shares being purchased by such Purchaser,
registered in the name of such Purchaser;

(viii) each Purchaser shall pay to the Company the purchase
price for the Shares being purchased by such Purchaser, by wire transfer or
certified check; and

(ix) the Company and each of the Purchasers shall execute and
deliver a cross-receipt.

(c) The Company will have the right, for a period of 90 days
following the Closing Date, to issue and sell to one or more persons, as
approved by the Company's Board of Directors, up to 423,370 additional shares of
Series C Preferred Stock on the same terms and conditions as set forth in this
Agreement. Such issuance and sale will be effected, if at all, by the execution
and delivery by the purchaser of such shares of an Instrument of Adherence to
this Agreement, the Investor Agreement, and the Right of First Refusal
Agreement, respectively, which will have the effect of amending this
<PAGE>
-3-

Agreement to add such purchaser as an additional "Purchaser" party hereto,
amending the Investor Agreement to add such purchaser as an additional "New
Purchaser" party thereto, and amending the Right of First Refusal Agreement to
add such purchaser as an additional "New Purchaser" party thereto, and such
amendments and the issuance and sale of such additional shares will for all
purposes be deemed to have occurred as of the Closing Date.

3.2 Capitalization. The authorized capital stock of the Company
(immediately prior to the Closing) consists of (a) 15,000,000 shares of
preferred stock, $0.01 par value per share (of which 7,220,000 shares have been
designated as Series A Convertible Preferred Stock (the "Series A Preferred
Stock"), 3,247,857 shares have been designated as Series B Convertible Preferred
Stock (the "Series B Preferred Stock"), and 2,153,072 shares have been
designated as Series C Convertible Preferred Stock), of which 7,180,000 shares
of Series A Preferred Stock, 3,204,287 shares of Series B Preferred Stock, and
no shares of Series C Preferred Stock are issued or outstanding and (b)
25,000,000 shares of common stock, $0.001 par value per share (the "Common
Stock"), of which (i) 3,317,093 shares are issued and outstanding other than
those under the Company's Amended and Restated 1997 Stock Incentive Plan (the
"Plan"), (ii) 5,250,000 shares had been reserved for issuance pursuant to the
Plan, of which the Company has issued or committed to issue not more than an
aggregate of 5,479,800 shares (which issuances will require an amendment
increasing the number of shares issuable under the Plan) in the form of
restricted shares of Common Stock or stock options exercised or exercisable for
shares of Common Stock pursuant to the terms of
<PAGE>
-4-

such Plan, and (iii) 12,584,707 shares have been reserved for issuance upon the
conversion of the Shares, shares of Series A Preferred Stock and shares of
Series B Preferred Stock. At the Closing, the Common Stock, the Series A
Preferred Stock, the Series B Preferred Stock, and the Series C Preferred Stock
will have the voting powers, designations, preferences, rights and
qualifications, and limitations or restrictions set forth in the Restated
Certificate. All of the issued and outstanding shares of Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable. Except
for the Series A Preferred Stock or Series B Preferred Stock or as set forth in
Section 3.2 of the Disclosure Schedule or as contemplated by this Agreement, (i)
no subscription, warrant, option, convertible security or other right
(contingent or otherwise) to purchase or acquire any shares of capital stock of
the Company is authorized or outstanding, (ii) the Company has no obligation
(contingent or otherwise) to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidences of indebtedness or assets of the
Company, and (iii) the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. All of the issued and outstanding shares of capital stock of
the Company have been offered, issued and sold by the Company in compliance in
all material respects with applicable Federal and state securities laws.

Agreements"), and the consummation by the Company of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action. This Agreement and the Ancillary Agreements have been, or as
of the Closing will have been, duly executed and delivered by the Company and
constitute, or as of the Closing will constitute, valid and binding obligations
of the Company enforceable in accordance with their respective terms. Except as
set forth in Section 3.5 of the Disclosure Schedule, the execution of and
performance of the transactions contemplated by this Agreement and the Ancillary
Agreements and compliance with their provisions by the Company will not violate
any provision of applicable law and will not conflict with or result in any
breach of any of the terms, conditions or provisions of, or constitute a default
under, or require a consent or waiver under, its Restated Certificate or By-laws
(each as amended to date) or any material indenture, lease, agreement or other
instrument to which the Company is a party or by which it or any of its
properties is bound, or any decree, judgment, order, statute, rule or regulation
applicable to the Company which would have a material adverse effect on the
business, properties or results of operations of the Company (a "Material
Adverse Effect").

3.6 Governmental Consents. Except as set forth in Section 3.6 of the
Disclosure Schedule, no consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
governmental authority is required on the part of the Company in connection with
the execution and delivery of this Agreement, the offer, issuance, sale and
delivery of the Shares, or the other transactions to be consummated at the
Closing, as contemplated by this Agreement, other than such filings as shall
have been made prior to and shall be effective on and as of the Closing. Based
on the representations made by the Purchasers in Section 4 of this Agreement,
the offer and sale of the Shares to the Purchasers will be exempt from the
registration requirements of applicable Federal and state securities laws.

3.8 Financial Statements. The Company has delivered to the
Purchasers copies of (i) its audited balance sheet as of December 31, 1998, and
the related audited statements of operations, stockholders' equity, and cash
flows for the fiscal year then ended and the period from inception (August 7,
1997) to December 31, 1998, as audited by Arthur Andersen LLP, together with the
report of Arthur Andersen
<PAGE>
-6-

LLP thereon, and (ii) its unaudited balance sheet as of June 30, 1999 (the "Most
Recent Balance Sheet"), and the related unaudited statements of operations,
stockholders' equity, and cash flows for the six (6) month period then ended and
the period from inception (August 7, 1997) to June 30, 1999 (the "Interim
Financials"). Each of such balance sheets fairly presents, in all material
respects, the financial condition of the Company as of its respective date, and
each of such statements of operations, stockholders' equity, and cash flows
fairly presents, in all material respects, the results of operations,
stockholders' equity, or cash flows, as the case may be, of the Company for the
period covered thereby; in each case in accordance with generally accepted
accounting principles, subject, in the case of Interim Financials, to the
absence of footnotes and normal year-end adjustments.

3.10 Taxes. The Company has filed all tax returns required to be
filed by it on or prior to the date hereof, each such tax return has been
prepared in compliance with all applicable laws and regulations, and, to the
best of the Company's knowledge, all such tax returns are true and accurate in
all material respects. All taxes due and payable by the Company with respect to
any periods ending on or before the Closing Date have been paid. No claim has
ever been made by a taxing authority in a jurisdiction where the Company does
not pay tax or file tax returns that the Company is or may be subject to taxes
assessed by such jurisdiction. There are no liens for taxes (other than current
taxes not yet due and payable) on the assets of the Company. No action, suit,
taxing authority proceeding, or audit with respect to any tax is pending or, to
the best of the Company's knowledge, threatened, against or with respect to the
Company. No deficiency or proposed adjustment in respect of taxes that has not
been settled or otherwise resolved has been asserted or assessed by any taxing
authority against the Company. The Company has withheld and paid all taxes
required to have been withheld and paid by it in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other person.
Neither the Company nor any of its stockholders has ever filed (a) an election
pursuant to Section 1362 of the Internal Revenue Code of 1986, as amended (the
"Code"), that the Company be taxed as an S Corporation, or (b) consent pursuant
to Section 341(f) of the Code relating to collapsible corporations.

or current taxes not yet due and payable and minor imperfections of title, if
any, not material in nature or amount and not materially detracting from the
value or impairing the use of the property subject thereto or impairing the
ability or operations of the Company, including without limitation, the ability
of the Company to secure financing using such properties and assets as
collateral. To the best of the Company's knowledge, there are no condemnation,
environmental, zoning or other land use regulation proceedings, either
instituted or planned to be instituted, which would adversely affect the use or
operation of the Company's properties and assets for their intended uses and
purposes, or the value of such properties, and the Company has not received
notice of any special assessment proceedings which would affect such properties
and assets.

3.13 Intellectual Property.

conduct of the business of the Company, will conflict with or result in a breach
of the terms, conditions or provisions of or constitute a default under any
contract, covenant or instrument under which any such person is obligated which
would have a Material Adverse Effect.

(b) Set forth in Section 3.13(b) of the Disclosure Schedule is
a list of all domestic and foreign patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service mark applications,
trade names and copyrights, and all applications for such which are currently in
the process of being prepared, owned by or registered in the name of the
Company, or of which the Company is a licensor or licensee or in which the
Company has any right, and in each case a brief description of the nature of
such right. Except as set forth in Section 3.13(b) of the Disclosure Schedule,
the Company owns or possesses adequate licenses or other rights to use all
patents, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names, copyrights, manufacturing processes,
formulae, trade secrets, customer lists and know-how (collectively,
"Intellectual Property") necessary for the conduct of its business as conducted
and as proposed to be conducted. Except as otherwise provided in Section 3.13(b)
of the Disclosure Schedule, no claim is pending or, to the best of the Company's
knowledge, threatened to the effect that the operations of the Company infringe
upon or conflict with the asserted rights of any other person under any
Intellectual Property, and, to the best of the Company's knowledge, there is no
basis for any such claim (whether or not pending or threatened). No claim is
pending or, to the best of the knowledge of the Company, threatened to the
effect that any such Intellectual Property owned or licensed by the Company, or
which the Company otherwise has the right to use, is invalid or unenforceable by
the Company, and, to the best of the Company's knowledge, there is no basis for
any such claim (whether or not pending or threatened). To the best of the
Company's knowledge, all technical information developed by and belonging to the
Company which has not been patented has been kept confidential. Except as set
forth in Section 3.13(b) of the Disclosure Schedule, the Company has not granted
or assigned to any other person or entity any right to manufacture, have
manufactured, assemble or sell the products or proposed products or to provide
the services or proposed services of the Company.

3.14 Material Contracts and Obligations. Except as contemplated by
this Agreement or as listed in Section 3.14 of the Disclosure Schedule, the
Company is not a party to any material agreement or commitment of any nature,
including without limitation (a) any agreement which requires future
expenditures by the Company in excess of $100,000, (b) any employment or
consulting agreement, employee benefit, bonus, pension, profit-sharing, stock
option, stock purchase or similar plan or arrangement, or distributor or sales
representative agreement, (c) any agreement with any stockholder, officer or
director of the Company, or any "affiliate" or "associate" of such persons (as
such terms are defined in the rules and regulations promulgated under the
Securities Act, including without limitation any agreement or other arrangement
providing for the furnishing of services by, rental of real or personal property
from, or
<PAGE>
-9-

otherwise requiring payments to, any such person or entity or (d) any agreement
relating to the intellectual property rights of the Company.

3.15 Compliance. The Company has, to its knowledge, in all material
respects, complied with all laws, regulations and orders applicable to its
present and proposed business and has all material permits and governmental
licenses required thereby. There is no term or provision of any mortgage,
indenture, contract, agreement or instrument to which the Company is a party or
by which it is bound, or, to the best of the Company's knowledge, of any
provision of any state or Federal judgment, decree, order, statute, rule or
regulation applicable to or binding upon the Company, which materially adversely
affects or, so far as the Company may now foresee, in the future is reasonably
likely to materially adversely affect, the business, assets or condition,
financial or otherwise, of the Company. To the best of the Company's knowledge,
no employee of the Company is in violation of any term of any contract or
covenant (either with the Company or with another entity) relating to
employment, patents, proprietary information disclosure, non-competition or
non-solicitation.

3.16 Employees.

(a) Each holder of Common Stock has executed and delivered to
the Company a Stock Repurchase Agreement in substantially the form attached
hereto as Exhibit E, and all of such agreements are in full force and effect.

(b) Each employee of the Company has executed and delivered to
the Company a Noncompetition and Confidentiality Agreement covering a period of
one year following the termination of such employee's employment with the
Company, in substantially the form attached hereto as Exhibit F, and all of such
agreements are in full force and effect.

3.17 ERISA.

(a) Except as set forth on Schedule 3.17 hereto, the Company
does not maintain and has no obligation to make contributions to, any employee
benefit plan (an "ERISA Plan") within the meaning of Section 3(3) of the United
States Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
any other retirement, profit sharing, stock option, stock bonus or employee
benefit plan (a "Non-ERISA Plan"). The Company has heretofore delivered to the
Purchasers true, correct and complete copies of each ERISA Plan and each
Non-ERISA Plan. All such ERISA Plans and Non-ERISA Plans have been maintained
and operated in all material respects in
<PAGE>
-10-

accordance with all federal, state and local laws applicable to such plans, and
the terms and conditions of the respective plan documents, except where the
failure to so maintain or operate such ERISA Plans and Non-ERISA Plans would not
have a Material Adverse Effect.

(b) No material liability to the United States Pension Benefit
Guaranty Corporation ("PBGC"), or to any multi-employer pension plan within the
meaning of section 3(35) of ERISA, or to any other governmental authority,
pension or retirement board, or other agency, under any federal, state or local
law, has been or is expected to be incurred by the Company with respect to any
ERISA or Non-ERISA Plan. There has been no "reportable event" within the meaning
of Section 4043(b) of ERISA with respect to any ERISA Plan, and no event or
condition that presents a material risk of termination of any ERISA Plan by the
PBGC.

(c) Full payment has been made of all material amounts that
the Company is required under the terms of each ERISA Plan and Non-ERISA Plan,
or pursuant to applicable federal, state or local law, to have paid as
contributions to such ERISA Plan or Non-ERISA Plan as of the last day of the
most recent fiscal year of such ERISA Plan or Non-ERISA Plan ended prior to the
date hereof, and no accumulated funding deficiency (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, exists with respect
to any ERISA Plan.

3.18 Books and Records. The minute books of the Company contain
records of all meetings and other corporate actions of its stockholders and its
Board of Directors and committees thereof, which are complete and accurate in
all material respects. The stock ledger of the Company is complete and reflects
all issuances, transfers, repurchases and cancellations of shares of capital
stock of the Company.

3.21 Year 2000 Compatibility. To the best of the Company's
knowledge, all of the Company's material products (including products currently
under development), if applicable, will record, store, process and calculate and
present calendar dates falling on and after January 1, 2000, and will calculate
any information dependent
<PAGE>
-11-

on or relating to such dates in substantially the same manner and with
substantially the same functionality, data integrity and performance as the
products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such date (collectively "Year 2000 Compliant"). To the best of the Company's
knowledge, all of the Company's material products will lose no material
functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000. To the best of the Company's knowledge, all
of the Company's internal computer systems, including without limitation, its
accounting systems, are Year 2000 Compliant.

4. Representations of the Purchasers. Each Purchaser represents and
warrants to the Company as follows:

investing in companies similar to the Company so as to be able to evaluate the
risks and merits of its investment in the Company and is able financially to
bear the risks thereof, including a complete loss of its investment. Such
Purchaser understands that an investment in the Company involves a high degree
of risk in view of the fact that the Company is a start-up enterprise with
minimal operating history, and there may never be an established market for the
Company's capital stock.

4.4 Status. Such Purchaser is an "accredited investor" as that term
is defined in Rule 501 of Regulation D promulgated under the Securities Act.
Such Purchaser represents that its investment in Series C Preferred Stock will
not violate any existing policy of its employer and that it has the authority to
make such an investment.

5. Covenants of the Company.

5.1 Inspection. The Company shall permit each Purchaser (together
with any of its affiliates) holding not less than 107,653 shares of Series C
Stock at the relevant time (as adjusted for stock splits, stock dividends,
recapitalizations and similar events), or any authorized representative thereof,
to visit and inspect the properties of the Company, including its corporate and
financial records, and to discuss its business and finances with officers of the
Company, during normal business hours following reasonable notice and as often
as may be reasonably requested, without interruption of the business of the
Company and subject to the confidentiality obligations of Section 7.2 hereof.

5.2 Financial Statements and Other Information.

(a) So long as a Purchaser (together with any of its
affiliates) holds at least 107,653 shares of Series C Preferred Stock (as
adjusted for stock splits, stock dividends, recapitalizations and similar
events), the Company shall deliver to such Purchaser:

(b) So long as a Purchaser (together with any of its
affiliates) holds at least 107,653 shares of Series C Preferred Stock (as
adjusted for stock splits, stock dividends, recapitalizations and similar
events), the Company shall deliver to such Purchaser:

(ii) as soon as available, but in any event within 30
days after commencement of each new fiscal year, a budget, consisting of
projected financial statements for such fiscal year; and

(c) The foregoing financial statements shall be prepared on a
consolidated basis if the Company then has any subsidiaries. The financial
statements delivered pursuant to clause (ii) of paragraph (a) and clause (i) of
paragraph (b) shall be accompanied by a certificate of the chief financial
officer of the Company stating that such statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as noted) and fairly present, in all material respects, the financial
condition and results of operations of the Company at the date thereof and for
the periods covered thereby (subject, in the case of any such unaudited
financial statements to the absence of footnotes and to year-end adjustments).

5.3 Material Changes and Litigation. The Company shall promptly
notify the Purchasers of any material adverse change in the business, assets or
condition, financial or otherwise, of the Company and of any litigation or
governmental proceeding or investigation brought or, to the best of the
Company's knowledge, threatened against the Company, or against Hassan Ahmed,
Rubin Gruber, Michael G. Hluchyj or Kwok P. Wong (the "Founders") or any
officer, director, key employee or principal stockholder of the Company
materially adversely affecting or which, if adversely determined, would
materially adversely affect the Company's business, prospects, assets or
condition, financial or otherwise.
<PAGE>
-14-

5.4 Insurance.

5.5 Employee Agreements. The Company shall require all employees
hereafter employed or engaged by the Company who are at or above the director
level or other key employees to enter into a Noncompetition and Confidentiality
Agreement covering a period of one year following the termination of such
employee's employment with the Company, substantially in the form attached
hereto as Exhibit F or in such other form as may be approved by the Board of
Directors. The Company shall require all employees not covered by the foregoing
sentence to enter into a Confidentiality Agreement substantially in the form
attached hereto as Exhibit G or in such other form as may be approved by the
Board of Directors.

5.7 Reservation of Common Stock. The Company shall reserve and
maintain a sufficient number of shares of Common Stock for issuance upon
conversion of all of the outstanding Shares.

5.8 Termination of Covenants. The covenants of the Company contained
in Sections 5.1 through 5.7 shall terminate, and be of no further force or
effect, upon the closing of the Company's first offering of Common Stock to the
public, resulting in net proceeds to the Company of at least $10,000,000, and at
a price per share of at least $20.00 (as adjusted for stock splits, stock
dividends, recapitalizations and similar events) or, at such time as the
Purchasers (together with any affiliated entities to whom Shares have been
transferred) own less than an aggregate of 107,653 shares of
<PAGE>
-15-

Series C Preferred Stock (as adjusted for stock splits, stock dividends,
recapitalizations and similar events).

5.9 Qualified Small Business Stock. The Company shall submit to its
stockholders (including the Purchasers) and to the Internal Revenue Service any
reports that may be required under Section 1202(d)(1)(C) of the Code and the
Regulations promulgated thereunder. In addition, within ten days after a
Purchaser's written request therefor, the Company shall deliver to such
Purchaser a written statement indicating whether such Purchaser's interest in
the Company constitutes "qualified small business stock" as defined in Section
1202(c) of the Code.

6. Transfer of Shares.

6.2 Requirements for Transfer.

(b) Notwithstanding the foregoing, no registration or opinion
of counsel shall be required for (i) a transfer by a Purchaser which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner, if the transferee agrees in writing to be subject to
the terms of this Section 6 to the same extent as if he were an original
Purchaser hereunder, or (ii) a transfer made in accordance with Rule 144 under
the Securities Act.

6.3 Legend. Each certificate representing Restricted Shares shall
bear a legend substantially in the following form:
<PAGE>
-16-

7. Miscellaneous.

7.1 Successors and Assigns. This Agreement, and the rights and
obligations of each Purchaser hereunder, may be assigned by such Purchaser to
any person or entity to which at least 107,653 Shares, as adjusted for stock
splits, stock dividends, recapitalizations and similar events (or 100% of the
Shares originally purchased hereunder by such Purchaser, if less than 107,653
Shares), are transferred by such Purchaser, and such transferee shall be deemed
a "Purchaser" for purposes of this Agreement; provided that the transferee
provides written notice of such assignment to the Company and agrees to be bound
by the terms and conditions set forth herein.

disclose such information (i) to its attorneys, accountants, consultants, and
other professionals to the extent necessary to obtain their services in
connection with its investment in the Company, (ii) to any prospective purchaser
of any Shares from such Purchaser as long as such prospective purchaser agrees
in writing to be bound by the provisions of this Section, or (iii) to any
affiliate of such Purchaser or to a partner, shareholder or subsidiary of such
Purchaser; subject to the agreement of such party to keep such information
confidential as set forth herein. Each Purchaser agrees that it will not make,
issue or release any public announcement, public statement or public
acknowledgement of the dollar amount of any Purchaser's investment in Series C
Preferred Stock, or who served as the lead investor in the Series C Preferred
Stock financing.

7.4 Expenses. The Company shall pay, at the Closing, the reasonable
costs and expenses of Gibson, Dunn & Crutcher LLP, counsel to the Purchasers,
not to exceed $15,000 in the aggregate, in connection with the preparation of
this Agreement and the other agreements and documents contemplated hereby and
the closing of the transactions contemplated hereby.

If to a Purchaser, at its address as set forth on Schedule I attached
hereto, or at such other address or addresses as may have been furnished to the
Company in writing by such Purchaser, with a copy to Gibson, Dunn & Crutcher
LLP, Attn: William L. Hudson.

and save the other parties harmless from and against any and all claims,
liabilities or obligations with respect to brokerage or finders' fees or
commissions in connection with the transactions contemplated by this Agreement
asserted by any person on the basis of any agreement, statement or
representation alleged to have been made by such indemnifying party.

7.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.

7.10 Section Headings. The section headings are for the convenience
of the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.

7.11 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.

7.12 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.

[remainder of page intentionally left blank]
<PAGE>

Executed as an instrument under seal as of the date first written above.

COMPANY:

SONUS NETWORKS, INC.

By: /s/ Hassan Ahmed
---------------------------------
Hassan Ahmed
President

PURCHASERS:

Frontier Internet Ventures, Inc.
1154 East Arques Avenue
Sunnyvale, CA 94086

By: /s/ Jonathan Heiliger
---------------------------------
Name: Jonathan Heiliger
Title: Senior Vice President

Nissho Iwai American Corporation Nissho Electronics Corporation
1211 Avenue of the Americas 3-1, Tsukiji 7-Chome, Chou-ku
New York, NY 10036 Tokyo, 104-8444 Japan

By: /s/ S. Kanaratani By: /s/ A. Kato
--------------------------------- -----------------------------
Name: S. Gene Kanaratani Name: A. Kato
Title: General Manager Title: Senior Managing
Director
Castile Ventures
1050 Winter Street, Suite 1000
Waltham, MA 02451

By: /s/ Nina F. Saberi
---------------------------------
Name: Nina F. Saberi
Title: General Partner

Korea Technology Banking Corp. Venture Capital
720 University Avenue, Suite 100
Palo Alto, CA 94301

By: /s/ J.W. Kim
---------------------------------
Name: Jong-Wook Kim
Title: Senior Vice President
<PAGE>

North Bridge Venture North Bridge Venture
Partners II, L.P. Partners III, L.P.
950 Winter Street, Suite 4600 950 Winter Street, Suite 4600
Waltham, MA 02451 Waltham, MA 02451

By: North Bridge Venture By: North Bridge Venture
Management II, L.P., Management III, L.P.,
its General Partner its General Partner

By: /s/ Edward T. Anderson By: /s/ Edward T. Anderson
----------------------- -----------------------
Edward T. Anderson Name: Edward T. Anderson
General Partner Title: General Partner

Matrix Partners V, L.P. Matrix V Entrepreneurs Fund, L.P.
Bay Colony Corporate Center Bay Colony Corporate Center
1000 Winter Street, Suite 4500 1000 Winter Street, Suite 4500
Waltham, MA 02154 Waltham, MA 02154

By: Matrix V Management Co., LLC, By: Matrix V Management Co., LLC,
its General Partner its General Partner

By: /s/ Paul J. Ferri By: /s/ Paul J. Ferri
----------------------- -----------------------
Name: Name:
Title: Title:

Charles River Partnership VIII, Charles River VIII-A LLC
A Limited Partnership 1000 Winter Street, Suite 3300
1000 Winter Street, Suite 3300 Waltham, MA 02154
Waltham, MA 02154

By: Charles River VIII GP Limited By: Charles River Friends VII,
Partnership, its General Partner Inc., its Manager

By: /s/ Richard M. Burnes By: /s/ Richard M. Burnes
----------------------- -----------------------
Richard M. Burnes Name:
General Partner Title:

Bessemer Venture Partners IV L.P.
Suite 407
1400 Old Country Road
Westbury, NY 11590

By: Deer IV & Co. LLC, General Partner

By: /s/ Robert H. Buescher
--------------------------------
Name: Robert H. Buescher
Title: Manager
<PAGE>

Bessec Ventures IV L.P.
c/o Bessemer Venture Partners
1400 Old Country Road
Suite 407
Westbury, NY 11590

By: Deer IV & Co. LLC, its General Partner

By: /s/ Robert H. Buescher
--------------------------------
Name: Robert H. Buescher
Title: Manager

Bedrock Capital Partners I, L.P.
c/o Volpe Brown Whelan & Company LLC
One Boston Place
Suite 3310
Boston, MA 02108

By: Bedrock General Partner I, LLC, General Partner

By: /s/ Paul W. Brown
--------------------------------
Name: Paul W. Brown
Title: Managing Member

VBW Employee Bedrock Fund, L.P.
c/o Volpe Brown Whelan & Company LLC
One Boston Place
Suite 3310
Boston, MA 02108

By: Bedrock General Partner I, LLC, General Partner

By: /s/ Paul W. Brown
--------------------------------
Name: Paul W. Brown
Title: Managing Member

Credit Suisse First Boston Bedrock Fund, L.P.
c/o Volpe Brown Whelan & Company LLC
Suite 3310
One Boston Street
Boston, MA 02108

By: Bedrock General Partner I, L.P.
Title: Attorney-in-Fact

By: /s/ Paul W. Brown
--------------------------------
Name: Paul W. Brown
Title: Managing Member
<PAGE>

/s/ Thomas S. Volpe
---------------------------------------
Thomas S. Volpe
c/o Volpe Brown Whelan & Company LLC
One Maritime Plaza
5th Floor
San Francisco, CA 94111

/s/ James A. Dolce
---------------------------------------
James Dolce
9 Stonegate Road
Hopkinton, MA 01748

---------------------------------------
Derek James
960 Crescent Beach Road
Vero Beach, FL 32963

/s/ David Engel
---------------------------------------
David L. Engel
45 Juniper Road
Belmont, MA 02178

/s/ David Rokoff
---------------------------------------
David Rokoff
30 Greylock Road
Wellesley, MA 02181

/s/ Robert G. Gallager
---------------------------------------
Robert G. Gallager
3 Hawthorne Lane
Gloucester, MA 01930

/s/ Barry Ross
---------------------------------------
Barry Ross
33 Ash Street
Weston, MA 02193

/s/ Howard Anderson
---------------------------------------
Howard Anderson
65 Commonwealth Avenue
Boston, MA 02166
<PAGE>
/s/ Carol Anderson
---------------------------------------
Carol Anderson
65 Commonwealth Avenue
Boston, MA 02166

Telinnovation General Partnership
c/o Charles Davis
415 Clyde Avenue
Mountain View, CA 94043

By: /s/ Charles E. Dave, its
--------------------
General Partner

By: Charles E. Dave
--------------------------
Name:
Title: General Partner

/s/ Frank Winiarski
---------------------------------------
Frank Winiarski
c/o Sonus Networks
5 Carlisle Road
Westford, MA 01886

/s/ Sheryl Schultz
---------------------------------------
Sheryl R. Schultz
220 N. Main Street
Suite 102
Natick, MA 01760

/s/ Paul Johnson
---------------------------------------
Paul Johnson
1112 Park Avenue
Apartment 14B
New York, NY 10128-1235

/s/ Paul Severino
---------------------------------------
Paul Severino
680 Strawberry Hill Road
Concord, MA 01742

---------------------------------------
Cheng Wu
3 Coburn Road
Hopkington, MA 01748
<PAGE>

/s/ Brian Hinman
---------------------------------------
Brian Hinman
37 Broadway
Los Gatos, CA 96030

/s/ Mark Pasculano
---------------------------------------
Mark Pasculano
44 Bridle Trail Road
Needham, MA 02492-1412

/s/ Jeff Pulver
---------------------------------------
Jeff Pulver
c/o Richard Stark
115 Broadhollow Road, Suite 225
Melville, NY 11747

/s/ Michael Walsh
---------------------------------------
Michael Walsh
115 Broadhollow Road, Suite 225
Melville, NY 11747

/s/ Steven Patterson
---------------------------------------
Steven Patterson
Techgenisis
84 Weston Avenue
Braintree, MA 02184

/s/ Stephen R. Bullerjahn
---------------------------------------
Rid Bullerjahn
39 Grantland Road
Wellesley, MA 02481

/s/ Jonathan Art
---------------------------------------
Jonathan Art
80 East End Ave.
New York, NY 10028

/s/ Frances M. Jewels
---------------------------------------
Frances Jewels
Sycamore Networks
10 Elizabeth Drive
Chelmsford, MA 01824
<PAGE>
/s/ Jules DeVigne
---------------------------------------
Jules DeVigne
3701 Clubland Drive
Marrietta, GA 30068

/s/ Ryker Young
---------------------------------------
Ryker Young
Sycamore Networks
10 Elizabeth Drive
Chelmsford, MA 01824

/s/ Daniel Smith
---------------------------------------
Daniel Smith
Sycamore Networks
10 Elizabeth Drive
Chelmsford, MA 01824

/s/ R.S. Cheheyl
---------------------------------------
R.S. Cheheyl
130 Lane's End
Concord, MA 01742
<PAGE>
/s/ Desh Deshpande
---------------------------------------
Desh Deshpande
Sycamore Networks
10 Elizabeth Drive
Chelmsford, MA 01824

/s/ Therese Melden
---------------------------------------
Therese Melden
7 Jackstraw Path
Westborough, MA 01581

/s/ Laurence M. Harding
---------------------------------------
Larry Harding
70 Pond Street
Natick, MA 01760

/s/ Paul W. Shaneck
---------------------------------------
Paul Shaneck
176 Quakertown Road
Quakertown, NJ 08868

/s/ Peter Koss
---------------------------------------
Peter Koss
Sonus Networks, Inc.
Carlisle Road
Westford, MA 01886

/s/ Robert Marzi
---------------------------------------
Robert Marzi
Sonus Networks, Inc.
Carlisle Road
Westford, MA 01886
<PAGE>
/s/ Gordon VanderBrug
--------------------------------------
Gordon VanderBrug
ibasis
22nd Avenue
Burlington, MA 01803

/s/ Ofer Gneezy
--------------------------------------
Ofer Gneezy
ibasis
22nd Avenue
Burlington, MA 01803

/s/ Lance B. Boxer
--------------------------------------
Lance Boxer
Lucent Technologies
184 Liberty Corner Road
Rm. 4WD-12C
Warren, NJ 07059

<PAGE>

Exhibit 10.7

SONUS NETWORKS, INC.

SERIES D PREFERRED STOCK
PURCHASE AGREEMENT

March 9, 2000

<PAGE>

SONUS NETWORKS, INC.

SERIES D PREFERRED STOCK
PURCHASE AGREEMENT

TABLE OF CONTENTS
-----------------

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Authorization and Sale of Shares............................................................ 1
1.1 Authorization...................................................................... 1
1.2 Sale of Shares..................................................................... 1
1.3 Use of Proceeds.................................................................... 1

2. The Closing................................................................................. 1

3. Representations of the Company.............................................................. 2
3.1 Organization and Standing.......................................................... 3
3.2 Capitalization..................................................................... 4
3.3 Subsidiaries, Etc.................................................................. 4
3.4 Issuance of Shares; Agreements..................................................... 4
3.5 Authority for Agreement............................................................ 4
3.6 Governmental Consents.............................................................. 5
3.7 Litigation......................................................................... 5
3.8 Financial Statements............................................................... 5
3.9 Absence of Certain Changes......................................................... 5
3.10 Taxes.............................................................................. 6
3.11 Title to Properties................................................................ 6
3.12 Leasehold Interests................................................................ 6
3.13 Intellectual Property.............................................................. 7
3.14 Material Contracts and Obligations................................................. 8
3.15 Compliance......................................................................... 8
3.16 Employees.......................................................................... 9
3.17 ERISA.............................................................................. 9
3.18 Books and Records..................................................................10
3.19 U.S. Real Property Holding Corporation.............................................10
3.20 Disclosures........................................................................10
3.21 Year 2000 Compatibility............................................................10

4. Representations of the Purchasers...........................................................11
4.1 Investment.........................................................................11
4.2 Authority..........................................................................11
4.3 Experience.........................................................................11
4.4 Status.............................................................................12

<PAGE>

5. Covenants of the Company....................................................................12
5.1 Inspection.........................................................................12
5.2 Financial Statements and Other Information.........................................12
5.3 Material Changes and Litigation....................................................13
5.4 Insurance..........................................................................13
5.5 Employee Agreements................................................................14
5.6 Related Party Transactions.........................................................14
5.7 Reservation of Common Stock........................................................14
5.8 Board of Directors.................................................................14
5.9 Termination of Covenants...........................................................14

6. Transfer of Shares..........................................................................15
6.1 Restricted Shares..................................................................15
6.2 Requirements for Transfer..........................................................15
6.3 Legend.............................................................................16
6.4 Rule 144A Information..............................................................16

7. Miscellaneous...............................................................................16
7.1 Successors and Assigns.............................................................16
7.2 Confidentiality....................................................................16
7.3 Survival of Representations and Warranties.........................................17
7.4 Expenses...........................................................................17
7.5 Notices............................................................................17
7.6 Brokers............................................................................17
7.7 Entire Agreement...................................................................17
7.8 Amendments and Waivers.............................................................18
7.9 Counterparts.......................................................................18
7.10 Section Headings...................................................................18
7.11 Severability.......................................................................18
7.12 Governing Law......................................................................18

Schedule I
Disclosure Schedule

Exhibit A Form of Restated Certificate
Exhibit B Form of Opinion of Bingham Dana LLP
Exhibit C Form of Investor Agreement
Exhibit D Form of Right of First Refusal Agreement
Exhibit E Form of Stock Repurchase Agreement
Exhibit F Form of Noncompetition and Confidentiality Agreement
</TABLE>

<PAGE>

SERIES D PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------

This Series D Preferred Stock Purchase Agreement (this "AGREEMENT"),
dated as of March 9, 2000, is entered into by and among Sonus Networks, Inc., a
Delaware corporation (the "COMPANY"), and the persons and entities listed on
SCHEDULE I attached hereto (individually, a "PURCHASER" and, collectively, the
"PURCHASERS").

In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:

1. AUTHORIZATION AND SALE OF SHARES.

1.1 AUTHORIZATION. The Company has duly authorized the sale
and issuance, pursuant to the terms of this Agreement, of up to 1,585,366 shares
of its Series D Convertible Preferred Stock, $0.01 par value per share (the
"SERIES D PREFERRED STOCK"), having the rights, restrictions, privileges and
preferences set forth in the Third Amended and Restated Certificate of
Incorporation of the Company attached hereto as EXHIBIT A (the "RESTATED
CERTIFICATE"). The Company has adopted and filed the Restated Certificate with
the Secretary of State of the State of Delaware.

1.2 SALE OF SHARES. Subject to the terms and conditions of
this Agreement the Company will issue and sell to each Purchaser, and each
Purchaser will purchase, for a purchase price of $16.40 per share, such number
of shares of Series D Preferred Stock as is set forth opposite such Purchaser's
name on SCHEDULE I attached hereto. The shares of Series D Preferred Stock being
sold under this Agreement are referred to as the "SHARES." The Company's
agreement with each of the Purchasers is a separate agreement, and the sale of
Shares to each of the Purchasers is a separate sale.

1.3 USE OF PROCEEDS. The Company will use the proceeds from
the sale of the Shares for working capital purposes, the purchase of fixed
assets, the acquisition of other businesses and/or technologies and the
repayment of certain indebtedness.

2. THE CLOSING. (a) The closing (the "CLOSING") of the sale and
purchase of the Shares under this Agreement shall take place at the offices of
Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts at 9:00 a.m. on the
date of this Agreement, or at such other time, date and place as are mutually
agreeable to the Company and the Purchasers. The date of the Closing is
hereinafter referred to as the "CLOSING DATE."

(b) At the Closing:

<PAGE>

-2-

(ii) the Company shall deliver to the Purchasers the Restated
Certificate of Incorporation, as in effect as of the Closing Date, certified by
the Secretary of State of the State of Delaware;

(iii) the Company shall deliver to the Purchasers a
Certificate of the Secretary of the Company attesting to (i) the By-laws of
the Company, and (ii) resolutions of the Board of Directors and the
stockholders of the Company authorizing and approving all matters in
connection with this Agreement and the transactions contemplated hereby;

(iv) Bingham Dana LLP, counsel for the Company, shall deliver to
the Purchasers an opinion, dated the Closing Date, in the form attached hereto
as EXHIBIT B;

(v) the Company and the Purchasers shall execute and deliver the
Third Amended and Restated Investor Rights Agreement in the form attached hereto
as EXHIBIT C (the "INVESTOR AGREEMENT");

(vi) the Company, the Purchasers and the other parties thereto
shall execute and deliver the Third Amended and Restated Right of First Refusal
and Co-Sale Agreement in the form attached hereto as EXHIBIT D (the "RIGHT OF
FIRST REFUSAL AGREEMENT");

(vii) the Company shall deliver to each Purchaser a copy of a
waiver of the pre-emptive rights of the holders of Series A, Series B and Series
C Preferred Stock;

(viii) the Company shall deliver to each Purchaser a certificate
for the number of Shares being purchased by such Purchaser, registered in the
name of such Purchaser;

(ix) each Purchaser shall pay to the Company the purchase price
for the Shares being purchased by such Purchaser, by wire transfer or certified
check; and

(x) the Company and each of the Purchasers shall execute and
deliver a cross-receipt.

3. REPRESENTATIONS OF THE COMPANY. The Company hereby represents and
warrants to the Purchasers as follows, subject in each case to such exceptions
as are

<PAGE>

-3-

specifically contemplated by this Agreement or as are set forth in the
Disclosure Schedule attached hereto (the "DISCLOSURE SCHEDULE"). Notwithstanding
any other provision of this Agreement or the Disclosure Schedule, each exception
set forth in the Disclosure Schedule will be deemed to qualify each
representation and warranty set forth in this Agreement that is specifically
identified (by cross-reference or otherwise) in the Disclosure Schedule as being
qualified by such exception.

3.1 ORGANIZATION AND STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to conduct its
business as presently conducted and as proposed to be conducted by it and to
enter into and perform this Agreement and to carry out the transactions
contemplated by this Agreement. The Company is duly qualified to do business as
a foreign corporation and is in good standing in the Commonwealth of
Massachusetts and in any other jurisdiction in which the failure to so qualify
would have a material adverse effect on the operations or financial condition of
the Company. The Company has furnished to special counsel to the Purchasers true
and complete copies of its Restated Certificate and By-laws, each as amended to
date and presently in effect.

3.2 CAPITALIZATION. The authorized capital stock of the Company
(immediately prior to the Closing) consists of (a) 17,000,000 shares of
preferred stock, $0.01 par value per share (of which 7,220,000 shares have been
designated as Series A Convertible Preferred Stock (the "SERIES A PREFERRED
STOCK"), 3,247,857 shares have been designated as Series B Convertible Preferred
Stock (the "SERIES B PREFERRED STOCK"), 2,153,072 shares have been designated as
Series C Convertible Preferred Stock (the "SERIES C PREFERRED STOCk"), and
1,585,366 have been designated as Series D Convertible Preferred Stock, of which
7,180,000 shares of Series A Preferred Stock, 3,204,287 shares of Series B
Preferred Stock, 1,939,681 shares of Series C Preferred Stock, and no shares of
Series D Preferred Stock are issued or outstanding and (b) 70,000,000 shares of
common stock, $0.001 par value per share (the "COMMON Stock"), of which (i)
8,292,731 shares are issued and outstanding other than those under the Company's
Amended and Restated 1997 Stock Incentive Plan (as amended, the "PLAN"), (ii)
16,250,000 shares have been reserved for issuance pursuant to the Plan, of which
the Company has issued or committed to issue not more than an aggregate of
15,759,922 shares in the form of restricted shares of Common Stock or stock
options exercised or exercisable for shares of Common Stock pursuant to the
terms of such Plan, and (iii) 30,809,920 shares have been reserved for issuance
upon the conversion of the Shares, shares of Series A Preferred Stock, shares of
Series B Preferred Stock, and shares of Series C Preferred Stock. At the
Closing, the Common Stock, the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock and the Series D Preferred Stock will have
the voting powers, designations, preferences, rights and qualifications, and
limitations or restrictions set forth in the Restated Certificate. All of the
issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. Except for the Series A
Preferred Stock, the Series B Preferred Stock or the Series C

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Preferred Stock or as set forth in Section 3.2 of the Disclosure Schedule or as
contemplated by this Agreement, (i) no subscription, warrant, option,
convertible security or other right (contingent or otherwise) to purchase or
acquire any shares of capital stock of the Company is authorized or outstanding,
(ii) the Company has no obligation (contingent or otherwise) to issue any
subscription, warrant, option, convertible security or other such right or to
issue or distribute to holders of any shares of its capital stock any evidences
of indebtedness or assets of the Company, and (iii) the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any shares of its capital stock or any interest therein or to pay any dividend
or make any other distribution in respect thereof. All of the issued and
outstanding shares of capital stock of the Company have been offered, issued and
sold by the Company in compliance in all material respects with applicable
Federal and state securities laws.

3.3 SUBSIDIARIES, ETC. Except as set forth in Section 3.3 of the
Disclosure Schedule, the Company has no subsidiaries and does not own or
control, directly or indirectly, any shares of capital stock of any other
corporation or any interest in any partnership, joint venture or other
non-corporate business enterprise.

3.4 ISSUANCE OF SHARES; AGREEMENTS. The issuance, sale and
delivery of the Shares in accordance with this Agreement, and the issuance and
delivery of the shares of Common Stock issuable upon conversion of the Shares,
have been duly authorized by all necessary corporate action on the part of the
Company, and all such shares have been duly reserved for issuance. The Shares
when so issued, sold and delivered against payment therefor in accordance with
the provisions of this Agreement, and the shares of Common Stock issuable upon
conversion of the Shares, when issued upon such conversion, will be duly and
validly issued, fully paid and non-assessable. Except as set forth in Section
3.4 of the Disclosure Schedule or as contemplated by this Agreement, there are
no agreements, written or oral, between the Company and any holder of its
capital stock, or, to the best of the Company's knowledge, among any holders of
its capital stock, relating to the acquisition (including without limitation
rights of first refusal or pre-emptive rights), disposition, registration under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), or voting of the
capital stock of the Company.

3.5 AUTHORITY FOR AGREEMENT. The execution, delivery and performance
by the Company of this Agreement and all other agreements required to be
executed by the Company at the Closing pursuant to Section 2 (the "ANCILLARY
AGREEMENTS"), and the consummation by the Company of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action. This Agreement and the Ancillary Agreements have been, or as
of the Closing will have been, duly executed and delivered by the Company and
constitute, or as of the Closing will constitute, valid and binding obligations
of the Company enforceable in accordance with their respective terms. The
execution of and performance of the transactions contemplated by this Agreement
and the Ancillary Agreements and compliance with their provisions by the Company
will not violate any provision of applicable law and will not

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conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or require a consent or waiver
under, its Restated Certificate or By-laws (each as amended to date) or any
material indenture, lease, agreement or other instrument to which the Company is
a party or by which it or any of its properties is bound, or any decree,
judgment, order, statute, rule or regulation applicable to the Company which
would have a material adverse effect on the business, properties or results of
operations of the Company (a "MATERIAL ADVERSE EFFECT").

3.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required on the part of the Company
in connection with the execution and delivery of this Agreement, the offer,
issuance, sale and delivery of the Shares, or the other transactions to be
consummated at the Closing, as contemplated by this Agreement, other than such
filings as shall have been made prior to and shall be effective on and as of the
Closing. Based on the representations made by the Purchasers in Section 4 of
this Agreement, the offer and sale of the Shares to the Purchasers will be
exempt from the registration requirements of applicable Federal and state
securities laws.

3.7 LITIGATION. Except as set forth in Section 3.7 of Disclosure
Schedule, there is no action, suit or proceeding, or governmental inquiry or
investigation, pending, or, to the best of the Company's knowledge, any basis
therefor or threat thereof, against the Company, which questions the validity of
this Agreement or the right of the Company to enter into it, or which might
result, either individually or in the aggregate, in any material adverse change
in the business, assets or condition, financial or otherwise, of the Company,
nor is there any litigation pending, or, to the best of the Company's knowledge,
any basis therefor or threat thereof, against the Company by reason of the
activities of the Company, or negotiations by the Company with possible
investors in the Company.

3.8 FINANCIAL STATEMENTS. The Company has delivered to the
Purchasers copies of (i) its unaudited balance sheet as of December 31, 1999,
and the related unaudited statements of operations, redeemable convertible
preferred stock and stockholders' deficit, and cash flows for the fiscal year
then ended and for the period from inception (August 7, 1997) to December 31,
1999, and (ii) its unaudited balance sheet as of January 31, 2000 (the "MOST
RECENT BALANCE SHEET"), and the related unaudited statements of operations,
redeemable convertible stock and stockholders' deficit, and cash flows for the
one (1) month period then ended and for the period from inception (August 7,
1997) to January 31, 2000 (the "INTERIM FINANCIALS"). Except as set forth in
Section 3.8 of the Disclosure Schedule, each of such balance sheets fairly
presents, in all material respects, the financial condition of the Company as of
its respective date, and each of such statements of operations, redeemable
convertible preferred stock and stockholders' deficit, and cash flows fairly
presents, in all material respects, the results of operations, redeemable
convertible preferred stock and stockholders' deficit, or cash flows, as the
case may be, of the Company for the period

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covered thereby; in each case in accordance with generally accepted accounting
principles, subject to the absence of footnotes and normal year-end adjustments.

3.9 ABSENCE OF CERTAIN CHANGES. Except as set forth in Section
3.9 of the Disclosure Schedule, since the date of the Most Recent Balance Sheet,
there have not been any changes in the business, assets, financial condition, or
operating results of the Company that, either individually or in the aggregate,
have had a Material Adverse Effect (as defined in Section 3.5 hereof).

3.10 TAXES. The Company has filed all tax returns required to
be filed by it on or prior to the date hereof, each such tax return has been
prepared in compliance with all applicable laws and regulations, and, to the
best of the Company's knowledge, all such tax returns are true and accurate in
all material respects. All taxes due and payable by the Company with respect to
any periods ending on or before the Closing Date have been paid. No claim has
ever been made by a taxing authority in a jurisdiction where the Company does
not pay tax or file tax returns that the Company is or may be subject to taxes
assessed by such jurisdiction. There are no liens for taxes (other than current
taxes not yet due and payable) on the assets of the Company. No action, suit,
taxing authority proceeding, or audit with respect to any tax is pending or, to
the best of the Company's knowledge, threatened, against or with respect to the
Company. No deficiency or proposed adjustment in respect of taxes that has not
been settled or otherwise resolved has been asserted or assessed by any taxing
authority against the Company. The Company has withheld and paid all taxes
required to have been withheld and paid by it in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other person.
Neither the Company nor any of its stockholders has ever filed (a) an election
pursuant to Section 1362 of the Internal Revenue Code of 1986, as amended (the
"CODE"), that the Company be taxed as an S Corporation, or (b) consent pursuant
to Section 341(f) of the Code relating to collapsible corporations.

3.11 TITLE TO PROPERTIES. Except as set forth in Section 3.11
of the Disclosure Schedule, the Company has good and valid title to its
properties and assets reflected in the Most Recent Balance Sheet or acquired by
it since the date of the Most Recent Balance Sheet (other than properties and
assets disposed of in the ordinary course of business since the date of the Most
Recent Balance Sheet), and, except as set forth in Section 3.11 of the
Disclosure Schedule, all such properties and assets are free and clear of
mortgages, pledges, security interests, liens, charges, claims, restrictions and
other encumbrances (including without limitation, easements and licenses),
except for liens for current taxes not yet due and payable and minor
imperfections of title, if any, not material in nature or amount and not
materially detracting from the value or impairing the use of the property
subject thereto or impairing the ability or operations of the Company, including
without limitation, the ability of the Company to secure financing using such
properties and assets as collateral. To the best of the Company's knowledge,
there are no condemnation, environmental, zoning or other land use regulation
proceedings, either instituted or planned to be instituted, which would
adversely affect the use or operation of

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-7-

the Company's properties and assets for their intended uses and purposes, or the
value of such properties, and the Company has not received notice of any special
assessment proceedings which would affect such properties and assets.

3.12 LEASEHOLD INTERESTS. Each lease or agreement to which the
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement, duly authorized and entered into by the
Company, without any default of the Company thereunder and, to the best of the
Company's knowledge, without any default thereunder of any other party thereto.
No event has occurred and is continuing which, with due notice of lapse of time
or both, would constitute a default or event of default by the Company under any
such lease or agreement or, to the best of the Company's knowledge, by any other
party thereto. The Company's possession of such property has not been disturbed
and, to the best of the Company's knowledge, no claim has been asserted against
the Company adverse to its rights in such leasehold interests.

3.13 INTELLECTUAL PROPERTY.

(a) To the best of the Company's knowledge, except as set forth
in Section 3.13(a) of the Disclosure Schedule, no third party has claimed or has
reason to claim that any person employed by or affiliated with the Company, in
connection with his or her employment by or affiliation with the Company, (i)
has violated or is violating any of the terms or conditions of his or her
employment, non-competition or non-disclosure agreement with such third party,
(ii) has disclosed or is disclosing or has utilized or is utilizing any trade
secret or proprietary information or documentation of such third party or (iii)
has interfered or is interfering in the employment relationship between such
third party and any of its present or former employees. Except as set forth in
Section 3.13(a) of the Disclosure Schedule, no third party has requested
information from the Company which suggests that such a claim might be
contemplated. To the best of the Company's knowledge, no person employed by or
affiliated with the Company has employed or proposes to employ any trade secret
or any information or documentation proprietary to any former employer, and to
the best of the Company's knowledge, no person employed by or affiliated with
the Company has violated any confidential relationship which such person may
have had with any third party, in connection with the development, manufacture
or sale or any product or proposed product or the development or sale of any
service or proposed service of the Company, and the Company has no reason to
believe there will be any such employment or violation. To the best of the
Company's knowledge, none of the execution or delivery of this Agreement, or the
carrying on of business of the Company by any officer, director or key employee
of the Company, or the conduct or proposed conduct of the business of the
Company, will conflict with or result in a breach of the terms, conditions or
provisions of or constitute a default under any contract, covenant or instrument
under which any such person is obligated which would have a Material Adverse
Effect.

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-8-

(b) Set forth in Section 3.13(b) of the Disclosure Schedule is
a list of all domestic and foreign patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service mark applications,
trade names and copyrights, and all applications for such which are currently in
the process of being prepared, owned by or registered in the name of the
Company, or of which the Company is a licensor or licensee or in which the
Company has any right, and in each case a brief description of the nature of
such right. Except as set forth in Section 3.13(b) of the Disclosure Schedule,
the Company owns or possesses adequate licenses or other rights to use all
patents, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names, copyrights, manufacturing processes,
formulae, trade secrets, customer lists and know-how (collectively,
"INTELLECTUAL PROPERTY") necessary for the conduct of its business as conducted
and as proposed to be conducted. Except as otherwise provided in Section 3.13(b)
of the Disclosure Schedule, no claim is pending or, to the best of the Company's
knowledge, threatened to the effect that the operations of the Company infringe
upon or conflict with the asserted rights of any other person under any
Intellectual Property, and, to the best of the Company's knowledge, there is no
basis for any such claim (whether or not pending or threatened). No claim is
pending or, to the best of the knowledge of the Company, threatened to the
effect that any such Intellectual Property owned or licensed by the Company, or
which the Company otherwise has the right to use, is invalid or unenforceable by
the Company, and, to the best of the Company's knowledge, there is no basis for
any such claim (whether or not pending or threatened). To the best of the
Company's knowledge, all technical information developed by and belonging to the
Company which has not been patented has been kept confidential. Except as set
forth in Section 3.13(b) of the Disclosure Schedule, the Company has not granted
or assigned to any other person or entity any right to manufacture, have
manufactured, assemble or sell the products or proposed products or to provide
the services or proposed services of the Company.

3.14 MATERIAL CONTRACTS AND OBLIGATIONS. Except as contemplated by
this Agreement or as listed in Section 3.14 of the Disclosure Schedule, the
Company is not a party to any material agreement or commitment of any nature,
including without limitation (a) any agreement which requires future
expenditures by the Company in excess of $100,000, (b) any employment or
consulting agreement, employee benefit, bonus, pension, profit-sharing, stock
option, stock purchase or similar plan or arrangement, or distributor or sales
representative agreement, (c) any agreement with any stockholder, officer or
director of the Company, or any "affiliate" or "associate" of such persons (as
such terms are defined in the rules and regulations promulgated under the
Securities Act), including without limitation any agreement or other arrangement
providing for the furnishing of services by, rental of real or personal property
from, or otherwise requiring payments to, any such person or entity or (d) any
agreement relating to the intellectual property rights of the Company.

3.15 COMPLIANCE. Except as set forth in Section 3.15 of the
Disclosure Schedule, the Company has, to its knowledge, in all material
respects, complied with all

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-9-

laws, regulations and orders applicable to its present and proposed business and
has all material permits and governmental licenses required thereby. There is no
term or provision of any mortgage, indenture, contract, agreement or instrument
to which the Company is a party or by which it is bound, or, to the best of the
Company's knowledge, of any provision of any state or Federal judgment, decree,
order, statute, rule or regulation applicable to or binding upon the Company,
which materially adversely affects or, so far as the Company may now foresee, in
the future is reasonably likely to materially adversely affect, the business,
assets or condition, financial or otherwise, of the Company. Except as set forth
in Section 3.15 of the Disclosure Schedule, to the best of the Company's
knowledge, no employee of the Company is in violation of any term of any
contract or covenant (either with the Company or with another entity) relating
to employment, patents, proprietary information disclosure, non-competition or
non-solicitation.

3.16 EMPLOYEES.

(a) Each holder of Common Stock has executed and delivered to
the Company a Stock Repurchase Agreement in substantially the form attached
hereto as EXHIBIT E, and all of such agreements are in full force and effect.

(b) Each employee of the Company has executed and delivered to
the Company a Noncompetition and Confidentiality Agreement covering a period of
one year following the termination of such employee's employment with the
Company, in substantially the form attached hereto as EXHIBIT F, and all of such
agreements are in full force and effect.

3.17 ERISA.

(a) Except as set forth on SCHEDULE 3.17 hereto, the Company
does not maintain and has no obligation to make contributions to, any employee
benefit plan (an "ERISA PLAN") within the meaning of Section 3(3) of the United
States Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
any other retirement, profit sharing, stock option, stock bonus or employee
benefit plan (a "NON-ERISA PLAN"). All such ERISA Plans and Non-ERISA Plans have
been maintained and operated in all material respects in accordance with all
federal, state and local laws applicable to such plans, and the terms and
conditions of the respective plan documents, except where the failure to so
maintain or operate such ERISA Plans and Non-ERISA Plans would not have a
Material Adverse Effect.

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(c) Full payment has been made of all material amounts that the
Company is required under the terms of each ERISA Plan and Non-ERISA Plan, or
pursuant to applicable federal, state or local law, to have paid as
contributions to such ERISA Plan or Non-ERISA Plan as of the last day of the
most recent fiscal year of such ERISA Plan or Non-ERISA Plan ended prior to the
date hereof, and no accumulated funding deficiency (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, exists with respect
to any ERISA Plan.

3.18 BOOKS AND RECORDS. The minute books of the Company contain
records of all meetings and other corporate actions of its stockholders and its
Board of Directors and committees thereof, which are complete and accurate in
all material respects. The stock ledger of the Company is complete and reflects
all issuances, transfers, repurchases and cancellations of shares of capital
stock of the Company.

3.19 U.S. REAL PROPERTY HOLDING CORPORATION. The Company is not now
and has never been a "United States Real Property Holding Corporation" as
defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service.

3.20 DISCLOSURES. Neither this Agreement nor any Schedule or Exhibit
hereto, nor any certificate or instrument furnished to the Purchasers at the
Closing or as required by the terms of this Agreement, when read together,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.

3.21 YEAR 2000 COMPATIBILITY. To the best of the Company's
knowledge, all of the Company's material products (including products currently
under development), if applicable, will record, store, process and calculate and
present calendar dates falling on and after January 1, 2000, and will calculate
any information dependent on or relating to such dates in substantially the same
manner and with substantially the same functionality, data integrity and
performance as the products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such date (collectively "Year 2000 Compliant"). To
the best of the Company's knowledge, all of the Company's material products will
lose

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no material functionality with respect to the introduction of records containing
dates falling on or after January 1, 2000. To the best of the Company's
knowledge, all of the Company's internal computer systems, including without
limitation, its accounting systems, are Year 2000 Compliant.

4. REPRESENTATIONS OF THE PURCHASERS. Each Purchaser represents and
warrants to the Company as follows:

4.1 INVESTMENT. Such Purchaser is acquiring the Shares, and the
shares of Common Stock into which the Shares may be converted, for its or his
own account for investment and not with a view to, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling the same; and such Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof. Such Purchaser acknowledges that the
Shares are restricted securities as defined under the Securities Act and shall
bear the legends set forth in Section 6.3 hereof.

4.2 AUTHORITY. Such Purchaser has full power and authority to
enter into and to perform this Agreement in accordance with its terms. Such
Purchaser represents that it has not been organized, reorganized or
recapitalized specifically for the purpose of investing in the Company. This
Agreement and the Ancillary Agreement to be executed by such Purchaser have been
duly executed and delivered by such Purchaser and constitute valid and binding
obligations of such Purchaser enforceable in accordance with their respective
terms. The execution of and performance of the transactions contemplated by this
Agreement and the Ancillary Agreements to be executed by such Purchaser and
compliance with their provisions by such Purchaser will not violate any
provision of law and will not conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute a default under, or
require a consent or waiver under, its organizational documents (each as amended
to date) or any indenture, lease, agreement or other instrument to which the
Purchaser is a party or by which it or any of its properties is bound, or any
decree, judgment, order, statute, rule or regulation applicable to such
Purchaser.

4.3 EXPERIENCE. Such Purchaser has carefully reviewed the
representations concerning the Company contained in this Agreement and has made
detailed inquiry concerning the Company, its business and its personnel; the
officers of the Company have made available to such Purchaser any and all
written information which it has requested and have answered to such Purchaser's
satisfaction all inquiries made by such Purchaser; and such Purchaser has
sufficient knowledge and experience in investing in companies similar to the
Company so as to be able to evaluate the risks and merits of its investment in
the Company and is able financially to bear the risks thereof, including a
complete loss of its investment. Such Purchaser understands that an investment
in the Company involves a high degree of risk in view of the fact that the

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Company is a start-up enterprise with minimal operating history, and there may
never be an established market for the Company's capital stock.

4.4 STATUS. Such Purchaser is an "accredited investor" as that
term is defined in Rule 501 of Regulation D promulgated under the Securities
Act. Such Purchaser represents that its investment in Series D Preferred Stock
will not violate any existing policy of its employer and that it has the
authority to make such an investment.

5. COVENANTS OF THE COMPANY.

5.1 INSPECTION. The Company shall permit each Purchaser (together
with any of its affiliates) holding not less than 237,805 shares of Series D
Stock at the relevant time (as adjusted for stock splits, stock dividends,
recapitalizations and similar events), or any authorized representative thereof,
to visit and inspect the properties of the Company, including its corporate and
financial records, and to discuss its business and finances with officers of the
Company, during normal business hours following reasonable notice and as often
as may be reasonably requested, without interruption of the business of the
Company and subject to the confidentiality obligations of Section 7.2 hereof.

5.2 FINANCIAL STATEMENTS AND OTHER INFORMATION.

(a) So long as a Purchaser (together with any of its
affiliates) holds at least 237,805 shares of Series D Preferred Stock (as
adjusted for stock splits, stock dividends, recapitalizations and similar
events), the Company shall deliver to such Purchaser:

(i) within 90 days after the end of each fiscal year of the
Company, an audited balance sheet of the Company as at the end of such year, and
audited statements of operations, stockholders' equity and cash flows of the
Company for such year, certified by certified public accountants of established
national reputation selected by the Company, and prepared in accordance with
generally accepted accounting principles; and

(ii) within 45 days after the end of each fiscal quarter of
the Company, an unaudited balance sheet of the Company as at the end of such
quarter, and unaudited statements of operations and cash flows of the Company
for such fiscal quarter and for the current fiscal year to the end of such
fiscal quarter.

(b) So long as a Purchaser (together with any of its
affiliates) holds at least 237,805 shares of Series D Preferred Stock (as
adjusted for stock splits, stock dividends, recapitalizations and similar
events), the Company shall deliver to such Purchaser:

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(ii) as soon as available, but in any event within 30 days
after commencement of each new fiscal year, a budget, consisting of projected
financial statements for such fiscal year; and

(c) The foregoing financial statements shall be prepared on a
consolidated basis if the Company then has any subsidiaries. The financial
statements delivered pursuant to clause (ii) of paragraph (a) and clause (i) of
paragraph (b) shall be accompanied by a certificate of the chief financial
officer of the Company stating that such statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as noted) and fairly present, in all material respects, the financial
condition and results of operations of the Company at the date thereof and for
the periods covered thereby (subject, in the case of any such unaudited
financial statements to the absence of footnotes and to year-end adjustments).

5.3 MATERIAL CHANGES AND LITIGATION. The Company shall promptly
notify the Purchasers of any material adverse change in the business, assets or
condition, financial or otherwise, of the Company and of any litigation or
governmental proceeding or investigation brought or, to the best of the
Company's knowledge, threatened against the Company, or against Hassan Ahmed,
Rubin Gruber, Michael G. Hluchyj or Kwok P. Wong (the "FOUNDERS") or any
officer, director, key employee or principal stockholder of the Company
materially adversely affecting or which, if adversely determined, would
materially adversely affect the Company's business, prospects, assets or
condition, financial or otherwise.

5.4 INSURANCE.

(b) The Company shall maintain in effect, policies of workers'
compensation insurance and of insurance with respect to its properties and
business,

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including, without limitation, insurance against loss, damage, fire, theft,
public liability and other risks, which is adequate for the maintenance and
preservation of the Company's properties and business.

5.5 EMPLOYEE AGREEMENTS. The Company shall require all employees
hereafter employed or engaged by the Company who are at or above the director
level or other key employees to enter into a Noncompetition and Confidentiality
Agreement covering a period of one year following the termination of such
employee's employment with the Company, substantially in the form attached
hereto as EXHIBIT F or in such other form as may be approved by the Board of
Directors.

5.6 RELATED PARTY TRANSACTIONS. The Company shall not enter into
any agreement with any stockholder, officer or director of the Company, or any
"affiliate" or "associate" of such persons (as such terms are defined in the
rules and regulations promulgated under the Securities Act), including without
limitation any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, any such person or entity, without the consent of at least a
majority of the members of the Company's Board of Directors having no interest
in such agreement or arrangement.

5.7 RESERVATION OF COMMON STOCK. The Company shall reserve and
maintain a sufficient number of shares of Common Stock for issuance upon
conversion of all of the outstanding Shares.

5.8 TERMINATION OF COVENANTS. The covenants of the Company contained
in Sections 5.1 through 5.7 shall terminate, and be of no further force or
effect, upon the closing of the Company's first offering of Common Stock to the
public, resulting in net proceeds to the Company of at least $25,000,000, and at
a price per share of at least $19.68 (as adjusted for stock splits, stock
dividends, recapitalizations and similar events) or, at such time as the
Purchasers (together with any affiliated entities to whom Shares have been
transferred) own less than an aggregate of 237,805 shares of Series D Preferred
Stock (as adjusted for stock splits, stock dividends, recapitalizations and
similar events).

5.9 QUALIFIED SMALL BUSINESS STOCK. The Company shall submit to its
stockholders (including the Purchasers) and to the Internal Revenue Service any
reports that may be required under Section 1202(d)(1)(C) of the Code and the
Regulations promulgated thereunder. In addition, within ten days after a
Purchaser's written request therefor, the Company shall deliver to such
Purchaser a written statement indicating whether such Purchaser's interest in
the Company constitutes "qualified small business stock" as defined in Section
1202(c) of the Code.

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6. TRANSFER OF SHARES.

6.1 RESTRICTED SHARES. "RESTRICTED SHARES" means (i) the Shares,
(ii) the shares of Common Stock issued or issuable upon conversion of the
Shares, (iii) any shares of capital stock of the Company acquired by a Purchaser
pursuant to the Investor Agreement or the Right of First Refusal Agreement, and
(iv) any other shares of capital stock of the Company issued in respect of such
shares (as a result of stock splits, stock dividends, reclassifications,
recapitalizations, or similar events); PROVIDED, HOWEVER, that shares of Common
Stock which are Restricted Shares shall cease to be Restricted Shares (i) upon
any sale pursuant to a registration statement under the Securities Act, or under
Section 4(1) of the Securities Act or Rule 144 under the Securities Act, or (ii)
at such time as they become eligible for sale under Rule 144(k) under the
Securities Act.

6.2 REQUIREMENTS FOR TRANSFER.

(b) Notwithstanding the foregoing, no registration or opinion
of counsel shall be required for (i) a transfer by a Purchaser which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner, if the transferee agrees in writing to be subject to
the terms of this Section 6 to the same extent as if he were an original
Purchaser hereunder, or (ii) a transfer made in accordance with Rule 144 under
the Securities Act.

6.3 LEGEND. Each certificate representing Restricted Shares shall
bear a legend substantially in the following form:

"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be offered,
sold or otherwise transferred, pledged or hypothecated unless and until
such shares are registered under such Act or an opinion of counsel
satisfactory to the Company is obtained to the effect that such
registration is not required."

The foregoing legend shall be removed from the certificates
representing any Restricted Shares, at the request of the holder thereof, at
such time as they become eligible for resale pursuant to Rule 144(k) under the
Securities Act.

<PAGE>

-16-

6.4 RULE 144A INFORMATION. The Company shall, at all times
during which it is neither subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange
Act, upon the written request of a Purchaser, provide in writing to such
Purchaser, and to any prospective transferee of any Restricted Shares of such
Purchaser, the information concerning the Company described in Rule 144A(d)(4)
under the Securities Act ("RULE 144A INFORMATION"). The Company also shall, upon
the written request of a Purchaser, cooperate with and assist such Purchaser or
any member of the National Association of Securities Dealers, Inc. PORTAL system
in applying to designate and thereafter maintain the eligibility of the
Restricted Shares for trading through PORTAL. The Company's obligations under
this Section 6.4 shall at all times be contingent upon receipt from the
prospective transferee of Restricted Shares of a written agreement to take all
reasonable precautions to safeguard the Rule 144A Information from disclosure to
anyone other than persons who will assist such transferee in evaluating the
purchase of any Restricted Shares and to use such Rule 144A Information only for
such evaluation purposes.

7. MISCELLANEOUS.

7.1 SUCCESSORS AND ASSIGNS. This Agreement, and the rights and
obligations of each Purchaser hereunder, may be assigned by such Purchaser to
any person or entity to which at least 237,805 Shares, as adjusted for stock
splits, stock dividends, recapitalizations and similar events (or 100% of the
Shares originally purchased hereunder by such Purchaser, if less than 237,805
Shares), are transferred by such Purchaser, and such transferee shall be deemed
a "Purchaser" for purposes of this Agreement; provided that the transferee
provides written notice of such assignment to the Company and agrees to be bound
by the terms and conditions set forth herein.

7.2 CONFIDENTIALITY. The Purchasers agree that they will keep
confidential and will not disclose or divulge any confidential, proprietary or
secret information which they may obtain from the Company pursuant to financial
statements, reports and other materials submitted by the Company to the
Purchasers pursuant to this Agreement or any rights granted hereunder, unless
such information is known, or until such information becomes known, to the
public; PROVIDED, HOWEVER, that a Purchaser may disclose such information (i) to
its attorneys, accountants, consultants, and other professionals to the extent
necessary to obtain their services in connection with its investment in the
Company, (ii) to any prospective purchaser of any Shares from such Purchaser as
long as such prospective purchaser agrees in writing to be bound by the
provisions of this Section, or (iii) to any affiliate of such Purchaser or to a
partner, shareholder or subsidiary of such Purchaser; subject to the agreement
of such party to keep such information confidential as set forth herein. Each
Purchaser agrees that it will not make, issue or release any public
announcement, public statement or public acknowledgement of the dollar amount of
any Purchaser's investment in Series D Preferred Stock. In addition, no
Purchaser shall make, issue or release any public

<PAGE>

-17-

announcement, public statement or public acknowledgement of who served as the
lead investor in the Series D Preferred Stock financing unless the lead investor
shall have reviewed such release prior to its publication.

7.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All agreements,
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby for a period of eighteen (18) months from the date hereof.

7.4 EXPENSES. The Company shall pay, at the Closing, the reasonable
costs and expenses of Gibson, Dunn & Crutcher LLP, counsel to the Purchasers,
not to exceed $15,000 in the aggregate, in connection with the preparation of
this Agreement and the other agreements and documents contemplated hereby and
the closing of the transactions contemplated hereby.

7.5 NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
by hand, sent via a reputable nationwide overnight courier service or mailed by
first class certified or registered mail, return receipt requested, postage
prepaid:

If to the Company, at Sonus Networks, Inc., 5 Carlisle Road, Westford,
MA 01886, Attn: President, or at such other address or addresses as may have
been furnished in writing by the Company to the Purchasers, with a copy to
Bingham Dana LLP, 150 Federal Street, Boston, MA 02110, Attn: David L. Engel,
Esq.

If to a Purchaser, at its address as set forth on SCHEDULE I attached
hereto, or at such other address or addresses as may have been furnished to the
Company in writing by such Purchaser, with a copy to Gibson, Dunn & Crutcher
LLP, Attn: Peter Heilmann, Esq.

7.6 BROKERS. The Company and the Purchasers each (i) represents and
warrants to the other parties hereto that he, she or it has retained no finder
or broker in connection with the transactions contemplated by this Agreement,
and (ii) will indemnify and save the other parties harmless from and against any
and all claims, liabilities or obligations with respect to brokerage or finders'
fees or commissions in connection with the transactions contemplated by this
Agreement asserted by any person on the basis of any agreement, statement or
representation alleged to have been made by such indemnifying party.

<PAGE>

-18-

7.7 ENTIRE AGREEMENT. This Agreement and the Ancillary Agreements
embody the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter.

7.8 AMENDMENTS AND WAIVERS. Except as otherwise expressly set
forth in this Agreement, any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the holders of at least 66 2/3% of the shares of
Common Stock issued or issuable upon conversion of the Shares. Any amendment or
waiver effected in accordance with this Section 7.8 shall be binding upon each
holder of any Shares (including shares of Common Stock into which such Shares
have been converted) and each future holder of all such securities and the
Company. No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such term, condition or provision.

7.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.

7.10 SECTION HEADINGS. The section headings are for the convenience
of the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.

7.11 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.

7.12 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

Executed as an instrument under seal as of the date first written
above.

COMPANY:

SONUS NETWORKS, INC.

By: /s/ Hassan Ahmed
------------------------------
Hassan Ahmed
President

PURCHASERS:

BroadBand Office, Inc.
2900 Telestar Court
Falls Church, VA 22042

By: /s/ Johnson Agogbua
------------------------------
Name: Johnson Agogbua
Title: Vice President, Engineering

Credit Suisse First Boston Venture Fund I, L.P.
2400 Hanover Street
Palo Alto, CA

By: QBB Management I, LLC, its General Partner

By: /s/ Frank Quattrone
------------------------------
Name: Frank Quattrone
Title: Member

Time Warner Telecom Inc.
10475 Park Meadows Drive
Suite 4400
Littleton, CO 80124

By: /s/ Paul B. Jones
------------------------------
Name: Paul B. Jones
Title: Senior Vice President
General Counsel & Regulatory Policy

<PAGE>

ICI Capital LLC
3625 Queen Palm Drive
Tampa, FL 33611

By: /s/ Raymond L. Lawless
------------------------------
Name: Raymond L. Lawless
Title: Vice President and Treasurer

Williams Communications, Inc.
One Williams Center
Tulsa, OK 74172

By: /s/ Dell B. [ILLEGIBLE]
------------------------------
Name:
Title:

Global Crossing Ventures, Inc.
141 Caspian Court
Sunnyvale, CA 94089

By: /s/ Michael Cohen
------------------------------
Name: Michael Cohen
Title:

Z-Tel Technologies, Inc.
601 S. Harbour Island Blvd.
Suite 220
Tampa, FL 33602

By: /s/ Eduard J. Mayer
------------------------------
Name: Eduard J. Mayer
Title: President

Tailwind Capital Partners 2000, L.P.
c/o Thomas Weisel Partners
One Montgomery Street, Suite 3700
San Francisco, CA 94104

By: Thomas Weisel Capital Partners LLC,
its General Partner

By: /s/ Marianne Winkler
------------------------------
Name: Marianne Winkler
Title: CFO

<PAGE>

Hambrecht & Quist California
One Bush Street
San Francisco, CA 94104

By: /s/ Thomas Szymoniak
------------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact

Hambrecht & Quist California
One Bush Street
San Francisco, CA 94104

By: /s/ Thomas Szymoniak
------------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact

H&Q Employee Venture Fund 2000, L.P.
One Bush Street
San Francisco, CA 94104

By: H&Q Venture Management LLC, its General Partner

By: /s/ Thomas Szymoniak
------------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact

Access Technology Partners, L.P.
One Bush Street
San Francisco, CA 94104

By: Access Technology Management LLC, its General Partner

By: /s/ Thomas Szymoniak
------------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact

<PAGE>

Access Technology Partners Brokers Fund, L.P.
One Bush Street
San Francisco, CA 94104

By: H&Q Venture Management, LLC, its General Partner

By: /s/ Thomas Szymoniak
------------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact

Viatel, Inc.
685 Third Avenue,
New York, NY 10017

By: /s/ Sheldon M. Goldman
------------------------------
Name: Sheldon M. Goldman
Title: EVP

VYTL, LLC
685 Third Avenue,
New York, NY 10017

By: /s/ Sheldon M. Goldman
------------------------------
Name: Sheldon M. Goldman
Title:

Eagle Teleprograms, Inc.
60 East 56th Street
New York, NY 10022

By: /s/ Kent Srikanth Chargundla
------------------------------
Name: Kent Srikanth Chargundla
Title: Chairman

River Partners I
c/o Tim Walsh
1221 Avenue of the Americas
New York, NY 10020

By: /s/ Tim Walsh
------------------------------
Name: Tim Walsh
Title: Managing Director

<PAGE>

Carrier 1

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

By:
------------------------------
Name:
Title:

Whitman Partners, L.P.

By: /s/ Douglas Whitman
------------------------------
Name:
Its: Manager

By:
------------------------------
Name:
Title:

<PAGE>

U.S. Bancorp Piper Jaffray ECM Fund I, LLC
222 South Ninth Street
Minneapolis, MN 55402

By: /s/ John Jacobs
------------------------------
Name: John Jacobs
Title: Managing Member

GD&C Partners 2000 Fund, LLC
333 South Grand Avenue
Los Angeles, CA 90071

By: /s/ [Illegible]
------------------------------
Name:
Its: Manager

<PAGE>

SCHEDULE I
----------

<TABLE>
<CAPTION>
NAME OF AND ADDRESS NO. OF SHARES OF AGGREGATE
OF PURCHASER SERIES D PREFERRED STOCK PURCHASE PRICE
- ---------------------------------------------------- ------------------------------ -----------------------------
<S> <C> <C>
Credit Suisse First Boston Venture Fund I, L.P.
2400 Hanover Street 297,257 $4,875,014.80
Palo Alto, CA

Time Warner Telecom Inc.
10475 Park Meadows Drive 182,927 $3,000,002.80
Suite 4400
Littleton, CO 80124

ICI Capital LLC
3625 Queen Palm Drive 121,952 $2,000,012.80
Tampa, FL 33611

BroadBand Office, Inc.
2900 Telestar Court 121,952 $2,000,012.80
Falls Church, VA 22042

Williams Communications, Inc.
One Williams Center 91,464 $1,500,009.60
Tulsa, OK 74172

Global Crossing Ventures, Inc.
141 Caspian Court 60,976 $1,000,006.40
Sunnyvale, CA 94089

Z-Tel Technologies, Inc.
601 S. Harbour Island Blvd. 42,683 $700,001.20
Suite 220
Tampa, FL 33602

Tailwind Capital Partners 2000, L.P.
c/o Thomas Weisel Partners 152,440 $2,500,016.00
One Montgomery Street, Suite 3700
San Francisco, CA 94104

Hambrecht & Quist California
One Bush Street 10,244 $168,001.60
San Francisco, CA 94104

Hambrecht & Quist California
One Bush Street 6,098 $100,007.20
San Francisco, CA 94104

<PAGE>

H&Q Employee Venture Fund 2000, L.P.
One Bush Street 6,098 $100,007.20
San Francisco, CA 94104

Access Technology Partners, L.P.
One Bush Street 97,561 $1,600,000.40
San Francisco, CA 94104

Access Technology Partners Brokers Fund, L.P.
One Bush Street 1,951 $31,996.40
San Francisco, CA 94104

U.S. Bancorp Piper Jaffray ECM Fund I, LLC
222 South Ninth Street 91,464 $1,500,009.60
Minneapolis, MN 55402

Viatel, Inc.
685 Third Avenue, 60,976 $1,000,006.40
New York, NY 10017

VYTL, LLC
685 Third Avenue, 18,293 $300,005.20
New York, NY 10017

Eagle Teleprogramming, Inc.
60 East 56th Street 15,244 $250,001.60
New York, NY 10022

River Partners I
c/o Tim Walsh 60,976 $1,000,006.40
1221 Avenue of the Americas
New York, NY 10020

Whitman Partners, L.P.
_______________ 60,976 $1,000,006.40
_______________

Carrier 1
_______________ 60,976 $1,000,006.40
_______________

GD&C Partners 2000 Fund, LLC
333 South Grand Avenue 7,622 $125,000.80
Los Angeles, CA 90071
</TABLE>

<PAGE>

Exhibit 10.8

THIRD AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT

This Third Amended and Restated Investor Rights Agreement (this
"AGREEMENT"), dated as of March 9, 2000, is entered into by and among Sonus
Networks, Inc., a Delaware corporation (the "COMPANY"), the persons and entities
listed on the signature pages hereto under the heading "Purchasers"
(individually, a "PURCHASER", and collectively, the "PURCHASERS") and Hassan
Ahmed, Rubin Gruber, Michael G. Hluchyj and Kwok P. Wong (individually, a
"FOUNDER", and collectively, the "FOUNDERS").

BACKGROUND

WHEREAS, on November 18, 1997, the Company, certain of the Purchasers
(the "SERIES A PURCHASERS") and the Founders entered into an Investor Rights
Agreement (the "ORIGINAL AGREEMENT") to provide for (i) the composition of the
Board of Directors of the Company, (ii) certain arrangements with respect to the
registration of shares of capital stock of the Company under the Securities Act
of 1933, and (iii) a right of first refusal with respect to the sale of any
securities of the Company;

WHEREAS, in connection with the purchase and sale of 3,144,287 shares
of Series B Convertible Preferred Stock, $.01 par value per share, of the
Company ("SERIES B PREFERRED STOCK"), by certain of the Purchasers (the "SERIES
B PURCHASERS"), the Company and the Series B Purchasers entered into an Amended
and Restated Investor Rights Agreement (the "RESTATED AGREEMENT");

WHEREAS, in connection with the purchase and sale of 1,939,681 shares
of Series C Convertible Preferred Stock, $.01 par value per share, of the
Company ("SERIES C PREFERRED STOCK"), by certain of the Purchasers (the "SERIES
C PURCHASERS"), the Company and the Series C Purchasers entered into a Second
Amended and Restated Investor Rights Agreement (the "SECOND RESTATED
AGREEMENT");

WHEREAS, the Company and certain of the Purchasers (the "SERIES D
PURCHASERS") have entered into a Series D Preferred Stock Purchase Agreement of
even date herewith (the "PURCHASE AGREEMENT"); and

WHEREAS, in connection with the purchase and sale of up to 1,585,366
shares of Series D Convertible Preferred Stock, $.01 par value per share, of the
Company ("SERIES D PREFERRED STOCK"), by the Series D Purchasers, pursuant to
the Purchase Agreement, the parties hereto desire to amend and restate the
Second Restated Agreement as provided herein (the terms of this Agreement to
supersede the terms of the Second Restated Agreement in their entirety).

NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and the consummation of the sale and purchase of
the Series D Preferred Stock pursuant to the Purchase Agreement, and for other
valuable

<PAGE>

-2-

consideration, receipt of which is hereby acknowledged, the parties hereto agree
as follows:

ARTICLE I
DEFINITIONS

As used in this Agreement, the following terms shall have the following
respective meanings:

"COMMISSION" means the United States Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.

"COMMON STOCK" means the common stock, $0.001 par value per
share, of the Company.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.

"INITIAL PUBLIC OFFERING" means (i) when such term is used in
connection with the Series A, Series B or Series C Preferred Stock, the sale of
shares of Common Stock in a firm commitment underwritten public offering
pursuant to a Registration Statement at a price to the public of at least $8.00
per share (adjusted for stock splits, stock dividends and similar events)
resulting in proceeds (net of the underwriting discounts or commissions and
offering expenses) to the Company of at least $10,000,000, and (ii) when such
term is used in connection with the Series D Preferred Stock, the sale of shares
of Common Stock in a firm commitment underwritten public offering pursuant to a
Registration Statement at a price to the public of at least $19.68 per share
(adjusted for stock splits, stock dividends and similar events) resulting in
proceeds (net of the underwriting discounts or commissions and offering
expenses) to the Company of at least $25,000,000.

"REGISTRATION STATEMENT" means a registration statement filed
by the Company with the Commission for a public offering and sale of Common
Stock by the Company (other than a registration statement on Form S-8 or Form
S-4, or their successors, or any other form for a similar limited purpose, or
any registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation).

"REGISTRATION EXPENSES" means the expenses described in
Section 4 of Article III below.

"REGISTRABLE SHARES" means (i) the shares of Common Stock
issued or issuable upon conversion of the Shares, (ii) shares of Common Stock
held from time to time by the Founders, (iii) any shares of Common Stock, and
any shares of Common Stock issued or issuable upon the conversion or exercise of
any other securities, acquired

<PAGE>

-3-

by the Purchasers pursuant to Article IV of this Agreement or pursuant to the
Third Amended and Restated Right of First Refusal and Co-Sale Agreement, of even
date herewith, among the Company, the Purchasers and the Founders, and (iv) any
other shares of Common Stock issued in respect of such shares (because of stock
splits, stock dividends, reclassifications, recapitalizations, or similar
events); PROVIDED, HOWEVER, that shares of Common Stock which are Registrable
Shares shall cease to be Registrable Shares (a) upon any sale of such shares
pursuant to a Registration Statement or Rule 144 under the Securities Act, (b)
upon any sale of such shares in any manner to a person or entity which, by
virtue of Section 2 of Article V of this Agreement, is not entitled to the
rights provided by this Agreement, or (c) for purposes of Section 2 of Article
III hereof, with respect to any one or more applicable series of the Company's
Preferred Stock, following the third anniversary of the Initial Public Offering.
Wherever reference is made in this Agreement to a request or consent of holders
of a certain percentage of Registrable Shares, the determination of such
percentage shall include shares of Common Stock issuable upon conversion of the
Shares even if such conversion has not yet been effected.

"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.

"SERIES A PREFERRED STOCK" means the Series A Convertible
Preferred Stock of the Company, $.01 par value per share.

"SERIES B PREFERRED STOCK" means the Series B Convertible
Preferred Stock of the Company, $.01 par value per share.

"SERIES C PREFERRED STOCK" means the Series C Convertible
Preferred Stock of the Company, $.01 par value per share.

"SERIES D PREFERRED STOCK" means the Series D Convertible
Preferred Stock of the Company, $.01 par value per share.

"SHARES" means the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock.

"STOCKHOLDERS" means the Purchasers, the Founders and any
persons or entities to whom the rights granted to Purchasers or Founders under
this Agreement are transferred by a Purchaser or Founder, its successors or
permitted assigns pursuant to Section 2 of Article V below.

ARTICLE II
VOTING RIGHTS

1. VOTING OF SHARES. In any and all elections of directors of the
Company (whether at a meeting or by written consent in lieu of a meeting), each
Stockholder shall

<PAGE>

-4-

vote or cause to be voted all Voting Shares (as defined in Section 2 of Article
II below) owned by him, her or it, or over which he, she or it has voting
control, and otherwise use his, her or its respective best efforts, so as to fix
the number of directors at seven and to elect as directors (i) the Chief
Executive Officer of the Company (initially Hassan Ahmed), (ii) a designee of
the Company (initially Rubin Gruber), (iii) one representative designated by
North Bridge Venture Partners II, L.P. (initially Edward T. Anderson), (iv) one
representative designated by Matrix Partners IV, L.P. (initially Paul J. Ferri),
(v) one person mutually agreed upon by all of the other members of the Board of
Directors (initially Paul J. Severino), and (vi) two persons selected by the
majority vote of the other members of the Board of Directors. The obligation of
the Stockholders under this Section 1 to elect as a director (a) a designee of
North Bridge Venture Partners II, L.P. shall continue only for so long as North
Bridge Venture Partners II, L.P. (together with any affiliates, within the
meaning of Rule 144 under the Securities Act) owns, after giving effect to the
conversion of all convertible preferred stock into Common Stock, at least
2,000,000 shares of Common Stock (subject to appropriate adjustment for stock
splits, stock dividends, combinations and other similar recapitalizations
affecting such shares) and (b) a designee of Matrix Partners IV, L.P. shall
continue only for so long as Matrix Partners IV, L.P. (together with any
affiliates, within the meaning of Rule 144 under the Securities Act) owns, after
giving effect to the conversion of all convertible preferred stock into Common
Stock, at least 2,000,000 shares of Common Stock (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other similar
recapitalizations affecting such shares).

2. VOTING SHARES. "VOTING SHARES" shall mean and include any and all
shares of the Common Stock, Shares, and/or shares of capital stock of the
Company, by whatever name called, which carry voting rights (including voting
rights which arise by reason of default).

3. RESTRICTIVE LEGEND. All certificates representing Voting Shares
owned or hereafter acquired by the Stockholders or any transferee bound by this
Agreement shall have affixed thereto a legend substantially in the following
form:

"The shares of stock represented by this certificate are subject to
certain voting agreements as set forth in an Investor Rights Agreement
by and among the registered owner of this certificate, the Company and
certain other stockholders of the Company, a copy of which is available
for inspection at the offices of the Secretary of the Company."

4. TRANSFERS OF VOTING RIGHTS. Any transferee to whom Voting Shares are
transferred by a Stockholder, whether voluntarily or by operation of law, shall
be bound by the voting obligations imposed upon the transferor under this
Agreement, to the same extent as if such transferee were a Stockholder
hereunder.
<PAGE>

-5-

ARTICLE III
REGISTRATION RIGHTS

1. REQUIRED REGISTRATIONS.

(a) At any time after the earlier of November 18, 2000 or the
closing of the Company's first underwritten public offering of shares of Common
Stock pursuant to a Registration Statement, Stockholders (other than the
Founders) holding in the aggregate at least 35% of the Registrable Shares held
by the Stockholders (other than the Founders) may request, in writing, that the
Company effect the registration on Form S-1 or Form S-2 (or any successor form)
of Registrable Shares owned by such Stockholders having an aggregate offering
price of at least $5,000,000 (based on the market price or fair value at the
time of such request). If the Stockholders initiating the registration intend to
distribute the Registrable Shares by means of an underwriting, they shall so
advise the Company in their request. Thereupon, the Company shall, as
expeditiously as possible, use its best efforts to effect the registration on
Form S-1 or Form S-2 (or any successor form) of all Registrable Shares which the
Company has been requested to so register.

(b) At any time after the Company becomes eligible to file a
Registration Statement on Form S-3 (or any successor form relating to secondary
offerings), a Stockholder or Stockholders may request the Company, in writing,
to effect the registration on Form S-3 (or such successor form), of Registrable
Shares having an aggregate offering price of at least $1,000,000 (based on the
public market price at the time of such request). Thereupon, the Company shall,
as expeditiously as possible, use its best efforts to effect the registration on
Form S-3 (or such successor form) of all Registrable Shares which the Company
has been requested to so register.

(c) The Company shall not be required to effect more than two
registrations pursuant to paragraph (a) above or more than three registrations
pursuant to paragraph (b) above; PROVIDED, HOWEVER, that such obligation shall
be deemed satisfied only when a registration statement covering the applicable
Registrable Shares shall have (i) become effective or (ii) been withdrawn at the
request of the Stockholders requesting such registration (other than as a result
of information concerning the business or financial condition of the Company
which is made known to the Stockholders after the date on which such
registration was requested).

(d) If at the time of any request to register Registrable
Shares pursuant to this Section 1, the Company is engaged or has plans to engage
within 90 days of the time of the request in a registered public offering of
securities for its own account or is engaged in any other activity which, in the
good faith determination of the Company's Board of Directors, would be adversely
affected by the requested registration to the material detriment of the Company,
then the Company may at its option direct that such request be delayed for a
period not in excess of three months from the effective date of such offering or
the date of commencement of such other material activity, as the case

<PAGE>

-6-

may be, such right to delay a request to be exercised by the Company not more
than once in any 12-month period.

2. INCIDENTAL REGISTRATIONS.

(a) Whenever the Company proposes to file a Registration
Statement at any time and from time to time, it will, prior to such filing, give
written notice to all Stockholders of its intention to do so and, upon the
written request of a Stockholder or Stockholders, given within 10 business days
after the Company provides such notice (which request shall state the intended
method of disposition of such Registrable Shares), the Company shall use its
reasonable best efforts to cause all Registrable Shares which the Company has
been requested by such Stockholder or Stockholders to register, to be registered
under the Securities Act to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of distribution specified in
the request of such Stockholder or Stockholders; PROVIDED, HOWEVER, that the
Company shall have the right to postpone or withdraw any registration effected
pursuant to this Section 2 without obligation to any Stockholder.

(b) In connection with any registration under this Section 2
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such registration unless the holders thereof accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it. If in the opinion of the managing underwriter it is
desirable because of marketing factors to limit the number of Registrable Shares
to be included in the offering, then the Company shall be required to include in
the registration only that number of Registrable Shares, if any, which the
managing underwriter believes should be included therein; PROVIDED, HOWEVER,
that no persons or entities other than the Company, the Stockholders and other
persons or entities holding registration rights shall be permitted to include
securities in the offering. If the number of Registrable Shares to be included
in the offering in accordance with the foregoing is less than the total number
of shares which the holders of Registrable Shares have requested to be included,
then the holders of Registrable Shares who have requested registration and other
holders of securities entitled to include them in such registration shall
participate in the registration pro rata based upon their total ownership of
shares of Common Stock (giving effect to the conversion into Common Stock of all
securities convertible thereinto). If any holder would thus be entitled to
include more securities than such holder requested to be registered, the excess
shall be allocated among other requesting holders pro rata in the manner
described in the preceding sentence.

3. REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, the
Company shall:

(a) file with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts to cause that
Registration Statement to become effective;
<PAGE>

-7-

(b) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary to keep
the Registration Statement effective, in the case of a firm commitment
underwritten public offering, until each underwriter has completed the
distribution of all securities purchased by it and, in the case of any other
offering, until the earlier of the sale of all Registrable Shares covered
thereby or 180 days after the effective date thereof;

(c) as expeditiously as possible furnish to each selling
Stockholder such reasonable numbers of copies of the prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as the selling Stockholder may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Shares owned by the selling Stockholder; and

(d) as expeditiously as possible use its best efforts to
register or qualify the Registrable Shares covered by the Registration Statement
under the securities or Blue Sky laws of such states as the selling Stockholder
shall reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the selling Stockholder to consummate the
public sale or other disposition in such states of the Registrable Shares owned
by the selling Stockholder; PROVIDED, HOWEVER, that the Company shall not be
required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.

If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the selling Stockholders and, if requested, the selling Stockholder shall
immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide each selling
Stockholder with revised prospectuses and, following receipt of the revised
prospectuses, the selling Stockholder shall be free to resume making offers of
the Registrable Shares.

Notwithstanding the foregoing, each selling Stockholder shall cease
making offers or sales pursuant to a "shelf" Registration Statement during any
period (not to exceed 90 days) in which the Company determines, by notice to
each selling Stockholder, that it is in possession of material non-public
information that, for valid business reasons, it wishes to keep confidential.

If, after a registration statement becomes effective, the Company
becomes engaged in any activity which, in the good faith determination of the
Company's Board of Directors, involves information that would have to be
disclosed in the Registration Statement but which the Company desires to keep
confidential for valid business reasons, then the Company may at its option, by
notice to such Stockholders, require that the Stockholders who have included
Shares in such Registration Statement cease sales of such Shares under such
Registration Statement for a period not in excess of three months from the date
of such notice, such right to be exercised by the Company not more than
<PAGE>

-8-

once in any 12-month period. If, in connection therewith, the Company considers
it appropriate for such Registration Statement to be amended, the Company shall
so amend such Registration Statement as promptly as practicable and such
Stockholders shall suspend any further sales of their Shares until the Company
advises them that such Registration Statement has been amended. The time periods
referred to herein during which such Registration Statement must be kept
effective shall be extended for an additional number of days equal to the number
of days during which the right to sell shares was suspended pursuant to this
paragraph.

4. ALLOCATION OF EXPENSES. The Company will pay all Registration
Expenses of all registrations under this Agreement. For purposes of this Section
4, the term "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Article III, Section 1, including, without limitation,
all registration and filing fees, exchange listing fees, printing expenses, fees
and expenses of one counsel for the Company to represent the selling
Stockholder(s), state Blue Sky fees and expenses, and the expense of any special
audits incident to or required by any such registration, but excluding
underwriting discounts, selling commissions and the fees and expenses of selling
Stockholders' own counsel.

5. INDEMNIFICATION AND CONTRIBUTION.

(a) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, the Company will
indemnify and hold harmless the seller of such Registrable Shares, each
underwriter of such Registrable Shares, and each other person, if any, who
controls such seller or underwriter within the meaning of the Securities Act or
the Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such seller, underwriter or controlling person may become
subject under the Securities Act, the Exchange Act, state securities or Blue Sky
laws or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to such Registration
Statement, or arise out of or are based upon the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Company will reimburse such seller,
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by such seller, underwriter or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the Company will not be liable in
any such case to a seller, underwriter or controlling person to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
untrue statement or omission made in such Registration Statement, preliminary
prospectus or final prospectus, or any such amendment or supplement, in reliance
upon and in conformity with information furnished to the Company, in writing, by
or on behalf of such seller, underwriter or controlling person specifically for
use in the preparation thereof.
<PAGE>

-9-

(b) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, each seller of
Registrable Shares, severally and not jointly, will indemnify and hold harmless
the Company, each of its directors and officers and each underwriter (if any)
and each person, if any, who controls the Company or any such underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages or liabilities, joint or several, to which the Company, such
directors and officers, underwriter or controlling person may become subject
under the Securities Act, Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information relating to such seller furnished in writing
to the Company by or on behalf of such seller specifically for use in connection
with the preparation of such Registration Statement, prospectus, amendment or
supplement; PROVIDED, HOWEVER, that the obligations of each such Stockholder
hereunder shall be limited to an amount equal to the net proceeds to such
Stockholder of Registrable Shares sold in connection with such registration.

(c) Each party entitled to indemnification under this Article
III, Section 5 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; PROVIDED, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and, PROVIDED FURTHER, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Article III, Section 5, unless
and except to the extent that the Indemnifying Party is prejudiced by the
failure of the Indemnified Party to provide timely notice. The Indemnified Party
may participate in such defense at such party's expense; PROVIDED, HOWEVER, that
the Indemnifying Party shall pay such expense if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of
<PAGE>

-10-

any judgment or settle such claim or litigation without the prior written
consent of the Indemnifying Party.

(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) any
holder of Registrable Shares exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Article III, Section 5 but it is judicially determined (by the
entry of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Article III, Section 5 provides for indemnification in such case, or
(ii) contribution under the Securities Act may be required on the part of any
such selling Stockholder or any such controlling person in circumstances for
which indemnification is provided under this Article III, Section 5; then, in
each such case, the Company and such Stockholder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportions so that such holder is
responsible for the portion represented by the percentage that the public
offering price of its Registrable Shares offered by the Registration Statement
bears to the public offering price of all securities offered by such
Registration Statement, and the Company is responsible for the remaining
portion; PROVIDED, HOWEVER, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the net proceeds to it of all
Registrable Shares sold by it pursuant to such Registration Statement, and (B)
no person or entity guilty of fraudulent misrepresentation, within the meaning
of Section 11(f) of the Securities Act, shall be entitled to contribution from
any person or entity who is not guilty of such fraudulent misrepresentation.

6. INDEMNIFICATION WITH RESPECT TO UNDERWRITTEN OFFERING. In the event
that Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering pursuant to Article III, Section 1, the Company agrees to
enter into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of an issuer of the
securities being registered and customary covenants and agreements to be
performed by such issuer, including without limitation customary provisions with
respect to indemnification by the Company of the underwriters of such offering.

7. INFORMATION BY HOLDER. Each Stockholder including Registrable Shares
in any registration shall furnish to the Company such information regarding such
Stockholder and the distribution proposed by such Stockholder as the Company may
reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.

8. "STAND-OFF" AGREEMENT. Each Stockholder, if requested by the Company
and the managing underwriter of an offering by the Company of Common Stock or
other securities of the Company pursuant to a Registration Statement, shall
agree not to sell publicly or otherwise transfer or dispose of any Registrable
Shares or other securities of
<PAGE>

-11-

the Company held by such Stockholder for a specified period of time (not to
exceed 180 days) following the effective date of such Registration Statement;
PROVIDED, that:

(a) with respect to the holders of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock, such agreement
shall only apply to the first Registration Statement covering Common Stock to
be sold by or on behalf of the Company to the public in an underwritten
offering;

(b) with respect to the holders of Series D Preferred
Stock, such agreement shall only apply to the first Registration Statement
covering Common Stock to be sold by or on behalf of the Company to the public
in an underwritten public offering, PROVIDED, HOWEVER, that if all officers,
directors and holders of 5% or more of the outstanding Common Stock of the
Company (on an as-converted basis) shall enter into such an agreement with
respect to the second Registration Statement covering Common Stock to be sold
by or on behalf of the Company to the public in an underwritten public
offering, the holders of the Series D Preferred Stock shall enter into a
similar agreement as such other holders; and

(c) subject to Section 8(b), all officers and directors of
the Company and all selling stockholders in such offering enter into
agreements similar to the agreements of holders of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock.

9. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. The Company shall
not, without the prior written consent of Purchasers holding 66 2/3% of the
Registrable Shares held by all Purchasers, enter into any agreement (other than
this Agreement) with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder (a) to include
securities of the Company in any Registration Statement upon terms which are
more favorable to such holder or prospective holder than the terms on which
holders of Registrable Shares may include shares in such registration, or (b) to
make a demand registration which could result in such registration statement
being declared effective prior to November 18, 2000.

10. RULE 144 REQUIREMENTS. After the earliest of (a) the closing of the
sale of securities of the Company pursuant to a Registration Statement, (b) the
registration by the Company of a class of securities under Section 12 of the
Exchange Act, or (c) the issuance by the Company of an offering circular
pursuant to Regulation A under the Securities Act, the Company agrees to:

(i) comply with the requirements of Rule 144(c) under the
Securities Act with respect to current public information about the Company;

(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and
<PAGE>

-12-

(iii) furnish to any holder of Registrable Shares upon request
(A) a written statement by the Company as to its compliance with the
requirements of said Rule 144(c), and the reporting requirements of the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), (B) a copy of the most recent annual or quarterly
report of the Company, and (C) such other reports and documents of the Company
as such holder may reasonably request to avail itself of any similar rule or
regulation of the Commission allowing it to sell any such securities without
registration.

ARTICLE IV
RIGHT OF FIRST REFUSAL

1. RIGHT OF FIRST REFUSAL

(a) The Company shall not issue, sell or exchange, agree to
issue, sell or exchange, or reserve or set aside for issuance, sale or exchange,
(i) any shares of its Common Stock, (ii) any other equity securities of the
Company, including, without limitation, shares of preferred stock, (iii) any
option, warrant or other right to subscribe for, purchase or otherwise acquire
any equity securities of the Company, or (iv) any debt securities convertible
into capital stock of the Company (collectively, the "OFFERED SECURITIES"),
unless in each such case the Company shall have first complied with Article IV
of this Agreement. The Company shall deliver to each Purchaser and Founder a
written notice of any proposed or intended issuance, sale or exchange of Offered
Securities (the "OFFER"), which Offer shall (i) identify and describe the
Offered Securities, (ii) describe the price and other terms upon which they are
to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (iii) identify the persons or
entities, if known, to which or with which the Offered Securities are to be
offered, issued, sold or exchanged, and (iv) offer to issue and sell to or
exchange with such Purchaser or Founder (A) such portion of the Offered
Securities as is equal to (1) 75% of the Offered Securities multiplied by (2) a
fraction the numerator of which is the aggregate number of shares of Common
Stock issued or issuable upon conversion of the Shares held by such Purchaser or
Founder and the denominator of which is the total number of shares of Common
Stock issued or issuable upon conversion of the Shares held by all Purchasers
and Founders as a group (the "BASIC AMOUNT"), and (B) such additional portion of
the Offered Securities as such Purchaser or Founder shall indicate it will
purchase or acquire should the other Purchasers and Founders subscribe for less
than their Basic Amounts (the "UNDERSUBSCRIPTION AMOUNT"). Each Purchaser or
Founder shall have the right, for a period of 20 days following delivery of the
Offer, to purchase or acquire, at the price and upon the other terms specified
in the Offer, the number or amount of Offered Securities described above. The
Offer by its terms shall remain open and irrevocable for such 20-day period.

(b) To accept an Offer, in whole or in part, a Purchaser or
Founder must deliver a written notice to the Company prior to the end of the
20-day period of the Offer, setting forth the portion of such Purchaser's Basic
Amount that such Purchaser or Founder elects to purchase and, if such Purchaser
or Founder shall elect to purchase all of
<PAGE>

-13-

its Basic Amount, the Undersubscription Amount (if any) that such Purchaser or
Founder elects to purchase (the "NOTICE OF ACCEPTANCE"). If the Basic Amounts
subscribed for by all Purchasers and Founders are less than the total Basic
Amounts, then each Purchaser or Founder who has set forth an Undersubscription
Amount in its Notice of Acceptance shall be entitled to purchase, in addition to
the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
for; PROVIDED, HOWEVER, that should the Undersubscription Amounts subscribed for
exceed the difference between the total Basic Amounts and the Basic Amounts
subscribed for (the "Available Undersubscription Amount"), each Purchaser or
Founder who has subscribed for any Undersubscription Amount shall be entitled to
purchase only that portion of the Available Undersubscription Amount as the
Undersubscription Amount subscribed for by such Purchaser or Founder bears to
the total Undersubscription Amounts subscribed for by all Purchasers and
Founders, subject to rounding by the Board of Directors to the extent it
reasonably deems necessary.

(c) In the event that Notice of Acceptances are not given by
Purchasers and Founders in respect of all the Offered Securities, the Company
shall have 90 days from the expiration of the 20-day period set forth in Article
IV, Section 1(a) to issue, sell or exchange all or any part of such Offered
Securities as to which a Notice of Acceptance has not been given by the
Purchasers and Founders (the "REFUSED SECURITIES"), but only to the offerees or
purchasers described in the Offer and only upon terms and conditions (including,
without limitation, unit prices and interest rates) which are not more
favorable, in the aggregate, to the acquiring person or persons or less
favorable to the Company than those set forth in the Offer.

(d) In the event the Company shall propose to sell less than
all the Refused Securities (any such sale to be in the manner and on the terms
specified in Article IV, Section 1(c)), then each Purchaser or Founder may, at
its sole option and in its sole discretion, reduce the number or amount of the
Offered Securities specified in its Notice of Acceptance to an amount that shall
be not less than the number or amount of the Offered Securities that the
Purchaser or Founder elected to purchase pursuant to Article IV, Section 1(b)
multiplied by a fraction, (i) the numerator of which shall be the number or
amount of Offered Securities the Company actually proposes to issue, sell or
exchange (including Offered Securities to be issued or sold to Purchasers and
Founders pursuant to Article IV, Section 1(b) prior to such reduction) and (ii)
the denominator of which shall be the amount of all Offered Securities. In the
event that a Purchaser or Founder so elects to reduce the number or amount of
Offered Securities specified in its Notice of Acceptance, the Company may not
issue, sell or exchange more than the reduced number or amount of the Offered
Securities unless and until such securities have again been offered to the
Purchasers and Founders in accordance with Article IV, Section 1(a).

(e) Upon the closing of the issuance, sale or exchange of all
or less than all the Refused Securities, the Purchasers and Founders shall
acquire from the Company, and the Company shall issue to the Purchasers and
Founders, the number or amount of Offered Securities specified in the Notices of
Acceptance, as reduced pursuant
<PAGE>

-14-

to Article IV, Section 1(d) if the Purchasers and Founders have so elected, upon
the terms and conditions specified in the Offer. The purchase by the Purchasers
and Founders of any Offered Securities is subject in all cases to the
preparation, execution and delivery by the Company and the Purchasers and
Founders of a purchase agreement relating to such Offered Securities reasonably
satisfactory in form and substance to the Purchasers and Founders and the
Company.

(f) Any Offered Securities not acquired by the Purchasers and
Founders or other persons in accordance with Article IV, Section 1(c) may not be
issued, sold or exchanged until they are again offered to the Purchasers and
Founders under the procedures specified in this Article.

2. EXCLUDED ISSUANCES. The rights of the Purchasers and Founders under
this Article IV shall not apply to:

(a) Common Stock issued as a stock dividend to holders of
Common Stock or upon any subdivision or combination of shares of Common Stock;

(b) the issuance of any shares of Common Stock upon conversion
of outstanding shares of convertible preferred stock;

(c) up to 16,250,000 shares of Common Stock, either issued in
the form of restricted stock awards or options exercisable for Common Stock
(subject to appropriate adjustment for stock split, stock dividends,
combinations and other similar recapitalizations affecting such shares), plus
such additional number of shares as may be approved by both the Board of
Directors of the Company and a majority of the non-employee directors of the
Company, issued or issuable to officers, directors, consultants and employees of
the Company or any subsidiary pursuant to any plan, agreement or arrangement
approved by the Board of Directors of the Company;

(d) securities issued solely in consideration for the
acquisition (whether by merger or otherwise) by the Company or any of its
subsidiaries of all or substantially all of the stock or assets of any other
entity; or

(e) shares of Common Stock sold by the Company in an
underwritten public offering pursuant to an effective registration statement
under the Securities Act.

ARTICLE V
GENERAL

1. TERMINATION. Article II and Article IV of this Agreement shall
terminate in their entirety with respect to any one or more applicable series of
the Company's Preferred Stock upon the earlier of (a) an Acquisition (as defined
below), or (b) the closing of an Initial Public Offering, or (c) the redemption
of all Shares. An "ACQUISITION" shall mean any (i) merger or consolidation which
results in the voting securities of the Company outstanding immediately prior
thereto representing
<PAGE>

-15-

immediately thereafter (either by remaining outstanding or by being converted
into voting securities of the surviving or acquiring entity) less than a
majority of the combined voting power of the voting securities of the Company or
such surviving or acquiring entity outstanding immediately after such merger or
consolidation, (ii) sale of all or substantially all the assets of the Company
or (iii) sale of shares of capital stock of the Company, in a single transaction
or series of related transactions, representing at least 80% of the voting power
of the voting securities of the Company.

2. TRANSFER OF RIGHTS.

(a) This Agreement, and the rights and obligations of a Series A
Purchaser hereunder, may be assigned by such Series A Purchaser to any person or
entity to which at least 355,000 Shares, as adjusted for stock splits, stock
dividends, recapitalizations and similar events (or 100% of the Shares
originally purchased by such Purchaser under the Series A Preferred Stock
Purchase Agreement of November 18, 1997, if less than 355,000 Shares), are
transferred by such Purchaser, and such transferee shall be deemed an "Series A
Purchaser" for purposes of this Agreement; PROVIDED that the transferee provides
written notice of such assignment to the Company and agrees to be bound by the
terms and conditions set forth herein.

(b) This Agreement, and the rights and obligations of a Series B
Purchaser hereunder, may be assigned by such Series B Purchaser to any person or
entity to which at least 157,214 Shares, as adjusted for stock splits, stock
dividends, recapitalizations and similar events (or 100% of the Shares
originally purchased by such Series B Purchaser under the Series B Preferred
Stock Purchase Agreement of September 23, 1998, if less than 157,214 Shares),
are transferred by such Series B Purchaser, and such transferee shall be deemed
an "Series B Purchaser" for purposes of this Agreement; PROVIDED that the
transferee provides written notice of such assignment to the Company and agrees
to be bound by the terms and conditions set forth herein.

(c) This Agreement, and the rights and obligations of a Series C
Purchaser hereunder, may be assigned by such Series C Purchaser to any person or
entity to which at least 107,563 Shares, as adjusted for stock splits, stock
dividends, recapitalizations and similar events (or 100% of the Shares
originally purchased by such Series C Purchaser under the Series C Preferred
Stock Purchase Agreement of September 10, 1999, if less than 107,563 Shares),
are transferred by such Series C Purchaser, and such transferee shall be deemed
an "Series C Purchaser" for purposes of this Agreement; PROVIDED that the
transferee provides written notice of such assignment to the Company and agrees
to be bound by the terms and conditions set forth herein.

-16-

transferred by such Series D Purchaser, and such transferee shall be deemed a
"Series D Purchaser" for purposes of this Agreement; PROVIDED that the
transferee provides written notice of such assignment to the Company and agrees
to be bound by the terms and conditions set forth herein.

3. SEVERABILITY. The provisions of this Agreement are severable, so
that the invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other term or provision of this
Agreement, which shall remain in full force and effect.

4. SPECIFIC PERFORMANCE. In addition to any and all other remedies that
may be available at law in the event of any breach of this Agreement, the
Purchasers and the Founders shall be entitled to specific performance of the
agreements and obligations of the other parties hereunder and to such other
injunctive or other equitable relief as may be granted by a court of competent
jurisdiction.

5. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware (without
reference to the conflicts of law provisions thereof).

6. NOTICES. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered by hand, sent
via a reputable nationwide overnight courier service or mailed by first class
certified or registered mail, return receipt requested, postage prepaid:

If to the Company, at Sonus Networks, Inc., 5 Carlisle Road, Westford,
MA 01886, Attn: President, or at such other address or addresses as may have
been furnished in writing by the Company to the Purchasers, with a copy to
Bingham Dana LLP, Boston, MA 02110, Attn: David L. Engel, Esq.;

If to a Purchaser, at its address as set forth the signature pages
hereto, or at such other address or addresses as may have been furnished to the
Company in writing by such Purchaser, with a copy to Gibson, Dunn & Crutcher
LLP, Attn: Peter Heilmann, Esq.; or

If to a Founder, at his address as set forth on the signature page
hereto, or at such other address or addresses as may have been furnished by such
Founder to the Company and the Purchasers.

Notices provided in accordance with this Article V, Section 6 shall be
deemed delivered upon personal delivery, one business day after being sent via a
reputable nationwide overnight courier service, or five business days after
deposit in the mail.
<PAGE>
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7. COMPLETE AGREEMENT; AMENDMENTS.

(a) This Agreement constitutes the full and complete agreement
of the parties hereto with respect to the subject matter hereof and supercedes
the Original Agreement, the Restated Agreement and the Second Restated Agreement
in their entirety.

(b) This Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) at any time by a written
instrument signed by the Company, Purchasers holding at least 66 2/3% of the
shares of Common Stock issued or issuable upon conversion of the Shares, and,
with respect to any amendment to Article II, Founders holding a majority, by
voting power, of the shares of capital stock of the Company held by Founders
then employed by the Company, provided that no consent shall be required for an
amendment pursuant to Section 11 below. No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.

8. PRONOUNS. Whenever the content may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and
vice versa.

9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute one Agreement binding on all the parties hereto.

10. CAPTIONS. Captions of sections have been added only for convenience
and shall not be deemed to be a part of this Agreement.

11. ADDITION OF PURCHASERS. Each purchaser of Series A Preferred Stock
of the Company under the Series A Preferred Stock Purchase Agreement of November
18, 1997 shall become a party to and a Series A Purchaser under this Agreement
upon its execution of a counterpart signature page to this Agreement. Each
purchaser of Series B Preferred Stock of the Company under the Series B
Preferred Stock Purchase Agreement of September 23, 1998 shall become a party to
and a Series B Purchaser under this Agreement upon its execution of a
counterpart signature page to this Agreement. Each purchaser of Series C
Preferred Stock of the Company under the Series C Preferred Stock Purchase
Agreement of September 10, 1999 shall become a party to and a Series C Purchaser
under this Agreement upon its execution of a counterpart signature page to this
Agreement. Each purchaser of Series D Preferred Stock of the Company under the
Purchase Agreement shall become a party to and a Series D Purchaser under this
Agreement upon the closing of its purchase of Series D Preferred Stock
thereunder and its execution of a counterpart signature page to this Agreement.
<PAGE>

IN WITNESS WHEREOF, this Agreement has been executed as an instrument
under seal as of the date first above written.

COMPANY

Sonus Networks, Inc.

By: /s/ Hassan Ahmed
--------------------------------
Hassan Ahmed
President

FOUNDERS:

/s/ Rubin Gruber
---------------------------------
Rubin Gruber
709 Sudbury Road
Concord, MA 01742

/s/ Michael G. Hluchyj
---------------------------------
Michael G. Hluchyj
27 Jackson Road
Wellesley, MA 02181

/s/ Kwok P. Wong
---------------------------------
Kwok P. Wong
22 Thoreau Road
Lexington, MA 02173

/s/ Hassan Ahmed
---------------------------------
Hassan Ahmed
3 Andover Country Club Lane
North Andover, MA 01810

PURCHASERS:

BroadBand Office, Inc.
2900 Telestar Court
Falls Church, VA 22042

By: /s/ Johnson Agogbua
-------------------------------------
Name: Johnson Agogbua
Title: Vice President, Engineering
<PAGE>

Credit Suisse First Boston Venture Fund I, L.P.
2400 Hanover Street
Palo Alto, CA

By: QBB Management I, LLC, its General Partner

By: /s/ Frank Quattrone
-----------------------------------
Name: Frank Quattrone
Title: Member

Time Warner Telecom Inc.
10475 Park Meadows Drive
Suite 4400
Littleton, CO 80124

By: /s/ Paul B. Jones
-----------------------------------
Name: Paul B. Jones
Title: Senior Vice President
General Counsel & Regulatory Policy

ICI Capital LLC
3625 Queen Palm Drive
Tampa, FL 33611

By: /s/ Raymond L. Lawless
-------------------------------------
Name: Raymond L. Lawless
Title: Vice President and Treasurer

Williams Communications, Inc.
One Williams Center
Tulsa, OK 74172

By: /s/ Dell B. [ILLEGIBLE]
-----------------------------------
Name:
Title:

Global Crossing Ventures, Inc.
141 Caspian Court
Sunnyvale, CA 94089

By: /s/ Michael Cohen
--------------------------------------
Name:
Title:
<PAGE>

Z-Tel Technologies, Inc.
601 S. Harbour Island Blvd.
Suite 220
Tampa, FL 33602

By: /s/ Eduard J. Mayer
--------------------------------------
Name: Eduard J. Mayer
Title: President

Tailwind Capital Partners 2000, L.P.
c/o Thomas Weisel Partners
One Montgomery Street, Suite 3700
San Francisco, CA 94104

By: Thomas Weisel Capital Partners LLC,
its General Partner

By: /s/ Marianne Winkler
---------------------------------------
Name: Marianne Winkler
Title: CFO

Hambrecht & Quist California
One Bush Street
San Francisco, CA 94104

By: /s/ Thomas Szymoniak
----------------------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact

Hambrecht & Quist California
One Bush Street
San Francisco, CA 94104

By: /s/ Thomas Szymoniak
----------------------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact

H&Q Employee Venture Fund 2000, L.P.
One Bush Street
San Francisco, CA 94104

By: H&Q Venture Management LLC, its General Partner

By: /s/ Thomas Szymoniak
-----------------------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact
<PAGE>

Access Technology Partners, L.P.
One Bush Street
San Francisco, CA 94104

By: Access Technology Management LLC, its General Partner

By: /s/ Thomas Szymoniak
------------------------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact

Access Technology Partners Brokers Fund, L.P.
One Bush Street
San Francisco, CA 94104

By: H&Q Venture Management, LLC, its General Partner

By: /s/ Thomas Szymoniak
------------------------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact

Viatel, Inc.
685 Third Avenue,
New York, NY 10017

By: /s/ Sheldon M. Goldman
-------------------------------------
Name: Sheldon M. Goldman
Title: EVP

VYTL, LLC
685 Third Avenue,
New York, NY 10017

By: /s/ Sheldon M. Goldman
-------------------------------------
Name: Sheldon M. Goldman
Title:

Eagle Teleprograms, Inc.
60 East 56th Street
New York, NY 10022

By: /s/ Kent Srikanth Chargundla
-------------------------------------
Name: Kent Srikanth Chargundla
Title: Chairman

<PAGE>

U.S. Bancorp Piper Jaffray ECM Fund I, LLC
22 South Ninth Street
Minneapolis, MN 55402

By: /s/ John Jacobs
-------------------------------------
Name: John Jacobs
Title: Managing Member

GD&C Partners 2000 Fund, LLC
333 South Grand Avenue
Los Angeles, CA 90071

By: /s/ [ILLEGIBLE]
--------------------------------
Name:
Its: Manager

<PAGE>

River Partners I
c/o Tim Walsh
1221 Avenue of the Americas
New York, NY 10020

By: /s/ Tim Walsh
------------------------------------
Name: Tim Walsh
Title: Managing Director

Carrier 1
____________________
____________________
____________________

By:
------------------------------------
Name:
Title:

Whitman Partners, L.P.
____________________
____________________

By: /s/ [ILLEGIBLE]
------------------------------------
Name:
Title: Manager

SERIES A PURCHASERS, SERIES B PURCHASERS AND SERIES C PURCHASERS:

<TABLE>
<S> <C>
North Bridge Venture Partners II, L.P. North Bridge Venture Partners III, L.P.
950 Winter Street, Suite 4600 950 Winter Street, Suite 4600
Waltham, MA 02451 Waltham, MA 02451

By: North Bridge Venture Management II, L.P., By: North Bridge Venture Management III, L.P.,
its General Partner its General Partner

By: /s/ Edward T. Anderson By: /s/ Edward T. Anderson
------------------------------------ -----------------------------------
Edward T. Anderson Edward T. Anderson
General Partner General Partner
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Matrix Partners V, L.P. Matrix V Entrepreneurs Fund, L.P.
Bay Colony Corporate Center Bay Colony Corporate Center
1000 Winter Street, Suite 4500 1000 Winter Street, Suite 4500
Waltham, MA 02154 Waltham, MA 02154

By: Matrix V Management Co., LLC, By: Matrix V Management Co., LLC,
its General Partner its General Partner

By: /s/ Paul J. Ferri By: /s/ Paul J. Ferri
------------------------------------- ------------------------------------
Name: Name:
Title: Title:

Charles River Partnership VIII, Charles River VIII-A LLC
A Limited Partnership 1000 Winter Street, Suite 3300
1000 Winter Street, Suite 3300 Waltham, MA 02154
Waltham, MA 02154

By: Charles River VIII GP Limited Partnership, By: Charles River Friends VII, Inc.,
its General Partner its Manager

By: /s/ Richard M. Burnes By: /s/ Richard M. Burns
------------------------------------- -------------------------------------
Richard M. Burnes Name:
General Partner Title:

Bedrock Capital Partners I, L.P.
c/o Volpe Brown Whelan & Company LLC
One Boston Place
Suite 3310
Boston, MA 02108

By: Bedrock General Partner I, LLC, General Partner

By: /s/ J.M. [ILLEGIBLE]
----------------------------------
Name:
Title:

VBW Employee Bedrock Fund, L.P.
c/o Volpe Brown Whelan & Company LLC
One Boston Place
Suite 3310
Boston, MA 02108

By: Bedrock General Partner I, LLC, General Partner

By: /s/ J.M. [ILLEGIBLE]
-----------------------------------
Name:
Title:
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Credit Suisse First Boston Bedrock Fund, L.P.
c/o Volpe Brown Whelan & Company LLC
One Boston Place
Suite 3310
Boston, MA 02108

By: Bedrock General Partner I, L.P.
Title: Attorney-in-Fact

By: /s/ J.M. [ILLEGIBLE]
------------------------------------
Name:
Title:
</TABLE>

<PAGE>

Exhibit 10.9

THIRD AMENDED AND RESTATED
RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT

This Third Amended and Restated Right of First Refusal and Co-Sale
Agreement (this "AGREEMENT"), dated as of March 9, 2000, is entered into by and
among Sonus Networks, Inc., a Delaware corporation (the "COMPANY"), the persons
and entities listed on the signature pages hereto under the heading "Purchasers"
(individually, a "PURCHASER" and, collectively, the "PURCHASERS"), and Hassan
Ahmed, Rubin Gruber, Michael G. Hluchyj and Kwok P. Wong (individually, a
"FOUNDER" and, collectively, the "FOUNDERS").

WHEREAS, on November 18, 1997, the Company, certain of the Purchasers (the
"SERIES A PURCHASERS") and the Founders entered into a Right of First Refusal
and Co-Sale Agreement (the "ORIGINAL AGREEMENT") to protect the management and
control of the Company from influence by any person not acceptable to the
Company and the Series A Purchasers and to assist the Series A Purchasers in
selling their Shares (as defined below) if they so desired;

WHEREAS, in connection with the purchase and sale of 3,144,287 shares of
Series B Convertible Preferred Stock, $0.01 par value per share, of the Company
(the "SERIES B PREFERRED STOCK"), by certain of the Purchasers (the "SERIES B
PURCHASERS"), the Company and the Series B Purchasers entered into an Amended
and Restated Right of First Refusal and Co-Sale Agreement, dated as of September
23, 1998 (the "RESTATED AGREEMENT"); and

WHEREAS, in connection with the purchase and sale of 1,939,681 shares of
Series C Convertible Preferred Stock, $0.01 par value per share, of the Company
(the "SERIES C PREFERRED STOCK"), by certain of the Purchasers (the "SERIES C
PURCHASERS"), the Company and the Series C Purchasers entered into a Second
Amended and Restated Right of First Refusal and Co-Sale Agreement, dated as of
September 10, 1999 (the "SECOND RESTATED AGREEMENT"); and

WHEREAS, in connection with the purchase and sale of up to 1,585,366
shares of Series D Convertible Preferred Stock, $.01 par value per share, of the
Company (the "SERIES D PREFERRED STOCK"), by certain of the Purchasers (the
"SERIES D PURCHASERS"), the parties hereto desire to amend and restate the
Second Restated Agreement so that the Series D Purchasers have substantially the
same rights and obligations the Series A Purchasers, the Series B Purchasers and
the Series C Purchasers had under the Second Restated Agreement, respectively
(the terms of this Agreement to supersede the terms of the Second Restated
Agreement in their entirety).

NOW, THEREFORE, for valuable consideration, it is agreed as follows:

1. RESTRICTIONS ON TRANSFER.

1.1 Any sale, assignment, transfer or other disposition, whether
voluntarily or by operation of law (collectively, "TRANSFER"), of any of the
Shares (as defined below) by a Founder other than according to the terms of this
Agreement, shall be void and shall transfer no right, title, or interest in or
to any of such Shares to the purported transferee. As used in this Agreement,
the term "SHARES" shall include all shares of capital stock of the Company held
by the Founders or the Purchasers, whether now owned or hereafter acquired. For
purposes of

<PAGE>

-2-

calculating a Purchaser's pro rata ownership of Shares, all shares of Series A
Convertible Preferred Stock, $0.01 par value per share ("SERIES A PREFERRED
STOCK"), Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock of the Company shall be deemed to have been converted into
shares of Common Stock of the Company.

1.2 Each Founder has presented or agrees to present the certificates
representing the Shares presently owned or hereafter acquired by him to the
Secretary of the Company and cause the Secretary to stamp on the certificate in
a prominent manner the following legend:

"The sale or other disposition of any of the shares represented by this
certificate is restricted by a Right of First Refusal and Co-Sale
Agreement among certain of the shareholders of this Corporation and
this Corporation (the "Agreement"). A copy of the Agreement is
available for inspection by a prospective purchaser without charge at
the office of the Secretary of the Corporation."

2. TRANSFERS NOT SUBJECT TO RESTRICTIONS.

A Founder may Transfer (i) any or all of his Shares to his parents,
spouse, children, stepchildren, grandchildren, siblings, brothers- or
sisters-in-law, cousins, nieces or nephews, or spouse of any such person, or to
a trust or similar estate- or tax-planning vehicle (including a family limited
partnership or a family limited liability company) established for the benefit
of any one or more of his parents, spouse, children, stepchildren,
grandchildren, siblings, brothers- or sisters-in-law, cousins, nieces or
nephews, or spouse of any such person, or himself or (ii) any or all of his
Shares under his will, without compliance with Sections 3 through 6 hereof;
PROVIDED in the case of each such Transfer that (i) the transferee delivers a
written instrument to the other parties hereto agreeing to be bound by the terms
hereof as if it were a Founder and (ii) the transferee grants its proxy to vote
such shares to such Founder or a legal representative of such Founder, PROVIDED,
HOWEVER, that such proxy need not be granted if such action would have an
adverse tax consequence on the Founder or the transferee.

3. OFFER OF TRANSFER; NOTICE OF PROPOSED TRANSFER.

If a Founder desires to Transfer any of his Shares, or any interest
in such Shares, in any transaction other than pursuant to Section 2 of this
Agreement, such Founder (a "SELLING STOCKHOLDER") shall first deliver written
notice of his desire to do so (the "NOTICE") to the Company and each Purchaser,
in the manner prescribed in Section 9.4 of this Agreement. The Notice must
specify: (i) the name and address of the party to which the Selling Stockholder
proposes to Transfer the Shares or an interest in the Shares (the "Offeror"),
(ii) the number of Shares the Selling Stockholder proposes to Transfer (the
"OFFERED SHARES"), (iii) the consideration per Share to be delivered to the
Selling Stockholder for the proposed Transfer, and (iv) all other material terms
and conditions of the proposed transaction.

4. COMPANY'S OPTION TO PURCHASE.

4.1 The Company shall have the first option to purchase all or any
part of the Offered Shares for the consideration per share and on the terms and
conditions specified in the Notice. The Company must exercise such option, no
later than 15 days after such Notice is

<PAGE>

-3-

deemed under Section 9.4 hereof to have been delivered to it, by written notice
to the Selling Stockholder.

4.2 In the event the Company does not exercise its option within such
15-day period with respect to all of the Offered Shares, the Secretary of the
Company shall, by the last day of such period, give written notice of that fact
to each Purchaser (the "COMPANY NOTICE"). The Company Notice shall specify the
number of Offered Shares not purchased by the Company (the "REMAINING SHARES").

4.3 In the event the Company duly exercises its option to purchase
all or part of the Offered Shares, the closing of such purchase shall take place
at the offices of the Company on the later of (i) the date five days after the
expiration of such 15-day period or (ii) the date that the Purchasers consummate
their purchase of Offered Shares under Section 5 hereof.

4.4 To the extent that the consideration proposed to be paid by the
Offeror for the Offered Shares consists of property other than cash or a
promissory note, the consideration required to be paid by the Company and/or the
Purchasers exercising their options under Sections 4 and 5 hereof may consist of
cash equal to the value of such property, as determined in good faith by
agreement of the Selling Stockholder and the Company and/or the Purchasers
acquiring such Offered Shares.

4.5 Notwithstanding anything to the contrary herein, neither the
Company nor the Purchasers shall have any right to purchase any of the Offered
Shares hereunder unless the Company and/or the Purchasers exercise their option
or options to purchase all of the Offered Shares.

5.PURCHASERS' OPTION TO PURCHASE.

5.1 Each Purchaser and Founder other than the Selling Stockholder
shall have an option, exercisable for a period of 15 days from the date of
delivery of the Company Notice, to purchase its pro rata share of the Remaining
Shares for the consideration per share and on the terms and conditions set forth
in the Notice. Such option shall be exercised by delivery of written notice to
the Secretary of the Company. Alternatively, if the Selling Stockholder is a
Significant Selling Stockholder (as defined below), each Purchaser and Founder
other than the Selling Stockholder may within the same 15-day period notify the
Secretary of the Company and the Significant Selling Stockholder of its desire
to participate in the sale of the Shares on the terms set forth in the Notice,
and the number of Shares it proposes to sell. A "SIGNIFICANT SELLING
STOCKHOLDER" shall mean any Founder who (together with his parents, spouse,
children, stepchildren, grandchildren, siblings, brothers- or sisters-in-law,
cousins, nieces or nephews, or spouse of any such person, and any trust or
similar estate- or tax-planning vehicle (including a family limited partnership
or a family limited liability company) established for the benefit of any one or
more of his parents, spouse, children, stepchildren, grandchildren, siblings,
brothers- or sisters-in-law, cousins, nieces or nephews, or spouse of any such
person, or himself) owns, after giving effect to the conversion of all
convertible preferred stock into Common Stock, at least 1,000,000 shares of
Common Stock (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other similar recapitalizations affecting such
shares).

<PAGE>

-4-

5.2 In the event options to purchase have been exercised by
Purchasers and Founders with respect to some but not all of the Remaining
Shares, those Purchasers and Founders who have exercised their options within
the 15-day period specified in Section 5.1 shall have an additional option, for
a period of five days next succeeding the expiration of such 15-day period, to
purchase all or any part of the balance of such Remaining Shares on the terms
and conditions set forth in the Notice, which option shall be exercised by the
delivery of written notice to the Secretary of the Company. In the event there
are two or more such Purchasers and Founders that choose to exercise the
last-mentioned option for a total number of Shares in excess of the number
available, the Shares available for each such Purchaser's and Founder's option
shall be allocated to such Purchaser and Founder pro rata based on the number of
Shares owned by the Purchasers and Founders so electing.

5.3 If the options to purchase the Remaining Shares are exercised in
full by the Purchasers and Founders, the Secretary of the Company shall promptly
notify all of the exercising Purchasers and Founders of that fact. The closing
of the purchase of the Remaining Shares shall take place at the offices of the
Company no later than five days after the date of such notice to the Purchasers.

6. FAILURE TO FULLY EXERCISE OPTIONS; CO-SALE.

6.1 If the Company and the Purchasers and Founders do not exercise
their options to purchase all of the Offered Shares within the periods described
in this Agreement (the "OPTION PERIOD"), then all options of the Company and the
Purchasers and Founders to purchase the Offered Shares, whether exercised or
not, shall terminate; but each Purchaser and Founder who has, pursuant to
Section 5, expressed a desire to sell Shares in the transaction ("PARTICIPANTS")
shall be entitled to do so pursuant to this Section. The Secretary of the
Company shall promptly, upon expiration of the Option Period, notify the
Significant Selling Stockholder of the aggregate number of Shares the
Participants wish to sell. The Significant Selling Stockholder shall use his or
its best efforts to interest the Offeror in purchasing, in addition to the
Offered Shares, the Shares the Participants wish to sell. If the Offeror does
not wish to purchase all of the Shares made available by the Significant Selling
Stockholder and the Participants, then each Participant and the Significant
Selling Stockholder shall be entitled to sell, at the price and on the terms and
conditions set forth in the Notice, a portion of the Shares being sold to the
Offeror, in the same proportion as the Significant Selling Stockholder or such
Participant's ownership of Shares bears to the aggregate number of Shares owned
by the Significant Selling Stockholder and the Participants. The transaction
contemplated by the Notice shall be consummated not later than 60 days after the
expiration of the Option Period.

6.2 The Selling Stockholder shall be entitled to sell to the Offeror,
according to the terms set forth in the Notice, that number of his Shares which
equals the difference between the number of Shares desired to be purchased by
the Offeror and (if applicable) the number of Shares the Participants wish to
sell in accordance with the provisions of Section 6.1 hereof. If the Selling
Stockholder wishes to Transfer any such Shares at a price per Share which
differs from that set forth in the Notice, upon terms different from those
previously offered to the Company and the Purchasers and Founders, or more than
60 days after the expiration of the Option Period, then, as a condition
precedent to such transaction, such Shares must first be offered to the Company
and the Purchasers and Founders on the same terms and conditions as given the
Offeror, and in accordance with the procedures and time periods set forth above.

<PAGE>

-5-

6.3 The proceeds of any sale made by the Selling Stockholder without
compliance with the provisions of this Section 6 shall be deemed to be held in
constructive trust in such amount as would have been due the Purchasers and
Founders if the Selling Stockholder had complied with this Agreement. The
contents of any such trust shall be delivered to the Purchasers and Founders
upon surrender of the applicable Shares to the Selling Stockholder.

7. TERMINATION OF AGREEMENT.

7.1 This Agreement shall terminate upon the earlier of the following
events:

(a) Any (i) merger or consolidation which results in the voting
securities of the Company outstanding immediately prior thereto representing
immediately thereafter (either by remaining outstanding or by being converted
into voting securities of the surviving or acquiring entity) less than a
majority of the combined voting power of the voting securities of the Company or
such surviving or acquiring entity outstanding immediately after such merger or
consolidation, (ii) sale of all or substantially all the assets of the Company
or (iii) sale of shares of capital stock of the Company, in a single transaction
or series of related transactions, representing at least 80% of the voting power
of the voting securities of the Company;

(b) The closing of the sale of shares of Common Stock in a firm
commitment underwritten public offering pursuant to a Registration Statement at
a price to the public of at least $19.68 per share (adjusted for stock splits,
stock dividends and similar events) resulting in proceeds to the Company (net of
the underwriting discounts and commissions and offering expenses) of at least
$25,000,000; or

(c) The redemption of all shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.

7.2 The provisions of Sections 3, 4, 5 and 6 hereof shall not apply
to sales of Shares pursuant to a transaction referred to in Sections 7.1(a) or
7.1(b) above.

8. TRANSFERS OF RIGHTS.

(a) This Agreement, and the rights and obligations of a Series A
Purchaser hereunder, may be assigned by such Series A Purchaser to any person or
entity to which at least 355,000 shares of Series A Preferred Stock, as adjusted
for stock splits, stock dividends, recapitalizations and similar events (or 100%
of the shares of Series A Preferred Stock originally purchased hereunder by such
Series A Purchaser, if less than 355,000 shares), are transferred by such Series
A Purchaser, and such transferee shall be deemed a "Series A Purchaser" for
purposes of this Agreement; provided that the transferee provides written notice
of such assignment to the Company and agrees to be bound by the terms and
conditions set forth herein.

(b) This Agreement, and the rights and obligations of a Series B
Purchaser hereunder, may be assigned by such Series B Purchaser to any person or
entity to which at least 157,214 shares of Series B Preferred Stock, as adjusted
for stock splits, stock dividends, recapitalizations and similar events (or 100%
of the shares of Series B Preferred Stock originally

<PAGE>

-6-

purchased hereunder by such Series B Purchaser, if less than 157,214 shares),
are transferred by such Series B Purchaser, and such transferee shall be deemed
a "Series B Purchaser" for purposes of this Agreement; provided that the
transferee provides written notice of such assignment to the Company and agrees
to be bound by the terms and conditions set forth herein.

(c) This Agreement, and the rights and obligations of a Series C
Purchaser hereunder, may be assigned by such Series C Purchaser to any person or
entity to which at least 107,653 shares of Series C Preferred Stock, as adjusted
for stock splits, stock dividends, recapitalizations and similar events (or 100%
of the shares of Series C Preferred Stock originally purchased hereunder by such
Series C Purchaser, if less than 107,653 shares), are transferred by such Series
C Purchaser, and such transferee shall be deemed a "Series C Purchaser" for
purposes of this Agreement; provided that the transferee provides written notice
of such assignment to the Company and agrees to be bound by the terms and
conditions set forth herein.

(d) This Agreement, and the rights and obligations of a Series D
Purchaser hereunder, may be assigned by such Series D Purchaser to any affiliate
of or fund managed by such Series D Purchaser without restriction or to any
person or entity to which at least 237,805 shares of Series D Preferred Stock,
as adjusted for stock splits, stock dividends, recapitalizations and similar
events (or 100% of the shares of Series D Preferred Stock originally purchased
hereunder by such Series D Purchaser, if less than 237,805 shares), are
transferred by such Purchaser, and such transferee shall be deemed a "Series D
Purchaser" for purposes of this Agreement; provided that the transferee provides
written notice of such assignment to the Company and agrees to be bound by the
terms and conditions set forth herein.

9. GENERAL.

9.1 SEVERABILITY. The provisions of this Agreement are severable, so
that the invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other term or provision of this
Agreement, which shall remain in full force and effect.

9.2 SPECIFIC PERFORMANCE. In addition to any and all other remedies
that may be available at law in the event of any breach of this Agreement, the
Purchasers shall be entitled to specific performance of the agreements and
obligations of the Company and the Founders hereunder and to such other
injunctive or other equitable relief as may be granted by a court of competent
jurisdiction.

9.3 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware.

9.4 NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
by hand, sent via a reputable nationwide overnight courier service or mailed by
first class certified or registered mail, return receipt requested, postage
prepaid:

If to the Company, at 5 Carlisle Road, Westford, MA 01886, Attn:
President, or at such other address or addresses as may have been furnished in
writing by the Company to the

<PAGE>

-7-

Purchasers, with a copy to Bingham Dana LLP, 150 Federal Street, Boston, MA
02110, Attn: David L. Engel, Esq.;

If to a Founder, at his address as set forth on the signature page
hereto or at such other address or addresses as may have been furnished to the
Company and the Purchasers in writing by such Founder.

Notices provided in accordance with this Section 9.4 shall be deemed
delivered upon personal delivery, one business day after being sent via a
reputable nationwide overnight courier service, or five business days after
deposit in the mail.

9.5 COMPLETE AGREEMENT; AMENDMENTS.

(a) This Agreement constitutes the full and complete agreement of the
parties hereto with respect to the subject matter hereof and supercedes the
Second Restated Agreement in its entirety. Notwithstanding the foregoing, each
Founder acknowledges that he is a party to a Stock Restriction Agreement with
the Company which imposes restrictions on the transfer of the shares issued
thereunder and a purchase option in favor of the Company which are in addition
the transfer restrictions and purchase rights set forth herein.

(b) No amendment, modification, termination or waiver (either general or
in a particular instance and either prospective or retrospective) of any
provision of this Agreement shall be valid unless in writing and signed by the
Company, Founders holding at least a majority by voting power of the shares of
capital stock held by the Founders, and the Purchasers holding at least 66 2/3%
of the shares of Common Stock issued or issuable upon conversion of the shares
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock held by the Purchasers, PROVIDED that no consent
shall be required for an amendment pursuant to Sections 9.9 or 9.10 below.

9.6 PRONOUNS. Whenever the content may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural, and vice
versa.

9.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute one Agreement binding on all the
parties hereto.

9.8 CAPTIONS. Captions of sections have been added only for convenience
and shall not be deemed to be a part of this Agreement.

9.9 ADDITION OF PURCHASERS. Each purchaser of Series A Preferred Stock of
the Company under the Series A Preferred Stock Purchase Agreement of November
18, 1997 shall become a party to and a Series A Purchaser under this Agreement
upon its execution of a counterpart signature page to this Agreement. Each
purchaser of Series B Preferred Stock of the Company under the Series B
Preferred Stock Purchase Agreement of September 23, 1998 shall

<PAGE>

-8-

become a party to and a Series B Purchaser under this Agreement upon the
execution of a counterpart signature page to this Agreement. Each purchaser of
Series C Preferred Stock of the Company under the Series C Preferred Stock
Purchase Agreement of September 10, 1999 shall become a party to and a Series C
Purchaser under this Agreement upon the execution of a counterpart signature
page to this Agreement. Each purchaser of Series D Preferred Stock of the
Company under the Series D Preferred Stock Purchase Agreement of even date
herewith shall become a party to and a Series D Purchaser under this Agreement
upon the closing of its purchase of Series D Preferred Stock thereunder and its
execution of a counterpart signature page to this Agreement.

9.10 ADDITIONAL PARTIES. The Company expects that it may issue Common
Stock, in the form of restricted stock, to additional key employees of the
Company (the "ADDITIONAL FOUNDERS"). The Company shall require that such
Additional Founder become a party to this Agreement by executing a counterpart
signature page hereto. The parties to this Agreement agree that, upon execution
by each Additional Founder of a counterpart signature page hereto, such
Additional Founder shall become a party hereto and shall be deemed a "Founder"
for all purposes hereof. Following the execution by an Additional Founder of a
counterpart signature page hereto, the Company shall promptly deliver to the
other parties hereto notice that such Additional Founder has become a party
hereto (which notice shall specify the number of shares of Common Stock issued
to such Additional Founder).

<PAGE>

IN WITNESS WHEREOF, this Agreement has been executed as an instrument
under seal as of the date first above written.

COMPANY

Sonus Networks, Inc.

By: /s/ Hassan Ahmed
------------------------------------
Hassan Ahmed
President

FOUNDERS:

/s/ Rubin Gruber
--------------------------------
Rubin Gruber
709 Sudbury Road
Concord, MA 01742

/s/ Michael G. Hluchyj
--------------------------------
Michael G. Hluchyj
27 Jackson Road
Wellesley, MA 02181

/s/ Kwok P. Wong
--------------------------------
Kwok P. Wong
22 Thoreau Road
Lexington, MA 02173

/s/ Hassan Ahmed
--------------------------------
Hassan Ahmed
3 Andover Country Club Lane
North Andover, MA 01810

PURCHASERS:

BroadBand Office, Inc.
2900 Telestar Court
Falls Church, VA 22042

By: /s/ Johnson Agogbua
-----------------------------
Name: Johnson Agogbua
Title: Vice President, Engineering

<PAGE>

Credit Suisse First Boston Venture Fund I, L.P.
2400 Hanover Street
Palo Alto, CA

By: QBB Management I, LLC, its General Partner

By: /s/ Frank Quattrone
---------------------------
Name: Frank Quattrone
Title: Member

Time Warner Telecom Inc.
10475 Park Meadows Drive
Suite 4400
Littleton, CO 80124

By: /s/ Paul B. Jones
---------------------------
Name: Paul B. Jones
Title: Senior Vice President
General Counsel & Regulatory Policy

ICI Capital LLC
3625 Queen Palm Drive
Tampa, FL 33611

By: /s/ Raymond L. Lawless
---------------------------
Name: Raymond L. Lawless
Title: Vice President and Treasurer

Williams Communications, Inc.
One Williams Center
Tulsa, OK 74172

By: /s/ Dell [ILLEGIBLE]
---------------------------
Name:
Title:

Global Crossing Ventures, Inc.
141 Caspian Court
Sunnyvale, CA 94089

By: /s/ Michael Cohen
---------------------------
Name:
Title:

<PAGE>

Z-Tel Technologies, Inc.
601 S. Harbour Island Blvd.
Suite 220
Tampa, FL 33602

By: /s/ Eduard J. Mayer
---------------------------
Name: Eduard J. Mayer
Title: President

Tailwind Capital Partners 2000, L.P.
c/o Thomas Weisel Partners
One Montgomery Street, Suite 3700
San Francisco, CA 94104

By: Thomas Weisel Capital Partners LLC,
its General Partner

By: /s/ Marianne Winkler
---------------------------
Name: Marianne Winkler
Title: CFO

Hambrecht & Quist California

One Bush Street
San Fransisco, CA 94104

By: /s/ Thomas Szymoniak
---------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact

Hambrecht & Quist California

One Bush Street
San Fransisco, CA 94104

By: /s/ Thomas Szymoniak
---------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact

H&Q Employee Venture Fund 2000, L.P.

One Bush Street
San Fransisco, CA 94104

By: H&Q Venture Management LLC, its General Partner

By: /s/ Thomas Szymoniak
---------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact

<PAGE>

Access Technology Partners, L.P.

One Bush Street
San Fransisco, CA 94104

By: Access Technology Management LLC, its General Partner

By: /s/ Thomas Szymoniak
---------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact

Access Technology Partners Brokers Fund, L.P.

One Bush Street
San Fransisco, CA 94104

By: H&Q Venture Management, LLC, its General Partner

By: /s/ Thomas Szymoniak
---------------------------
Name: Thomas Szymoniak
Title: Attorney-in-Fact

Viatel, Inc.
685 Third Avenue,
New York, NY 10017

By: /s/ Sheldon M. Goldman
---------------------------
Name: Sheldon M. Goldman
Title: EVP

VYTL, LLC
685 Third Avenue,
New York, NY 10017

By: /s/ Sheldon M. Goldman
---------------------------
Name: Sheldon M. Goldman
Title:

Eagle Teleprograms, Inc.

60 East 56th Street
New York, NY 10022

By: /s/ Kent Srikanth Chargundla
---------------------------
Name: Kent Srikanth Chargundla
Title: Chairman

<PAGE>

U.S. Bancorp Piper Jaffray ECM Fund I, LLC
22 South Ninth Street
Minneapolis, MN 55402

By: /s/ John Jacobs
------------------------------------
Name: John Jacobs
Title: Managing Member

GD&C Partners 2000 Fund, LLC
333 South Grand Avenue
Los Angeles, CA 90071

By: /s/ [ILLEGIBLE]
------------------------------------
Name:
Its: Manager

<PAGE>

River Partners I
c/o Tim Walsh
1221 Avenue of the Americas
New York, NY 10020

By: /s/ Tim Walsh
---------------------------
Name: Tim Walsh
Title: Managing Director

Carrier 1

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

By:
---------------------------
Name:
Title:

Whitman Partners, L.P.

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

By: /s/ [ILLEGIBLE]
---------------------------
Name:
Title:

SERIES A PURCHASERS, SERIES B PURCHASERS, AND SERIES C PURCHASERS;

<S> <C> <C>
North Bridge Venture Partners II, L.P. North Bridge Venture Partners III, L.P.
950 Winter Street, Suite 4600 950 Winter Street, Suite 4600
Waltham, MA 02451 Waltham, MA 02451

By: North Bridge Venture Management II, L.P., By: North Bridge Venture Management III, L.P.,
its General Partner its General Partner

By: /s/ Edward T. Anderson By: /s/ Edward T. Anderson
----------------------------------------- -----------------------------------
Edward T. Anderson Edward T. Anderson
General Partner General Partner

<PAGE>

By: Matrix V Management Co., LLC, By: Matrix V Management Co., LLC,
its General Partner its General Partner

By: /s/ Paul J. Ferri By: /s/ Paul J. Ferri
----------------------------------------- ----------------------------------------
Name: Name:
Title: Title:

Charles River Partnership VIII, Charles River VIII-A LLC
A Limited Partnership 1000 Winter Street, Suite 3300
1000 Winter Street, Suite 3300 Waltham, MA 02154
Waltham, MA 02154

By: Charles River VIII GP Limited Partnership, By: Charles River Friends VII, Inc.,
its General Partner its Manager

By: /s/ Richard M. Burnes By: Richard M. Burns
----------------------------------------- ----------------------------------------
Richard M. Burnes Name:
General Partner Title:

</TABLE>

Bedrock Capital Partners I, L.P.
c/o Volpe Brown Whelan & Company LLC
One Boston Place
Suite 3310
Boston, MA 02108

By: Bedrock General Partner I, LLC, General Partner

By: /s/ J.M. [ILLEGIBLE]
------------------------------------------
Name:
Title:

VBW Employee Bedrock Fund, L.P.
c/o Volpe Brown Whelan & Company LLC
One Boston Place
Suite 3310
Boston, MA 02108

By: Bedrock General Partner I, LLC, General Partner

By: /s/ J.M. [ILLEGIBLE]
------------------------------------------
Name:
Title:

<PAGE>

Credit Suisse First Boston Bedrock Fund, L.P.
c/o Volpe Brown Whelan & Company LLC
One Boston Place
Suite 3310
Boston, MA 02108

By: Bedrock General Partner I, L.P.
Title: Attorney-in-Fact

By: /s/ J.M. [ILLEGIBLE]
------------------------------------------
Name:
Title:

<PAGE>

Exhibit 10.10

LOAN AND SECURITY AGREEMENT

$1,500,000 EQUIPMENT LINE
PROVIDED BY
SILICON VALLEY BANK
TO
SONUS NETWORKS, INC.

March 6, 1998
<PAGE>

This LOAN AND SECURITY AGREEMENT is entered into as of March 6,1998, by
and between SILICON VALLEY BANK, a California-chartered bank with its principal
place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan
production office located at Wellesley Office Park, 40 William Street, Suite
350, Wellesley, MA 02181, doing business under the name Silicon Valley East
("Bank"), and SONUS NETWORKS, INC., a Delaware corporation with its principal
place of business at 5 Carlisle Road, Westford, Massachusetts 01886
("Borrower").

RECITALS

Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.

AGREEMENT

The parties agree as follows:

1. DEFINITIONS AND CONSTRUCTION

1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:

"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.

"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person that
is a limited liability company, such Person's managers and members.

"Bank Expenses" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents, (including fees and
expenses of appeal or review, or those incurred in any Insolvency Proceeding)
whether or not suit is brought.

"Borrower's Books" means all of Borrower's books and records
including, without limitation: ledgers; records concerning Borrower's assets or
liabilities, the Collateral, business operations or financial condition; and all
computer programs or tape files containing such information.

"Business Day" means any day that is not a Saturday, Sunday,
or other day on which banks in the State of California are authorized or
required to close.

"Closing Date" means the date of this Agreement.

"Code" means the Massachusetts Uniform Commercial Code.

"Collateral" means the property described on Exhibit A
attached hereto.

"Committed Equipment Line" means a credit extension of up to
ONE MILLION FIVE HUNDRED THOUSAND Dollars ($1,500,000).
<PAGE>

"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. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.

"Credit Extension" means each Equipment Advance or any other
extension of credit by Bank for the benefit of Borrower hereunder.

"Current Assets" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.

"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 Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Credit
Extensions made under this 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 Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.

"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.

"Equipment Advance" has the meaning set forth in Section
2.1.1.

"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.

"GAAP" means generally accepted accounting principles as in
effect in the United States from time to time.

"Indebtedness" means (a) all 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 and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations, but specifically excludes all redemption obligations of Borrower
pursuant to its redeemable preferred stock, whether now or in the future
authorized and outstanding.

"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.

"Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of

2
<PAGE>

Borrower, including such inventory as is temporarily out of its custody or
possession or in transit and including any returns upon any accounts or other
proceeds, including insurance proceeds, resulting from the sale or disposition
of any of the foregoing and any documents of title representing any of the
above.

"Investment" means any beneficial ownership of (including
stock, partnership interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.

"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.

"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.

"Loan Documents" means, collectively, this Agreement, any note
or notes executed by Borrower, and any other present or future agreement entered
into between Borrower and/or for the benefit of Bank in connection with this
Agreement, all as amended, extended or restated from time to time.

"Material Adverse Effect" means a material adverse effect on
(i) the business operations or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan Documents.

"Maturity Date" means June 5, 2002.

"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper.

"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement,
whether absolute or contingent, due or to become due, now existing or hereafter
arising, including any interest that accrues after the commencement of an
Insolvency Proceeding.

"Payment Date" means the FIFTH calendar day of each month
commencing on the first such date after the Closing Date and ending on the
Maturity Date.

"Permitted Indebtedness" means:

(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;

(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;

(d) Indebtedness to trade creditors incurred in the ordinary
course of business; and

(e) Indebtedness secured by Permitted Liens.

"Permitted Investment" means:

(a) Investments existing on the Closing Date disclosed in the
Schedule;

(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's

3
<PAGE>

Investors Service, Inc., and (iii) certificates of deposit maturing no more than
one (1) year from the date of investment therein issued by Bank; and

(c) Investments consisting of (i) travel and expense advances
to employees and other employee loans and advances in the ordinary course of
business in an aggregate amount not in excess of $50,000 outstanding at any time
and (ii) loans to employees, officers or directors of Borrower relating to the
purchase of equity securities of Borrower pursuant to employee stock purchase
plans approved by Borrower's Board of Directors.

"Permitted Liens" means the following:

(a) Any Liens existing on the Closing Date and disclosed in
the Schedule or arising under this Agreement or the other Loan Documents;

(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings and as to which adequate reserves are maintained on
Borrower's Books in accordance with GAAP, provided the same have no priority
over any of Bank's security interests;

(c) Liens (i) upon or in any Equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment, or (ii) existing on such Equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such Equipment;

(d) Liens on Equipment leased by Borrower or any Subsidiary
pursuant to an operating or capital lease in the ordinary course of business
(including proceeds thereof and accessions thereto) incurred solely for the
purpose of financing the lease of such Equipment (including Liens pursuant to
leases permitted pursuant to Section 7.1 and Liens arising from UCC financing
statements regarding leases permitted by this Agreement); and

(e) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (d) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.

"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.

"Prime Rate" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.

"Quick Assets" means, as of any applicable date, the
consolidated cash, cash equivalents, accounts receivable and investments with
maturities of fewer than 90 days of Borrower determined in accordance with GAAP.

"Responsible Officer" means each of the Chief Executive
Officer, the President, the Chief Financial Officer, the Treasurer and the
Controller of Borrower.

"Schedule" means the schedule of exceptions attached hereto,
if any.

"Subordinated Debt" means any debt incurred by Borrower that
is subordinated to the debt owing by Borrower to Bank on terms acceptable to
Bank (and identified as being such by Borrower and Bank).

4
<PAGE>

"Subsidiary" means with respect to any Person, a corporation,
partnership, company association, joint venture, or any other business entity of
which more than fifty percent (50%) of the voting stock or other equity
interests is owned or controlled, directly or indirectly, by such Person or one
or more Affiliates of such Person.

"Tangible Net Worth" means as of any applicable date, the
consolidated total assets of Borrower and its Subsidiaries minus, without
duplication, (i) the sum of any amounts attributable to (a) goodwill, (b)
intangible items such as unamortized debt discount and expense, patents, trade
and service marks and names, copyrights and research and development expenses
except prepaid expenses, and (c) all reserves not already deducted from assets
and (ii) Total Liabilities.

"Total Liabilities" means as of any applicable date, any date
as of which the amount thereof shall be determined, all obligations that should,
in accordance with GAAP be classified as liabilities on the consolidated balance
sheet of Borrower, including in any event all Indebtedness, but specifically
excluding Subordinated Debt and all redemption obligations of Borrower's
pursuant to its redeemable preferred stock, whether now or in the future
authorized and outstanding.

1.2 Accounting and Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP and all
calculations and determinations made hereunder shall be made in accordance with
GAAP. When used herein, the term "financial statements" shall include the notes
and schedules thereto, if any, subject to year-end adjustments for unaudited
financial statements. The terms "including"/ "includes" shall always be read as
meaning "including (or includes) without limitation", when used herein or in any
other Loan Document.

2. LOAN AND TERMS OF PAYMENT

2.1 Credit Extensions. Subject to and upon the terms and conditions
of this Agreement, Borrower promises to pay to the order of Bank, in lawful
money of the United States of America, at such place as Bank may reasonably
designate, the aggregate unpaid principal amount of all Credit Extensions made
by Bank to Borrower hereunder. Borrower shall also pay interest on the unpaid
principal amount of such Credit Extensions at rates in accordance with the terms
hereof.

2.1.1 Equipment Advances.

(a) At any time from the date hereof through JUNE 30,
1998, Borrower may from time to time request advances from Bank in an aggregate
amount not to exceed ONE MILLION AND NO/100THS DOLLARS ($1,000,000) to finance
Equipment purchased after JULY 1,1997 and prior to JULY 1, 1998.

(b) At any time after JUNE 30, 1998 through DECEMBER
31,1998, Borrower may from time to time request advances from Bank in an
aggregate amount not to exceed the Committed Equipment Line less any advances
made under Section 2.1.1(a) of this Agreement, to finance Equipment purchased
after JUNE 1, 1998 and prior to JANUARY 1, 1999.

(c) The advances under Sections 2.1.1(a) and 2.1.1(b) of
this Agreement (each an "Equipment Advance" and collectively, the "Equipment
Advances") shall not exceed ONE HUNDRED Percent (100%) of the invoice amount of
such equipment approved from time to time by Bank, excluding taxes, shipping,
warranty charges, freight discounts and installation expense. Software may,
however, constitute up to FORTY percent (40%) of aggregate Equipment Advances.

5
<PAGE>

Any Equipment Advances made under Section 2.1.1(b) of this Agreement that are
outstanding on JANUARY 1, 1999 will be payable in FORTY TWO (42) equal monthly
installments of principal, plus all accrued interest, beginning on the Payment
Date of each month commencing JANUARY 5,1999 and with the last payment due on
JUNE 5, 2002. Equipment Advances may be prepaid without penalty. Equipment
Advances, once repaid, may not be reborrowed.

(e) When Borrower desires to obtain an Equipment Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time one (1)
Business Day before the day on which the Equipment Advance is to be made. Such
notice shall be substantially in the form of Exhibit B. The notice shall be
signed by a Responsible Officer or its designee and include a copy of the
invoice(s) for the Equipment to be financed.

2.2 Interest Rates, Payments, and Calculations.

(a) Interest Rate. Except as set forth in Section 2.2(b), any
Credit Extensions shall bear interest, on the average daily balance thereof, at
a per annum rate equal to ONE-HALF (0.50) percentage points above the Prime
Rate.

(b) Default Rate. All Obligations shall bear interest, from
and after the occurrence of an Event of Default, at a rate equal to three (3)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.

(c) Payments. Interest hereunder shall be due and payable on
each Payment Date. Borrower hereby authorizes Bank to debit any accounts with
Bank, including, without limitation, Account Number 3300070686 for payments of
principal and interest due on the Obligations and any other amounts owing by
Borrower to Bank. Bank will notify Borrower of all debits which Bank has made
against Borrower's accounts. Any such debits against Borrower's accounts in no
way shall be deemed a set-off. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.

(d) Computation. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.

2.3 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment, whether directed to Borrower's deposit
account with Bank or to the Obligations or otherwise, shall be immediately
applied to conditionally reduce Obligations, but shall not be considered a
payment in respect of the Obligations unless such payment is of immediately
available federal funds or unless and until such check or other item of payment
is honored when presented for payment. Notwithstanding anything to the contrary
contained herein, any wire transfer or payment received by Bank after 12:00 noon
Pacific time shall be deemed to have been received by Bank as of the opening of
business on the immediately following Business Day. Whenever any payment to Bank
under the Loan Documents would otherwise be due (except by reason of
acceleration) on a date that is not a Business Day, such payment shall instead
be due on the next Business Day, and additional fees or interest, as the case
may be, shall accrue and be payable for the period of such extension.

2.4 Fees. Borrower shall pay to Bank the following:

(a) Financial Examination and Appraisal Fees. Bank's customary
fees and out-of-pocket expenses (not to exceed $1,500 per audit or appraisal,
unless an Event of Default has occurred and is continuing) for Bank's audits of
Borrower's Accounts, and for each appraisal of Collateral and financial analysis
and examination of Borrower performed from time to time by Bank or its agents,
provided that such audits and

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appraisals will be conducted no more often than every twelve (12) months unless
an Event of Default has occurred and is continuing;

(b) Bank Expenses. Upon demand from Bank, including, without
limitation, upon the date hereof, all Bank Expenses incurred through the date
hereof, including reasonable attorneys' fees and expenses, and, after the date
hereof, all Bank Expenses, including reasonable attorneys' fees and expenses, as
and when they become due.

2.5 Additional Costs. In case any law, regulation, treaty or
official directive or the interpretation or application thereof by any court or
any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law):

(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);

(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or

and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.

2.6 Term. Except as otherwise set forth herein, this Agreement shall
become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Maturity Date.
Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination of this Agreement, Bank's lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.

2.7 Application of Payment. Borrower irrevocably waives the right to
direct the application of any and all payments at any time hereafter received by
Bank from or on behalf of Borrower, and Borrower irrevocably agrees that Bank
shall have the continuing exclusive right to apply any and all such payments
against the then due and owing obligations of Borrower as Bank may deem
advisable. In the absence of a specific determination by Bank with respect
thereto, all payments shall be applied in the following order: (a) then due and
payable fees and expenses; (b) then due and payable interest payments and
mandatory prepayments; and (c) then due and payable principal payments and
optional prepayments.

3. CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:

(a) this Agreement duly executed by Borrower;

(b) a certificate of the Secretary of Borrower with respect to
charter, bylaws, incumbency and resolutions authorizing the execution and
delivery of this Agreement;

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(d) insurance certificate;

(e) payment of the fees and Bank Expenses then due specified
in Section 2.4 hereof;

(f) Certificate of Foreign Qualification (if applicable); and

(g) financial statements and a Certificate of Compliance as
required by Section 6.3 hereof.

3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:

(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and

(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, except to the extent any such
representation or warranty specifically relates to a prior date, and no Event of
Default shall have occurred and be continuing, or would result from such Credit
Extension. The making of each Credit Extension shall be deemed to be a
representation and warranty by Borrower on the date of such Credit Extension as
to the accuracy of the facts referred to in this Section 3.2(b).

4. CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest. Borrower grants and pledges to Bank
a continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt payment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule or with respect to Permitted Liens, such security interest constitutes
a valid, first priority security interest in the presently existing Collateral,
and will constitute a valid, first priority security interest in Collateral
acquired after the date hereof. Borrower acknowledges that Bank may place a
"hold" on any Deposit Account pledged as Collateral to secure the Obligations.
Notwithstanding termination of this Agreement, Bank's Lien on the Collateral
shall remain in effect for so long as any Obligations are outstanding.

4.2 Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.

4.3 Right to Inspect. Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.

5. REPRESENTATlONS AND WARRANTIES

Borrower represents and warrants as follows:

5.1 Due Organization and Qualification. Borrower and each Subsidiary
is a corporation duly existing and in good standing under the laws of its state
of incorporation and qualified and licensed to do

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business in, and is in good standing in, any state in which the conduct of its
business or its ownership of property requires that it be so qualified.

5.2 Due Authorization: No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Certificate of Incorporation or Bylaws, nor
will they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.

5.3 No Prior Encumbrances. Borrower has good and indefeasible title
to the Collateral, free and clear of Liens, except for Permitted Liens.

5.4 Merchantable Inventory. All Inventory is in all material
respects of good and marketable quality, free from all material defects, subject
to recorded reserves for obsolete inventory.

5.5 Name: Location of Chief Executive Office. Except as disclosed in
the Schedule, Borrower has not done business and will not without at least
thirty (30) days prior written notice to Bank do business under any name other
than that specified on the signature page hereof The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.

5.6 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending, or, to Borrower's knowledge, threatened by or
against Borrower or any Subsidiary before any court or administrative agency in
which an adverse decision could have a Material Adverse Effect or a material
adverse effect on Borrower's interest or Bank's security interest in the
Collateral.

5.7 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank on or about the Closing Date.

5.8 Solvency. The fair saleable value of Borrower's assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement; and Borrower is able to pay its
debts (including trade debts) as they mature.

5.9 Regulatory Compliance. Borrower and each Subsidiary has met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrowers incurring any
liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied in all material respects with all the
provisions of the Federal Fair Labor Standards Act. Borrower has not violated
any statutes, laws, ordinances or rules applicable to it, violation of which
could have a Material Adverse Effect.

5.10 Environmental Condition. None of Borrower's or any Subsidiary's
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrowers knowledge, without independent investigation, by previous
owners or operators, in the disposal of, or to produce, store, handle, treat,
release, or transport, any hazardous waste or hazardous substance other than in
accordance with applicable law; to the best of Borrower's knowledge, without
independent investigation, none of Borrower's properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a hazardous waste or hazardous substance disposal site, or a
candidate for closure pursuant to any environmental

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<PAGE>

protection statute; no lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned by
Borrower or any Subsidiary; and neither Borrower nor any Subsidiary has received
a summons, citation, notice, or directive from the Environmental Protection
Agency or any other federal, state or other governmental agency concerning any
action or omission by Borrower or any Subsidiary resulting in the release, or
other disposition of hazardous waste or hazardous substances into the
environment.

5.11 Taxes. Borrower and each Subsidiary has filed or caused to be
filed all tax returns required to be filed on a timely basis, or has duly and
timely filed for extensions with respect to same, and has paid, or has made
adequate provision for the payment of all taxes reflected therein.

5.12 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.

5.13 Government Consents. Borrower and each Subsidiary has obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted,
except where the failure to do so would not have a Material Adverse Effect.

5.14 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.

6. AFFIRMATIVE COVENANTS

Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:

6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.

6.2 Government Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.

6.3 Financial Statements, Reports, Certificates. (i) Borrower shall
deliver to Bank:

(a) as soon as available, but in any event within thirty (30)
days after the end of each month, a company prepared unaudited consolidated
balance sheet and unaudited income statement covering Borrowers consolidated
operations during such period, in a form and certified by an officer of Borrower
reasonably acceptable to Bank;

(b) as soon as available, but in any event within one hundred
twenty (120) days after the end of Borrowers fiscal year 1997, company prepared
unaudited consolidated balance sheet and unaudited income statement covering
Borrowers consolidated operations during such year, in a form and certified by
an officer of Borrower reasonably acceptable to Bank; provided, however, that if
Borrower's fiscal year 1997 financial statements are audited, such financial
statements need not be accompanied by an unqualified opinion of the auditing
certified public accounting firm.

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<PAGE>

(c) as soon as available, but in any event within one hundred
twenty (120) days after the end of each of Borrower's fiscal year other than FYE
12/31/97, audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an unqualified opinion
on such financial statements of Ernst & Young or another independent certified
public accounting firm reasonably acceptable to Bank;

(d) within five (5) days of filing, copies of all statements,
reports and notices sent or made available generally by Borrower to its security
holders or to any holders of Subordinated Debt and all reports on Form 10-K,
10-Q and 8-K filed with the Securities and Exchange Commission;

(e) promptly upon receipt of notice thereof, a report of any
legal actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any Subsidiary of One Hundred
Thousand Dollars ($100,000) or more;

(f) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time.

(g) within thirty (30) days after the last day of each month,
with the monthly financial statements, a Compliance Certificate signed by a
Responsible Officer in substantially the form of Exhibit C hereto.

6.4 Inventory; Returns. Borrower shall keep all Inventory in good
and marketable condition, free from all material defects, subject to recorded
reserves for obsolete inventory. Returns and allowances, if any, as between
Borrower and its account debtors shall be on the same basis and in accordance
with the usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement. Borrower shall promptly notify Bank of
all returns and recoveries and of all disputes and claims, where the return,
recovery, dispute or claim involves more than Fifty Thousand Dollars ($50,000).

6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon reasonable request, furnish Bank
with proof satisfactory to Bank indicating that Borrower or a Subsidiary has
made such payments or deposits; provided that Borrower or a Subsidiary need not
make any payment if the amount or validity of such payment is (i) contested in
good faith by appropriate proceedings, (ii) is reserved against (to the extent
required by GAAP) by Borrower and (iii) no lien other than a Permitted Lien
results.

6.6 Insurance.

(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.

(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as are reasonably satisfactory to Bank. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. At Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.

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<PAGE>

6.7 Principal Operating Accounts. Borrower shall maintain its
principal operating accounts with Bank.

6.8 Tangible Net Worth. Borrower shall maintain, as of the last day
of each calendar month, a Tangible Net Worth of not less than the total of all
outstanding Obligations under this Agreement.

6.9 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.

7. NEGATIVE COVENANTS

Borrower covenants and agrees that, so long as any Credit Extension
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Credit
Extensions, Borrower will not do any of the following:

7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than Transfers: (i) of
inventory in the ordinary course of business, (ii) of non-exclusive licenses and
similar arrangements for the use of the property of Borrower or its Subsidiaries
in the ordinary course of business, (iii) that constitute payment of normal and
usual operating expenses in the ordinary course of business, or (iv) of worn-out
or obsolete Equipment.

7.2 Changes in Business, Ownership, or Management, Business
Locations. Engage in any business, or permit any of its Subsidiaries to engage
in any business, other than the businesses currently engaged in by Borrower and
any business substantially similar or related thereto (or incidental thereto),
or if any two of Rubin Gruber, Michael G. Hluchyj or Kwok Wong cease to be
executive officers of Borrower and replacements reasonably satisfactory to Bank
are not made within ninety (90) days. Borrower will not, without at least thirty
(30) days prior written notification to Bank, relocate its chief executive
office or add any new offices or business locations.

7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person if an event
of default has occurred and is continuing or would result from such action.

7.4 Indebtedness. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.

7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.

7.6 Distributions. Pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase of any capital
stock other than (i) cash dividends on preferred stock issued after the date of
this Agreement, as required by Borrower's charter, at an annual rate not in
excess of five percent (5%) of original issue price of such stock, and (ii)
payments in an aggregate amount not to exceed $50,000 in any fiscal year of
Borrower made for the repurchase of stock effected in connection with the
termination of employees of Borrower.

7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments,

7.8 Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of

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<PAGE>

Borrower's business, upon fair and reasonable terms that are no less favorable
to Borrower than would be obtained in an arm's length transaction with a
non-affiliated Person.

7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.

7.10 Collateral. Store the Collateral with a bailee, warehouseman,
or similar party unless Bank has received a pledge of any warehouse receipt
covering such Collateral. Except for Collateral sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Collateral only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.

7.11 Compliance. Become an "investment company" or a company
controlled by an "investment company," within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Credit Extension
for such purpose; fail to meet the minimum funding requirements of ERISA; permit
a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur;
fail to comply with the Federal Fair Labor Standards Act or violate any other
law or regulation, which violation could have a Material Adverse Effect or a
material adverse effect on the Collateral or the priority of Banks Lien on the
Collateral; or permit any of its Subsidiaries to do any of the foregoing.

7.12 Negative Pledge of Intellectual Property. Without Bank's prior
written consent which consent shall not be unreasonably withheld, sell,
transfer, assign, mortgage, pledge, lease, grant a security interest in, or
encumber any of Borrower's intellectual property, including, without limitation,
the following:

(a) Any and all copyright rights, copyright applications,
copyright registrations and the like protections in each work of authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held;

(b) Any and all blueprints, drawings, trade secrets, and any
and all intellectual property rights in computer software and computer software
products now or hereafter existing, created, acquired or held;

(d) All patents, patent applications and like protections
including, without limitation, improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same, including without
limitation the patents and patent applications;

(e) Any trademark and service mark rights, whether registered
or not, applications to register and registrations of the same and like
protections, and the entire good will of the business of Borrower connected with
and symbolized by such trademarks;

(f) Any and all claims for damages by way of past, present and
future infringements of any of the rights included above, with the right, but
not the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;

(g) All licenses or other right to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;

(h) All amendments, extensions, renewals and extensions of any
of the Copyrights, Trademarks or Patents; and

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(i) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.

8. EVENTS OF DEFAULT

Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:

8.1 Payment Default. If Borrower fails to pay, when due, any of the
Obligations.

8.2 Covenant Default.

(a) If Borrower fails to perform any obligation under Sections
6.3, 6.6, 6.7 or 6.8 or violates any of the covenants contained in Article 7 of
this Agreement, or

(b) If Borrower fails or neglects to perform, keep, or observe
any other material term, provision, condition, covenant, or agreement contained
in this Agreement, in any of the Loan Documents, or in any other present or
future agreement between Borrower and Bank and as to any default under such
other term, provision, condition, covenant or agreement that can be cured, has
failed to cure such default within ten (10) days after the occurrence thereof;
provided, however, that if the default cannot by its nature be cured within the
ten (10) day period or cannot after diligent attempts by Borrower be cured
within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed thirty (30) days) to attempt to cure such default,
and within such reasonable time period the failure to have cured such default
shall not be deemed an Event of Default (provided that no Credit Extensions will
be required to be made during such cure period):

8.3 Material Adverse Change. If there occurs (i) a material
impairment of the perfection or priority of Bank's security interests in the
Collateral or of the value of such Collateral which is not covered by adequate
insurance, or (ii) a material adverse change in the business, operations or
condition (financial or otherwise) of the Borrower;

8.4 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);

8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within 30 days (provided that no
Credit Extensions will be made prior to the dismissal of such Insolvency
Proceeding);

8.6 Other Agreements. If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;

8.7 Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;

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<PAGE>

8.8 Judgments. If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least Fifty Thousand
Dollars ($50,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment); or

8.9 Misrepresentations. If any misrepresentation or misstatement
with respect to a circumstance which could have a Material Adverse Effect
exists now or hereafter in any warranty or representation set forth herein or in
any certificate or writing delivered to Bank by Borrower or any Person acting on
Borrower's behalf pursuant to this Agreement or to induce Bank to enter into
this Agreement or any other Loan Document.

9. BANK'S RIGHTS AND REMEDIES

9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:

(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);

(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;

(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;

(d) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's premises, Borrower hereby grants Bank a
license to enter such premises and to occupy the same, without charge in order
to exercise any of Bank's rights or remedies provided herein, at law, in equity,
or otherwise;

(e) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;

(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a non-exclusive, royalty-free
license or other right, solely pursuant to the provisions of this Section 9.1,
to use, without charge, Borrower's labels, patents, copyrights, mask works,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in completing production of, advertising for sale,
and selling any Collateral and, in connection with Bank's exercise of its rights
under this Section 9.1, Borrower's rights under all licenses and all franchise
agreements shall inure to Bank's benefit;

(g) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply the proceeds thereof to the
Obligations in whatever manner or order it deems appropriate;

15
<PAGE>

(h) Bank may credit bid and purchase at any public sale, or at
any private sale as permitted by law; and

(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.

9.2 Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; and (f) to file, in its
sole discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of Borrower
where permitted by law; provided Bank may exercise such power of attorney to
sign the name of Borrower on any of the documents described in Section 4.2
regardless of whether an Event of Default has occurred. The appointment of Bank
as Borrower's attorney in fact, and each and every one of Bank's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and performed and Bank's obligation to
provide Credit Extensions hereunder is terminated.

9.3 Accounts Collection. Upon the occurrence and during the
continuance of an Event of Default, Bank may notify any Person owing funds to
Borrower of Bank's security interest in such funds and verify the amount of such
Account. Borrower shall collect all amounts owing to Borrower for Bank, receive
in trust all payments as Bank's trustee, and if requested or required by Bank,
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.

9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following:
(a) make payment of the same or any part thereof; or (b) obtain and maintain
insurance policies of the type discussed in Section 6.6 of this Agreement, and
take any action with respect to such policies as Bank deems prudent. Any amounts
so paid or deposited by Bank shall constitute Bank Expenses, shall be
immediately due and payable, and shall bear interest at the then applicable rate
hereinabove provided, and shall be secured by the Collateral. Any payments made
by Bank shall not constitute an agreement by Bank to make similar payments in
the future or a waiver by Bank of any Event of Default under this Agreement.

9.5 Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.

9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not expressly set forth herein as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrowers part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.

9.7 Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.

16
<PAGE>

10. NOTICES

Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:

If to Borrower Sonus Networks, Inc.
5 Carlisle Road
Westford, MA 01886
Attn: Rubin Gruber, President
FAX: 978-392-9118

If to Bank Silicon Valley Bank
40 William Street
Wellesley, MA 02181
Attn: Joan S. Parsons
FAX: 617-431-9906

Any such notice shall be deemed to have been given on the date of personal
delivery or telefacsimile, one (1) day after the date of sending by overnight
delivery as aforesaid or two (2) days after the date of mailing as aforesaid.
The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.

11. CHOICE OF LAW AND VENUE

The laws of the Commonwealth of Massachusetts shall apply to this
Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
UNCONDITlONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT,
OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER ACCEPTS JURISDICTION
OF THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA. BORROWER AND BANK
EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY
RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.

12. GENERAL PROVISIONS

12.1 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.

12.2 Indemnification. Borrower shall indemnify, defend, protect and
hold harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or

17
<PAGE>

asserted by any other party in connection with the transactions contemplated by
the Loan Documents; and (b) all losses or Bank Expenses in any way suffered,
incurred, or paid by Bank as a result of or in any way arising out of,
following, or consequential to transactions between Bank and Borrower whether
under the Loan Documents, or otherwise (including without limitation reasonable
attorneys fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.

12.3 Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.

12.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.

12.5 Amendments in Writing, Integration. This Agreement cannot be
amended or terminated except by a writing signed by Borrower and Bank. All prior
agreements, understandings, representations warranties, and negotiations between
the parties hereto with respect to the subject matter of this Agreement if any,
are merged into this Agreement and the Loan Documents.

12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.

12.7 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.

12.8 Effectiveness. This Agreement shall become effective only when
it shall have been executed by Borrower and Bank (provided, however, in no event
shall this Agreement become effective until signed by an officer of Bank in
California).

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as a sealed instrument as of the date first set forth above.

"Borrower" "Bank"

SONUS NETWORKS, INC. SILICON VALLEY BANK, doing business
as SILICON VALLEY EAST

By: /s/ Rubin Gruber By: /s/ Mark J. Pasculano, VP
-------------------------------- ------------------------------------
Rubin Gruber, President Mark J. Pasculano, VP

SILICON VALLEY BANK

By: /s/ Michelle Gianneni
-------------------------------------

Title: AVP
----------------------------------
(Signed in Santa Clara County, California)

<PAGE>

Exhibit 10.11

LOAN MODIFICATION AGREEMENT

This LOAN MODIFICATION AGREEMENT is entered into as of November 31, 1998, by
and between SILICON VALLEY BANK, a California-chartered bank with its principal
place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan
production office located at Wellesley Office Park, 40 William Street, Suite
350, Wellesley, MA 02481, doing business under the name "Silicon Valley East"
("Bank"), and SONUS NETWORKS, INC., a Delaware corporation with its principal
place of business at 5 Carlisle Road, Westford, Massachusetts 01886
("Borrower").

RECITALS

Borrower has borrowed money from Bank pursuant to certain Existing Loan
Documents, as defined below. In consideration of certain financial
accommodations from Bank, and Borrower's continuing obligations under the
Existing Loan Documents, Borrower and Bank agree as follows:

AGREEMENT

1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which
may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to,
among other documents, a Loan and Security Agreement dated March 6. 1998
providing for an equipment line of credit in the maximum principal amount of ONE
MILLION FIVE HUNDRED THOUSAND AND NO/100THS DOLLARS ($1,500,000) (the "Loan
Agreement").

Hereinafter, all indebtedness owing by Borrower to Bank shall be referred
to as the "Indebtedness."

2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured
pursuant to the Loan Agreement. Hereinafter, the Loan Agreement, together with
all other documents securing payment of the Indebtedness, shall be referred to
as the "Existing Loan Documents."

3. DESCRIPTION OF CHANGES IN TERMS.

3.1 Modifications to Definitions. Section 1.1 of the Loan Agreement is
hereby amended by substituting the following definitions for those set forth
therein for the same terms, and in the case of new definitions, by adding those
new definitions to that Section 1.1:

"Advance" or "Advances" means a loan advance under the Committed
Revolving Line.

"Committed Revolving Line" means a credit extension of up to TWO
HUNDRED THOUSAND AND NO/100THS Dollars ($200,000).

"1998-2 Committed Equipment Line" means a credit extension of up to
SEVEN HUNDRED FIFTY THOUSAND AND NO/100THS Dollars ($750,000);
provided, however, that when and if (i) Bank receives Borrower's
1999 budget as approved by Borrower's Board of Directors, and (ii)
Bank verifies, in its reasonable discretion, that the projections in
that budget will be in compliance with Borrower's financial covenant
set forth in Section 6.8 of this Agreement for all of calendar year
1999, then the 1998-2 Committed Equipment Line shall mean a credit
extension of up to TWO MILLION AND NO/100THS Dollars ($2,000,000).
Bank will notify Borrower of the results of its verification within
ten (10) business days after receipt of Borrower's 1999 budget.

"Credit Extension" means each Advance, Equipment Advance, Letter of
Credit, or any other extension of credit by Bank for the benefit of
Borrower hereunder.
<PAGE>

"Equipment Advance" has the meaning set forth in Sections 2.1.1 and
2.1.2, as applicable.

"Letter of Credit" means a letter of credit or similar undertaking
issued by Bank pursuant to Section 2.1.3.

"Letter of Credit Reserve" has the meaning set forth in Section
2.1.3.

"Maturity Date" means June 5, 2003.

"Revolving Maturity Date" means NOVEMBER 30, 1999.

3.2 Addition of 1998-2 Equipment Line. Section 2.1.2 is hereby added to
the Loan Agreement as follows:

2.1.2 1998-2 Equipment Line.

(a) In addition to any Equipment Advances made pursuant to Section
2.1.1 of this Agreement, at any time from the date hereof through
JUNE 30, 1999, Borrower may from time to time request advances from
Bank in an aggregate amount not to exceed the lesser of the 1998-2
Committed Equipment Line or ONE MILLION FIVE HUNDRED THOUSAND AND
NO/100THS DOLLARS ($1,500,000) to finance Equipment purchased after
OCTOBER 1,1998 and prior to JULY 1, 1999.

(b) In addition to any Equipment Advances made pursuant to Section
2.1.1 of this Agreement, at any time after JUNE 30, 1999 through
DECEMBER 31, 1999, Borrower may from time to time request advances
from Bank in an aggregate amount not to exceed the 1998-2 Committed
Equipment Line less any advances made under Section 2.1.2(a) of this
Agreement, to finance Equipment purchased after JUNE 1, 1999 and
prior to JANUARY 1, 2000.

(c) The advances under Sections 2.1.2(a) and 2.1.2(b) of this
Agreement (each an "Equipment Advance" and collectively, the
"Equipment Advances") shall not exceed ONE HUNDRED Percent (100%) of
the invoice amount of such equipment approved from time to time by
Bank, excluding taxes, shipping, warranty charges, freight discounts
and installation expense. Software may, however, constitute up to
FIFTY percent (50%) of aggregate Equipment Advances. In order to be
eligible for financing under the 1998-2 Committed Equipment Line,
invoices must be submitted to Bank for financing within sixty (60)
days of invoice date.

(d) Interest shall accrue from the date of each Equipment Advance at
the rate specified in Section 2.2(a), and shall be payable on the
Payment Date of each month through the month in which the applicable
Equipment Advance converts to a term loan as set forth in this
Section 2.1.2(d). Any Equipment Advances made under Section 2.1.2(a)
of this Agreement that are outstanding on JULY 1, 1999 will be
payable in FORTY EIGHT (48) equal monthly installments of principal,
plus all accrued interest, beginning on the Payment Date of each
month commencing JULY 5, 1999 and with the last payment due on JUNE
5, 2003. Any Equipment Advances made under Section 2.1.2(b) of this
Agreement that are outstanding on JANUARY 1, 2000 will be payable in
FORTY TWO (42) equal monthly installments of principal, plus all
accrued interest, beginning on the Payment Date of each month
commencing JANUARY 5, 2000 and with the last payment due on JUNE 5,
2003. Equipment Advances may be prepaid without penalty. Equipment
Advances, once repaid, may not be reborrowed.

2
<PAGE>

(e) When Borrower desires to obtain an Equipment Advance under this
Section 2.1.2, Borrower shall notify Bank (which notice shall be
irrevocable) by facsimile transmission to be received no later than
3:00 p.m. Pacific time one (1) Business Day before the day on which
the Equipment Advance is to be made. Such notice shall be
substantially in the form of Exhibit B. The notice shall be signed
by a Responsible Officer or its designee and include a copy of the
invoice(s) for the Equipment to be financed.

3.3 Addition of Committed Revolving Line. Section 2.1.3 is hereby added to
the Loan Agreement as follows:

2.1.3 Advances for Letters of Credit.

(a) Subject to the terms and conditions of this Agreement, Bank
agrees to issue or cause to be issued Letters of Credit for the
account of Borrower in an aggregate outstanding face amount not to
exceed the Committed Revolving Line. Borrower's Letter of Credit
reimbursement obligation shall be secured by cash on terms
acceptable to Bank at any time after the Revolving Maturity Date if
the term of this Agreement is not extended by Bank. All Letters of
Credit shall be in form and substance reasonably acceptable to Bank
in its discretion and shall be subject to the terms and conditions
of Bank's form of standard Application and Letter of Credit
Agreement.

(b) Borrower shall pay to Bank a one-time Facility Fee equal to ONE
PERCENT (1.0%), of the face amount of each Letter of Credit when
issued, which fee shall be fully earned and non-refundable upon such
issuance.

(c) The obligation of Borrower to immediately reimburse Bank for
drawings made under Letters of Credit shall be absolute,
unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement and such Letters of
Credit, under all circumstances whatsoever. Borrower shall
indemnify, defend, protect and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation,
reasonable attorneys' fees, arising out of or in connection with any
Letters of Credit.

(d) Borrower may request that Bank issue a Letter of Credit payable
in a currency other than United States Dollars. If a demand for
payment is made under any such Letter of Credit, Bank shall treat
such demand as an Advance to Borrower of the equivalent of the
amount thereof (plus cable charges) in United States currency at the
then prevailing rate of exchange in San Francisco, California, for
sales of that other currency for cable transfer to the country of
which it is the currency.

(e) Upon the issuance of any Letter of Credit payable in a currency
other than United States Dollars, Bank shall create a reserve under
the Committed Revolving Line for letters of credit against
fluctuations in currency exchange rates, in an amount equal to ten
percent (10%) of the face amount of such Letter of Credit (the
"Letter of Credit Reserve"). The amount of such Letter of Credit
Reserve may be amended by Bank from time to time to account for
fluctuations in the exchange rate. The availability of funds under
the Committed Revolving Line shall be reduced by the amount of such
Letter of Credit Reserve for so long as such Letter of Credit
remains outstanding.

(f) The Committed Revolving Line shall terminate on the Revolving
Maturity Date, at which time all Advances under this Section 2.1.3
and

3
<PAGE>

other amounts due under this Agreement (except as otherwise
expressly specified herein, including without limitation payments
due under Sections 2.1.1 and 2.1.2 of this Agreement) shall be
immediately due and payable.

3.4 Modifications to Interest Rates. Section 2.2(a) of the Loan Agreement
is hereby replaced in its entirety with the following:

(a) Interest Rate. Except as set forth in Section 2.2(b), any
Equipment Advances shall bear interest, on the average daily balance
thereof, at a per annum rate equal to ONE-HALF (0.50) percentage
points above the Prime Rate and any Advances shall bear interest, on
the average daily balance thereof, at a per annum rate equal to the
Prime Rate.

3.5 Modifications to Tangible Net Worth Covenant. Section 6.8 of the Loan
Agreement is hereby replaced in its entirety with the following:

6.8 Tangible Net Worth. Borrower shall maintain, as of the last day
of each calendar month a Tangible Net Worth of not less than the
total of the outstanding principal amount of Equipment Advances,
plus all accrued and unpaid interest arising from Equipment Advances
plus TWO HUNDRED THOUSAND AND NO/100THS Dollars ($200,000).

3.6 Modifications to Compliance Certificate. Exhibit C of the Loan
Agreement is hereby replaced in its entirety with Exhibit C to this Agreement.

4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described in this Loan Modification
Agreement.

5. NO DEFENSES OF BORROWER. Borrower agrees that as of this date, it has
no defenses against any of the obligations to pay any amounts under the
Indebtedness.

6. CONTINUING VALIDITY. Borrower understands and agrees that (i) in
modifying the Existing Loan Documents, Bank is relying upon Borrower's
representations, warranties and agreements, as set forth in the Existing Loan
Documents, (ii) except as expressly modified pursuant to this Loan Modification
Agreement (including the effects of Section 4 hereof), the Existing Loan
Documents remain unchanged and in full force and effect, (iii) Bank's agreement
to modify the Existing Loan Documents pursuant to this Loan Modification
Agreement shall in no way obligate Bank to make any future modifications to the
Existing Loan Documents, (iv) it is the intention of Bank and Borrower to retain
as liable parties all makers and endorsers of the Existing Loan Documents,
unless a party is expressly released by Bank in writing, (v) no maker, endorser
or guarantor will be released by virtue of this Loan Modification Agreement, and
(vi) the terms of this Section 6 apply not only to this Loan Modification
Agreement but also to all subsequent loan modification agreements, if any.

7. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. The laws of the
Commonwealth of Massachusetts shall apply to this Agreement. BORROWER ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT, OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF
OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER ACCEPTS
JURISDICTION OF THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA.
BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS

4
<PAGE>

AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

8. EFFECTIVENESS. This Agreement shall become effective only when it shall
have been executed by Borrower and Bank (provided, however, in no event shall
this Agreement become effective until signed by an officer of Bank in
California).

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument as of the date first set forth above.

"Borrower" "Bank"

SONUS NETWORKS, INC. SILICON VALLEY BANK, doing business
as SILICON VALLEY EAST

By: /s/ Rubin Gruber By:
------------------------------- ---------------------------------------
Rubin Gruber, President Mark J. Pasculano, VP

SILICON VALLEY BANK

By:
---------------------------------------

Title:
-------------------------------------
(Signed in Santa Clara County, California)

<PAGE>

Exhibit 10.12

LOAN MODIFICATION AGREEMENT

This LOAN MODIFICATION AGREEMENT Is entered into as of November 29, 1999,
by and between SILICON VALLEY BANK, a California-chartered bank with its
principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with
a loan production office located at Wellesley Office Park, 40 William Street,
Suite 350, Wellesley, MA 02481, doing business under the name "Silicon Valley
East" ("Bank"), and SONUS NETWORKS, INC., a Delaware corporation with its
principal place of business at 5 Carlisle Road, Westford, Massachusetts 01886
("Borrower").

RECITALS

AGREEMENT

1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which
may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to,
among other documents, a Loan and Security Agreement dated March 6,1998, as
amended by a Loan Modification Agreement dated as of November 30,1998, providing
for equipment lines of credit up to a maximum aggregate principal amount of
THREE MILLION FIVE HUNDRED THOUSAND AND NO/100THS DOLLARS ($3,500,000) and a
revolving line of credit for Letters of Credit of up to a maximum principal
amount of TWO HUNDRED THOUSAND AND NO/100THS DOLLARS ($200,000) (the "Loan
Agreement").

Hereinafter, all Indebtedness owing by Borrower to Bank shall be referred
to as the "Indebtedness."

3. DESCRIPTION OF CHANGES IN TERMS.

"1999 Committed Equipment Line" means a credit extension of up to
THREE MILLION FIVE HUNDRED THOUSAND AND NO/100THS Dollars
($3,500,000).

"Equipment Advance" has the meaning set forth in Sections 2.1.1,
2.1.2 and 2.1.4, as applicable.

"Maturity Date" means December 5, 2003.

3.2 Addition of 1999 Equipment Line. Section 2.1.4 is hereby added to the
Loan Agreement as follows:

2.1.4 1999 Committed Equipment Line.

(a) in addition to any Equipment Advances made pursuant to Sections
2.1.1 and 2.1.2 of this Agreement, at any time after November 29,
1999 and before JANUARY 1, 2000, Borrower may from time to time
request advances from Bank in an aggregate amount not to exceed the
<PAGE>

lesser of the 1999 Committed Equipment Line or TWO MILLION FIVE
HUNDRED THOUSAND AND NO/100THS DOLLARS ($2,500,000) to finance
Equipment purchased after JUNE 30, 1999 end prior to JANUARY 1,
2000.

(b) In addition to any Equipment Advances made pursuant to Sections
2.1.1 and 2.1.2 of this Agreement, at any time after DECEMBER 31,
1999 and before JULY 1, 2000, Borrower may from time to time request
advances from Bank in an aggregate amount not to exceed the 1999
Committed Equipment Line less any advances made under Section
2.1.4(a) of this Agreement, to finance Equipment purchased after
OCTOBER 31,1999 and prior to JULY 1, 2000.

(c) The advances under Sections 2.1.4(a) and 2.1.4(b) of this
Agreement (each an "Equipment Advance" and collectively, the
"Equipment Advances") shall not exceed ONE HUNDRED Percent (100%) of
the invoice amount of such equipment approved from time to time by
Bank, excluding taxes, shipping, warranty charges, freight discounts
and installation expense. Software may, however, constitute up to
FIFTY percent (50%) of aggregate Equipment Advances. In order to be
eligible for financing under the 1999 Committed Equipment Line,
invoices must be submitted to Bank for financing within sixty (60)
days of invoice date; provided, however, that Borrower's initial
Equipment Advance under the 1999 Committed Equipment Line, if made
on or before December 29, 1999, may be used to finance equipment
purchased after JUNE 30, 1999 but more than 60 days after invoice
date.

(d) Interest shall accrue from the date of each Equipment Advance at
the rate specified in Section 2.2(a), and shall be payable on the
Payment Date of each month through the month in which the applicable
Equipment Advance converts to a term loan as set forth in this
Section 2.1.4(d). Any Equipment Advances made under Section 2.1.4(a)
of this Agreement that are outstanding on JANUARY 1, 2000 will be
payable in FORTY EIGHT (48) equal monthly installments of principal,
plus all accrued interest, beginning on the Payment Date of each
month commencing JANUARY 5, 2000 and ending with the last payment
due on DECEMBER 5, 2003. Any Equipment Advances made under Section
2.1.4(b) of this Agreement that are outstanding on JULY 1, 2000 will
be payable in FORTY TWO (42) equal monthly installments of
principal, plus all accrued interest, beginning on the Payment Date
of each month commencing JULY 5, 2000 and ending with the last
payment due on DECEMBER 5, 2003. Equipment Advances may be prepaid
without penalty. Equipment Advances, once repaid, may not be
reborrowed.

(e) When Borrower desires to obtain an Equipment Advance under this
Section 2.1.4, Borrower shall notify Bank (which notice shall be
irrevocable) by facsimile transmission to be received no later than
3:00 p.m. East Coast time at least one (1) Business Day before the
day on which the Equipment Advance is to be made. Such notice shall
be substantially in the form of Exhibit B. The notice shall be
signed by a Responsible Officer or its designee and include a copy
of the invoice(s) for the Equipment to be financed.

2
<PAGE>

3.3 Modifications to Tangible Net Worth Covenant. Section 6.8 of the Loan
Agreement is hereby replaced In Its entirety with the following:

6.8 Tangible Net Worth. Borrower shall maintain, as of the last day
of each calendar month, a Tangible Net Worth of not less than the
total outstanding principal and accrued interest under all credit
facilities from Bank to Borrower plus TWO HUNDRED THOUSAND AND
NO/100THS Dollars ($200,000).

3.4 Addition of Adjusted Quick Ratio Covenant. Section 6.10 is hereby
added to the Loan Agreement as follows:

6.10 Adjusted Quick Ratio. Borrower shall maintain, as of the last
day of each calendar month, a ratio of Quick Assets to Current
Liabilities of at least 1.5 to 1.0.

3.5 Modifications to Compliance Certificate. Exhibit C of the Loan
Agreement is hereby replaced in its entirety with Exhibit C to this Agreement.

4. FACILITY FEE. Borrower shall pay to Bank any out-of-pocket expenses
incurred by the Bank through the date hereof, including reasonable attorneys'
fees end expenses, and after the date hereof, all Bank Expenses, including
reasonable attorneys' fees and expenses, as and when they become due.

5. CONDITIONS PRECEDENT TO FURTHER ADVANCES. The obligation of Bank to
make further advances to Borrower is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank the
following:

(a) this Loan Modification Agreement duly executed by Borrower;

(b) payment of the fees and Bank Expenses then due specified in
Section 4 hereof; and

6. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described in this Loan Modification
Agreement

7. NO DEFENSES OF BORROWER. Borrower agrees that as of this date, It has
no defenses against any of the obligations to pay any amounts under the
Indebtedness.

8. CONTINUING VALIDITY. Borrower understands and agrees that (i) in
modifying the Existing Loan Documents, Bank is relying upon Borrower's
representations, warranties and agreements, as set forth in the Existing Loan
Documents, (ii) except as expressly modified pursuant to this Loan Modification
Agreement (including the effects of Section 6 hereof), the Existing Loan
Documents remain unchanged and in full force and effect, (iii) Bank's agreement
to modify the Existing Loan Documents pursuant to this Loan Modification
Agreement shall in no way obligate Bank to make any future modifications to the
Existing Loan Documents, (iv) it is the intention of Bank and Borrower to retain
as liable parties all makers and endorsers of the Existing Loan Documents,
unless a party is expressly released by Bank in writing, (v) no maker, endorser
or guarantor will be released by virtue of this Loan Modification Agreement, and
(vi) the terms of this Section 8 apply not only to this Loan Modification
Agreement but also to all subsequent loan modification agreements, if any.

9. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. The laws of the
Commonwealth of Massachusetts shall apply to this Agreement. BORROWER ACCEPTS
FOR ITSELF AND IN

3
<PAGE>

CONNECTION WITH ITS PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION
OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF
MASSACHUSETTS IN ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND AGAINST IT WHICH
ARISES OUT OF OR BY REASON OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY
REASON BANK CANNOT AVAIL ITSELF OF THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS, BORROWER ACCEPTS JURISDICTION OF THE COURTS AND VENUE IN SANTA
CLARA COUNTY, CALIFORNIA. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

10. EFFECTIVENESS. This Agreement shall become effective only when it
shall have been executed by Borrower and Bank (provided, however, in no event
shall this Agreement become effective until signed by an officer of Bank in
California).

IN WITNESS WHEREOF, the parties hereto have caused this Loan Modification
Agreement to be executed as a sealed instrument as of the date first set forth
above.

"Borrower" "Bank"

SONUS NETWORKS, INC. SILICON VALLEY BANK, doing business
as SILICON VALLEY EAST

By: /s/ Hassan Ahmed By:
-------------------------------- -------------------------------------
Hassan Ahmed, President

SILICON VALLEY BANK

By:
-------------------------------------

Title:
----------------------------------
(Signed in Santa Clara County, California)

EXHIBIT C FOLLOWS

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report dated March 10, 2000 (and to all references to our Firm) included in or
made a part of this Registration Statement.

/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP

Boston, Massachusetts
March 10, 2000

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
(IDENTIFY SPECIFIC FINANCIAL STATEMENTS HERE) __________________________________
________________________________________________________________________________
________________________________________________________________________________
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 8,885
<SECURITIES> 14,681
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,210
<CURRENT-ASSETS> 26,074
<PP&E> 6,075
<DEPRECIATION> 1,806
<TOTAL-ASSETS> 30,782
<CURRENT-LIABILITIES> 6,470
<BONDS> 3,402
48,609
0
<COMMON> 22
<OTHER-SE> 661
<TOTAL-LIABILITY-AND-EQUITY> 30,782
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 20,119
<OTHER-EXPENSES> 4,255
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 224
<INCOME-PRETAX> (23,887)
<INCOME-TAX> 0
<INCOME-CONTINUING> (23,887)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,887)
<EPS-BASIC> 5.53
<EPS-DILUTED> 5.53

</TABLE>