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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
                            ------------------------
                                   FORM 10-K
 
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
                      FOR THE YEAR ENDED DECEMBER 31, 2001
 
                        COMMISSION FILE NUMBER 000-30229
 
                              SONUS NETWORKS, INC.
             (Exact name of Registrant as specified in its charter)
 

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<S>                                                  <C>
                  DELAWARE                                        04-3387074
(State or other jurisdiction of incorporation        (I.R.S. employer identification no.)
              or organization)
</Table>

 
                 5 CARLISLE ROAD, WESTFORD, MASSACHUSETTS 01886
          (Address of principal executive offices, including zip code)
 
                                 (978) 692-8999
              (Registrant's telephone number, including area code)
                            ------------------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      None
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                         Common stock, $0.001 par value
 
    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x]    No [ ]
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy statement or information
proxy statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
 
    As of January 31, 2002, there were 204,220,958 shares of $0.001 par value
per share, common stock, outstanding. As of that date, the aggregate market
value of the voting stock held by non-affiliates of the Registrant was
approximately $740,000,000.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    The information required in Items 10-13 are incorporated by reference to
specified portions of the Registrant's definitive Proxy Statement to be issued
in conjunction with the Registrant's 2002 Annual Meeting of Shareholders, which
is expected to be filed not later than 120 days after the Registrant's fiscal
year ended December 31, 2001.
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ITEM 1. BUSINESS.
 
OVERVIEW
 
    We are a leading provider of voice infrastructure products for the new
public network. Our products are a new generation of carrier-class switching
equipment and software that enable voice services to be delivered over
packet-based networks. Our target customers include new and established
communications service providers, including long distance carriers, local
exchange carriers, Internet service providers, cable operators, international
telephone companies and carriers that provide services to other carriers. Many
of these carriers have been building packet-based networks to support the
dramatic growth in data traffic resulting from Internet use. Packet-based
networks, which transport traffic in small bundles, or "packets," offer a
significantly more flexible, cost-effective and efficient means for providing
communications services than existing circuit-based networks, designed years ago
for telephone calls. By enabling voice traffic to be carried over these
packet-based networks, our products will accelerate the convergence of voice and
data into the new public network.
 
    Our suite of voice infrastructure products includes the GSX9000-TM- Open
Services Switch, the Insignus-TM- Softswitch and the Sonus Insight-TM-
Management System. Our products, designed for deployment at the core of a
service provider's network, significantly reduce the cost to build and operate
voice services compared to traditional alternatives. Moreover, our products
offer a powerful and open platform for service providers to increase their
revenues through the creation and delivery of new and innovative voice and data
services. Our switching equipment and software can be rapidly and easily
deployed, and readily expanded to accommodate growth in traffic volumes. Our
products also interoperate with service providers' existing telephone
infrastructure, allowing them to preserve the investment in their current
networks. Designed for the largest telephone networks in the world, our products
offer the reliability and voice quality that have been hallmarks of the public
telephone network for decades.
 
    We have been recognized as the 2001 worldwide market share leader for
carrier-class packet voice infrastructure products by three market research
firms. Our announced customers include many of the world's major service
providers: Alestra (Mexico), BellSouth Corporation, China Netcom, Fusion
Communications (Japan), Global Crossing, Level 3 Communications, Qwest
Communications, Time Warner Telecom, Williams Communications and XO
Communications. We sell our products principally through a direct sales force
and, in some markets, through distributors and resellers. We also collaborate
with our customers to identify and develop new advanced services and
applications that they can offer to their customers.
 
    As a result of the current challenging business environment in the
telecommunications industry, many service providers, including some of Sonus'
customers, are experiencing financial difficulties, and some are in the process
of restructuring their businesses or have filed for bankruptcy. While this has
resulted in recent reductions in spending by service providers for products such
as those we offer, we believe that over time the market opportunity for packet
voice solutions is one of the largest in networking and communications. Synergy
Research Group projects that the market for service provider voice over Internet
protocol equipment will grow dramatically to more than $6 billion in 2006. Our
objective is to capitalize on our early technology and market lead and build the
premier franchise in voice infrastructure solutions for the new public network.
The following are key elements of our strategy:
 
    - leverage our technology leadership to achieve key service provider design
      wins;
 
    - extend our technology platform from the core of the network to the access
      edge;
 
    - 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;
 
    - actively contribute to the standards definition and adoption process; and
 
    - pursue strategic acquisitions and alliances.
 
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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 local or long
distance, are disappearing. The opportunity created by opening up the
$750 billion telephone services market has encouraged new participants to enter
the market and incumbent service providers to expand into new markets, both
domestically as well as internationally.
 
    Competition between new players and incumbents is driving down service
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 new, creative and
differentiated service offerings as the means to introduce new revenue
opportunities and to reduce 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.
 
    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" 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 the left and right side of the cloud, aligned linearly,
are icons representing a computer, connected to the cloud by dotted lines.
Connected to the bottom of the cloud by dotted lines are three additional
computers.]
 
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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 one-number/follow-me
services, 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.
 
    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.
 
    The early VoIP systems also lack 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, a substantial majority of which are derived from voice
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, immediate opportunities
exist to reduce the burden on overloaded and expensive circuit-switched
resources, such as Internet call diversion. Internet call diversion allows
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.
 
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.
 
    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 or ISDN and various
physical interfaces such as T1 and E1. 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 SIP, MGCP, Megaco (H.248) and H.323.
Infrastructure solutions must also seamlessly integrate with service providers'
existing operations support systems.
 
    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
 
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compare favorably with existing networks in terms of cost per port, space
occupied, power consumption and cooling requirements.
 
    INTELLIGENT SOFTWARE IN AN OPEN AND FLEXIBLE PLATFORM.  The architecture for
the new public network decouples 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. The Sonus
solution consists of the following carrier-class products:
 
    - GSX9000-TM- Open Services Switch;
 
    - Insignus-TM- Softswitch; and
 
    - Sonus Insight-TM- Management System.
 
    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.
Extending from left side of the "Packet Network" cloud is a box with caption
reading "Sonus GSX9000(TM) Open Services Switch" and extending from that,
connected by a bold line, a small cloud labeled "PSTN", or Public Switched
Telephone Network Extending from right side of the "Packet Network" cloud is a
box with caption reading "3 rd Party Media Gateways" and extending from that,
connected by a bold line, a small cloud labeled "PSTN", or Public Switched
Telephone Network. Below the "Packet Network" cloud is a box labeled "IADs" and
connected by bold lines are three icons representing telephones. Above the
"Packet Network" cloud on the left side are three small boxes labeled "OSPA
Enhanced Services." Directly above the "Packet Network" cloud are three icons
representing servers labeled "Sonus Insignus(TM) Softswitch." Above the "Packet
Network" cloud on the right side is a small icon representing a computer
terminal labeled "Sonus Insight(TM) Management."]
 
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    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 equal or superior to today's circuit-switched network;
 
    - system hardware designed for Network Equipment Building Standards, or NEBS
      Level 3, compliance;
 
    - network monitoring and provisioning designed for Operations System
      Modifications for the Integration of Network Elements, or OSMINE,
      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 INDUSTRY 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;
 
    - call management standards including SIP, MGCP, H.323 and others;
 
    - voice coding standards such as G.711 and echo cancellation standard G.168;
      and
 
    - all common interfaces, including T1, T3, E1 and optical interfaces.
 
    The Sonus 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.  The Sonus 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-TM- 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-TM- 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(TM) 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.]
 
    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. 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
 
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number of third-party application software developers in our Open Services
Partner Alliance, or OSPA, 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 capitalize on our early technology and market lead and
build the premier franchise in voice infrastructure solutions for the new public
network. The following are key elements of our strategy:
 
    LEVERAGE OUR TECHNOLOGY LEADERSHIP TO ACHIEVE KEY SERVICE PROVIDER DESIGN
WINS.  As the first company to provide voice infrastructure products for the new
public network, we have achieved 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
expand our business as these networks are deployed. We have been awarded
contracts by major service providers including Alestra, BellSouth Corporation,
China Netcom, Fusion Communications, Global Crossing, Level 3 Communications,
Qwest Communications, Time Warner Telecom, Williams Communications and XO
Communications. Furthermore, by working closely with our customers as they
deploy these networks, we gain valuable knowledge regarding their requirements,
positioning us to develop product enhancements and extensions that address
evolving service provider needs.
 
    EXTEND OUR TECHNOLOGY PLATFORM FROM THE CORE OF THE NETWORK 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 this fundamental
position in the trunking infrastructure, we are extending our reach by moving
outward to the access segments of the network. Sonus supports multiple carrier
applications in a single platform. These applications include long
distance/international calling, tandem switching, Internet call diversion,
business PBX access, residential access/Centrex, H.323 termination, direct voice
over broadband and enhanced services. This approach will allow our customers to
design and execute a co-ordinated migration and expansion strategy as they build
entirely new networks or transition from their legacy circuit-switched
infrastructure.
 
    EXPAND AND BROADEN OUR 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. The next-generation service providers, who
are relatively unencumbered by legacy equipment, have been among the initial
purchasers of our equipment and software. Other newer entrants, cable operators,
and Internet service providers, or ISPs, are also likely to be early adopters of
our products. Incumbents, including interexchange service providers, or IXCs,
Regional Bell Operating Companies, or RBOCs, and international PTTs are also
expected to adopt packet voice technologies over time.
 
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    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 broadening our
sales, marketing, support and distribution capabilities to address this need. We
have established offices throughout the United States, in China, Japan,
Singapore, Germany and France, and in the United Kingdom. In addition, we plan
to augment our global direct 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 a partner program, the OSPA, that brings together a
broad range of development partners to provide our customers with a variety of
advanced services, application options and interoperability testing. Our OSPA
partners include companies such as Agilent Technologies, Ericsson, Juniper
Networks, Priority Call Management, Redback Networks, Riverstone Networks and
Ulticom.
 
    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 teaming 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.
 
SONUS PRODUCTS
 
GSX9000-TM- OPEN SERVICES SWITCH
 
    The Sonus GSX9000-TM- Open Services Switch enables voice traffic to be
transported over packet networks. Its carrier-class hardware, which is NEBS
Level 3 compliant and designed to provide 99.999% availability with no single
point of failure, 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-TM- 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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<S>                     <C>
- T1;                   [Diagram depicting a large box. Detail on
- T3;                   the face includes the Sonus logo in the
- E1;                   upper left corner and a set of vertical
- OC3;                  slots.]
- 100BaseT;
- 1000BaseT; and
- OC12c/STM-4.
</Table>

 
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    The GSX9000-TM- is designed to deliver voice quality equal, or superior, to
that of the legacy circuit-switched public network. It is designed to support
the multiple encoding schemes used in circuit switches such as G.711 and
delivers 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-TM- is also designed to minimize delay,
further enhancing perceived voice quality. The GSX9000-TM- scales to the very
large configurations required by major service providers. With density
improvements introduced in March 2002, a single GSX9000-TM- shelf will be able
to support up to 22,176 simultaneous calls. A single GSX9000-TM-, consisting of
multiple shelves, can support 100,000 or more simultaneous calls. The
GSX9000-TM- is designed to operate with our Insignus-TM- Softswitch and with
softswitches and network products offered by other vendors.
 
INSIGNUS-TM- SOFTSWITCH
 
    Softswitches provide the network intelligence in next-generation networks,
including call control, signaling, core network routing and a management
foundation. Our Insignus-TM- Softswitch is based on a modular architecture that
is designed for high performance and scalability, as well as interoperability
with third-party gateways, devices and services. The Insignus-TM- Softswitch
includes the following functionality:
 
    - call control and signaling;
 
    - service selection and routing;
 
    - line-side endpoint control and services for both residential and
      enterprise markets;
 
    - local calling features and regulatory requirements such as emergency
      services routing; and
 
    - a gateway between existing SS7/C7 signaling networks and the packet
      network.
 
    The Insignus-TM- Softswitch functions can be deployed on the same or
separate platforms, and can be configured in either a centralized or distributed
manner, based on a service providers' network requirements. This high level of
flexibility allows service providers to precisely allocate functionality and
processing performance, avoiding the cost of unused resources. Service providers
can also deploy additional Insignus-TM- modules as their requirements change.
For instance, a service provider deploying the functions for a long distance
application might require only service selection routing and SS7 connectivity.
As the service provider moves into the local market, it can add line-side
endpoint control to deliver access services on the same platform. The
Insignus-TM- Softswitch can scale from the smallest single point of presence to
the largest global networks.
 
    The Insignus-TM- Softswitch supports industry-standard protocols such as
SIP, H.323 and MGCP, using them for both interaction with third-party products
and for communication among components of the Open Services Architecture. The
Insignus-TM- Softswitch supports a large number of international SS7/C7
variants, for both call signaling and interaction with legacy intelligent
network, or IN, and advanced intelligent network, or AIN, services.
 
    The Insignus-TM- Softswitch is deployed on industry-standard, NEBS-compliant
computing platforms. The Insignus-TM- Softswitch supports redundancy, providing
carrier-class reliability. In fully redundant configurations, there is no loss
of active calls during switchover for any hardware and software component.
 
    We believe that in addition to traditional voice services, our Insignus-TM-
Softswitch will enable service providers to offer differentiated, value-added
features and services developed by us, by application software developers,
system integrators or service providers themselves, including:
 
    - one-number/follow-me services, which route a subscriber's email, phone and
      Web services to any location;
 
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    - unified messaging that integrates telephone services, email and Web
      applications, and allows subscribers to have a unified mailbox for email,
      voicemail and message filtering;
 
    - conference calling across the Internet;
 
    - multimedia conferencing;
 
    - Internet-enabled call centers; and
 
    - Internet content delivered with voice.
 
SONUS INSIGHT-TM- MANAGEMENT SYSTEM
 
    Sonus Insight-TM- is a complete, web-based management system designed to
simplify the operation of carrier-class packet voice networks. Sonus Insight-TM-
includes the Element Management System, or EMS, and the DataStream Integrator,
or DSI, that together provide comprehensive configuration, provisioning,
security, alarm reporting, performance data and billing mediation capabilities.
Sonus Insight-TM- seamlessly integrates with service providers' existing
back-office systems, and offers many tools that enhance and consolidate key
management functions, allowing service providers to streamline many of today's
labor-intensive processes. Sonus Insight-TM- scales to support hundreds of
switches and concurrent users, and is based on industry standards and protocols
to facilitate management from any location worldwide.
 
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;
 
    - system integration and testing;
 
    - 24-hour technical support; and
 
    - educational services to customer personnel on the installation, operation
      and maintenance of our equipment.
 
    We have established technical assistance centers in Westford, Massachusetts,
Richardson, Texas and in the United Kingdom. The technical assistance centers
provide customers with around-the-clock technical support, as well as 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. Our approach to professional services is
designed to ensure that our products are integrated into our customers' networks
to meet their specific needs and that these customers realize the maximum value
from their networking technology investments. As of December 31, 2001, our
customer support and professional services organization consisted of 111
employees.
 
CUSTOMERS
 
    Our target customer base includes long distance carriers, local exchange
carriers, ISPs, cable operators, international telephone companies and carriers
that provide services to other carriers. We
 
                                       11
<Page>
have shipped products to customers including: Alestra, BellSouth Corporation,
China Netcom, Fusion Communications, Global Crossing, Level 3 Communications,
Qwest Communications, Time Warner Telecom, Williams Communications and XO
Communications. As a result of the current challenging business environment in
the telecommunications industry, many service providers, including some of
Sonus' customers, are experiencing financial difficulties, and some are in the
process of restructuring their businesses or have filed for bankruptcy. For the
year ended December 31, 2001, Fusion Communications, Global Crossing, Qwest
Communications and XO Communications each contributed more than 10% of our
revenues and collectively represented an aggregate of 67% of our total revenues.
Currently, some of our customers have deployed our products in their commercial
networks while others are using our products in laboratory testing and internal
trials.
 
SALES AND MARKETING
 
    We sell our products principally through a direct sales force and, in some
markets, through distributors and resellers, including Nissho Electronics
Corporation (Japan), Samsung Corporation (Korea) and Sumitomo Corporation
(Japan). 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.
 
    Through our Open Services Partner Alliance, or OSPA, vendors achieve
interoperability with our products quickly and efficiently, allowing those
vendors, as well as service providers, to reduce the time to deploy new
services. This partner program also allows service providers to select from a
list of vendors that are Sonus "Powered," which signifies proven
interoperability with Sonus products. We believe that this flexibility offers
those service providers a choice of solutions and value-added services, and
enables them to achieve differentiation through an integrated suite of
"best-of-breed" solutions.
 
    As of December 31, 2001, our sales and marketing organization consisted of
101 employees, of which 20 were located in Westford, Massachusetts and 81 were
located in sales and support offices in the United States and around the world.
 
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 comprehensive
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 December 31, 2001, we had 306
employees responsible for research and development, of which 268 were software
and quality assurance engineers and 38 were hardware engineers. Our engineering
effort is focused on new applications and network access features, new network
interfaces, improved scalability, interoperability, quality, reliability and
next generation technologies. We currently maintain United States research and
development offices in Massachusetts, New Jersey, Virginia and Texas and have an
office in the United Kingdom. In addition, we have a joint development effort in
Japan with Nissho Electronics Corp. and NTT Communicationware Corp., a wholly
owned subsidiary of NTT, the world's largest carrier.
 
    We have made, and intend to continue to make, a substantial investment in
research and development. Research and development expenses were $65.0 million
for the year ended December 31, 2001, $26.4 million for the year ended
December 31, 2000 and $10.8 million for the year ended December 31, 1999.
 
                                       12
<Page>
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 and
Nortel Networks. Some 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, these
competitors have more extensive customer bases and broader customer
relationships than we do, including relationships with our potential customers.
Numerous smaller and mostly private companies are also focusing on similar
market opportunities.
 
    In order to compete effectively, we must deliver innovative 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 hold three patents, and have seven
patent applications pending in the United States. In addition, we have fifteen
patent applications pending abroad. We can't be certain that patents will be
granted based on these pending 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.
 
                                       13
<Page>
    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.
 
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 facility 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 from our outside contract manufacturers on a purchase order
basis. We may not be able to enter into long-term contracts with outside
manufacturers on terms acceptable to us, if at all. As of December 31, 2001, we
had 40 employees responsible for manufacturing, purchasing, final testing and
assembly.
 
EMPLOYEES
 
    As of December 31, 2001, we had a total of 593 employees, including 306 in
research and development, 101 in sales and marketing, 111 in customer support
and professional services, 40 in manufacturing and 35 in finance and
administration. Our employees are not represented by any collective bargaining
unit. We believe our relations with our employees are good.
 

I
TEM 2. PROPERTIES.
 
    Our headquarters are located in a leased facility in Westford,
Massachusetts, consisting of 90,000 square feet under leases that expire in
March 2004. We have additional facilities in Westford and Littleton,
Massachusetts, consisting of an aggregate of 51,000 square feet under subleases
that expire through December 2008, and in Richardson, Texas, consisting of
25,000 square feet under a lease expiring in April 2003. We also lease
short-term office space in Colorado, Oklahoma, New Jersey, Virginia, China,
Japan, Singapore and the United Kingdom. We believe our existing facilities are
adequate for our current needs and that suitable additional space will be
available as needed.
 

ITEM 3. LEGAL PROCEEDINGS.
 
    On November 8, 2001, a purchaser of Sonus' common stock filed a complaint in
the federal district court for the Southern District of New York against Sonus,
two of its officers and the lead underwriters alleging violations of the federal
securities laws in connection with our initial public offering (IPO) and seeking
unspecified monetary damages. The purchaser seeks to represent a class of
persons who purchased Sonus' common stock between the IPO on May 24, 2000 and
December 6, 2000. The complaint alleges that Sonus' registration statement
contained false or misleading information or omitted to state material facts
concerning the alleged receipt of undisclosed compensation by the underwriters
and the existence of undisclosed arrangements between underwriters and certain
purchasers to make additional purchases in the after market. The claims against
Sonus are asserted under Section 11 of the Securities Act of 1933 and against
the individual defendants under Sections 11 and 15 of that Act. Sonus intends to
vigorously defend this action.
 
                                       14
<Page>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
    No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
 

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
 
    Our common stock has been quoted on the Nasdaq National Market under the
symbol "SONS" since May 25, 2000. Prior to that time, there was no public market
for the common stock.
 
    On October 6, 2000, Sonus effected a three-for-one stock split in the form
of a stock dividend to each stockholder of record. All stock information has
been retroactively adjusted to reflect the stock split.
 
    In May 2000, Sonus completed its IPO of 17,250,000 shares of common stock,
which includes the exercise of the underwriters' over-allotment option of
2,250,000 shares, at $7.67 per share. The IPO generated net proceeds of
$121,705,000, after deducting the underwriting discount and commissions and
offering expenses of $10,545,000.
 
    The following table sets forth, for the time periods indicated, the high and
low sales prices of the common stock as reported on the Nasdaq National Market.
 

<Table>
<Caption>
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
FISCAL 2001:
First quarter...............................................   $46.50     $16.25
Second quarter..............................................    33.80      12.00
Third quarter...............................................    25.00       2.26
Fourth quarter..............................................     8.37       2.44
 
FISCAL 2000:
Second quarter (since May 25, 2000).........................    56.65      10.67
Third quarter...............................................    93.67      38.50
Fourth quarter..............................................    49.00      18.50
</Table>

 
    We have never declared or paid cash dividends and have no present intention
to pay cash dividends in the foreseeable future. Further, our bank agreement
prohibits us from declaring any cash dividends. At January 9, 2002, there were
approximately 960 holders of record of our common stock.
 
                                       15
<Page>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
 
    The following selected consolidated financial data of Sonus should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and notes
to those statements included elsewhere in this report.
 

<Table>
<Caption>
                                                                                                PERIOD FROM
                                                                                                 INCEPTION
                                                                                                 (AUGUST 7,
                                                            YEAR ENDED DECEMBER 31,               1997) TO
                                                   ------------------------------------------   DECEMBER 31,
                                                     2001        2000       1999       1998         1997
                                                   ---------   --------   --------   --------   ------------
                                                           (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                <C>         <C>        <C>        <C>        <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.........................................  $ 173,199   $ 51,770   $     --   $    --       $   --
Cost of revenues (1).............................     75,698     27,848      1,861        --           --
                                                   ---------   --------   --------   -------       ------
Gross profit (loss)..............................     97,501     23,922     (1,861)       --           --
 
Operating expenses:
  Research and development (1)...................     65,004     26,430     10,780     5,824          299
  Sales and marketing (1)........................     42,267     21,569      5,606       426           --
  General and administrative (1).................     13,068      5,477      1,723       919          187
  Stock-based compensation.......................     75,500     26,729      4,404        59           --
  Amortization of goodwill and purchased
    intangibles..................................    107,759         --         --        --           --
  Write-off of goodwill and purchased
    intangibles..................................    374,735         --         --        --           --
  Restructuring charges..........................     25,807         --         --        --           --
  In-process research and development............     43,800         --         --        --           --
                                                   ---------   --------   --------   -------       ------
Total operating expenses.........................    747,940     80,205     22,513     7,228          486
                                                   ---------   --------   --------   -------       ------
Loss from operations.............................   (650,439)   (56,283)   (24,374)   (7,228)        (486)
Interest income (expense), net...................      5,007      6,245        487       314           25
                                                   ---------   --------   --------   -------       ------
Net loss.........................................   (645,432)   (50,038)   (23,887)   (6,914)        (461)
Beneficial conversion feature of Series C
  preferred stock................................         --         --     (2,500)       --           --
                                                   ---------   --------   --------   -------       ------
Net loss applicable to common stockholders.......  $(645,432)  $(50,038)  $(26,387)  $(6,914)      $ (461)
                                                   =========   ========   ========   =======       ======
 
Net loss per share (2):
  Basic and diluted..............................  $   (3.74)  $  (0.52)  $  (1.84)  $ (1.42)      $   --
  Pro forma basic and diluted....................                 (0.37)     (0.25)
Shares used in computing net loss per share (2):
  Basic and diluted..............................    172,382     95,877     14,324     4,858           --
  Pro forma basic and diluted....................               135,057     96,188
</Table>

 

<Table>
<Caption>
                                                                         DECEMBER 31,
                                                   --------------------------------------------------------
                                                     2001        2000       1999       1998        1997
                                                   ---------   --------   --------   --------   -----------
                                                                        (IN THOUSANDS)
<S>                                                <C>         <C>        <C>        <C>        <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable
  securities.....................................  $ 125,067   $142,065   $ 23,566   $16,501      $6,606
Working capital..................................     97,023    135,597     19,604    15,321       6,308
Total assets.....................................    184,884    194,835     30,782    18,416       6,987
Long-term obligations, less current portion......     12,698         --      3,402     1,220           6
Convertible subordinated notes...................     10,000         --         --        --          --
Redeemable convertible preferred stock...........         --         --     46,109    22,951       7,100
Total stockholders' equity (deficit).............    102,885    150,706    (25,199)   (7,097)       (447)
</Table>

 
--------------------------
 
(FOOTNOTES ON FOLLOWING PAGE)
 
                                       16
<Page>
(1) Excludes non-cash, stock-based compensation expense as follows:
 

<Table>
<Caption>
                                                                       YEAR ENDED DECEMBER 31,
                                                              -----------------------------------------
                                                                2001       2000       1999       1998
                                                              --------   --------   --------   --------
                                                                           (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>        <C>
Cost of revenues............................................  $ 1,328    $   404     $   92      $--
Research and development....................................   43,553     11,428      1,537       29
Sales and marketing.........................................   18,300     12,051      2,104       12
General and administrative..................................   12,319      2,846        671       18
                                                              -------    -------     ------      ---
                                                              $75,500    $26,729     $4,404      $59
                                                              =======    =======     ======      ===
</Table>

 
(2) See Note 1 (o) to our consolidated financial statements for an explanation
    of the method of calculation. Pro forma per share calculation reflects the
    conversion of all outstanding shares of redeemable convertible preferred
    stock into shares of common stock which occurred upon the closing of our IPO
    in May 2000, as if the conversion occurred at the date of original issuance.
 
                                       17
<Page>

ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
    THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES TO THOSE STATEMENTS AND OTHER FINANCIAL
INFORMATION APPEARING ELSEWHERE IN THIS REPORT. 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 A NUMBER OF FACTORS, INCLUDING THE
RISKS DISCUSSED IN "RISK FACTORS" AND ELSEWHERE IN THIS REPORT.
 
OVERVIEW
 
    Sonus is a leading provider of voice infrastructure products for the new
public network. We offer a new generation of carrier-class switching equipment
and software that enables voice services to be delivered over packet-based
networks.
 
    Since our inception, we have incurred significant losses and, as of
December 31, 2001, had an accumulated deficit of $729.4 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 continue 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 primarily through a direct sales force and, in some
markets, through resellers and distributors. In the future, we anticipate
expanding our sales efforts to include additional 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.
 
    Sonus began shipping product to customers during the fourth quarter of
fiscal 1999 and recorded its first revenues of $51.8 million in fiscal 2000. For
the year ended December 31, 2001, Sonus recognized $173.2 million in revenue.
For the six consecutive quarters ending June 30, 2001, our revenue increased
each quarter sequentially compared to the previous quarter. However, our revenue
declined sequentially in the third and fourth quarters of fiscal 2001 to
$40.3 million and $38.9 million, due to unfavorable business conditions
primarily caused by declines in capital spending by telecommunications service
providers. As a result of the current challenging business environment in the
telecommunications industry, many service providers, including some of Sonus'
customers are experiencing financial difficulties, and some are in the process
of restructuring their businesses or have filed for bankruptcy. Due to these
factors, our revenues could be further reduced.
 
    In response to these unfavorable economic conditions, in September 2001,
Sonus announced a restructuring plan designed to reduce expenses and align its
cost structure with its revised business outlook. Accordingly, Sonus recorded a
restructuring charge in fiscal 2001 of $25.8 million for a worldwide workforce
reduction, consolidation of excess facilities and other charges, a non-cash
impairment charge of $374.7 million for the write-off of goodwill and certain
purchased intangibles related to the acquisition of telecom technologies, inc.
(TTI) and a $25.4 million write-off of deferred compensation for shares and
options held by terminated employees. See Note 2 to our consolidated financial
statements.
 
CRITICAL ACCOUNTING POLICIES
 
    The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires management to make judgments, assumptions and estimates that affect the
amounts reported in the consolidated financial statements and accompanying
notes. Actual results could differ from these estimates. The following critical
 
                                       18
<Page>
accounting policies are impacted significantly by judgments, assumptions and
estimates used in the preparation of our consolidated financial statements.
 
    Our revenue recognition policy complies with SEC Staff Accounting Bulletin
No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS. See Note 1(h) to our
consolidated financial statements.
 
    The allowance for doubtful accounts is based on our assessment of the
collectibility of specific customer accounts. If there is a deterioration of a
major customer's credit worthiness or actual defaults are higher than our
historical experience, the actual results could differ from these estimates.
 
    Inventory purchases and commitments are based upon estimated future demand
for our products. If there is a sudden and significant decrease in demand for
our products or there is a higher risk of inventory obsolescence because of
rapidly changing technology and customer requirements, we may be required to
increase our inventory allowances and our gross profit could be adversely
affected.
 
    We accrue for warranty costs based on the historical rate of claims and
costs to provide warranty services. If we experience an increase in warranty
claims which are higher than our historical experience or our costs to provide
warranty services increase, our gross profit could be adversely affected.
 
    We are subject to the possibility of various loss contingencies arising in
the ordinary course of business. We consider the likelihood of the loss or
impairment of an asset or the incurrence of a liability as well as our ability
to reasonably estimate the amount of loss in determining loss contingencies. An
estimated loss contingency is accrued when it is probable that a liability has
been incurred or an asset has been impaired and the amount of loss can be
reasonably estimated. We regularly evaluate current information available to us
to determine whether such accruals should be adjusted.
 
ACQUISITION OF TELECOM TECHNOLOGIES, INC.
 
    In January 2001, we acquired TTI. Upon the closing of this acquisition, we
issued an aggregate of 10,800,000 shares of common stock in exchange for all
outstanding capital stock of TTI. Of the 10,800,000 shares issued to the TTI
shareholders, 1,200,000 shares were placed into escrow as security for indemnity
obligations which were released to TTI shareholders on January 18, 2002. Also
during 2001, TTI shareholders received an additional 4,200,000 shares of common
stock upon the achievement of certain specified business expansion and product
development milestones. In connection with our acquisition of TTI, we adopted
our 2000 Retention Plan and issued 3,000,000 shares of common stock under this
plan to certain employees of TTI who became employees of Sonus. These shares
vest subject to continued employment and the attainment of the business
expansion and product development milestones. Due to the termination of certain
former TTI employees in connection with the restructuring plan in
September 2001, restrictions associated with approximately 860,000 shares of
common stock awarded under the 2000 Retention Plan have been removed.
 
    We accounted for the acquisition as a purchase for financial reporting
purposes. Accordingly, Sonus' financial statements for the year ended
December 31, 2001 reflect the results of operations of TTI since the date of
acquisition. The purchase price was allocated to TTI's assets and liabilities
based on the fair value of the assets acquired and the liabilities assumed. The
excess of the purchase price over the fair value of the net tangible assets and
identifiable intangible assets acquired has been classified as goodwill. In
addition, a portion of the purchase price was allocated to in-process research
and development. Additionally, since the closing date, the purchase price has
been increased as escrowed shares subject to milestone conditions were earned.
Goodwill and other intangibles have been amortized by charges to operations over
their estimated useful lives of three years and purchased in-process research
and development was charged to operations at the time of closing. Sonus has
recorded deferred stock-based compensation relating to the issuance of awards
under our 2000 Retention Plan. For the year ended December 31, 2001, Sonus
recorded a non-cash impairment charge of $374.7 million for the write-off of
goodwill and certain purchased intangibles related to the acquisition of TTI.
See Notes 2 and 3 to our consolidated financial statements.
 
                                       19
<Page>
RESULTS OF OPERATIONS
 
    REVENUES.  Revenue is recognized from product sales to end users, resellers
and distributors 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.
In multiple element arrangements, in accordance with Statement of Position 97-2
and 98-9, we use the residual method to recognize revenue when vendor-specific
objective evidence does not exist for one of the delivered elements in the
arrangement. Service revenue is recognized as the services are provided. Revenue
from maintenance and support arrangements is recognized ratably over the term of
the contract. Amounts collected prior to satisfying the revenue recognition
criteria are reflected as deferred revenue. We estimate and record warranty
costs at the time of product revenue recognition.
 
    COST OF REVENUES.  Our cost of revenues consists primarily of amounts paid
to third-party manufacturers for purchased materials and services, and
manufacturing and professional services personnel and related costs.
Manufacturing engineering, documentation control, final testing and assembly are
performed at our facility.
 
    GROSS PROFIT.  We believe that our gross profit margins will be affected
primarily by the following factors:
 
    - demand for our products and services;
 
    - new product introductions and enhancements both by us and by our
      competitors;
 
    - 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;
 
    - write off of any obsolete inventory;
 
    - 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.
 
    We expect gross profit as a percentage of revenues to increase modestly from
their current levels in the future due to continuing product mix changes and
increases in support and maintenance revenues.
 
    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 expense 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 our recent restructuring actions will reduce
research and development expenses in fiscal 2002 from the fiscal 2001 level.
However, rapid technological innovation is critical to our long-term success and
we intend to continue to make substantial investments to enhance our products
and technologies.
 
    SALES AND MARKETING EXPENSES.  Sales and marketing expenses consist
primarily of salaries and related personnel expenses, commissions, travel and
entertainment expenses, promotions, customer evaluations and other marketing
expenses. We believe that our recent restructuring actions will reduce sales and
marketing expenses in fiscal 2002 from the fiscal 2001 level.
 
    GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
consist primarily of salaries and related expenses for executive and
administrative personnel, recruiting expenses, provision for bad debts and
professional fees. We believe that our recent restructuring actions will reduce
general and administrative expenses in fiscal 2002 from the fiscal 2001 level.
 
                                       20
<Page>
    STOCK-BASED COMPENSATION EXPENSES.  Stock-based compensation expenses
include the amortization of stock compensation charges resulting from the
granting of stock options, including those TTI stock options assumed by Sonus,
stock awards to TTI employees under the 2000 Retention Plan, the sales of
restricted common stock to employees and compensation expense associated with
the grant of stock options and issuance of restricted stock to non-employees.
See Note 13 (i) to our consolidated financial statements. Deferred compensation
related to the granting of stock options and sales of restricted common stock to
employees, including those TTI stock options assumed by Sonus, are being
amortized over the vesting periods of four to five years. The deferred
compensation associated with the 2000 Retention Plan awarded to TTI employees
will be expensed over the approximate two-year vesting period of the retention
shares. These amounts have been adjusted for changes in the fair value of Sonus
common stock on the date the related milestone release conditions were earned.
Upon the termination of an employee, the remaining value of shares held under
the 2000 Retention Plan, to which such employee is entitled, if any, will be
expensed. The compensation expense associated with non-employees is recorded at
the time services are provided. As of December 31, 2001, we expect to record up
to approximately $21.0 million, $6.5 million and $1.2 million in employee
stock-based compensation expense in the years ending December 31, 2002, 2003 and
2004.
 
    BENEFICIAL CONVERSION OF PREFERRED STOCK.  In fiscal 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 the fourth quarter of 1999. This charge was accounted for as a
dividend to preferred stockholders and, as a result, increased the net loss
available to common stockholders and the related net loss per share.
 
YEARS ENDED DECEMBER 31, 2001 AND 2000
 
    REVENUES.  Revenues were $173.2 million for fiscal 2001, an increase of
$121.4 million, or 235% from $51.8 million in fiscal 2000. The increase in
revenues was the result of a significant increase in the sale of voice
infrastructure products. For the years ended December 31, 2001 and 2000, four
and three customers each contributed more than 10% of our revenues, representing
an aggregate of 67% and 70% of total revenues. International revenues, primarily
to Asia and Europe, were 18% and 11% of revenues for the years ended
December 31, 2001 and 2000.
 
    GROSS PROFIT.  Gross profit was $97.5 million, or 56% of revenues, for
fiscal 2001, compared with $23.9 million, or 46% of revenues, in fiscal 2000.
The increase in gross profit as a percentage of revenues is primarily the result
of improved manufacturing efficiencies due to increased volume, a favorable
product mix and a reduction in material costs.
 
    RESEARCH AND DEVELOPMENT EXPENSES.  Research and development expenses were
$65.0 million for fiscal 2001, an increase of $38.6 million, or 146%, from
$26.4 million in fiscal 2000. The increase reflects costs primarily associated
with a significant increase in personnel and personnel-related expenses
including those in connection with our acquisition of TTI, and, to a lesser
extent, prototype and software expenses for the development of our products.
 
    SALES AND MARKETING EXPENSES.  Sales and marketing expenses were
$42.3 million for fiscal 2001, an increase of $20.7 million, or 96%, from
$21.6 million in fiscal 2000. The increase reflects costs primarily associated
with the hiring of additional U.S. and international sales and marketing
personnel including those in connection with our acquisition of TTI,
commissions, the opening of international sales offices and, to a lesser extent,
travel-related expenses, marketing program costs and trade shows.
 
    GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
were $13.1 million for fiscal 2001, an increase of $7.6 million, or 139%, from
$5.5 million in fiscal 2000. The increase reflects the hiring of additional
personnel including those in connection with our acquisition of TTI, and, to a
lesser extent, an increase in professional fees, bad debt expense and costs
associated with being a public company.
 
                                       21
<Page>
    STOCK-BASED COMPENSATION EXPENSES.  Stock-based compensation expenses were
$75.5 million for fiscal 2001, an increase of $48.8 million, or 182% from
$26.7 million in fiscal 2000. The increase is primarily due to the amortization
of deferred stock-based compensation resulting from the unvested TTI stock
options assumed by Sonus, retention stock awards issued to TTI employees and the
write-off of $25.4 million of deferred compensation of shares and options held
by terminated employees impacted by the restructuring plan.
 
    GOODWILL, PURCHASED INTANGIBLES AND IN-PROCESS RESEARCH AND DEVELOPMENT
EXPENSES.  In January 2001, Sonus acquired certain intellectual property,
in-process research and development and intangible assets in connection with our
acquisition of TTI, which resulted in the recording of $523.7 million of
goodwill and other intangibles. Results of operations for fiscal 2001 include
$107.6 million in amortization of TTI goodwill and purchased intangibles, a
$40.0 million write-off of TTI purchased in-process research and development and
the write-off of $374.7 million in TTI goodwill and certain purchased
intangibles. Due to the implementation of Statement of Financial Accounting
Standards (SFAS) No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS, amortization
expense for fiscal 2002 will be substantially reduced from the fiscal 2001
level. See Notes 2 and 3 to our consolidated financial statements.
 
    In July 2001, Sonus completed the acquisition of certain intellectual
property and other assets of privately-held Linguateq Incorporated, a provider
of data distribution and billing application software, which resulted in the
recording of $5.4 million of goodwill and other intangibles. Results of
operations for fiscal 2001 include the amortization of purchased intangibles of
$167,000 and a non-cash charge of $3.8 million for purchased in-process research
and development. See Note 4 to our consolidated financial statements.
 
    RESTRUCTURING CHARGES.  On September 26, 2001, in response to unfavorable
business conditions largely caused by a rapid further decrease in capital
spending by telecommunications service providers, Sonus announced a
restructuring plan designed to reduce expenses and align its cost structure with
its revised business outlook. Accordingly, during the third quarter of fiscal
2001, Sonus recorded a restructuring charge of $25.8 million for a worldwide
workforce reduction, consolidation of excess facilities and other charges.
 
        WORKFORCE REDUCTION.  Restructuring actions in September 2001 resulted
    in the reduction of Sonus' workforce by approximately 150 employees, or 21%.
    The affected employees were entitled to severance and other benefits for
    which Sonus recorded a charge of $4.5 million in fiscal 2001. Remaining cash
    expenditures of $871,000 at December 31, 2001 relating to workforce
    reductions are expected to be substantially paid in the first quarter of
    fiscal 2002.
 
        CONSOLIDATION OF EXCESS FACILITIES AND OTHER CHARGES.  Sonus recorded a
    restructuring charge in fiscal 2001 of $21.3 million for the consolidation
    of excess facilities and other miscellaneous charges, which are included on
    the balance sheet as accrued restructuring expenses and long-term
    obligations. In March 2002, we completed a lease renegotiation for certain
    excess space and expect to record a restructuring benefit in the first
    quarter of fiscal 2002. The remaining cash expenditures relating to the
    consolidation of excess facilities and other miscellaneous charges are
    expected to be paid through May 2004.
 
    WRITE-OFF OF GOODWILL AND PURCHASED INTANGIBLES.  In light of negative
industry and economic conditions, a general decline in technology valuations and
our decision to discontinue the development and use of certain acquired
technology, we performed an assessment of the carrying value of the goodwill and
purchased intangibles recorded in connection with our acquisition of TTI. In
accordance with SFAS No. 121, Sonus recorded a non-cash impairment charge of
$374.7 million in fiscal 2001 for the write-off of goodwill and certain
purchased intangibles because the estimated undiscounted future cash flows of
these assets was less than the carrying value.
 
                                       22
<Page>
    INTEREST INCOME (EXPENSE), NET.  Interest income consists of interest earned
on our cash balances and marketable securities. Interest expense consists of
interest incurred on convertible subordinated notes, equipment financing and
capital lease arrangements. Interest income, net of interest expense, was
$5.0 million for fiscal 2001, a decrease of $1.2 million from $6.2 million in
fiscal 2000. The decrease reflects a reduction in interest rates and invested
balances and increasing interest expense incurred on capital lease arrangements
assumed in the TTI acquisition and convertible subordinated notes.
 
    NET OPERATING LOSS CARRYFORWARDS.  As of December 31, 2001, we had
approximately $92.8 million of federal net operating loss carryforwards for tax
purposes available to offset future taxable income. These net operating loss
carryforwards expire at various dates through 2021, to the extent that they are
not used. We have not recognized any benefit from the future use of net
operating loss carryforwards for fiscal 2001 and 2000, 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.
 
    INCOME TAXES.  No provision for income taxes has been recorded for fiscal
2001 and 2000, due to accumulated net losses.
 
YEARS ENDED DECEMBER 31, 2000 AND 1999
 
    REVENUES.  Revenues were $51.8 million for fiscal 2000, as a result of the
introduction of our voice infrastructure products. No revenues were reported for
fiscal 1999. For the year ended December 31, 2000, three customers each
contributed more than 10% of our revenues and represented an aggregate of 70% of
total revenues. International revenues, primarily to Europe, were 11% of
revenues for the year ended December 31, 2000.
 
    COST OF REVENUES.  Cost of revenues was $27.8 million, or 54% of revenues,
for fiscal 2000, an increase of $25.9 million from $1.9 million in fiscal 1999.
The increase is primarily the result of an increase in product manufacturing and
personnel costs associated with revenues recorded in fiscal 2000.
 
    RESEARCH AND DEVELOPMENT EXPENSES.  Research and development expenses were
$26.4 million in fiscal 2000, an increase of $15.6 million, or 145%, from
$10.8 million in fiscal 1999. The increase reflects costs primarily associated
with a significant increase in personnel and personnel-related expenses and, to
a lesser extent, prototype and software expenses for the development of our
products.
 
    SALES AND MARKETING EXPENSES.  Sales and marketing expenses were
$21.6 million in fiscal 2000, an increase of $16.0 million, or 285%, from
$5.6 million in fiscal 1999. The increase reflects costs primarily associated
with the hiring of additional U.S. and international sales and marketing
personnel and the opening of international sales offices and, to a lesser
extent, sales commissions, travel-related expenses, marketing program costs,
trade shows and product launch activities.
 
    GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
were $5.5 million in fiscal 2000, an increase of $3.8 million, or 218%, from
$1.7 million in fiscal 1999. The increase reflects the hiring of additional
general and administrative personnel and, to a lesser extent, costs associated
with being a public company.
 
    STOCK-BASED COMPENSATION EXPENSES.  Stock-based compensation expenses were
$26.7 million in fiscal 2000, an increase of $22.3 million from $4.4 million in
fiscal 1999. This increase is due to the amortization of deferred stock-based
compensation resulting from the granting of additional stock options and sale of
restricted common stock to employees and non-employees.
 
    INTEREST INCOME (EXPENSE), NET.  Interest income, net of interest expense,
was $6.2 million in fiscal 2000, an increase of $5.7 million from $487,000 in
fiscal 1999. This increase reflects higher invested cash and marketable
securities balances as a result of our May 2000 IPO and private financings and
is partially offset by interest expense from increased borrowings, which were
repaid in June 2000.
 
                                       23
<Page>
    INCOME TAXES.  No provision for income taxes has been recorded for fiscal
2000 and 1999, due to accumulated net losses. We did not record any tax benefits
relating to these losses or other tax benefits due to the uncertainty
surrounding the realization of these future tax benefits.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    Prior to our IPO, we financed our operations primarily through private sales
of redeemable convertible preferred stock totaling $70.7 million in net
proceeds. Upon the closing of our IPO on May 31, 2000, Sonus received cash
proceeds, net of underwriters' discount and offering expenses, totaling
$121.7 million, and all of our redeemable convertible preferred stock converted
into 96,957,222 shares of common stock. At December 31, 2001, cash, cash
equivalents and marketable securities totaled $125.1 million.
 
    Net cash used in operating activities was $1.2 million for fiscal 2001, as
compared to $14.4 million for fiscal 2000. The net cash used in operating
activities for fiscal 2001 compared to the prior year primarily reflects a
significantly higher net loss and reductions in accounts payable and deferred
revenues offset by significantly higher non-cash charges, decreases in accounts
receivable and inventories and an increase in accrued expenses.
 
    Net cash used in investing activities was $50.4 million for fiscal 2001, as
compared to $55.8 million for fiscal 2000. Net cash used in investing activities
for fiscal 2001 primarily reflects net purchases of marketable securities of
$21.0 million, purchases of property and equipment of $23.1 million and cash
expenditures associated with our acquisitions of $6.1 million. Sonus has no
current material commitments for capital expenditures but does expect
approximately $8.0 million in purchases during fiscal 2002.
 
    In January 2002, we established a $10.0 million equipment line of credit and
a $20.0 million working capital line of credit with a bank available through
March 24, 2003. The lines of credit are collateralized by all of our assets,
except intellectual property and bear interest at the banks prime rate. We are
required to comply with various financial and restrictive covenants.
 
    Net cash provided by financing activities was $13.6 million for fiscal 2001,
as compared to $148.4 million for fiscal 2000. The net cash provided by
financing activities for fiscal 2001 resulted from the sale of common stock, the
exercise of stock options and the issuance of $10.0 million in convertible
subordinated notes offset by the repayment of $8.0 million in a bank note
payable assumed as part of the acquisition of TTI. The net cash provided by
financing activities in fiscal 2000, was primarily a result of net proceeds
received from Sonus' IPO and to a lesser extent, from the sale of Series D
redeemable convertible preferred stock, partially offset by repayment of
long-term obligations.
 
    The following summarizes our future contractual cash obligations as of
December 31, 2001, after reflecting the lease renegotiation in March 2002, in
thousands:
 

<Table>
<Caption>
                                                2002       2003       2004       2005       2006     THEREAFTER    TOTAL
                                              --------   --------   --------   --------   --------   ----------   --------
<S>                                           <C>        <C>        <C>        <C>        <C>        <C>          <C>
Capital lease obligations...................   $  640     $  539     $  193      $ 30     $    --       $ --      $ 1,402
Operating leases............................    3,493      2,956        942       186         195        418        8,190
Convertible subordinated notes..............      475        475        475       475      10,238         --       12,138
                                               ------     ------     ------      ----     -------       ----      -------
Total contractual cash obligations..........   $4,608     $3,970     $1,610      $691     $10,433       $418      $21,730
                                               ======     ======     ======      ====     =======       ====      =======
</Table>

 
    We believe our current cash, cash equivalents, marketable securities and
available bank financing, will be sufficient to meet our anticipated cash needs
for working capital and capital expenditures for at least 12 months. The rate at
which we will consume cash will be dependent on the cash needs of future
operations that in turn will be directly effected by the levels of demand for
our products. If our existing resources 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.
 
                                       24
<Page>
RECENT ACCOUNTING PRONOUNCEMENTS
 
    In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, BUSINESS COMBINATIONS, and SFAS No. 142, GOODWILL AND OTHER INTANGIBLE
ASSETs. SFAS No. 141 requires that all business combinations initiated after
June 30, 2001 be accounted for using the purchase method of accounting and
prohibits the use of the pooling of interest method. SFAS No. 142 eliminates the
amortization of goodwill and certain other intangibles and instead subjects
these assets to periodic impairment assessments. SFAS No. 142 is effective
immediately for all goodwill and certain other intangible assets acquired after
June 30, 2001 and shall commence on January 1, 2002 for all goodwill and certain
other intangibles existing on June 30, 2001. Sonus has adopted SFAS No. 141 and
is currently assessing the potential impact that SFAS No. 142 will have on its
consolidated financial statements.
 
    In August 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT
OR DISPOSAL OF LONG-LIVED ASSETs, which supersedes SFAS No. 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
and the accounting and reporting provisions of APB No. 30, REPORTING THE RESULTS
OF OPERATIONS--REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS, AND
EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONs. SFAS
No. 144 addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and is effective for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years. Sonus is
currently reviewing this statement to determine the effect on its consolidated
financial statements.
 
                                       25
<Page>
                                  RISK FACTORS
 
    INVESTING IN OUR COMMON STOCK 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 OCCURS, THE TRADING PRICE OF OUR COMMON
STOCK COULD DECLINE AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
 
OUR BUSINESS HAS BEEN ADVERSELY AFFECTED BY RECENT DEVELOPMENTS IN THE
TELECOMMUNICATIONS INDUSTRY AND THESE DEVELOPMENTS WILL CONTINUE TO IMPACT OUR
REVENUES AND OPERATING RESULTS.
 
    From our inception through the end of 2000, the telecommunications market
was experiencing rapid growth spurred by a number of factors including
deregulation in the industry, entry of a large number of new emerging service
providers, growth in data traffic and the availability of significant capital
from the financial markets. In 2001, the telecommunications industry experienced
a reversal of some of these trends, marked by a dramatic reduction in current
and projected future capital expenditures by service providers, financial
difficulties and in some cases bankruptcies experienced by emerging service
providers and a sharp contraction in the availability of capital. These
conditions caused a substantial reduction in demand for telecommunications
equipment, including our products.
 
    We expect the developments described above to affect our business for the
next several quarters in the following manner:
 
    - our ability to accurately forecast revenue will be diminished;
 
    - our revenues could be reduced; and
 
    - our losses may increase because operating expenses are largely based on
      anticipated revenue trends and a high percentage of our expenses are and
      will continue to be fixed in the short-term.
 
    Our business, operating results and financial condition could be materially
and adversely impacted by any one or a combination of the above.
 
THE WEAKENED FINANCIAL POSITION OF MANY EMERGING SERVICE PROVIDERS WILL INCREASE
THE UNPREDICTABILITY OF OUR RESULTS.
 
    A substantial portion of our revenues to date are from emerging service
providers who have been the primary early adopters of our voice infrastructure
products. Several of our emerging service provider customers, including XO
Communications and Global Crossing, who contributed 17% and 13% of our total
2001 revenues, are experiencing financial difficulties and are in the process of
restructuring their operations or have filed for bankruptcy. Our operating
results could be materially and adversely affected if any present or future
emerging service provider chooses to reduce its level of orders, delays or fails
to pay our receivables, or fails to successfully and timely reorganize its
operations including emerging from bankruptcy.
 
WE EXPECT THAT A MAJORITY OF OUR REVENUES WILL BE GENERATED FROM A LIMITED
NUMBER OF CUSTOMERS AND WE WILL NOT BE SUCCESSFUL IF WE DO NOT GROW OUR CUSTOMER
BASE.
 
    To date, we have shipped our products to a limited number of customers. 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. Four and three
customers each contributed more than 10% of our revenues for the years ended
December 31, 2001 and 2000, which represented an aggregate of 67% and 70% of
total revenues. 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;
 
    - our customers' inability to raise capital to finance their business plans
      and capital expenditures;
 
    - new product introductions by our competitors;
 
                                       26
<Page>
    - any failure of our products to perform as expected; or
 
    - any difficulty we may incur in meeting customers' delivery requirements.
 
    The loss of any of our significant customers or any substantial reduction in
orders from these customers could materially adversely affect our financial
condition and results of operations. 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 PRODUCTS 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 WILL NOT RETAIN CUSTOMERS OR ATTRACT NEW CUSTOMERS IF WE DO NOT ANTICIPATE
AND MEET SPECIFIC CUSTOMER REQUIREMENTS OR 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 may
result in significant warranty, support and repair costs, divert the attention
of our engineering personnel from our hardware 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.
 
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, 2001 we had an accumulated
deficit of $729.4 million and had only recognized cumulative revenues since
inception of $225.0 million through December 31, 2001. We have not achieved
profitability on a quarterly or annual basis. Our revenues may not grow and we
may never generate sufficient revenues to achieve or sustain profitability.
 
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE, WHICH MAY NOT BE AVAILABLE TO US,
AND IF IT IS AVAILABLE, MAY DILUTE THE 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 and capital requirements;
 
    - take advantage of opportunities, including more rapid expansion or
      acquisition of complementary products, technologies or businesses;
 
    - develop new products; or
 
    - respond to competitive pressures.
 
                                       27
<Page>
    Any additional capital raised through the sale of equity may dilute an
investor's percentage ownership of our common stock. Furthermore, additional
financings may not be available on terms favorable to us, or at all. A failure
to obtain additional funding could prevent us from making expenditures that may
be required to grow or maintain our operations.
 
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 customer orders;
 
    - the cancellation or deferral of existing customer orders;
 
    - the failure of certain of our customers to successfully and timely
      reorganize their operations, including emerging from bankruptcy;
 
    - the length and variability of the sales cycle for our products and the
      corresponding timing of recognizing or deferring 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;
 
    - the mix of product configurations sold;
 
    - 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.
 
    As with other telecommunications product suppliers, we may recognize a
substantial portion of our revenue in a given quarter from sales booked and
shipped in the last weeks of that quarter. As a result, a delay in customer
orders is likely to result in a delay in shipments and recognition of revenue
beyond the end of a given quarter, which would have a significant impact on our
operating results for that quarter.
 
    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.
 
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
 
                                       28
<Page>
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.
Most of our officers or key employees are not bound by employment agreements 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 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 have expanded our operations rapidly and have hired a significant number
of employees during fiscal 2001. 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 effective planning and
management processes. We expect that we will need to continue to improve our
financial, managerial and manufacturing controls and reporting systems, and will
need to continue to train and manage our worldwide workforce. 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.
 
WE MAY FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL EXPANSION THAT COULD IMPAIR
OUR ABILITY TO GROW OUR REVENUES ABROAD.
 
    International revenues, primarily to Asia and Europe, were 18% of our
revenues for fiscal 2001 and we intend to continue to expand our sales 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, distributing
and supporting 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 international 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;
 
    - potentially adverse tax consequences; and
 
    - political and economic instability.
 
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. We intend to develop and introduce new products and
enhancements to existing products in the future. We
 
                                       29
<Page>
may not successfully complete the development or introduction of these products.
If our target 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 substantially deployed in very large networks with high volumes of
traffic. Some of our customers have only recently begun to commercially deploy
our products and they may discover errors or defects in the software or
hardware, or the products may not operate as expected. 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 difficulties with software development,
hardware design, manufacturing or marketing that could delay or prevent our
development, introduction or marketing of new products and enhancements. The
introduction of new products by our 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.
 
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 our direct competitors. We also face
competition from other large telecommunications and networking companies,
including Cisco Systems, which have entered our market by acquiring companies
that design competing products. In addition, a number of smaller and mostly
private companies have announced plans for new products that target market
opportunities similar to those 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 that 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 or harm
our ability to attract new customers.
 
                                       30
<Page>
    To compete effectively, we must deliver innovative products that:
 
    - provide extremely high 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.
 
    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 profit margins.
 
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 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 in delays in our fulfillment of customer orders or if a
contract manufacturer fails to make timely delivery of orders, we may lose
revenues and suffer damage to our customer relationships.
 
WE AND OUR CONTRACT 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 contract 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
an 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, 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.
 
                                       31
<Page>
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 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 become involved in litigation as a result of allegations that
we infringe the 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.
 
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 future investments or acquisitions, we could:
 
    - issue stock that would dilute our current stockholders' percentage
      ownership; incur debt or assume liabilities;
 
    - incur significant impairment charges related to the write-off of goodwill
      and purchased intangible assets;
 
    - incur significant amortization expenses related to purchased intangible
      assets; or
 
    - incur large and immediate write-offs for in-process research and
      development and stock-based compensation.
 
                                       32
<Page>
    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;
 
    - 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.
 
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.
 
SECURITIES LITIGATION COULD RESULT IN SUBSTANTIAL COST AND DIVERT THE ATTENTION
OF KEY PERSONNEL, WHICH COULD SERIOUSLY HARM OUR BUSINESS.
 
    On November 8, 2001, a securities class action complaint was filed against
Sonus, two of its officers and the lead underwriters in connection with our IPO.
Sonus has reviewed the complaint and intends to vigorously defend this action.
In the past, securities class action litigation has often been brought against
companies following periods of volatility in the market price of their
securities. Securities litigation could result in substantial costs and divert
management's attention and resources, which could seriously harm our business.
 
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE.
 
    The market for technology stocks has been and will likely continue to be
extremely volatile. The following factors could cause the market price of our
common stock to fluctuate significantly:
 
    - loss of any of our major customers;
 
    - changes in the financial condition or anticipated capital expenditure
      purchases 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 or by our stockholders in
      the future;
 
    - economic conditions for the telecommunications, networking and related
      industries;
 
    - worldwide economic instability; and
 
    - any acquisitions, distribution partnerships, joint ventures or capital
      commitments.
 
                                       33
<Page>
SALES OF A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK IN THE FUTURE COULD CAUSE OUR
STOCK PRICE TO FALL.
 
    Some stockholders who acquired shares prior to our IPO or in connection with
our acquisition of TTI hold a substantial number of shares of our common stock
that have not yet been sold in the public market. Further, additional shares may
become available for sale upon the conversion or redemption of convertible
subordinated notes. Sales of a substantial number of shares of our common stock
within a short period of time in the future could impair our ability to raise
capital through the sale of additional debt or stock and/or cause our stock
price to fall.
 
INSIDERS HAVE SUBSTANTIAL CONTROL OVER US AND COULD LIMIT YOUR ABILITY TO
INFLUENCE THE OUTCOME OF KEY TRANSACTIONS, INCLUDING A CHANGE OF CONTROL.
 
    Our executive officers, directors and entities affiliated with them
beneficially own, in the aggregate, a significant portion of our outstanding
common stock. 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.
 
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, our
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.
 
               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
    This report contains forward-looking statements that involve substantial
risks and uncertainties. In some cases you can identify these statements by
forward-looking words such as "anticipate," "believe," "could," "estimate,"
"expect," "intend," "may," "should," "will," and "would" or similar words. You
should read statements that contain these words carefully because they discuss
future expectations, contain projections of future results of operations or of
financial position or state other "forward-looking" information. The important
factors listed above in the section captioned "Risk Factors," as well as any
cautionary language in this report, provide examples of risks, uncertainties and
events that may cause the actual results to differ materially from the
expectations described in these forward-looking statements. You should be aware
that the occurrence of the events described in the risk factors and elsewhere in
this report could have a material adverse effect on the business, results of
operations and financial position of Sonus.
 
    Any forward-looking statements in this report are not guarantees of future
performances, and actual results, developments and business decisions may differ
from those envisaged by such forward-looking statements, possibly materially.
Sonus disclaims any duty to update any forward-looking statements, all of which
are expressly qualified by the statements in this section.
 
                                       34
<Page>

I
TEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT 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. To date, sales from our international
operations have been made in United States dollars. Accordingly, we have no
current material exposure to foreign currency rate fluctuations, though we will
continue to evaluate the impact of foreign currency exchange risk on our results
of operations as we expand internationally.
 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
    The consolidated financial statements of Sonus Networks, Inc. are filed as a
part of this Annual Report on Form 10-K beginning on page F-1.
 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.
 
    Not applicable.
 

ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT.
 
    The information required by this Item 10 is incorporated by reference to our
definitive Proxy Statement with respect to our 2002 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission not later
than 120 days after the end of the fiscal year.
 

ITEM 11. EXECUTIVE COMPENSATION.
 
    The information required by this Item 11 is incorporated by reference to our
definitive Proxy Statement with respect to our 2002 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission not later
than 120 days after the end of the fiscal year.
 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
    The information required by this Item 12 is incorporated by reference to our
definitive Proxy Statement with respect to our 2002 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission not later
than 120 days after the end of the fiscal year.
 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
    The information required by this Item 13 is incorporated by reference to our
definitive Proxy Statement with respect to our 2002 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission not later
than 120 days after the end of the fiscal year.
 

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
 
(A) DOCUMENTS FILED AS PART OF FORM 10-K:
 
    1) FINANCIAL STATEMENTS.
 
    The following consolidated financial statements and notes thereto are
included in Part II, Item 8 filed as part of this report:
 
       - Report of Independent Public Accountants
 
       - Consolidated Balance Sheets
 
       - Consolidated Statements of Operations
 
                                       35
<Page>
       - Consolidated Statements of Redeemable Convertible Preferred Stock and
         Stockholders' Equity (Deficit)
 
       - Consolidated Statements of Cash Flows
 
       - Notes to Consolidated Financial Statements
 
    2) FINANCIAL STATEMENT SCHEDULES.
 
    None. All schedules are omitted because they are inapplicable, not required
under the instructions or because the information is reflected in the
consolidated financial statements or notes thereto.
 
    3) LIST OF EXHIBITS.
 
    The following is a list of exhibits filed as a part of this Form 10-K:
 

<Table>
<Caption>
       EXHIBIT
       NUMBER                                   DESCRIPTION
---------------------   ------------------------------------------------------------
<C>                     <S>
       2.1****          Agreement and Plan of Merger and Reorganization, dated as of
                        November 2, 2000, by and among the Registrant, Storm Merger
                        Sub, Inc. and telecom technologies, inc.
 
       3.1***           Certificate of Amendment to Fourth Amended and Restated
                        Certificate of Incorporation of Sonus Networks, Inc.
 
       3.2**            Fourth Amended and Restated Certificate of Incorporation of
                        Sonus Networks, Inc.
 
       3.3**            Amended and Restated By-Laws of Sonus Networks, Inc.
 
       4.1**            Form of Stock Certificate representing shares of Sonus
                        Networks, Inc. Common Stock.
 
       9.1****          Voting Agreement, dated as of November 2, 2000, among the
                        Registrant, the Stockholder parties thereto and telecom
                        technologies, inc.
 
      10.1*             Registration Rights Agreement, dated as of November 2, 2000,
                        by and among Sonus Networks, Inc. and the Stockholder
                        parties thereto.
 
      10.2*             Sonus 2000 Retention Plan.
 
      10.3*             Telecom technologies, inc. 1998 Amended Equity Incentive
                        Plan.
 
      10.4**            Amended and Restated 1997 Stock Incentive Plan of the
                        Registrant.
 
      10.5**            2000 Employee Stock Purchase Plan of the Registrant.
 
      10.6**            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.
 
      10.7*             Sub-lease, dated October 20, 2000, between the Registrant
                        and Unisphere Networks, Inc. with respect to property
                        located at 5 Carlisle Road, Massachusetts.
 
      10.8*             Sub-Lease, dated October 20, 2000, between the Registrant
                        and Unisphere Networks, Inc. with respect to property
                        located at 235 Littleton Road, Westford, Massachusetts.
 
      10.9*             Lease, dated September 30, 2000, between the Registrant and
                        BCIA New England Holdings LLC with respect to property
                        located at 25 Porter Road, Littleton, Massachusetts.
 
      10.10**           Agreement of Sublease, dated April 14, 2000, between the
                        Registrant and Unisphere Solutions, Inc. with respect to
                        property located at 25 Porter Road, Littleton,
                        Massachusetts.
 
      10.11*            Office Lease Agreement, dated as of November 14, 2000,
                        between telecom technologies, inc. and TR Lookout Partners,
                        Ltd. with respect to property located at 1301 East Lookout
                        Drive, Suite 3000, Richardson, Texas.
 
      10.12*            First Amendment to Office Lease Agreement, dated as of
                        January 8, 2001, between telecom technologies, inc. and TR
                        Lookout Partners, Ltd. with respect to property located at
                        1300 East Lookout Drive, Suite 3000, Richardson, Texas.
 
      10.13             Office Lease Agreement dated April 4, 1997, between telecom
                        technologies, inc. and Collins Campbell Joint Venture with
                        respect to property located at 1701 North Collins Blvd.,
                        Suite 3000, Richardson, Texas.
</Table>

 
                                       36
<Page>
 

<Table>
<Caption>
       EXHIBIT
       NUMBER                                   DESCRIPTION
---------------------   ------------------------------------------------------------
<C>                     <S>
      10.14             First Amendment to Office Lease Agreement, dated
                        November 1, 1997, between telecom technologies, inc. and
                        Collins Campbell Joint Venture with respect to property
                        located at 1701 North Collins Blvd., Suite 3000, Richardson,
                        Texas.
 
      10.15             Second Amendment to Office Lease Agreement, dated July 1,
                        1998, between telecom technologies, inc. and Collins
                        Campbell Joint Venture with respect to property located at
                        1701 North Collins Blvd., Suite 3000, Richardson, Texas.
 
      10.16             Third Amendment to Office Lease Agreement, dated July 1,
                        1998, between telecom technologies, inc. and Collins
                        Campbell Joint Venture with respect to property located at
                        1701 North Collins Blvd., Suite 3000, Richardson, Texas.
 
      10.17             Fourth Amendment to Office Lease Agreement, dated
                        February 1, 1999, between telecom technologies, inc. and
                        Collins Campbell Joint Venture with respect to property
                        located at 1701 North Collins Blvd., Suite 3000, Richardson,
                        Texas.
 
      10.18             Global Agreement, dated March 5, 2002, by and between TR
                        Lookout Partners, Ltd., Collins Campbell Joint Venture,
                        telecom technologies, inc. and Registrant related to
                        property lease agreements.
 
      10.19**           Series A Preferred Stock Purchase Agreement, dated as of
                        November 18, 1997, by and among the Registrant and the
                        "Purchaser" parties thereto.
 
      10.20**           Series B Preferred Stock Purchase Agreement, dated as of
                        September 23, 1998, by and among the Registrant and the
                        "Purchaser" parties thereto.
 
      10.21**           Series C Preferred Stock Purchase Agreement, dated as of
                        September 10, 1999, by and among the Registrant and the
                        "Purchaser" parties thereto.
 
      10.22**           Series D Preferred Stock Purchase Agreement, dated as of
                        March 9, 2000, by and among the Registrant and the
                        "Purchaser" parties thereto.
 
      10.23**           Third Amended and Restated Investor Rights Agreement, dated
                        as of March 9, 2000, by and among the Registrant and the
                        "Purchaser" parties thereto.
 
      10.24**           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.
 
      10.25             Loan and Security Agreement, dated as of January 16, 2002,
                        by and between the Registrant and Silicon Valley Bank.
 
      21.1              Subsidiaries of the Registrant.
 
      23.1              Consent of Arthur Andersen LLP.
 
      99.1              Letter to Commission Pursuant to Temporary Note 3T.
</Table>

 
------------------------
 
*   Incorporated by reference to the Registrant's Registration Statement on
    Form S-4 (file No. 333-52682).
 
**  Incorporated by reference to the Registrant's Registration Statement on
    Form S-1 (file No. 333-32206).
 
*** Incorporated by reference to the Registrant's Current Report on Form 8-K,
    filed June 21, 2001 with the Securities and Exchange Commission.
 
****Incorporated by reference to the Registrant's Current Report on Form 8-K,
    filed November 17, 2000 with the Securities and Exchange Commission.
 
(B) REPORTS ON FORM 8-K FILED DURING THE FOURTH QUARTER OF FISCAL 2001.
 
    Sonus filed on October 11, 2001 a Current Report on Form 8-K dated
September 26, 2001 with the SEC in connection with its revised business and
financial outlook for the third and fourth quarters of fiscal 2001.
 
                                       37
<Page>

                                   SIGNATURES
 
    Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
Town of Westford, Commonwealth of Massachusetts, on this 27th day of March,
2002.
 

<Table>
<S>                                                    <C>  <C>
                                                       SONUS NETWORKS, INC.
 
                                                       By:  /s/ HASSAN M. AHMED
                                                            -----------------------------------------
                                                            Hassan M. Ahmed
                                                            PRESIDENT AND CHIEF EXECUTIVE OFFICER
</Table>

 
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
 

<Table>
<Caption>
                      SIGNATURE                                    TITLE                    DATE
                      ---------                                    -----                    ----
<C>                                                    <S>                             <C>
                                                       President, Chief Executive
                 /s/ HASSAN M. AHMED                     Officer and Director
     -------------------------------------------         (Principal Executive          March 27, 2002
                   Hassan M. Ahmed                       Officer)
 
                                                       Chief Financial Officer,
                                                         Vice President of Finance
                 /s/ STEPHEN J. NILL                     and Administration and
     -------------------------------------------         Treasurer (Principal          March 27, 2002
                   Stephen J. Nill                       Financial and
                                                         Accounting Officer)
 
                  /s/ RUBIN GRUBER
     -------------------------------------------       Chairman of the Board of        March 27, 2002
                    Rubin Gruber                         Directors and Director
 
               /s/ EDWARD T. ANDERSON
     -------------------------------------------       Director                        March 27, 2002
                 Edward T. Anderson
 
                  /s/ PAUL J. FERRI
     -------------------------------------------       Director                        March 27, 2002
                    Paul J. Ferri
 
                /s/ PAUL J. SEVERINO
     -------------------------------------------       Director                        March 27, 2002
                  Paul J. Severino
</Table>

 
                                       38
<Page>
                              SONUS NETWORKS, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Public Accountants....................   F-2
Consolidated Balance Sheets.................................   F-3
Consolidated Statements of Operations.......................   F-4
Consolidated Statements of Redeemable Convertible Preferred
  Stock and Stockholders' Equity (Deficit)..................   F-5
Consolidated Statements of Cash Flows.......................   F-6
Notes to Consolidated 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 consolidated balance sheets of Sonus
Networks, Inc. (a Delaware corporation) as of December 31, 2001 and 2000 and the
related consolidated statements of operations, redeemable convertible preferred
stock and stockholders' equity (deficit) and cash flows for the years ended
December 31, 2001, 2000 and 1999. These consolidated financial statements are
the responsibility of the Sonus Networks, Inc. management. Our responsibility is
to express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Sonus
Networks, Inc. as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for the years ended December 31, 2001, 2000 and
1999 in conformity with accounting principles generally accepted in the United
States.
 
                                          Arthur Andersen LLP
 
Boston, Massachusetts
January 14, 2002 (except with respect

to the matters discussed in Note 17,
as to which the date is March 5, 2002)
 
                                      F-2
<Page>
                              SONUS NETWORKS, INC.
 
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2001       2000
                                                              --------   --------
<S>                                                           <C>        <C>
                                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $ 49,123   $ 87,108
  Marketable securities.....................................    75,944     54,957
  Accounts receivable, net of allowances....................     9,440     14,100
  Inventories...............................................    18,865     20,668
  Other current assets......................................     2,952      2,893
                                                              --------   --------
      Total current assets..................................   156,324    179,726
 
PROPERTY AND EQUIPMENT, net of accumulated depreciation and
  amortization..............................................    23,335     14,273
 
GOODWILL AND PURCHASED INTANGIBLES, net of accumulated
  amortization..............................................     4,536         --
 
OTHER ASSETS, net of accumulated amortization of $930 and
  $585 at December 31, 2001 and 2000, respectively..........       689        836
                                                              --------   --------
                                                              $184,884   $194,835
                                                              ========   ========
 
                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable..........................................  $  8,630   $ 13,439
  Accrued expenses..........................................    27,671     16,239
  Accrued restructuring expenses............................     8,596         --
  Deferred revenue..........................................    13,349     14,451
  Current portion of long-term obligations..................     1,055         --
                                                              --------   --------
      Total current liabilities.............................    59,301     44,129
 
LONG-TERM OBLIGATIONS, less current portion.................    12,698         --
 
CONVERTIBLE SUBORDINATED NOTES..............................    10,000         --
 
COMMITMENTS AND CONTINGENCIES (Note 11).....................
 
STOCKHOLDERS' EQUITY:
  Preferred stock, $0.01 par value; 5,000,000 shares
    authorized, none issued and outstanding.................        --         --
  Common stock, $0.001 par value; 600,000,000 shares
    authorized, 205,181,085 and 184,244,474 shares issued
    and 204,167,335 and 183,471,974 shares outstanding at
    December 31, 2001 and 2000, respectively................       205        184
  Capital in excess of par value............................   860,883    266,488
  Accumulated deficit.......................................  (729,398)   (83,966)
  Stock subscriptions receivable............................        --       (238)
  Deferred compensation.....................................   (28,721)   (31,697)
  Treasury stock, at cost; 1,013,750 and 772,500 common
    shares at December 31, 2001 and 2000, respectively......       (84)       (65)
                                                              --------   --------
      Total stockholders' equity............................   102,885    150,706
                                                              --------   --------
                                                              $184,884   $194,835
                                                              ========   ========
</Table>

 
  THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
                                  STATEMENTS.
 
                                      F-3
<Page>
                              SONUS NETWORKS, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 

<Table>
<Caption>
                                                                     YEAR ENDED DECEMBER 31,
                                                                ---------------------------------
                                                                  2001         2000        1999
                                                                ---------    --------    --------
<S>                                                             <C>          <C>         <C>
REVENUES....................................................    $ 173,199    $ 51,770    $     --
Cost of revenues (1)........................................       75,698      27,848       1,861
                                                                ---------    --------    --------
 
GROSS PROFIT (LOSS).........................................       97,501      23,922      (1,861)
 
OPERATING EXPENSES:
  Research and development (1)..............................       65,004      26,430      10,780
  Sales and marketing (1)...................................       42,267      21,569       5,606
  General and administrative (1)............................       13,068       5,477       1,723
  Stock-based compensation..................................       75,500      26,729       4,404
  Amortization of goodwill and purchased intangibles........      107,759          --          --
  Write-off of goodwill and purchased intangibles...........      374,735          --          --
  Restructuring charges.....................................       25,807          --          --
  In-process research and development.......................       43,800          --          --
                                                                ---------    --------    --------
      Total operating expenses..............................      747,940      80,205      22,513
                                                                ---------    --------    --------
 
LOSS FROM OPERATIONS........................................     (650,439)    (56,283)    (24,374)
Interest expense............................................         (567)       (209)       (224)
Interest income.............................................        5,574       6,454         711
                                                                ---------    --------    --------
 
NET LOSS....................................................     (645,432)    (50,038)    (23,887)
Beneficial conversion feature of Series C preferred stock...           --          --      (2,500)
                                                                ---------    --------    --------
 
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS..................    $(645,432)   $(50,038)   $(26,387)
                                                                =========    ========    ========
 
NET LOSS PER SHARE (NOTE 1 (O)):
  Basic and diluted.........................................    $   (3.74)   $  (0.52)   $  (1.84)
                                                                =========    ========    ========
  Pro forma basic and diluted...............................                 $  (0.37)   $  (0.25)
                                                                             ========    ========
 
SHARES USED IN COMPUTING NET LOSS PER SHARE (NOTE 1 (O)):
  Basic and diluted.........................................      172,382      95,877      14,324
                                                                =========    ========    ========
  Pro forma basic and diluted...............................                  135,057      96,188
                                                                             ========    ========
------------------------
 
(1) Excludes non-cash, stock-based compensation expense as
  follows:
    Cost of revenues........................................    $   1,328    $    404    $     92
    Research and development................................       43,553      11,428       1,537
    Sales and marketing.....................................       18,300      12,051       2,104
    General and administrative..............................       12,319       2,846         671
                                                                ---------    --------    --------
                                                                $  75,500    $ 26,729    $  4,404
                                                                =========    ========    ========
</Table>

 
  THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
                                  STATEMENTS.
 
                                      F-4
<Page>
                              SONUS NETWORKS, INC.
 
     CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
                         STOCKHOLDERS' EQUITY (DEFICIT)
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)

<Table>
                                                               REDEEMABLE CONVERTIBLE
                                                                  PREFERRED STOCK             COMMON STOCK        CAPITAL IN
                                                              ------------------------   ----------------------   EXCESS OF
                                                                            REDEMPTION                  PAR          PAR
                                                                SHARES       VALUE         SHARES      VALUE        VALUE
                                                              -----------   ----------   -----------   --------   -----------
<S>                                                           <C>           <C>          <C>           <C>        <C>
  BALANCE, DECEMBER 31, 1998................................   10,334,287    $22,951      49,570,059     $ 50      $    556
    Issuance of Series B preferred stock and issuance costs
     of $9..................................................       50,000        250              --       --            --
    Issuance of Series C preferred stock 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...............................................           --         --      15,230,612       15         1,488
    Exercise of stock options...............................           --         --         710,250        1            15
    Compensation associated with the grant of stock options
     and sale of restricted stock to non-employees..........           --         --              --       --           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      65,510,921       66        25,567
    Issuance of Series D preferred stock and issuance costs
     of $46.................................................    1,509,154     24,750              --       --            --
    Issuance of common stock to public, net of issuance
     costs of $10,545.......................................           --         --      17,250,000       17       121,688
    Payments on subscriptions receivable....................           --         --              --       --            --
    Issuance of common stock to employees...................           --         --       3,870,676        4         6,421
    Conversion of preferred stock to common stock...........  (13,833,122)   (70,859)     96,957,222       97        70,762
    Exercise of stock options...............................           --         --         655,655       --           228
    Repurchase of common stock..............................           --         --              --       --            --
    Compensation associated with the grant of stock options
     and sale of restricted stock to non-employees..........           --         --              --       --         2,389
    Deferred compensation related to stock option grants and
     sale of restricted common stock........................           --         --              --       --        39,433
    Amortization of deferred compensation...................           --         --              --       --            --
    Net loss................................................           --         --              --       --            --
                                                              -----------    -------     -----------     ----      --------
  BALANCE, DECEMBER 31, 2000................................           --         --     184,244,474      184       266,488
    Issuance of common stock in connection with employee
     stock purchase program.................................           --         --       1,021,333        1         7,865
    Issuance of common stock in connection with acquisition
     of TELECOM TECHNOLOGIES, INC. (TTI) (Note 3)...........           --         --      15,000,000       15       504,998
    Issuance of common stock in connection with acquisition
     of certain assets of LINGUATEQ, INC. (Note 4)..........           --         --         221,753       --         4,995
    Issuance of restricted stock awards in connection with
     acquisition of TTI (Note 3)............................           --         --       3,000,000        3        55,193
    Deferred compensation related to unvested stock options
     assumed in connection with acquisition of TTI (Note
     3).....................................................           --         --              --       --        22,600
    Exercise of stock options...............................           --         --       1,693,525        2         4,016
    Amortization of deferred compensation...................           --         --              --       --            --
    Deferred compensation for terminated employees (Note
     2).....................................................           --         --              --       --        (5,272)
    Payment on subscriptions receivable.....................           --         --              --       --            --
    Repurchase of common stock..............................           --         --              --       --            --
    Net loss................................................           --         --              --       --            --
                                                              -----------    -------     -----------     ----      --------
  BALANCE, DECEMBER 31, 2001................................           --    $    --     205,181,085     $205      $860,883
                                                              ===========    =======     ===========     ====      ========
 
<S>                                                           <C>           <C>            <C>            <C>         <C>
                                                                              STOCK                          TREASURY STOCK
                                                              ACCUMULATED   SUBSCRIPTIONS   DEFERRED      --------------------
                                                               DEFICIT      RECEIVABLE     COMPENSATION    SHARES      COST
                                                              -----------   ------------   ------------   ---------   --------
  BALANCE, DECEMBER 31, 1998................................   $  (7,446)     $  (257)       $     --            --    $  --
    Issuance of Series B preferred stock and issuance costs
     of $9..................................................          (9)          --              --            --       --
    Issuance of Series C preferred stock and issuance costs
     of $40.................................................         (40)          --              --            --       --
    Beneficial conversion feature of Series C preferred
     stock..................................................      (2,500)          --              --            --       --
    Payments on subscriptions receivable....................          --           21              --            --       --
    Issuance of common stock to employees, officers and a
     director...............................................          --         (110)             --            --       --
    Exercise of stock options...............................          --           --              --            --       --
    Compensation associated with the grant of stock options
     and sale of restricted stock to non-employees..........          --           --              --            --       --
    Deferred compensation related to stock option grants and
     sale of restricted common stock........................          --           --         (20,859)           --       --
    Amortization of deferred compensation...................          --           --           4,255            --       --
    Net loss................................................     (23,887)          --              --            --       --
                                                               ---------      -------        --------     ---------    -----
  BALANCE, DECEMBER 31, 1999................................     (33,882)        (346)        (16,604)           --       --
    Issuance of Series D preferred stock and issuance costs
     of $46.................................................         (46)          --              --            --       --
    Issuance of common stock to public, net of issuance
     costs of $10,545.......................................          --           --              --            --       --
    Payments on subscriptions receivable....................          --          108              --            --       --
    Issuance of common stock to employees...................          --           --              --            --       --
    Conversion of preferred stock to common stock...........          --           --              --            --       --
    Exercise of stock options...............................          --           --              --            --       --
    Repurchase of common stock..............................          --           --              --       772,500      (65)
    Compensation associated with the grant of stock options
     and sale of restricted stock to non-employees..........          --           --              --            --       --
    Deferred compensation related to stock option grants and
     sale of restricted common stock........................          --           --         (39,433)           --       --
    Amortization of deferred compensation...................          --           --          24,340            --       --
    Net loss................................................     (50,038)          --              --            --       --
                                                               ---------      -------        --------     ---------    -----
  BALANCE, DECEMBER 31, 2000................................     (83,966)        (238)        (31,697)      772,500      (65)
    Issuance of common stock in connection with employee
     stock purchase program.................................          --           --              --            --       --
    Issuance of common stock in connection with acquisition
     of TELECOM TECHNOLOGIES, INC. (TTI) (Note 3)...........          --           --              --            --       --
    Issuance of common stock in connection with acquisition
     of certain assets of LINGUATEQ, INC. (Note 4)..........          --           --              --            --       --
    Issuance of restricted stock awards in connection with
     acquisition of TTI (Note 3)............................          --           --         (55,196)           --       --
    Deferred compensation related to unvested stock options
     assumed in connection with acquisition of TTI (Note
     3).....................................................          --           --         (22,600)           --       --
    Exercise of stock options...............................          --           --              --            --       --
    Amortization of deferred compensation...................          --           --          50,071            --       --
    Deferred compensation for terminated employees (Note
     2).....................................................          --           --          30,701            --       --
    Payment on subscriptions receivable.....................          --          238              --            --       --
    Repurchase of common stock..............................          --           --              --       241,250      (19)
    Net loss................................................    (645,432)          --              --            --       --
                                                               ---------      -------        --------     ---------    -----
  BALANCE, DECEMBER 31, 2001................................   $(729,398)     $    --        $(28,721)    1,013,750    $ (84)
                                                               =========      =======        ========     =========    =====
 
<S>                                                           <C>
                                                                TOTAL
                                                              STOCKHOLDERS'
                                                               EQUITY
                                                              (DEFICIT)
                                                              -----------
  BALANCE, DECEMBER 31, 1998................................   $ (7,097)
    Issuance of Series B preferred stock and issuance costs
     of $9..................................................         (9)
    Issuance of Series C preferred stock and issuance costs
     of $40.................................................        (40)
    Beneficial conversion feature of Series C preferred
     stock..................................................         --
    Payments on subscriptions receivable....................         21
    Issuance of common stock to employees, officers and a
     director...............................................      1,393
    Exercise of stock options...............................         16
    Compensation associated with the grant of stock options
     and sale of restricted stock to non-employees..........        149
    Deferred compensation related to stock option grants and
     sale of restricted common stock........................         --
    Amortization of deferred compensation...................      4,255
    Net loss................................................    (23,887)
                                                               --------
  BALANCE, DECEMBER 31, 1999................................    (25,199)
    Issuance of Series D preferred stock and issuance costs
     of $46.................................................        (46)
    Issuance of common stock to public, net of issuance
     costs of $10,545.......................................    121,705
    Payments on subscriptions receivable....................        108
    Issuance of common stock to employees...................      6,425
    Conversion of preferred stock to common stock...........     70,859
    Exercise of stock options...............................        228
    Repurchase of common stock..............................        (65)
    Compensation associated with the grant of stock options
     and sale of restricted stock to non-employees..........      2,389
    Deferred compensation related to stock option grants and
     sale of restricted common stock........................         --
    Amortization of deferred compensation...................     24,340
    Net loss................................................    (50,038)
                                                               --------
  BALANCE, DECEMBER 31, 2000................................    150,706
    Issuance of common stock in connection with employee
     stock purchase program.................................      7,866
    Issuance of common stock in connection with acquisition
     of TELECOM TECHNOLOGIES, INC. (TTI) (Note 3)...........    505,013
    Issuance of common stock in connection with acquisition
     of certain assets of LINGUATEQ, INC. (Note 4)..........      4,995
    Issuance of restricted stock awards in connection with
     acquisition of TTI (Note 3)............................         --
    Deferred compensation related to unvested stock options
     assumed in connection with acquisition of TTI (Note
     3).....................................................         --
    Exercise of stock options...............................      4,018
    Amortization of deferred compensation...................     50,071
    Deferred compensation for terminated employees (Note
     2).....................................................     25,429
    Payment on subscriptions receivable.....................        238
    Repurchase of common stock..............................        (19)
    Net loss................................................   (645,432)
                                                               --------
  BALANCE, DECEMBER 31, 2001................................   $102,885
                                                               ========
</Table>

 
  THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
                                  STATEMENTS.
 
                                      F-5
<Page>
                              SONUS NETWORKS, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
 

<Table>
<Caption>
                                                                  YEAR ENDED DECEMBER 31,
                                                              --------------------------------
                                                                2001        2000        1999
                                                              ---------   ---------   --------
<S>                                                           <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss..................................................  $(645,432)  $ (50,038)  $(23,887)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Depreciation and amortization...........................     15,189       5,112      1,632
    Stock-based compensation................................     75,500      26,729      4,404
    Amortization of goodwill and purchased intangibles......    107,759          --         --
    Write-off of goodwill and purchased intangibles.........    374,735          --         --
    In-process research and development.....................     43,800          --         --
    Changes in current assets and liabilities:
      Accounts receivable...................................      8,666     (14,100)        --
      Inventories...........................................      2,284     (18,458)    (2,210)
      Other current assets..................................      1,081      (2,595)      (136)
      Accounts payable......................................     (5,665)     12,027        990
      Accrued expenses......................................     27,659      13,548      2,201
      Deferred revenue......................................     (6,781)     13,420      1,031
                                                              ---------   ---------   --------
        Net cash used in operating activities...............     (1,205)    (14,355)   (15,975)
                                                              ---------   ---------   --------
 
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment.......................    (23,050)    (14,832)    (4,151)
  Maturities of marketable securities.......................     42,416      32,262     22,020
  Purchases of marketable securities........................    (63,403)    (72,538)   (23,784)
  Other assets..............................................       (194)       (681)      (436)
  Acquisitions, net of cash acquired........................     (6,125)         --         --
                                                              ---------   ---------   --------
        Net cash used in investing activities...............    (50,356)    (55,789)    (6,351)
                                                              ---------   ---------   --------
 
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from sale of common stock....................      7,866     128,130      1,393
  Proceeds from exercise of stock options...................      4,018         228         16
  Net proceeds from issuance of redeemable convertible
    preferred stock.........................................         --      24,704     23,109
  Payment of stock subscriptions receivable.................        238         108         21
  Proceeds from long-term obligations.......................         --         405      3,609
  Payments of long-term obligations.........................       (527)     (5,143)      (521)
  Payment of note payable to bank...........................     (8,000)         --         --
  Proceeds from issuance of convertible subordinated
    notes...................................................     10,000          --         --
  Repurchase of common stock................................        (19)        (65)        --
                                                              ---------   ---------   --------
        Net cash provided by financing activities...........     13,576     148,367     27,627
                                                              ---------   ---------   --------
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........    (37,985)     78,223      5,301
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................     87,108       8,885      3,584
                                                              ---------   ---------   --------
CASH AND CASH EQUIVALENTS, END OF YEAR......................  $  49,123   $  87,108   $  8,885
                                                              =========   =========   ========
</Table>

 
  THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
                                  STATEMENTS.
 
                                      F-6
<Page>
                              SONUS NETWORKS, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
 
    Sonus Networks, Inc. (Sonus) was incorporated on August 7, 1997 and is a
leading provider of voice infrastructure products for the new public network.
Sonus offers a new generation of carrier-class switching equipment and software
that enable voice services to be delivered over packet-based networks.
 
    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 business plan. Sonus has a limited
operating history and has incurred significant operating losses since inception.
 
    The accompanying consolidated financial statements reflect the application
of certain significant accounting policies as described in this note and
elsewhere in the accompanying consolidated financial statements and notes.
 
    (A) PRINCIPLES OF CONSOLIDATION
 
    The accompanying consolidated financial statements include the accounts of
Sonus and its wholly owned subsidiaries. All material intercompany transactions
and balances have been eliminated.
 
    (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 high
quality credit instruments, primarily U.S. Government obligations and corporate
obligations with contractual maturities of less than one year. There have been
no gains or losses to date.
 
    (C) CONCENTRATIONS OF CREDIT AND OFF-BALANCE SHEET RISK, SIGNIFICANT
     CUSTOMERS AND LIMITED SUPPLIERS
 
    The financial instruments that potentially subject Sonus to concentrations
of credit risk are cash, cash equivalents, marketable securities and
receivables. Sonus has no off-balance-sheet concentrations such as foreign
exchange contracts, options contracts or other foreign hedging arrangements.
Sonus' cash and cash equivalent holdings are diversified between four financial
institutions.
 
    For the years ended December 31, 2001 and 2000, four and three customers,
each of whom contributed more than 10% of revenues, accounted for an aggregate
of 67% and 70% of revenues. As of December 31, 2001 and 2000, four and two
customers each accounted for an aggregate of 69% and 80% of Sonus' accounts
receivable balance. International revenues, primarily to Asia and Europe, were
18% and 11% of revenues for the year ended December 31, 2001 and 2000. 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. Sonus provides inventory allowances based on excess and obsolete
inventories.
 
                                      F-7
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    (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) GOODWILL AND PURCHASED INTANGIBLES
 
    Goodwill and purchased intangibles are being amortized over two and three
year periods (Notes 1(p), 3 and 4). Statement of Financial Accounting Standards
(SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF, requires that long-lived assets, goodwill
and other intangibles be reviewed for impairment whenever circumstances indicate
that the carrying value of an asset may not be recoverable. The carrying value
of long-lived assets, goodwill and other intangibles are considered impaired
when the estimated undiscounted future cash flow from such assets is less than
the carrying value (Note 2).
 
    (G) 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.
 
    (H) REVENUE RECOGNITION
 
    Sonus recognizes revenue from product sales to end users, resellers and
distributors 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. In multiple element arrangements, in accordance with Statement of
Position 97-2 and 98-9, Sonus uses the residual method when vendor-specific
objective evidence does not exist for one of the delivered elements in the
arrangement. Service revenue is recognized as the services are provided. Revenue
from maintenance and support arrangements is recognized ratably over the term of
the contract. Amounts collected prior to satisfying the revenue recognition
criteria are reflected as deferred revenue. Warranty costs are estimated and
recorded by Sonus at the time of product revenue recognition.
 
    In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS. This
bulletin established guidelines for revenue recognition. Sonus' revenue
recognition policy complies with this pronouncement.
 
    (I) SOFTWARE DEVELOPMENT COSTS
 
    Sonus accounts for its software development costs in accordance with 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.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    (J) STOCK-BASED COMPENSATION
 
    Sonus uses the intrinsic value-based method of Accounting Principles Board
(APB) 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.
 
    (K) COMPREHENSIVE LOSS
 
    Sonus applies Financial Accounting Standards Board (FASB) SFAS No. 130,
REPORTING COMPREHENSIVE INCOME. The comprehensive loss for the years ended
December 31, 2001, 2000 and 1999 does not differ from the reported loss.
 
    (L) FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    The carrying amounts of Sonus' financial instruments, which include cash
equivalents, marketable securities, accounts payable, accrued expenses,
long-term obligations and the convertible subordinated note, approximate their
fair value.
 
    (M) USE OF ESTIMATES
 
    The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.
 
    (N) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE
 
    SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION, established standards for reporting information regarding operating
segments and established 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 regarding resource allocation and assessing
performance. To date, Sonus has viewed its operations and manages its business
as principally one operating segment.
 
    (O) NET LOSS PER SHARE
 
    Basic net loss per share is computed by dividing the net loss for the year
by the weighted average number of shares of unrestricted common stock
outstanding during the year. Diluted net loss per share is computed by dividing
the net loss for the year by the weighted average number of shares of
unrestricted common stock and potential common stock outstanding during the
year, if dilutive. Potential common stock consists of restricted shares of
common stock, shares of common stock issuable upon the exercise of stock
options, conversion of convertible subordinated notes and shares of common stock
issued in connection with our acquisition of telecom technologies, inc. (TTI)
subject to the achievement of milestones and employee retention (Notes 3 and
13(g)). For both basic and diluted net loss per share, shares of common stock
issuable upon the conversion of Sonus' redeemable convertible preferred stock
have been excluded from the date of issuance until conversion into common stock.
There were no dilutive shares of potential common stock for the years ended
December 31, 2001, 2000 and 1999 as Sonus incurred a net loss in each year.
 
                                      F-9
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    Pro forma basic and diluted net loss per share for the years ended
December 31, 2000 and 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, C and D redeemable convertible
preferred stock into shares of Sonus' common stock which occurred upon the
closing of Sonus' initial public offering (IPO), as if such conversion occurred
at the date of original issuance.
 
    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>
                                                                     YEAR ENDED DECEMBER 31,
                                                              -------------------------------------
                                                                 2001          2000         1999
                                                              -----------   ----------   ----------
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                           <C>           <C>          <C>
HISTORICAL--
  Net loss applicable to common stockholders................   $(645,432)    $(50,038)    $(26,387)
                                                               =========     ========     ========
 
  Weighted average common shares outstanding................     198,068      135,364       57,460
  Less weighted average restricted common shares
    outstanding.............................................     (25,686)     (39,487)     (43,136)
                                                               ---------     --------     --------
  Shares used in computing basic and diluted net loss per
    share...................................................     172,382       95,877       14,324
                                                               =========     ========     ========
  Basic and diluted net loss per share......................   $   (3.74)    $  (0.52)    $  (1.84)
                                                               =========     ========     ========
PRO FORMA--
  Net loss..................................................                 $(50,038)    $(23,887)
                                                                             ========     ========
  Shares used in computing historical basic and diluted
    net loss per share......................................                   95,877       14,324
  Weighted average number of common shares assumed to be
    issued upon conversion of redeemable convertible
    preferred stock.........................................                   39,180       81,864
                                                                             --------     --------
  Shares used in computing pro forma basic and diluted
    net loss per share......................................                  135,057       96,188
                                                                             ========     ========
  Pro forma basic and diluted net loss per share............                 $  (0.37)    $  (0.25)
                                                                             ========     ========
</Table>

 
    Excluded from the computation of diluted net loss per share in the above
table are options to purchase shares of common stock and shares of common stock
issuable upon conversion of convertible subordinated notes representing an
aggregate of 20,615,955, 17,725,526, and 3,052,743, for the years ended
December 31, 2001, 2000 and 1999, as their effects would have been
anti-dilutive. Had Sonus recorded net income for the year ended December 31,
2001 and used the treasury stock method in accordance with SFAS No. 128,
EARNINGS PER SHARe, approximately 210,000,000 weighted average shares of common
stock would have been used in the computation of diluted earnings per share.
 
    (P) RECENT ACCOUNTING PRONOUNCEMENTS
 
    In June 2001, the FASB issued SFAS No. 141, BUSINESS COMBINATIONS, and SFAS
No. 142, GOODWILL AND OTHER INTANGIBLE ASSETs. SFAS No. 141 requires that all
business combinations initiated after June 30, 2001 be accounted for using the
purchase method of accounting and prohibits the use of the pooling of interest
method. SFAS No. 142 eliminates the amortization of goodwill and certain other
intangibles with indefinite lives and instead subjects these assets to periodic
impairment assessments. SFAS No. 142 is effective immediately for all goodwill
and certain other intangible assets acquired after June 30, 2001 and shall
commence on January 1, 2002 for all goodwill and certain other intangibles
existing on June 30, 2001. Sonus has adopted SFAS No. 141 and is currently
assessing the potential impact SFAS No. 142 will have on its consolidated
financial statements.
 
                                      F-10
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    In August 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT
OR DISPOSAL OF LONG-LIVED ASSETs, which supersedes SFAS No. 121, and the
accounting and reporting provisions of APB No. 30, REPORTING THE RESULTS OF
OPERATIONS--REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS, AND
EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONs. SFAS
No. 144 addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and is effective for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years. Sonus is
currently reviewing this statement to determine the effect on its consolidated
financial statements.
 
(2) RESTRUCTURING CHARGES AND WRITE-OFF OF GOODWILL AND PURCHASED INTANGIBLES
 
    In September 2001, in response to unfavorable business conditions primarily
caused by declines in capital spending by telecommunications service providers,
Sonus announced a restructuring plan designed to reduce expenses and align its
cost structure with its revised business outlook. The restructuring plan
includes a worldwide workforce reduction, consolidation of excess facilities and
other charges. Additionally, Sonus recorded a write-off of goodwill and
purchased intangibles related to the acquisition of TTI (Note 3). Sonus'
restructuring related reserves as of December 31, 2001 are summarized as
follows, in thousands:
 

<Table>
<Caption>
                                                 INITIAL
                                              RESTRUCTURING              ACCRUAL    CURRENT    LONG-TERM
                                                 CHARGES      PAYMENTS   BALANCE    PORTION     PORTION
                                              -------------   --------   --------   --------   ---------
<S>                                           <C>             <C>        <C>        <C>        <C>
Workforce reduction.........................     $ 4,506       $3,635    $   871     $  871     $    --
Consolidation of facilities and other
  charges...................................      21,301        1,116     20,185      7,725      12,460
                                                 -------       ------    -------     ------     -------
Total.......................................     $25,807       $4,751    $21,056     $8,596     $12,460
                                                 =======       ======    =======     ======     =======
</Table>

 
    Remaining cash expenditures relating to the workforce reductions are
expected to be substantially paid in the first quarter of fiscal 2002. In March
2002, Sonus completed a lease renegotiation for certain excess space and expects
to record a restructuring benefit in the first quarter of fiscal 2002
(Note 17(b)). The remaining amounts related to the net lease expense due to the
consolidation of excess facilities and other miscellaneous charges will be paid
through May 2004.
 
    (A) WORKFORCE REDUCTION
 
    The restructuring actions in September 2001 resulted in the reduction of
Sonus' workforce by approximately 150 employees, or 21%. The affected employees
were entitled to severance and other benefits for which Sonus recorded a charge
of $4,506,000 in fiscal 2001. In addition in fiscal 2001, Sonus recorded
non-cash stock-based compensation expense of $25,429,000 related to the
write-off of deferred compensation associated with shares and options held by
terminated employees.
 
    (B) CONSOLIDATION OF EXCESS FACILITIES AND OTHER CHARGES
 
    The Company recorded a restructuring charge in fiscal 2001 of $21,301,000
for the consolidation of excess facilities and other miscellaneous charges,
which are included on the balance sheet in accrued restructuring expenses and
long-term obligations. The accrual for the consolidation of excess facilities
was determined assuming no sub-lease income.
 
    (C) WRITE-OFF OF GOODWILL AND PURCHASED INTANGIBLES
 
    In light of negative industry and economic conditions, a general decline in
technology valuations and our decision to discontinue the development and use of
certain acquired technology, we performed an assessment of the carrying value of
the goodwill and purchased intangibles recorded in connection with our
acquisition of TTI. In accordance with SFAS No. 121, Sonus recorded a non-cash
impairment charge of $374,735,000 in fiscal 2001 for the write-off of goodwill
and certain purchased intangibles because the estimated undiscounted future cash
flows of these assets was less than the carrying value.
 
                                      F-11
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
(3) ACQUISITION OF TELECOM TECHNOLOGIES, INC.
 
    In January 2001, Sonus acquired privately-held TTI. Upon the closing of this
acquisition, an aggregate of 10,800,000 shares of Sonus common stock (Merger
Shares) were exchanged for all outstanding shares of TTI common stock. Of the
10,800,000 shares issued to the TTI stockholders, 1,200,000 shares were placed
into escrow as security for indemnity obligations which were released to TTI
stockholders on January 18, 2002. In addition to the Merger Shares, the TTI
stockholders received in fiscal 2001, 4,200,000 additional shares of Sonus
common stock upon the achievement of certain specified business expansion and
product development milestones. Sonus has also issued contingent awards of
3,000,000 shares of common stock under the 2000 Retention Plan to certain former
TTI employees (Note 13 (g)).
 
    The acquisition of TTI was accounted for using the purchase method of
accounting in accordance with APB Opinion No. 16, BUSINESS COMBINATIONs.
Accordingly, the total purchase price was allocated to the assets acquired and
liabilities assumed based upon their estimated fair values. The purchase price
was determined by using the average market value of Sonus common stock for the
period from two days before to two days after the announcement of the TTI
acquisition ($41.61 per share) to value the 10,800,000 Sonus common shares
issued to the TTI stockholders at the closing date and adding the fair value of
liabilities assumed and expenses of the acquisition. Additionally, since the
closing date, the purchase price has been increased as the 4,200,000 shares of
common stock which were subject to milestone conditions were earned. As of
December 31, 2001, the purchase price has been computed as follows, in
thousands:
 

<Table>
<S>                                                           <C>
Fair market value of shares issued..........................  $527,613
Liabilities assumed.........................................    21,184
Acquisition expenses........................................     5,833
                                                              --------
                                                              $554,630
                                                              ========
</Table>

 
    In accordance with APB Opinion No. 16 and with the assistance of valuation
experts, the purchase price was allocated to the tangible and intangible assets
acquired based upon their fair values as follows, in thousands:
 

<Table>
<S>                                                           <C>
Tangible assets.............................................  $  8,296
Intangible assets:
  Workforce, developed technology and customer list.........    32,300
  In-process research and development.......................    40,000
  Deferred compensation related to unvested stock options...    22,600
  Goodwill..................................................   451,434
                                                              --------
                                                              $554,630
                                                              ========
</Table>

 
    Sonus engaged third-party appraisers to conduct a valuation of the tangible
and intangible assets and to assist in the determination of the useful lives for
such assets. Based on the results of the appraisal, $40,000,000 was allocated to
in-process research and development, which was expensed in fiscal 2001. The
amounts allocated to developed technology, customer list, assembled workforce
and goodwill have been amortized over their estimated useful lives of three
years. During the year ended December 31, 2001, amortization of goodwill and
purchased intangibles for the TTI acquisition was $107,592,000. In fiscal 2001,
Sonus recorded a non-cash impairment charge of $374,735,000 for the write-off of
TTI goodwill and certain purchased intangibles (Note 2). Deferred compensation
was computed based on the intrinsic value of the unvested TTI stock options
assumed by Sonus and is being expensed over the remaining vesting period of up
to four years.
 
                                      F-12
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    The valuation of in-process research and development was determined using
the income method. Revenue and expense projections for the in-process
development project were prepared by the management of Sonus through 2008 and
the present value was computed using a discount rate of 22.5%. In the event that
the project is not completed and technological feasibility is not achieved,
there is no alternative future use for the in-process technology. The
assumptions used for the valuation of in-process research and development are
the responsibility of management.
 
PRO FORMA INFORMATION
 
    The following unaudited pro forma information presents a summary of the
consolidated results of operations of Sonus and TTI as if the acquisition had
occurred on January 1, 2001 and 2000. The pro forma adjustments exclude the
one-time write-off of TTI in-process research and development.
 

<Table>
<Caption>
                                                                 YEAR ENDED
                                                                DECEMBER 31,
                                                    -------------------------------------
                                                          2001                2000
                                                    -----------------   -----------------
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                 <C>                 <C>
Revenues......................................          $ 173,533           $  80,401
Net loss......................................           (607,011)           (255,420)
Basic and diluted net loss per share..........          $   (3.51)          $   (2.34)
Pro forma basic and diluted net loss per
  share.......................................                                  (1.72)
</Table>

 
    The pro forma results are not necessarily indicative of what would have
occurred if the acquisition had been in effect for the years presented. In
addition, they are not intended to be a projection of future results and do not
reflect any synergies from combining operations.
 
(4) ACQUISITION OF CERTAIN ASSETS OF LINGUATEQ, INC.
 
    In July 2001, Sonus completed the acquisition of certain intellectual
property and other assets of privately-held Linguateq Incorporated. Linguateq
was a provider of data distribution and billing application software for both
next generation and legacy networks. The acquisition of certain intellectual
property and other assets was accounted for using the purchase method of
accounting in accordance with SFAS No. 141. The purchase price has been
determined by using the average market value of Sonus common stock for the
period from two days before to two days after the terms were agreed upon for the
acquisition ($22.53 per share) to value the 221,753 Sonus common shares issued
to the Linguateq stockholders at the closing date and adding payments to
employees and vendors and expenses of the acquisition. As of December 31, 2001,
the purchase price has been computed as follows, in thousands:
 

<Table>
<S>                                                           <C>
Fair market value of shares issued..........................   $4,995
Payments to employees and vendors...........................      241
Acquisition expenses........................................      141
                                                               ------
                                                               $5,377
                                                               ======
</Table>

 
    In accordance with SFAS No. 142, and with the assistance of valuation
experts, the purchase price was allocated to the intangible assets acquired
based upon their fair values as follows, in thousands:
 

<Table>
<S>                                                           <C>
Intangible assets:
  Developed technology and customer list....................   $  700
  In-process research and development.......................    3,800
  Goodwill..................................................      877
                                                               ------
                                                               $5,377
                                                               ======
</Table>

 
                                      F-13
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    Sonus engaged third-party appraisers to conduct a valuation of the
intangible assets and to assist in the determination of useful lives for such
assets. Based on the results of the appraisal, $3,800,000 was allocated to
in-process research and development, which was expensed in fiscal 2001. The
amounts allocated to developed technology and customer list are being amortized
over their estimated useful lives of up to two years. During the year ended
December 31, 2001, amortization of purchased intangibles for Linguateq was
$167,000.
 
    The valuation of in-process research and development was determined using
the income method. Revenue and expense projections for the in-process
development project were prepared by the management of Sonus through 2007 and
the present value was computed using a discount rate of 25.0%. In the event that
the project is not completed and technological feasibility is not achieved,
there is no alternative future use for the in-process technology. The
assumptions used for the valuation of in-process research and development are
the responsibility of management.
 
    Pro forma information related to the consolidated results of operations of
Sonus and Linguateq were not material for 2001 and 2000.
 
(5) INVENTORIES
 
    Inventories consist of the following, in thousands:
 

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2001       2000
                                                              --------   --------
<S>                                                           <C>        <C>
Raw materials...............................................  $ 4,899    $ 3,082
Work in progress............................................      525      3,021
Finished goods..............................................   13,441     14,565
                                                              -------    -------
                                                              $18,865    $20,668
                                                              =======    =======
</Table>

 
(6) PROPERTY AND EQUIPMENT
 
    Property and equipment consist of the following, in thousands:
 

<Table>
<Caption>
                                                                     DECEMBER 31,
                                                    ESTIMATED     -------------------
                                                   USEFUL LIFE      2001       2000
                                                  -------------   --------   --------
<S>                                               <C>             <C>        <C>
Equipment and software..........................  2-3 years       $ 41,723   $19,805
Furniture and fixtures..........................  3-5 years            579       342
Leasehold improvements..........................  Life of lease      2,514       760
                                                                  --------   -------
                                                                    44,816    20,907
Less accumulated depreciation and
  amortization..................................                   (21,481)   (6,634)
                                                                  --------   -------
                                                                  $ 23,335   $14,273
                                                                  ========   =======
</Table>

 
                                      F-14
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
(7) OTHER BALANCE SHEET DATA
 
    (A) ACCRUED EXPENSES
 
    Accrued expenses consist of the following, in thousands:
 

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2001       2000
                                                              --------   --------
<S>                                                           <C>        <C>
Employee compensation and related costs.....................  $ 5,830    $ 3,121
Employee stock purchase plan................................    3,351      3,108
Professional fees...........................................    2,094        817
Royalties...................................................    3,582      3,613
Warranty....................................................    4,478      1,543
Other.......................................................    8,336      4,037
                                                              -------    -------
                                                              $27,671    $16,239
                                                              =======    =======
</Table>

 
    (B) ALLOWANCE FOR DOUBTFUL ACCOUNTS
 
    The following table sets forth activity in Sonus' allowance for doubtful
accounts, in thousands:
 

<Table>
<Caption>
                              BALANCE AT   CHARGED TO   CHARGED TO                BALANCE AT
                              BEGINNING    COSTS AND      OTHER                     END OF
YEAR ENDED DECEMBER 31:        OF YEAR      EXPENSES     ACCOUNTS    DEDUCTIONS      YEAR
-----------------------       ----------   ----------   ----------   ----------   ----------
<S>                           <C>          <C>          <C>          <C>          <C>
2001........................    $1,000       $1,622     $      --    $      --      $2,622
2000........................        --        1,000            --           --       1,000
</Table>

 
(8) 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.
 
    The following is a summary of the significant components of Sonus' deferred
tax assets and liabilities, in thousands:
 

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2001       2000
                                                              --------   --------
<S>                                                           <C>        <C>
Net operating loss carryforwards............................  $ 37,077   $ 15,924
Tax credit carryforwards....................................     5,867      1,779
Other temporary differences.................................    23,179      5,032
Valuation allowance.........................................   (66,123)   (22,735)
                                                              --------   --------
                                                              $     --   $     --
                                                              ========   ========
</Table>

 
    As of December 31, 2001, Sonus has net operating loss carryforwards for
federal income tax purposes of approximately $92,800,000, which expire through
2021. Sonus also has available research and development credit carryforwards of
approximately $5,867,000 that expire through 2021. 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.
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.
 
                                      F-15
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
(9) LONG-TERM OBLIGATIONS
 
    Long-term obligations consist of capital leases and restructuring expenses
(Notes 2 and 17(b)). Sonus assumed certain capital leases as part of the
acquisition of TTI. The capital leases are due in monthly installments expiring
at various dates through March 2005 and accrue interest at annual rates ranging
from 4.62% to 14.39%. The future minimum annual payments under capital leases
and amounts due for long-term obligations, as of December 31, 2001, are as
follows, in thousands:
 

<Table>
<S>                                                           <C>
CAPITAL LEASES:
2002........................................................  $   640
2003........................................................      539
2004........................................................      193
2005........................................................       30
                                                              -------
Total minimum lease payments................................    1,402
Less amount representing interest...........................     (109)
                                                              -------
Present value of minimum payments...........................    1,293
Less current portion of capital leases......................   (1,055)
                                                              -------
Long-term portion of capital leases.........................      238
RESTRUCTURING EXPENSES:
Long-term portion of restructuring expenses.................   12,460
                                                              -------
Total long-term obligations.................................  $12,698
                                                              =======
</Table>

 
(10) CONVERTIBLE SUBORDINATED NOTES
 
    In May 2001, Sonus completed a private placement of an aggregate principal
amount of $10,000,000 of 4.75% convertible subordinated notes, due May 1, 2006,
with a customer. Interest payments are due semi-annually on May 1 and
November 1 of each year through May 2006. The notes may be converted by the
holder into shares of Sonus' common stock at any time before their maturity or
prior to their redemption or repurchase by Sonus. The conversion rate is 33.314
shares per each $1,000 principal amount of notes, subject to adjustment in
certain circumstances. After May 1, 2004, Sonus has the option to redeem all or
a portion of the notes at 100% of the principal amount. Also, at any time if the
market price of Sonus' common stock exceeds $60.04 per share for twenty trading
days in any thirty trading-day period, Sonus may redeem these notes through the
issuance of shares of common stock or for cash. In the event of a change of
control in Sonus, the holder at its option may require Sonus to redeem the notes
through the issuance of common stock or cash. Interest expense related to our
convertible subordinated notes was $317,000 for the year ended December 31,
2001.
 
(11) COMMITMENTS AND CONTINGENCIES
 
    (A) LEASES
 
    Sonus leases its facilities under operating leases, which expire through
December 2008. Rent expense was approximately $4,146,000, $1,310,000 and
$537,000 the years ended December 31, 2001, 2000 and 1999. Sonus is responsible
for certain real estate taxes, utilities and maintenance costs under these
leases. The future minimum payments under operating lease arrangements as of
December 31, 2001, after reflecting the lease renegotiation (Note 17(b)) are as
follows: $3,493,000 in 2002; $2,956,000 in 2003; $942,000 in 2004; $186,000 in
2005; $195,000 in 2006; and $418,000 thereafter.
 
    (B) PENDING LITIGATION
 
    In November 2001, a purchaser of the Company's common stock filed a
complaint in the federal district court for the Southern District of New York
against Sonus, two of its officers and the lead underwriters alleging violations
of the federal securities laws in connection with our IPO and seeking
 
                                      F-16
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
unspecified monetary damages. The purchaser seeks to represent a class of
persons who purchased Sonus' common stock between the IPO on May 24, 2000 and
December 6, 2000. The complaint alleges that Sonus' registration statement
contained false or misleading information or omitted to state material facts
concerning the alleged receipt of undisclosed compensation by the underwriters
and the existence of undisclosed arrangements between underwriters and certain
purchasers to make additional purchases in the after market. The claims against
Sonus are asserted under Section 11 of the Securities Act of 1933 and against
the individual defendants under Sections 11 and 15 of that Act. Sonus intends to
vigorously defend this action.
 
(12) REDEEMABLE CONVERTIBLE PREFERRED STOCK
 
    In connection with our IPO in May 2000, all redeemable convertible preferred
stock was converted into an aggregate of 96,957,222 shares of common stock. A
summary of the redeemable convertible preferred stock issuances from inception
and the redemption value as of the closing of our IPO in May 2000 are as
follows:
 

<Table>
<Caption>
                                                                              NUMBER OF SHARES
                                                                          ------------------------   PRICE PER     REDEMPTION
DESCRIPTION                                   DATE                        AUTHORIZED   OUTSTANDING     SHARE         VALUE
-----------             ------------------------------------------------  ----------   -----------   ---------   --------------
                                                                                                                 (IN THOUSANDS)
<S>                     <C>                                               <C>          <C>           <C>         <C>
 Series A               November 1997 and July 1998                        7,220,000    7,180,000     $  1.00        $ 7,180
 Series B               September and December 1998, May 1999              3,247,857    3,204,287        5.00         16,021
 Series C               September, November and December 1999              2,153,072    1,939,681       11.81         22,908
 Series D               March 2000                                         1,585,366    1,509,154       16.40         24,750
                                                                          ----------   ----------                    -------
                                                                          14,206,295   13,833,122                    $70,859
                                                                          ==========   ==========                    =======
</Table>

 
    The rights, preferences and privileges of the Series A, B, C and D
redeemable convertible preferred stock are as follows:
 
CONVERSION
 
    Each share of Series A, B and C preferred stock was convertible into 7.5
shares of common stock and each share of Series D preferred stock was
convertible into three shares of common stock, each adjustable for certain
dilutive events. Conversion was at the option of the holder, but became
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 $2.67 per share and for the Series D preferred stock with at
least $25,000,000 of net proceeds at a price of at least $6.56 per share.
 
REDEMPTION
 
    If requested prior to specified redemption dates, by the holders of 66 2/3%
of the then outstanding Series A, B, C and D preferred stock, Sonus was required
to redeem such stock at $1.00, $5.00, $11.81 and $16.40 per share, as adjusted
in the event of future dilution, plus declared but unpaid dividends.
 
DIVIDENDS
 
    Series A, B, C and D preferred stockholders were 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
1999, in connection with the sale of an aggregate of 211,688 shares of Series C
preferred stock in the fourth quarter of fiscal 1999, Sonus recorded a charge to
accumulated deficit of $2,500,000. 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' capital in excess of par value, net loss applicable to common
stockholders and the related net loss per share.
 
                                      F-17
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
LIQUIDATION PREFERENCE
 
    In the event of liquidation of Sonus and before any distribution to common
stockholders, the Series A, B, C and D preferred stockholders were entitled to
share pro rata, $1.00, $5.00, $11.81 and $16.40 per share, plus all declared but
unpaid dividends.
 
VOTING RIGHTS
 
    Series A, B, C and D preferred stockholders were entitled to one vote per
common share equivalent on all matters voted on by holders of common stock.
 
(13) STOCKHOLDERS' EQUITY (DEFICIT)
 
    (A) AUTHORIZED CAPITAL STOCK
 
    In May 2001, Sonus' stockholders approved an increase in the authorized
common stock from 300,000,000 to 600,000,000 shares.
 
    (B) STOCK SPLIT
 
    On October 6, 2000, Sonus effected a three-for-one stock split in the form
of a stock dividend. All common shares, common stock options and per share
amounts in the accompanying financial statements and footnotes have been
retroactively adjusted to reflect the stock split.
 
    (C) INITIAL PUBLIC OFFERING
 
    On May 31, 2000, Sonus completed its IPO of 17,250,000 shares of common
stock, which included the exercise of the underwriters' over allotment option of
2,250,000 shares, at $7.67 per share. The proceeds from the IPO were
$121,705,000, after deducting the underwriting discount and commissions and
offering expenses of $10,545,000.
 
    (D) RESTRICTED COMMON STOCK
 
    Sonus issued 24,615,693 and 262,500 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 $0.0001 to $0.001 per share. All shares of common
stock subject to repurchase restrictions contain the same rights and privileges
as unrestricted shares of common stock and are presented as outstanding as of
the date of issuance. As of December 31, 2001, 1,259,274 of these common shares
were restricted and subject to Sonus' repurchase.
 
    (E) 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 non-qualified
stock options for the purchase of common stock to employees, directors and
consultants. On January 1 of each year, commencing with January 2001, the
aggregate number of shares of 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. At
December 31, 2001, 90,173,599 shares were authorized and 24,051,950 shares were
available under the Plan for future issuance.
 
                                      F-18
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    Sonus issued shares of restricted common stock to employees and consultants
which are subject to repurchase agreements and generally 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 price ranging from $0.01 to $4.67 per
share. All shares of common stock subject to repurchase restrictions contain the
same rights and privileges as unrestricted shares of common stock and are
presented as outstanding as of the date of issuance. As of December 31, 2001,
16,275,097 shares of the outstanding common stock issued under the Plan were
restricted and subject to Sonus' repurchase.
 
    A summary of activity under the Plan for the years ended December 31, 1999,
2000 and 2001, is as follows:
 
RESTRICTED COMMON STOCK ISSUANCES
 

<Table>
<Caption>
                                                                                        WEIGHTED
                                                                                        AVERAGE
                                                              NUMBER OF     PURCHASE    PURCHASE
                                                                SHARES       PRICE       PRICE
                                                              ----------   ----------   --------
<S>                                                           <C>          <C>          <C>
Outstanding, December 31, 1998..............................  24,954,366   $0.01-0.07    $0.02
  Issued....................................................  14,968,116    0.07-0.22     0.10
                                                              ----------
Outstanding, December 31, 1999..............................  39,922,482    0.01-0.22     0.05
  Issued....................................................   3,870,672    0.22-4.67     1.88
  Repurchased...............................................    (772,500)   0.07-0.22     0.08
                                                              ----------
Outstanding, December 31, 2000..............................  43,020,654    0.01-4.67     0.21
  Repurchased...............................................    (241,250)   0.07-0.22     0.08
                                                              ----------
Outstanding, December 31, 2001..............................  42,779,404   $0.01-4.67    $0.20
                                                              ==========   ==========    =====
Unrestricted common stock, December 31, 2001................  26,504,307   $0.01-4.67    $0.05
                                                              ==========   ==========    =====
</Table>

 
    As of December 31, 2000 and 1999, 17,319,885 and 7,438,965 shares of
unrestricted common stock were outstanding with a weighted average purchase
price of $0.04 and $0.02 per share.
 
COMMON STOCK OPTION GRANTS
 

<Table>
<Caption>
                                                                                        WEIGHTED
                                                                                        AVERAGE
                                                             NUMBER OF     EXERCISE     EXERCISE
                                                               SHARES        PRICE       PRICE
                                                             ----------   -----------   --------
<S>                                                          <C>          <C>           <C>
Outstanding, December 31, 1998.............................   1,672,500   $0.001-0.07    $ 0.04
  Granted..................................................   2,090,493     0.07-0.22      0.13
  Exercised................................................    (710,250)   0.001-0.07      0.02
                                                             ----------
Outstanding, December 31, 1999.............................   3,052,743     0.01-0.22      0.11
  Granted..................................................  15,531,937    0.67-22.25     10.39
  Canceled.................................................    (203,499)    0.01-3.33      1.75
  Exercised................................................    (655,655)    0.07-7.67      0.31
                                                             ----------
Outstanding, December 31, 2000.............................  17,725,526    0.01-22.25      9.07
  Granted..................................................   6,466,196    2.60-29.00     12.95
  Canceled.................................................  (2,215,382)   0.07-22.25     15.68
  Exercised................................................  (1,693,525)    0.07-7.67      2.36
                                                             ----------
Outstanding, December 31, 2001.............................  20,282,815   $0.01-29.00    $10.17
                                                             ==========   ===========    ======
Exercisable, December 31, 2001.............................   4,838,112   $0.01-22.25    $ 8.94
                                                             ==========   ===========    ======
</Table>

 
                                      F-19
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    As of December 31, 2000 and 1999, 783,589 and 374,379 options were
exercisable at an average exercise price of $1.35 and $0.06 per share. The
weighted average fair value of each option granted under the Plan for 2001, 2000
and 1999 is $11.15, $7.05 and $0.06 per share.
 
    The following table summarizes information relating to currently outstanding
and exercisable options as of December 31, 2001:
 

<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>
$0.01-0.67.........   2,548,337       7.38        $ 0.29      813,171    $ 0.23
2.60-4.67.........    8,232,129       8.66          3.87    2,543,898      4.03
7.67-19.00........    4,785,200       9.24         14.31       21,025     15.14
22.25-29.00.......    4,717,149       8.98         22.29    1,460,018     22.25
                     ----------                             ---------
                     20,282,815                   $10.17    4,838,112    $ 8.94
                     ==========                   ======    =========    ======
</Table>

 
    (F) 2000 EMPLOYEE STOCK PURCHASE PLAN
 
    In March 2000, the stockholders approved the 2000 Employee Stock Purchase
Plan (ESPP). The ESPP consists of a series of overlapping 24-month offering
periods. Each offering period generally consists of four consecutive 6-month
purchase periods. 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 of each offering period or end of each purchase 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 ESPP 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. As of December 31, 2001, 7,269,439 shares
of common stock were authorized and 1,021,333 shares have been issued under the
ESPP.
 
    (G) 2000 RETENTION PLAN
 
    In January 2001 in conjunction with the acquisition of TTI, Sonus
established the 2000 Retention Plan (the Retention Plan) and issued contingent
awards of 3,000,000 shares of common stock to certain employees of TTI who
became employees of Sonus. Pursuant to the Retention Plan, these awards will
vest in equal installments on each of October 31, 2002, November 30, 2002,
January 31, 2003 and February 28, 2003, if (i) the recipients do not voluntarily
terminate employment with TTI or Sonus prior to such vesting dates and (ii) the
business expansion and product development escrow release conditions are
satisfied in whole or in part. Generally, any awards forfeited by employees who
terminate employment with TTI, other than a termination by Sonus or TTI without
cause, prior to the date on which they would otherwise vest, may be reallocated
to remaining TTI employees, awarded to replacement hires or returned to Sonus as
provided by the terms of the Retention Plan. Due to the termination of certain
former TTI employees in connection with the restructuring plan announced in
September 2001, restrictions associated with approximately 860,000 shares of
common stock awarded under the Retention Plan have been removed.
 
                                      F-20
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    (H) 1998 EQUITY INCENTIVE PLAN
 
    In January 2001 in connection with the completion of the TTI acquisition,
Sonus assumed TTI's 1998 Equity Incentive Plan and all grants of options under
this plan. Each outstanding option to purchase shares of Class B common stock
granted under the 1998 Equity Incentive Plan immediately prior to the effective
time of the acquisition was converted into an option to purchase Sonus common
stock based on the merger consideration, with the exercise price of the options
being proportionately adjusted.
 
    In continuation of a 1997 agreement entered into by the TTI founders and
other then TTI shareholders, the founders agreed, in exchange for the option
exercise proceeds, to transfer to Sonus a number of shares of Sonus' common
stock received by them in the acquisition equal to the number of shares of
Sonus' common stock issued upon exercise by former TTI employees of the stock
options granted under the TTI 1998 Equity Incentive Plan. As a result of this
agreement, the aggregate number of outstanding shares of Sonus' common stock
that will be issued upon exercise of these stock options will not increase.
 
    (I) STOCK-BASED COMPENSATION
 
    Stock-based compensation expenses includes the amortization of deferred
employee compensation and other equity related expenses for non-employees.
 
    In connection with certain employee stock option grants and the issuance of
employee restricted common stock during the years ended December 31, 2000 and
1999, Sonus recorded deferred stock-based compensation of $39,433,000 and
$20,859,000. 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 is recognized as an
expense over the vesting period of the underlying stock options and restricted
common stock.
 
    In connection with the TTI acquisition, Sonus recorded deferred stock-based
compensation of $22,600,000 for the year ended December 31, 2001, related to the
intrinsic value of unvested TTI stock options assumed by Sonus. This deferred
compensation is recognized as an expense over the remaining vesting period of
the underlying stock options of up to four years. Additionally, Sonus recorded
$55,196,000 of deferred stock-based compensation on 3,000,000 shares awarded to
TTI employees under the Retention Plan, based on the fair value of the Sonus
common stock on the closing date of the acquisition. This deferred compensation
is being expensed ratably over the approximate two-year vesting period of the
retention shares and was adjusted for changes in the fair value of Sonus common
stock on the date the specific escrow release conditions were satisfied. Upon
termination of an employee, the remaining value of the retention shares held to
which such employee is entitled, if any, will be expensed (See Note 13 (g)).
 
    Sonus has valued the stock options and the issuances of restricted common
stock to non-employees 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 non-employees are valued based upon the
Black-Scholes option pricing model. As of December 31, 2001, Sonus has 135,000
stock options and 120,000 shares of restricted common stock outstanding to
non-employees. In accordance with Emerging Issues Task Force 96-18, Sonus will
record the value at the time the services are provided.
 
    Sonus recorded stock-based compensation of $75,500,000, $26,729,000 and
$4,404,000 for the years ended December 31, 2001, 2000, and 1999. Stock-based
compensation expense for the year ended December 31, 2001 includes $25,429,000
related to the write-off of deferred compensation with respect to shares held by
terminated employees impacted by the restructuring plan (Note 2). Sonus expects
to
 
                                      F-21
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
record up to approximately $21,000,000, $6,500,000 and $1,200,000 in employee
stock-based compensation expense in the years ending December 31, 2002, 2003 and
2004.
 
    Sonus has computed the pro forma disclosures required under SFAS No. 123 for
stock options granted to employees and shares purchased under the ESPP using the
Black-Scholes option pricing model with an assumed 4.5% risk-free interest rate
in 2001, and 5% risk-free rate in 2000 and 1999, volatility of 150%, 80%, and
60% in 2001, 2000, and 1999 and an expected life ranging from 2-5 years for
stock options and 6 months for the ESPP, with the assumption that no dividends
will be paid. Had compensation expense for Sonus' stock option plan and ESPP
been determined consistent with SFAS No. 123, the pro forma net loss and pro
forma net loss per share would have been as follows:
 

<Table>
<Caption>
                                                                  YEAR ENDED DECEMBER 31,
                                                              -------------------------------
                                                                2001        2000       1999
                                                              ---------   --------   --------
<S>                                                           <C>         <C>        <C>
Net loss applicable to common stockholders, in thousands --
  As reported...............................................  $(645,432)  $(50,038)  $(26,387)
  Pro forma.................................................   (699,168)   (55,980)   (26,400)
Basic and diluted net loss per share --
  As reported...............................................  $   (3.74)  $  (0.52)  $  (1.84)
  Pro forma.................................................      (4.06)     (0.58)     (1.84)
</Table>

 
    The Black-Scholes option pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option pricing models require the input of highly
subjective assumptions including the expected stock price volatility. Because
Sonus' employee stock options and ESPP shares have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of Sonus' options and ESPP shares.
 
    (J) COMMON STOCK RESERVED
 
    Common stock reserved for future issuance at December 31, 2001 consist of
the following:
 

<Table>
<S>                                                           <C>
Stock incentive plan........................................  44,334,765
Employee stock purchase plan................................   6,248,106
Conversion of convertible subordinated notes................     333,140
                                                              ----------
                                                              50,916,011
                                                              ==========
</Table>

 
(14) EMPLOYEE BENEFIT PLAN
 
    In 1998, Sonus adopted a savings plan for its employees, which has been
qualified under Section 401(a) 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.
 
                                      F-22
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
(15) SUPPLEMENTAL CASH FLOW INFORMATION
 

<Table>
<Caption>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2001       2000       1999
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the year for interest....................  $    503   $   225      $208
                                                              ========   =======      ====
 
  ACQUISITION OF TELECOM TECHNOLOGIES, INC:
  Tangible assets...........................................  $  8,296   $    --      $ --
  Liabilities assumed.......................................   (21,184)       --        --
  Goodwill and purchased intangibles........................   523,734        --        --
  Issuance of common stock in connection with the
    acquisition.............................................  (505,013)       --        --
  Cash acquired.............................................       (90)       --        --
                                                              --------   -------      ----
  Acquisition, net of cash acquired.........................     5,743        --        --
                                                              --------   -------      ----
 
  ACQUISITION OF CERTAIN ASSETS OF LINGUATEQ, INC.:
  Goodwill and purchased intangibles........................     5,377        --        --
  Issuance of common stock in connection with the
    acquisition.............................................    (4,995)       --        --
                                                              --------   -------      ----
  Acquisition...............................................       382        --        --
                                                              --------   -------      ----
 
  TOTAL ACQUISITIONS, NET OF CASH ACQUIRED..................  $  6,125   $    --      $ --
                                                              ========   =======      ====
 
SUPPLEMENTARY DISCLOSURE OF NON-CASH TRANSACTIONS:
  Issuance of common stock for subscriptions receivable.....  $     --   $    --      $110
                                                              ========   =======      ====
  Conversion of redeemable convertible preferred stock into
    common stock............................................  $     --   $70,859      $ --
                                                              ========   =======      ====
</Table>

 
(16) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
 
    The following table presents our quarterly operating results for the years
ended December 31, 2001 and 2000. The information for each of these quarters is
unaudited and has been prepared on the same basis as the audited consolidated
financial statements. In the opinion of management, all necessary adjustments,
consisting only of normal recurring adjustments, have been included to present
fairly the unaudited consolidated quarterly results when read in conjunction
with our audited consolidated financial statements and related notes. These
operating results are not necessarily indicative of the results of any future
period.
 
                                      F-23
<Page>
                              SONUS NETWORKS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 

<Table>
<Caption>
                                                                     THREE MONTHS ENDED
                                   ---------------------------------------------------------------------------------------
                                   MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                                     2001       2001       2001        2001       2000       2000       2000        2000
                                   --------   --------   ---------   --------   --------   --------   ---------   --------
                                                                       (IN THOUSANDS)
                                                                         (UNAUDITED)
<S>                                <C>        <C>        <C>         <C>        <C>        <C>        <C>         <C>
CONSOLIDATED STATEMENT OF
  OPERATIONS DATA:
REVENUES.........................  $ 41,499   $ 52,551   $  40,286   $ 38,863   $  1,093   $  6,511   $ 15,568    $28,598
Cost of revenues.................    18,011     22,160      18,129     17,398      1,462      4,555      8,830     13,001
                                   --------   --------   ---------   --------   --------   --------   --------    -------
GROSS PROFIT (LOSS)..............    23,488     30,391      22,157     21,465       (369)     1,956      6,738     15,597
 
OPERATING EXPENSES:
  Research and development.......    13,919     16,697      18,746     15,642      4,844      6,355      7,032      8,199
  Sales and marketing............     8,488     10,615      12,660     10,504      3,358      4,381      5,833      7,997
  General and administrative.....     2,663      3,279       3,330      3,796        713      1,277      1,763      1,724
  Stock-based compensation.......    15,423     13,847      39,069      7,161      6,979      6,386      6,982      6,382
  Amortization of goodwill and
    purchased intangibles........    27,207     38,704      41,368        480         --         --         --         --
  Write-off of goodwill and
    purchased intangibles........        --         --     376,719     (1,984)        --         --         --         --
  Restructuring charges..........        --         --      25,807         --         --         --         --         --
  In-process research and
    development..................    40,000         --       3,800         --         --         --         --         --
                                   --------   --------   ---------   --------   --------   --------   --------    -------
    Total operating expenses.....   107,700     83,142     521,499     35,599     15,894     18,399     21,610     24,302
                                   --------   --------   ---------   --------   --------   --------   --------    -------
LOSS FROM OPERATIONS.............   (84,212)   (52,751)   (499,342)   (14,134)   (16,263)   (16,443)   (14,872)    (8,705)
Interest income (expense), net...     1,733      1,360       1,181        733        228      1,089      2,495      2,433
                                   --------   --------   ---------   --------   --------   --------   --------    -------
NET LOSS.........................  $(82,479)  $(51,391)  $(498,161)  $(13,401)  $(16,035)  $(15,354)  $(12,377)   $(6,272)
                                   ========   ========   =========   ========   ========   ========   ========    =======
NET LOSS PER SHARE (NOTE 1 (O)):
  Basic and diluted..............  $  (0.51)  $  (0.30)  $   (2.81)  $  (0.07)  $  (0.69)  $  (0.24)  $  (0.09)   $ (0.04)
                                   ========   ========   =========   ========   ========   ========   ========    =======
  Pro forma basic and diluted....                                               $  (0.14)  $  (0.12)
                                                                                ========   ========
SHARES USED IN COMPUTING NET LOSS
  PER SHARE (NOTE 1 (O)):
  Basic and diluted..............   162,091    171,329     177,313    181,260     23,229     64,278    144,836    148,912
                                   ========   ========   =========   ========   ========   ========   ========    =======
  Pro forma basic and diluted....                                                116,765    129,273
                                                                                ========   ========
</Table>

 
(17) SUBSEQUENT EVENTS
 
    (A) BANK FINANCING
 
    As of January 16, 2002, Sonus established a $10,000,000 equipment line of
credit and a $20,000,0000 working capital line of credit with a bank, at the
bank's prime rate, available through March 24, 2003. Amounts borrowed under the
equipment line shall be repaid over a 36-month period. Amounts borrowed under
the working capital line will be based on a percentage of eligible accounts
receivable balances. Under the agreement, all of Sonus' assets, except
intellectual property, have been pledged as collateral. Sonus must also maintain
a certain minimum tangible stockholders' equity and quick ratio, as defined and
maintain certain minimum investment balances with the bank.
 
    (B) LEASE RENEGOTIATION
 
    As of March 5, 2002, TTI reduced its lease commitments for excess space in
its Texas facilities in exchange for a one-time payment of $835,000 to a
landlord and a guarantee by Sonus of TTI's rents owed through April 2003, the
remainder of the revised lease term. As a result of this transaction, Sonus
expects to record a restructuring benefit in the first quarter of fiscal 2002
(Note 2).
 
                                      F-24




<PAGE>


                                                                   Exhibit 10.13


                             OFFICE LEASE AGREEMENT

STATE OF TEXAS
COUNTY OF DALLAS

     THIS LEASE AGREEMENT, made and entered into as of the 4th day of April,
1997, by and between the Landlord and Tenant herein after named.

                              W I T N E S S E T H:

     1. Definitions and Basic Provisions. The following definitions and
basic provisions shall be used in conjunction with and limited by the reference
thereto in the provisions of this lease:

     (a)   "Landlord":   Collins Campbell Joint Venture

     (b)    "Tenant":    Telecom Technologies, Inc.
     (c)   "Premises":   The Atrium on Collins Phase II
                           1701 N. Collins, Suite 3000
                           Richardson, Texas 75080

as generally outlined on the plan attached hereto as Exhibit "A." The term
"rentable area" as used herein, shall refer to all floor areas within the
outside surface of the outer walls and the common area side of walls separating
lease space from common areas and measured to the midpoint of walls separating
areas leased by or held for lease to other tenants, enclosing the
tenant-occupied portion of the Building. Common areas are areas devoted to
corridors, elevators, foyers, rest rooms (but only on multi-tenant floors),
mechanical rooms, janitor closets, vending areas, atrium planting areas, and
other similar facilities for the use of all tenants.
 No deductions from
rentable area are made for columns or projections necessary to the Building.
The rentable area in the leased Premises has been calculated on the basis of
the foregoing definition and is hereby stipulated for all purposes hereof to be
20,153 square feet of rentable area, whether the same should be more or less as
a result of a minor variation resulting from actual construction and completion
of the leased Premises for occupancy so long as such work is done in accordance
with the terms and provisions hereof. The Premises are divided into two
portions, approximately 11,000 square feet of rentable area (the "First
Portion") outlined on the plan attached hereto as Exhibit "A", and
approximately 9,153 square feet of rentable area (the "Second Portion") also
outlined on the plan attached hereto as Exhibit "A". Landlord and Tenant both
agree to the following occupancy and takedown schedule: On October 1, 1997,
Tenant will occupy the First Portion; on April 1, 1998, Tenant will occupy the
Second Portion. The total rentable area of the Building is stipulated for all
purposes herein to be 57,575 square feet. Landlord and Tenant will have the
option to increase the size of the First Portion, thereby decreasing the size
of the Second Portion, during the space planning process. Such a change in the
sizes of the First and Second Portions will result in proportionate increases
and decreases in the monthly rental installments described below.

     (d)   "Lease term":   A period of 60 months, commencing on October 1,
                             1997 (the "Commencement Date") and ending on
                             September 30, 2002.

     (e)   "Basic rental":   $ 1,827,581.68

     (f)   "Monthly rental installment":  Monthly from October 1, 1997
                                          through March 31, 1998     $17,416.67

                                          Monthly from April 1, 1998 through
                                          September 30, 2002         $31,908.92

     (g)   "Security Deposit":   $ 17,416.67.

     (h)   "Permitted use":   Office

     (i)   "Land":   The real property upon which the Project is located,
                       described more particularly on Exhibit "E" attached
                       hereto and made a part hereof.

     (j)   "Building":  The Atrium on Collins Phase II located at 1701
                          N. Collins, Richardson, Texas 75080.

     (k)   "Project":   The Atrium on Collins Phase I and Phase II located at
                          1701 N. Collins, Richardson, Texas 75080.


<PAGE>

     2. Lease Grant. Before the Commencement Date. Landlord shall construct the
Building and install in the First Portion of the Premises the items to be
constructed or installed by Landlord pursuant to the provisions of the Work
Letter Agreement attached as Exhibit "C" hereto. On or before April 1, 1998,
Landlord shall construct and install in the Second Portion of the Premises the
items to be constructed or installed by Landlord pursuant to the provisions of
the Work Letter Agreement. If for any reason Landlord cannot deliver the First
Portion of the Premises to Tenant by the Commencement Date, this lease shall
not be void or voidable, and Landlord shall not be liable for any loss or
damage resulting therefrom, except that the rent payable under Paragraph 1(f)
hereof shall be waived for the period between the Commencement Date and the
date on which Landlord can deliver possession. If for any reason Landlord
cannot deliver the Second Portion of the Premises to Tenant on or before April
1, 1998, this lease shall not be void or voidable, and Landlord shall not be
liable for any loss or damage resulting therefrom, except that the rent payable
under Paragraph 1(f) hereof shall be reduced to $17,416.67 for the period
between April 1, 1998, and the date on which Landlord can deliver the Second
Portion of the Premises. No delay in the delivery of possession shall extend
the lease term. If for any reason the First Portion of the Premises are not
ready for occupancy on or before October 1, 1998, Tenant may at its option
cancel and terminate this Lease by written notice to Landlord delivered on or
before November 1, 1998, in which event neither party shall have any further
liabilities or obligations hereunder, except that Landlord will repay to Tenant
any prepaid rent or security deposit. Tenant may not enter or occupy the
pertinent portion of the Premises until such portion is tendered by Landlord,
unless Tenant's entry relates to construction or other pre-occupancy work
therein. Any entry of a pertinent portion of the Premises before the date
specified in this Paragraph 2 may be made only with Landlord's written consent.
The pertinent portion of the Premises shall be deemed completed and possession
delivered upon completion of the items to be constructed and installed by
Landlord pursuant to the provisions of the Work Letter Agreement attached as
Exhibit "C", other than completion of minor finish items, if any, which do
not materially interfere with Tenant's occupancy. Upon taking of possession of
a pertinent portion of the Premises, Tenant shall be deemed to have accepted
such portion as suitable for its purposes and shall be deemed to have waived
any defects in the such portion of the Premises and in the Building, except for
latent defects or the completion of any minor finish items which do not
materially interfere with Tenant's occupancy.

     3. Rent. In consideration of this lease, Tenant promises and agrees to
pay Landlord the basic rental (as defined in Paragraph 1(e) hereof) in two lump
sum payments and thereafter in monthly installments as set forth in Paragraph
1(f) hereof, and the additional rent as determined in accordance with Exhibit
"B", without deduction, set off, notice or demand.

     Sixteen and 79/100 months of basic rental, to be applied to the first
seventeen monthly basic rental installments accruing hereunder, totaling $
448,927.50 ("Prepaid Rent"), together with the security deposit (as defined
in Paragraph 1(g) hereof), shall be payable by Tenant to Landlord in two lump
sum payments.  $241,880.42 will be due contemporaneously with the execution
hereof.  $224,463.75 will be due upon the later of June 1, 1997, or
commencement of construction by Landlord of the work described in the Work
Letter Agreement.  Landlord will deposit the Prepaid Rent in an escrow account
with Plano Bank & Trust to be held until occupancy of the First Portion of the
Premises by Tenant, at which time the Prepaid Rent will become the property of
Landlord remaining in the escrow account, which escrow account shall be debited
monthly as basic rental accrues. On the first day of the seventeenth month
following the date on which basic rent begins to accrue under this lease,
Tenant shall pay $6,570.64. On the first day of the eighteenth month following
the date on which basic rental begins to accrue under this lease. Tenant shall
begin paying the scheduled monthly rental installment without demand and shall
continue paying such monthly rental installments on or before the first day of
each succeeding calendar month during the term hereof. The monthly rental
installment for any fractional month at the beginning of the lease term shall
be prorated at the nineteenth month when the payment of regularly scheduled
installments commences, and for any fractional month at the end of the lease
term shall be prorated at the end of the lease term.

                                        1


<PAGE>

     If the monthly rental installment is not received by the Landlord on or
before the 5th day of the month for which such monthly rental installment is
due, a service charge of 2% of the monthly rental installment owed shall become
due and payable in addition to the monthly rental installment owed. Such
service charge is for the purpose of reimbursing Landlord for the extra costs
and expenses incurred in connection with the handling and processing of late
monthly rental installment payments.

     The security deposit shall be held by Landlord without liability for
interest and as security for the performance by Tenant of Tenant's covenants
and obligations under this lease, it being expressly understood that such
deposit shall not be considered an advance payment of rental or a measure of
Landlord's damages in case of default by Tenant. Upon the occurrence of any
event of default by Tenant, Landlord may, from time to time, without prejudice
to any other remedy, use such deposit to the extent necessary to make good any
arrearages of rent and other damage, injury expense of liability caused to
Landlord by such event of default. Following any such application of the
security deposit, Tenant shall pay to Landlord on demand the amount so applied
in order to restore the security deposit to this original amount. If Tenant is
not then in default hereunder, any remaining balance of such deposit shall be
returned by Landlord to Tenant upon termination of this lease. If Landlord
transfers its interest in the Premises during the lease term, Landlord will
assign the security deposit to the transferee and thereafter shall have no
further liability for the return of such security deposit. The obligation of
Tenant to pay rent is an independent covenant, and no act or circumstance
whatsoever, whether such act or circumstance constitutes a breach of covenant
by Landlord or not shall release Tenant of the obligation to pay rent.

     4. Rental Escalation. See Exhibit "B" attached hereto and incorporated
as a part hereof.

     5. Services.

          (a)  Landlord agrees to furnish Tenant while occupying the Premises,
     at Landlord's sole cost and expense: (i) hot and cold water at those
     points of supply provided for general use of tenantry; (ii) electrical
     current for Tenant's use and occupancy of the Premises to the extent
     reasonably deemed to be standard in comparable suburban "Class A" low
     rise office buildings in Richardson, Texas, provided however, that all
     costs for extraordinary or unusual demand for electrical service shall be
     borne by Tenant; (iii) heating and air conditioning at such times as
     Landlord normally furnishes such services to all tenants of the Project
     and at such temperatures and in such amounts as are reasonably provided
     in comparable suburban "Class A" low rise office buildings in
     Richardson, Texas; (iv) janitor service on a daily basis excluding
     holidays and weekends and elevator service; (v) replacement of Building
     standard light bulbs and tubes.

          (b)  Landlord does not warrant that any of such specified services
     will be free from interruption or stoppage, but nevertheless Landlord
     shall use reasonable diligence to resume any such interrupted or stopped
     service. Anything to the contrary notwithstanding, no failure, to any
     extent, to furnish such services or any stoppage or interruption of these
     defined services shall render Landlord liable in any respect for damages
     to either person, property or business, nor shall any such failure,
     interruption or stoppage of such services be deemed or construed as an
     eviction, actual or constructive, of Tenant nor work an abatement of rent
     nor relieve Tenant from the obligation to fulfill any covenant or
     agreement contained in this lease.

     6. Leasehold Improvements. Landlord agrees to install at Landlord's cost
and expense, except as otherwise stated therein, the improvements described in
Exhibit "C" attached hereto. Landlord has made no representations as to the
condition of the Premises or the Building, or Landlord's undertaking to
remodel, repair or decorate, except as expressly set forth herein and in
Exhibit "C".

     7. Use. Tenant shall use the Premises only for the permitted use (as
defined in Paragraph 1(h) hereof). Tenant will not occupy or use the Premises,
or permit any portion of the Premises to be occupied or used for any business
or purpose other than the permitted use or for any use or purpose which is
unlawful in part or in whole or deemed to be disreputable in any manner or
extrahazardous on account of fire, nor permit anything to be done which will in
any way increase the rate of fire insurance on the Building or contents; and in
the event that, by reason of acts of Tenant, there shall be any increase in the
rate of Insurance on the Building or contents created by Tenant's acts or
conduct of business than Tenant hereby agrees to pay to Landlord the amount of
such increase promptly. Tenant will conduct its business and control its
agents, employees and invitees in such a manner as not to create any nuisance,
nor interfere with, annoy or disturb other tenants or Landlord in management of
the Building. Tenant will maintain the Premises in a clean, healthful and safe
condition and will comply with all laws, ordinances, orders, rules and
regulations (state, federal, municipal and other agencies or bodies having any
jurisdiction thereof) with reference to use, condition or occupancy of
Premises. Tenant's obligation to comply with all laws specifically includes any
and all laws applicable to Tenant and relating to environmental hazards and to
accessibility by persons with disabilities. Tenant will not, without the prior
written consent of Landlord, such consent not to be unreasonably withheld,
paint, install lighting, window coverings or decoration, or install any signs,
window or door lettering or advertising media of any type on or about the
Premises or any part thereof. Should Landlord agree in writing to any of the
foregoing items in the preceding sentence, Tenant will maintain such permitted
items in good condition and repair at all times.


<PAGE>

     8. Repairs and Maintenance And Compliance with Accessibility Laws

          (a)  By Landlord: Landlord shall maintain only the roof, foundation,
     heating and air conditioning systems, common areas, plumbing, elevators,
     fire protection sprinkler system, the structural soundness and appearance
     of the exterior walls, the paving outside the Building, and the
     landscaping in good repair and condition, except for reasonable wear and
     tear. Landlord shall be responsible for pest eradication. If such pests
     result from Tenant's use and occupancy of the Premises, Tenant shall pay
     to Landlord on demand the cost for such eradication. Tenant shall give
     written notice to Landlord of the need for repairs or corrections and
     Landlord shall proceed promptly to make such repairs or corrections.
     Landlord's liability hereunder shall be limited to the cost of such
     repairs or corrections.

          (b)  By Tenant: Tenant shall at its expense and risk maintain the
     Premises and related facilities in good repair and condition. Tenant
     will not in any manner deface or injure the Building, the Premises or
     related facilities and will pay the cost of repairing any damage or
     injury done by Tenant or Tenant's agents, employees or invitees. Tenant
     shall throughout the term of this lease take good care of the Building,
     the Premises and related facilities and keep them free from waste and
     nuisance of any kind. If Tenant shall fall to make any repair required
     hereunder (including all necessary replacements) within fifteen (15) days
     after written notification to do so, Landlord may at its option make such
     repair and Tenant shall, upon demand therefor, pay Landlord for the cost
     thereof together with interest on any such cost which remains unpaid
     following such demand at the rate of 10% per annum until paid.

          (c)  By Landlord and Tenant: Tenant shall at its expense and risk
     cause the Premises and related facilities to be in compliance with the
     requirements of the Americans With Disabilities Act and all other
     pertinent laws relating to public access ("Accessibility Laws").
     Landlord shall at its expense and risk cause the common areas of the
     Building to comply with Accessibility Laws. Any extraordinary or atypical
     requirements imposed by Accessibility Laws relating to the nature of
     Tenant's business shall be Tenant's responsibility and Tenant shall bear
     the risk and expense of compliance with such extraordinary or atypical
     requirements. Tenant acknowledges that Landlord's responsibility is to
     insure that common areas of the Building comply with Accessibility Laws
     assuming the imposition of requirements typical for a suburban office
     building.

     9. Alterations and improvements. Tenant will not make or allow to be made
any alterations or physical additions in or to the Premises without the prior
written consent of Landlord, which consent shall not be unreasonably withheld
as to nonstructural alterations. Landlord may require, as a condition to
granting its consent to any such alterations or physical additions, that Tenant
agree to remove such alterations or physical additions at the end of the lease
term and restore the Premises to the condition in which the same existed before
such alterations or physical additions were made. At the end or other
termination of this lease, Tenant shall deliver up the Premises with all
improvements located thereon (except as otherwise herein provided) in good
repair and condition, reasonable wear and tear excepted, and shall deliver to
Landlord all keys to the Premises. The cost and expense of any repairs
necessary to restore the condition of the Premises to such condition in which
they are to be delivered to Landlord shall be borne by Tenant. All permanent
alterations, additions or Improvements made in or upon the Premises, either by
Landlord or Tenant, shall be Landlord's property on termination of this lease
and shall remain on the Premises without compensation to Tenant. All temporary
alterations, furniture, movable trade fixtures and equipment installed and paid
for by Tenant may be removed by Tenant at the termination of this lease if
Tenant so elects, and shall be so removed if required by Landlord, or if not so
removed shall at the option of Landlord, become the property of Landlord. All
such installations, removals and restoration shall be accomplished in good
workmanlike manner so as not to damage the Premises or the primary structure or
structural qualities of the Building or the plumbing, electrical lines or other
utilities.

                                        2


<PAGE>

     10. Common Areas. The use and occupation by Tenant of the Premises shall
include the use in common with others entitled thereto of the common areas,
parking areas, service roads, loading facilities, sidewalks, and other
facilities as may be designated from time to time by Landlord, subject,
however, to the terms and conditions of this agreement and to reasonable rules
and regulations for the use thereof as prescribed from time to time by Landlord.

     All common areas described above shall at all times be subject to the
exclusive control and management of Landlord, and Landlord shall have the right
from time to time to establish, modify and enforce reasonable rules and
regulations with respect to all facilities and areas mentioned in this Article.
Landlord shall have the right to construct, maintain, and operate lighting
facilities on all such areas and improvements; to police same; from time to
time to change the area, level, location and arrangement of parking areas and
other facilities hereinabove referred to; and to restrict parking by tenants,
their officers, agents, and employees to employee parking areas. If Landlord
ever assigns non-covered parking spaces to other tenants, Tenant will be
assigned a fair number of parking spaces at no charge. The number of parking
spaces assigned to Tenant will be determined by looking at the rentable area of
the Premises versus the rentable area let by the other tenants.

     All common areas and facilities not within the Premises, which Tenant may
be permitted to use and occupy, are to be used and occupied under a revocable
license, and if the amount of such areas be diminished, Landlord shall not be
subject to liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such diminution of such areas be
deemed constructive or actual eviction.

     11. Assignment and Subletting. If Tenant desires to assign this lease or
sublet the Premises or any part thereof, Tenant shall give Landlord written
notice of such desire together with the name of the proposed assignee or
sublessee, a detailed description of its business, and current financial
information about it in sufficient detail to allow Landlord to assess the
financial condition of such proposed assignee or sublessee. Tenant shall give
such notice and information to Landlord at least 60 days prior to the date on
which Tenant desires to make such assignment or sublease. For the purposes
hereof, transfer of more than half of the stock or other voting control of
Tenant shall be deemed to constitute an assignment of this Lease. Landlord
shall, within 30 days following receipt of such notice, notify Tenant in
writing that Landlord elects either (i) to terminate this lease as to the space
so affected as of the date so specified by Tenant, in which event Tenant will
be relieved of all further obligation hereunder as to such space, (ii) to
permit Tenant to assign this lease or sublet such space, or (iii) refuse to
permit Tenant to assign this lease or sublet such space. If Landlord should
fail to notify Tenant in writing of such election within such thirty-day
period, Landlord shall be deemed to have elected (iii) above. Consent by
Landlord to one or more assignments or sublettings shall not operate as a
waiver of Landlord's rights as to any subsequent assignments and sublettings.
Tenant shall pay all costs incurred by Landlord in connection with the
foregoing provisions including without limitation legal fees, construction
costs to reconfigure the Premises, and credit checks. Notwithstanding any
assignment or subletting, Tenant and any guarantor of Tenant's obligations
under this lease shall at all times remain fully responsible and liable for the
payment of the rent herein specified and for compliance with all of Tenant's
other obligations under this lease.  Moreover, if the rental or other
consideration (or a combination of the rental and any bonus or other
consideration therefor or incident thereto) due and payable to Tenant by an
assignee or sublessee exceeds the rental payable under this lease
(appropriately prorated in the case of a sublease of less than all of the
Premises), then Tenant shall be bound and obligated to pay Landlord fifty
percent (50%) of all such excess rental and other excess consideration within
ten (10) days after receipt thereof by Tenant. Notwithstanding the f
immediately preceeding sentence, in the event that Tenant fails to occupy or
vacates the Premises prior to consummating an approved sublease or assignment,
Tenant shall be bound and obligated to pay to Landlord one hundred percent
(100%) of all excess rental and other excess consideration. Finally, upon any
assignment or subletting all rentals paid to Tenant by an assignee or sublessee
shall be received by Tenant in trust for Landlord, to be forwarded immediately
to Landlord. If Landlord transfers and assigns its interest in this lease and
the Building containing the Premises, Landlord shall thereby be released from
any further obligations hereunder, and Tenant agrees to look solely to such
successor in interest of the Landlord for performance of such obligations.
Tenant shall not mortgage, pledge or otherwise encumber its interest in this
lease or in the Premises.

     Landlord's permission to assign this lease or sublet Tenant's space will
not be denied in the event the proposed assignee or sublesse is at the time of
the proposed assignment or subletting a "Fortune 1000" company and the
proposed assignee or sublesse will use the Premises for purely office purposes.

     12. Indemnity. Landlord shall not be liable for and Tenant will indemnify
and save harmless Landlord of and from all fines, suits, claims, demands,
losses and actions (including attorney's fees) for any injury to person or
damage to or loss of property on or about the Premises caused by the negligence
or misconduct or breach of this lease by Tenant, its agents, employees,
sublessees, invitees or by any other person entering the Building, the
Premises, or related facilities under express or implied invitation of Tenant,
or arising out of Tenant's use of the Building, the Premises, or related
facilities. Landlord shall not be liable or responsible for any loss or damage
to any property or death or injury to any person occasioned by theft, fire, Act
of God, public enemy, injunction, riot, strike, insurrection, war, court order,
requisition of any governmental body or authority, by other tenants of the
Building or related facilities or any other matter beyond control of Landlord,
or for any injury or damage or inconvenience which may arise through repair or
alteration of any part of the Building, the Premises or related facilities, or
failure to make repairs or from any cause whatsoever except Landlord's gross
negligence. Tenant shall, at all times during the term of this lease, maintain
a policy or policies of insurance with the premiums thereon fully paid in
advance, in amounts and with insurance companies approved by Landlord Insuring
Tenant's obligations to Landlord under Paragraph 12 of this lease.

     Tenant shall not be liable for and Landlord will indemnify and save
harmless Tenant of and from all fines, suits, claims, demands, losses and
actions (including attorney's fees) for any injury to person or damage to or
loss of property on or about the common areas of the Building caused by the
gross negligence or willfull misconduct or breach of this lease by Landlord,
its agents or employees.

     13. Mortgages. Tenant accepts this lease subject to any deeds of trust,
security interests or mortgages which might now or hereafter constitute a lien
upon the Building or improvements therein, the Premises, or related facilities,
and to zoning ordinances and other building and fire ordinances and
governmental regulations relating to the use of the property Tenant shall at
any time hereafter, on demand, execute any instruments, releases or other
documents that may be required by any mortgagee for the purpose of subjecting
and subordinating this lease to the lien of any such deed of trust, security
interest or mortgage. With respect to any deed of trust, security interest or
mortgage hereafter constituting a lien on the Building or improvements therein,
the Premises, or related facilities. Landlord, at its sole options, shall have
the right to waive the applicability of this Paragraph 13 so that this lease
will not be subject and subordinate to any such deed of trust, security
interest or mortgage.

     14. Insurance. Landlord shall, at all times during the term of this lease
maintain a policy or policies of insurance with the premiums thereon fully paid
in advance, issued by and binding upon some solvent insurance company, insuring
the Building against loss or damage by fire, explosion, or other hazards and
contingencies for the full insurable value thereof; provided that Landlord
shall not be obligated to insure any furniture, equipment, machinery, goods or
supplies not covered by this lease which Tenant may bring or obtain upon the
Premises, or any additional improvements which Tenant may construct thereon.

     Tenant shall, at all times during the term of this lease, maintain a
policy or policies of insurance, with the premiums thereon fully paid in
advance, issued by and binding upon insurance companies approved by Landlord,
such approval not to be unreasonably withheld, insuring any furniture,
equipment, machinery, goods or supplies which Tenant may bring or obtain upon
the Premises, and any additional improvements which Tenant may construct on the
Premises against loss or damage by fire, explosion or other hazards and
contingencies for the full insurable value thereof. Tenant shall also, at all
times during the term of this lease, maintain a policy or policies of
insurance, with the premiums thereon fully paid in advance, for comprehensive
general and contractual liability insurance against claims for personal injury,
death and property damage occurring in or about the Premises, such insurance to
afford protection to the limits of (i) not less than $1,000,000.00 in respect
of injury to or death of any number of persons arising out of any one
occurrence and (ii) $1,000,000.00 in respect of any instance of property
damage. Such policy or policies shall be issued by and binding upon insurance
companies approved by Landlord, such approval not to be unreasonably withheld.

     Tenant shall deliver to Landlord, prior to the Commencement Date,
certificates of such insurance and shall, at all times during the term of this
lease, deliver to Landlord upon request true and correct copies of such
insurance policies. The comprehensive general and contractual liability policy
described above shall (i) name Landlord as an additional Insured, (ii) insure
performance of the indemnities of Tenant contained in this lease, and (iii) be
primary coverage, so that any insurance coverage obtained by Landlord shall be
in excess thereof. Each insurance policy obtained by Tenant shall provide that
it will not be canceled or reduced in coverage without 30 days' prior written
notice to Landlord. Tenant shall deliver to Landlord certificates of renewal at
least 30 days prior to the expiration date of each such policy and copies of
new policies at least 5 days prior to terminating any such policies.

                                        3


<PAGE>

     15.  Inspection. Landlord or representatives shall have the right to enter
into and upon any and all parts of the Premises at any time I and without
notice in the event of an emergency and with prior notice at reasonable hours to
(i) inspect same or clean or make repairs or alterations or additions as
Landlord may deem necessary (but without any obligation to do so, except as
expressly provided for herein), or (ii) show the Premises to prospective
tenants, purchasers or lenders; and Tenant shall not be entitled to any
abatement or reduction of rent by reason thereof, nor shall such be deemed to
be an actual or constructive eviction.

     16.  Condemnation. If, during the term of this lease, or any extension or
renewal thereof, all of the Premises should be taken for any public or
quasi-public use under any governmental law, ordinance or regulation or by
right of eminent domain or by private purchase in lieu thereof, this lease
shall terminate and the rent shall be abated during the unexpired portion of
this lease, effective on the date physical possession is taken by the
condemning authority, and Tenant shall have no claim against Landlord for the
value of any unexpired term of this lease.

     In the event a portion but not all of the Premises shall be taken for any
public or quasi-public use under any governmental law, ordinance or regulation,
or by right of eminent domain or by private sale in lieu thereof and the
partial taking or condemnation shall render the Premises unsuitable for
Tenant's business, then Landlord shall have the option, in its sole discretion,
of terminating this lease, or, at Landlord's sole risk and expense, restoring
and reconstructing the Premises to the extent necessary to make same reasonably
tenantable. Should Landlord elect to restore, the lease shall continue in full
force and effect with the rent payable during the unexpired portion of this
lease adjusted to such an extent as may be fair and reasonable under the
circumstances, and Tenant shall have no claim against Landlord for the value of
any interrupted portion of this lease.

      In the event of any condemnation or taking, total or partial, Tenant
shall not be entitled to any part of the award or price paid in lieu thereof,
and Landlord shall receive the full amount of such award or price, Tenant
hereby expressly waiving any right or claim to any part thereof.

     17.  Fire or Other Casualty. In the event that the Premises should be
totally destroyed by fire, tornado or other casualty or in the event the
Premises or the Building should be so damaged that rebuilding or repairs cannot
be completed within 180 days after the date of such damage, either Landlord or
Tenant may at its option terminate this lease by delivering written notice
thereof to the other party within twenty (20) days following such damage, in
which event the rent shall be abated during the unexpired portion of this lease
effective with the date of such damage. In the event the Premises should be
damaged by fire, tornado or other casualty covered by Landlord's insurance, but
only to such extent that rebuilding or repairs can be completed within 180 days
after the date of such damage, or if the damage should be more serious but
neither Landlord nor Tenant elects to terminate this lease, in either such
event Landlord shall within thirty (30) days after the date of such damage
commence to rebuild or repair the Premises and shall proceed with reasonable
diligence to restore the Premises to substantially the same condition in which
they were immediately prior to the happening of the casualty, except that
Landlord shall not be required to rebuild, repair or replace any part of the
furniture, equipment, fixtures and other improvements which may have been
placed by Tenant or other tenants within the Building or the Premises, or
related facilities. In the event that the Premises are totally untenantable,
Landlord shall abate the rent during the time Premises are unfit for occupancy.
If the Premises are not totally untenantable, Landlord shall allow Tenant a
fair diminution of rent during the time the Premises are partially unfit for
occupancy. In the event any mortgagee under a deed of trust, security agreement
or insurance proceeds be used to retire the mortgage debt, Landlord shall have
no obligation to rebuild and this lease shall terminate upon notice to Tenant.
Any insurance which may be carried by Landlord or Tenant against loss or damage
to the Project or to the Premises shall be for the sole benefit of the party
carrying such insurance and under its sole control.

     Notwithstanding anything to the contrary contained herein in the event
that either Landlord or Tenant terminates this lease, pursuant to a right
granted in this Paragraph 17, any unapplied Prepaid Rent shall be refunded to
Tenant.

     18.  Holding Over. Should Tenant, or any of its successors in interest,
hold over the Premises, or any part thereof, after the expiration of the term
of this lease, unless otherwise agreed in writing, such holding over shall
constitute and be construed as tenancy at sufferance only. Such tenancy shall
be at a daily rental equal to 1/30th of the higher of (i) 150% of the sum of
the monthly rental installment plus the most current rental adjustment which
may have been made thereto pursuant to Paragraph 4 hereof, or (ii) 150% of the
current rate for the Premises being quoted by Landlord to prospective tenants.
The inclusion of the preceding sentence shall not be construed as Landlord's
consent for the Tenant to hold over. In the event of any unauthorized holding
over, Tenant shall also indemnify Landlord against all claims for damages by
any other tenant to whom Landlord may have leased all or any part of the Leased
Premises effective upon the termination of this lease Notwithstanding the
foregoing during the first month of any holdover, and only during that first
month, the daily rental rate shall be equal to 1/30 th of 110% of the sum of
the monthly rental installment plus the most current rental adjustment which
may have been made thereto pursuant to Paragraph 4 hereof.

     19.  Taxes on Tenant's Property. Tenant shall be liable for all taxes
levied or assessed against personal property, furniture or fixtures placed by
Tenant in the Premises. If any such taxes for which Tenant is liable are levied
or assessed against Landlord or Landlord's property and if Landlord elects to
pay the same or if the assessed value of Landlord's property is increased by
inclusion of personal property, furniture or fixtures placed by Tenant in the
Premises, and Landlord elects to pay the taxes based on such increase, Tenant
shall pay to Landlord promptly that part of such taxes for which Tenant is
primarily liable hereunder.

      20.  Events of Default. The following events shall be deemed to be events
of default by Tenant under this lease:

          (a)  Tenant shall fail to pay any monthly rental installment or any
     portion of the basic rental hereby reserved when due and such failure
     shall continue for more than 10 days after I Landlord notifiles Tenant in
     writing of such failure to pay;

          (b)  Tenant shall fail to comply with any term, provision or covenant
     of this lease, other than the payment of rent or shall fail to comply with
     any term, provision or covenant in any other agreement with Landlord
     affecting the Premises, and shall not cure such failure within t thirty
     (30) days after written notice there of to tenant;

          (c)  Tenant shall make an assignment for the benefit of creditors;

          (d)  Tenant shall file a petition under any section or chapter of the
     Federal Bankruptcy Code, as amended, or under any similar law or statute
     of the United States or any State thereof, or Tenant shall be adjudged
     bankrupt or insolvent in any proceeding filed against Tenant thereunder
     and such adjudication shall not be vacated or set aside within thirty (30)
     days;

          (e)  A receiver or Trustee shall be appointed for all or substantially
     all of the assets of Tenant and such receivership shall not be terminated
     or stayed within thirty (30) days;

          (f)  Intentionally deleted;

          (g)  Intentionally deleted.; or

          (h)  Tenant shall assign this lease or sublet the Premises without
     Landlord's consent, where Landlord's consent is required under Section 11.

     21.  Remedies. Upon the occurrence of any event of default specified in
Paragraph 20 hereof, Landlord shall have the option to pursue any one or more
of the following remedies without any notice or demand whatsoever;

          (a)  Terminate this lease in which event Tenant shall immediately
     surrender the Premises to Landlord, and if Tenant fails to do so, Landlord
     may, without prejudice to any other remedy which it may have for
     possession or arrearages in rent, enter upon and take possession and expel
     or remove Tenant and any other person who may be occupying such Premises
     or any part thereof, without being liable for prosecution or any claim of
     damages therefor. Tenant agrees to pay to Landlord on demand the amount of
     all loss and damage which Landlord may suffer by reason of such
     termination, including (i) the cost of recovering the Premises (including
     attorneys' fees and costs of suit), (ii) the cost of removing and storing
     any personal property, (iii) the unpaid rent earned at the time of
     termination, plus interest thereon at the rate described in Paragraph 35,
     (iv) the present value (discounted at the rate of six percent (6%) per
     annum) of the balance of the basic rental and additional rental

                                      4


<PAGE>

     for the remainder of the lease term less the present value (discounted at
     the same rate) of the fair market rental value of the Premises for such
     period, taking into account the period of time the Premises will remain
     vacant until a new tenant is obtained, and the cost to prepare the
     Premises for occupancy and the other costs (such as costs of repairs or
     remodeling, leasing commissions and attorneys' fees) to be incurred by
     Landlord in connection therewith, and (v) any other sum of money and
     damages owed by Tenant to Landlord under this lease;

          (b)  Enter upon and take possession of the Premises and expel or
     remove Tenant and any other person who may be occupying the Premises or
     any part thereof, without being liable for prosecution or any claim for
     damages therefor, and if Landlord so elects, relet the Premises on such
     terms as Landlord shall deem advisable and receive the rent thereof.
     Tenant agrees to pay to Landlord on demand any deficiency in basic rental
     that may arise by reason of such reletting;

          (c)  Enter upon the Premises, without being liable for prosecution or
     any claim for damages therefor, and do whatever Tenant is obligated to do
     under the terms of this lease, and tenant agrees to reimburse Landlord on
     demand for any expenses which Landlord may incur in thus effecting
     compliance with Tenant's obligations under this lease, and Tenant further
     agrees that Landlord shall not be liable for any damages resulting to the
     Tenant from such action; and

          (d)  Landlord may, and is hereby entitled and authorized, without any
     notice to Tenant whatsoever, to enter upon the Premises by use of a master
     key, a duplicate key, or other peaceable means, and to change, alter,
     and/or modify the door locks on all entry doors of the Premises, thereby
     permanently excluding Tenant, and its officers, principals, agents,
     employees, and representatives therefrom. If Landlord has either
     permanently repossessed the Premises pursuant to the foregoing provisions
     of this Lease, or has terminated this lease by reason of Tenant's default,
     Landlord shall not thereafter be obligated to provide Tenant with a key to
     the Premises at any time; provided, however, that in any such instance,
     during Landlord's regular business hours and at the convenience of
     Landlord, and upon the written request of Tenant accompanied by such
     written waivers and releases as Landlord may require, Landlord will escort
     Tenant or its authorized personnel to the Premises to retrieve any
     personal belongings or other property of Tenant not subject to the lien or
     security interest described herein. If Landlord elects to exclude Tenant
     from the Premises without permanently repossessing or terminating pursuant
     to the foregoing provisions of this lease, then Landlord (at any time
     prior to actual repossession or termination) shall not be obligated to
     provide Tenant a key to re-enter the Premises until such time as all
     delinquent rental and other amounts due under this lease have been paid in
     full (and all other defaults, if any, have been completely cured to
     Landlord's satisfaction), and Landlord has been given assurance reasonably
     satisfactory to Landlord evidencing Tenant's ability to satisfy its
     remaining obligations under this lease. During any such temporary period
     of exclusion, Landlord will, during Landlord's regular business hours and
     at Landlord's convenience, upon written request by Tenant, escort Tenant
     or its authorized personnel to the Premises to retrieve personal
     belongings of Tenant or its employees, and such other property of Tenant
     as is not subject to the Landlord's lien and security interest described
     herein. This remedy of Landlord shall override and control any conflicting
     provisions of the Texas Property Code.

     No re-entry or taxing possession of the Premises by Landlord shall be
construed as an election on its part to terminate this lease, unless a written
notice of such intention be given to Tenant. Notwithstanding any such reletting
or re-entry or taking possession, Landlord may at any time thereafter elect to
terminate this lease for a previous default. Pursuit of any of the foregoing
remedies shall not preclude pursuit of any of the other remedies herein
provided or any other remedies provided by law, nor shall pursuit of any remedy
herein provided constitute a forfeiture or waiver of any rent due to Landlord
hereunder or of any damages accruing to Landlord by reason of the violation of
any of the terms, provisions and covenants herein contained. Landlord's
acceptance of rent following an event of default hereunder shall not be
construed as Landlord's waiver of such event of default. No waiver by Landlord
of any violation or breach of any of the terms, provisions, and covenants
herein contained shall be deemed or construed to constitute a waiver of any
other violation or breach of any of the terms, provisions, and covenants herein
contained. Forbearance by Landlord to enforce one or more of the remedies
herein provided upon an event of default shall not be deemed or construed to
constitute a wavier of any other violation or default.

     22.  Surrender of Premises. No act or thing done by the Landlord or its
agents during the term hereby granted shall be deemed as acceptance of a
surrender of the Premises, and no agreement to accept a surrender of the
Premises shall be valid unless the same be made in writing and subscribed by
the Landlord.

     23.  Attorneys' Fees. In case it should be necessary or proper for
Landlord or Tenant to bring any action under this lease or to consult or place
such lease, or any amount payable by Landlord or Tenant thereunder, with an
attorney concerning or for the enforcement of any of Landlord's or Tenant's
rights hereunder, then the non-prevailing party agrees in each and any such
case to pay the prevailing party on demand a reasonable attorney's fee.

      24.  Landlord's Lien. In addition to the statutory Landlord's lien,
Landlord shall have, at all times, a valid security interest to secure payment
of all rentals and other sums of money becoming due hereunder from Tenant, and
to secure payment of any damages or loss which Landlord may suffer by reason of
the breach by Tenant of any covenant, agreement or condition contained herein,
upon all goods, wares, equipment, fixtures, furniture, improvements and other
personal property of Tenant presently or which may hereafter be situated on the
Premises and all proceeds therefrom, and such property shall not be removed
therefrom without the consent of Landlord until all arrearages in rent as well
as any and all other sums of money then due to Landlord hereunder shall first
have been paid and discharged and all the covenants, agreements and conditions
hereof have been fully complied with and performed by Tenant, upon the
occurrence of an event of default by Tenant, Landlord may, in addition to any
other remedies provided herein, enter upon the Premises and take possession of
any and all goods, wares, equipment, fixtures, furniture, improvements and
other personal property of Tenant situated on the Premises without liability
for trespass or conversion, and sell the same at public or private sale, with
or without having such property at the sale, after giving Tenant reasonable
notice of the time and place of any public sale or of the time after which any
private sale is to be made, at which sales the Landlord or its assigns may
purchase unless otherwise prohibited by law. Unless otherwise provided by law,
and without intending to exclude any other manner of giving Tenant reasonable
notice, the requirement of reasonable notice shall be met if such notice is
given in the manner prescribed in Paragraph 27 of this lease at least five (5)
days before the time of sale. The proceeds from any such disposition, less any
and all expenses connected with the taking of possession, holding and selling
of the property (including reasonable attorneys' fees and other expenses),
shall be applied as a credit against the indebtedness secured by the security
interest granted in this Paragraph 24. Any surplus shall be paid to Tenant or
as otherwise required by law; and the Tenant shall pay any deficiencies
forthwith. The statutory lien for rent is not hereby waived.

     25.  Mechanic's Lien. Tenant will not permit any mechanic's lien or liens
to be placed upon the Premises or the Project or improvements thereon during
the term hereof caused by or resulting from any work performed, materials
furnished or obligation incurred by or at the request of Tenant, and in the
case of the filing of any such lien Tenant will promptly pay same. If default
in payment thereof shall continue for twenty (20) days after written notice
thereof from Landlord to the Tenant, the Landlord shall have the right and
privilege at Landlord's option of paying the same or any portion thereof
without inquiry as to the validity thereof, and any amounts so paid, including
expenses and interest, shall be so much additional rent hereunder due from
Tenant to Landlord and shall be repaid to Landlord immediately on rendition of
bill therefor, together with interest until repaid as provided in Paragraph 35.
Tenant will have the option to "bond around" any mechanics's lien or liens,
provided such bonding around is in accordance with, and permitted by, deeds of
trust or mortgages affecting the Building.

     26.  Waiver of Subrogation. Anything in this lease to the contrary
notwithstanding, the parties hereto hereby waive any and all rights of
recovery, claim action or cause of action, against each other, their agents,
officers, and employees, for any loss or damage that may occur to the Premises
hereby demised, or any improvements thereof, or such Project of which the
Premises are a part, any improvements thereto, or related facilities, by reason
of fire, the elements, or any other cause which could be insured against under
the terms of standard fire and extended coverage insurance policies, regardless
of cause or origin, including negligence of the parties hereto, their agents,
officers and employees.

     No insurer of one party hereunder shall hold any right of subrogation
against the other party. If the respective insurer of Landlord and Tenant does
not permit the foregoing waiver without an appropriate endorsement to such
party's insurance policy, then Landlord and Tenant each covenant and agree to
notify its insurer of the waiver set forth herein and to secure from such
insurer an appropriate endorsement to its respective insurance policy with
respect to such waiver.

     27.  Notices. Each provision of the Agreement, or of any applicable
governmental laws, ordinances, regulations, and other requirements with
reference to the sending, mailing or delivery of any notice, or with reference
to the making of any payment by Tenant to Landlord, shall be deemed to be
complied with when and if the following steps are taken:

                                      5


<PAGE>

     (a)  All rent and other payment required to be made by Tenant to Landlord
hereunder shall be payable to Landlord in Dallas County, Texas, at the address
herein below set forth, or at such other address as Landlord may specify from
time to time by written notice delivered in accordance herewith:

     (b)  Any notice or document required to be delivered hereunder shall be
deemed to be delivered if actually received and whether or not received when
deposited in the United States mail, postage prepaid, certified or registered
mail (with or without return receipt requested) addressed to the parties hereto
at the respective addresses set out opposite their names below, or at such
other address as they have heretofore specified by written notice delivered in
accordance herewith:

LANDLORD:      Collins Campbell Joint Venture
               c/o Thompson Realty Corporation
               1701 N. Collins, Suite 120
               Richardson, Texas 75080

TENANT:        Telecom Technologies, Inc.
               1701 N. Collins, Suite 3000
               Richardson, Texas 75080

     28.  Force Majeure. Whenever a period of time is herein prescribed for
action to be taken by either party, specifically excluding Tenant's obligation
to pay rental and other monetary obligations of Tenant hereunder, such party
shall not be liable or responsible for, and there shall be excluded from the
computation of any such period of time, any delays due to strikes, riots, Acts
of God, shortages of labor or materials, war, governmental laws, regulations or
restrictions or any other causes of any kind whatsoever which are beyond the
control of such party.

     29.  Separability. If any clause or provision of this lease is illegal,
invalid or unenforceable under present or future laws effective during the term
of this lease, then and in that event, it is the intention of the parties
hereto that the remainder of this lease shall not be affected thereby, and it
is also the intention of the parties to this that in lieu of each clause or
provision of this lease that is illegal, invalid, or unenforceable, there be
added as part of this lease a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.

     30.  Entire Agreement: Amendments: Binding Effect. This lease contains the
entire agreement between the parties and may not be altered, changed or
amended, except by instrument in writing signed by both parties hereto. No
provision of this lease shall be deemed to have been waived by Landlord unless
such waiver be in writing signed by Landlord and addressed to Tenant, nor shall
any custom or practice which may grow up between the parties in the
administration of the terms hereof be construed to waive or lessen the right of
Landlord to insist upon the performance by Tenant in strict accordance with the
terms hereof. The terms, provisions, covenants and conditions contained in this
lease shall apply to, inure to the benefit of, and binding upon the parties
hereto, and upon their respective successors in interest and legal
representatives, except as otherwise herein expressly provided.

     31.  Quiet Enjoyment. Provided Tenant has performed all of the terms,
covenants, agreements and conditions of this lease, including the payment of
rent, to be performed by Tenant, Tenant shall peaceably and quietly hold and
enjoy the Premises for the term hereof, without hindrance from landlord,
subject to the terms and conditions of this lease.

     32.  Rules and Regulations. Tenant and Tenant's agents, employees, and
invitees will comply fully with all requirements of the rules and regulations
of the Project and related facilities which are attached hereto as Exhibit
"D", and made a part hereof as though fully set out herein. Landlord shall at
all times have the right to change such rules and regulations or to promulgate
other rules and regulations in such reasonable manner as may be deemed
advisable for safety, care, or cleanliness of the Project, the Premises, or
related facilities, and for preservation of good order therein, all of which
rules and regulations, changes and amendments will be forwarded to Tenant in
writing and shall be carried out and observed by Tenant. Tenant shall further
be responsible for the compliance with such rules and regulations by the
employees, servants, agents, visitors and invitees of Tenant.

     33.  Broker's or Agent's Commission. Tenant represents and warrants that
there are no claims for brokerage commissions or finder's fees in connection
with the execution of this lease, except as listed below, and Tenant agrees to
indemnify and hold harmless Landlord against all liabilities and costs arising
from such claims, including without limitation attorneys' fees in connection
therewith. Broker for Tenant is Partners National Real Estate Group, Inc.
Broker for Landlord is Thompson Realty Corporation.

     34.  Guaranty, Joint and Several Liability. If there be more than one
Tenant, the obligations hereunder imposed upon Tenant shall be joint and
several. If there be a guarantor of Tenant's obligations hereunder, the
obligations hereunder imposed upon Tenant shall be the joint and several
obligations of Tenant and such guarantor and Landlord need not first proceed
against the Tenant hereunder before proceeding against such guarantor, nor
shall any such guarantor be released from its guaranty for any reason
whatsoever, including without limitation, in case of any amendments hereto,
waivers hereof or failure to give such guarantor any notices hereunder.

    35.  Interest. Any rent or other amount which becomes owing by Tenant to
Landlord under this lease (including unpaid service charges) shall bear
interest from the date of demand at the lesser of the highest lawful rate or
ten percent (10%) per annum.

     36. Estoppel Certificate. Tenant will, at any time and from time to time,
upon not less than ten (10) days' prior request by Landlord, execute,
acknowledge and deliver to Landlord a statement in writing executed by Tenant
certifying that this lease is unmodified and in full effect (or, if there have
been modifications, that this lease is in full effect as modified, and selling
forth such modifications) and the dates to which the rent has been paid, and
either stating that to the knowledge of the signer of such certificate no
default exists hereunder or specifying each such default of which the signer
may have knowledge; it being intended that any such statement by Tenant may be
relied upon by any prospective purchaser or mortgagee of the Project. I.

     37.  Landlord's Liability. The liability of Landlord to Tenant for any
default by Landlord under the terms of this lease shall be limited to the
proceeds of sale on execution of the interest of Landlord in the Building and
Landlord shall not be personally liable for any deficiency. This clause shall
not be deemed to limit or deny any remedies which Tenant may have in the event
of default by Landlord hereunder, which do not involve the personal liability
of Landlord.

     38.  Captions. The captions contained in this lease are for convenience of
reference only, and in no way limit or enlarge the terms and conditions of this
lease.

     39.  Gender. Words of any gender used in this lease shall be held and
construed to include any other gender, and words in the singular number shall
be held to include the plural, unless the context otherwise requires.

     40.  Place of Performance. Tenant shall perform all covenants, conditions
and agreements contained herein, including but not limited to payment of rent,
in Dallas County, Texas. Any suit arising from or relating to this agreement
shall be brought in Dallas County, Texas.

     41.  I Relocation. Upon request by Landlord during the term of this lease,
but only at a point in time that Tenant falls to occupy seventy-five percent
(75%) of an entire floor in the Building, Tenant agrees to relocate to other
space in the Building designated by Landlord, provided such other space is as
large or larger than the Premises (the "Substitution Space"). If Landlord
desires to exercise such right to relocate Tenant, it shall give Tenant at
least sixty (60) days prior written notice thereof specifying the effective
date of such substitution and the location of the Substitution Space (including
any new expansion areas or right of first refusal areas if this lease contains
any options for same). As of such effective date; (i) the description of the
Premises set forth in this lease shall, without further act on the part of
Landlord or Tenant, be deemed amended so that the Substitution Space shall, for
all intents and purposes, be deemed to be the Premises hereunder and all of the
terms, covenants, conditions, provisions and agreements of this lease shall
continue in full force and effect and shall apply to the Substitution Space;
and (ii) Tenant shall move from the existing Premises into the Substitution
Space and shall vacate and surrender possession to Landlord of the existing
Premises. Tenant shall have the option either to accept possession of the
Substitution Space in its "as is" condition as of such effective date or to
require Landlord to after the Substitution Space in the same manner as the
existing Premises were altered pursuant to the Work Letter Agreement attached
hereto as Exhibit "C". Such

                                      6


<PAGE>

option shall be exercised by notice from Tenant to Landlord within ten (10)
days after the aforesaid notice from Landlord to Tenant of such proposed
relocation. If Tenant fails to deliver to Landlord within such ten (10) day
period notice of its election, or if Tenant is in default under any of the
terms, covenants, conditions, provisions or agreements of this lease as of the
date of such notice by Landlord, Tenant shall be deemed to have elected to
accept possession of the Substitution Space in its "as is" condition. If
Landlord exercises this relocation right, Landlord shall, after receipt of paid
invoices, promptly reimburse Tenant for Tenant's reasonable out-of-pocket
expenses for (i) printing a reasonable supply of new business stationery, and
(ii) moving Tenant's furniture, equipment, supplies and telephones from the
existing Premises to the Substitution Space.

     42.  Moving Allowance. Upon Tenant's occupancy of the First Portion of the
Premises and if no uncured event of default exists under this lease, Landlord
agrees to pay Tenant a moving allowance equal to $8,250.00. Upon Tenant's
occupancy of the Second Portion of the Premises and if no uncured event of
default exists under this lease, Landlord agrees to pay Tenant a moving
allowance equal to $6,864.75.

     43.  Building Signage. After Tenant occupies the First Portion of the
Premises, Tenant may, after having obtained any necessary governmental
approvals and the written approval of Landlord, at Tenant's sole cost and
expense, install a sign on the Building. Landlord will have the right to
approve all aspects of such sign, in its reasonable discretion, including
location, manner of installation, size, color, lettering, lighting, and
content. Tenant agrees to remove such sign immediately at its sole cost and
expense if Tenant is no longer occupying an entire floor in the Building, or if
for any reason the lease is terminated or expires. In connection with the
installation or removal of such sign, Tenant will repair any and all damage to
the Building at Tenant's sole cost and expense.

     44.  Intentionally deleted.

     45.  Intentionally deleted.

     46.  Lender Approval. This lease is subject to the approval of existing
lienholders on the Building. If Landlord is unable to obtain any and all
necessary lender approvals on or before April 15, 1997, this lease shall
thereafter be null and void, any prepaid rent shall be returned to Tenant, and
neither party shall have any liability to the other by reason of such
cancellation.

     47.  Special Provisions. Exhibits A, B, C, D, E, Rider No. 101 and Rider
No. 201.

                       LANDLORD:          Collins Campbell Joint Venture,
                                           a Texas general partnership

                                          By: Jaytex Properties, Ltd.,
                                               a Texas limited partnership

                                              By: JRS Management, Inc.,
                                                   a Texas corporation

                                               By: /s/ W. T. Field
                                                   ---------------------------
                                                   W. T. Field, President

                       TENANT:            Telecom Technologies, Inc.

                                          By: /s/ ANOUSHEH ANSARI
                                             ---------------------------------
                                          Printed Name:  ANOUSHEH ANSARI
                                                        ----------------------
                                          Title:  PRESIDENT
                                                 -----------------------------


                                       7

<PAGE>

                                  EXHIBIT "A"
                                   SITE PLAN

TELECOM TECHNOLOGIES, INC.

PREMISES:  20,153 SQUARE FEET OF RENTABLE AREA

[Diagram of 3rd Level Floorplan]


<PAGE>

                                  EXHIBIT "A"
                                   SITE PLAN

TELECOM TECHNOLOGIES, INC.
RIGHT OF FIRST REFUSAL SPACE

GROWTH AREA:  18,880 SQUARE FEET OF RENTABLE AREA

[Diagram of 2nd Level Floorplan]



<PAGE>

                                  EXHIBIT "B"

                     RENTAL ESCALATION - OPERATING EXPENSES

     In addition to the basic rental payable by Tenant in accordance with
Paragraph 1(e) of this lease, Tenant shall pay additional rent determined as
follows:

     (a)  For the purposes of this provision, the term "Basic Cost" shall
mean any and all costs, expenses and disbursements of every kind and character
(subject to the limitations set forth below) (specifically excluding leasing
commissions, attorney's fees, costs and disbursements and other expenses
incurred in connection with leasing, renovating or improving space for tenants,
and costs incurred in lease disputes) which Landlord shall incur, pay or become
obligated to pay in connection with the ownership of any estate or interest in,
operation, maintenance, repair, replacement, and security of the Building,
determined in accordance with generally accepted accounting principles
consistently applied, including but not limited to the following:

          (i)    Wages and salaries (including management fees) of all employees
engaged in the operation, repair, replacement, maintenance, and security of the
Building, including taxes, insurance, and benefits relating thereto.

          (ii)   All supplies and materials used in the operation, maintenance,
repair, replacement, and security of the Building.

          (iii)  Annual cost of all capital improvements made to the Building
which although capital in nature can reasonably be expected to reduce the
normal operating costs of the Building, as well as all capital improvements
made in order to comply with any statutes, rules, regulations or directives
hereafter promulgated by a governmental authority relating to energy,
conservation, public safety or security, as amortized over the useful life of
such improvements by Landlord for federal income tax purposes.

          (iv)   Cost of all utilities.

          (v)    Cost of all maintenance and service agreements on equipment,
including alarm service, window cleaning and elevator maintenance.

          (vi)   Cost of casualty and liability insurance applicable to the
Building and Landlord's personal property used in connection therewith.

          (vii)  All taxes, assessments and governmental charges, whether
federal, state, county or municipal, and whether they be by taxing districts or
authorities presently taxing or by other, subsequently created or otherwise,
and any other taxes, assessments or other governmental charges attributable to
the Building or its operation, excluding, however, federal and state taxes on
income.

          (viii) Cost of repairs, replacements, and general maintenance of the
Building.

          (ix)   Cost of service or maintenance contract with independent
contractors for the operation, maintenance, repair, replacement, or security of
the Building.

If Landlord incurs any such costs and expenses that are applicable to both The
Atrium on Collins Phase I and Phase II, Landlord will apportion such costs and
expenses between Phase I and Phase II as the Landlord, in the exercise of its
reasonable judgment, deems appropriate.

There are specifically excluded from the definition of the term "Basic Cost"
expenses for capital improvements made to the Building, other than capital
improvements described in subparagraph (iii) above and except for items which,
though capital for accounting purposes, are properly considered maintenance and
repair items, such as painting of common areas, replacement of carpet in
elevator lobbies, and the like; expenses for repair, replacements and general
maintenance paid by proceeds of insurance or by Tenant or other third parties,
and alterations attributable solely to tenants of the Building other than
Tenant; interest, amortization or other payments on loans to Landlord, whether
secured or unsecured; depreciation of the Building; legal expenses; and income,
excess profits or franchise taxes or other such taxes imposed on or measured by
the income of the Landlord from the operation of the Building.

     (b)  Tenant shall during the term of this lease pay as additional rent an
amount (the "Excess") equal to (i) the total amount of Basic Costs for a
calendar year, divided by the rentable area of the Building, and multiplied by
the rentable area of the Premises minus (ii) the product of the "Basic Costs
Stop" (herein after defined) multiplied by the rentable area of the Premises.
Basic Cost Stop is herein defined to be the quotient of the Basic Cost
applicable to the Premises per calendar year 1998 divided by the number of
square feet of rentable area in the Premises. Landlord may collect such
additional rent in arrears on a calendar year basis. Beginning with January 1,
1999, and on each January 1 thereafter, Landlord shall also have the option to
make a good faith estimate of the Excess for each upcoming calendar year and
upon thirty (30) days' written notice to Tenant may require the monthly payment
of such additional rent equal to 1/12 of such estimate. Any amounts paid based
on such an estimate shall be subject to adjustment pursuant to subparagraph (c)
when actual Basic Cost is available for each calendar year. For the purposes of
calculating the additional rental payable hereunder with respect to any
fractional calendar year during the term of this lease, Landlord may either (i)
estimate Basic Cost for the portion of the lease term during such partial year,
or (ii) estimate Basic Cost for the entire calendar year and reduce the same to
an amount bearing the same proportion to the full amount of estimated Basic
Cost for such year as the number of days in such fractional calendar year bears
to the total number of days in such full calendar year.

     (c)  By April 1 of each calendar year during Tenant's occupancy, or as
soon thereafter as practical, Landlord shall furnish to Tenant a statement of
Landlord's actual Basic Cost for the previous year adjusted as provided in
subparagraph (d). If for any calendar year additional rent collected for the
prior year as a result of Landlord's estimate of Basic Cost is in excess of the
additional rent actually due during such prior year, then Landlord shall refund
to Tenant any overpayment. Likewise, Tenant shall pay to Landlord, on demand,
any underpayment with respect to the prior year.

     (d)  With respect to any calendar year or partial calendar year during the
term of this lease in which the Building is not occupied to the extent of
ninety-five percent (95%) of the rentable area thereof, the Basic Cost for such
period shall, for the purposes hereof, be increased to the amount which would
have been incurred had the Building been occupied to the extent of ninety-five
percent (95%) of the rentable area thereof.

     (e)  If any amounts which become due by reason hereof are not paid by the
5th day following the day on which they are due, a service charge of 2% of such
rental escalation amount shall become due and payable in addition to such
rental escalation. Such service charge is for the purpose of reimbursing
Landlord for the extra costs and expenses incurred in connection with the
handling and processing of late rental escalation payments.


<PAGE>

                                  EXHIBIT "C"
                             WORK LETTER AGREEMENT

Telecom Technologies, Inc.
2425 N. Central Expressway
Suite 910
Richardson, Texas 75080

Re:  Suite 3000, 1701 N. Collins, The Atrium on Collins Phase II, Richardson,
     Texas, Specifically divided into two portions, the First Portion and the
     Second Portion

Ladies and Gentlemen:

     You (herein after referred to as "Tenant") and we (herein after referred
to as "Landlord") are executing, simultaneously with this "Work Letter
Agreement" (herein so called), a written lease (the "Lease") covering the
space referred to above (hereinafter called the "Premises").

     To induce Tenant to enter into such Lease (which is hereby incorporated by
reference) and in consideration of the mutual covenants hereinafter contained,
Landlord and Tenant mutually agree as follows:

     1.   Final Plans. Landlord agrees to provide, by Landlord's designated
space planner, architect and/or engineer, the following Building Standard
(hereinafter defined) space plans and architectural and mechanical drawings and
specifications (hereinafter collectively referred to as the "Final Plans"),
to be drawn for the First Portion and the Second Portion of the Premises on
Tenant's behalf:

          (a)  Complete Building Standard "Space Plans" (herein so called)
for the layout of the Premises;

          (b)  Complete, finished and detailed 1/8 inch scale architectural
drawings and specifications for Tenant's partition layout, reflected ceiling,
telephone and electrical outlets, and finish schedule for the work to be done
by Landlord under Paragraph 3 hereof (the "Construction Plans"); and

          (c)  Complete Building Standard mechanical plans and specifications
where necessary for installation of normal air conditioning system and duct
work and heating and electrical facilities for the work to be done by Landlord
under Paragraph 3 hereof (the "MP & E Plans").

     Tenant shall pay all costs of preparing the Final Plans, subject, however,
to the reimbursement provisions of Paragraph 7 below.

     2.   Preparation of Final Plans: Changes to Final Plans. Tenant covenants
and agrees to furnish to Landlord all information necessary for the preparation
of each of the Space Plans, the Construction Plans and the M P & E Plans on or
before January 31, 1997. Landlord will cause the Space Plans, the Construction
Plans, and the M P & E Plans to be prepared from such information and will
submit such plans to Tenant. Within ten (10) days after receipt thereof, Tenant
shall approve the Space Plans, Construction Plans and M P & E Plans or indicate
what changes, if any, that it desires to make. Such proposed changes, if any,
shall be submitted to Landlord in writing for Landlord's written approval. If
within ten (10) days after receipt thereof, Tenant fails to approve any of the
Space Plans, Construction Plans and M P & E Plans or if Tenant fails to propose
in writing any changes to be made to such Space Plans, Construction Plans and M
P & E Plans, then Tenant shall be deemed to have approved each of same. Any
redrawing of all or any of the Final Plans occasioned by Tenant after Tenant's
approval (or deemed approval) thereof as well as any changes requested by
Tenant in connection with its initial review of the Final Plans which are
agreed to by Landlord shall be at Tenant's sole cost and expense and no portion
of the Credit (as defined in Paragraph 7 below) shall be applicable to such
costs.

     3.   Construction of Improvements. Subject to each of Paragraph 2 and
Paragraph 28 of the Lease, provided that Tenant has not committed an event of
default pursuant to Paragraph 20 of the Lease, Landlord agrees to cause the
improvements to the Premises to be constructed pursuant to and in substantial
accordance with the Final Plans. The construction of such improvements in the
Premises shall be at Tenant's sole cost and expense, subject, however, to the
reimbursement provisions of Paragraph 7 below. Tenant acknowledges that
commencement of construction of the work in the First Portion of the Premises
will take place before commencement of construction of the work in the Second
Portion of the Premises and the timing of such construction will be structured
to achieve delivery of space in accordance with Paragraph 2 of the Lease.
Tenant acknowledges that all work done in the Premises pursuant to this Work
Letter Agreement shall be performed by a contractor (and such subcontractors,
suppliers and laborers) designated by Landlord and approved by Tenant.

     4.   Condition of Premises. Landlord will, at Landlord's sole cost and
expense, construct all improvements to the Premises necessary to characterize
the Premises as being in Shell Condition (hereinafter defined). As used herein
the term "Shell Condition" means:

          (a)  The sprinkler system and sprinkler heads have been installed.

          (b)  The main ducting for the HVAC system has been installed.

          (c)  Electric lines have been run to junction boxes in the Premises.

          (d)  Semi-finished ceiling.

          (e)  Smooth concrete floor slab.


<PAGE>

     5.   Modifications to Shell Condition. To the extent that the Final Plans
call for any modifications (herein "Shell Modifications") to the Shell
Condition, the costs of such Shell Modifications shall be borne solely by
Tenant, subject, however, to the reimbursement provisions of Paragraph 7 below.
By way of example, and not by way of limitation, the following shall each be
examples of Shell Modifications:

          (a)  Any modifications to the existing sprinkler system, or the
moving of existing sprinkler heads, or the installation of additional sprinkler
heads.

          (b)  Any modifications to the existing HVAC system, the moving of the
existing duct work and/or diffusers, or the installation of additional duct
work and/or diffusers.

          (c)  Any rewiring of existing junction boxes, relocation of existing
junction boxes, or installation of additional junction boxes.

     6.   Building Standard. Tenant shall be required to use, and the Final
Plans shall specify Building Standard (a) light fixtures, (b) doors, (c)
ceiling tiles, and (d) hardware throughout the Premises and the costs of
purchasing, transporting and installing each of the foregoing Building Standard
items shall be borne solely by Tenant, subject, however, to the reimbursement
provisions of Paragraph 7 below. Whenever the term "Building Standard" is
used in this Work Letter Agreement, it shall mean the exclusive type, brand,
quality, and/or quantity of materials Landlord designates from time to time to
be the quality or quantity to be used in the Building.

     7.   Payment of Costs: Credit. Tenant agrees to pay Landlord, promptly
upon being billed therefor, the actual cost (labor, materials, architectural,
space planning, engineering and other costs) of all work performed pursuant to
this Work Letter Agreement plus a fee of four percent (4%) of such cost for
Landlord's review, supervision and management of such work; Landlord shall have
the right to submit interim statements of cost incurred which shall be promptly
paid by Tenant to Landlord. Tenant agrees that all payments due to Landlord
pursuant hereto shall constitute payments of additional rent and that in the
event of default of payment thereof, Landlord shall (in addition to all other
remedies) have the same rights as in the event of default of payment of rent
under the Lease. Notwithstanding the above, so long as no event of default, as
defined in Paragraph 20 of the Lease, shall have occurred, Landlord shall
credit Tenant in an amount not to exceed $18.50 per square foot of Rentable
Area in the Premises (the "Credit"), such Credit to be applied only against
sums due from Tenant to Landlord pursuant to this Work Letter Agreement
(exclusive of those sums which, pursuant to Paragraph 2 above are not eligible
to be offset by the Credit).

     8.   Delays. It is agreed that, notwithstanding the provisions of
Paragraph 2 of the Lease, waiving Tenant's obligation for the payment of rental
under Paragraph 1(f) of the Lease until the date on which Landlord can deliver
possession of the Premises, if Landlord shall be delayed in substantially
completing the work to be performed by Landlord pursuant to this Work Letter
Agreement as a result of:


<PAGE>

          (a)  Tenant's failure to timely furnish information or specifications
in accordance with Paragraph 2 above; or

          (b)  Tenant's request for materials, finishes or installations other
than Landlord's Building Standard; or

          (c)  Tenant's changes in or modifications to any plans and
specifications or any of the Final Plans; or

          (d)  The performance of any work in the Premises by a person, firm or
corporation employed by Tenant; (all such persons, firms or corporations being
subject to the approval of Landlord);

Tenant's obligation for payment of rental under the Lease (as affected by such
waiver) shall be accelerated by the number of days of such delay.

     9.   Entry by Tenant's Agents. Landlord will permit Tenant and its agents
to enter the Premises prior to the date specified for the commencement of
Tenant's occupancy under the Lease, in order that Tenant may perform through
its own contractors (to be first approved by Landlord) such other work and
decorations as Landlord may approve at the same time that Landlord's
contractors are working in the Premises. The foregoing license to enter prior
to the commencement of the lease term, however, is conditioned upon Tenant's
workmen and mechanics working in harmony and not interfering with the labor
employed by Landlord, Landlord's mechanics or contractors or by any other
tenant or their contractors. Such license is further conditioned upon workers'
compensation and public liability insurance for bodily injury and property
damage, all in amounts and with companies and on forms satisfactory to
Landlord, being provided and at all times maintained by Tenant's contractors
engaged in the performance of the work, and certificates of such insurance
being furnished to Landlord prior to proceeding with the work. If at any time
such entry shall cause disharmony or interference therewith, this license may
be withdrawn by Landlord upon forty-eight (48) hours written notice to Tenant.
Such entry conditions shall be deemed to be under all of the terms, covenants,
provisions and conditions of the Lease except as to the covenant to pay rent.
Landlord shall not be liable in any way for any injury, loss or damage which
may occur to any of Tenant's decorations or installations so made prior to
commencement of the lease term, the same being solely at Tenant's risk, and
Tenant shall hold Landlord harmless from any claim, demand or action arising
from activities of Tenant's contractors, workmen or mechanics.

     If the foregoing correctly sets forth our understanding, kindly
acknowledge your approval in the space provided below whereupon this work
letter shall become a binding agreement between us.

                                  Yours very truly,

                                  COLLINS CAMPBELL JOINT VENTURE
                                    a Texas general partnership

                                  By: Jaytex Properties, Ltd.,
                                        a Texas limited partnership

                                      By: JRS Management, Inc.,
                                            a Texas corporation

                                          By: /s/ W. T. Field
                                             ------------------------------
                                               W. T. Field, President

AGREED TO AND ACCEPTED
as of the 4th day of April, 1997.

TELECOM TECHNOLOGIES, INC.,
a Texas corporation

By: /s/ ANOUSHEH ANSARI
   -----------------------

Name: ANOUSHEH ANSARI
      --------------------

Title: PRESIDENT
       -------------------


<PAGE>

                                  EXHIBIT "D"

                         BUILDING RULES AND REGULATIONS

1.   Landlord agrees to furnish Tenant two keys to Tenant door at no charge and
two keys to entry doors requiring a $10.00 refundable deposit. Additional keys
will be furnished at a nominal charge.

2.   Tenant will refer all contractors, contractor's representatives and
installation technicians, rendering any service on or to the Premises for
Tenant, to Landlord for Landlord's approval and supervision before performance
of any contractual service. This provision shall apply to all work performed in
the Building including installation of telephones, telegraph equipment,
electrical devices and attachments and installations of any nature affecting
floors, walls, woodwork, trim, windows, celling, equipment or any other
physical portion of the Building.

3.   No Tenant shall at any time occupy any part of the Project as sleeping or
lodging quarters.

4.   Tenant shall not place, install or operate on Premises or in any part of
the Project, any engine, stove or machinery or conduct mechanical operations or
cook thereon or therein, or place or use in or about Premises any explosives,
gasoline, kerosene, oil, acids, caustics, or any other inflammable, explosive,
or hazardous material without prior written consent of Landlord.

5.   Landlord will not be responsible for lost or stolen personal property,
equipment, money or jewelry from Tenant's area or public rooms regardless of
whether such loss occurs when area is locked against entry or not.

6.   No birds, fowl, dogs, animals or pets of any kind shall be brought into or
kept in or about the Project.

7.   Landlord will not permit entrance to Tenant's offices by use of pass key
controlled by Landlord, to any person at any time without permission by Tenant,
except employees, contractors, or service directly supervised or employed by
Landlord.

8.   None of the entries, passages, doors, elevators, hallways or stairways
shall be blocked or obstructed, or any rubbish, litter, trash, or material of
any nature placed, emptied or thrown into these areas, or shall such areas be
used at any time except for ingress or egress by Tenant, Tenant's agents,
employees or invitees.

9.   The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed. No person shall waste
water by interfering with the faucets or otherwise.

10.  No person shall disturb the occupants of the Building by the use of any
musical instruments, the making of raucous noises, or other unreasonable use.

11.  Nothing shall be thrown out of the windows of the Building, or down the
stairways or other passages.

12.  Tenant shall not store any materials, equipment, products, etc., outside
the Premises as shown on the plats attached hereto.

13.  Tenant shall not erect any sign or other insignia upon or in any part of
the Project or other portion of the Premises without the prior written consent
of the Landlord.

14.  Tenant shall comply with all local and federal codes and ordinances. In
the event of fire or code problems, Tenant shall comply with such requirements.

15.  Tenant and its agents, employees and invitees shall observe and comply
with the driving and parking signs and markers on the Project grounds and
surrounding areas.

16.  Corridor and passage doors when not in use shall be kept closed.

17.  Movement in or out of the Building of furniture, office equipment, or any
other bulky or heavy materials shall be controlled by the Landlord. Landlord
will determine the method of routing of such items so as to ensure the safety
of all concerned.


<PAGE>

18.  Directories will be placed by the Landlord, at Landlord's expense, in the
building and no other directories shall be permitted.

19.  No signs, draperies, shutters, window coverings, decorations, hangings or
obstructions of any type shall be placed on any skylights or on any doors or
windows which are visible from outside the leased premises without the prior
written consent of the Landlord.

20.  All locks for doors in each tenant's leased area shall be building
standard and no tenant shall place any additional lock or locks on any door in
its leased area without Building Management's written consent.

21.  Building Management shall have the authority to prescribe the weight and
manner that safes and other heavy equipment are positioned.

22.  Tenant space that is visible from public areas must be kept neat and clean.

23.  Standard climate control hours are 7 a.m. to 6 p.m., Monday through
Friday, and 8 a.m. to 12 noon on Saturday. Landlord shall adjust thermostats to
maintain building standard temperature. Tenant shall not attempt to adjust
temperature control thermostats. Window blinds should remain down and lifted at
a 45-degree angle toward the street to maintain temperatures and conserve
energy.

24.  Tenant will comply with all requirements necessary for the security of the
Premises both during business hours and after hours and on weekends.

25.  Tenants are to lock all office doors leading to corridors and to turn out
all lights at the close of their working day.

26.  The work of the janitor or cleaning personnel shall not be hindered by
Tenant after 6:30 p.m. The windows, doors and fixtures may be cleaned at any
time. Tenant shall provide adequate waste and rubbish receptacles, cabinets,
bookcases, map cases, etc., necessary to prevent unreasonable hardship to
Landlord in discharging its obligation regarding cleaning service.

27.  Employees of Landlord shall not receive or carry messages for or to any
tenant or other person nor contact with or render free or paid services to any
tenant or tenant's agent, employees or invitees.

28.  Landlord desires to maintain standards of environment, comfort and
convenience for its tenants. It will be appreciated if any undesirable
conditions or lack of courtesy or attention by its employees are reported
directly to Landlord.

29.  All tenant modifications resulting from remodeling in or to the leased
Premises must conform to the City of Richardson Building and Fire Codes and
approved by Property Management in writing prior to performance of the work.

30.  The Landlord reserves the right to rescind any of these rules and make
such other and further rules and regulations as in the judgment of Landlord
shall from time to time be needed for the safety, protection, care and
cleanliness of the Project, the operation thereof, the preservation of good
order therein, and the protection and comfort of its tenants, their agents,
employees and invitees, including but not limited to rules and regulations
regarding hours of access to the Project, which rules when made and notice
thereof given to a tenant shall be binding upon him in like manner as if
originally prescribed. In the event of any conflict, inconsistency, or other
difference between the terms and provisions of these rules and regulations and
any lease now or hereafter in effect between Landlord and any tenant in the
Building, Landlord shall have the right to rely on the term or provision in
either such lease or such Rules and Regulations which is most restrictive on
such tenant and most favorable to Landlord.


<PAGE>

                                  EXHIBIT "E"
                              DESCRIPTION OF LAND

STATE OF TEXAS
COUNTY OF DALLAS
CITY OF RICHARDSON

WHEREAS, Collins Campbell Joint Venture, a Texas Joint Venture, is the owner of
a tract of land situated in the WILLIAM HUGHES SURVEY, Abstract No. 573 in
Dallas County, Texas and all of COLLINS ATRIUM ADDITION, on addition to the
City of Richardson as recorded in Volume 85032, Page 3368 of the Deed Records
of Dallas County, Texas (DRDCT) and being more particularly described as
follows:

COMMENCING at the Intersection of the southerly right-of-way MUNICIPAL DRIVE
(80 foot right-of-way) and the westerly right-of-way of NORTH COLLINS BOULEVARD
(100 foot right-of-way);

THENCE departing the southerly right-of-way of said MUNICIPAL DRIVE and along
the westerly right-of-way of NORTH COLLINS BOULEVARD South 00'06'07'' West, a
distance of 450.00 feet to a 1/2 inch iron rod found for the POINT OF
BEGINNING, said point being the most southeasterly corner of Lot 1, Block 1,
COLLINS PLAZA recorded in Volume 83215, Page 2473 (DRDCT);

THENCE continuing along the westerly right-of-way of said NORTH COLLINS
BOULEVARD South 00'06'07'' West, a distance of 387.48 feet to a 1/2 Inch Iron
rod set for corner, said point being the most northeasterly corner of the
UNIVERSITY PLACE TWO recorded in Volume 84114, Page 2132 (DRDCT);

THENCE departing the westerly right-of-way of said NORTH COLLINS BOULEVARD and
along the northerly line of said UNIVERSITY PLACE TWO as follows:

     North 89'53'53'' West, a distance of 503.31 feet to a 1/2 inch iron rod
     found for corner;

     South 51'59'00'' West, a distance of 17.53 feet to a 1/2 inch Iron rod set
     for corner. in the northeasterly right-of-way of the G.C. & S.F. RAILROAD
     (150 foot right-of-way);

THENCE departing the northerly line of said UNIVERSITY PLACE TWO and along the
northeasterly right-of-way of said RAILROAD North 38'01'00'' West, a distance
of 221.82 feet to a 1/2 inch Iron rod. set for corner, said point being the
most southwesterly corner of the RICHARDSON MEDICAL PARK recorded in Volume
79020, Page 5 (DRDCT);

THENCE departing the northeasterly right-of-way of said RAILROAD and along the
southerly line of said RICHARDSON MEDICAL PARK North 51'54'32'' East, a
distance of 408.39 feet to a 1/2 inch Iron rod found for corner, said point
being found in the westerly line of said Lot 1, Block 1, COLLINS PLAZA;

THENCE departing the southerly line of said RICHARDSON MEDICAL PARK and along
the westerly line of said Lot 1, Block 1 South 28'26'50'' East, a distance of
32.70 feet to a 1/2 inch Iron rod set for corner, said point being the most
southwesterly corner of said Lot 1, Block 1;

THENCE departing the westerly line of said Lot 1, Block 1 and along the
southerly line of said Lot 1, Block 1 South 89'53'53'' East, a distance of
317.43 feet to the POINT OF BEGINNING;

CONTAINING within these mates and bounds 4.866 acres or 211,952 square feet of
land, more or less.


<PAGE>

                                 RIDER NO. 101
                                 -------------
                                OPTION TO EXTEND
                                ----------------

Tenant at its option may extend the term of this lease for up to one (1)
extension term(s) of five (5) years (each) by serving written notice thereof
upon Landlord at least six (6) months before the expiration of the initial
lease term (or the prior extension term), provided that at the time of such
notice and at the commencement of such extended term, no event of default, as
defined in Paragraph 20 of this lease, shall have occurred. Upon the service of
such notice and subject to the conditions set forth in the preceding sentence,
this lease shall be extended without the necessity of the execution of any
further Instrument or document. Such extended term shall commence upon the
expiration date of the initial lease term (or the prior extension term), expire
upon the annual anniversary of such date five (5) years thereafter, and be upon
the same terms, covenants, and conditions as provided in this lease for the
initial term, except that the basic rental payable during each extended term
shall be at the prevailing rate (the "Market Rate") for comparable space in the
Building and office/buildings comparable to the Building located in Richardson,
Dallas County, Texas, taking into consideration factors including, but not
limited to, the quality of construction and finish of the Building, the ease of
accessibility to the Building and the visibility of the Building from major
thoroughfares, and the availability of free parking associated with the
Building, at the commencement of each such extended term, which new basic
rental shall be adjusted as provided in and under this lease. Payment of all
additional rent and other charges required to be made by Tenant as provided in
this lease for the initial term shall continue to be made during each such
extended term. Any termination of this lease during the initial term (or the
prior extension term) shall terminate all rights of extension hereunder. Any
assignment or subletting by Tenant pursuant to Paragraph 11 of this lease,
except an assignment or subletting to a Fortune 1000 company specifically
described under Paragraph 11, shall terminate the option(s) of Tenant contained
herein, except for a permitted transfer described in Paragraph 11.
Notwithstanding the foregoing, in no event shall the monthly rental installment
for any extension term be less than the monthly rental installment during the
last year of the initial term (or the prior extension term).


<PAGE>

                                 RIDER NO. 201

                             RIGHT OF FIRST REFUSAL

Provided this lease is then in full force and effect and no event of default,
as defined in Paragraph 20 of this lease, shall have occurred, Tenant shall
have the right of first refusal as hereinafter described to lease all (or any
applicable part) of the space (the "Right of First Refusal Space") containing
approximately 18,880 square feet of rentable area which is labelled on Exhibit
"A" to this lease as the "Growth Area"; subject to the rights of the
existing tenant, Thompson Realty Investment Corporation, on 9,847 square feet
of rentable area comprising the northern portion of the Growth Area, at such
time as Landlord engages in negotiations with a prospective tenant, exercisable
at the following times and upon the following conditions:

     1.   If Landlord enters into negotiations with a prospective tenant to
          lease all or any part of the Right of First Refusal Space, Landlord
          shall notify Tenant of such fact and shall include in such notice the
          rent, term, and other terms (including finish out) at which Landlord
          is prepared to offer such Right of First Refusal Space to such
          prospective tenant.  Tenant shall have a period of five (5) days from
          the date of delivery of the notice to notify Landlord whether Tenant
          elects to exercise the right granted hereby to lease the entire
          Right of First Refusal Space. If Tenant fails to give any notice to
          Landlord within the required five (5) day period, Tenant shall be
          deemed to have waived its right to lease the Right of First Refusal
          Space.

     2.   If Tenant so waives its right to lease the Right of First Refusal
          Space (either by giving written notice thereof or by failing to give
          any notice), Landlord shall have the right thereafter to lease all or
          the applicable portion of the Right of First Refusal Space to the
          prospective tenant and upon the execution of such lease between
          Landlord and the prospective Tenant this Right of First Refusal shall
          thereafter be null, void and of no further force or effect.

     3.   If Landlord does not enter into a lease with such prospective tenant
          covering all or the applicable portion of the Right of First Refusal
          Space, Landlord shall not thereafter engage in other lease
          negotiations with respect to the Right of First Refusal Space without
          first complying with the provisions of this Rider No. 201.

     4.   Upon the exercise by Tenant of its right of first refusal as provided
          in this Rider No. 201, Landlord and Tenant shall, within ten (10)
          days after Tenant delivers to Landlord notice of its election, enter
          into a lease covering the Right of First Refusal Space for the rent,
          for the term, and containing such other terms and conditions as
          Landlord notified Tenant pursuant to paragraph 1 above.

     5.   Any assignment or subletting by Tenant pursuant to Paragraph 11 of
          this lease, except for an assignment of subletting specifically
          permitted under Paragraph 11 without Landlord's consent, shall
          terminate the right of first refusal of Tenant contained herein.
          Notwithstanding anything to the contrary contained in this Rider No.
          201, upon the second anniversary of the Commencement Date of this
          lease, the right of first refusal of Tenant contained herein shall
          terminate and be of no further force or effect.


<PAGE>

[Diagram of Preliminary Signage]


<PAGE>

[Diagram of Sign]


<PAGE>

[Blueprint of East Elevation with signage detail]


<PAGE>


                                                                   Exhibit 10.14


                   FIRST AMENDMENT TO OFFICE LEASE AGREEMENT

STATE OF TEXAS
COUNTY OF DALLAS

     THIS FIRST AMENDMENT TO OFFICE LEASE AGREEMENT (this "First Amendment")
is made and entered into effective as of November 1, 1997, by and between
Collins Campbell Joint Venture ("Landlord") and telecom technologies, inc.
("Tenant").

                                R E C I T A L S

     WHEREAS, Landlord and Tenant entered into that certain Office Lease
Agreement dated as of April 4, 1997 (the "Lease") concerning certain Premises
defined therein and commonly known as Suite 3000 at 1701 North Collins Blvd.,
Richardson, Dallas County, Texas, which Lease is incorporated herein by
reference; and

     WHEREAS, Landlord and Tenant desire to amend the Lease to increase the
size of the First Portion of the Premises and to decrease the size of the
Second Portion of the Premises and to increase the Basic Rental.

     NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the mutual agreements set forth in the Lease, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant have agreed, and do hereby agree, as follows:

     1.   All terms capitalized herein and not specifically defined shall have
the same meaning
 herein as is ascribed to them in the Lease.

     2.   In Section 1. (c), "Premises", the rentable area in the leased
Premises is increased to 20,227 square feet of rentable area. The First Portion
of the Premises is increased in size to 14,277 square feet of rentable area
(highlighted in yellow on Exhibit A) and the Second Portion of the Premises is
decreased in size to 5,950 square feet of rentable area (highlighted in blue on
Exhibit A) described on Exhibit A attached hereto and incorporated herein for
all purposes. The total rentable area of the building is now stipulated for all
purposes herein to be 56,991 square feet of rentable area.


<PAGE>

     3.   In Section 1.(d), "Lease Term", is changed to sixty (60) months,
commencing on November 1, 1997 (the "Commencement Date") and ending on
October 31, 2002.

     4.   In Section 1.(e), "Basic Rental", is increased to $2,026,933.47.

     5.   In Section 1.(f), "Monthly Rental Installment", is changed to:

          Monthly from November 1, 1997 through March 31, 1998 - $23,497.56;
          then
          Monthly from April 1, 1998 through October 31, 1998 - $33,290.27;
          then
          Monthly from November 1, 1998 through October 31, 2002 - $34,925.29;
          then

     6.   In Section 3, "Rent", Paragraph 2 is changed to read as follows:

          14.818 months of basic rental, to be applied to the first fifteen
          monthly basic rental installments accruing hereunder, totaling
          $448,927.50 ("Prepaid Rent"), together with the security deposit (as
          defined in


<PAGE>

          Paragraph 1(g) hereof), shall be payable by Tenant to Landlord in
          two lump sum payments. $241,880.42 will be due contemporaneously with
          the execution hereof.  $224,463.75 will be due upon the later of June
          1, 1997, or commencement of construction by Landlord of the work
          described in the Work Letter Agreement.  Landlord will deposit the
          Prepaid Rent and Security Deposit in an escrow account with State
          Bank & Trust to be held until occupancy of the First Portion of the
          Premises by Tenant, at which time the Prepaid Rent and Security
          Deposit will become the property of Landlord remaining in the escrow
          account, which escrow account shall be debited monthly as basic
          rental accrues. On the first day of the fifteenth month following the
          date on which basic rent begins to accrue under this lease, Tenant
          shall pay $6,368.07. On the first day of the sixteenth month
          following the date on which basic rental begins to accrue under this
          lease, Tenant shall begin paying the scheduled monthly rental
          installment of $34,925.29 without demand and shall continue paying
          such monthly rental installments on or before the first day of each
          succeeding calendar month during the term hereof.

     7.   Exhibit C, "Work Letter Agreement", Section 7, "Payment of Costs;
Credit", line 7, the number $18.50 is increased to $23.75.

     8.   Except as herein provided to the contrary, Tenant's lease of the
          premises from Landlord pursuant hereto shall be on the same terms and
          conditions as those specified in the Lease.

     9.   The Lease (as amended by this First Amendment) remains in full force
and effect and is hereby ratified and affirmed.

     IN WITNESS WHEREOF, this First Amendment is hereby executed effective as
of the day and year first set forth above.

                                   LANDLORD:

                                   COLLINS CAMPBELL JOINT VENTURE,
                                     a Texas general partnership

                                   By: Jaytex Properties, Ltd.,
                                         a Texas limited partnership

                                       By: JRS Management, Inc.

                                            /s/ W. T. Field
                                           ---------------------------
                                            W. T. Field, President


<PAGE>

                                    TENANT:

                                    telecom technologies, inc.,
                                     a Texas corporation

                                    By: /s/ Anousheh Ansari
                                        ------------------------------
                                        Anousheh Ansari, President


<PAGE>

[Floor Plan Third Floor]


<PAGE>


                                                                   Exhibit 10.15


                   SECOND AMENDMENT TO OFFICE LEASE AGREEMENT

     THIS SECOND AMENDMENT TO OFFICE LEASE AGREEMENT (this "Second
Amendment") is made and entered into effective as of July 1, 1998, by and
between Collins Campbell Joint Venture, ("Landlord") and telecom
technologies, inc.  ("Tenant").

                               R E C I T A L S
                               ---------------

     WHEREAS, Landlord and Tenant entered into that certain Office Lease
Agreement dated as of April 4, 1997 and amended as of November 1, 1997 (the
"Lease"), with respect to certain Premises defined therein and commonly known
as Suite 3000 at 1701 North Collins Blvd., Richardson, Dallas County, Texas,
which Lease is incorporated herein by reference; and

     WHEREAS, Landlord and Tenant desire to further amend the Lease to 
increase the size of the Premises and increase the Basic Rental;

     NOW, THEREFORE, in consideration of the mutual agreements herein set 
forth, the mutual agreements set forth in the Lease, and other good and 
valuable consideration, the receipt and sufficiency of which are hereby 
acknowledged, Landlord and Tenant have agreed, and do hereby agree, as 
follows:

     1.  All terms used herein and not specifically defined shall have the same
         meaning herein as is ascribed to them in the Lease.

     2.  The Premises are hereby increased to
 31,944 square feet of rentable
         area by adding 11,717 square feet of rentable area on the second
         floor, the "Expansion Space" described on Exhibit "A", which is
         attached hereto and incorporated herein for all purposes.

     3.  Basic Rental is increased to $3,061,979.54.

     4.  The monthly rental installment" is increased as set forth below:

         Monthly from July 1, 1998 through October 31, 1998-$44,286.10; then
         Monthly from November 1, 1998 through October 31, 2002-$54,746.55.

     5.  Landlord agrees to install, in accordance with the Work Letter
         Agreement attached hereto as Exhibit "C", the improvements described
         in Exhibit "C". Landlord has made no representations as to the
         condition of the Premises or the Building, or Landlord's undertaking
         to remodel, repair or decorate, except as expressly set forth herein
         and in Exhibit "C".


<PAGE>

     6.  Except as herein provided to the contrary, Tenant's lease of the
         Premises from Landlord pursuant hereto shall be on the same terms and
         conditions as those specified in the Lease.

     7.  The Lease (as amended by this First Amendment) remains in full force
         and effect and is hereby ratified and affirmed.

     8.  All other terms and conditions of the Lease shall remain unchanged and
         in full force and effect.

     9.  Special Provisions: Exhibits "A" and "C". Exhibit "B" was
         intentionally omitted.

     IN WITNESS WHEREOF, this Second Amendment is hereby executed effective as
of the day and year first set forth above.


<PAGE>

Second Amendment to Office Lease Agreement
Page 2 of 2

                                    LANDLORD:

                                    COLLINS CAMPBELL JOINT VENTURE
                                     a Texas general partnership

                                    By: Jaytex Properties, Ltd.,
                                         a Texas limited partnership

                                        By: JRS Management, Inc.

                                            By: /s/ W. T. Field
                                                ---------------------------
                                                W. T. Field, President

                                    TENANT:
                                    telecom technologies, inc.,
                                      a Texas corporation

                                    By: /s/ Anousheh Ansari
                                        -----------------------------------
                                        Anousheh Ansari, President


<PAGE>

                                   Exhibit A

[Diagram of 2nd Level Floor Plan]


<PAGE>

                                  EXHIBIT "C"

                             WORK LETTER AGREEMENT

telecom technologies, inc.
1701 North Collins Blvd.
Suite 3000
Richardson, Texas 75080

Re:  Suite 2000, 1701 North Collins Blvd., The Atrium on Collins Phase II,
     Richardson, Texas.

Dear Anousheh:

     You (hereinafter referred to as "Tenant") and we (hereinafter referred to
as "Landlord") are executing, simultaneously with this "Work Letter Agreement"
(herein so called), a written Second Amendment to Office Lease Agreement (the
"Second Amendment") covering the space referred to above (herein after called
the "Expansion Space").

     To induce Tenant to enter into such Second Amendment (which is hereby
incorporated by reference) and in consideration of the mutual covenants
hereinafter contained, Landlord and Tenant mutually agree as follows:

     1.   Final Plans. Landlord agrees to provide, by Landlord's designated
space planner, architect and/or engineer, the following Building Standard
(hereinafter defined) space plans and architectural and mechanical drawings and
specifications (hereinafter collectively referred to as the "Final Plans"),
to be drawn for the Expansion Space on Tenant's behalf:

          (a)  Complete Building Standard "Space Plans" (herein so called)
for the layout of the Expansion Space;

          (b)  Complete, finished and detailed 1/8 inch scale architectural
drawings and specifications for Tenant's partition layout, reflected ceiling,
telephone and electrical outlets, and finish schedule for the work to be done
by Landlord under Paragraph 3 hereof (the "Construction Plans"); and

          (c)  Complete Building Standard mechanical plans and specifications
where necessary for installation of normal air conditioning system and duct
work and heating and electrical facilities for the work to be done by Landlord
under Paragraph 3 hereof (the "MP & E Plans").

     Tenant shall pay all costs of preparing the Final Plans, subject, however,
to the reimbursement provisions of Paragraph 7 below.

     2.   Preparation of Final Plans; Changes to Final Plans. Tenant covenants
and agrees to furnish to Landlord all information necessary for the preparation
of each of the Space Plans, the Construction Plans and the M P & E Plans on or
before May 5, 1998. Landlord will cause the Space Plans, the Construction
Plans, and the M P & E Plans to be prepared from such information and will
submit such plans to Tenant. Within ten (10) days after receipt thereof, Tenant
shall approve the Space Plans, Construction Plans and M P & E Plans or indicate
what changes, if any, that it desires to make. Such proposed changes, if any,
shall be submitted to Landlord in writing for Landlord's written approval. If
within ten (10) days after receipt thereof, Tenant fails to approve any of the
Space Plans, Construction Plans and M P & E Plans or if Tenant fails to propose
in writing any changes to be made to such Space Plans, Construction Plans and M
P & E Plans, then Tenant shall be deemed to have approved each of same. Any
redrawing of all or any of the Final Plans occasioned by Tenant after Tenant's
approval (or deemed approval) thereof as well as any changes requested by
Tenant in connection with its initial review of the Final Plans which are
agreed to by Landlord shall be at Tenant's sole cost and expense and no portion
of the Credit (as defined in Paragraph 7 below) shall be applicable to such
costs.

     3.   Construction of Improvements. Subject to each of Paragraph 2 and
Paragraph 28 of the Lease, provided that Tenant has not committed an event of
default pursuant to Paragraph 20 of the Lease, Landlord agrees to cause the
improvements to the Expansion Space to be constructed pursuant to and in
substantial accordance with the Final Plans. The construction of such
improvements in the Expansion Space shall be at Tenant's sole cost and expense,
subject, however, to the reimbursement provisions of Paragraph 7 below. Tenant
acknowledges that all work done in the Expansion Space pursuant to this Work
Letter Agreement shall be performed by a contractor (and such subcontractors,
suppliers and laborers) designated by Landlord and approved by Tenant.


<PAGE>

     4.   Condition of Expansion Space. Landlord will, at Landlord's sole cost
and expense, construct all improvements to the Expansion Space necessary to
characterize the Expansion Space as being in Shell Condition (hereinafter
defined). As used herein the term "Shell Condition" means:

          (a)  The sprinkler system and sprinkler heads have been installed.

          (b)  The main ducting for the HVAC system has been installed.

          (c)  Electric lines have been run to junction boxes in the Expansion
               Space.

          (d)  The ceiling grid has been installed. Building standard ceiling
               tile and lights stacked on the floor.

          (e)  Smooth concrete floor slab.

     5.   Modifications to Shall Condition. To the extent that the Final Plans
call for any modifications (herein "Shell Modifications") to the Shell
Condition, the costs of such Shell Modifications shall be borne solely by
Tenant, subject, however, to the reimbursement provisions of Paragraph 7 below.
By way of example, and not by way of limitation, the following shall each be
examples of Shell Modifications:

          (a)  Any modifications to the existing sprinkler system, or the
moving of existing sprinkler heads, or the installation of additional sprinkler
heads.

          (b)  Any modifications to the existing HVAC system, the moving of
the existing ductwork and/or diffusers, or the installation of additional
ductwork and/or diffusers.




          (c)  Any rewiring of existing junction boxes, relocation of existing
junction boxes, or installation of additional junction boxes.

     6.   Building Standard. Tenant shall be required to use, and the Final
Plans shall specify Building Standard (a) light fixtures, (b) doors, (c)
ceiling tiles, and (d) hardware throughout the Expansion Space and the costs of
purchasing, transporting and installing each of the foregoing Building Standard
items shall be borne solely by Tenant, subject, however, to the reimbursement
provisions of Paragraph 7 below. Whenever the term "Building Standard" is
used in this Work Letter Agreement, it shall mean the exclusive type, brand,
quality, and/or quantity of materials Landlord designates from time to time to
be the quality or quantity to be used in the Building.

     7.   Payment of Costs: Credit. Tenant agrees to pay Landlord, promptly upon
being billed therefor, the actual cost (labor, materials, architectural, space
planning, engineering and other costs) of all work performed pursuant to this
Work Letter Agreement; Landlord shall have the right to submit interim
statements of cost incurred which shall be promptly paid by Tenant to Landlord.
Tenant agrees that all payments due to Landlord pursuant hereto shall
constitute payments of additional rent and that in the event of default of
payment thereof, Landlord shall (in addition to all other remedies) have the
same rights as in the event of default of payment of rent under the Lease.
Notwithstanding the above, so long as no event of default, as defined in
Paragraph 20 of the Lease, shall have occurred, Landlord shall credit Tenant
in an amount not to exceed $15.00 per square foot of Rentable Area in the
Expansion Space (the "Credit"), such Credit to be applied only against
sums due from Tenant to Landlord pursuant to this Work Letter Agreement
(exclusive of those sums which, pursuant to Paragraph 2 above are not eligible
to be offset by the Credit).

     8.   Delays. If Landlord shall be delayed in substantially completing the
work to be performed by Landlord pursuant to this Work Letter Agreement as a
result of:

          (a)  Tenant's failure to timely furnish information or specifications
in accordance with Paragraph 2 above; or

          (b)  Tenant's request for materials, finishes or installations other
than Landlord's Building Standard; or

          (c)  Tenant's changes in or modifications to any plans and
specifications or any of the Final Plans; or

          (d)  The performance of any work in the Expansion Space by a person,
firm or corporation employed by Tenant; (all such persons, firms or
corporations being subject to the approval of Landlord);

Tenant's obligation for payment of rental under the Second Amendment (as
affected by such waiver) shall be accelerated by the number of days of such
delay.

     9.   Entry by Tenant's Agents. Landlord will permit Tenant and its agents
to enter the Expansion Space prior to the date specified for the commencement
of Tenant's occupancy under the Second Amendment, in order that Tenant may
perform through its own contractors (to be first approved by Landlord) such
other work and decorations as Landlord may approve at the same time that
Landlord's contractors are working in the Expansion Space. The foregoing
license to enter, however, is conditioned upon Tenant's workmen and mechanics
working in harmony and not interfering with the labor employed by Landlord,
Landlord's mechanics or contractors or by any other tenant or their
contractors. Such license is further conditioned upon workers' compensation and
public liability insurance for bodily injury and property damage, all in
amounts and with companies and on forms satisfactory to Landlord, being
provided and at all times maintained by Tenant's contractors engaged in the
performance of the work, and certificates of such insurance being furnished to
Landlord prior to proceeding with the work. If at any time such entry shall
cause disharmony or interference therewith, Landlord may withdraw this license
upon forty-eight (48) hours written notice to Tenant. Such entry conditions
shall be deemed to be under all of the terms, covenants, provisions and
conditions of the Lease. Landlord shall not be liable in any way for any
injury, loss or damage which may occur to any of Tenant's decorations or
installations, the same being solely at Tenant's risk, and Tenant shall hold
Landlord harmless from any claim, demand or action arising from activities of
Tenant's contractors, workmen or mechanics.

     If the foregoing correctly sets forth our understanding, kindly
acknowledge your approval in the space provided below whereupon this work
letter shall become a binding agreement between us.

                                Yours very truly,

                                COLLINS CAMPBELL JOINT VENTURE
                                  a Texas general partnership

                                By: Jaytex Properties, Ltd.,
                                      a Texas limited partnership

                                    By: JRS Management, Inc.,
                                          a Texas corporation

                                          By: /s/ W. T. Field
                                              ----------------------------
                                              W. T. Field, President

AGREED TO AND ACCEPTED
as of the 8th day of May, 1998.

telecom technologies, inc.
 a Texas corporation

By: /s/ Anousheh Ansari
    ---------------------
Name: Anousheh Ansari

Title: President

















<PAGE>


                                                                   Exhibit 10.16


                   THIRD AMENDMENT TO OFFICE LEASE AGREEMENT

     THIS THIRD AMENDMENT TO OFFICE LEASE AGREEMENT (this "Third Amendment")
is made and entered into effective as of July 1, 1998, by and between Collins
Campbell Joint Venture ("Landlord") and telecom technologies, inc. ("Tenant").

                                    RECITALS
                                    --------

     WHEREAS, Landlord and Tenant entered into that certain Office Lease
Agreement dated as of April 4, 1997, that certain First Amendment to Office
Lease Agreement, dated November 1, 1997, and that certain Second Amendment to
Office Lease Agreement dated July 1, 1998 collectively, (the "Lease"), with
respect to certain Premises defined therein and commonly known as Suite 3000 at
1701 North Collins Blvd., Richardson, Dallas County, Texas, which Lease is
incorporated herein by reference;

     WHEREAS, Landlord and Tenant desire to further amend the Lease to adjust
and clarify payment terms;

     NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the mutual agreements set forth in the Lease, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant have agreed, and do hereby agree, as follows:

     1.  All terms used herein and not specifically defined shall
 have the
         same meaning herein as is ascribed to them in the Lease.

     2.  Basic Rental is recalculated to be $3,009,171.04.

     3.  The Monthly Rental Installments are adjusted as set forth below for
         the period from and after July 1, 1998:

         Monthly from July 1, 1998 through August 31, 1998        -$33,290.27;
         Monthly from September 1, 1998 through September 30, 1998-$44,286.10;
         Monthly from October 1, 1998 through October 31, 1998    -$53,111.53;
         and
         Monthly from November 1, 1998 through October 31,2002    -$54,746.55

     4.  Prepaid Rent/Escrow Account: The Monthly Rental Installments shall be
         paid directly from the Escrow Account pursuant to the Escrow
         Agreement, Escrow No. 3488, as same has been amended from time to
         time until such time as funds in the Escrow Account are not sufficient
         to pay the required Monthly Rental Installment. At the time there are
         not sufficient funds in the Escrow Account to pay the Monthly Rental
         Installments, the Tenant shall begin paying the Monthly Rental
         Installments. The following schedule approximates when the Escrow
         Account will be depleted.


<PAGE>

         Escrow Account Balance as of July 1, 1998: $250,137.27
         Less: July 98 Rent            $33,290.27         $216,847.00
               August 98 Rent          $33,290.27         $183,556.73
               September 98 Rent       $44,286.10         $139,270.63
               October 98 Rent         $53,111.53         $ 86,159.10
               November 98 Rent        $54,746.55         $ 31,412.55
               December 98 Rent        $54,746.55        ($ 23,334.00)
         So, effective December 1, 1998, Tenant will pay Landlord $23,334 for
         the balance of December 98 rent. Then beginning the January 1, 1999
         and continuing through October 31, 2002, Tenant will pay the monthly
         rental installment of $54,746.55 at the first of each month.


<PAGE>

Third Amendment to Office Lease Agreement
Page 2 of 2

     5.  Except as herein provided to the contrary, Tenant's lease of the
         Premises from Landlord pursuant hereto shall be on the same terms and
         conditions as those specified in the Lease.

     6.  The Lease (as amended by this Third Amendment) remains in full force
         and effect and is hereby ratified and affirmed.

     7.  All other terms and conditions of the Lease shall remain unchanged
         and in full force and effect.

     IN WITNESS WHEREOF, this Third Amendment is hereby executed effective as
of the day and year first set forth above.

                                        LANDLORD:

                                        COLLINS CAMPBELL JOINT VENTURE
                                          a Texas general partnership

                                        By: Jaytex Properties, Ltd.,
                                              a Texas limited partnership

                                            By: JRS Management, Inc.

                                               By: /s/ W.T. Field
                                                  ------------------------
                                                   W.T. Field, President

                                        TENANT:

                                        telecom technologies, inc.,
                                          a Texas corporation

                                        By: /s/ Anousheh Ansari
                                           ----------------------------
                                            Anousheh Ansari, President


<PAGE>


                  [Letter head of THOMPSON REALTY CORPORATION]

                                August 26, 1998

Kevin R. Griffin
State Bank & Trust
8214 Westchester
Dallas, Texas 75225

     RE:   Escrow Agreement #3488 between Collins Campbell Joint Venture and
           telecom technologies, inc. ("TTI") with State Bank & Trust Company,
           as Escrow Agent

Dear Mr. Griffin:

     Enclosed for your file is a copy of the Third Amendment to Office Lease
Agreement effective July 1, 1998. TTI has leased an additional 11,717 rentable
square feet on the second floor of the pertinent building. Accordingly, the
lease payments have changed. Please let your records reflect that effective
September 1, 1998, and continuing through September 30, 1998, the revised
monthly rental payment to be paid out of escrow fund is $44,286.10. Then
beginning October 1, 1998, and continuing through October 31, 1998, the revised
monthly rental payment to be paid out of the escrow fund will be $53,111.53.
Then beginning November 1, 1998, and continuing through the depletion of the
escrow account, which we calculate to be on or around December 1, 1998, the
revised monthly rental payment to be paid out of the escrow fund will be
$54,746.55.

                                  Sincerely,

                                  COLLINS CAMPBELL JOINT VENTURE,
                                       a Texas joint venture

                                  By: Jaytex Properties, Ltd., joint venturer

                                       By: JRS Management, Inc., general partner

                                            By: /s/ W.T. Field
                                                -----------------------------
                                                 W.T. Field, President

ACCEPTED AND AGREED TO, as of this 8th day of September, 1998.
TELECOM TECHNOLOGIES, INC., a Texas corporation

By: Anousheh Ansari
    ------------------------------
    Anousheh Ansari, President


<PAGE>

                  [Letter head of THOMPSON REALTY CORPORATION]

                               September 9, 1998

Ms. Anousheh Ansari
President
telecom technologies, inc.
1701 North Collins Blvd.
Suite 3000
Richardson, Texas 75080

     RE:   Right of First Refusal Challenge

Dear Anousheh:

     Pursuant to Rider No. 201 of your Lease at 1701 North Collins Blvd.,
please be advised that we are considering entering into a lease with HPS
America, Inc.  The size of the lease is 1,601 rentable square feet ("RSF"). The
entire 1,601 rentable square feet is located within the Growth Area (see
Exhibit A attached) described in your Lease. The terms of the proposed lease
would be as follows:

Commencement Date:      November 1, 1998

Demised Premises:       1,601 RSF, Second Floor

Annual Rental Rate:     Year One (1) - $22.00/RSF
                        Year Two (2) - $22.00/RSF
                        Year Three (3) - $22.00/RSF
                        Year Four (4) - $22.00/RSF
                        Year Five (5) - $22.00/RSF

Expense Stop:           1998 Base Year

Space Planning and
Improvement Allowance:  $18.00/RSF

Please deliver a signed copy of this notice back to us at your earliest
convenience.

                                   Very truly yours,

                                 /s/ Douglas Thompson

                                 H. Douglas Thompson

HDT:sc


<PAGE>

Ms. Anousheh Ansari
telecom technologies, inc.
September 9, 1998
Page 2 of 2

telecom technologies, inc. has reviewed this notice and by its signature below
Accept to take the 1,601 rentable square feet.

AGREED TO AND ACCEPTED THIS 14 DAY OF SEPTEMBER, 1998.

telecom technologies, inc.

/s/ Anousheh Ansari
----------------------------
Anousheh Ansari, President

A mutually agreable start date will be negotiated


<PAGE>

                                  EXHIBIT "A"

                                   SITE PLAN

                               RPS AMERICA, INC.

                     PREMISES : 1,601 RENTABLE SQUARE FEET

                               1701 : N. COLLINS

                                   SUITE 2100

                              RICHARDSON, TX 75080

[Diagram of 2nd Level Floor Plan]



<PAGE>


                                                                   Exhibit 10.17


                   FOURTH AMENDMENT TO OFFICE LEASE AGREEMENT

     THIS FOURTH AMENDMENT TO OFFICE LEASE AGREEMENT (this "Fourth
Amendment") is made and entered into effective as of February 1, 1999, by and
between Collins Campbell Joint Venture ("Landlord") and telecom technologies,
inc. ("Tenant").

                                    RECITALS
                                    --------

     WHEREAS, Landlord and Tenant entered into that certain Office Lease
Agreement dated as of April 4, 1997, as amended by that certain First Amendment
to Office Lease Agreement dated as of November 1, 1997 and by that certain
Second and Third Amendment to Office Lease Agreement dated as of July 1, 1998,
collectively (the "Lease"), with respect to certain Premises defined therein
and commonly known as Suite 3000 at 1701 North Collins Blvd., Richardson,
Dallas County, Texas, which Lease is incorporated herein by reference; and

     WHEREAS, Landlord and Tenant desire to further amend the Lease to extend
the Lease Term, increase the size of the Premises, and increase the Basic
Rental.

     NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the mutual agreements set forth in the Lease, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant have
 agreed, and do hereby agree, as follows:

     1.  All terms used herein and not specifically defined shall have the same
         meaning herein as is ascribed to them in the Lease.

     2.  The Premises are hereby increased to 38,016 square feet of rentable
         area by adding 6,072 square feet of rentable area on the second
         floor, the "Expansion Space" described on Exhibit "A", which is
         attached hereto and incorporated herein for all purposes.

     3.  The Lease Term is hereby extended to end on April 30, 2003 in lieu of
         October 31, 2002.

     4.  Basic Rental is increased to $3,909,279.04.

     5.  The "Monthly Rental Installment" is increased as set forth below:


<PAGE>

         Monthly from February 1, 1999 through October 31, 2002 - $65,878.55;
         then Monthly from November 1, 2002 through April 30, 2003 - $66,528.00.

     6.  Landlord agrees to install, in accordance with the Work Letter
         Agreement attached hereto as Exhibit "C", the improvements described
         in Exhibit "C". Landlord has made no representations as to the
         condition of the Premises or the Building, or Landlord's undertaking
         to remodel, repair or decorate, except as expressly set forth herein
         and in Exhibit "C".

     7.  Except as herein provided to the contrary, Tenant's lease of the
         Premises from Landlord pursuant hereto shall be on the same terms and
         conditions as those specified in the Lease.

     8.  The Lease (as amended by this Fourth Amendment) remains in full force
         and effect and is hereby ratified and affirmed.

     9.  Special Provisions: Exhibits "A" and "C". Exhibit "B" was
         intentionally omitted.

     10. The submission of this Lease to Tenant shall not be construed as an
         offer, nor shall Tenant have any rights with respect hereto unless and
         until Landlord shall execute a copy of this Lease and deliver the same
         to Tenant.


<PAGE>

Fourth Amendment to Office Lease Agreement
Page 2 of 2
     IN WITNESS WHEREOF, this Fourth Amendment is hereby executed effective as
of the day and year first set forth above.

                                         LANDLORD:

                                         COLLINS CAMPBELL JOINT VENTURE
                                          a Texas general partnership

                                         By: Jaytex Properties, Ltd.,
                                             a Texas limited partnership

                                             By: JRS Management, Inc.

                                         By: /s/ W.T. Field
                                         --------------------------
                                             W.T. Field, President

                                         TENANT:
                                         telecom technologies, inc.,
                                           a Texas corporation

                                         By: /s/ Anousheh Ansari
                                         --------------------------------
                                         Anousheh Ansari, President



<PAGE>

                                   Exhibit A

[Diagram of 2nd Level Floor Plan]



<PAGE>

                                  EXHIBIT "C"

                             WORK LETTER AGREEMENT

telecom technologies, inc.
1701 North Collins Blvd.
Suite 3000
Richardson, Texas 75080

RE:  Suite 2200, 1701 North Collins Blvd., The Atrium on Collins Phase II,
     Richardson, Texas.

Dear Anousheh:

     You (hereinafter referred to as "Tenant") and we (hereinafter referred to
as "Landlord") are executing, simultaneously with this "Work Letter Agreement"
(herein so called), a written Fourth Amendment to Office Lease Agreement (the
"Fourth Amendment") covering the space referred to above (hereinafter called
the "Expansion Space").

     To induce Tenant to enter into such Fourth Amendment (which is hereby
incorporated by reference) and in consideration of the mutual covenants
hereinafter contained, Landlord and Tenant mutually agree as follows:

     1.   Final Plans. Landlord agrees to provide, by Landlord's designated
     space planner, architect and/or engineer, the following Building Standard
     (hereinafter defined) space plans and architectural and mechanical
     drawings and specifications (hereinafter collectively referred to as the
     "Final Plans"), to be drawn for the Expansion Space on Tenant's behalf:

          (a)  Complete Building Standard "Space Plans" (herein so called) for
          the layout of the Expansion Space;

          (b)  Complete, finished and detailed 1/8 inch scale architectural
          drawings and specifications for Tenant's partition layout, reflected
          ceiling, telephone and electrical outlets, and finish schedule for
          the work to be done by Landlord under Paragraph 3 hereof (the
          "Construction Plans"); and

          (c)  Complete Building Standard mechanical plans and specifications
          where necessary for installation of normal air conditioning system
          and duct work and heating and electrical facilities for the work to
          be done by Landlord under Paragraph 3 hereof (the "MP & E Plans").

     Tenant shall pay all costs of preparing the Final Plans, subject, however,
to the reimbursement provisions of Paragraph 7 below.

     2.   Preparation of Final Plans; Changes to Final Plans. Tenant covenants
and agrees to furnish to Landlord all information necessary for the preparation
of each of the Space Plans, the Construction Plans and the M P & E Plans on or
before October 30, 1998. Landlord will cause the Space Plans, the Construction
Plans, and the M P & E Plans to be prepared from such information and will
submit such plans to Tenant. Within ten (10) days after receipt thereof, Tenant
shall approve the Space Plans, Construction Plans and M P & E Plans or indicate
what changes, if any, that it desires to make. Such proposed changes, if any,
shall be submitted to Landlord in writing for Landlord's written approval. If
within ten (10) days after receipt thereof, Tenant fails to approve any of the
Space Plans, Construction Plans and M P & E Plans or if Tenant fails to propose
in writing any changes to be made to such Space Plans, Construction Plans and M
P & E Plans, then Tenant shall be deemed to have approved each of same. Any
redrawing of all or any of the Final Plans occasioned by Tenant after Tenant's
approval (or deemed approval) thereof as well as any changes requested by
Tenant in connection with its initial review of the Final Plans which are
agreed to by Landlord shall be at Tenant's sole cost subject to credit in
Paragraph 7.

     3.   Construction of Improvements. Subject to each of Paragraph 2 and 
Paragraph 28 of the Lease, provided that Tenant has not committed an event of 
default pursuant to Paragraph 20 of the Lease, Landlord agrees to cause the 
improvements to the Expansion Space to be constructed pursuant to and in 
substantial accordance with the Final Plans. The construction of such 
improvements in the Expansion Space shall be at Tenant's sole cost and 
expense, subject, however, to the reimbursement provisions of Paragraph 7 
below. Tenant acknowledges that all work done in the Expansion Space pursuant 
to this Work Letter Agreement shall be performed by a contractor (and such 
subcontractors, suppliers and laborers) designated by Landlord and approved 
by Tenant.

     4.   Condition of Expansion Space. Landlord will, at Landlord's sole cost
and expense, construct all improvements to the Expansion Space necessary to
characterize the Expansion Space as being in Shell Condition (hereinafter
defined). As used herein the term "Shell Condition" means:

     (a)  The sprinkler system and sprinkler heads have been installed.

     (b)  The main ducting for the HVAC system has been installed.

     (c)  Electric lines have been run to junction boxes in the Expansion Space.

     (d)  The Ceiling grid has been installed. Building standard ceiling tile
          and lights stacked on the floor.

     (e)  Smooth concrete floor slab.


<PAGE>

     5.   Modifications to Shell Condition. To the extent that the Final Plans
call for any modifications (herein "Shell Modifications") to the Shell
Condition, the costs of such Shell Modifications shall be borne solely by
Tenant, Subject, however, to the reimbursement provisions of Paragraph 7 below.
By way of example, and not by way of limitation, the following shall each be
examples of Shell Modifications:

     (a)  Any modifications to the existing sprinkler system, or the moving of
     existing sprinkler heads, or the installation of additional sprinkler
     heads.

     (b)  Any modifications to the existing HVAC system, the moving of the
     existing ductwork and/or diffusers, or the installation of additional
     ductwork and/or diffusers.

     (c)  Any rewiring of existing junction boxes, relocation of existing
     junction boxes, or installation of additional junction boxes.

     6.   Building Standard. Tenant shall be required to use, and the Final
Plans shall specify Building Standard (a) light fixtures, (b) doors, (c)
ceiling tiles, and (d) hardware throughout the Expansion Space and the costs of
purchasing, transporting and installing each of the foregoing Building Standard
items shall be borne solely by Tenant, subject, however, to the reimbursement
provisions of Paragraph 7 below. Whenever the term "Building Standard" is used
in this Work Letter Agreement, it shall mean the exclusive type, brand,
quality, and/or quantity of materials Landlord designates from time to time to
be the quality or quantity to be used in the Building.

     7.   Payment of Costs; Credit. Tenant agrees to pay Landlord, promptly 
upon being billed therefor, the actual cost (labor, materials, architectural, 
space planning, engineering and other costs) of all work performed pursuant 
to this Work Letter Agreement; Landlord shall have the right to submit 
interim statements of cost incurred which shall be promptly paid by Tenant to 
Landlord. Tenant agrees that all payments due to Landlord pursuant hereto 
shall constitute payments of additional rent and that in the event of default 
of payment thereof, Landlord shall (in addition to all other remedies) have 
the same rights as in the event of default of payment of rent under the 
Lease. Notwithstanding the above, so long as no event of default, as defined 
in Paragraph 20 of the Lease, shall have occurred, Landlord shall credit 
Tenant in an amount equal to $15.10 per square foot of Rentable Area in the 
Expansion Space (the "Credit").

     8.   Delays. If Landlord shall be delayed in substantially completing the
work to be performed by Landlord pursuant to this Work Letter Agreement as a
result of:

          (a)  Tenant's failure to timely furnish information or specifications
          in accordance with Paragraph 2 above; or

          (b)  Tenant's request for materials, finishes or installations other
          than Landlord's Building Standard; or

          (c)  Tenant's changes in or modifications to any plans and
          specifications or any of the Final Plans; or

          (d)  The performance of any work in the Expansion Space by a person,
          firm or corporation employed by Tenant; (all such persons, firms or
          corporations being subject to the approval of Landlord);


<PAGE>

     Tenant's obligation for payment of rental under the Fourth Amendment (as
affected by such waiver) shall be accelerated by the number of days of such
delay.
     9.   Entry by Tenant's Agents. Landlord will permit Tenant and its agents
to enter the Expansion Space prior to the date specified for the commencement
of Tenant's occupancy under the Fourth Amendment, in order that Tenant may
perform through its own contractors (to be first approved by Landlord) such
other work and decorations as Landlord may approve at the same time that
Landlord's contractors are working in the Expansion Space. The foregoing
license to enter, however, is conditioned upon Tenant's workmen and mechanics
working in harmony and not interfering with the labor employed by Landlord,
Landlord's mechanics or contractors or by any other tenant or their
contractors. Such license is further conditioned upon workers' compensation and
public liability insurance for bodily injury and property damage, all in
amounts and with companies and on forms satisfactory to Landlord, being
provided and at all times maintained by Tenant's contractors engaged in the
performance of the work, and certificates of such insurance being furnished to
Landlord prior to proceeding with the work. If at any time such entry shall
cause disharmony or interference therewith, Landlord may withdraw this license
upon forty-eight (48) hours written notice to Tenant. Such entry conditions
shall be deemed to be under all of the terms, covenants, provisions and
conditions of the Lease. Landlord shall not be liable in any way for any
injury, loss or damage which may occur to any of Tenant's decorations or
installations, the same being solely at Tenant's risk, and Tenant shall hold
Landlord harmless from any claim, demand or action arising from activities of
Tenant's contractors, workmen or mechanics.

     If the foregoing correctly sets forth our understanding, kindly
acknowledge your approval in the space provided below whereupon this work
letter shall become a binding agreement between us.

                                        Yours very truly,

                                        COLLINS CAMPBELL JOINT VENTURE,
                                          a Texas general partnership

                                        By: Jaytex Properties, Ltd.,
                                            a Texas limited partnership

                                            By: JRS Management, Inc.,
                                                  a Texas corporation

                                                By: /s/ W. T. Field
                                                    ---------------------
                                                    W. T. Field, President

AGREED TO AND ACCEPTED
as of the 2 day of October, 1998.

telecom technologies, inc.,
  a Texas corporation

By: /s/ Anousheh Ansari
    -----------------------------
    Anousheh Ansari,
    President


<Page>

                                 EXHIBIT 10.18

                                GLOBAL AGREEMENT

     This Global Agreement (this "AGREEMENT") is being entered into effective as
of March 5, 2002 (the "EFFECTIVE DATE"), by and among TR Lookout Partners,
Ltd. ("TRLP"), Collins Campbell Joint Venture ("CCJV"), telecom technologies,
inc. ("TTI"), and Sonus Networks, Inc. ("SONUS"). TRLP, CCJV, TTI, and Sonus
shall be collectively referred to as the "PARTIES".

                                    RECITALS:

     WHEREAS, TTI has entered into several leases (the "LEASES") with TRLP and
CCJV, as landlords, and pursuant to the terms of the Leases, TTI is bound and
obligated to perform all of its obligations under the Leases for the remaining
terms of each of the Leases;

     WHEREAS, TTI is a wholly owned subsidiary of Sonus and due to economic
conditions, requires a reduction in its Richardson, Texas facilities under lease
with TRLP and CCJV (collectively, the "LANDLORDS");

     WHEREAS, the Landlords have agreed to certain lease terminations and/or
modifications in exchange for the agreements set forth herein, the payments by
Sonus to TRLP representing a reimbursement to CCJV of the cost of various tenant
improvements, lease termination, capital expenses, and build out costs in
connection with the premises covered by the lease terminated hereunder, all as
more fully described
 below, and such other good and valuable consideration; and

     NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the Parties have agreed to the
above recitals and as follows:

     1.  Notwithstanding anything to the contrary in this Agreement (or any of
         the agreements including lease agreements referenced herein; hereafter
         such agreements, together with this Agreement, shall be collectively
         referred to as the "DOCUMENTS"), the Documents (inclusive of this
         Agreement) shall NOT be effective until the occurrence of each and
         every one of the following events: (A) the execution and delivery by
         the Parties to each other of (i) this Agreement; (ii) the Termination
         of Office Lease Agreement attached as EXHIBIT "A" hereto; (iii) the
         Termination of Office Lease Agreement, attached as EXHIBIT "B" hereto;
         (iv) the Fifth Amendment to Office Lease Agreement, attached as EXHIBIT
         "C" hereto; (v) the Guarantee, attached as EXHIBIT "D" hereto; (vi) the
         Bill of Sale, attached as EXHIBIT "E" hereto; (vii) the Storage
         Agreement with respect to the Personal Property, attached as EXHIBIT
         "F" hereto; (viii) the Guarantee of Sonus with respect to the
         obligations of TTI under the Bill of Sale and Storage Agreement,
         attached as EXHIBIT "G" hereto; (B) the indefeasible and irrevocable
         payment by Sonus of One Million Dollars ($1,000,000) to TRLP, in care
         of Thompson Realty Investment Corporation ("THOMPSON REALTY"),
         contemporaneous with the payment by TRLP to TTI of such payment
         described in subsection (D) immediately below; (C) the indefeasible and
         irrevocable payment by Sonus to Thompson Realty of $2,500.00,
         representing no less than fifty percent (50%) of all legal fees, costs
         and expenses incurred by counsel for Thompson Realty in connection with
         these matters; and (D) the wire transfer by TRLP at Closing to TTI of
         One Hundred Sixty Five Thousand Two Hundred Thirty-Six and 50/100
         Dollars ($165,236.50) as provided under EXHIBIT "A" to this Agreement,
         contemporaneous with the payment by Sonus to TRLP described in
         subsection (B) immediately above. At Closing, TRLP and CCJV shall
         deliver to Sonus and TTI consents from their respective lenders
         approving the termination, and amendments where applicable, of their
         respective Leases with TTI, as provided herein, which consents shall be
         in the form of EXHIBITS "H" and "I" hereto.

                                     Page 1
<Page>

     2.  On the Effective Date, that certain Office Lease Agreement, dated
         November 14, 2000, as amended by that certain First Amendment to Office
         Lease Agreement, dated as of January, 8, 2001, by and between TRLP and
         TTI, will be terminated and shall be of no further force and effect, in
         accordance with the terms set forth in the Termination of Office Lease
         Agreement, attached hereto as EXHIBIT "A" and incorporated herein for
         all purposes.

     3.  On the Effective Date, those certain Office Lease Agreements described
         below, by and between CCJV and TTI, will be modified and/or terminated
         in accordance with the agreements attached hereto as EXHIBIT "B", and
         EXHIBIT "C", each of which is incorporated herein for all purposes.
         These agreements generally provide for the following:

         a. Suite 1050, Richardson, Texas 75080, approximately 6,618 square feet
            - terminated;
         b. Suite 3000, Richardson, Texas 75080, approximately 38,016 square
            feet - modified to reduce the size of the premises ("LEASE 1");
         c. Suite 339, Richardson, Texas 75080, approximately 2,281 square feet
            - no change in terms ("LEASE 2"); and
         d. Suite 2400, Richardson, Texas 75080, approximately 2,055 square feet
            - no change in terms ("LEASE 3").

     4.  TTI hereby acknowledges and consents to all of the terms and conditions
         of Lease 1, Lease 2, and Lease 3 (collectively, the "OFFICE LEASES"),
         and TTI and Sonus each ratifies, reaffirms, and confirms the
         effectiveness of each of the Office Leases. TTI and Sonus each
         acknowledges that each such party has no claims, counterclaims,
         offsets, credits or defenses to the Leases, and each party's
         performance of its obligations thereunder (to the extent applicable),
         or if TTI or Sonus has any such claims, counterclaims, offsets, credits
         or defenses to the Leases or any transaction related to the Leases, the
         same are hereby waived, relinquished and released in consideration of
         the Parties' mutual agreements set forth in this Agreement.

     5.  On the Effective Date, Sonus will guarantee unconditionally all of the
         obligations and covenants of TTI to CCJV under the three (3) remaining
         leases at the "Atrium on Collins", in accordance with the terms of the
         Guarantee attached hereto as EXHIBIT "D" and incorporated herein for
         all purposes.

     6.  CCJV hereby agrees to exercise good faith efforts to reach a written
         agreement with Hamid Ansari and Anousheh Ansari (collectively, the
         "ANSARIS") providing for a release from the Ansaris in favor of CCJV,
         TTI, and Sonus, with respect to any obligations of such parties, if any
         (with respect to the payment of a profit fee), as provided in that
         certain letter agreement, dated April 4, 1997, executed by CCJV and the
         Ansaris, as amended by that certain letter agreement, dated November 1,
         2000, executed by CCJV and the Ansaris, each of which letter agreements
         was consented to by TTI; PROVIDED, HOWEVER, that if CCJV is unable to
         provide such release to Sonus and TTI, on or prior to the Effective
         Date, then CCJV shall indemnify Sonus and TTI in accordance with the
         terms of the agreement in the form attached hereto as EXHIBIT "J".

     7.  On the Effective Date, TTI agrees that (i) TTI shall transfer to CCJV
         on the earlier of (the "TRANSFER DATE") (A) the date that TTI vacates
         the premises at Suite 3000, 1701 North Collins Boulevard, Richardson,
         Texas 75080, or (B) April 30, 2003 (or such later date, as may be
         extended pursuant to an amendment to the lease, with respect to such
         premises, entered into by TTI and CCJV, thereby extending the term of
         such lease), all of TTI's right, title, and interest in and to certain
         furniture, fixtures, and equipment owned by TTI, substantially in
         accordance with the terms of the bill of sale attached hereto as
         EXHIBIT "E" incorporated herein for all purposes (the "BILL OF SALE"),
         and (ii) TTI shall enter into with CCJV a storage agreement, thereby
         agreeing to store such furniture, fixtures, and equipment, at Suites
         1050 and 2000, at 1701 North Collins Boulevard, Richardson, Texas
         75080, for the period from and after the Effective Date and continuing
         through the earlier of (the "REMOVAL DATE")

                                     Page 2
<Page>

         (A) April 30, 2003, or (B) twenty (20) calendar days after written
         notice from CCJV to TTI to remove such furniture, fixtures and
         equipment, and TTI and CCJV shall execute and deliver a storage
         agreement in the form attached hereto as EXHIBIT "F" and incorporated
         herein for all purposes (the "STORAGE AGREEMENT"). Such Bill of Sale
         and Storage Agreement shall be without recourse or liability to CCJV
         (or its assigns), and shall not constitute, nor be deemed to be, any
         assumption by CCJV (or its assigns) of any obligations, liabilities, or
         indebtedness of TTI (i) on or under such personal property leases or
         (ii) arising out of or in connection with the personal property to be
         transferred under the Bill of Sale. On the Effective Date, Sonus shall
         execute and deliver to CCJV a Guarantee in the form attached hereto as
         EXHIBIT "G", thereby guaranteeing all of TTI's obligations to CCJV (or
         its assigns) with respect to the Bill of Sale, the Storage Agreement,
         and TTI's obligations to CCJV (or its assigns) in this paragraph 7.

     8.  On the Effective Date, Sonus shall pay to Thompson Realty the sum of
         $2,500 representing no less than fifty percent (50%) of the legal fees
         incurred by counsel for Thompson Realty in connection with this these
         transactions and matters.

     9.  Each Party hereto hereby makes the following representations and
         warranties to each other Party, each of which is material, is being
         relied upon by each of the Parties hereto, and is true as of the date
         hereof: (i) this Agreement (and the Documents) has been duly and
         validly executed and delivered by such party; (ii) no further action of
         any kind or nature will be or is necessary on the part of such party,
         or any other person whomsoever, to make this Agreement (and the
         Documents) valid, binding and enforceable upon such party in accordance
         with the terms hereof; (iii) this Agreement (and the Documents) has
         been consented to by TRLP's and CCJV's lender and is thereby authorized
         by such lenders; and (iv) this Agreement (and the Documents)
         constitutes a legal, valid and binding obligation of such Party,
         enforceable in accordance with the terms hereof or as otherwise
         provided by law.

     10. It is the mutual intent of all of the Parties hereto that the Documents
         are, and shall be, final, conclusive, binding, enforceable and
         non-terminable as of, and from and after, the Effective Date, subject
         to the conditions precedent to paragraph 1 of this Agreement.

     11. Each of the Parties hereto hereby covenants and agrees to do such acts
         and things and, in connection therewith, to execute and deliver such
         documents and instruments as reasonably may be required for effecting
         and otherwise carrying out the purposes of the transactions covered and
         contemplated hereby.

     12. No Party hereto may assign any of its rights or delegate any of its
         duties hereunder without the prior written notice of the other Parties
         hereto, and any such assignment or delegation without the prior written
         notice shall be void ab initio.

     13. All terms and provisions of the Documents shall be binding upon and
         inure to the benefit of the respective Parties to each of the Documents
         and their respective transferees.

     14. The Documents may be executed in one or more counterparts, all of which
         taken together shall constitute one instrument. Signatures delivered by
         telecopy shall be binding, and the Parties hereto agree to send to the
         other originals of this Agreement (and the Documents) within
         twenty-four (24) hours of the closing of these transactions.

     15. The Documents are made and entered into in the State of Texas, and the
         laws of said state shall govern the validity and interpretation hereof
         and the performance of the Parties hereto of their respective duties
         and obligations hereunder.

     16. No breach of any provision hereof (or in the Documents) may be waived
         unless in writing executed by the affected Party(s) hereto and the
         waiver of any one breach shall not be deemed to be a waiver of any
         other breach of the same or any other provision hereof.

                                     Page 3
<Page>

     17. The Documents may be amended only by a written agreement executed by
         the respective Parties to each of this Agreement and the applicable
         Parties to the other Documents.

     18. The Documents are entered into for the express benefit of the Parties
         hereto, and it is not intended and shall not be deemed to create in any
         other person any rights or interest whatsoever, including without
         limitation, any rights to enforce the terms hereof.

     19. This Agreement (together with the other Documents) embodies the entire
         understanding of the Parties with respect to the matters set forth
         herein (and therein); and there are no further or other agreements or
         understandings, written or oral, in effect between the Parties hereto
         relating to the subject matter hereof, unless expressly referred to by
         reference herein or executed concurrently herewith.

     20. The Parties agree that the payments made, and obligations incurred, by
         Sonus to, or in favor of, TRLP constitutes reasonable equivalent value
         for the termination and modification of the lease agreements described
         herein, and agreements set forth herein (in accordance with the terms
         of this Agreement) and the restructuring of obligations provided for
         herein by TRLP and CCJV to Sonus and TTI. Sonus represents, warrants,
         and covenants that (i) the $1 million payment to TRLP as provided
         herein shall be paid solely from the funds of Sonus, and not the funds
         of TTI; (ii) the $1 million payment shall be wire-transferred by Sonus
         to TRLP, in care of Thompson Realty, on the Effective Date; and (iii)
         the $1 million payment represents a reasonable calculation of the costs
         to reimburse TRLP for its tenant improvements, lease termination costs,
         capital expenses, and build-out costs in connection with the premises
         covered by the leases terminated under this Agreement. The Parties
         agree that Hughes & Luce, L.L.P., shall serve as the escrow agent at
         the Closing of the transactions contemplated hereunder, and the escrow
         agent shall make the contemporaneous wire transfers described in this
         paragraph to the respective Parties at the Closing. At the Closing,
         CCJV shall wire transfer to TTI the sum of $165,236.50, as provided
         under EXHIBIT "A" of this Agreement, and Sonus shall wire transfer to
         TRLP, in care of Thompson Realty, the sum of $1,000,000, as provided in
         this Agreement.

     21. If the incurrence or payment of the obligations by either TTI or Sonus
         or the transfer to the Landlords of any property should for any reason
         subsequently be declared to be void or voidable under any state or
         federal law relating to creditors' rights, including provisions of the
         Bankruptcy Code relating to fraudulent conveyances, preferences, or
         other voidable or recoverable payments of money or transfers of
         property (collectively, a "VOIDABLE TRANSFER"), and if the Landlords
         are required to repay or restore, in whole or in part, any such
         Voidable Transfer, or elect to do so upon the reasonable advice of its
         or their counsel, then, as to any such Voidable Transfer, or the amount
         thereof that the Landlords are required or elect to repay or restore,
         and as to all reasonable costs, expenses, and attorneys fees of the
         Landlords related thereto, the liabilities and obligations of TTI and
         Sonus, arising out of or in any way related to the termination of lease
         obligations provided for above, or other releases granted in connection
         with this Agreement, automatically shall be revived, reinstated, and
         restored and shall exist as though such Voidable Transfer had never
         been made and this Agreement and the Documents had not been executed;
         provided, however, that notwithstanding the foregoing, (i) the payments
         made pursuant to paragraph 1 of this Agreement by the respective
         Parties hereto shall be returned or applied against any payments due or
         which became due after the Effective Date; (ii) all rights, titles, and
         interests of TTI in such leases terminated under the relevant Documents
         shall nonetheless be terminated and of no further force or effect upon
         the Effective Date of this Agreement; (iii) the Fifth Amendment to
         Office Lease Agreement shall remain in full force and effect and
         binding upon the Parties (but the liabilities of TTI with respect to
         such Office Lease Agreement prior to such Fifth Amendment shall be
         reinstated); and (iv) the Bill of Sale and Storage Agreement shall
         remain effective and binding upon such Parties.

                                     Page 4
<Page>

     22. TTI and Sonus each hereby acknowledges that as of the date hereof it
         has no defense, counterclaim, offset (except to the extent of payments
         made pursuant to this Agreement), cross-complaint, claim or demand of
         any kind or nature whatsoever that can be asserted to reduce or
         eliminate all or any part of its liability to repay the obligations or
         to seek affirmative relief or damages of any kind or nature from the
         Landlords or Thompson Realty, Thompson Realty Corporation, or each of
         the foregoing parties' respective affiliates, participants, partners,
         directors, officers, agents, employees, representatives or attorneys.
         TTI and Sonus each hereby voluntarily and knowingly releases and
         forever discharges the Landlords, Thompson Realty, Thompson Realty
         Corporation, and each of the foregoing parties' respective affiliates,
         participants, partners, agents, representatives, officers, directors,
         attorneys, employees, successors and assigns (collectively, the
         "LANDLORD RELEASEE GROUP"), from all possible claims, demands, actions,
         causes of action, damages, costs, expenses, and liabilities whatsoever,
         known or unknown, anticipated or unanticipated, suspected or
         unsuspected, fixed, contingent, or conditional, at law or in equity,
         originating in whole or in part on or before the date this Agreement
         becomes effective (collectively, the "LANDLORD CLAIMS"); PROVIDED,
         HOWEVER, that notwithstanding the foregoing, nothing herein shall
         release the Landlord Releasee Group from any obligations,
         representations, or covenants set forth in this Agreement, Leases 1, 2,
         and 3, or any of the other Documents, to the extent applicable to the
         particular member of the Landlord Releasee Group.

     23. Each of TTI and Sonus hereby covenants and agrees never to institute
         any action or suit at law or in equity, nor institute, prosecute, or in
         any way aid in the institution or prosecution of any claim, action or
         cause of action, rights to recover debts or demands of any nature
         against the Landlord Releasee Group, or any one of them, arising out of
         or related to the Landlord Claims.

     24. CCJV, TRLP, Thompson Realty, and Thompson Realty Corporation each
         hereby voluntarily and knowingly releases and forever discharges Sonus
         and TTI, and each of the foregoing parties' respective affiliates,
         participants, partners, agents, representatives, officers, directors,
         attorneys, employees, successors and assigns (collectively, the "TENANT
         RELEASEE GROUP"), from all possible claims, demands, actions, causes of
         action, damages, costs, expenses, and liabilities whatsoever, known or
         unknown, anticipated or unanticipated, suspected or unsuspected, fixed,
         contingent, or conditional, at law or in equity, originating in whole
         or in part on or before the date this Agreement becomes effective
         (collectively, the "TENANT CLAIMS"); PROVIDED, HOWEVER, that
         notwithstanding the foregoing, nothing herein shall release the Tenant
         Releasee Group from any obligations, representations, or covenants set
         forth in this Agreement, Lease 1, 2 and 3, the Guarantees, the Bill of
         Sale, the Storage Agreement, or any of the other Documents, to the
         extent applicable to the particular member of the Tenant Releasee
         Group.

     25. Each of CCJV, TRLP, Thompson Realty, and Thompson Realty Corporation
         hereby covenants and agrees never to institute any action or suit at
         law or in equity, nor institute, prosecute, or in any way aid in the
         institution or prosecution of any claim, action or cause of action,
         rights to recover debts or demands of any nature against the Tenant
         Releasee Group, or any one of them, arising out of or related to the
         Tenant Claims.

     This Agreement is executed as of March 5, 2002.

                        TR LOOKOUT PARTNERS, LTD.,
                         a Texas limited partnership

                        By:   Thompson Realty Investment Corporation,
                                general partner

                                     Page 5
<Page>

                                By:      /s/ W.T. Field
                                         ------------------------
                                         W.T. Field, President

                        COLLINS CAMPBELL JOINT VENTURE,
                            a Texas general partnership

                           By:      Jaytex Properties, Ltd.,
                                     a Texas limited partnership

                                    By:      JRS Management, Inc.

                                             By:      /s/ W.T. Field
                                                      ----------------------
                                                      W.T. Field, President

                           telecom technologies, inc.,
                            a Texas corporation

                           By:     /s/ G.M. Eastep
                                   ------------------------
                           Name:   G.M. Eastep
                                   ------------------------
                           Title:  Vice President and Chief Operating Officer
                                   -------------------------------------------

                           SONUS NETWORKS, INC.,
                            a Delaware corporation

                           By:     /s/ Peter S. Hemme
                                   ------------------------
                           Name:   Peter S. Hemme
                                   ------------------------
                           Title:  Vice President and Controller
                                   -----------------------------

AGREED AS TO PARAGRAPHS 24
AND 25 ONLY:

TH0MPSON REALTY INVESTMENT
CORPORATION, a Texas
corporation

By:     /s/ W.T. Field
        ------------------------
Name:   W.T. Field
        ------------------------
Title:  President
        ------------------------

TH0MPSON REALTY CORPORATION,
a Texas corporation

By:     /s/ W.T. Field
        ------------------------

                                     Page 6
<Page>

Name:   W.T. Field
        ------------------------
Title:  President
        ------------------------

                                     Page 7
<Page>

                                   EXHIBIT "A"

                      TERMINATION OF OFFICE LEASE AGREEMENT

     This Termination of Office Lease Agreement (this "Termination") is being
entered into as of February 28, 2002, by and between TR Lookout Partners, Ltd.
("Landlord") and telecom technologies, inc. ("Tenant").

                                R E C I T A L S:

     WHEREAS, Landlord and Tenant entered into that certain Office Lease
Agreement dated November 14, 2000, as amended by that certain First Amendment to
Office Lease Agreement dated as of January 8, 2001 (collectively, the "Lease")
with respect to approximately 119,966 square feet of space plus the Basement
Area (as defined and specified in the Lease) (the "Demised Premises") at 1301 E.
Lookout Drive, Richardson, Texas 75080;

     WHEREAS, Tenant has chosen not to occupy the Demised Premises;

     WHEREAS, Landlord and Tenant, among others, have entered into the terms of
a certain global agreement of even date herewith (the "Global Agreement"), and
Landlord and Tenant acknowledge and agree that the terms of the Global Agreement
shall be binding on the parties hereto;

     WHEREAS, Landlord and Tenant have reached certain agreements with respect
to the termination of the Lease; and

     WHEREAS, Landlord and Tenant now desire to set forth these certain
agreements with respect to the termination of the Lease and certain other
related matters.

     NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, Landlord and Tenant covenant and
agree to the above recitals and as follows:

     1.  Subject to the occurrence of all of the events set forth in the Global
Agreement in Paragraph 1 thereof, the Lease is terminated and Tenant shall no
longer have any right to occupy and/or use the Demised Premises.

     2.  Subject to the occurrence of all of the events set forth in the Global
Agreement in Paragraph 1 thereof, the Landlord hereby releases Tenant, Tenant's
parent company, Sonus Networks, Inc., and any and all guarantors of Tenant's
obligations under the Lease and from each and every obligation contained in the
Lease, including, but not limited to, the cost of various tenant improvements,
capital expenses, lease termination costs, and build out costs, or any guaranty
thereof. Subject to the occurrence of all of the events set forth in Paragraph 1
of the Global Agreement, Tenant hereby releases Landlord from any and all claims
Tenant might assert against Landlord relating in any way to the Lease or to
Tenant's occupancy of the Demised Premises. At closing, Landlord shall refund by
wire transfer to Tenant the prepaid rent held by Landlord in the amount of
$165,236.50.

     3.  The Global Agreement, and all of the terms therein, shall be
incorporated herein for all purposes.

                             EXHIBIT "A" Page 1 of 2
<Page>

     EXECUTED as of the date herein first written above.

                             LANDLORD:                                       
                                                                             
                             TR Lookout Partners, Ltd.,                      
                              a Texas limited partnership                    
                                                                             
                             By:      Thompson Realty Investment Corporation,
                                          general partner                    
                                                                             
                                      By:     /s/ W.T. Field, President
                                              ------------------------       
                                               W.T. Field, President         
                                                                             
                             TENANT:                                         
                                                                             
                             telecom technologies, inc.,                     
                               a Texas corporation                           
                                                                             
                             By:      /s/ G.M. Eastep
                                      --------------------------             
                             Name:    G.M. Eastep
                                      --------------------------             
                             Title:   Vice President and Chief
                                      Operating Officer
                                      --------------------------             
                             
                             EXHIBIT "A" Page 2 of 2
<Page>

                                   EXHIBIT "B"

                      TERMINATION OF OFFICE LEASE AGREEMENT

     This Termination of Office Lease Agreement (this "Termination") is being
entered into as of February 28, 2002, by and between Collins Campbell Joint
Venture ("Landlord") and telecom technologies, inc. ("Tenant").

                                R E C I T A L S:

     WHEREAS, Landlord and Tenant entered into that certain Office Lease
Agreement, dated January 25, 2000, as amended by that certain First Amendment to
Office Lease Agreement dated July 10, 2000 (collectively, the "Lease"),
concerning approximately 6,618 square feet of space (the "Premises") at 1701 N.
Collins, Suite 1050, Richardson, Dallas County, Texas 75080;

     WHEREAS, Tenant has chosen to vacate the Premises;

     WHEREAS, Landlord and Tenant, among others, have entered into the terms of
a certain global agreement of even date herewith (the "Global Agreement"), and
Landlord and Tenant acknowledge and agree that the terms of the Global Agreement
shall be binding on the parties hereto;

     WHEREAS, Landlord and Tenant have reached certain agreements with respect
to a termination of the Lease; and

     WHEREAS, Landlord and Tenant now desire to set forth these certain
agreements with respect to the termination of the Lease and certain other
related matters.

     NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, Landlord and Tenant covenant and
agree to the above recitals, and as follows:

     1.  Subject to the occurrence of all of the events set forth in the Global
Agreement in Paragraph 1 thereof, the Lease is terminated and Tenant shall no
longer have any right to occupy and/or use the Premises.

     2.  Subject to the occurrence of all of the events set forth in the Global
Agreement in Paragraph 1 thereof, Landlord hereby releases Tenant, Tenant's
parent company, Sonus Networks, Inc., and any and all guarantors of Tenant's
obligations under the Lease and from each and every obligation contained in the
Lease, including, but not limited to, the cost of various tenant improvements,
capital expenses, lease termination costs, and build out costs, or any guaranty
thereof. Subject to the occurrence of all of the events set forth in the Global
Agreement in Paragraph 1 thereof, Tenant hereby releases Landlord from any and
all claims Tenant might assert against Landlord relating in any way to the Lease
or to Tenant's occupancy of the Premises.

     3.  The Global Agreement, and all of the terms therein, shall be
incorporated herein for all purposes.

                             EXHIBIT "B" Page 1 of 2
<Page>

     EXECUTED as of the date herein first written above.

                             LANDLORD:                                       
                                                                             
                             Collins Campbell Joint Venture,                 
                                     a Texas general partnership             
                                                                             
                             By:      Jaytex Properties, Ltd.,               
                                      a Texas limited partnership            
                                                                             
                                      By:      JRS Management, Inc.,         
                                               a Texas corporation           
                                                                             
                                               By:      /s/ W.T. Field
                                                        ---------------------
                                                        W.T. Field, President
                                                                             
                             TENANT:                                         
                                                                             
                             telecom technologies, inc.,                     
                              a Texas corporation                            
                                                                             
                             By:      /s/ G.M. Eastep
                                      --------------------------             
                             Name:    G.M. Eastep
                                      --------------------------             
                             Title:   Vice President and Chief Operating 
                                      Officer
                                      ------------------------------------
                             
                             EXHIBIT "B" Page 2 of 2
<Page>

                                   EXHIBIT "C"

                    FIFTH AMENDMENT TO OFFICE LEASE AGREEMENT

     THIS FIFTH AMENDMENT TO OFFICE LEASE AGREEMENT (this "Fifth Amendment") is
made and entered into effective as of February 28, 2002, by and between Collins
Campbell Joint Venture ("Landlord") and telecom technologies, inc. ("Tenant").

                                 R E C I T A L S

     WHEREAS, Landlord and Tenant entered into that certain Office Lease
Agreement, dated as of April 4, 1997, as amended by (i) that certain First
Amendment to Office Lease Agreement, dated as of November 1, 1997; (ii) those
certain Second and Third Amendments to Office Lease Agreement, each dated as of
July 1, 1998; and (iii) that certain Fourth Amendment to Office Lease Agreement,
dated February 1, 1999 (collectively, the "Lease"), with respect to certain
Premises defined therein and commonly known as Suite 3000 at 1701 North Collins
Blvd., Richardson, Dallas County, Texas 75080, which Lease is incorporated
herein by reference;

     WHEREAS, Landlord and Tenant, among others, have entered into the terms of
a certain global agreement of even date herewith (the "GLOBAL AGREEMENT"), and
Landlord and Tenant acknowledge and agree that the terms of the Global Agreement
shall be binding on the parties hereto;

     WHEREAS, Landlord and Tenant desire to further amend the Lease to reduce
the size of the Premises.

     NOW, THEREFORE, in consideration of the mutual agreements herein set forth,
the mutual agreements set forth in the Lease, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant have agreed, and do hereby agree, to the above Recitals, and
as follows, subject to the occurrence of all of the events set forth in
Paragraph 1 of the Global Agreement:

     1.  All terms used herein and not specifically defined shall have the same
         meanings herein as is ascribed to them in the Lease.

     2.  The Premises are hereby reduced to approximately 20,227 square feet of
         rentable area by deleting approximately 17,789 square feet of rentable
         area on the second floor, such "Give Back Space" being described on
         Exhibit "A", attached hereto and incorporated herein for all purposes.

     3.  Basic rental is decreased from $3,909,279.04 to $3,475,939.00.

     4.  The monthly rental installment is decreased as set forth below:

         Monthly from March 1, 2002 through October 31, 2002 - $35,043.28
         Monthly from November 1, 2002 through April 30, 2003 - $35,397.25

     5.  Tenant's option to extend the term of the Lease set forth in Rider 101
         is hereby eliminated and of no further force or effect.

     6.  Except as herein provided to the contrary, Tenant's lease of the
         Premises from Landlord shall be on the same terms and conditions as
         those specified in the Lease.

     7.  The Lease (as amended by this Fifth Amendment) remains in full force
         and effect and is hereby ratified and affirmed.

                             EXHIBIT "C" Page 1 of 2
<Page>

     8.  All notices required to be sent to the Tenant shall also be sent to
         Sonus Networks, Inc., 5 Carlisle Road, Westford, Massachusetts 01886;
         Attention: Chief Financial Officer.

     9.  The Global Agreement, and all of the terms therein, shall be
         incorporated herein for all purposes. To the extent that there is a
         conflict between the terms of this Fifth Amendment and the terms of the
         Global Agreement with respect to the relevant subject matter, the terms
         of this Fifth Amendment shall control.

     IN WITNESS WHEREOF, this Fifth Amendment is hereby executed as of the day
and year first set forth above.

                             LANDLORD:                                     
                                                                           
                             COLLINS CAMPBELL JOINT VENTURE,               
                              a Texas general partnership                  
                                                                           
                             By:  Jaytex Properties, Ltd.,                 
                                   a Texas limited partnership             
                                                                           
                                  By:  JRS Management, Inc.                
                                                                           
                                               By:      /s/ W.T. Field
                                                        ---------------------
                                                        W.T. Field, President
                                                                             
                             TENANT:                                         
                                                                             
                             telecom technologies, inc.,                     
                              a Texas corporation                            
                                                                             
                             By:      /s/ G.M. Eastep
                                      --------------------------             
                             Name:    G.M. Eastep
                                      --------------------------             
                             Title:   Vice President and Chief Operating 
                                      Officer
                                      ------------------------------------
                             
                             EXHIBIT "C" Page 2 of 2
<Page>

            EXHIBIT "A" TO FIFTH AMENDMENT TO OFFICE LEASE AGREEMENT

          [DESCRIPTION OF "GIVE BACK SPACE" TO BE PROVIDE BY LANDLORD]'

      EXHIBIT "A" TO FIFTH AMENDMENT TO OFFICE LEASE AGREEMENT Page 1 of 2
<Page>

                                   EXHIBIT "D"

                                    GUARANTEE

     In connection with that certain Global Agreement, dated as of March 5,
2002, by and among TR Lookout Partners, Ltd., Collins Campbell Joint Venture,
telecom technologies, inc., Sonus Networks, Inc., the undersigned hereby
unconditionally guarantees the full payment and performance of and agrees to pay
and perform as primary obligor all liabilities, obligations and duties
(including, but not limited to, payment of rent) imposed upon telecom
technologies, inc. ("Tenant") under the terms of those three (3) certain leases
(collectively, the "Leases"), as more fully described below, as if the
undersigned had executed the Leases, as Tenant thereunder:

                                GUARANTEED LEASES

     1.  Office Lease Agreement, dated April 4, 1997, by and between Landlord
         and Tenant, as amended by that certain Fourth Amendment to Office Lease
         Agreement dated February 1, 1999, to be amended by that certain Fifth
         Amendment to Office Lease Agreement, concerning approximately 20, 227
         square feet, Suite 3000, Richardson, Texas 75080;

     2.  Office Lease Agreement, dated January 25, 2000, by and between Landlord
         and Tenant, concerning approximately 2,281 square feet, Suite 339,
         Richardson, Texas 75080; and

     3.  Office Lease Agreement, dated October 14, 1999, as amended by that
         certain First Amendment to Office Lease Agreement dated June 15, 2000,
         by and between Landlord and Tenant, concerning approximately 2,055
         square feet, Suite 2400, Richardson, Texas 75080.

     The undersigned hereby waives notice of acceptance of this guarantee and
all other notices in connection herewith or in connection with the liabilities,
obligations, and duties guaranteed hereby, including notices of default by
Tenant under the Leases, and waives diligence, presentment, and suit on the part
of Collins Campbell Joint Venture ("Landlord") in the enforcement of any
liability, obligation or duty guaranteed hereby.

     The undersigned further agrees that Landlord shall not be first required to
enforce against Tenant or any other person any liability, obligation or duty
guaranteed hereby before seeking enforcement thereof against the undersigned.
Suit may be brought and maintained against the undersigned by Landlord to
enforce any liability, obligation or duty guaranteed hereby without joinder of
Tenant or any other person. The liability of the undersigned shall not be
affected by any indulgence, compromise, settlement or variation of terms which
may be extended to the Tenant by the Landlord or agreed upon by the Landlord and
the Tenant, and shall not be affected by any termination of the Leases, to the
extent that the Tenant thereafter continues to be liable thereunder. Landlord
and Tenant, without notice to or consent by the undersigned, may at any time or
times enter into such modifications, extensions, amendments, or other covenants
respecting the Leases, as they may deem appropriate and the undersigned shall
not be released thereby, but shall continue to be fully liable for the payment
and performance of all liabilities, obligations and duties of Tenant under the
Leases, as so further modified, extended or amended; PROVIDED, HOWEVER, that the
undersigned shall not be bound by any modifications, extensions, amendments, or
any other covenants respecting the Leases prior to Landlord's notice to the
undersigned of same, and upon notice to the undersigned of the foregoing, the
undersigned shall be bound by and liable to Landlord under the terms thereof.
Notice to the undersigned shall be sufficient, if sent to Sonus Networks, Inc.,
5 Carlisle Road, Westford, Massachusetts 01886; Attention: Chief Financial
Officer.

     This agreement shall be binding upon the undersigned and the successors,
heirs, executors, and administrators of the undersigned, and shall inure to the
benefit of the Landlord and its heirs, executors, administrators and assigns.

                             EXHIBIT "D" Page 1 of 2
<Page>

     EXECUTED this 5th day of March, 2002.

                             Guarantor:                         
                                                                
                             Sonus Networks, Inc.,              
                              a Delaware corporation            
                                                                
                             By:      /s/ Peter S. Hemme
                                      --------------------------
                             Name:    Peter S. Hemme
                                      --------------------------
                             Title:   Vice President and Controller
                                      --------------------------
                             
                             EXHIBIT "D" Page 2 of 2
<Page>

                                   EXHIBIT "E"

                    BILL OF SALE OF CERTAIN PERSONAL PROPERTY

     This Bill Of Sale Of Certain Personal Property (this "BILL OF SALE") is
made this 30th day of April, 2003, by telecom technologies, inc., a Texas
corporation ("SELLER"), to and in favor of Collins Campbell Joint Venture
("PURCHASER"), and Sonus Networks, Inc. ("SONUS").

     WHEREAS, Seller, Sonus, and Purchaser, among others, have entered into the
terms of a certain global agreement, dated March 5, 2002, (the "GLOBAL
AGREEMENT"), and Seller, Sonus, and Purchaser acknowledge and agree that the
terms of the Global Agreement shall be binding on the parties hereto;

     WHEREAS, Seller has sold to Purchaser, and Purchaser has agreed to purchase
from Seller, various items of furniture, fixtures, and equipment, and other
personal property located on the premises at Suite 3000, 1701 North Collins
Boulevard, Richardson, Texas 75080, which are more particularly described on
EXHIBIT "A" attached to this Bill of Sale and made a part hereof (collectively,
the "PERSONAL PROPERTY").

     NOW, THEREFORE, for and in consideration of the payment of in the amount of
Ten and No/100 Dollars ($10.00) and other good and valuable consideration,
including the mutual covenants and agreements between and among Seller, Sonus,
and Purchaser in the Global Agreement, the receipt and sufficiency of which are
hereby acknowledged, and in further consideration of the mutual covenants and
agreements contained herein, Seller, Sonus, and Purchaser hereby agree to the
above recitals, and Seller does hereby sell, assign, transfer and convey to
Purchaser and its successors and assigns, all of the Personal Property. The
parties hereto agree that to the extent that such sale of assets provided
hereunder requires that sales tax be paid to any appropriate taxing authorities
on account of such transaction, the Purchaser agrees to assume such obligations.

     TO HAVE AND TO HOLD the Personal Property unto Purchaser, its successors
and assigns, for their exclusive use and benefit forever. Seller warrants that
it has good and marketable title to the Personal Property, free and clear of all
mortgages, liens, charges and encumbrances (including any ad valorem taxes) as
of the effective date of this Bill of Sale.

     Seller hereby assigns to Purchaser any and all service agreements,
warranties, operating agreements, maintenance agreements, manuals, plans, and
all similar and other documents relating to the Personal Property which are in
the possession or under the control of Seller, to the extent that the same may
be assigned (collectively, "SERVICE AGREEMENTS"). Seller shall deliver to
Purchaser copies of all of the Service Agreements at the time of the closing of
the sale, unless otherwise agreed to by Seller and Purchaser in writing.

     Such transfers and assignments provided herein shall be without recourse or
liability to the Purchaser, and shall not constitute, nor be deemed to be, any
assumption by the Purchaser of any obligations, liabilities, or indebtedness of
the Seller arising out of or in connection with the Personal Property or Service
Agreements to be transferred under this Bill of Sale.

     This instrument and the Documents (as defined in the Global Agreement)
contain the entire agreement and understanding between Purchaser and Seller as
to the Personal Property conveyed by this Bill of Sale. No addition, or
amendment, alteration, modification or waiver of, any provisions of this Bill of
Sale shall be of any force or effect unless in writing and signed by Purchaser
and Seller or their duly authorized representatives.

                             EXHIBIT "E" Page 1 of 2
<Page>

     Sonus agrees to indemnify and hold harmless the Purchaser, and pay
Purchaser any losses, costs, fees, liabilities or expense (including attorney's
fees) arising out of Seller's failure to meet its obligations under this
agreement.

     IN WITNESS WHEREOF, Seller, Sonus, and Purchaser have caused this
instrument to be duly executed as of the date first written above.

                             SELLER:                                          
                                                                              
                             telecom technologies, inc.,                      
                                a Texas corporation                           
                                                                              
                             By:                                              
                                     ------------------------                 
                             Name:                                            
                                     ------------------------                 
                             Title:                                           
                                     ------------------------                 
                                                                              
                             SONUS:                                           
                                                                              
                             SONUS NETWORKS, INC.,                            
                                a Delaware corporation                        
                                                                              
                             By:                                              
                                     ------------------------                 
                             Name:                                            
                                     ------------------------                 
                             Title:                                           
                                     ------------------------                 
                                                                              
                             PURCHASER:                                       
                                                                              
                             COLLINS CAMPBELL JOINT VENTURE,                  
                              a Texas general partnership                     
                                                                              
                             By:      Jaytex Properties, Ltd.,                
                                       a Texas limited partnership            
                                                                              
                                      By:      JRS Management, Inc.           
                                                                              
                                               By:                            
                                                        ----------------------
                                                        W.T. Field, President 

                             EXHIBIT "E" Page 2 of 2
<Page>

                           EXHIBIT "A" TO BILL OF SALE

                            LIST OF PERSONAL PROPERTY

                 [TO BE PROVIDED BY TELECOM TECHNOLOGIES, INC.]

                             EXHIBIT "E" Page 3 of 2
<Page>

                                   EXHIBIT "F"

                     STORAGE AGREEMENT OF PERSONAL PROPERTY

     This Storage Agreement of Personal Property (this "STORAGE AGREEMENT") is
made this 5th day of March, 2002, by telecom technologies, inc., a Texas
corporation ("TENANT"), to and in favor of Collins Campbell Joint Venture
("LANDLORD").

                                   WITNESSETH:

     That, for and in consideration of the sum of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by Tenant, Tenant and Landlord agree that
Tenant may store all of the personal property (the "PERSONAL PROPERTY"),
described on EXHIBIT "A" hereto.

     Tenant and Landlord agree that Tenant shall have the right to store the
Personal Property, without any fee or charge payable to Landlord, for the period
from the effective date of that certain Global Agreement of even date herewith,
by and among Tenant, Landlord, and others, and continuing for the period through
and including the earlier of (i) April 30, 2003, or (ii) the Removal Date (as
defined below).

     Upon twenty (20) calendar days' prior written notice by the Landlord to the
Tenant (the "REMOVAL DATE"), Tenant shall immediately thereafter remove all of
the Personal Property from the premises of the Landlord, and the Tenant shall
indemnify and hold harmless the Landlord from any damages, losses, or claims of
the Landlord, caused by the removal of the Personal Property from the premises
of the Landlord.

     At any time or from time to time after the date hereof, the parties shall
execute and deliver or cause to be executed and delivered to each other such
other instruments and take or cause to be taken such other actions as may
reasonably be requested in order to carry out the intent and purposes of this
Storage Agreement.

     During the term of this Storage Agreement, Tenant shall maintain and insure
the Personal Property.

     In the event that Landlord enters into a new lease with one or more tenants
for the space where the Personal Property is presently stored, Tenant agrees to
exercise best efforts to reach agreements with such Tenants for the sale and/or
lease of the Personal Property, upon reasonable commercial terms acceptable to
such parties, to facilitate the efforts of the Landlord in leasing such space to
the new tenants.

     Such right of storage shall be without recourse or liability to Landlord
(or its successors and assigns), and shall not constitute, nor be deemed to be,
any assumption by Landlord (or its successors and assigns) of any obligations,
liabilities, or indebtedness of Tenant on or under the Personal Property Leases.

     No addition, or amendment, alteration, modification or waiver of, any
provisions of this Storage Agreement shall be of any force or effect unless in
writing and signed by Tenant and Landlord or their duly authorized
representatives.

                             EXHIBIT "F" Page 1 of 2
<Page>

     IN WITNESS WHEREOF, the undersigned have caused this instrument to be duly
executed as of the date first written above.

                             TENANT:                                          
                                                                              
                             telecom technologies, inc.,                      
                              a Texas corporation                             
                                                                              
                             By:     /s/ Peter S. Hemme
                                     ------------------------                 
                             Name:   Peter S. Hemme
                                     ------------------------                 
                             Title:  Treasurer
                                     ------------------------                 
                                                                              
                             LANDLORD:                                        
                                                                              
                             COLLINS CAMPBELL JOINT VENTURE,                  
                              a Texas general partnership                     
                                                                              
                             By:      Jaytex Properties, Ltd.,                
                                       a Texas limited partnership            
                                                                              
                                      By:      JRS Management, Inc.           
                                                                              
                                               By: /s/ Kelly P.B. Drabbs
                                                   ----------------------
                                                   Vice President

EXHIBITS

A    -   List of Personal Property [TO BE PROVIDED BY TENANT]

                             EXHIBIT "F" Page 2 of 2
<Page>

                                   EXHIBIT "G"

                                    GUARANTEE

     In connection with that certain Global Agreement, dated as of March 5,
2002 (the "Global Agreement"), by and among TR Lookout Partners, Ltd., Collins
Campbell Joint Venture ("CCJV"), telecom technologies, inc. ("TTI"), Sonus
Networks, Inc., the undersigned hereby unconditionally guarantees the full
payment and performance of and agrees to pay and perform as primary obligor all
liabilities, obligations and duties (including, but not limited to, payment of
rent) imposed upon telecom technologies, inc. ("TTI") under the terms of the
following agreements (collectively, the "Agreements"), as if the undersigned had
executed the Agreements:

                              GUARANTEED AGREEMENTS

     1.  The obligations of TTI to CCJV under Paragraph 7 of the Global
         Agreement;

     2.  The obligations of TTI to CCJV under the Bill of Sale, attached as
         Exhibit "E" to the Global Agreement; and

     3.  The obligations of TTI to CCJV under the Storage Agreement, attached as
         Exhibit "F" to the Global Agreement.

     The undersigned hereby waives notice of acceptance of this guarantee and
all other notices in connection herewith or in connection with the liabilities,
obligations, and duties guaranteed hereby, including notices of default by TTI
under the Agreements, and waives diligence, presentment, and suit on the part of
CCJV in the enforcement of any liability, obligation or duty guaranteed hereby.

     The undersigned further agrees that CCJV shall not be first required to
enforce against TTI or any other person, any liability, obligation or duty
guaranteed hereby before seeking enforcement thereof against the undersigned.
Suit may be brought and maintained against the undersigned by CCJV to enforce
any liability, obligation or duty guaranteed hereby without joinder of TTI or
any other person. The liability of the undersigned shall not be affected by any
indulgence, compromise, settlement or variation of terms which may be extended
to TTI by CCJV or agreed upon by CCJV and TTI, and shall not be affected by any
termination of and of the Agreements, to the extent that TTI thereafter
continues to be liable thereunder. CCJV and TTI, without notice to or consent by
the undersigned, may at any time or times enter into such modifications,
extensions, amendments, or other covenants respecting the Agreements, as they
may deem appropriate and the undersigned shall not be released thereby, but
shall continue to be fully liable for the payment and performance of all
liabilities, obligations and duties of TTI under the Agreements, as so further
modified, extended or amended; PROVIDED, HOWEVER, that the undersigned shall not
be bound by any modifications, extensions, amendments, or any other covenants
respecting the Agreements prior to CCJV's notice to the undersigned of same, and
upon notice to the undersigned of the foregoing, the undersigned shall be bound
by and liable to CCJV under the terms thereof. Notice to the undersigned shall
be sufficient, if sent to Sonus Networks, Inc., 5 Carlisle Road, Westford,
Massachusetts 01886; Attention: Chief Financial Officer.

     This agreement shall be binding upon the undersigned and the successors,
heirs, executors, and administrators of the undersigned, and shall inure to the
benefit of CCJV and its heirs, executors, administrators and assigns.

                             EXHIBIT "G" Page 1 of 2
<Page>

     EXECUTED this 5th day of March, 2002.

                             Guarantor:                      
                                                             
                             Sonus Networks, Inc.,           
                                a Delaware corporation       
                                                             
                             By:     /s/ Peter S. Hemme
                                     ------------------------
                             Name:   Peter S. Hemme
                                     ------------------------
                             Title:  Vice President and Controller
                                     -----------------------------
                             
                             EXHIBIT "G" Page 2 of 2
<Page>

                                   EXHIBIT "H"

                     [CONSENT BY LENDER TO TRLP TERMINATION]

                                 March 5, 2002

James Reynolds
Texas Capital Bank, National Association
2100 McKinney Ave., Suite 900
Dallas, Texas 75201

RE:      Termination of Office Lease Agreement (the "Termination") by and
         between TR Lookout Partners, Ltd. ("Landlord") and telecom
         technologies, inc. ("Tenant")

Ladies and Gentlemen:

     The Termination attached hereto has been consented to by Texas Capital
Bank, National Association ("Lender"). Lender holds the first lien on the
building affected by the Termination. Please sign where indicated below to
evidence your consent in writing to the Termination.

                             Very truly yours                               
                                                                            
                             TR Lookout Partners, Ltd.,                     
                              a Texas limited partnership                   
                                                                            
                             By:      Thompson Realty Investment Corporation
                                                                            
                                      By:      /s/ W.T. Field
                                               ---------------------        
                                               W.T. Field, President        
                                                                            
                             telecom technologies, inc.,                    
                               a Texas corporation                          
                                                                            
                             By:    /s/ G.M. Eastep
                                    ---------------------                   
                              Name: G.M. Eastep
                                    ---------------------                   
                              Title: Vice President and Chief Operating
                                     Officer
                                    -----------------------------------
                             
ACCEPTED AND AGREED TO:

Texas Capital Bank, National Association
By:  /s/ James R. Reynolds
     -----------------------------
Name: James R. Reynolds
         -------------------------
Title:  SVP
      ----------------------------

                             EXHIBIT "H" Page 1 of 1
<Page>

                                   EXHIBIT "I"

           [CONSENT BY LENDER TO CCJV TERMINATION AND FIFTH AMENDMENT]

                                 March 5, 2002

Principal Life Insurance Company
C/O Principal Financial Group
Des Moines, IA 50392-1360

RE:      Termination of Office Lease Agreement (the "Termination") and Fifth
         Amendment to Office Lease Agreement (the "Amendment"), both by and
         between Collins Campbell Joint Venture ("Landlord") and telecom
         technologies, inc. ("Tenant")

Ladies and Gentlemen:

     The Termination and the Amendment attached hereto have been consented to by
Principal Life Insurance Company ("Lender"). Lender holds the first lien on the
building affected by the Termination and the Amendment. Please sign where
indicated below to evidence your consent in writing to the Termination and the
Amendment.

                             Very truly yours                        
                                                                     
                             COLLINS CAMPBELL JOINT VENTURE,         
                              a Texas general partnership            
                             By:      Jaytex Properties, Ltd.,       
                                      a Texas limited partnership    
                             By:      JRS Management, Inc.           
                                                                     
                                      By:      /s/ W.T. Field
                                               --------------------- 
                                               W.T. Field, President 
                                                                     
                             telecom technologies, inc.,             
                              a Texas corporation                    
                                                                     
                             By:      /s/ G.M. Eastep
                                      -------------------            
                             Name:    G.M. Eastep
                                      -------------------            
                             Title:   Vice President and Chief
                                      Operating Officer
                                      ----------------------            
                             
ACCEPTED AND AGREED TO:

PRINCIPAL LIFE INSURANCE COMPANY,
 an Iowa corporation

By:  /s/ Deborah A. Reinhard
     -----------------------------
Name: Deborah A. Reinhard
     -----------------------------
Title: Senior Loan Administrator
      ----------------------------

                             EXHIBIT "I" Page 1 of 1
<Page>

                                   EXHIBIT "J"

                           LIMITED INDEMNITY AGREEMENT

     This Limited Indemnity Agreement (this "INDEMNITY") is entered into this
5th day of March, 2002, by and among Collins Campbell Joint Venture ("CCJV"),
telecom technologies, inc., a Texas corporation ("TTI"), and Sonus Networks,
Inc. ("SONUS").

     WHEREAS, CCJV entered into a certain letter agreement, dated April 4, 1997
(the "AGREEMENT"), with Hamid Ansari and Anousheh Ansari (collectively, the
"ANSARIS"), as amended by that certain letter agreement, dated November 1, 2000
(the "AMENDED AGREEMENT"), by and between the Ansaris and CCJV;

     WHEREAS, the Agreement and the Amended Agreement (collectively, the "LETTER
AGREEMENTS") provide for the payment by CCJV of a certain profit fee to the
Ansaris under certain conditions and circumstances more fully described in the
Letter Agreements, and which circumstances and conditions have not occurred as
of this date and may not occur;

     WHEREAS, TTI has consented to the terms of the Letter Agreements, but is
not obligated to make any payments under the same to the Ansaris, nor has TTI
agreed to perform any obligations under the Letter Agreements; and

     WHEREAS, CCJV, TTI, and Sonus, among others, have entered into the terms of
a certain global agreement, dated March 5, 2002, (the "GLOBAL AGREEMENT"), and
CCJV, TTI, and Sonus acknowledge and agree that the terms of the Global
Agreement shall be binding on the parties hereto;

     NOW, THEREFORE, for and in consideration of the payment in the amount of
Ten and No/100 Dollars ($10.00) and other good and valuable consideration,
including the mutual covenants and agreements between and among CCJV, TTI, and
Sonus in the Global Agreement, the receipt and sufficiency of which are hereby
acknowledged, and in further consideration of the mutual covenants and
agreements contained herein, CCJV, TTI, and Sonus hereby agree to the above
Recitals and as follows:

     1.  This Limited Indemnity Agreement shall be subject to the occurrence of
all of the events set forth in the Global Agreement in Paragraph 1 thereof.

     2.  Subject to paragraph 3 below, CCJV agrees to (i) defend Sonus and TTI
against any claims, suits or actions brought by the Ansaris (or either one of
them) against Sonus or TTI for performance of TTI's obligations, if any, in the
Letter Agreements (the "ANSARI CLAIMS"), and (ii) indemnify Sonus and TTI
against any damages, liabilities, costs and expenses (including reasonable
attorneys' fees) awarded by a court of final jurisdiction arising out of the
Ansari Claims. CCJV shall assume the defense of the Ansari Claims against Sonus
and TTI by counsel retained at CCJV's own expense.

     3.  CCJV's indemnification obligation is conditioned on Sonus' and TTI's
compliance with the following procedures: (a) Sonus and TTI will promptly notify
CCJV in writing of any claim or the commencement of any suit, action, proceeding
or threat that Sonus and TTI believe will result in costs for which TTI or Sonus
will be entitled to indemnification; (b) Sonus and TTI will tender to CCJV (and
its insurer) full authority to defend or settle any such claim; and (c) Sonus
and TTI shall cooperate in the defense of such claim. CCJV has no obligation to
indemnify Sonus and TTI in connection with any settlement made without CCJV's
written consent.

                             EXHIBIT "J" Page 1 of 2
<Page>

     IN WITNESS WHEREOF, CCJV, Sonus, and TTI have executed this Limited
Indemnity Agreement as of the date first written above.

                             TTI:                                             
                                                                              
                             telecom technologies, inc.,                      
                               a Texas corporation                            
                                                                              
                             By:     /s/ G.M. Eastep
                                     -------------------------                
                             Name:   G.M. Eastep
                                     -------------------------                
                             Title:  Vice President and Chief Operating 
                                     Officer
                                     -----------------------------------
                                                                              
                             SONUS:                                           
                                                                              
                             SONUS NETWORKS, INC.,                            
                                a Delaware corporation                        
                                                                              
                             By:     /s/ Peter S. Hemme
                                     -------------------------                
                             Name:   Peter S. Hemme
                                     -------------------------                
                             Title:  Vice President and Controller
                                     ------------------------------
                                                                              
                             CCJV:                                            
                                                                              
                             COLLINS CAMPBELL JOINT VENTURE,                  
                               a Texas general partnership                    
                                                                              
                             By:      Jaytex Properties, Ltd.,                
                                       a Texas limited partnership            
                                                                              
                                      By:      JRS Management, Inc.           
                                                                              
                                               By:      /s/ W.T. Field
                                                        ----------------------
                                                        W.T. Field, President 
                             
                            EXHIBIT "J" Page 2 of 2


<Page>

                                  EXHIBIT 10.25

                           LOAN AND SECURITY AGREEMENT

     This LOAN AND SECURITY AGREEMENT (this "Agreement") between SILICON 
VALLEY BANK, a California chartered bank, with its principal place of 
business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan 
production office located at One Newton Executive Park, Suite 200, 2221 
Washington Street, Newton, Massachusetts 02462, doing business under the name 
"Silicon Valley East" ("Bank") and SONUS NETWORKS, INC., a Delaware 
corporation with its chief executive office located at 5 Carlisle Road, 
Westford, Massachusetts 01886 ("Borrower"), provides the terms on which Bank 
shall lend to Borrower and Borrower shall repay Bank. The parties agree as 
follows:

     1         ACCOUNTING AND OTHER TERMS

     Accounting terms not defined in this Agreement shall be construed following
GAAP. Calculations and determinations must be made following GAAP. The term
"financial statements" includes the notes and schedules, if any. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document. Capitalized terms in this Agreement
shall have the meanings set forth in Section 13.

     2         LOAN AND TERMS OF PAYMENT

     2.1  PROMISE TO PAY. Borrower hereby unconditionally
 promises to pay Bank
the unpaid principal amount of all Credit Extensions and interest on the unpaid
principal amount of the Credit Extensions as and when due in accordance with
this Agreement.

     2.1.1     Revolving Advances.

               (a)  Bank shall make Advances not exceeding (i) the lesser of
Committed Revolving Line or, if Borrower's Tangible Net Worth at any time falls
below the TNW Threshold, the Borrowing Base, MINUS (ii) the amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit), MINUS (iii) the FX Reserve, AND MINUS (iv) the aggregate outstanding
Advances hereunder (including any Cash Management Services). Amounts borrowed
under this Section may be repaid and reborrowed during the term of this
Agreement.

               (b)  To obtain an Advance, Borrower must notify Bank by facsimile
or telephone by 3:00 p.m. Eastern time on the Business Day the Advance is to be
made. If such notification is by telephone, Borrower must promptly confirm the
notification by delivering to Bank a completed Payment/Advance Form in the form
attached as EXHIBIT B. Bank shall credit Advances to Borrower's deposit account.
Bank may make Advances under this Agreement based on instructions from a
Responsible Officer or his or her designee or without instructions if the
Advances are necessary to meet Obligations which have become due. Bank may rely
on any telephone notice given by a person whom Bank reasonably believes is a
Responsible Officer or designee. Borrower shall indemnify Bank for any loss Bank
suffers due to such reliance.

               (c)  The Committed Revolving Line terminates on the Revolving
Maturity Date, when the principal amount of all Advances and the unpaid interest
thereon, shall be immediately payable.

LETTERS OF CREDIT SUBLIMIT.

               (d)  Subject to the availability of Credit Extensions in Section
2.1.1(a), Bank shall issue or have issued Letters of Credit for Borrower's
account not exceeding: (i) the lesser of Committed Revolving Line or, if
Borrower's Tangible Net Worth at any time falls below the TNW Threshold, the
Borrowing Base, MINUS (ii) the outstanding principal balance of any Advances
(including any Cash Management Services), MINUS (iii) the FX Reserve, MINUS (iv)
the amount of all Letters of Credit (including drawn but unreimbursed Letters of
Credit), PLUS (v) an amount equal to any Letter of Credit Reserves. Without
limiting the foregoing, the face amount of

<Page>

outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve) may not exceed One Million Dollars
($1,000,000.00). Each Letter of Credit shall have an expiry date no later than
180 days after the Revolving Maturity Date provided Borrower's Letter of Credit
reimbursement obligation shall be secured by cash on terms acceptable to Bank at
all times on and after (i) the Revolving Maturity Date if the term of the
Committed Revolving Line is not extended by Bank, or (ii) the occurrence of an
Event of Default hereunder. All Letters of Credit shall be, in form and
substance, acceptable to Bank in its sole discretion and shall be subject to the
terms and conditions of Bank's form of standard Application and Letter of Credit
Agreement. Borrower agrees to execute any further documentation in connection
with the Letters of Credit as Bank may reasonably request.

               (e)  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.

               (f)  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.

               (g)  Upon the issuance of any letter of credit payable in a
currency other than United States Dollars, Bank shall create a reserve (the
"Letter of Credit 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 amount of
such 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 reserve for so long as
such letter of credit remains outstanding.

FOREIGN EXCHANGE SUBLIMIT. If there is availability for Credit Extensions under
Section 2.1.1(a), then Borrower may enter in foreign exchange forward contracts
with the Bank under which Borrower commits to purchase from or sell to Bank a
set amount of foreign currency more than one business day after the contract
date (the "FX Forward Contract"). Bank shall subtract 10% of each outstanding FX
Forward Contract as the foreign exchange sublimit, which sublimit is a maximum
of One Million Dollars ($1,000,000.00) (the "FX Reserve"). The total FX Forward
Contracts at any one time may not exceed 10 times the amount of the FX Reserve.
Bank may terminate the FX Forward Contracts if an Event of Default occurs. Any
outstanding amounts payable to the Bank under the FX Forward Contracts shall be
paid in full, or, if agreed to by Bank, secured by cash on terms acceptable to
Bank at all times on and after (i) the Revolving Maturity Date if the term of
the Committed Revolving Line is not extended by Bank, or (ii) the occurrence of
an Event of Default hereunder.

     2.1.2     CASH MANAGEMENT SERVICES SUBLIMIT. Subject to the availability of
Credit Extensions in Section 2.1.1(a), Borrower may use up to Five Million
Dollars ($5,000,000.00) for the Bank's Cash Management Services, which may
include merchant services, direct deposit of payroll, business credit card, and
check cashing services identified in the various cash management services
agreements related to such services (the "Cash Management Services"). Such
aggregate amounts utilized under the Cash Management Services sublimit shall at
all times reduce the amount otherwise available for Credit Extensions under the
Committed Revolving Line. Any amounts Bank pays on behalf of Borrower or any
amounts that are not paid by Borrower for any Cash Management Services will be
treated as Advances under the Committed Revolving Line and will accrue interest
at the interest rate applicable to Advances. The balance of any Cash Management
Services payable to the Bank on the Revolving Maturity Date shall be paid in
full, or, if agreed to by Bank, secured by cash on terms acceptable to Bank at
all times on and after (i) the Revolving Maturity Date if the term of the
Committed Revolving Line is not extended by Bank, or (ii) the occurrence of an
Event of Default hereunder.

                                        2
<Page>

     2.1.3     EQUIPMENT ADVANCES.

               (a)  Through the date which is three hundred sixty-four (364)
days following the Closing Date (the "Equipment Availability End Date"), Bank
shall make advances ("Equipment Advance" and, collectively, "Equipment
Advances") to Borrower in an aggregate amount not exceeding the Committed
Equipment Line. To evidence the Equipment Advance or Equipment Advances,
Borrower shall deliver to Bank, at the time of each Equipment Advance request,
an invoice for the Eligible Equipment to be financed. Except as provided below,
the Equipment Advances may only be used to finance Eligible Equipment purchased
within ninety (90) days (determined based upon the applicable invoice date of
such Eligible Equipment) of each Equipment Advance request. Notwithstanding the
foregoing, the initial Equipment Advance may be used to finance Eligible
Equipment purchased on or after September 30, 2001 (determined based upon the
applicable invoice date of such Eligible Equipment). Equipment Advances shall
not exceed one hundred percent (100%) of the invoice amount of such Eligible
Equipment, excluding taxes, shipping, warranty charges, freight discounts and
installation expense relating to such Equipment. Expect as provided below, each
Equipment Advance under the Committed Equipment Line shall be made by Bank on
the first (1st) day of the month. Notwithstanding the foregoing, if Borrower
requests an Equipment Advance on a day other than the first (1st) day of the
month, such Equipment Advance shall be deemed to have occurred on and interest
shall be calculated beginning with the first day of such month. Each Equipment
Advance must be for a minimum amount of One Hundred Thousand Dollars
($100,000.00).

               (b)  Interest accrues from the date of each Equipment Advance at
the per annum rate described in Section 2.3(a), and shall be payable monthly on
the Payment Date of each month commencing with the initial Payment Date
following each such Equipment Advance. Each Equipment Advance shall be payable
in (i) thirty-six (36) equal monthly installments of principal, PLUS (ii)
monthly payments of accrued interest, beginning on the first Payment Date
following such Equipment Advance and continuing on each Payment Date thereafter
through the Equipment Maturity Date applicable to such Equipment Advance.
Borrower shall have the right to pre-pay Equipment Advances without penalty.
Equipment Advances when repaid may not be reborrowed.

               (c)  To obtain an Equipment Advance, Borrower must notify Bank
(the notice is irrevocable) by facsimile no later than 3:00 p.m. Eastern time
one (1) Business Day before the day on which the Equipment Advance is to be
made. The notice in the form of Exhibit B (Payment/Advance Form) must be signed
by a Responsible Officer or designee and include a copy of the invoice for the
Equipment being financed.

     2.1.4     UNDISBURSED CREDIT EXTENSIONS. The Bank's obligation to lend the
undisbursed portion of the Credit Extensions shall terminate if there has been a
Material Adverse Change, or there has been any material adverse deviation by
Borrower from the most recent business plan or budget of Borrower presented to
and accepted by Bank prior to the execution of this Agreement.

     2.2       OVERADVANCES. If Borrower's Tangible Net Worth at any time falls
below the TNW Threshold, then at all times thereafter Borrower must immediately
pay in cash to Bank the amount (if any) in which Borrower's aggregate
Obligations under Sections 2.1.1, 2.1.2, 2.1.3 and 2.1.4 exceed the Borrowing
Base.

     2.3       INTEREST RATE; PAYMENTS.

               (a)  INTEREST RATE. Advances under the Committed Revolving Line
shall accrue interest on the outstanding principal balance of the Committed
Revolving Line at a per annum rate described on the INTEREST RATE SUPPLEMENT TO
AGREEMENT attached hereto and incorporated by reference herein. Equipment
Advances under the Committed Equipment Line shall accrue interest on the
outstanding principal balance of the Committed Equipment Line at a per annum
rate equal to the Bank's Prime Rate. After an Event of Default, Obligations
shall bear interest at five percent (5.0%) above the rate effective immediately
before the Event of Default. The interest rate shall increase or decrease when
the Prime Rate changes. Interest is computed on the basis of a 360 day year for
the actual number of days elapsed.

               (b)  PAYMENTS. Interest is payable on all Credit Extensions under
this Agreement on the Payment Date of each month. Bank may debit any of
Borrower's deposit accounts including Account Number

                                        3
<Page>

____________________ for principal and interest payments or any amounts Borrower
owes Bank. Bank shall promptly notify Borrower when it debits Borrower's
accounts. These debits are not a set-off. Payments received after 12:00 noon
Eastern time are considered received at the opening of business on the next
Business Day; provided that this shall not apply if the Borrower had sufficient
cash in such account to make such payment in full at all times on the due date
therefore. When a payment is due on a day that is not a Business Day, the
payment is due the next Business Day and additional fees or interest, as
applicable, shall continue to accrue.

     2.4       FEES. Borrower shall pay to Bank:

               (a)  COMMITTED REVOLVING LINE FACILITY FEE. A fully earned,
non-refundable, one-time Committed Revolving Line facility fee of Fifty Thousand
Dollars ($50,000.00), due and payable on the Closing Date; and

               (b)  UNUSED COMMITTED EQUIPMENT LINE FACILITY FEE. As
compensation for the Bank's maintenance of sufficient funds available for such
purpose, the Bank shall have earned a facility fee on the Unused Committed
Equipment Line in an amount equal to one-half of one percent (0.50%) of the
Unused Committed Equipment Line on September 30, 2002, which Unused Committed
Equipment Line facility fee shall be due and payable by Borrower on September
30, 2002. If the Committed Equipment Line is terminated prior to September 30,
2002, the Unused Committed Equipment Line facility fee shall be equal to
one-half of one percent (0.50%) of the Unused Committed Equipment Line as of the
date of such termination, which fee shall be due and payable by Borrower on the
date of such termination. The Borrower shall not be entitled to any credit,
rebate or repayment of any facility fee previously earned by the Bank pursuant
to this Section notwithstanding any termination of the within Agreement, or
suspension or termination of the Bank's obligation to make loans and advances
hereunder; and

               (c)  LETTER OF CREDIT FEE. Except as provided below, Borrower
shall pay the Bank's customary fees and expenses for the issuance of Letters of
Credit, including, without limitation, a per annum fee for each Letter of Credit
equal to one percent (1.0%) of the face amount of each such Letter of Credit
issued, upon the issuance or renewal of such Letter of Credit by the Bank. The
Letter of Credit fees shall be due and fully earned upon Borrower's request for
each such Letter of Credit. Notwithstanding the foregoing, no Letter of Credit
fee shall be charged to the Borrower for the initial Five Hundred Fifty-Five
Thousand Dollars ($555,000.00) of Letters of Credit (the "Non-Fee Letters of
Credit") in the aggregate issued hereunder, nor shall any Letter of Credit fee
be charged to Borrower for any renewal of the Non-Fee Letters of Credit; and

               (d)  BANK EXPENSES. All Bank Expenses (including reasonable
attorneys' fees and expenses incurred through and after the Closing Date) when
due.

     2.5       ADDITIONAL COSTS. If any law or regulation increases Bank's costs
or reduces its income for any loan, Borrower shall pay the increase in cost or
reduction in income or additional expense PROVIDED, HOWEVER, that Borrower shall
not be liable for any amount attributable to any period before 180 days prior to
the date Bank notifies Borrower of such increased costs. Bank agrees that it
shall allocate any increased costs among its customers similarly affected in
good faith and in a manner consistent with Bank's customary practice.

     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;

               (b)  Interest Rate Supplement to Agreement;

               (c)  Copy of Borrower's Certificate of Incorporation (certified
     by Secretary of State);

                                        4
<Page>

               (d)  a certificate of the Secretary of Borrower with respect to
     articles, bylaws, incumbency and resolutions authorizing the execution and
     delivery of this Agreement;

               (e)  Negative Pledge Agreement covering Intellectual Property;

               (f)  landlord's consent;

               (g)  a legal opinion of Borrower's counsel, in form and substance
     acceptable to Bank;

               (h)  financing statements (Forms UCC-1);

               (i)  Account Control Agreement/ Investment Account Control
     Agreement;

               (j)  Perfection Certificate;

               (k)  insurance certificate;

               (l)  results satisfactory to Bank in its sole discretion from the
     Initial Audit described in Section 6.2 prior to the initial Advance under
     the Committed Revolving Line;

               (m)  payment of the fees and Bank Expenses then due specified in
     Section 2.4 hereof;

               (n)  Certificate of Good Standing/Legal Existence (Long Form);

               (o)  Certificate of Foreign Qualification (if applicable); and

               (p)  such other documents, and completion of such other matters,
     as Bank may reasonably deem necessary or appropriate.

     3.2       CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. Bank's obligations
to make each Credit Extension, including the initial Credit Extension, is
subject to the following:

               (a)  timely receipt of any Payment/Advance Form; and

               (b)  the representations and warranties in Section 5 shall be
materially true on the date of the Payment/Advance Form and on the effective
date of each Credit Extension and no Event of Default shall have occurred and be
continuing as of such effective date, or result from the Credit Extension. Each
Credit Extension is Borrower's representation and warranty on that date that the
representations and warranties in Section 5 remain true.

     4         CREATION OF SECURITY INTEREST

     4.1       GRANT OF SECURITY INTEREST. Borrower hereby grants Bank, to
secure the payment and performance in full of all of the Obligations and the
performance of each of Borrower's duties under the Loan Documents, a continuing
security interest in, and pledges and assigns to the Bank, the Collateral,
wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof. Borrower warrants and represents that the
security interest granted herein shall be a first priority security interest in
the Collateral. Upon and during the continuance of an Event of Default, Bank may
place a "hold" on any deposit account pledged as Collateral. Borrower agrees
that any disposition of the Collateral in violation of this Agreement, by either
the Borrower or any other Person, shall be deemed to violate the rights of the
Bank under the Code. If the Agreement is terminated, Bank's lien and security
interest in the Collateral shall continue until Borrower fully satisfies its
Obligations. If Borrower shall at any time, acquire a commercial tort claim,
Borrower shall promptly notify Bank in a writing signed by Borrower of the brief
details thereof and grant to Bank in such writing a security interest therein
and in the

                                        5
<Page>

proceeds thereof, all upon the terms of this Agreement, with such writing to
be in form and substance satisfactory to Bank.

     5         REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants as follows:

     5.1       DUE ORGANIZATION AND AUTHORIZATION. Borrower and each Subsidiary
is duly existing and in good standing in its state of formation and qualified
and licensed to do business in, and in good standing in, any state in which the
conduct of its business or its ownership of property requires that it be
qualified except where the failure to do so could not reasonably be expected to
cause a Material Adverse Change. In connection with this Agreement, the Borrower
delivered to the Bank a certificate signed by the Borrower and entitled
"Perfection Certificate". The Borrower represents and warrants to the Bank that:
(a) the Borrower's exact legal name is that indicated on the Perfection
Certificate and on the signature page hereof; and (b) the Borrower is an
organization of the type, and is organized in the jurisdiction, set forth in the
Perfection Certificate; and (c) the Perfection Certificate accurately sets forth
the Borrower's organizational identification number or accurately states that
the Borrower has none; and (d) the Perfection Certificate accurately sets forth
the Borrower's place of business, or, if more than one, its chief executive
office as well as the Borrower's mailing address if different, and (e) all other
information set forth on the Perfection Certificate pertaining to the Borrower
is accurate and complete. If the Borrower does not now have an organizational
identification number, but later obtains it, Borrower shall forthwith notify the
Bank or such organizational identification number.

     The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's organizational documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which or by
which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.

     5.2       COLLATERAL. Borrower has good title to the Collateral, free of
Liens except Permitted Liens. As of the Closing Date, Borrower has no other
deposit account, other than the deposit accounts with Bank and deposit accounts
described in the Perfection Certificate delivered to the Bank in connection
herewith. The Accounts are bona fide, existing obligations, and the service or
property has been performed or delivered to the account debtor or its agent for
immediate shipment to and unconditional acceptance by the account debtor. The
Collateral is not in the possession of any third party bailee (such as a
warehouse). In the event that Borrower, after the date hereof, intends to store
or otherwise deliver any portion of the Collateral to a bailee, then Borrower
will first receive the written consent of Bank and such bailee must acknowledge
in writing that the bailee is holding such Collateral for the benefit of Bank.
Borrower has no knowledge of any actual or imminent Insolvency Proceeding of any
account debtor whose accounts are an Eligible Account in any Borrowing Base
Certificate. All Inventory is in all material respects of good and marketable
quality, free from material defects.

     5.3       LITIGATION. Except as shown in the Schedule, there are no actions
or proceedings pending or, to the knowledge of Borrower's Responsible Officers,
threatened by or against Borrower or any Subsidiary in which an adverse decision
could reasonably be expected to cause a Material Adverse Change.

     5.4       NO MATERIAL DEVIATION IN FINANCIAL STATEMENTS. All consolidated
financial statements for Borrower and any Subsidiary delivered to Bank fairly
present in all material respects Borrower's consolidated financial condition and
Borrower's consolidated results of operations for the periods indicated. Such
monthly financial statements shall not include notes. There has not been any
material deterioration in Borrower's consolidated financial condition since the
date of the most recent financial statements submitted to Bank.

     5.5       SOLVENCY. Borrower is able to pay its debts (including trade
debts) as they mature.

     5.6       REGULATORY COMPLIANCE. Borrower is not an "investment company" or
a company "controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important

                                        6
<Page>

activities in extending credit for margin stock (under Regulations T and U of
the Federal Reserve Board of Governors). Borrower has complied in all material
respects with the Federal Fair Labor Standards Act. Borrower has not violated
any laws, ordinances or rules, the violation of which could reasonably be
expected to cause a Material Adverse Change. None of Borrower's or any
Subsidiary's properties or assets has been used by Borrower or any Subsidiary
or, to the best of Borrower's knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous substance other than
legally. Borrower and each Subsidiary has timely filed all required tax returns
and paid, or made adequate provision to pay, all material taxes, except those
being contested in good faith with adequate reserves under GAAP. Borrower and
each Subsidiary has obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all government
authorities that are necessary to continue its business as currently conducted
except where the failure to make such declarations, notices or filings would not
reasonably be expected to cause a Material Adverse Change.

     5.7       SUBSIDIARIES. Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments.

     5.8       FULL DISCLOSURE. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank
taken together with all such written certificates and written statements given
to Bank contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results).

     5.9       DESIGNATED SENIOR DEBT. All Obligations of the Borrower under or
arising in connection with this Agreement, as may be amended from time to time,
constitute "Designated Senior Debt" under and as defined in the 4.75%
Convertible Subordinated Note Due 2006 dated May 1, 2001 made by Borrower
payable to BellSouth Corporation issued pursuant to that certain Securities
Purchase Agreement dated as of May 1, 2001 between BellSouth Corporation and the
Borrower (hereinafter, said Note and Securities Purchase Agreement shall be
referred to as the "BellSouth Debt"). The Borrower hereby acknowledges, confirms
and agrees that the BellSouth Debt shall not be amended in any manner which
might adversely effect the Bank's interest as a holder of "Designated Senior
Debt", as such term is defined in the BellSouth Debt as of the Closing Date.

     6         AFFIRMATIVE COVENANTS

     Borrower shall do all of the following:

     6.1       GOVERNMENT COMPLIANCE. Except as permitted in Section 7.1 and
Section 7.3 with respect to Borrower's Subsidiaries, Borrower shall maintain its
and all Subsidiaries' legal existence and good standing in its jurisdiction of
formation and maintain qualification in each jurisdiction in which the failure
to so qualify would reasonably be expected to have a material adverse effect on
Borrower's business or operations. Borrower shall comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could have a material adverse effect on
Borrower's business or operations or be expected to cause a Material Adverse
Change.

     6.2       FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.

               (a)  Borrower shall deliver to Bank: (i) as soon as available,
but no later than twenty-five (25) days after the last day of each month, a
company prepared unaudited consolidated balance sheet and unaudited income
statement covering Borrower's consolidated operations during the period
certified by a Responsible Officer and in a form acceptable to Bank and such
financial statements shall not include notes and shall be subject to year-end
and quarterly adjustments; (ii) on or before the earlier of: (A) forty-five (45)
days after the last day of each quarter or (B) five (5) days after filing with
the Securities and Exchange Commission, a copy of Borrower's Form 10-Q as filed
with the Securities and Exchange Commission; (iii) on or before the earlier of:
(A) one hundred twenty

                                        7
<Page>

(120) days after the last day of Borrower's fiscal year or (B) five (5) days
after filing with the Securities and Exchange Commission, a copy of Borrower's
Form 10-K as filed with the Securities and Exchange Commission, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm; (iv) within five (5) days of filing with the Securities
and Exchange Commission, a copy of Borrower's Form 8-K as filed with the
Securities and Exchange Commission; (v) as soon as available, but no later than
forty-five (45) days after the end of Borrower's fiscal year (and upon any
revisions to same which are approved by Borrower's Board of Directors), a
balance sheet, income statement and cash flow projections for the then current
fiscal year; (vi) within five (5) days of filing, copies of all statements,
reports and notices made available to Borrower's security holders or to any
holders of Subordinated Debt; (vii) a prompt 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 Five Hundred Thousand Dollars
($500,000.00) or more; and (viii) other financial information reasonably
requested by Bank.

               (b)  If Borrower's Tangible Net Worth as at the last day of a
month is below the TNW Threshold, Borrower shall deliver to Bank, within
twenty-five (25) days after the last day of each month thereafter in which
Advances were requested by Borrower or Obligations under the Committed Revolving
Line were outstanding, a Borrowing Base Certificate signed by a Responsible
Officer in the form of EXHIBIT C, with aged listings of accounts receivable.

               (c)  Within twenty-five (25) days after the last day of each
month, Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in the form of EXHIBIT D.

               (d)  Allow Bank to audit Borrower's Collateral at Borrower's
expense. Such audits shall be conducted no more often than once every twelve
(12) months unless an Event of Default has occurred and is continuing. The
Borrower shall provide the Bank with access to all its records and financial
information so that the first such audit (the "Initial Audit") of Borrower's
Accounts shall be completed by Bank prior to the initial Advance under the
Committed Revolving Line.

     6.3       INVENTORY; RETURNS. Borrower shall keep all Inventory in good and
marketable condition, free from material defects. Returns and allowances between
Borrower and its account debtors shall follow Borrower's customary practices as
they exist at the Closing Date. Borrower must promptly notify Bank of all
returns, recoveries, disputes and claims that involve more than Two Hundred
Fifty Thousand Dollars ($250,000.00). The obligations under this Section 6.3
shall not apply to Inventory which is supplied to Borrower's customers for trial
or evaluation purposes.

     6.4       TAXES. Borrower shall make, and cause each Subsidiary to make,
timely payment of all material federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting in good faith,
with adequate reserves maintained in accordance with GAAP) and will deliver to
Bank, on demand, appropriate certificates attesting to such payments.

     6.5       INSURANCE. Borrower shall keep its business and the Collateral
insured for risks and in amounts, standard for Borrower's industry. Insurance
policies shall be in a form, with companies, and in amounts that are reasonably
satisfactory to Bank. All property policies shall have a lender's loss payable
endorsement showing Bank as an additional loss payee and all liability policies
shall show the Bank as an additional insured and all policies shall provide that
the insurer must give Bank at least twenty (20) days notice before canceling its
policy. At Bank's request, Borrower shall deliver certified copies of policies
and evidence of all premium payments. Proceeds payable under any policy shall,
at Bank's option, be payable to Bank on account of the Obligations.
Notwithstanding the foregoing, so long as no Event of Default has occurred and
is continuing, Borrower shall have the option of applying the proceeds of any
casualty policy up to $25,000.00, in the aggregate, toward the replacement or
repair of destroyed or damaged property; provided that (i) any such replaced or
repaired property (a) shall be of equal or like value as the replaced or
repaired Collateral and (b) shall be deemed Collateral in which Bank has been
granted a first priority security interest and (ii) after the occurrence and
during the continuation of an Event of Default all proceeds

                                        8
<Page>

payable under such casualty policy shall, at the option of the Bank, be payable
to Bank on account of the Obligations. If Borrower fails to obtain insurance as
required under this Section or to pay any amount or furnish any required proof
of payment to third persons and the Bank, Bank may make all or part of such
payment or obtain such insurance policies required in this Section, and take any
action under the policies Bank deems prudent.

     6.6       PRIMARY ACCOUNTS. In order to permit the Bank to monitor the
Borrower's financial performance and condition, Borrower shall maintain its
primary operating accounts with Bank. In addition to the foregoing: (i) on the
Closing Date, Borrower shall maintain or have administered through the Bank not
less than Thirty-Five Million Dollars ($35,000,000.00) in cash or securities,
and (ii) at all times after the Closing Date and prior to the termination of
this Agreement, Borrower shall maintain or have administered through the Bank
not less than Twenty-Five Million Dollars ($25,000,000.00) in cash or securities
in excess of that amount used for Borrower's operations. Borrower shall identify
to Bank, in writing, of any bank or securities account opened by Borrower with
any institution other than Bank. In addition, for each such account that the
Borrower at any time opens or maintains, Borrower shall, at the Bank's request
and option, pursuant to an agreement in form and substance acceptable to the
Bank, cause the depository bank or securities intermediary to agree that such
account is the collateral of the Bank pursuant to the terms hereunder. The
provisions of this paragraph shall not apply to deposit accounts exclusively
used for payroll, payroll taxes and other employee wage and benefit payments to
or for the benefit of the Borrower's employees.

     6.7       FINANCIAL COVENANTS. Borrower shall maintain at all times, to be
tested as of the last day of each month, unless otherwise noted:

               (a)  QUICK RATIO. Borrower shall maintain a ratio of Quick Assets
     to Current Liabilities (less Deferred Maintenance Revenue), as of the last
     day of each month, of at least 1.5 to 1.0.

               (b)  TANGIBLE NET WORTH. Borrower shall maintain, as of the last
     day of each month, a Tangible Net Worth of at least: (i) Seventy Million
     Dollars ($70,000,000.00) for each month through the month ending March 31,
     2002, (ii) Sixty Million Dollars ($60,000,000.00) for each month from April
     30, 2002 through the month ending September 30, 2002, and (iii) Fifty
     Million Dollars ($50,000,000.00) for each month after September 30, 2002;
     PROVIDED THAT each of the threshold amounts listed in (i)-(iii) above shall
     be increased by fifty percent (50%) of the amount of the proceeds received
     by Borrower from equity issued by Borrower after the Closing Date.

     6.8       FURTHER ASSURANCES. Borrower shall execute any further
instruments and take further action as Bank reasonably requests to perfect or
continue Bank's security interest in the Collateral or to effect the purposes of
this Agreement.

     7         NEGATIVE COVENANTS

     Borrower shall not do any of the following without the Bank's prior written
consent which shall not be unreasonably withheld:

     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, except for 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) of worn-out or obsolete Equipment;
(iv) the discontinued products identified on the Schedule; and (v) furniture or
equipment owned by telecom technologies, inc. and other fixed assets to be
transferred to its landlord pursuant to a real property lease agreement; and
(vi) of assets from a Subsidiary of the Borrower to the Borrower or another
Subsidiary of the Borrower.

     7.2       CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrower, or have a

                                        9
<Page>

material change in management. Borrower shall not, without providing Bank with
written notice within fifteen (15) days thereafter: (i) relocate its chief
executive office, or add any new offices or business locations (unless such new
offices or business locations contain less than Fifty Thousand Dollars
($50,000.00) in Borrower's assets or property), or (ii) change its jurisdiction
of organization, or (iii) change its organizational structure or type, or (iv)
change its legal name, or (v) change any organizational number (if any) assigned
by its jurisdiction of organization.

     7.3       MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person other than: (i) mergers of: (A)
Borrower's Subsidiaries with other of Borrower's Subsidiaries, or (B) Borrower's
Subsidiaries with and into the Borrower (provided that Borrower is the surviving
legal entity), and (ii) the dissolution of Borrower's Subsidiaries by Borrower.

     7.4       INDEBTEDNESS. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.

     7.5       ENCUMBRANCE. Create, incur, or allow any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein. The Collateral may also be subject to Permitted Liens.

     7.6       DISTRIBUTIONS; INVESTMENTS. (i) Directly or indirectly acquire or
own any Person, or make any Investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do so; or (ii) pay any cash
dividends or make any distribution (other than non-cash dividends) or payment or
redeem, retire or purchase any capital stock except for: (A) the repurchase by
Borrower of restricted stock owned by Borrower's terminated employees, and (B)
the purchase by Borrower of Borrower's common stock purchased in the open
market, except that the amount of Borrower's repurchases or purchases, as
applicable, of stock in (A) and (B) above shall not be greater than
$3,000,000.00 in the aggregate.

     7.7       TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter or
permit any material transaction with any Affiliate, except transactions that are
in the ordinary course of 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.

     7.8       SUBORDINATED DEBT. Make or permit any payment on any Subordinated
Debt, except under the terms of the Subordinated Debt, or amend any provision in
any document relating to the Subordinated Debt, without Bank's prior written
consent.

     7.9       COMPLIANCE. Become an "investment company" or a company
controlled by an "investment company", under the Investment Company Act of 1940
or undertake as one of its important activities extending credit to purchase or
carry margin stock, or use the proceeds of any Credit Extension for that
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, if the violation could reasonably be expected to have a material
adverse effect on Borrower's business or operations or would reasonably be
expected to cause a Material Adverse Change, or permit any of its Subsidiaries
to do so.

     8         EVENTS OF DEFAULT

     Any one of the following is an Event of Default:

     8.1       PAYMENT DEFAULT. Borrower fails to pay any of the Obligations
within three (3) Business Days after their due date. During the additional
period the failure to cure the default is not an Event of Default (but no Credit
Extension shall be made during the cure period);

                                       10
<Page>

     8.2       COVENANT DEFAULT. Borrower does not perform any obligation in
Section 6 or violates any covenant in Section 7 or does not perform or observe
any other material term, condition or covenant in this Agreement, any Loan
Documents, or in any agreement between Borrower and Bank and as to any default
under a term, condition or covenant that can be cured, has not cured the default
within twenty (20) days after it occurs, or if the default cannot be cured
within such twenty (20) days or cannot be cured after Borrower's attempts in the
twenty (20) day period, and the default may be cured within a reasonable time,
then Borrower shall have additional time, (of not more than twenty (20) days) to
attempt to cure the default. Grace periods provided under this section shall not
apply, among other things, to financial covenants or any other covenants that
are required to be satisfied, completed or tested by a date certain. During the
additional period the failure to cure the default is not an Event of Default
(but no Credit Extensions shall be made during the cure period);

     8.3       MATERIAL ADVERSE CHANGE. A Material Adverse Change occurs;

     8.4       ATTACHMENT. (i) Any material portion of Borrower's assets is
attached, seized, levied on, or comes into possession of a trustee or receiver
and the attachment, seizure or levy is not removed in ten (10) days; (ii) the
service of process upon the Borrower seeking to attach, by trustee or similar
process any funds of the Borrower on deposit with the Bank; (iii) Borrower is
enjoined, restrained, or prevented by court order from conducting a material
part of its business; (iv) a judgment or other claim becomes a Lien on a
material portion of Borrower's assets; or (v) a notice of lien, levy, or
assessment is filed against any of Borrower's assets by any government agency
and not paid within ten (10) days after Borrower receives notice. These are not
Events of Default if stayed or if a bond is posted pending contest by Borrower
(but no Credit Extensions shall be made during the cure period);

     8.5       INSOLVENCY. (i) Borrower becomes insolvent; (ii) Borrower begins
an Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against
Borrower and not dismissed or stayed within forty-five (45) days (but no Credit
Extensions shall be made before any Insolvency Proceeding is dismissed);

     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 Five Hundred Thousand Dollars
($500,000) or that could result in a Material Adverse Change;

     8.7       JUDGMENTS. Except with respect to a judgment specified on
SCHEDULE 8.7 with regard to Borrower's wholly-owned Subsidiary, telecom
technologies, inc., if a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least Five Hundred Thousand
Dollars ($500,000) 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);

     8.8       MISREPRESENTATIONS. If Borrower or any Person acting for Borrower
makes any material misrepresentation or material misstatement now or later in
any warranty or representation in this Agreement or in any writing delivered to
Bank or to induce Bank to enter this Agreement or any Loan Document.

     9         BANK'S RIGHTS AND REMEDIES

     9.1       RIGHTS AND REMEDIES. When an Event of Default occurs and
continues Bank may, without notice or demand, do any or all of the following:

               (a)  Declare all Obligations immediately due and payable (but if
     an Event of Default described in Section 8.5 occurs all Obligations are
     immediately due and payable without any action by Bank);

               (b)  Stop advancing money or extending credit for Borrower's
     benefit under this Agreement or under any other agreement between Borrower
     and Bank;

                                       11
<Page>

               (c)  Settle or adjust disputes and claims directly with account
     debtors for amounts, on terms and in any order that Bank considers
     advisable;

               (d)  Make any payments and do any acts it considers necessary or
     reasonable to protect its security interest in the Collateral. Borrower
     shall assemble the Collateral if Bank requests and make it available as
     Bank designates. Bank may enter premises where the Collateral is located
     (to extent not prohibited by applicable law and as to Collateral in the
     possession of customers of Borrower, only after thirty (30) days prior
     written notice to Borrower), take and maintain possession of any part of
     the Collateral, and pay, purchase, contest, or compromise any Lien which
     appears to be prior or superior to its security interest and pay all
     expenses incurred. Borrower grants Bank a license to enter and occupy any
     of its premises, without charge, to exercise any of Bank's rights or
     remedies;

               (e)  Apply to the Obligations any (i) balances and deposits of
     Borrower it holds, or (ii) any amount held by Bank owing to or for the
     credit or the account of Borrower;

               (f)  Ship, reclaim, recover, store, finish, maintain, repair,
     prepare for sale, advertise for sale, and sell the Collateral. Bank is
     granted a non-exclusive, royalty-free license or other right 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 similar property 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, Borrower's rights under all licenses and all franchise
     agreements inure to Bank's benefit for the purposes described herein and to
     the extent not prohibited by the terms of any licenses or franchise
     agreements in effect on the date hereof and under which the Borrower is the
     licensee or franchisee, only to the extent such prohibitions are
     enforceable; and

               (g)  Dispose of the Collateral according to the Code.

     9.2       POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank as
its lawful attorney-in-fact, to be effective upon the occurrence and during the
continuance of an Event of Default, to: (i) endorse Borrower's name on any
checks or other forms of payment or security; (ii) sign Borrower's name on any
invoice or bill of lading for any Account or drafts against account debtors;
(iii) settle and adjust disputes and claims about the Accounts directly with
account debtors, for amounts and on terms Bank determines reasonable; (iv) make,
settle, and adjust all claims under Borrower's insurance policies; and (v)
transfer the Collateral into the name of Bank or a third party as the Code
permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign
Borrower's name on any documents necessary to perfect or continue the perfection
of any security interest regardless of whether an Event of Default has occurred
until all Obligations have been satisfied in full and Bank is under no further
obligation to make Credit Extensions hereunder. Bank's foregoing appointment as
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.

     9.3       ACCOUNTS COLLECTION. In the event that an Event of Default occurs
and is continuing, Bank may notify any Person owing Borrower money of Bank's
security interest in the funds and verify and/or collect the amount of the
Account. After the occurrence of an Event of Default, any amounts received by
Borrower shall be held in trust by Borrower for Bank, and, if requested by Bank,
Borrower shall immediately deliver such receipts to Bank in the form received
from the account debtor, with proper endorsements for deposit.

     9.4       BANK EXPENSES. Any amounts paid by Bank as provided herein are
Bank Expenses and are immediately due and payable, and shall bear interest at
the then applicable rate and be secured by the Collateral. No payments by Bank
shall be deemed an agreement to make similar payments in the future or Bank's
waiver of any Event of Default.

     9.5       BANK'S LIABILITY FOR COLLATERAL. So long as the Bank complies
with reasonable banking practices regarding the safekeeping of collateral, the
Bank shall not be liable or responsible for: (a) the safekeeping of the

                                       12
<Page>

Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the
value of the Collateral; or (d) any act or default of any carrier, warehouseman,
bailee, or other person. Borrower bears all risk of loss, damage or destruction
of the Collateral.

     9.6       REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements are cumulative. Bank has
all rights and remedies provided under the Code, by law, or in equity. Bank's
exercise of one right or remedy is not an election, and Bank's waiver of any
Event of Default is not a continuing waiver. Bank's delay is not a waiver,
election, or acquiescence. No waiver hereunder shall be effective unless signed
by Bank and then is only effective for the specific instance and purpose for
which it was given.

     9.7       DEMAND WAIVER. Borrower waives demand, 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 held by Bank on which
Borrower is liable.

     10        NOTICES

     All notices or demands by any party to this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile at the addresses listed below. Either Bank or Borrower may
change its notice address by giving the other written notice.

                  If to Borrower:   Sonus Networks, Inc.
                                    5 Carlisle Road
                                    Westford, Massachusetts 01886
                                    Attn: Mr. Stephen J. Nill, CFO
                                    Fax: 978-692-9118

                  with a copy to:   Bingham Dana LLP
                                    150 Federal Street
                                    Boston, Massachusetts 02110
                                    Attn: Johan V. Brigham, Esquire
                                    Fax: 617-951-8736

                  If to Bank:       Silicon Valley Bank
                                    One Newton Executive Park, Suite 200
                                    2221 Washington Street
                                    Newton, Massachusetts  02462
                                    Attn: Ms. Pamela Braren
                                    Fax:  (617) 969-4395

                  with a copy to:   Riemer & Braunstein LLP
                                    Three Center Plaza
                                    Boston, Massachusetts 02108
                                    Attn: David A. Ephraim, Esquire
                                    FAX: (617) 880-3456

     11        CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

     Massachusetts law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Massachusetts; provided, however, that if for
any reason Bank cannot avail itself of such courts in the Commonwealth of
Massachusetts, Borrower accepts jurisdiction of the courts and venue in Santa
Clara County, California. NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING

                                       13
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AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION
WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE
COLLATERAL OR TO OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER OR ITS
PROPERTY.

BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

     12        GENERAL PROVISIONS

     12.1      SUCCESSORS AND ASSIGNS. This Agreement binds and is for the
benefit of the successors and permitted assigns of each party. Borrower may not
assign this Agreement or any rights or Obligations under it without Bank's prior
written consent which may be granted or withheld in Bank's discretion. Bank has
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 under this Agreement, the Loan Documents
or any related agreement.

     12.2      INDEMNIFICATION. Borrower hereby indemnifies, defends and holds
the Bank and its officers, employees and agents harmless against: (a) all
obligations, demands, claims, and liabilities asserted by any other party in
connection with the transactions contemplated by the Loan Documents; and (b) all
losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and Borrower (including reasonable
attorneys' fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.

     12.3      RIGHT OF SET-OFF. Borrower and any guarantor hereby grant to
Bank, a lien, security interest and right of setoff as security for all
Obligations to Bank, whether now existing or hereafter arising upon and against
all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under the
control of the Bank or in transit to any of them. At any time after the
occurrence and during the continuance of an Event of Default, without demand or
notice, Bank may set off the same or any part thereof and apply the same to any
liability or obligation of Borrower and any guarantor even though unmatured and
regardless of the adequacy of any other collateral securing the Obligations. ANY
AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT
TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS
RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.

     12.4      TIME OF ESSENCE. Time is of the essence for the performance of
all Obligations in this Agreement.

     12.5      SEVERABILITY OF PROVISION. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.

     12.6      AMENDMENTS IN WRITING; INTEGRATION. All amendments to this
Agreement must be in writing signed by both Bank and Borrower. This Agreement
and the Loan Documents represent the entire agreement about this subject matter,
and supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.

     12.7      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, are an original, and all taken together, constitute
one Agreement.

                                       14
<Page>

     12.8      SURVIVAL. All covenants, representations and warranties made in
this Agreement continue in full force while any Obligations remain outstanding.
The obligation of Borrower in Section 12.2 to indemnify Bank shall survive until
the statute of limitations with respect to such claim or cause of action shall
have run.

     12.9      CONFIDENTIALITY. In handling any Confidential Information, Bank
shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Bank's
subsidiaries or affiliates in connection with their business with Borrower; (ii)
to prospective transferees or purchasers of any interest in the Credit
Extensions (provided, however, Bank shall use commercially reasonable efforts in
obtaining such prospective transferee's or purchaser's agreement to the terms of
this provision); (iii) as required by law, regulation, subpoena, or other order,
(iv) as required in connection with Bank's examination or audit; and (v) upon
the occurrence and continuance of an Event of Default, as Bank considers
appropriate in exercising remedies under this Agreement. The restrictions set
forth above shall not apply to information that (a) is generally known within
the industry at the time of its disclosure; (b) is lawfully received by the Bank
from a third party (unless the Bank is aware that such third party is not
permitted to make such disclosures due to a confidential relationship with the
Borrower); (c) was already in the Bank's possession at the time such information
was disclosed by the Borrower to the Bank; or (d) was independently developed by
the Bank without use of the information disclosed under this Agreement. If a
portion or aspect of the Confidential Information becomes generally known
through no action of the Bank, only that portion or aspect shall not be governed
by this Agreement and all other aspects of the Confidential Information shall
remain subject to the provisions of this Agreement.

     13        DEFINITIONS

     13.1      DEFINITIONS.

     "ACCOUNTS" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.

     "ADVANCE" or "ADVANCES" is a loan advance (or advances) under the Committed
Revolving Line, including, without limitation, the Prime Rate Loans and the
LIBOR Rate Loans described in the Interest Rate Supplement.

     "AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.

     "BANK EXPENSES" are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).

     "BELLSOUTH DEBT" is defined in Section 5.9.

     "BORROWER'S BOOKS" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.

     "BORROWING BASE" is eighty percent (80%) of Eligible Accounts, as
determined by Bank from Borrower's most recent Borrowing Base Certificate;
provided, however, that Bank may lower the percentage of the Borrowing Base
after performing an audit of Borrower's Collateral, which reduction of the
Borrowing Base shall be effective ten (10) days after Bank provides notice to
Borrower of such change.

                                       15
<Page>

     "BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.

     "CASH MANAGEMENT SERVICES" are defined in Section 2.1.4.

     "CLOSING DATE" is March 25, 2002.

     "CODE" is the Uniform Commercial Code as adopted in Massachusetts, as
amended and as may be amended and in effect from time to time.

     "COLLATERAL" is any and all properties, rights and assets of the Borrower
(other than Intellectual Property, except to the extent that a security interest
in Borrower's Intellectual Property is granted by Borrower to Bank hereafter)
granted by the Borrower to Bank or arising under the Code, now, or in the
future, in which the Borrower obtains an interest, or the power to transfer
rights, including, without limitation, the property described on EXHIBIT A.

     "COMMITTED EQUIPMENT LINE" is an Equipment Advance or Equipment Advances of
up to Ten Million Dollars ($10,000,000.00).

     "COMMITTED REVOLVING LINE" is an Advance or Advances of up to Twenty
Million Dollars ($20,000,000.00). Notwithstanding the foregoing, the
availability of the initial Advance under the Committed Revolving Line shall be
subject to the receipt by the Bank of satisfactory results, in the sole and
absolute discretion of the Bank, of the Initial Audit of Borrower's Accounts
pursuant to Section 6.2 hereof. If the results of the Initial Audit are not
satisfactory to the Bank for any reason, the Bank may, at its discretion, reduce
the amount of the Committed Revolving Line, or not make any Advances thereunder,
except pursuant to terms satisfactory to Bank.

     "CONFIDENTIAL INFORMATION" means all commercially valuable, propriety and
confidential information and trade secrets with respect to the Borrower's
business and products, whether of a technical, business or other nature
(including, without limitation, know-how and information relating to the
technology, customers, business plans, promotional and marketing activities,
finances and other business affairs of the Borrower), that is disclosed to the
Bank or any of its officers, employees or agents or is otherwise learned by the
Bank or any of its officers, employees or agents in the course of discussions or
business dealings with, or physical or electronic access to the premises of, the
Borrower, and that has been identified as being proprietary and/or confidential
or that by the nature of the circumstances surrounding the disclosure or receipt
ought to be treated as proprietary and confidential.

     "CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.

     "CREDIT EXTENSION" is each Advance (including Cash Management Services),
Equipment Advance, Letter of Credit, FX Forward Contract or any other extension
of credit by Bank for Borrower's benefit.

     "CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year, PLUS, without duplication, all
obligations and liabilities of Borrower to Bank.

                                       16
<Page>

     "DEFERRED MAINTENANCE REVENUE" is all amounts received in advance of
performance under maintenance contracts and not yet recognized as revenue.

     "ELIGIBLE ACCOUNTS" are billed Accounts in the ordinary course of
Borrower's business that meet all Borrower's representations and warranties in
Section 5.2; BUT Bank may in its reasonable discretion change eligibility
standards by giving Borrower thirty (30) days prior written notice. Unless Bank
agrees otherwise in writing, Eligible Accounts shall not include:

               (a)  Accounts that the account debtor has not paid within ninety
     (90) days of invoice date;

               (b)  Accounts for an account debtor, fifty percent (50%) or more
     of whose Accounts have not been paid within ninety (90) days of invoice
     date;

               (c)  Credit balances over ninety (90) days from invoice date;

               (d)  Accounts for an account debtor, including Affiliates, whose
     total obligations to Borrower exceed twenty-five percent (25%) of all
     Accounts, for the amounts that exceed that percentage, unless Bank approves
     in writing;

               (e)  Accounts for which the account debtor does not have its
     principal place of business in the United States, except for certain
     foreign accounts receivable which may be approved by Bank in its sole
     discretion on a case-by-case basis;

               (f)  Accounts for which the account debtor is a federal, state or
     local government entity or any department, agency, or instrumentality
     thereof;

               (g)  Accounts for which Borrower owes the account debtor, but
     only up to the amount owed (sometimes called "contra" accounts, accounts
     payable, customer deposits or credit accounts);

               (h)  Accounts for demonstration or promotional equipment, or in
     which goods are consigned, sales guaranteed, sale or return, sale on
     approval, bill and hold, or other terms if account debtor's payment may be
     conditional;

               (i)  Accounts for which the account debtor is Borrower's
     Affiliate, officer, employee, or agent;

               (j)  Accounts in which the account debtor disputes liability or
     makes any claim and Bank believes there may be a basis for dispute (but
     only up to the disputed or claimed amount), or if the Account Debtor is
     subject to an Insolvency Proceeding, or becomes insolvent, or goes out of
     business;

               (k)  Accounts for which Bank reasonably determines collection to
     be doubtful.

     "ELIGIBLE EQUIPMENT" is (a) general purpose computer equipment, office
equipment, test, manufacturing and laboratory equipment, furnishings, subject to
the limitations set forth herein, and (b) Other Equipment that complies with all
of Borrower's representations and warranties to Bank and which is reasonably
acceptable to Bank in all respects.

     "EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.

     "EQUIPMENT ADVANCE " is defined in Section 2.1.5.
     "EQUIPMENT AVAILABILITY END DATE" is defined in Section 2.1.5.

                                       17
<Page>

     "EQUIPMENT MATURITY DATE" is, with respect to each Equipment Advance, the
thirty-sixth (36th) Payment Date following each such Equipment Advance.

     "ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.

     "FX FORWARD CONTRACT" is defined in Section 2.1.3.

     "FX RESERVE" is defined in Section 2.1.3.

     "GAAP" is generally accepted accounting principles.

     "GUARANTOR" is any present or future guarantor of the Obligations.

     "INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred price
of property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.

     "INSOLVENCY PROCEEDING" is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

     "INTELLECTUAL PROPERTY" is any copyright rights, copyright applications,
copyright registrations and like protections in each work of authorship and
derivative work, whether published or unpublished, now owned or later acquired;
any patents, trademarks, service marks and applications therefor; any trade
secret rights, including any rights to unpatented inventions, now owned or
hereafter acquired.

     "INTEREST RATE SUPPLEMENT" is that certain Interest Rate Supplement to
Agreement attached hereto and incorporated herein by reference.

     "INVENTORY" is 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 later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.

     "INVESTMENT" is any beneficial ownership of (including stock, partnership
interests or other securities) any Person, or any loan, advance or capital
contribution to any Person.

     "LETTER OF CREDIT" means a letter of credit or similar undertaking issued
by Bank pursuant to Section 2.1.2.

     "LETTER OF CREDIT FEES" is defined in Section 2.4.

     "LETTER OF CREDIT RESERVE" has the meaning set forth in Section 2.1.2.

     "LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

     "LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower, and any other present or future agreement
between Borrower and/or for the benefit of Bank in connection with this
Agreement, all as amended, extended or restated.

     "MATERIAL ADVERSE CHANGE" is: (i) A material impairment in the perfection
or priority of Bank's security interest in the Collateral or in the value of
such Collateral; or (ii) a material adverse change in the business, operations,
or condition (financial or otherwise) of the Borrower; or (iii) a material
impairment of the prospect of

                                       18
<Page>

repayment of any portion of the Obligations; or (iv) Bank determines, based upon
information available to it and in its reasonable judgment, that there is a
substantial likelihood that Borrower shall fail to comply with one or more of
the financial covenants in Section 6 during the next succeeding financial
reporting period.

     "OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later under or in connection with this
Agreement, including letters of credit, cash management services, and foreign
exchange contracts, if any, and including interest accruing after Insolvency
Proceedings begin and debts, liabilities, or obligations of Borrower assigned to
Bank.

     "OTHER EQUIPMENT" is leasehold improvements, intangible property such as
computer software and software licenses, equipment specifically designed or
manufactured for Borrower, other intangible property, limited use property and
other similar property and soft costs approved by the Bank, excluding sales tax,
freight and installation expenses. Unless otherwise agreed to by Bank, not more
than 25% of the proceeds of the Committed Equipment Line shall be used to
finance Other Equipment.

     "PAYMENT DATE" is the first calendar day of each month.

     "PERMITTED INDEBTEDNESS" is:

               (a)  Borrower's indebtedness to Bank under this Agreement or the
     Loan Documents;

               (b)  Indebtedness existing on the Closing Date and shown on the
     Schedule;

               (c)  Subordinated Debt;

               (d)  Indebtedness to trade creditors incurred in the ordinary
     course of business;

               (e)  Indebtedness secured by Permitted Liens; and

               (f)  Extensions, refinancings, modifications, amendments and
     restatements of any items of Permitted Indebtedness (a) through (e) above,
     provided that the principal amount thereof is not increased or the terms
     thereof are not modified to impose more burdensome terms upon Borrower or
     its Subsidiary, as the case may be.

     "PERMITTED INVESTMENTS" are:

               (a)  Investments shown on the Investments Schedule and existing
     on the Closing Date; and

               (b)  (i) marketable direct obligations issued or unconditionally
     guaranteed by  the United States or its agency (including FannieMae or
     FreddieMac) or any state maturing within 1 year from its acquisition, (ii)
     commercial paper maturing no more than 1 year after its creation and having
     the highest rating from either Standard & Poor's Corporation or Moody's
     Investors Service, Inc., (iii) certificates of deposit issued maturing no
     more than 1 year after issue, and (iv) any other investments administered
     through the Bank.

     "PERMITTED LIENS" are:

               (a)  Liens existing on the Closing Date and shown on the Schedule
     or arising under this Agreement or other Loan Documents;

               (b)  Liens for taxes, fees, assessments or other government
     charges or levies, either not delinquent or being contested in good faith
     and for which Borrower maintains adequate reserves on its Books, IF they
     have no priority over any of Bank's security interests;

                                       19
<Page>

               (c)  Purchase money Liens granted in connection with the
     financing (by loan or capital lease) of Equipment in an outstanding amount
     not greater than $10,000,000.00: (i) on Equipment acquired or held by
     Borrower incurred for financing the acquisition of the Equipment, or (ii)
     existing on Equipment when acquired, IF the Lien is confined to the
     property and improvements and the proceeds of the Equipment;

               (d)  Leases or subleases and non-exclusive licenses or
     sublicenses granted in the ordinary course of Borrower's business; and

               (e)  Liens incurred in the extension, renewal or refinancing of
     the indebtedness secured by Liens described in (a) through (d), BUT any
     extension, renewal or replacement Lien must be limited to the property
     encumbered by the existing Lien and the principal amount of the
     indebtedness may not increase.

     "PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

     "PRIME RATE" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.

     "QUICK ASSETS" is, on any date, the Borrower's consolidated, unrestricted
cash, cash equivalents, net billed accounts receivable and investments with
maturities of fewer than 12 months determined according to GAAP.

     "RESPONSIBLE OFFICER" is each of the Chief Executive Officer, President,
Chief Financial Officer and Controller of Borrower.

     "REVOLVING MATURITY DATE" is that date which is three hundred sixty-four
(364) days following the Closing Date.

     "SCHEDULE" is any attached schedule of exceptions.

     "SUBORDINATED DEBT" is debt incurred by Borrower subordinated to Borrower's
debt to Bank (pursuant to a subordination agreement entered into between the
Bank, the Borrower and the subordinated creditor), on terms acceptable to Bank.
As of the Closing Date, the BellSouth Debt shall be deemed Subordinated Debt
hereunder.

     "SUBSIDIARY" of any Person is any corporation, partnership, limited
liability company, joint venture, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.

     "TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries MINUS (i) any amounts attributable to (a)
goodwill, (b) intangible items including unamortized debt discount and expense,
patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, MINUS (ii) Total Liabilities, PLUS (iii) Subordinated Debt
to the extent that such Subordinated Debt is due and payable greater than one
(1) year from the applicable testing date.

     "TOTAL LIABILITIES" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion of Subordinated Debt permitted by Bank to
be paid by Borrower, but excluding all other Subordinated Debt.

     "TNW THRESHOLD" is Borrower's maintaining a Tangible Net Worth, as of the
last day of the month, of not less than Seventy Million Dollars
($70,000,000.00), as determined by Bank upon its review of Borrower's Compliance
Certificate and financial statements.

                                       20
<Page>

     "UNUSED COMMITTED EQUIPMENT LINE" is the maximum principal amount of the
Committed Equipment Line less the principal amount of the Equipment Advances
made thereunder (including any Equipment Advances which have been repaid by
Borrower).

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       21
<Page>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be 
executed as a sealed instrument under the laws of the Commonwealth of 
Massachusetts as of March 25, 2002, to be effective as of January 16, 2002.

BORROWER:

SONUS NETWORKS, INC.

By:   /s/ Peter S. Hemme
   --------------------------------------------

Name:  Peter S. Hemme
     ------------------------------------------

Title: Vice President and Controller
      -----------------------------------------

BANK:

SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST

By:   /s/ Timothy O'Loughlin
   --------------------------------------------

Name:  Timothy O'Loughlin
     ------------------------------------------

Title:  Senior Vice President
     ------------------------------------------

SILICON VALLEY BANK

By:     /s/ Maggie Garcia
   --------------------------------------------

Name:   Maggie Garcia
     ------------------------------------------

Title:  AVP
      -----------------------------------------
     (Signed in Santa Clara County, California)

                                       22
<Page>

                                    EXHIBIT A

     The Collateral consists of all right, title and interest of Borrower in and
to the following:

     All goods, equipment, inventory, contract rights or rights to payment of
money, license agreements, franchise agreements, general intangibles (including
payment intangibles), accounts (including health-care receivables), documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), commercial tort claims,
securities, and all other investment property supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

     All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

     The Collateral does not include:

     Any copyright rights, copyright applications, copyright registrations and
     like protections in each work of authorship and derivative work, whether
     published or unpublished, now owned or later acquired; any patents,
     trademarks, service marks and applications therefor; any trade secret
     rights, including any rights to unpatented inventions, now owned or
     hereafter acquired. Notwithstanding the foregoing, the Collateral shall
     include all accounts, license and royalty fees and other revenues,
     proceeds, or income arising out of or relating to any of the foregoing
     Intellectual Property.

                                       23
<Page>

                                    EXHIBIT B

                   LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
              DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., E.S.T.

TO:  CENTRAL CLIENT SERVICE DIVISION                  DATE:
                                                           --------------------

FAX#:  (617) 969-5965                                 TIME:
                                                           ---------------------

--------------------------------------------------------------------------------
FROM:  SONUS NETWORKS, INC.
      ------------------------------------------------
                                CLIENT NAME (BORROWER)
REQUESTED BY:
             ------------------------------------------------------
                            AUTHORIZED SIGNER'S NAME

AUTHORIZED SIGNATURE:
                     ----------------------------------------------

PHONE NUMBER:
             ------------------------------------------------------


FROM ACCOUNT #                     TO ACCOUNT #
              --------------------             --------------------

REQUESTED TRANSACTION TYPE                  REQUEST DOLLAR AMOUNT
--------------------------                  ---------------------

PRINCIPAL INCREASE (ADVANCE)                $
                                             ----------------
PRINCIPAL PAYMENT (ONLY)                    $
                                             ----------------
INTEREST PAYMENT (ONLY)                     $
                                             ----------------
PRINCIPAL AND INTEREST (PAYMENT)            $
                                             ----------------

OTHER INSTRUCTIONS: 
                    --------------------------------------------------

All Borrower's representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone request for and Advance confirmed by this Borrowing Certificate; but
those representations and warranties expressly referring to another date shall
be true, correct and complete in all material respects as of that date.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                                  BANK USE ONLY

TELEPHONE REQUEST:

The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.

-------------------------------------         ----------------------------
       Authorized Requester                               Phone #
--------------------------------------------------------------------------------

                                       24
<Page>

                                    EXHIBIT C
                           BORROWING BASE CERTIFICATE

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

Borrower:   SONUS NETWORKS, INC.                   Lender:   Silicon Valley Bank

Commitment Amount:   $20,000,000.00

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


<Table>
<Caption>
ACCOUNTS RECEIVABLE
<S>      <C>                                                                    <C>
1.       Accounts Receivable Book Value as of                                   $
                                             -------------------                ------------------
2.       Additions (please explain on reverse)                                  $
                                                                                 -----------------
3.       TOTAL ACCOUNTS RECEIVABLE                                              $
                                                                                 -----------------

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4.       Amounts over 90 days due                                               $
                                                                                 -----------------
5.       Balance of 50% over 90 day accounts                                    $
                                                                                 -----------------
6.       Credit balances over 90 days                                           $
                                                                                 -----------------
7.       Concentration Limits                                                   $
                                                                                 -----------------
8.       Foreign Accounts                                                       $
                                                                                 -----------------
9.       Governmental Accounts                                                  $
                                                                                 -----------------
10.      Contra Accounts                                                        $
                                                                                 -----------------
11.      Promotion or Demo Accounts                                             $
                                                                                 -----------------
12.      Intercompany/Employee Accounts                                         $
                                                                                 -----------------
13.      Other (please explain on reverse)                                      $
                                                                                 -----------------
14.      TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS                                   $
                                                                                 -----------------
15.      Eligible Accounts (#3 minus #14)                                       $
                                                                                 -----------------
16.      LOAN VALUE OF ACCOUNTS(80% OF #15)                                     $
                                                                                 -----------------

BALANCES
17.      Maximum Loan Amount                                                    $
                                                                                 -----------------
18.      Total Funds Available (Lesser of #16 and #17)                          $
                                                                                 -----------------
19.      Present balance owing on Committed Revolving Line                      $
                                                                                 -----------------
20.      Outstanding under Sublimits (Letter of Credit, FX Reserve, Cash Mngt)  $
                                                                                 -----------------
21.      RESERVE POSITION (#18 minus #19 and #20)                               $
                                                                                 -----------------
</Table>


THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THIS IS TRUE, COMPLETE AND CORRECT,
AND THAT THE INFORMATION IN THIS BORROWING BASE CERTIFICATE COMPLIES WITH THE
REPRESENTATIONS AND WARRANTIES IN THE LOAN AND SECURITY AGREEMENT BETWEEN THE
UNDERSIGNED AND SILICON VALLEY BANK.

                                                         BANK USE ONLY

COMMENTS:                                    Received by:
                                                         ----------------------
                                                           AUTHORIZED SIGNER
                                             Date:
                                                  ------------------------------

By:                                          Verified:
   -------------------------                          --------------------------
        Authorized Signer                                  AUTHORIZED SIGNER

                                             Date:
                                                  -----------------------------

                                             Compliance Status: Yes  No

                                       25
<Page>

                                    EXHIBIT D
                             COMPLIANCE CERTIFICATE

TO:      SILICON VALLEY BANK

FROM:    SONUS NETWORKS, INC.

     The undersigned authorized officer of SONUS NETWORKS, INC. certifies that
under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the "Agreement"), (i) Borrower is in complete compliance for
the period ending _______________ with all required covenants except as noted
below and (ii) all representations and warranties in the Agreement are true and
correct in all material respects on this date. Attached are the required
documents supporting the certification. The Officer certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.

     PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.


<Table>
<Caption>
     REPORTING COVENANT                      REQUIRED                               COMPLIES
     ------------------                      --------                               --------
     <S>                                     <C>                                    <C>
     Financial statements with CC            Monthly within 25 days                 Yes  No
     BBC w/ A/R Agings                       Monthly w/in 25 days*                  Yes  No
     10-Q, 10-K and 8-K                      Within 5 days after filing with SEC    Yes  No
     Balance Sheet, Income Statement, and    FYE within 45 days                     Yes  No
</Table>


     Cash Projections (plus all revisions approved by Board)

* To be submitted by Borrower to Bank in accordance with Section 6.2 of the Loan
and Security Agreement


<Table>
<Caption>
     FINANCIAL COVENANT                      REQUIRED                            ACTUAL            COMPLIES
     ------------------                      --------                            ------            --------
     <S>                                     <C>                                <C>                <C>
     Minimum Quick Ratio (monthly)           1.5:1.0                                  :1.0         Yes   No
                                                                                ------
     Minimum Tangible Net Worth (monthly)    (i) $70,000,000 thru 3/31/02,      $                  Yes   No
                                                                                 --------
                                             $60,000,000 thru 9/30/02,          $                  Yes   No
                                                                                 --------
                                             and $50,000,000 after 9/30/02;     $                  Yes   No
                                                                                 --------
                                             PLUS (ii) 50% of new equity issued.
</Table>


COMMENTS REGARDING EXCEPTIONS:  See Attached.             BANK USE ONLY

Sincerely,                                    Received by:
                                                          ---------------------
                                                            AUTHORIZED SIGNER

-----------------------------                 Date:
SIGNATURE                                          ----------------------------

                                              Verified:
-----------------------------                          ------------------------
                                                           AUTHORIZED SIGNER
TITLE
                                              Date:
-----------------------------                      ----------------------------
DATE
                                             Compliance Status:   Yes     No

                                       26


<Page>

                                  EXHIBIT 21.1

                         SUBSIDIARIES OF THE REGISTRANT


<Table>
<Caption>
NAME                                                     JURISDICTION OF INCORPORATION
----                                                     -----------------------------
<S>                                                               <C>

telecom technologies, inc.                                        Texas

Sonus International, Inc.,                                        Delaware

Sonus Securities Corp.                                            Massachusetts

Sonus Networks Limited                                            United Kingdom

Sonus Networks Pte Ltd                                            Singapore

Nihon Sonus Networks K.K.                                         Japan

Westford Networks Mexico, S. de R.L. de C.V.                      Mexico
</Table>





<Page>

                                                                    Exhibit 23.1

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statement File Nos. 333-61940, 333-54932, 333-53970 and 333-32206.

                                                 /s/ Arthur Andersen LLP

Boston, Massachusetts
March 25, 2002




<Page>

                                  EXHIBIT 99.1

                              SONUS NETWORKS, INC.

                                 5 Carlisle Road
                               Westford, MA 01886

               LETTER TO COMMISSION PURSUANT TO TEMPORARY NOTE 3T

                                 March 27, 2002

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C.  20549-0408

Ladies and Gentlemen:

Pursuant to Temporary Note 3T to Article 3 of Regulation S-X, Sonus Networks,
Inc. has obtained a letter of representation from Arthur Andersen LLP
("Andersen") stating that the December 31, 2001 audit was subject to their
quality control system for the U.S. accounting and auditing practice to provide
reasonable assurance that the engagement was conducted in compliance with
professional standards, that there was appropriate continuity of Andersen
personnel working on the audit and availability of national office consultation.
Availability of personnel at foreign affiliates of Andersen is not relevant to
this audit.

                               Very truly yours,           
                                                           
                               Sonus Networks, Inc.        
                                                           
                               /s/ Stephen J. Nill         
                                                           
                               Stephen J. Nill             
                               Vice President Finance and  
                               Administration and Treasurer