Document:

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                                                                   EXHIBIT 10.36

                              EMPLOYMENT AGREEMENT

          THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
as of this 12th day of February, 2001 (the "Effective Date"), by and between
Gary J. Sbona ("Employee") and Accelerated Networks, Inc.. ("Employer"). In
consideration of the covenants, representations and agreements set forth below,
Employer and Employee hereby agree as follows:

     1. Employment of Employee. Employer hereby hires Employee pursuant to the
Agreement between Regent Pacific Management Corporation dated February 12, 2001
(the "Regent Agreement"), and Employee hereby accepts such employment on the
terms and conditions contained in this Agreement and the Regent Agreement.

     2. Term of the Agreement. The initial term of this Agreement (the "Term")
shall commence upon the Effective Date and shall terminate 18 months thereafter
(the "Termination Date"), unless sooner terminated as provided herein. Employer
and Employee may, upon mutual agreement, elect to continue Employee's employment
on an at-will basis (meaning that either Employee or Employer may terminate the
employment relationship at any time with or without cause or notice), after the
initial term of this Agreement. If the term of the Regent Agreement is extended
in the future, the Termination Date of the Agreement will automatically extend
to coincide with the amended term of the Regent Agreement, unless otherwise
mutually agreed between Employer and Employee.

     3. Services to be Provided by Employee.

          3.1 Scope, Responsibilities and Duties. Employee agrees to provide
services to Employer, generally in the field of corporate strategy, , so that
Employer may have the benefit of the experience and knowledge possessed by
Employee (the "Services"). It shall be the duty of Employee in rendering the
Services to make such periodic reports to Employer as the directors of Employer
may, from time to time, reasonably request.

          3.2. Non-exclusivity. Employee shall not be required to devote full
time to the affairs of Employer. Subject to the provisions of Section 7 below,
Employee may accept other employment and perform services for others.

     4. Compensation. Employee shall receive $1,000 per week in addition to any
compensation received from Regent Pacific Management Corporation, for the
Services to be provided hereunder..

     5. Expenses. Employer shall reimburse Employee for all reasonable and
necessary business expenses pursuant to the Regent Agreement.

<PAGE>   2

     6. Termination. Termination pursuant to this Section shall become effective
immediately upon receipt by Employee of written notice from Employer of such
termination.

          6.1 Termination by Incapacity or Disability of Employee. If Employee
shall become unable to fully perform the Services in accordance with the terms
of this Agreement due to incapacity, ill health or disability for a consecutive
period of two months, the Employer may, at its option, terminate this Agreement.

          6.2 Death of Employee. Upon the death of Employee, this Agreement
shall terminate without further obligation or liability on the part of Employer
to Employee's estate.

          6.3 Termination of Regent Agreement. Employee's employment shall
terminate upon termination of the Regent Agreement unless otherwise mutually
agreed between Employer and Employee.

          6.4 Termination for Cause. Company may terminate Employee's employment
for "cause", which shall mean a reasonable belief that Employee has engaged in
any one of the following: (i) financial dishonesty, including, without
limitation, misappropriation of funds or property, or any attempt by Employee to
secure any personal profit related to the business or business opportunities of
the Company without the informed, written approval of the Company's Board of
Directors; (ii) refusal to comply with reasonable directives of the Company's
Board of Directors; (iii) negligence or reckless or willful misconduct in the
performance of Employee's duties; (iv) failure to perform, or continuing neglect
in the performance of, duties assigned to Employee; (v) misconduct which has a
materially adverse effect upon the Company's business or reputation; (vi) the
conviction of, or plea of nolo contendre to, any felony or a misdemeanor
involving dishonesty or fraud; (vii) the material breach of any provision of
this agreement; or (viii) violation of Company policies including, without
limitation, the Company's policies on equal employment opportunity and
prohibition of unlawful harassment.

     7. Confidentiality and Trade Secrets. Employee acknowledges and agrees that
during the Term of this Agreement, and during any continuing term of employment
on at at-will basis he will become privy to important proprietary, confidential
business information and trade secrets that are the exclusive property of
Employer. This information includes, without limitation, business plans,
marketing concepts, designs, proposals, product information, financial
information, technology and costs, pricing information, customer lists, and key
accounts, including their credit information and product wants and needs (the
"Confidential Information"). This Confidential Information derives independent
economic value, both actual and potential, from not being generally known to the
public or to other persons who can obtain economic value from its disclosure and
use. As Employer has always held the Confidential Information as proprietary,
confidential trade secret information and has taken steps to insure that the
Confidential Information is not disclosed outside of Accelerated Networks, Inc.,
the Confidential Information constitutes "trade secrets" under the Uniform Trade
Secrets Act, California Civil Code Section 3426(d)(1). In light of the
foregoing, Employee therefore agrees that: (1) he will not at any time, now or
in the future, share, disseminate, disclose, discuss or use the Confidential
Information in any way; and (2) upon termination of this Agreement, Employee
will return to Employer all property, writings and/or documents in his
possession or custody belonging to or

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<PAGE>   3

relating to the affairs of Employer or any of its subsidiaries or affiliates, or
comprising or relating to the Confidential Information.

     8. Ownership of Intellectual Property. Employee hereby acknowledges and
agrees that any and all copyrightable works authored by Employee in connection
with the performance of the Services, alone or with others, during the Term of
this Agreement, and during any continuing term of employment on at at-will
basis, shall be deemed to have been specially ordered or commissioned for use as
either a contribution to a collective work, as a translation, as a supplementary
work, as a compilation, or as an instructional text and, as such, shall be
deemed to be "works for hire" under the United States copyright laws from the
inception of creation of such works. In the event that any such works shall be
deemed by a court of competent jurisdiction not to be a "work made for hire,"
this Agreement shall operate as an irrevocable assignment by Employee to
Employer of all right, title and interest in and to such works, including
without limitation, all worldwide copyright interests therein, in perpetuity.
The fact that such copyrightable works are created by Employee outside of
Employer's facilities or other than during Employee's working hours with
Employer, shall not diminish Employer's rights with respect to such works which
otherwise fall within this subsection. Employee agrees to execute and deliver to
Employer such further instruments or documents as may be requested by Employer
in order to effectuate the purposes of this subsection.

     9. Relationship of the Parties. Employee shall not be entitled to any
vacation, retirement or health benefits or participation in any other employee
benefit plan.

     10. Appointment as a Director. The Board of Directors of Employer (the
"Board") has resolved to appoint Employee as a Class III Director. In this
capacity, Employee will serve at the pleasure of the Board and pursuant to
Employer's bylaws.

     11. Stock Options. Concurrently with the execution of this Agreement as an
inducement to Employee to accept employment with Employer, Employee and Employer
are executing and delivering an Option Certificate attached hereto as Exhibit A
and a Stock Option Agreement (the ("Option Agreement") attached hereto as
Exhibit B and incorporated herein by this reference, which grants to Employee
the option to purchase three million eight hundred eighty thousand six hundred
(3,880,600) shares of the Common Stock of Employer at an exercise price of
$1.938. 323,383 of the shares subject to this option shall be earned and vested
immediately on the Date of Grant and the remaining shares subject to this Option
shall be earned and vested in eleven equal monthly installments upon each month
of continued service by Employee to the Company after the Date of Grant and
shall become exercisable pursuant to the exercise schedule contained in Exhibit
B. Should Employee's employment be terminated for cause, the Options will
terminate immediately as to all unvested shares.

     12. Arbitration.

          12.1 Any dispute regarding any aspect of this Agreement or any act
which would violate any provision in this Agreement (hereafter referred to as
"arbitrable disputes" shall be resolved by an experienced arbitrator licensed to
practice law in the State of California and selected in accordance with the
rules of the American Arbitration Association, as the exclusive

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remedy for such dispute. Judgment on any award rendered by such arbitrator may
be entered in any court having proper jurisdiction.

          12.2 Should Employee or Employer institute any legal action or
administrative proceeding regarding any dispute or matter covered by this
Section by any method other than said arbitration, the responding party shall be
entitled to recover from the other party all damages, costs, expenses and
attorney's fees incurred as a result of such action.

     13. Severability and Governing Law.

          13.1 Should any of the provisions in this Agreement be declared or be
determined to be illegal or invalid, all remaining parts, terms or provisions
shall be valid, and the illegal or invalid part, term or provision shall be
deemed not to be a part of this Agreement.

          13.2 This Agreement is made and entered into in the State of
California and shall in all respects be interpreted, enforced and governed under
the laws of California.

     14. Proper Construction.

          14.1 The language of all parts of this Agreement shall in all cases be
construed as a whole according to its fair meaning, and not strictly for or
against any of the parties.

          14.2 As used in this Agreement, the term "or" shall be deemed to
include the term "and/or" and the singular or plural number shall be deemed to
include the other whenever the context so indicates or requires.

          14.3 The paragraph headings used in this Agreement are intended solely
for convenience of reference and shall not in any manner amplify, limit, modify
or otherwise be used in the interpretation of any of the provisions hereof.

     15. Entire Agreement. This Agreement is the entire agreement between
Employee and Employer and fully supersedes any and all prior agreements or
understandings between the parties pertaining to its subject matter.

     16. Notices. All notices, requests, demands and other communications called
for or contemplated under this Agreement shall be in writing and shall be deemed
to have been duly given when personally delivered, on the date of transmission
if sent by facsimile, on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, postage prepaid, and properly
addressed as follows:

               If to Employer:         Accelerated Networks, Inc.
                                       301 Science Drive
                                       Moorpark, California 93021
                                       Attn: Steven Krausz

               If to Employee:         Gary J. Sbona

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                                       c/o Regent Pacific Management Corporation
                                       425 California Street, Suite 1310
                                       San Francisco, CA  94104

     17. Amendments. This Agreement may not be amended, supplemented, canceled,
or discharged except by written instrument executed by the parties hereto.

     18. Waivers. All waivers hereunder shall be in writing. No waiver by any
party hereto of any breach or anticipated breach of any provision of this
Agreement by any other party shall be deemed a waiver of any other
contemporaneous, preceding, or succeeding breach or anticipated breach, whether
or not similar, on the part of the same or any other party.

     IN WITNESS WHEREOF, the parties hereto have hereby executed this Agreement
as of the day and year first written above.

                                        ACCELERATED NETWORKS, INC.

/s/ Gary Sbona                          By: /s/ Steve Krausz
--------------------------------           -------------------------------------
Gary J. Sbona                           Its:  Board Member

                                  Page 5 of 5

<PAGE>   6

                                   EXHIBIT A
                               OPTION CERTIFICATE

     THIS IS TO CERTIFY that Accelerated Networks, Inc., a Delaware corporation
(the "COMPANY"), has granted to the employee of the Company named below a
non-statutory stock option (the "OPTION") to purchase shares of the Company's
Common Stock (the "SHARES"), and upon the terms and conditions determined by the
Compensation Committee (the "COMMITTEE") of the Board of Directors of the
Company (the "BOARD"), as follows:

               Name of Optionee:            Gary J. Sbona

               Address of Optionee:         c/o Accelerated Networks, Inc.
                                            301 Science Drive
                                            Moorpark, CA  3021

     Number of Shares: 3,880,600, provided, however, that 323,383 of the shares
subject to this Option shall be earned and vested immediately on the Date of
Grant and the remaining shares subject to this Option shall be earned over
eleven (11) equal monthly installments upon the completion of each month of
continued service by Optionee after the Date of Grant. However, if Regent
Pacific Management Corporation's ("Regent Pacific") contract with the Company is
terminated without cause during this eleven-month period, then the entire amount
shall be considered earned upon termination.

               Option Exercise Price:       $ 1.938 per share

               Date of Grant:       March 2, 2001

               Option Expiration Date:      Five years from the Date of Grant.

     EXERCISE SCHEDULE: The shares earned, as described above, shall be
exercisable upon vesting, provided, however, that such option shall fully vest
(i) upon the termination of Regent Pacific's contract by the Company without
cause, (ii) the termination of Employee without cause or, (iii) upon a Change of
Control Transaction.

A "Change of Control Transaction" shall mean (i) the consummation of a sale of
all or substantially all of the assets of Company, or (ii) a merger of Company
with or into another corporation in which the stockholders of Company
immediately before the transaction do not own, directly or indirectly, a
majority of Company or the surviving entity immediately following the
transaction.

     OUTSIDE OF COMPANY'S 2000 STOCK INCENTIVE PLAN: The Option has been granted
outside the Company's 2000 Stock Incentive Plan and is not subject to the terms
thereof.

     SUMMARY OF OTHER TERMS: This Option is defined in the Stock Option
Agreement (Non-Statutory Stock Option) (the "OPTION AGREEMENT") which is
attached to this Option

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Certificate (the "CERTIFICATE") as Exhibit B. This Certificate summarizes
certain of the provisions of the Option Agreement for your information, but is
not complete. Your rights are governed by the Option Agreement, not by this
summary. The Company strongly suggests that you carefully review the full Option
Agreement prior to signing this Certificate or exercising the Option.

     Among the terms of the Option Agreement are the following:

     TERMINATION OF EMPLOYMENT: While the Option terminates on the Option
Expiration Date, it will terminate earlier if you cease to be employed by the
Company or the direct or indirect subsidiary of the Company with whom you are
employed. If your employment ends as the result of any of the circumstances
described in the Exercise Schedule, above, the terms of that section shall
apply. If your employment terminates due to disability, the Option terminates
one year after the date of such termination, and is exercisable during such
one-year period as to the portion of the Option which had vested prior to the
date of termination (but in no event later than the Option Expiration Date). If
your employment terminates due to death, the Option terminates eighteen (18)
months after the date of such termination, and is exercisable during such
eighteen-month period as to the portion of the Option which had vested prior to
the date of termination (but in no event later than the Option Expiration Date).
If your employment ends for cause, the Option will terminate immediately. In all
other cases, including retirement, the Option terminates one year after the date
of termination of employment, and is exercisable during such time period as to
the portion of the Option which had vested prior to the date of termination of
employment (but in no event later than the Option Expiration Date). See Section
5 of the attached Option Agreement.

     TRANSFER: The Option is personal to you, and cannot be sold, transferred,
assigned or otherwise disposed of to any other person, except upon your death.
See Section 12(d) of the attached Option Agreement.

     EXERCISE: You can exercise the Option (while it is exercisable), in whole
or in part, by delivering to the Company a Notice of Exercise identical to
Exhibit "A" attached to the Option Agreement, accompanied by payment of, or
provision pursuant to the Option Agreement for the payment of, the Exercise
Price for the Shares to be purchased. The Company may require you to submit
certain written assurances to the Company with respect to your status as a
stockholder. The Company will then issue a certificate to you for the Shares you
have purchased. You are under no obligation to exercise the Option. See Section
4 of the attached Option Agreement.

     ADJUSTMENTS UPON RECAPITALIZATION: The Option contains provisions which
affect your rights in the event of stock splits, stock dividends, mergers and
other major corporate reorganizations. See Section 6 of the attached Option
Agreement.

     WAIVER: By signing this Certificate, you will be agreeing to all of the
terms of the Option Agreement, including those not summarized in this
Certificate. You will waive your

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rights to options or stock which may otherwise have been promised to you. See
Section 7 of the attached Option Agreement.

     WITHHOLDING: The Company may require you to make any arrangements necessary
to insure the proper withholding of any amount of tax, if any, required to be
withheld by the Company as a result of the exercise of the Option. See Section
10 of the attached Option Agreement.

<PAGE>   9

                                A G R E E M E N T

     Accelerated Networks, Inc., a Delaware corporation, and Optionee each
hereby agrees to be bound by all of the terms and conditions of the Stock Option
Agreement (Non-Statutory Stock Option) which is attached hereto as Exhibit B and
incorporated herein by this reference as if set forth in full in this document.

DATED:
      -------------------------------

                                        ACCELERATED NETWORKS, INC.

                                        By: Steve Krausz
                                            ------------------------------------

                                        Its: Board Member

                                        OPTIONEE

                                        Name: /s/ Gary J. Sbona
                                              ----------------------------------

                                              Gary J. Sbona
                                        ----------------------------------------
                                        (Please print your name exactly as
                                        you wish it to appear on any stock
                                        certificates issued to you upon
                                        exercise of the Option)

<PAGE>   10

                                    EXHIBIT B

                             STOCK OPTION AGREEMENT
                          (NON-STATUTORY STOCK OPTION)

     This STOCK OPTION AGREEMENT (this "OPTION AGREEMENT") is made and entered
into on the execution date of the Option Certificate to which it is attached
(the "CERTIFICATE"), by and between Accelerated Networks, Inc., a Delaware
corporation (the "COMPANY"), and the employee of the Company named in the
Certificate ("OPTIONEE").

     The Board of Directors of the Company (the "BOARD") has authorized the
grant to Optionee of a non-statutory stock option to purchase shares of the
Company's Common Stock, par value $0.001 per share (the "COMMON STOCK"), upon
the terms and subject to the conditions set forth in this Option Agreement.

     The Company and Optionee agree as follows:

     1. GRANT OF OPTION.

          The Company hereby grants to Optionee the right and option (the
"OPTION"), upon the terms and subject to the conditions set forth in this Option
Agreement, to purchase all or any portion of that number of shares of the Common
Stock (the "SHARES") set forth in the Certificate, at the Option exercise price
set forth in the Certificate (the "EXERCISE PRICE").

     2. TERM OF OPTION.

          The Option shall terminate and expire on the Option Expiration Date
set forth in the Certificate, unless sooner terminated as provided herein. In no
event shall the Option be exercisable after the expiration of five years from
the date it was granted.

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     3. EXERCISE PERIOD.

          (a) Subject to the provisions of Sections 3(b) and 5 of this Option
Agreement, the Option shall become exercisable (in whole or in part) upon and
after the dates set forth or referred to under the caption "Exercise Schedule"
in the Certificate. The installments shall be cumulative; i.e., the Option may
be exercised, as to any or all Shares covered by an installment, at any time or
times after the installment first becomes exercisable and until expiration or
termination of the Option.

          (b) Notwithstanding anything to the contrary contained in this Option
Agreement, the Option may not be exercised, in whole or in part, unless and
until any then-applicable requirements of all federal, state and local laws and
regulatory agencies shall have been fully complied with to the satisfaction of
the Company and its counsel.

     4. EXERCISE OF OPTION.

          There is no obligation to exercise the Option, in whole or in part.
The Option may be exercised, in whole or in part, only by delivery to the
Company of:

          (a) written notice of exercise in form and substance identical to
Exhibit "A" attached to this Option Agreement stating the number of shares of
Common Stock then being purchased (the "PURCHASED SHARES");

          (b) the Exercise Price for each Purchased Share shall be paid in full
upon exercise and shall be payable in cash in United States dollars (including
check, bank draft or money order). The Company will cooperate with any person
who participates in a cashless exercise program of a broker or other agent under
which all or part of the shares received upon exercise of the Option are sold
through the broker or other agent or under which the broker or other agent makes
a loan to such person. Notwithstanding the foregoing, the exercise of the Option
shall not be deemed to occur and no shares of Common Stock will be issued by the
Company upon exercise of the Option until the Company has received payment of
the Exercise Price in full. The date of exercise of an Option shall be
determined under procedures established by the Committee.

     5. TERMINATION OF EMPLOYMENT.

          (a) If Employee shall cease to be an employee of the Company, or any
direct or indirect subsidiary of the Company, under any of the circumstances
described in the Option Certificate under the caption "Exercise Schedule" then
the terms of the Option Certificate shall control. To the extent unexercised
pursuant to the Option Certificate, the Option shall terminate.

          (b) If, by reason of death or disability (a "SPECIAL TERMINATING
EVENT"), Employee shall cease to be an employee the Company or any direct or
indirect subsidiary of

<PAGE>   12

the Company, then Employee, Employee's executors or administrators or any person
or persons acquiring the Option directly from Employee by bequest or
inheritance, shall have the right to exercise the Option (i) in the event of
Employee's disability, within twelve months following the date of such Special
Terminating Event and (ii) in the event of Employee's death, within eighteen
months following the date of such Special Terminating Event, but in each case of
(i) and (ii), on or prior to the Option Expiration Date. The Option may be
exercised following a Special Terminating Event only to the extent exercisable
at the date of the Special Terminating Event. To the extent unexercised at the
end of the period referred to above, the Option shall terminate.

          (c) If Employee shall cease to be an employee of the Company, for any
reason other than as described in (a) or (b) above or for cause, Employee shall
have the right to exercise the Option at any time following such termination
until the earliest to occur of (x) one year following the date of such
termination and (y) the Option Expiration Date. The Option may be exercised
following such termination only to the extent exercisable as of the date of the
termination. To the extent unexercised at the end of the period referred to
above, the Option shall terminate.

          (d) If Company terminates Employee for cause, the Option shall
terminate immediately.

          (e) For purposes of this Option Agreement, "disability" shall mean
total and permanent disability as defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"). Employee shall not be considered
permanently disabled unless he furnishes proof of such disability in such form
and manner, and at such times, as the Committee may from time to time require.

     6. ADJUSTMENTS UPON RECAPITALIZATION.

          In the event of any change in the outstanding shares of the Common
Stock or other securities then subject to this option by reason of any stock
split, reverse stock split, stock dividend, recapitalization, merger,
consolidation, combination or exchange of shares or other similar corporate
change, or if the outstanding securities of the class then subject to this
Agreement are exchanged for or converted into cash, property or a different kind
of securities, or if cash, property or securities are distributed in respect of
such outstanding securities (other than a regular cash divided) then, unless the
terms of such transaction shall otherwise provide, such equitable adjustments
shall be made by the Board, in the Option (including, without limitation,
appropriate and proportionate adjustments to the number and type of shares or
other securities or cash or other property that may be acquired pursuant to
exercise of the Option); and any such adjustments made by the Board shall be
final, binding and conclusive for any and all purposes.

     7. WAIVER OF RIGHTS TO PURCHASE STOCK.

<PAGE>   13

     By signing this Option Agreement, Optionee acknowledges and agrees that
neither the Company nor any other person or entity is under any obligation to
sell or transfer to Optionee any option or equity security of the Company, other
than the shares of Common Stock subject to the Option and any other right or
option to purchase Common Stock which was previously granted in writing to
Optionee by the Committee (or the Board). By signing this Option Agreement,
Optionee specifically waives all rights which he or she may have had prior to
the date of this Option Agreement (other than any other right or option to
purchase Common Stock which was previously granted in writing to Optionee by the
Committee or the Board) to receive any option or equity security of the Company.

     8. NO RIGHTS AS STOCKHOLDER.

          Except as provided in Section 6 of this Option Agreement, Optionee
shall have no rights as a stockholder with respect to the Shares until the date
of the issuance to Optionee of a stock certificate or stock certificates
evidencing such Shares. Except as may be provided in Section 6 of this Option
Agreement, no adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued.

     9. MODIFICATION.

          The Committee (or the Board) may modify, extend or renew the Option or
accept the surrender of, and authorize the grant of a new option in substitution
for, the Option (to the extent not previously exercised); provided, that a
modification of the Option shall be effective only with the consent of the
Optionee.

     10. WITHHOLDING.

          The Company shall be entitled to require as a condition of delivery of
any Purchased Shares upon exercise of any Option that the Optionee agree to
remit, at the time of such delivery or at such later date as the Company may
determine, an amount sufficient to satisfy all federal, state and local
withholding tax requirements relating thereto, and Optionee agrees to take such
other action required by the Company to satisfy such withholding requirements.

     11. CHARACTER OF OPTION.

          The Option is not intended to qualify as an "incentive stock option"
as that term is defined in Section 422 of the Code.

<PAGE>   14

     12. GENERAL PROVISIONS.

          (a) FURTHER ASSURANCES. Optionee shall promptly take all actions and
execute all documents requested by the Company which the Company deems to be
reasonably necessary to effectuate the terms and intent of this Option
Agreement.

          (b) NOTICES. All notices, requests, demands and other communications
under this Option Agreement shall be in writing and shall be given to the
parties hereto as follows:

                             13.    If to the Company, to:
                                    Accelerated Networks, Inc.
                                    301 Science Drive
                                    Moorpark, CA  93021
                                    Attention:  Chief Financial Officer

                             14.    If to Optionee, to the address set
                                    forth in the records of the Company,

or at such other address or addresses as may have been furnished by such either
party in writing to the other party hereto. Any such notice, request, demand or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mail by first-class certified mail, return
receipt requested, postage prepaid, addressed as aforesaid; or (ii) if given by
any other means, when delivered at the address specified in this subparagraph
(b).

          (c) TRANSFER OF RIGHTS UNDER THIS OPTION AGREEMENT. The Company may at
any time transfer and assign its rights and delegate its obligations under this
Option Agreement to any other person, corporation, firm or entity, including its
employees, directors and stockholders, with or without consideration.

          (d) OPTION NON-TRANSFERABLE. Optionee may not sell, transfer, assign
or otherwise dispose of the Option except by will or the laws of descent and
distribution, and Options may be exercised during the lifetime of Optionee only
by Optionee or by his or her guardian or legal representative.

          (e) MARKET STAND-OFF. In the event of an underwritten public offering
by the Company of its equity securities pursuant to an effective registration
statement filed under the Securities Act of 1933, as amended, Optionee shall not
sell, make any short sale of, loan, hypothecate, pledge, grant any option for
the repurchase of, or otherwise dispose or transfer for value, or otherwise
agree to engage in any of the foregoing transactions with respect to any shares
of Common Stock without the prior written consent of the Company or its
underwriters, for such period of time from and after the effective date of such
registration statement as may

<PAGE>   15

be requested by the Company or such underwriters (the "MARKET STAND-OFF");
provided, however, that in no event shall such period exceed 180 days.

          (f) SUCCESSORS AND ASSIGNS. Except to the extent specifically limited
by the terms and provisions of this Option Agreement, this Option Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, assigns, heirs and personal representatives.

          (g) GOVERNING LAW. THIS OPTION AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE IN, AND TO BE PERFORMED SOLELY WITHIN, THAT STATE.

          (h) MISCELLANEOUS. Titles and captions contained in this Option
Agreement are inserted for convenience of reference only and do not constitute a
part of this Option Agreement for any other purpose.

          The Signature Page to this Option Agreement consists of the last page
of the Certificate.

<PAGE>   16

                                   Exhibit "A"

                               NOTICE OF EXERCISE

                 (To be signed only upon exercise of the Option)

TO:     Accelerated Networks, Inc.

     The undersigned, the holder of the enclosed Stock Option Agreement
(Non-Statutory Stock Option), hereby irrevocably elects to exercise the purchase
rights represented by the Option and to purchase thereunder ______* shares of
Common Stock Accelerated Networks, Inc. (the "COMPANY"), and herewith encloses
payment of $__________ and/or _________ shares of the Company's Common Stock in
full payment of the purchase price of such shares being purchased.

Dated:
      -------------------------------

                                      ------------------------------------------
                                      (Signature must conform in all respects to
                                      name of holder as specified on the face of
                                      the Option)

                                      ------------------------------------------
                                      (Please Print Name)

                                      ------------------------------------------
                                      (Address)

     * Insert here the number of shares called for on the face of the Option
(or, in the case of a partial exercise, the number of shares being exercised),
in either case without making any adjustment for additional Common Stock of the
Company, other securities or property which, pursuant to the adjustment
provisions of the Option, may be deliverable upon exercise.<PAGE>   1

                                                                   EXHIBIT 10.37

                       SEPARATION AND CONSULTING AGREEMENT
                               AND GENERAL RELEASE

                  This SEPARATION AND CONSULTING AGREEMENT AND GENERAL RELEASE
of claims ("Agreement") is entered into by and between Accelerated Networks,
Inc. (the "Company") on the one hand, and Suresh Nihalani ("Employee"), on the
other hand.

                                    RECITALS

                  WHEREAS, Employee has resigned as the Chairman and Chief
Executive Officer of the Company and as a member of the Company's Board of
Directors;

                  WHEREAS, the Company desires to continue Employee's employment
pursuant to the consulting arrangement hereunder; and

                  WHEREAS, the parties wish to preserve the good will which
exists between them and settle any and all disputes which may exist between them
arising from or related to Employee's employment with the Company and/or his
resignation from employment.

                                    AGREEMENT

                  NOW, THEREFORE, in consideration of the mutual promises
contained herein, and for other good and sufficient consideration, receipt of
which is hereby acknowledged, the parties agree as follows:

         A. AGREEMENT BY EMPLOYEE. Employee for himself, his heirs, executors,
administrators, assigns, and successors, agrees as follows:

                  1. The Company, through its Board of Directors, hereby accepts
Employee's resignation as Chief Executive Officer ("CEO") of the Company
effective February 13, 2001.

                  2. The Company, through its Board of Directors, hereby accepts
Employee's resignation as Chairman of the Board of Directors and as a member of
the Board of Directors effective February 13, 2001.

                  3. The Company, through its Board of Directors, hereby accepts
Employee's resignation from employment with the Company effective February 12,
2002 (or any earlier date upon which this Agreement is terminated in accordance
with the terms herein, the "Termination Date"). Employee agrees that he will
have no right to employment with the Company after the Termination Date.

                  4. At all times during his continued employment, Employee will
reasonably cooperate with and assist the Company's new Chairman and CEO, as such
cooperation and assistance may reasonably be requested by the Company's Board of
Directors and Employee will faithfully and competently execute any duties
assigned to him as provided in Section B.1 hereof.

<PAGE>   2

                  5. Employee agrees that prior to the execution of this
Agreement, Employee was not entitled to receive any further monetary payments
from the Company, other than accrued and unpaid base salary for the period from
February 1, 2001 through February 13, 2001, accrued vacation pay and previously
unreimbursed business expenses incurred by Employee on behalf of the Company in
accordance with the Company's policies. Employee further agrees that the only
payments and benefits he is entitled to receive from the Company in the future
are those specified in this Agreement.

                  6. Employee hereby expressly waives, releases, acquits and
forever discharges the Company and its parents, successors, assigns, divisions,
subsidiaries, affiliates, partners, officers, directors, executives, investors,
stockholders, managers, supervisors, employees, agents, attorneys and
representatives, from any and all claims, demands, and causes of action which
Employee has or claims to have, whether known or unknown, of whatever nature,
which exist or may exist as of the date of Employee's execution of this
Agreement. As used in this paragraph, "claims," "demands," and "causes of
action" include, but are not limited to, contract claims, equitable claims,
fraud claims, tort claims, discrimination claims, harassment claims, retaliation
claims, personal injury claims, constructive discharge claims, emotional
distress claims, public policy claims, wage claims, claims for debts, accounts,
attorneys' fees, compensatory damages, punitive damages, and/or liquidated
damages, claims for vesting or accelerated vesting of options to purchase the
Company's Common Stock, claims for defamation, and any and all claims arising
under the Americans with Disabilities Act, the Family Medical Leave Act, or any
other federal or state statute governing employment, including but not limited
to Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, 29 U.S.C. Section 621 et seq, as such statutes may have been or
may be amended from time to time. The foregoing release shall not include claims
for (i) any indemnification Employee shall be entitled to pursuant to the
Company's bylaws, certificate of incorporation, that certain Director's
Indemnification Agreement dated as of June 14, 2000, between Employee and the
Company, or insurance policies in effect as of the date of execution of this
Agreement, (ii) recovery of reimbursable business expenses incurred on behalf of
the Company, (iii) breach of the terms of this Agreement or (iv) recovery of
Employee's personal property located on the Company's premises.

                  7. Without in any way limiting the generality or scope of
Section A.6 of this Agreement, Employee hereby understands and agrees to release
and hereby does release any and all claims, rights or benefits Employee has or
may have for age discrimination arising out of or under the Age Discrimination
in Employment Act of 1967 ("ADEA"), 29 U.S.C. Section 621, et seq., as the ADEA
may have been or may be amended, as well as any equivalent or comparable
provision of state or local law.

                  8. In compliance with any statute or ordinance which requires
a specific release of unknown claims or benefits, this Agreement includes a
release of unknown claims, and Employee hereby expressly waives and relinquishes
any and all claims, rights or benefits that Employee may have which are unknown
to Employee at the time of the execution of this Agreement.

                  9. Employee acknowledges and agrees that given the extent and
nature of the confidential and proprietary information he has and will obtain
during the course of his

                                       2
<PAGE>   3

employment with the Company, it would be inevitable that such confidential
information would be disclosed or utilized by Employee should he obtain
employment from, or otherwise provide services to, an entity or person that is
engaged in a Competitive business. As used herein, the businesses and
enterprises set forth on Schedule A hereto shall be deemed to be a "Competitive
business." Consequently, if, during the Consulting Period, Employee commences
employment with any other person, business or entity, Employee agrees that he
will notify the Company in writing within ten (10) calendar days of (a) his
commencement of such employment and (b) of any change of his duties with such
employer. If within ten (10) calendar days of the Company's actual receipt of
such notification (or at any later time if Employee's employment duties with
such other employer are changed or if such employer acquires, or is acquired by,
any entity which operates a Competitive business) the Committee reasonably
determines that such employment is with a Competitive business, the Company may
immediately terminate Employee's employment hereunder with "Cause", as defined
in Section C.6. As used in this Section 9, the "Committee" shall mean a
committee of the Company's Board of Directors, as mutually agreed to in writing
by the Company and Employee.

                  10. During the Consulting Period, and for one year following
termination or expiration thereof, Employee shall not encourage or solicit any
of the Company's employees to leave the Company's employ for any reason or
knowingly interfere in any other manner with employment relationships at the
time existing between the Company and its employees. In addition, during the
Consulting Period, and for one year following termination or expiration thereof,
Employee shall not solicit, directly or indirectly, Competing business from any
client of the Company, induce any of the Company's clients to terminate their
existing business relationship with the Company, or knowingly interfere in any
other manner with any existing business relationship between the Company and any
client or other third party. As used herein, "Competing business" shall mean any
part of a "Competitive business" as defined in Schedule A hereto.

                  11. Employee understands that, during the course of his work
as an employee of the Company, he has had and will have access to Proprietary
Information (as defined below) concerning the Company and parties with which the
Company has a business relationship. Employee acknowledges that the Company has
developed, compiled, and otherwise obtained, at great expense, its Proprietary
Information. Employee hereby agrees to hold in strict confidence all Proprietary
Information and, unless he receives written permission from the Company's Chief
Executive Officer, will not disclose any Proprietary Information to anyone
outside of the Company, except as required by law or as necessary to carry out
his responsibilities hereunder. Employee further agrees he will not use, copy,
publish, summarize, or remove from Company premises Proprietary Information
except during his employment to the extent necessary to carry out his
responsibilities hereunder or as required by law. As used herein, the term
"Proprietary Information" means all information and any idea in whatever form,
written or oral, tangible or intangible, whether disclosed to or learned or
developed by me, pertaining in any manner to the current or proposed business of
the Company or parties with which the Company has a business relationship, but
only to the extent that the Company imposes reasonable safeguards to protect the
confidentiality of such information and does not include information which: (i)
is publicly known through lawful means; (ii) was rightfully in Employee's
possession prior to his employment with the Company as demonstrated by written
documents currently in existence; or (iii) is disclosed to Employee without
restriction by a third party who rightfully possesses and

                                       3
<PAGE>   4

discloses the information and who did not learn of it directly from the Company.
Without limiting the scope of the definition, Employee understands that the
Company considers the following to be included in the definition of Proprietary
Information: (i) all client/customer lists and all lists or other compilations
containing client, customer or vendor information; (ii) information about
products, proposed products, research, product development, techniques,
processes, costs, profits, product pricing, markets, marketing plans,
strategies, forecasts, sales and commissions; (iii) plans for the future
development and new product concepts; (iv) the compensation and terms of
employment of other employees; (v) all other information that has been or will
be given to Employee in confidence by the Company; and (vi) software in various
stages of development, designs, drawings, specifications, techniques, models,
data, source code, algorithms, object code, documentation, diagrams, flow
charts, computer programs, databases, and other data of any kind and
description, including electronic data recorded or retrieved by any means.
Proprietary Information also includes any information described above which the
Company obtains from another party and which the Company treats as proprietary
or designates as Proprietary Information whether or not owned or developed by
the Company or the other party.

                  12. Employee acknowledges that monetary damages may not be
sufficient to compensate the Company for any economic loss which may be incurred
by reason of his breach of the restrictive covenants set forth in Sections A.10
or A.11. Accordingly, in the event of any such breach, the Company shall, in
addition to the termination of this Agreement and any remedies available to the
Company at law, be entitled to obtain equitable relief in the form of an
injunction precluding Employee from continuing such breach.

                  13. Employee and Company will not, except as may be mandated
by statutory or regulatory requirements or as may be required by legal process,
or in the event of a material transaction by the Company in which similar
contracts are commonly disclosed to others, disclose the terms of this
settlement, the amounts referred to in this Agreement, or the fact of the
payment of said amounts, except that they may disclose to their attorneys,
accountants or other professional advisors to whom the disclosure is necessary
to effectuate the purposes for which they have consulted with such professional
advisors; and provided that Employee and Company may each disclose that
Employee's resignation as the Company's Chief Executive Officer and Chairman was
on amicable terms. Each party understands that this covenant of non-disclosure
is a material inducement to the other party for the making of this settlement
and that, for the breach thereof the other party will be entitled to pursue its
legal and equitable remedies, including, without limitation, the right to seek
injunctive relief. Employee may disclose the fact and terms of this settlement
to his spouse provided she signs a written agreement to help the fact and terms
of this Agreement confidential.

         B. AGREEMENT BY THE COMPANY. In exchange for the Employee's agreement
to the releases and other terms and conditions of this Agreement, the Company
agrees as follows:

                  1. From February 13, 2001 through the Termination Date (the
"Consulting Period"), the Company will continue Employee's employment in an
advisory position and Employee will have such duties as are reasonably assigned
or delegated by the Board of Directors of the Company. Throughout this period,
Employee shall not be required to work more than twenty (20) hours in any
calendar month during the first six months and more than

                                       4
<PAGE>   5

fifteen (15) hours in any calendar month in the second six months and his duties
shall be consistent with his duties during the last two years of employment with
the Company, including, as requested, assisting in maintaining relations with
customers, advising on general business matters, working on special projects and
making periodic reports to the Board of Directors in the advancement of the best
interests of the Company. Employee's employment will be subject to the policies
maintained and established by the Company from time to time, however, nothing in
this Section B.1 will prevent Employee from (i) employment with a person or an
entity that is not a Competitor, (ii) engaging in additional activities in
connection with passive personal investments and community affairs that are not
inconsistent with Employee's duties under this Agreement. Additionally, nothing
in this Section B.1 will prevent Employee from serving on the board of directors
of other companies or organizations, or engaging in other activities, so long as
such participation does not require such involvement as to interfere with the
performance of Employee's duties hereunder and so long as the company or
organization is not a Competitive Business. The Company shall provide Employee
at least seventy-two (72) hours notice of the specific duties assigned to him
during the Consulting Period and Employee shall have the right to reschedule
commitments to the Company to accommodate his outside interests so long as he
makes himself available by telephone during the seventy-two (72) hour period.
Employee acknowledges and agrees that he owes a fiduciary duty of loyalty,
fidelity and allegiance to act at all times in the best interests of the
Company.

                  2. During the Consulting Period, Employee shall earn a monthly
salary (the "Base Salary") of Thirteen Thousand Five Hundred Ninety Dollars
($13,590.00) less all applicable deductions, payable in accordance with the
Company's standard payroll schedule. Employee and his immediate family will
continue to receive the health and welfare benefits he received as of the date
of execution of this Agreement through the Company's payment of Employee's
wife's health and dental benefits through COBRA until August 13, 2002; provided,
however, neither Employee nor Employee's wife shall be entitled to participate
in any other employee benefit plan, including without limitation, the Company's
401(k) plan or any executive incentive plans; provided further, that if this
Agreement is terminated prior to February 13, 2002, the Company shall
nonetheless continue making the foregoing COBRA payments until February 13, 2002
and shall thereafter be relieved of further COBRA payments.

                  3. Within ten (10) days after execution of this Agreement,
Company shall pay Employee a one-time lump sum payment (the "Separation
Payment") of Ninety-Eight Thousand Five Hundred Thirty-Six Dollars ($98,536.00),
less all applicable deductions (it being understood that Five Thousand Dollars
($5,000) of the foregoing amount represents reimbursement of legal fees and
shall be subject only to income tax withholding); provided, that Employee does
not elect to revoke this Agreement pursuant to Section C.13(b) of this
Agreement. Within ten (10) days after execution of this Agreement, Company shall
also pay Employee a one-time lump sum payment (the "Vacation Payment") of
$17,836.89, which Employee and Company hereby agree represents full compensation
for all accrued and unused vacation due to Employee. Notwithstanding anything
herein to the contrary, Employee shall not be entitled to receive any bonus or
other payment, other than Base Salary, the Separation Payment, the Vacation Pay,
payment of premiums for continuing health and welfare benefits and reimbursement
of unpaid business-related expenses incurred on behalf of the Company in
accordance with Company's policies.

                                       5
<PAGE>   6

                  4. The Company forever fully releases and discharges Employee
from any claims, damages and causes of action it may have against him and
covenants not to sue or otherwise institute or cause to be instituted or in any
way participate in legal or administrative proceedings against Employee (except
as required by law) with respect to any matter arising out of or connected with
his employment with the Company or the termination of that employment, including
any and all liabilities, claims, demands, contracts, debts, obligations and
causes of action of every nature, kind and description, in law, equity or
otherwise, whether or not now known or ascertained, which heretofore do or may
exist.

                  5. The Company shall, to the extent reasonably practicable,
assign to Employee, as soon as reasonably practicable, all of its rights, title
and interest in and to Employee's existing life insurance policy 978206706PR
with Metropolitan Life; provided, that Employee shall first arrange or otherwise
guarantee that Company receives a pro-rated refund of any pre-paid premiums for
the period from the date of such assignment through October 7, 2001.

         C. JOINT AGREEMENTS. Company and Employee, for himself, his heirs,
executors, administrators, assigns, and successors, jointly agree as follows:

                  1. Nothing contained in this Agreement shall constitute or be
treated as an admission by the Company or Employee of liability, of any
wrongdoing, or of any violation of law.

                  2. If any provision of this Agreement is found to be
unenforceable, it shall not affect the enforceability of the remaining
provisions and a court shall enforce all remaining provisions to the extent
permitted by law.

                  3. The Company's Purchase Option, as set forth in that certain
Founder/Employee Shareholder Agreement dated as of March 28, 1997, and amended
as of April 14, 1997 by and between Employee and the Company, as amended to
date, shall automatically lapse upon execution of this Agreement, provided that
this Agreement is not revoked or terminated by Employee pursuant to Section
C.13(b) hereof. In the event Employee revokes this Agreement pursuant to Section
C.13(b) hereof, the Purchase Option shall automatically be reinstated in
accordance with its terms.

                  4. On January 10, 2000, Employee was granted two separate
options to purchase an aggregate of 690,200 shares (the "Option Shares") of the
Company's Common Stock at an exercise price per share of Seven Dollars ($7.00).
Of those shares, 14,285 are Incentive Stock Options and 675,915 are
Non-statutory Stock Options or non-qualified options. As of the date of this
Agreement, Employee has vested in 27.08% of the Option Shares. The Company and
Employee hereby agree that the Option Shares shall continue to vest in
accordance with their terms during the Consulting Period; provided, that if the
Company terminates this Agreement pursuant to Section A.9 herein, Employee's
Option Shares shall vest on an accelerated basis such that Employee shall be
immediately be entitled to an additional four (4) months of vesting; provided
further, that after such accelerated vesting, Employee shall be vested in a
maximum of 52.08% of the Option Shares, on a pro-rata basis. For the sake of
clarity, the Company agrees that the provisions of section 6 of the Stock Option
Agreements governing the Option Shares shall continue to apply up to and
including the Termination Date. Employee

                                       6
<PAGE>   7

understands and agrees that he must exercise any vested Option Shares within
three (3) months after the Termination Date. Furthermore, Employee understands
and agrees that notwithstanding anything herein to the contrary, the Option
Shares shall immediately terminate and cease to be exercisable if Employee
breaches the provisions of Sections A.10 or A.11 hereof.

                  5. Employee shall have the right to terminate the employment
relationship upon written notice at anytime prior to the Termination Date.

                  6. If (i) Employee terminates his employment for any reason
prior to the Termination Date, (ii) Company terminates Employee's employment for
Cause (as defined below), or (iii) Employee's employment terminates pursuant to
Section A.10 above, Employee will not be entitled to any additional compensation
or other rights or benefits from the Company and as a result the Company shall
be obligated to pay Employee only that portion of his Base Salary earned prior
to the date of the termination of his employment with the Company. In the case
of such a termination, all other covenants in this Agreement shall remain in
full force and effect, to the extent that they are not inconsistent with the
foregoing. For purposes of this Agreement, "Cause" shall exist if Employee (i)
embezzles or otherwise criminally misappropriates funds or property belonging to
the Company; (ii) is convicted by a court of law, or admits that he is guilty,
of fraud or any crime involving moral turpitude; (iii) continues to neglect the
performance of his duties after a written demand for substantial performance is
delivered to him by the Company's Board of Directors, which demand specifically
identifies the manner in which the Board of Directors believes Employee has not
substantially performed his duties; or (iv) makes slanderous, libelous or
defamatory statements about the Company or its officers, directors, employees,
investors, stockholders, administrators, affiliates, divisions, subsidiaries,
predecessor and successor corporations and assigns. The Company may not
terminate Employee's employment for Cause except upon a determination by the
Board at a meeting duly called for such purpose that Cause exists for
termination after Employee has been given written notice by the Company of the
specific reason for such termination and an opportunity for Employee, together
with his counsel, to be heard in person before the Company's Board of Directors.

                  7. Except for Employee's Stock Option Agreements, to the
extent that they are consistent with this Agreement, and that certain Directors
Indemnification Agreement dated as of June 14, 2000, between the Company and
Employee, this Agreement shall supersede and render null and void any and all
prior agreements between the parties.

                  8. Employee and the Company expressly waive and release any
and all rights and benefits under Section 1542 of the CIVIL CODE OF THE STATE OF
CALIFORNIA (or any analogous law of any other state), which reads as follows: "A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH, IF
KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Furthermore, both parties agree and understand that if, hereafter, they discover
facts different from or in addition to those which they now know or believe to
be true, that this waiver shall be and remain effective in all respects
notwithstanding such different or additional facts or the discovery thereof.

                                       7
<PAGE>   8

                  9. This Agreement shall bind and benefit Employee's heirs,
executors, administrators, successors, assigns, and each of them; it shall also
bind and benefit Company and its successors and assigns.

                  10. This Agreement shall, in all respects, be interpreted,
enforced and governed under the laws of the State of California without giving
effect to conflicts of law principles.

                  11. Each party hereby agrees to accept and assume the risk
that any fact with respect to any matter covered by this Agreement may hereafter
be found to be other than or different from the facts it believes at the time of
this Agreement to be true, and agrees that this Agreement shall be and will
remain effective notwithstanding any such difference in fact.

                  12. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one
agreement.

                  13. Employee hereby acknowledges and understands and Employee
agrees that:

                           (a) Employee may have, and has had, at least
twenty-one (21) days after receipt of this Agreement within which he may review
and consider it, discuss it with an attorney of his own choosing, and decide to
execute or not execute this Agreement and Employee represents that this
Agreement was first presented on February 13, 2001 and is the product of
negotiations between the parties;

                           (b) Employee has seven (7) days after the execution
of this Agreement within which he may revoke this Agreement;

                           (c) in order to revoke this Agreement, Employee must
deliver by personal service to the Company's Chief Financial Officer, on or
before seven (7) days after the execution of this Agreement, a letter stating
that he is revoking this Agreement, and;

                           (d) that this Agreement shall not become effective or
enforceable until after the expiration of seven (7) days following the date
Employee executes this Agreement.

                  14. All notices required or given pursuant to this Consulting
Agreement shall be addressed to the Company or Consultant at the designated
addresses shown below by registered mail, special delivery, or by certified
courier service or by confirmed facsimile to the numbers set forth below, as may
be changed by either party from time to time by prior written notice to the
other party:

    To the Company:                        To Consultant:
    --------------                         --------------
    Accelerated Networks, Inc.             Suresh Nihalani
    301 Science Drive,                     11261 Broadview Dr.
    Moorpark, California  93021            Moorpark, CA  93021
    Attention: Chief Financial Officer     Telephone/Facsimile: (805) 523-0832
    Facsimile: (805) 553-9696
    Telephone: (805) 553-9680

                                       8
<PAGE>   9

                  Notices shall be effective when deposited in the United States
mail in the manner required by this paragraph, or in the case of notices by
facsimile, upon confirmation of transmission thereof.

                  This Agreement may be executed in several counterparts, each
of which shall constitute an original and all of which, when taken together,
shall constitute one agreement.

                  The parties hereto have read and understand this Agreement and
affix their signatures hereto voluntarily and without coercion. Employee
acknowledges that the waivers he has made and the terms he has agreed to herein
are knowing, conscious and with full appreciation that he is forever foreclosed
from pursuing any of the rights so waived.

                                               Employee:

Dated: March 16, 2001                          /s/ Suresh Nihalani
                                               ---------------------------------
                                               Suresh Nihalani

Dated: March 13, 2001                          Company:

                                               By: /s/ Steven M. Krausz
                                                   -----------------------------
                                                   Steven M. Krausz, Director

APPROVED AS TO FORM:

Dated: March 16, 2001                              /s/ Linda Griffey
                                                   -----------------------------
                                                   Linda Griffey
                                                   O'Melveny & Myers
                                                   Attorneys for Suresh Nihalani

I agree to hold the terms of this Agreement confidential and to be bound by the
provisions of Section A.13 of this Agreement to the same extent as Employee.

                                                   /s/ Varsha Nihalani
                                                   -----------------------------
                                                   Varsha Nihalani

                                       9
<PAGE>   10

                                   SCHEDULE A

                             COMPETITIVE BUSINESSES

As used in the Agreement, any business, enterprise or activity involving the
development, manufacture or sale of any of the following products shall be
deemed to be a "Competitive Business":

o    IAD - Any integrated access device capable of transporting voice and/or
     data over XDSL or conventional T1, DS3, or OC-3, including but not limited
     to, native ATM, Frame Relay, or Ethernet line-side interfaces or ATM or
     Ethernet trunk side interfaces for voice and/or data services.

o    MSAP - Any ATM-based concentrator, DSLAM or gateway, including but not
     limited to GR 303, TR 08, V5.2, native ATM or Ethernet interfaces and MGCP,
     H.248, or other service level managed gateways capable of interoperating
     with a call agent soft switch or service management application.

                                       10

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