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                                Elastic Networks

                     PATENT TRANSFER AND LICENSE AGREEMENT

                                     between

                              Nortel Networks Inc.

                                       and

                              Elastic Networks Inc.

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                                TABLE OF CONTENTS

ARTICLE I         DEFINITIONS                                                  1

ARTICLE II        TRANSFER OF RIGHTS                                           2

ARTICLE III       GRANTBACK LICENSE                                            3

ARTICLE IV        NOTICES                                                      3

ARTICLE V         PAYMENT                                                      4

ARTICLE VI        LIABILITY                                                    4

ARTICLE VII       GENERAL                                                      5

SCHEDULE A - ETHERLOOP PRODUCTS
SCHEDULE B - NORTEL PATENT CROSS-LICENSE AGREEMENTS
SCHEDULE C - TRANSFERRED PATENTS

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                      PATENT TRANSFER AND LICENSE AGREEMENT

This PATENT TRANSFER AND LICENSE AGREEMENT (the "Agreement" entered into with
effect as of the 12th day of May, 1999 (the "Effective Date")

BY AND BETWEEN:

            NORTEL NETWORKS INC., a corporation organized and existing under the
            laws of Delaware, having its executive offices at Northern Telecom
            Plaza, 200 Athens Way, Nashville, Tennessee, U.S.A. 37228-1397
            (hereinafter referred to as "NNI"),

AND:

            ELASTIC NETWORKS INC., a corporation organized and existing under
            the laws of Delaware, with offices located at 6120 Windward Parkway,
            Suite 100, Alpharetta, Georgia, U.S.A. 30005 (hereinafter referred
            to as "Elastic").

WHEREAS NNI, through its business unit known as Elastic Networks, is engaged,
among other activities, in the design, research, development, provision and sale
of Etherloop Devices (as hereinafter defined), and of associated equipment.
software applications and services: and

WHEREAS Elastic is a wholly-owned subsidiary of NNI, which has been formed to
operate Elastic Networks after the transfer of certain assets pursuant to a
certain contribution agreement between Elastic, NNI and Nortel Networks
Corporation ("NNC"; of which NNI is a wholly owned subsidiary) dated as of the
date hereof (the "Contribution Agreement"); and

WHEREAS pursuant to a certain Patent Transfer Agreement between NNC and NNI, NNC
transferred all of its right, title and interest in the Transferred Patents (as
hereinafter defined) to NNI; and

WHEREAS in order to carry on the business of Elastic Networks, Elastic wishes to
obtain, and NNI is willing to transfer its rights in the Transferred Patents:

NOW THEREFORE, in consideration of the mutual promises hereinafter set forth,
the Parties agree as follows:

ARTICLE I DEFINITIONS

1.1 Capitalized terms used herein not otherwise defined have the meaning
ascribed to them in the Contribution Agreement. As used in this Agreement and
the Schedules attached hereto:

      "Affiliate" shall mean a corporation or company which directly or
      indirectly controls, or is under common control with, or is controlled by,
      a Party. As used in this definition, "control" (including, with its
      correlative meanings, "controlled by" and "under common control with")
      shall mean the possession, directly or indirectly, of the power to direct
      or cause the direction of management or policies of the subject person
      (whether through


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      ownership of securities or partnership or other ownership interests, by
      contract or otherwise);

      "Elastic Business" means the business related to (i) the design, research,
      manufacture and development of Etherloop Devices and associated equipment,
      software applications and services by Elastic on or after the date hereof,
      or by Elastic, NNC and/or NNI before the date hereof; and (ii) the
      marketing, distribution and licensing of Etherloop Devices and associated
      equipment, software applications and services by Elastic on or after the
      date hereof, or by Elastic, NNC and/or NNI before the date hereof;

      "Etherloop Products" shall mean the products listed in Schedule A;

      "Etherloop Device" shall mean a device or system for communicating
      Ethernet data frames between master and slave modems using burst mode half
      duplex transmission and providing a collision avoidance technique over a
      communications path other than Hybrid Fibre Coaxial Cable (including, but
      not limited to, the Etherloop Products);

      "Improvement" shall mean any invention, development, change, innovation or
      extension;

      "Licensed Products" shall mean the products manufactured and sold, and
      services provided, by the Elastic Business as of the Effective Date, and
      the products which the relevant business records establish are being
      designed or funded by the Elastic Business as of the Effective Date to be
      manufactured arid sold by or on behalf of the Elastic Business, and
      natural evolutions thereof in the field of the Elastic Business, including
      without limitation, the Etherloop Products;

      "Party" shall mean either NNI or Elastic;

      "Patent Cross License Agreements" shall means those general corporate
      patent cross-license agreements with third parties entered into by NNC
      listed in Schedule B;

      "Patents" shall mean patents, patent applications, continuations,
      continuations in part, divisionals, reissues or reexaminations;

      "Subsidiary" shall mean a company in which a Party hereto effectively owns
      or controls, and continues to own or control, directly or indirectly, more
      than fifty percent (50%) of the voting stock or ownership interest
      therein; and

      "TI License Agreement" shall mean the Cooperative Development and License
      Agreement between Texas Instruments Incorporated and NNI dated September
      9, 1998;

      "Transferred Patents" shall mean the Patents listed in Schedule C;

ARTICLE II TRANSFER OF RIGHTS

2.1 Subject to the terms and conditions of this Agreement, and subject to the
rights granted under the Patent Cross-License Agreements and the TI License
Agreement, NNI hereby transfers and assigns all of its right, title and
interest in the Transferred Patents to Elastic.


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ARTICLE III GRANTBACK LICENSE

3.1 Subject to the provisions of Section 10.04 of the Contribution Agreement,
Elastic hereby grants to NNI, its Subsidiaries and Affiliates an unrestricted,
irrevocable, non-exclusive, worldwide, perpetual (or full-term, as the case may
be), fully paid-up license under:

      (a)   the Transferred Patents; and

      (b)   any Improvements to the Transferred Patents;

to make, have made, use, lease, sell, offer to sell and import all products.
Such license shall include the right to sublicense rights in such patents to
purchasers and users of such products, but not to otherwise sublicense such
rights.

ARTICLE IV NOTICES

4.1 Notices shall be provided by one Party to another, shall be in writing, and
shall be deemed sufficiently given when sent by prepaid registered or certified
first-class mail, facsimile transmission, overnight courier, or hand delivery to
the other Party at the following address (or such other address as the other
Party may designate by giving twenty (20) days prior written notice):

        If to NNI:

               Northern Telecom Plaza
               200 Athens Way
               Nashville, Tennessee
               U.S.A. 37228-1397
               Fax No. (615) 734 - 4067
               Attention: Secretary

               Copy to: _________________
                        (General Manager)

        If to Elastic:

               Elastic Networks Inc.
               6120 Windward Parkway
               Suite 100
               Alpharetta, Georgia
               U.S.A. 30005
               Attention: President

4.2 Such notices shall be deemed to have been received ten (10) business days
after mailing if sent by mail, and the following business day if sent by
facsimile transmission, overnight courier, or delivered by hand.


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4.3 In the event of a generally-prevailing labour dispute or other situation
which will delay or impede the giving of notice by any such means, in either the
country of origin or of destination, the notice shall be given by such specified
mode as will be most reliable and expeditious and least affected by such dispute
or situation.

ARTICLE V PAYMENT

5.1 In consideration of the rights granted hereunder, Elastic has issued
5.000.000 common shares in Elastic to NNI pursuant to the provisions of Section
5.02(b) of the Contribution Agreement.

5.2 All payments and consideration required by this Agreement shall be exclusive
of taxes, and NNI shall be responsible for the payment of all such taxes,
including, but not limited to, all sales, value-added, use, rental receipt,
personal property or other taxes and their equivalents which may be levied or
assessed in connection with this Agreement (excluding only taxes based on
Elastic's net income). For further certainty, Elastic shall not be responsible
for the payment of any taxes incurred in connection with the transfer of the
Transferred Patent from NNC to NNI.

ARTICLE VI LIABILITY

6.1 Nothing contained in this Agreement shall be construed as:

      (a)   requiring the filing of any patent or trademark application, the
            securing of any patent or trademark, or the maintaining of any
            patent or trademark in force provided that NNI shall reasonably
            cooperate with Elastic in connection with the foregoing;

      (b)   a representation or warranty of any kind by NNI as to
            merchantability, fitness for a particular purpose, validity or scope
            of the Transferred Patents or any Improvements thereto, or whether
            or not the use of the Transferred Patents or any Improvements
            thereto will infringe any patent or other rights of any other
            person.

      (c)   an agreement to bring or prosecute actions or suits against third
            parties for infringement;

      (d)   an obligation to furnish any assistance or any manufacturing or
            technical information not constituting Transferred Patents;

      (e)   except as provided herein, conferring any right to use, in
            advertising, publicity or otherwise, any name, trade name or
            trademark, or any contraction, abbreviation or simulation thereof;

      (f)   conferring by implication, estoppel or otherwise upon either Party
            any license or other right under any patent or other intellectual
            property right, except the licenses and rights expressly granted
            herein; or

      (g)   an obligation on the part of one Party to indemnify the other Party
            for any reason.


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6.2 EXCEPT AS EXPRESSLY PROVIDED FOR IN THE CONTRIBUTION AGREEMENT, IN NO EVENT
SHALL NNI OR ELASTIC INCLUDING THEIR SUBSIDIARIES, AFFILIATES, SHAREHOLDERS,
OFFICERS, CONTRACTORS, DIRECTORS, EMPLOYEES AND AGENTS) BE LIABLE FOR ANY
INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING WITHOUT
LIMITATION, DAMAGES ARISING FROM LOST BUSINESS, LOST SAVINGS, LOST DATA, AND
LOST PROFITS, REGARDLESS OF THE CAUSE AND WHETHER ARISING IN CONTRACT (INCLUDING
FUNDAMENTAL BREACH), TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, EVEN IF THE
BREACHING PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

ARTICLE VII GENERAL

7.1 No agency, partnership, joint venture or employment relationship is or shall
be created by virtue of this Agreement.

7.2 A Party shall not be liable, wholly or in part, for non-performance or a
delay in performance of its obligations under this Agreement, if such delay is
due to force majeure or contingencies or causes beyond the reasonable control of
such Party, including but not limited to, flood, wind, hurricane, tornado,
earthquake, explosion, or other similar catastrophe, hostilities, restraint of
rulers or people, civil commotion, act of terrorism, strike, labor dispute,
blockage or embargo or any act of nature, fires, accident, epidemic or
quarantine restrictions.

7.3 The attached Schedules A, Band C, as may be modified in accordance with the
terms and conditions herein, form part of this Agreement. This Agreement may
only be modified by an instrument in writing mutually agreed upon and executed
by each Party's duly authorized representatives.

7.4 Elastic acknowledges that Transferred Patents are subject to US export
control laws, including the US Export Administration Act and its associated
regulations, and may be subject to export or import regulations in other
countries. Elastic agrees to comply strictly with all such regulations and
acknowledges that it has the responsibility to obtain such licenses to export,
re-export or import Licensed Products or Transferred Patents as may be required
after delivery to Elastic.

7.5 The Parties agree that the UN Convention on Contracts for the International
Sale of Goods (Vienna, 1980) shall not apply to this Agreement nor to any
dispute arising out of this Agreement.

7.6 In the event that any provision of this Agreement is found to be invalid,
voidable or unenforceable, the Parties agree that such invalidity, voidability
or unenforceability shall affect neither the validity of this Agreement nor the
remaining portions thereof, and that the provision in question shall be deemed
to be replaced with a valid and enforceable provision most closely reflecting
the intent and purpose of the original provision. This Agreement constitutes the
entire agreement between the Parties and supersedes all other agreements between
the Parties concerning the subject matter herein.


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7.7 This Agreement constitutes the entire agreement between the Parties and
supersedes all other agreements between the Parties concerning the subject
matter herein.

7.8 This Agreement shall be governed by and construed in accordance with the
laws of the State of Massachusetts (without reference to the conflict of law
provisions thereof) and the federal laws of the United States of America
applicable therein.


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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective
Date.

NORTEL NETWORKS INC.                       ELASTIC NETWORKS INC.


/s/ Michael Pangia
----------------------------------------   -------------------------------------
Authorized Signature                       Authorized Signature

Michael Pangia, Vice President, Finance,
Sales and Business Development             Guy D. Gill, President
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Printed Name and Title                     Printed Name and Title

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective
Date.

NORTEL NETWORKS INC.                       ELASTIC NETWORKS INC.


                                           /s/ Guy D. Gill
----------------------------------------   -------------------------------------
Authorized Signature                       Authorized Signature

Michael Pangia, Vice President, Finance,
Sales and Business Development             Guy D. Gill, President
----------------------------------------   -------------------------------------
Printed Name and Title                     Printed Name and Title