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                                                                    EXHIBIT 10.4

                                LOUDCLOUD, INC.

                         EMPLOYEE STOCK PURCHASE PLAN

     The following constitute the provisions of the Employee Stock Purchase Plan
of Loudcloud, Inc.

     1.  Purpose.  The purpose of the Plan is to provide employees of the
         -------
Company and its Designated Affiliates with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Code. In addition, this Plan authorizes the grant of
options which do not qualify under Section 423 of the Code pursuant to rules,
procedures or sub-plans adopted by the Administrator designed to achieve desired
tax or other objectives in particular locations outside the United States. The
provisions of the Plan shall be construed so as to extend and limit
participation in a uniform and nondiscriminatory basis consistent with the
requirements of Section 423 of the Code; provided, however, that an Eligible
Employee participating in a sub-plan or under special rules pursuant to Section
15 not designed to qualify under Section 423 of the Code need not have the same
rights and privileges as Eligible Employees participating in the Code Section
423 Plan.

     2.  Definitions.
         -----------

         (a)  "Administrator" shall mean the Board or any Committee designated
               -------------
by the Board to administer the plan pursuant to Section 14.

         (b)  "Affiliate" means (i) any Subsidiary and (ii) any other entity in
               ---------
which Company has an equity interest or which Company has a significant business
relationship.

         (c)  "Board" shall mean the Board of Directors of the Company.
               -----

         (d)  "Change of Control"  shall mean the occurrence of any of the
               -----------------
following events:

              (i)  Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company's then outstanding voting securities; or

             (ii)  The consummation of the sale or disposition by the Company of
all or substantially all of the Company's assets; or

            (iii)  The consummation of a merger or consolidation of the Company,
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or its parent) at least
fifty percent (50%) of the total voting power represented by the voting
securities of

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the Company, or such surviving entity or its parent outstanding immediately
after such merger or consolidation.

             (iv)  A change in the composition of the Board, as a result of
which fewer than a majority of the Directors are Incumbent Directors. "Incumbent
Directors" shall mean Directors who either (A) are Directors of the Company, as
applicable, as of the date hereof, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of
those Directors whose election or nomination was not in connection with any
transaction described in subsections (i), (ii) or (iii) or in connection with an
actual or threatened proxy contest relating to the election of directors of the
Company.

         (e)  "Code" shall mean the Internal Revenue Code of 1986 of the United
               ----
States, as amended.

         (f)  "Committee" means a committee of the Board appointed by the Board
               ---------
in accordance with Section 14 hereof.

         (g)  "Common Stock" shall mean the common stock of the Company.
               ------------

         (h)  "Company" shall mean Loudcloud, Inc., a Delaware corporation.
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         (i)  "Compensation" shall mean all base straight time gross earnings,
               ------------
commissions overtime, shift premium, and incentive compensation, but exclusive
of payments for bonuses and other compensation. The Committee, in its
discretion, may establish a different definition of Compensation prior to an
Enrollment Date for all options to be granted on such Enrollment Date.

         (j)  "Designated Affiliate" shall mean any Affiliate selected by the
               --------------------
Administrator as eligible to participate in the Plan.

         (k)  "Eligible Employee" shall mean any individual who is a common
               -----------------
law employee of the Company or any Designated Affiliate and whose customary
employment with the Company or Designated Affiliate is at least twenty (20)
hours per week and more than five (5) months in any calendar year. For purposes
of the Plan, the employment relationship shall be treated as continuing intact
while the individual is on sick leave or other leave of absence approved by the
Company. Where the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship shall be deemed to have terminated on the 91st day of such leave.

         (l)  "Exercise Date" shall mean the last Trading Day in February and
               -------------
August of each year. The first Exercise Date under the Plan shall be the last
Trading Day in August 2001.

         (m)  "Fair Market Value" shall mean, as of any date, the value of
               -----------------
Common Stock determined as follows:

              (i)  If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system

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on the date of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable (including, without limitation, as
quoted on the Nasdaq National Market website, www.nasdaq.com);

             (ii)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable;

            (iii)  In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board; or

             (iv)  For purposes of the Offering Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").

         (n)  "Offering Date" shall mean the first Trading Day of each
               -------------
Offering Period.

         (o)  "Offering Periods" shall mean the periods of approximately
               ----------------
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after March 1 and
September 1 of each year and terminating on the first Trading Day on or after
the February 28 and August 31 Offering Period commencement date approximately
twenty-four months later; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the Company's registration
statement on Form S-1 effective and ending on the first Trading Day on or after
the earlier of (i) February 28, 2003 or (ii) twenty-seven (27) months from the
beginning of the first Offering Period. The duration and timing of Offering
Periods may be changed pursuant to Section 4 of this Plan.

         (p)  "Plan" shall mean this Employee Stock Purchase Plan.
               ----

         (q)  "Purchase Period" shall mean the approximately six (6) month
               ---------------
period commencing on one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Offering Date and end with the next Exercise Date.

         (r)  "Purchase Price" shall mean 85% of the Fair Market Value of a
               --------------
share of Common Stock on the Offering Date or on the Exercise Date, whichever is
lower; provided however, that the Purchase Price may be adjusted by the
Administrator pursuant to Section 20.

         (s)  "Subsidiary" shall mean a "subsidiary corporation," whether now or
               ----------
hereafter existing, as defined in Section 424(f) of the Code.

         (t)  "Trading Day" shall mean a day on which national stock exchanges
               -----------
and the Nasdaq System are open for trading.

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     3.  Eligibility.
         -----------

         (a)  First Offering Period.  Any individual who is an Eligible Employee
              ----------------------
immediately prior to the first Offering Period shall be automatically
enrolled in the first Offering Period.

         (b)  Subsequent Offering Periods.  Any Eligible Employee on a given
              ---------------------------
Offering Date shall be eligible to participate in the Plan.

         (c)  Limitations.  Any provisions of the Plan to the contrary
              -----------
notwithstanding, no Eligible Employee shall be granted an option under the Plan
(i) to the extent that, immediately after the grant, such Eligible Employee (or
any other person whose stock would be attributed to such Eligible Employee
pursuant to Section 424(d) of the Code) would own capital stock of the Company
and/or hold outstanding options to purchase such stock possessing five percent
(5%) or more of the total combined voting power or value of all classes of the
capital stock of the Company or of any Subsidiary, or (ii) to the extent that
his or her rights to purchase stock under all employee stock purchase plans of
the Company and its subsidiaries accrues at a rate which exceeds $25,000 worth
of stock (determined at the fair market value of the shares at the time such
option is granted) for each calendar year in which such option is outstanding at
any time.

     4.  Offering Periods.  The Plan shall be implemented by consecutive,
         ----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after March 1 and September 1 each year, or on such other date
as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 21 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date upon which the Company's registration statement on Form S-1 is declared
effective by the Securities and Exchange Commission and ending on the first
Trading Day on or after February 28, 2003. The Board shall have the power to
change the duration of Offering Periods (including the commencement dates
thereof) with respect to future offerings without shareholder approval if such
change is announced prior to the scheduled beginning of the first Offering
Period to be affected thereafter.

     5.  Participation.
         -------------

         (a)  First Offering Period.  An Eligible Employee shall be entitled to
              ---------------------
participate in the first Offering Period only if such individual submits a
subscription agreement authorizing payroll deductions in the form of Exhibit A
                                                                     ---------
to this Plan (i) no earlier than the effective date of the Form S-8 registration
statement with respect to the issuance of Common Stock under this Plan and (ii)
no later than a date determined by the Administrator in its discretion (the
"Enrollment Window"). An Eligible Employee's failure to submit the subscription
agreement during the Enrollment Window shall result in the automatic termination
of such individual's participation in the Offering Period.

         (b)  Subsequent Offering Periods.  An Eligible Employee may become a
              ---------------------------
participant in the Plan by completing a subscription agreement authorizing
payroll deductions in the form of Exhibit A to this Plan and filing it with the
                                  ---------
Company's Benefits Department prior to the applicable Offering Date.

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     6.  Payroll Deductions.
         ------------------

         (a)  At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding 15% of the Compensation which he or
she receives on each pay day during the Offering Period. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.

         (b)  Payroll deductions for a participant shall commence on the first
payday following the Offering Date and shall end on the last payday in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof; provided,
however, that for the first Offering Period, payroll deductions shall commence
on the first payday on or following the end of the Enrollment Window.

         (c)  All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.

         (d)  A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing or filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Administrator may, in its discretion, limit the nature
and/or number of participation rate changes during any Offering Period. The
Administrator, in its sole discretion, shall determine when the change in such
participation rate is effective.

         (e)  Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period.

         (f)  At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Eligible Employee.

     7.  Grant of Option.  On the Offering Date of each Offering Period, each
         ---------------
Eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Eligible Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price; provided that
in no event shall an Eligible Employee be permitted to purchase during each
Purchase Period more than 5,000 shares of the Company's Common Stock (subject to
any adjustment pursuant to Section 20), and provided further that such purchase
shall be subject to the limitations set forth in Sections 3(c) and 13 hereof.
The

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Eligible Employee may accept the grant of such option by turning in a completed
Subscription Agreement (attached hereto as Exhibit A) to the Company on or prior
                                           ---------
to an Offering Date, or with respect to the first Offering Period, prior to the
last day of the Enrollment Window. The Administrator may, for future Offering
Periods, increase or decrease, in its absolute discretion, the maximum number of
shares of the Company's Common Stock an Eligible Employee may purchase during
each Purchase Period of such Offering Period. Exercise of the option shall occur
as provided in Section 8 hereof, unless the participant has withdrawn pursuant
to Section 10 hereof. The option shall expire on the last day of the Offering
Period.

     8.  Exercise of Option.
         ------------------

         (a)  Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other funds left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.

         (b)  If the Administrator determines that, on a given Exercise Date,
the number of shares with respect to which options are to be exercised may
exceed (i) the number of shares of Common Stock that were available for sale
under the Plan on the Offering Date of the applicable Offering Period, or (ii)
the number of shares available for sale under the Plan on such Exercise Date,
the Administrator may in its sole discretion (x) provide that the Company shall
make a pro rata allocation of the shares of Common Stock available for purchase
on such Offering Date or Exercise Date, as applicable, in as uniform a manner as
shall be practicable and as it shall determine in its sole discretion to be
equitable among all participants exercising options to purchase Common Stock on
such Exercise Date, and continue all Offering Periods then in effect, or (y)
provide that the Company shall make a pro rata allocation of the shares
available for purchase on such Offering Date or Exercise Date, as applicable, in
as uniform a manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all participants exercising options to
purchase Common Stock on such Exercise Date, and terminate any or all Offering
Periods then in effect pursuant to Section 21 hereof. The Company may make pro
rata allocation of the shares available on the Offering Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Offering Date.

     9.  Delivery.  As soon as reasonably practicable after each Exercise Date
         --------
on which a purchase of shares occurs, the Company shall arrange the delivery to
each participant the shares purchased upon exercise of his or her option in a
form determined by the Administrator.

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<PAGE>

     10.  Withdrawal.
          ----------

          (a)  A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
            ---------
credited to his or her account shall be paid to such participant as soon as
administratively practicable after receipt of notice of withdrawal and such
participant's option for the Offering Period shall be automatically terminated,
and no further payroll deductions for the purchase of shares shall be made for
such Offering Period. If a participant withdraws from an Offering Period,
payroll deductions shall not resume at the beginning of the succeeding Offering
Period unless the participant delivers to the Company a new subscription
agreement.

          (b)  A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.

     11.  Termination of Employment.  In the event a participant ceases to be an
          -------------------------
Eligible Employee of the Company or any Designated Affiliate, as applicable, his
or her option shall expire on the date of such termination and any payroll
deductions credited to such participant's account during the Offering Period but
not yet used to purchase shares under the Plan shall be returned to such
participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 15 hereof, and such participant's option shall be
automatically terminated.

     12.  Interest.  No interest shall accrue on the payroll deductions of a
          --------
participant in the Plan.

     13.  Stock.
          -----

          (a)  Subject to adjustment upon changes in capitalization of the
Company as provided in Section 20 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 1,500,000 shares plus an annual increase to be added on the first day
of the Company's fiscal year beginning in 2003, equal to the lesser of (i)
5,000,000 shares, (ii) 2% of the outstanding shares on such date or (iii) an
amount determined by the Administrator.

          (b)  Until the shares are issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), a participant shall only have the rights of an unsecured creditor with
respect to such shares, and no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to such shares.

          (c)  Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.

     14.  Administration.  The Administrator shall administer the Plan and
          --------------
shall have full and exclusive discretionary authority to construe, interpret and
apply the terms of the Plan, to determine eligibility and to adjudicate all
disputed claims filed under the Plan, to establish deadlines enrollment in the
Plan, to adopt sub-plans applicable to specified Affiliates or locations, and to
designate which

                                      -7-
<PAGE>

Affiliates will participate in the Plan. Every finding, decision and
determination made by the Administrator shall, to the full extent permitted by
law, be final and binding upon all parties.

     15.  Administrator Rules for Foreign Jurisdictions

          (a)  The Administrator may adopt rules or procedures relating to the
operation and administration of the Plan to accommodate the specific
requirements of local laws and procedures. Without limiting the generality of
the foregoing, the Administrator is specifically authorized to adopt rules and
procedures regarding handling of payroll deductions, payment of interest,
conversion of local currently, payroll tax, withholding procedures and handling
of stock certificates which vary with local requirements.

          (b)  The Administrator may also adopt rules, procedures or sub-plan
applicable to particular Affiliates or locations, which sub-plans may be
designed to be outside the scope of Code Section 423. The rules of such sub-
plans may take precedence over other provides of this Plan, with the exception
of Section 13(a) but unless otherwise superceded by the terms of such sub-plan,
the provisions of this Plan shall govern the operation of such sub-plan.

     16.  Beneficiary.  In the event of the death of a participant prior to the
          -----------
purchase of shares under the Plan, the Company shall deliver any cash received
from the participant for the purchase of shares prior to such participant's
death to the executor or administrator of the estate of the participant.

     17.  Transferability.  Neither payroll deductions credited to a
          ---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 16 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.

     18.  Use of Funds.  All payroll deductions received or held by the
          ------------
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions. Until
shares are issued, participants shall only have the rights of an unsecured
creditor.

     19.  Reports.  Individual accounts shall be maintained for each
          -------
participant in the Plan. Statements of account shall be given to participating
Eligible Employees at least annually, which statements shall set forth the
amounts of payroll deductions, the Purchase Price, the number of shares
purchased and the remaining cash balance, if any.

     20.  Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
          ---------------------------------------------------------------------
Merger or Change of Control.
---------------------------

          (a)  Changes in Capitalization.  Subject to any required action by the
               -------------------------
shareholders of the Company, the maximum number of shares of the Company's
Common Stock which shall be made available for sale under the Plan, the maximum
number of shares each participant may purchase each Purchase Period (pursuant to
Section 7), the number of shares that may be added annually to the shares
reserved under the Plan (pursuant to Section 13(a)(i)), as well as the price per

                                      -8-
<PAGE>

share and the number of shares of Common Stock covered by each option under the
Plan which has not yet been exercised shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other change in the number of
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.

          (b)  Dissolution or Liquidation.  In the event of the proposed
               --------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Administrator. The
New Exercise Date shall be before the date of the Company's proposed dissolution
or liquidation. The Administrator shall notify each participant in writing, at a
time determined by the Administrator (in its discretion and on a uniform basis)
prior to the New Exercise Date, that the Exercise Date for the participant's
option has been changed to the New Exercise Date and that the participant's
option shall be exercised automatically on the New Exercise Date, unless prior
to such date the participant has withdrawn from the Offering Period as provided
in Section 10 hereof.

         (c)  Merger or Change of Control.  In the event of a merger or Change
              ---------------------------
of Control, each outstanding option shall be assumed or an equivalent option
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the option, any Purchase Periods then in progress shall
be shortened by setting a New Exercise Date and any Offering Periods then in
progress shall end on the New Exercise Date. The New Exercise Date shall be
before the date of the Company's proposed merger or Change of Control. The
Administrator shall notify each participant in writing, at a time determined by
the Administrator (in its discretion and on a uniform basis) prior to the New
Exercise Date, that the Exercise Date for the participant's option has been
changed to the New Exercise Date and that the participant's option shall be
exercised automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 10
hereof.

     21.  Amendment or Termination.
          ------------------------

          (a)  The Administrator may at any time and for any reason terminate or
amend the Plan. Except as otherwise provided in the Plan, no such termination
can affect options previously granted, provided that an Offering Period may be
terminated by the Administrator on any Exercise Date if the Administrator
determines that the termination of the Offering Period or the Plan is in the
best interests of the Company and its shareholders. Except as provided in
Section 20 and this Section 21 hereof, no amendment may make any change in any
option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock

                                      -9-
<PAGE>

exchange rule), the Company shall obtain shareholder approval in such a manner
and to such a degree as required.

          (b)  Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Administrator shall be entitled to change the Offering Periods, limit the
frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Administrator determines in its sole discretion advisable which are
consistent with the Plan.

          (c)  In the event the Administrator determines that the ongoing
operation of the Plan may result in unfavorable financial accounting
consequences, the Board may, in its discretion and, to the extent necessary or
desirable, modify or amend the Plan to reduce or eliminate such accounting
consequence including, but not limited to:

              (i)  increasing the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;

             (ii)  shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of
the Board action; and

            (iii)  allocating shares.

Such modifications or amendments shall not require stockholder approval or the
consent of any Plan participants.

     22.  Notices.  All notices or other communications by a participant to the
          -------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form and manner specified by the Company at the
location, or by the person, designated by the Company for the receipt thereof.

     23.  Conditions Upon Issuance of Shares.  Shares shall not be issued with
          ----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

          As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such

                                      -10-
<PAGE>

shares if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned applicable provisions of law.

     24.  Term of Plan.  The Plan shall become effective upon the earlier to
          ------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect until terminated under
Section 21 hereof.

     25.  Automatic Transfer to Low Price Offering Period.  To the extent
          -----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Offering Date of
such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period.

                                      -11-
<PAGE>

                                   EXHIBIT A
                                   ---------

                                LOUDCLOUD, INC.

                          EMPLOYEE STOCK PURCHASE PLAN

                             SUBSCRIPTION AGREEMENT


_____ Original Application                             Offering Date:___________
_____ Change in Payroll Deduction Rate

1.   ____________________ hereby elects to participate in the Loudcloud, Inc.
     Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and
     subscribes to purchase shares of the Company's Common Stock in accordance
     with this Subscription Agreement and the Employee Stock Purchase Plan.

2.   I hereby authorize payroll deductions from each paycheck in the amount of
     ____% of my Compensation on each payday (from 0 to 10%) during the Offering
     Period in accordance with the Employee Stock Purchase Plan.  (Please note
     that no fractional percentages are permitted.)

3.   I understand that said payroll deductions shall be accumulated for the
     purchase of shares of Common Stock at the applicable Purchase Price
     determined in accordance with the Employee Stock Purchase Plan.  I
     understand that if I do not withdraw from an Offering Period, any
     accumulated payroll deductions will be used to automatically exercise my
     option.

4.   I have received a copy of the complete Employee Stock Purchase Plan.  I
     understand that my participation in the Employee Stock Purchase Plan is in
     all respects subject to the terms of the Plan.  I understand that my
     ability to exercise the option under this Subscription Agreement is subject
     to shareholder approval of the Employee Stock Purchase Plan.

5.   Shares purchased for me under the Employee Stock Purchase Plan should be
     issued in the name(s) of (Eligible Employee or Eligible Employee and Spouse
     only).

6.   I understand that if I dispose of any shares received by me pursuant to the
     Plan within 2 years after the Offering Date (the first day of the Offering
     Period during which I purchased such shares) or one year after the Exercise
     Date, I will be treated for federal income tax purposes as having received
     ordinary income at the time of such disposition in an amount equal to the
     excess of the fair market value of the shares at the time such shares were
     purchased by me over the price which I paid for the shares.  I hereby agree
                                                                  --------------
     to notify the Company in writing within 30 days after the date of any
     ---------------------------------------------------------------------
     disposition of my shares and I will make adequate provision for Federal,
     ------------------------------------------------------------------------
     state or other tax withholding obligations, if any, which arise upon the
     ------------------------------------------------------------------------
     disposition of the Common Stock.  The Company may, but will not be
     -------------------------------
     obligated to, withhold
<PAGE>

     from my compensation the amount necessary to meet any applicable
     withholding obligation including any withholding necessary to make
     available to the Company any tax deductions or benefits attributable to
     sale or early disposition of Common Stock by me. If I dispose of such
     shares at any time after the expiration of the 2-year and 1-year holding
     periods, I understand that I will be treated for federal income tax
     purposes as having received income only at the time of such disposition,
     and that such income will be taxed as ordinary income only to the extent of
     an amount equal to the lesser of (1) the excess of the fair market value of
     the shares at the time of such disposition over the purchase price which I
     paid for the shares, or (2) 15% of the fair market value of the shares on
     the first day of the Offering Period. The remainder of the gain, if any,
     recognized on such disposition will be taxed as capital gain.

7.   I hereby agree to be bound by the terms of the Employee Stock Purchase
     Plan.  The effectiveness of this Subscription Agreement is dependent upon
     my eligibility to participate in the Employee Stock Purchase Plan.


     Employee Number                ______________________________________

     Employee Name                  ______________________________________

     Employee's Social
     Security Number:               ______________________________________


I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

Dated:_________________________     ______________________________________
                                    Signature of Employee


                                      -2-
<PAGE>

                                   EXHIBIT B
                                   ---------

                                LOUDCLOUD, INC.

                          EMPLOYEE STOCK PURCHASE PLAN

                              NOTICE OF WITHDRAWAL


     The undersigned participant in the Offering Period of the Loudcloud, Inc.
Employee Stock Purchase Plan which began on ____________, ______ (the "Offering
Date") hereby notifies the Company that he or she hereby withdraws from the
Offering Period.  He or she hereby directs the Company to pay to the undersigned
as promptly as practicable all the payroll deductions credited to his or her
account with respect to such Offering Period.  The undersigned understands and
agrees that his or her option for such Offering Period will be automatically
terminated.  The undersigned understands further that no further payroll
deductions will be made for the purchase of shares in the current Offering
Period and the undersigned shall be eligible to participate in succeeding
Offering Periods only by delivering to the Company a new Subscription Agreement.



Name (Please print):  _________________________________________________

Employee Number:      ______________________

Signature:   _________________________________________________________

Date:  ____________________