Document:

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                                                                   EXHIBIT 10.10

                            BDS BUSINESS CENTER, INC.

                           INVESTORS' RIGHTS AGREEMENT

                                   DATED AS OF

                                 AUGUST 20, 1999
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                                TABLE OF CONTENTS

                                                                            Page

1.       Definitions.......................................................   1
         1.1      Capitalized Terms........................................   1
         1.2      Definitions..............................................   1

2.       Registration Rights...............................................   4
         2.1      Demand Registration Rights...............................   4
         2.2      Company Registration.....................................   6
         2.3      Obligations of the Company...............................   6
         2.4      Furnish Information......................................   9
         2.5      Expenses of Registration.................................   9
         2.6      Underwriting Requirements................................   9
         2.7      Damages..................................................  10
         2.8      Indemnification..........................................  10
         2.9      Reports Under Securities Exchange Act of 1934............  13
         2.10     Form S-3 Registration....................................  14
         2.11     Assignment of Registration Rights........................  14
         2.12     Limitations on Subsequent Registration Rights............  15
         2.13     "Market Stand-Off" Agreement.............................  15
         2.14     "Lock-Up" Agreement......................................  15
         2.15     Amendments...............................................  16

3.       Covenants of the Company..........................................  16
         3.1      Pre-emptive Rights.......................................  16
         3.2      Delivery of Financial Statements.........................  17
         3.3      Budget and Operating Forecast: Inspection................  18
         3.4      Board of Directors; Meetings; Indemnification............  18
         3.5      Board Observation Rights.................................  19
         3.6      Composition of Board Committees..........................  19
         3.7      Positive Covenants.......................................  20

4.       Miscellaneous.....................................................  22
         4.1      Survival of Covenants....................................  22
         4.2      Legend on Securities.....................................  22
         4.3      Successors and Assigns...................................  22
         4.4      Governing Law............................................  23
         4.5      Counterparts.............................................  23
         4.6      Titles and Subtitles; Gender.............................  23
         4.7      Notices..................................................  23
         4.8      Expenses.................................................  23
         4.9      Amendments and Waivers...................................  23
         4.10     Severability.............................................  24
         4.11     Aggregation of Stock.....................................  24
         4.12     Entire Agreement; Amendment; Waiver......................  24

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                           INVESTORS' RIGHTS AGREEMENT

         THIS INVESTORS' RIGHTS AGREEMENT (this "Agreement") is made as of the
20th day of August, 1999, by and between BDS Business Center, Inc., a Delaware
corporation (the "Company") and the investors named on Schedule A attached
hereto (collectively, the "Investors," and each individually, an "Investor").

                                    RECITALS

         WHEREAS, the Company and the Investors are parties to the Stock
Purchase Agreement of even date herewith (the "Purchase Agreement"); and

         WHEREAS, in order to induce the Company to enter into the Purchase
Agreement and to induce the Investors to invest funds in the Company pursuant to
the Purchase Agreement, the Investors and the Company hereby agree that this
Agreement shall govern the rights of the Investors to cause the Company to
register shares of Common Stock issuable to the Investors and certain other
matters as set forth herein.

         NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

         1.       DEFINITIONS.

                  1.1 Capitalized Terms. Capitalized terms used herein but not
defined herein shall have the meanings ascribed to such terms in the Purchase
Agreement.

                  1.2 Definitions. The following capitalized terms as used in
this Agreement shall have the meanings set forth below.

                           (a) An "Affiliate" of any Person shall mean a Person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with the first mentioned Person. A
Person shall be deemed to control another Person if such first Person possesses
directly or indirectly the power to direct, or cause the direction of, the
management and policies of the second Person, whether through the ownership of
voting securities, by contract or otherwise.

                           (b) The term "Board of Directors" shall mean the
Board of Directors of the Company.

                           (c) The term "Change in Control" shall mean a change
in ownership or control of the Company effected through any of the following
transactions: (i) a merger, consolidation or reorganization approved by the
Company's stockholders, unless securities representing more than fifty percent
(50%) of the total combined voting power of the voting securities of the
successor corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the Company's outstanding voting securities immediately prior
to such transaction, (ii) any stockholder-approved transfer or other disposition
of all or substantially all of the Company's assets, or (iii) the acquisition,
directly or indirectly, by any person or related group of persons
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(other than the Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company), of beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities pursuant to a tender or exchange offer made
directly to the Company's stockholders which the Board recommends such
stockholders accept.

                           (d) The term "Common Stock" shall mean the Common
Stock, and any other securities into which the Common Stock may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.

                           (e) The term "Form S-3" shall mean such form under
the Securities Act as in effect on the date hereof or any registration form
under the Securities Act subsequently adopted by the SEC in lieu of such form as
currently in effect which similarly permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.

                           (f) The term "Holder" shall mean any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 2.11 hereof.

                           (g) The term "Initial Public Offering" shall mean the
initial sale of securities pursuant to an effective registration statement filed
by the Company under the Securities Act (as hereinafter defined) in connection
with a firm commitment underwritten offering of its securities to the general
public.

                           (h) The term "Investor" shall mean an Investor or its
Permitted Transferees.

                           (i) The term "J.H. Whitney Investors" shall mean J.H.
Whitney III, L.P., Whitney Strategic Partners III, L.P. and their respective
Permitted Transferees.

                           (j) The term "MSVP Investors" shall mean Morgan
Stanley Venture Partners III, L.P., Morgan Stanley Venture Investors III, L.P.,
The Morgan Stanley Venture Partners Entrepreneur Fund, L.P., and their
respective Permitted Transferees.

                           (k) The term "1934 Act" shall mean the Securities
Exchange Act of 1934, as amended.

                           (l) The term "Permitted Transferee" shall mean with
respect to any Investor, (i) the spouse, children, grandchildren or parents
thereof, or a trust of which such Investor is the settlor and a trustee for the
benefit of such spouse, children or parents, provided that any such trust does
not require or permit distribution of any Registrable Securities during the term
of this Agreement, (ii) any such Investor's affiliates, partners, retired
partners, members, employees (provided the number of employees of any Investor
who may be Permitted Transferees shall not exceed 30), general partners or
managing members of such Investor; (iii) a liquidating trust established for the
benefit of any partners or members of such Investor; (iv) any investment fund or
other entity controlled or managed by an Affiliate of such Investor; and (v)

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any person who acquires at least twenty-five (25%) of (A) the shares of Series B
Convertible Preferred Stock or Common Stock issued upon conversion of such
shares or (B) the shares of Common Stock initially issued pursuant to the
Purchase Agreement, provided that the Company has been provided with written
notice of such transfer and such person agrees in writing to be bound by the
terms of this Agreement.

                           (m) The term "Person" shall mean an individual, a
corporation, a partnership, a joint venture, a trust, an unincorporated
organization, a limited liability company, and any other entity or organization,
governmental or otherwise.

                           (n) The term "Preferred Stock" shall mean the Series
A Redeemable Preferred Stock and the Series B Convertible Preferred Stock, and
any other securities into which the Preferred Stock may be converted or
exchanged pursuant to a plan or recapitalization, reorganization, merger, sale
of assets or otherwise.

                           (o) The term "Pro Rata Share" shall mean the
percentage that the Shares held by the Investors then represents of all Common
Stock of the Company then outstanding, giving effect to the conversion of
convertible securities and assuming the exercise of all vested outstanding
options, warrants or subscription rights for Common Stock.

                           (p) The terms "register," "registered," and
"registration" shall refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Securities
Act, and the declaration or ordering of effectiveness of such registration
statement or document.

                           (q) The term "Registrable Securities" shall mean (i)
the Common Stock issuable or issued upon conversion of the Series B Convertible
Preferred Stock and held by the Investors or their Permitted Transferees (it
being understood that for purposes of this Agreement, a Person will be deemed to
be a holder of Registrable Securities whenever such Person has the right to then
acquire or obtain from the Company any Registrable Securities, whether or not
such acquisition has actually been effected), (ii) the Common Stock initially
issued pursuant to the Purchase Agreement and held by the Investors or their
Permitted Transferees, (iii) any Common Stock that may be subsequently issued
pursuant to the Purchase Agreement and held by the Investors or their Permitted
Transferees, (iv) any shares of Common Stock held by any Permitted Transferees,
and (v) any shares of Common Stock issued or issuable with respect to any such
shares described in clause (i), (ii), (iii) or (iv) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization; provided,
however, that notwithstanding anything to the contrary contained herein,
"Registrable Securities" shall not at any time include any securities (i)
registered and sold pursuant to the Securities Act, (ii) sold to the public
pursuant to Rule 144 promulgated under the Securities Act or (iii) that may be
sold to the public under Rule 144(k) of the Securities Act.

                           (r) The number of shares of "Registrable Securities
then outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.

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                           (s) The term "SEC" shall mean the Securities and
Exchange Commission.

                           (t) The term "Securities Act" shall mean the
Securities Act of 1933, as amended.

                           (u) The term "Shares" shall mean the shares of Common
Stock (including the Common Stock issuable or issued upon conversion of the
Series B Convertible Preferred Stock), Series B Convertible Preferred Stock and
any other equity securities now or hereafter issued by the Company, together
with any options thereon and any other shares of stock issued or issuable with
respect thereto (whether by way of a stock dividend, stock split or in exchange
for or upon conversion of such shares or otherwise in connection with a
combination of shares, recapitalization, merger, consolidation or other
corporate reorganization).

         2.       REGISTRATION RIGHTS.

                  2.1 Demand Registration Rights.

                           (a) If the Company shall receive at any time after
one hundred and eighty (180) days after the effective date of the first
registration statement for an Initial Public Offering of securities of the
Company (other than a registration statement relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction), a written request from
either the MSVP Investors or the J.H. Whitney Investors that the Company file a
registration statement under the Securities Act covering the registration and
sale of Registrable Securities and such other securities (if any) then
outstanding and held by the Investors at an aggregate price to the public (net
of any underwriters' discounts and commissions) of at least Ten Million Dollars
($10,000,000), then the Company shall:

                                    (i) within ten (10) days of the receipt
         thereof, give written notice of such request to all Investors; and

                                    (ii) file, as soon as practicable and in any
         event within ninety (90) days of the receipt of such request, a
         registration statement with the SEC under the Securities Act covering
         all Registrable Securities which the Investors request to be registered
         (such request having been made within twenty (20) days of the mailing
         of such notice by the Company in accordance with Section 4.7) subject
         to the limitations of Section 2.1(b), and thereafter to use its
         reasonable best efforts to cause the registration statement to be
         declared effective as soon as practicable.

                           (b) If the Holders initiating the registration
request hereunder (the "Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 2.1(a) and the Company shall include such information in the written
notice referred to in Section 2.1(a). The managing underwriter will be selected
by the Company and shall be reasonably acceptable to 50.01% in interest of the
Initiating Holders. In such event, the right of any Investor to include his
Registrable Securities in such registration shall be conditioned upon such
Investor's participation in such underwriting and the inclusion of such

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Investor's Registrable Securities in the underwriting (unless otherwise mutually
agreed by 50.01% in interest of the Initiating Holders and such Investor) to the
extent provided herein. All Investors proposing to distribute their securities
through such underwriting shall (together with the Company as provided in
Section 2.3(j)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any
other provision of this Section 2.1, if the underwriter advises the Initiating
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then the number of shares of Registrable Securities
that may be included in the underwriting shall be reduced to a number deemed
satisfactory by such managing underwriter, provided that the shares to be
excluded shall be determined in the following sequence: (i) first, securities
held by any other Persons (other than the Investors holding Registrable
Securities) having a contractual, incidental "piggyback" right to include such
securities in the registration statement, (ii) second, shares sought to be
registered by the Company, (iii) third, Registrable Securities of Holders who
are not Investors, and (iv) fourth, Registrable Securities held by the
Investors, it being understood that no shares shall be registered for the
account of the Company or any stockholder other than the Investors unless all
Registrable Securities for which Investors have requested registration have been
registered. If there is a reduction of the number of Registrable Securities
pursuant to clauses (ii), (iii) or (iv), such reduction shall be made on a pro
rata basis (based upon the aggregate number of shares of Common Stock or
Registrable Securities held by the holders in each tranche).

                           (c) The Company may not cause any other registration
of securities for sale for its own account (other than a registration effected
solely to implement an employee benefit plan or a transaction to which Rule 145
of the Securities Act is applicable) to become effective within one hundred
eighty (180) days following the effective date of the Company's initial public
offering and ninety (90) days following the effective date of any registration
required pursuant to this Section 2.

                           (d) Notwithstanding the foregoing, if the Company
shall furnish to Holders requesting a registration statement pursuant to this
Section 2.1 a certificate signed by the Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the Company
it would be materially detrimental to the Company and its stockholders for such
registration statement to be filed and it is therefore essential to defer the
filing of such registration statement, the Company shall have the right to defer
taking action with respect to such filing for a period of not more than one
hundred and eighty (180) days after receipt of the request of the Initiating
Holders; provided, however, that the Company may not utilize this right more
than once in any twelve (12) month period.

                           (e) In addition, the Company shall not be obligated
to effect, or to take any action to effect, any registration pursuant to this
Section 2.1:

                                    (i) After the Company has effected one (1)
         registration requested by the MSVP Investors and one (1) registration
         requested by the J.H. Whitney Investors pursuant to this Section 2.1
         and such registrations have been declared or ordered effective, unless
         one or both such registrations are on Form S-3, in which case the
         Company may be required to effect more than two registrations pursuant
         to this Section 2.1;

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                                    (ii) During the period starting with the
         date sixty (60) days prior to the Company's good faith estimate of the
         date of filing of, and ending on a date ninety (90) days after the
         effective date of, a registration subject to Section 2.2 hereof;
         provided that the Company is actively employing in good faith its
         reasonable best efforts to cause such registration statement to become
         effective; or

                                    (iii) If the Initiating Holders propose to
         dispose of shares of Registrable Securities that may be immediately
         registered on Form S-3 pursuant to a request made pursuant to Section
         2.10 below.

                  2.2 Company Registration. If the Company at any time proposes
to register (including for this purpose a registration effected by the Company
for stockholders other than the Holders) any of its stock or other securities
under the Securities Act in connection with the public offering of such
securities solely for cash (other than an Initial Public Offering or a
registration statement relating either to the sale of securities to employees of
the Company pursuant to a stock option, stock purchase or similar plan or a SEC
Rule 145 transaction), the Company shall, at such time, promptly give each
Holder at least thirty (30) days written notice of its intention to do so. Upon
the written request of each Holder given within twenty (20) days after receipt
of such notice by the Holder in accordance with Section 5.7, the Company shall
use its reasonable best efforts to cause to be registered under the Securities
Act all of the Registrable Securities that each such Holder has requested to be
registered; provided, however, that if the Company is advised in writing in good
faith by any managing underwriter of the Company's securities being offered in
an underwritten public offering pursuant to such registration statement that the
amount to be sold by persons other than the Company (collectively, "Selling
Stockholders") is greater than the amount which can be offered without adversely
affecting the offering, the Company may reduce the amount offered for the
accounts of Selling Stockholders (including such holders of Registrable
Securities) to a number deemed satisfactory by such managing underwriter; and
provided further, that the shares to be excluded shall be determined in the
following order of priority: (i) first, securities held by any Persons not
having any such contractual, incidental registration rights, (ii) second,
securities held by any Persons having contractual, incidental registration
rights pursuant to an agreement which is not this Agreement and (iii) third,
Registrable Securities held by the Investors; provided that in no event shall
the amount of Registrable Securities of the selling Investors be included in
such delivery be reduced below Twenty Percent (20%) of the total amount of
securities to be included in such offering, in which case, the Investors may be
excluded if any managing underwriter advises as provided above and no other
stockholder's securities are included.

                  2.3 Obligations of the Company. Whenever required under this
Section 2 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as possible:

                           (a) Prepare and file with the SEC, within ninety (90)
days of the receipt of a request pursuant to this Section 2, a registration
statement on the appropriate form under the Securities Act with respect to such
securities, which form shall comply in all material respects with the
requirements of the SEC, and use its reasonable best efforts to cause such
registration statement to become and remain effective until the completion of
the proposed offering (but for no more than One Hundred Eighty (180) days);
provided, however, that (i) such

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One Hundred Eighty (180) day period shall be extended for a period of time equal
to the period the Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company; and (ii) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such One Hundred Eighty (180) day period shall be
extended, if necessary, to keep the registration statement effective until all
such Registrable Securities are sold, provided that Rule 415, or any successor
rule under the Securities Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Securities Act
governing the obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (I) includes any prospectus required by
Section 10(a)(3) of the Securities Act or (II) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the incorporation by reference of information
required to be included in (I) and (II) above to be contained in periodic
reports filed pursuant to Section 13 or 15(d) of the 1934 Act in the
registration statement;

                           (b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all of the securities covered by such registration statement;

                           (c) Furnish to the Holders and the underwriters, if
any, such numbers of copies of such registration statement, any amendments
thereto, any documents incorporated by reference therein, the prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the sale or other disposition of the securities owned by them;

                           (d) Use its reasonable best efforts to register and
qualify the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders and do any and all other acts and things that may be
necessary under such securities and blue sky laws to enable such selling Holders
to consummate the sale or other disposition of the securities owned by them;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;

                           (e) Within a reasonable time before each filing of
the registration statement or prospectus or amendments or supplements thereto
with the SEC, furnish to counsel selected by any holders of Registrable
Securities copies of such documents proposed to be filed, which documents shall
be subject to the reasonable approval of such counsel;

                           (f) Promptly notify each selling Holder of
Registrable Securities, such selling Holder's counsel and any underwriter and
(if requested by any such Person) confirm such notice in writing, of the
happening of any event which makes any statement made in the registration
statement or related prospectus untrue or which requires the

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making of any changes in such registration statement or prospectus so that they
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein in the light of the circumstances under which they were made not
misleading; and, as promptly as practicable thereafter, prepare and file with
the SEC and furnish a supplement or amendment to such prospectus so that, as
thereafter deliverable to the purchasers of such Registrable Securities, such
prospectus will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;

                           (g) Use its reasonable best efforts to prevent the
issuance of any order suspending the effectiveness of a registration statement
and, if one is issued, use its reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of a registration statement at the
earliest possible moment;

                           (h) If requested by the managing underwriter or
underwriters (if any), any selling Holder, or such selling Holder's counsel,
promptly incorporate in a prospectus supplement or post-effective amendment such
information as such Person requests to be included therein with respect to the
selling Holder or the securities being sold, including, without limitation, with
respect to the securities being sold by such selling Holder to such underwriter
or underwriters, the purchase price being paid therefor by such underwriter or
underwriters and with respect to any other terms of an underwritten offering of
the securities to be sold in such offering, and promptly make all required
filings of such prospectus supplement or post-effective amendment;

                           (i) Make available to each selling Holder, any
underwriter participating in any disposition pursuant to a registration
statement, and any attorney, accountant or other agent or representative
retained by any such selling Holder or underwriter (collectively, the
"Inspectors"), upon request, all financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "Records"),
as shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such Inspector in connection
with such registration statement subject, in each case, to such confidentiality
agreements as the Company shall reasonably request;

                           (j) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter or underwriters of such
offering;

                           (k) Cause all such Registrable Securities registered
pursuant to such registration statement to be listed on each securities exchange
or quoted on the quotation system on which the Company's Common Stock is then
listed or quoted (or if the Common Stock of the Company is not yet listed or
quoted, then on such exchange or quotation system as the selling Holders of
Registrable Securities and the Company shall mutually agree);

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                           (l) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration;

                           (m) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 2, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 2, if such securities
are being sold through underwriters, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities, and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities;

                           (n) Otherwise use its reasonable best efforts to
comply with all applicable rules and regulations of the SEC and make generally
available to its security holders, in each case as soon as practicable, but not
later than 45 days after the close of the period covered thereby, an earnings
statement of the Company which will satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder (or any comparable successor
provisions); and

                           (o) Otherwise cooperate with the underwriter(s), the
SEC and other regulatory agencies and take all reasonable actions and execute
and deliver or cause to be executed and delivered all documents reasonably
necessary to effect the registration of any securities under this Agreement.

                  2.4 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 2
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall reasonably be required to effect the registration of
such Holder's Registrable Securities.

                  2.5 Expenses of Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 2.1, Section 2.2
(which right may be assigned as provided in Section 2.11) or Section 2.10,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the Company
and the reasonable fees and disbursements of a single counsel for the selling
Holders shall be borne by the Company; provided, however, that the selling
Holders shall bear the fees and expenses of counsel for the selling Holders in
excess of Twenty Five Thousand Dollars ($25,000) for any single registration,
filing or qualification.

                  2.6 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be

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required under Section 2.2 to include any of the Holders' securities in such
underwriting unless such Holders accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by the Company (or by
other persons entitled to select the underwriters) and then only in such
quantity as the underwriters determine in their sole discretion will not,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling Holders according to the
total amount of securities entitled to be included therein owned by each selling
Holder or in such other proportions as shall mutually be agreed to by such
selling Holders) but in no event shall the amount of securities of the selling
Holders included in the offering be reduced below twenty percent (20%) of the
total amount of securities included in such offering unless such offering is
pursuant to another stockholder's demand right in which case the selling Holders
may be excluded if the underwriters make the determination described above.

                  2.7 Damages. The Company recognizes and agrees that each
holder of Registrable Securities will not have an adequate remedy if the Company
fails to comply with the terms and provisions of this Agreement and that damages
will not be readily ascertainable, and the Company expressly agrees that, in the
event of such failure, it shall not oppose an application by any holder of
Registrable Securities or any other Person entitled to the benefits of this
Agreement requiring specific performance of any and all provisions hereof or
enjoining the Company from continuing to commit any such breach of this
Agreement.

                  2.8 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 2:

                           (a) The Company shall indemnify and hold harmless
each selling Holder, each underwriter (as defined in the Securities Act) and
each Person who participates in the offering of securities under such
registration statement, and each other Person, if any, who controls (within the
meaning of the Securities Act) such seller, underwriter or participating Person
(individually and collectively, the "Indemnified Person"), against any losses,
claims, damages or liabilities (joint or several) to which they may become
subject under the Securities Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (joint or several), or
actions in respect thereof, to which such Indemnified Person may become subject
under the Securities Act or any other statute or at common law which arise out
of or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the 1934 Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the 1934 Act or any
state securities law, and the Company shall pay to each such Indemnified Person,
as incurred, any legal or other expenses reasonably

                                       10
<PAGE>   13
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the Company shall
not be liable to any Indemnified Person in any such case for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon any untrue statement or alleged untrue statement or omission or
alleged omission in such registration statement, preliminary or final
prospectus, or amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by such Person
expressly for use therein.

                           (b) To the extent permitted by law, each selling
Holder of Registrable Securities included in such registration being effected
shall indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the registration statement, each underwriter, any
other Holder selling securities in such registration statement and any Person
who controls (within the meaning of the Securities Act) the Company, such
underwriter or such Holder (individually or collectively, also the "Indemnified
Person"), against any losses, claims, damages, or liabilities (joint or
several), or actions in respect thereof, to which they may become subject, under
the Securities Act or any other statute or at common law, which arise out of or
are based upon any other statute or at common law, which arises out of or is
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained, on the effective date thereof, in any registration statement
under which securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or (ii) any omission or alleged omission by such selling Holder to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading under the circumstances in which such
statements were made, in the case of (i) and (ii) to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in such registration statement, preliminary or final
prospectus, amendment or supplement thereto in reliance upon and in conformity
with information furnished in writing to the Company by such selling holder
specifically for use therein; and such selling holder shall reimburse any
Indemnified Person for any legal fees incurred in investigating or defending any
such liability; provided, however, that such selling Holder's obligations
hereunder shall be limited to an amount equal to the proceeds (net of
underwriting discounts, commissions and expenses) to such selling Holder of the
securities sold in any such registration; and provided further, that no selling
Holder shall be required to indemnify any Person against any liability arising
from any untrue or misleading statement or omission contained in any preliminary
prospectus if such deficiency is corrected in the final prospectus or for any
liability which arises out of the failure of any Person to deliver a prospectus
as required by the Securities Act.

                           (c) Promptly after receipt by an indemnified party
under this Section 2.8 of a complaint, claim or notice of the commencement of
any liability or action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 2.8, promptly notify the indemnifying party of such
complaint, claim, notice or action, and such indemnifying party shall have the
right to investigate and assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying

                                       11
<PAGE>   14
party would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such counsel
in such proceeding. The Person claiming indemnification shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof but the fees and the expenses of such counsel shall not be at the
expense of the Person against whom indemnification is sought (unless the
indemnifying party fails to promptly defend, in which case the reasonable fees
and expenses of such separate counsel shall be borne by the Person against whom
indemnification is sought). The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party for
any losses, claims, damages or liabilities emanating from such action for which
indemnification would otherwise be available under this Section 2.8, but the
omission to so deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to any indemnified party otherwise than
under this Section 2.8. In no event shall a Person against whom indemnification
is sought be obligated to indemnify any Person for any settlement of any claim
or action effected without the indemnifying Person's prior written consent which
shall not be unreasonably withheld.

                           (d) If the indemnification provided for in this
Section 2.8 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or expense
referred to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, the other Selling Stockholders and the
underwriters from the offering of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, the
selling Holders of Registrable Securities and the underwriters in connection
with the statements or omissions which resulted in such losses, claims, damages,
expenses or liabilities, as well as any other relevant equitable considerations.
The relative benefits received by the Company, the selling Holders of
Registrable Securities and the underwriters shall be deemed to be in the same
respective proportions that the proceeds from the offering received by the
Company and the selling Holders of Registrable Securities and the underwriting
discount received by the underwriters, in each case as set forth in the table on
the cover page of the applicable prospectus, bear to the aggregate public
offering price of the Registrable Securities. The relative fault of the Company,
the selling Holders of Registrable Securities and the underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, the selling
Holders of Registrable Securities or the underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.

                  The Company and the selling Holders of Registrable Securities
agree that it would not be just and equitable if contribution pursuant to this
Section 2.8 were determined by pro rata or per capita allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. In no event, however, shall
a Selling Stockholder be required to contribute any amount under this Section
2.8

                                       12
<PAGE>   15
in excess of the proceeds (net of underwriting discounts, commissions and
expenses) received by such Selling Stockholder from its sale of Registrable
Securities under such registration statement. No person found guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
found guilty of such fraudulent misrepresentation.

                           (e) The obligations of the Company and Holders under
this Section 2.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 2, and otherwise, and
the termination of this Agreement.

                  2.9 Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 (together, with any
successor rule, Rule 144) promulgated under the Securities Act and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration or pursuant to a
registration on Form S-3, provided the Company is qualified to register
securities on Form S-3 (or any successor form), the Company agrees to:

                           (a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective date of the first registration statement
filed by the Company for the offering of its securities to the general public,
and all action as may be required as a condition to the availability of SEC Rule
144;

                           (b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared
effective;

                           (c) use its reasonable best efforts to file with the
SEC in a timely manner all reports and other documents required of the Company
under the Securities Act and the 1934 Act;

                           (d) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Securities Act and the 1934
Act (at any time after it has become subject to such reporting requirements), or
that it qualifies as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form; and

                           (e) facilitate and expedite transfers of Registrable
Securities pursuant to SEC Rule 144, including providing timely notice to its
transfer agent to expedite such transfers.

                                       13
<PAGE>   16
                  2.10 Form S-3 Registration. After the first public offering of
its securities registered under the Securities Act, the Company shall use its
commercially reasonable efforts to qualify and remain qualified to register
securities on Form S-3 (or any successor form) under the Securities Act. In case
the Company shall receive from any Holder or Holders a written request or
requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:

                           (a) promptly give at least thirty (30) days written
notice of the proposed registration, and any related qualification or
compliance, to all other Holders; and

                           (b) as soon as practicable, effect such registration
and all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within fifteen (15) days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this Section
2.10: (1) if Form S-3 is not available for such offering by the Holders; (2) if
the Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public (net of any underwriters' discounts or commissions) of less than Three
Million Dollars ($3,000,000); (3) if the Company shall furnish to the Holders a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
materially detrimental to the Company and its stockholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.10; provided, however, that the Company
shall not utilize this right more than once in any twelve (12) month period; (4)
if the Company has, within the twelve (12) month period preceding the date of
such request, already effected two (2) registrations on Form S-3 for the Holders
pursuant to this Section 2.10; (5) if the Company has already effected three (3)
registrations on Form S-3 for the Holders pursuant to the Section 2.10; or (6)
in any particular jurisdiction in which the Company would be required to qualify
to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.

                           (c) Subject to the foregoing, the Company shall file
a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. Registrations effected pursuant to this
Section 2.10 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.1 or 2.2, respectively.

                  2.11 Assignment of Registration Rights. The rights to cause
the Company to register Registrable Securities pursuant to this Section 2 may be
assigned (but only with all related obligations) by a Holder to a Permitted
Transferee of such Registrable Securities, provided that: (a) the Company is,
within a reasonable time after such transfer, furnished with

                                       14
<PAGE>   17
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
and (b) such transferee or assignee agrees in writing to be bound by and subject
to the terms and conditions of this Agreement, including without limitation the
provisions of Section 2.13 below.

                  2.12 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Investors holding 50.01% of the outstanding Registrable
Securities held by the Investors, (a) allow purchasers of the Company's
securities to become a party to this Agreement or (b) grant any other
registration rights to any third parties other than subordinate piggyback
registration rights.

                  2.13 "Market Stand-Off" Agreement. Each Investor hereby agrees
that, during the period of duration specified by the Company and an underwriter
of Common Stock or other securities of the Company, following the date of the
first sale to the public pursuant to a registration statement of the Company
filed under the Securities Act, it shall not, to the extent requested by the
Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by it at any
time during such period except Common Stock included in such registration;
provided, however, that:

                           (a) such agreement shall be applicable only to the
first such registration statement of the Company which covers Common Stock to be
sold on its behalf to the public in an underwritten offering;

                           (b) officers and directors of the Company, all
holders of more than Five Percent (5%) of the outstanding capital stock of the
Company, and all other persons with registration rights (whether or not pursuant
to this Agreement) enter into similar agreements; and

                           (c) such market stand-off time period shall not
exceed one hundred eighty (180) days.

                  In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
the Investors (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period. Notwithstanding the
foregoing, the obligations described in this Section 2.13 shall not apply to a
registration relating solely to employee benefit plans on Form S-8 or similar
forms which may be promulgated in the future, or a registration relating solely
to a SEC Rule 145 transaction on Form S-4 or similar forms which may be
promulgated in the future.

                  2.14 "Lock-Up" Agreement. Each Investor hereby agrees that,
during the one-year period continuing to and including August 20, 2000, such
Investor will not directly or indirectly offer, sell, contract to sell, make any
short sale, pledge, grant any option to purchase or otherwise dispose of or
enter into any hedging transaction that is likely to result in a transfer of,
any Registrable Securities, except in connection with the redemption by the
Company of the shares of Series A Redeemable Preferred Stock in connection with
Qualified Public Offering;

                                       15
<PAGE>   18
provided, however, that this Section 2.14 shall terminate and be of no further
force or effect upon a Change in Control.

                  2.15 Amendments. The provisions of this Section 2 may be
amended, and the Company may take any action herein prohibited or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the MSVP Investors and the J.H. Whitney
Investors.

         3.       COVENANTS OF THE COMPANY.

         The Company agrees for the benefit of the Investors that it shall
comply with the following covenants, provided that the covenants set forth in
Section 3.2 shall not be in effect during any period in which the Company is
subject to the periodic reporting obligations set forth in Section 13(a) or
Section 15(d) of the 1934 Act and that all of the covenants set forth in this
Section 3 shall terminate as of the closing of the Company's first Qualified
Public Offering (as defined in the Company's certificate of incorporation, as
amended).

                  3.1 Pre-emptive Rights. So long as any shares of Series A
Redeemable Preferred Stock or Series B Convertible Preferred Stock are
outstanding, the Company hereby grants the Investors certain pre-emptive rights
with respect to future sales of equity securities by the Company. The Company
agrees that it will not sell or issue any shares of, or securities convertible
into or exercisable for any shares of, any class of its capital stock
("Securities"), unless the Company shall first submit a written offering of such
Securities to the Stockholders in accordance with the following provisions:

                  (1) The Company shall deliver a notice by certified mail
("Notice") to the Investors stating (i) that the Company is offering such
Securities, (ii) the number of such Securities to be offered, and (iii) the
price and material terms, if any, upon which it proposes to offer such
Securities, and offering the Investors the opportunity to purchase their Pro
Rata Share of the Securities on terms and conditions, including price, not less
favorable than those on which the Company proposes to sell such Securities to a
third party or parties.

                  (2) Within twenty (20) days after receipt of the Notice, the
Investors may elect to purchase or obtain, at the price and on the terms and
conditions specified in the Notice, up to their Pro Rata Share of such
Securities. The Company shall promptly, in writing, inform each Investor who
purchases all the Securities available to it (each a "Fully Exercising
Investor") of any other Investor's failure to do likewise. During the ten (10)
day period commencing after the receipt of such information, each Fully
Exercising Investor shall be entitled to obtain that portion of the Securities
not subscribed for by the other Investors which is equal to the proportion that
the number of Shares issued and held by, or issuable to, such Fully Exercising
Investor bears to the total number of Shares issued and held by, or issuable to,
all Fully Exercising Investors who wish to purchase some of the unsubscribed
Securities.

                  (3) If all Securities referred to in the Notice which the
Investors are entitled to obtain pursuant to Section 3.1(1) are not elected to
be obtained as provided in Section 3.1(2) hereof, the Company may, during the
ninety (90) day period following the expiration of the period provided in
Section 3.1(2) hereof, offer the remaining unsubscribed portion of such

                                       16
<PAGE>   19
Securities to any person or persons at a price not less than, and upon terms and
conditions no more favorable to the offeree than those specified in the Notice.
If the Company does not enter into an agreement for the sale of the Securities
within such period, or if such agreement is not consummated within three (3)
months of the execution thereof, the right provided hereunder shall be deemed to
be revived and such Shares shall not be offered unless first re-offered to the
Investors in accordance herewith.

                  (4) The pre-emptive rights in this Section 3.1 shall not be
applicable (i) to the issuance or sale of not more than Ten Million One Hundred
Fifty Thousand (10,150,000) shares of Common Stock (or the grant of options
therefor) (such number to be equitably adjusted to compensate for stock splits,
stock dividends, stock combinations and similar events) under the 1998 Employee
Stock Option and Performance Incentive Plan and 1999 Stock Option and Incentive
Plan (together, the "Option Plans"), (ii) with respect to, or after consummation
of, a Qualified Public Offering as defined in the Certificate of Designations of
Series B Preferred Stock or (iii) to the issuance of securities pursuant to the
conversion or exercise of convertible or exercisable securities outstanding on
the date hereof. In addition, provided that the Board of Directors of the
Company has approved each of the following issuances, which approval must
include the approval of the MSVP Nominee and the Whitney Nominee (each as
defined in the Stock Restriction Agreement), the pre-emptive rights in this
Section 3.1 shall not be applicable (i) to issuances or sales under the Option
Plans (as may be amended) in excess of Ten Million One Hundred Fifty Thousand
(10,150,000) shares of Common Stock, (ii) to the issuance of securities solely
as consideration for the acquisition (whether by merger or otherwise) by the
Company or any of its subsidiaries of all or substantially all of the stock or
assets of any other entity (including all or substantially all of the assets of
a line of business or division of such entity), (iii) to the issuance of
securities pursuant to any debt or lease financing transaction, or (iv) to the
issuance of securities in connection with strategic transactions involving the
Company and other entities, including, but not limited to, joint ventures,
marketing or distribution arrangements, technology transfer arrangements or
development arrangements.

                  (5) The pre-emptive rights set forth in this Section 3.1 may
not be assigned or transferred except by the Investors to a Permitted
Transferee.

                  3.2 Delivery of Financial Statements. The Company will
maintain a comparative system of accounts in accordance with generally accepted
accounting principles, keep full and complete financial records and furnish to
each Investor the following reports:

                           (a) as soon as available and within ninety (90) days
after the end of each fiscal year commencing with the year ending December 31,
1999, a copy of the balance sheet of the Company as of the end of such year,
together with statements of income and retained earnings and cash flow of the
Company for such year, audited and reported on by independent public accountants
of recognized national standing reasonably satisfactory to the Board of
Directors, prepared in accordance with generally accepted accounting principles
and practices consistently applied;

                           (b) as soon as available and in any event within
forty-five (45) days after the end of each quarter of each fiscal year
commencing with the quarter ending

                                       17
<PAGE>   20
September 30, 1999, a copy of the balance sheet of the Company as of the end of
such quarter, together with statements of income and retained earnings and cash
flow of the Company for the period commencing at the end of the previous fiscal
quarter and ending with the end of such fiscal quarter, all in reasonable detail
and certified (subject to year-end audit adjustments) by the chief financial
officer of the Company as having been prepared in a manner consistent with
generally accepted accounting principles and practices consistently applied; and

                           (c) as soon as available and in any event within
thirty (30) days after the end of each month commencing with the month ending
June 30, 1999, an unaudited balance sheet of the Company as of the end of such
month and unaudited statements of income and retained earnings and cash flow for
the Company for such month, each of the foregoing balance sheets and statements
of income and retained earnings (except those delivered pursuant to Section
3.2(c)) shall set forth in comparative form the corresponding figures for the
corresponding fiscal period in the prior fiscal year; and

                           (d) such other information relating to the financial
condition, business, prospects or results of operations as Investors holding 25%
or more of the Registrable Securities may reasonably request, including, without
limitation, certificates of the principal financial officer of the Company
concerning compliance with the covenants of the Company under this Section 3.2.

                  3.3 Budget and Operating Forecast: Inspection.

                           (a) The Company will prepare and submit to the Board
of Directors of the Company a budget for the Company for each fiscal year of the
Company at least thirty (30) days prior to the beginning of such fiscal year.
The budget shall be accepted as the budget for such fiscal year when it has been
approved by a majority of the Board of Directors of the Company and, thereupon,
a copy of such budget promptly shall be sent to each Investor. The Company shall
review the budget periodically and shall advise the Board of Directors of all
material changes therein and all material deviations therefrom.

                           (b) The Company will, upon reasonable prior notice to
the Company, permit authorized representatives (including, without limitation,
accountants and legal counsel) of any Investor, at the Investor's expense, to
visit and inspect any of the properties of the Company, including its books of
account (and to make copies thereof and take extracts therefrom), and to discuss
its affairs, finances and accounts with its officers, administrative employees
and independent accountants, all at such reasonable times during normal business
hours and as often as may be reasonably requested by any Investor; provided,
that in the event any person exercising such inspection rights shall be someone
other than an Investors' Nominee (as defined below) or a director designated by
the Investors, the Company may, as a condition to the exercise of such
visitation or inspection rights, require such person to execute a standard form
non-disclosure agreement in form and substance satisfactory to the Company.

                  3.4 Board of Directors; Meetings; Indemnification. The Company
will ensure that meetings of its Board of Directors are held at least four (4)
times each year at intervals of not more than four (4) months. The Company shall
reimburse each Investors' Nominee for reasonable travel expenses incurred in
connection with attending meetings or other

                                       18
<PAGE>   21
functions of the Board of Directors and for the Investors' Nominees' reasonable
out-of-pocket costs associated with any other work performed at the request of,
and on behalf of, the Company. The Charter and By-laws of the Company will in
respect of all times during which any Investors' Nominee serves as a director of
the Company provide for exculpation and indemnification of the directors and
limitations on the liability of the directors to the fullest extent permitted
under applicable state law, and within ninety (90) days of the date hereof the
Company shall obtain and maintain thereafter directors and officers' liability
insurance coverage in such form and amount and from such insurance carrier as
shall be reasonably satisfactory to the Investors and their special counsel
covering, among other things, violations of federal or state securities laws by
the Company and shall use its reasonable best efforts to obtain, prior to an
Initial Public Offering, additional directors and officers' liability insurance
coverage to include claims under the Securities Act and the 1934 Act.

                  3.5 Board Observation Rights. The Company agrees that, as long
as Canaan Equity L.P. ("Canaan") owns at least 50% of the Common Stock
(including the Common Stock issued or issuable upon conversion of the Series B
Convertible Preferred Stock) purchased by Canaan pursuant to the terms of the
Purchase Agreement, Canaan or its designee shall be permitted to have one
representative attend each meeting of the Board of Directors of the Company and
each meeting, which is material to the interests of the Series A Preferred Stock
and the Series B Preferred Stock, of any Committee thereof (a "Relevant
Committee") and to participate in all discussions during each such meeting. The
Company shall send to Canaan and its designee the notice of the time and place
of such meeting in the same manner and at the same time as it shall send such
notice to its directors or committee members as the case may be. The Company
shall also provide to Canaan and its designee copies of all notices, reports,
minutes and consents at the time and in the manner as they are provided to the
Board of Directors or the Relevant Committee, except for information reasonably
designated as proprietary information by the Board of Directors. Any notices,
reports, minutes and consents provided to Canaan shall also be provided to the
Investor Nominees (as defined below) at the same time and in the same manner.

                  3.6 Composition of Board Committees. The Company agrees to
cause the Board of Directors to establish or maintain a Compensation Committee
(which shall be charged with exclusive authority over all compensation matters
with respect to the senior management of the Company and shall serve as the
administering committee under the Option Plans and any future stock option
plans) and an Audit Committee (which shall be charged with reviewing the
Company's financial statements and accounting practices). The Compensation
Committee shall be comprised of independent directors, one of whom shall be
nominated by the MSVP Investors and one of whom shall be nominated by the J.H.
Whitney Investors (collectively, the "Investor Nominees"). The MSVP Investors'
and the J.H. Whitney Investors' respective right to nominate a member of the
Compensation Committee shall terminate upon the earlier of (i) the date on which
the Investors do not hold at least fifty percent (50%) of the shares of Common
Stock issued to the Investors under the Purchase Agreement (including those
shares of Common Stock issued or issuable upon conversion of the Series B
Convertible Preferred Stock) or (ii) consummation of a merger, acquisition or
sale of all or substantially all of the assets of the Corporation which has been
approved by the Board of Directors unless the Corporation's stockholders of
record as constituted immediately prior to such merger, acquisition or sale
will, immediately after such merger, acquisition or sale (by virtue of
securities issued as

                                       19
<PAGE>   22
consideration for the Corporation's merger, acquisition or sale or otherwise)
hold at least fifty percent (50%) of the voting power of the surviving or
acquiring entity.

                  3.7 Positive Covenants. So long as any shares of Series A
Redeemable Preferred Stock or Series B Convertible Preferred Stock are
outstanding, the Company agrees as follows:

                           (a) The Company will promptly pay and discharge, or
cause to be paid and discharged, when due and payable, all lawful Taxes,
assessments, and governmental charges or levies imposed upon the income,
profits, property, or business of the Company or any subsidiary; provided,
however, that any such Taxes, assessments, charges, or levies need not be paid
if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company shall have set aside on its books
adequate reserves with respect thereof, and provided further, that the Company
will pay all such taxes, assessments, charges, or levies forthwith upon the
commencement of proceedings to foreclose any lien that may have attached as
security therefor. The Company will promptly pay or cause to be paid when due,
or in conformance with customary trade terms, all other indebtedness incident to
the operations of the Company;

                           (b) The Company will continue to engage principally
in the business now conducted by the Company or a business or businesses
substantially similar thereto. The Company will keep in full force and effect
its corporate existence and all Intellectual Property Rights useful in its
business (except such rights as the Board of Directors has reasonably determined
are not material to the continuing operations of the Company);

                           (c) The Company will keep its properties and those of
its subsidiaries in good repair, working order, and condition, reasonable wear
and tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions, and improvements thereto; and the Company and
its subsidiaries will at all times comply in all material respects with the
provisions of all material leases to which any of them is a party or under which
any of them occupies property so as to prevent any loss or forfeiture thereof or
thereunder;

                           (d) The Company will comply in all material respects
with all applicable laws and regulations in the conduct of its business,
including, without limitation, all applicable material federal and state
securities laws in connection with the issuance of any shares of its capital
stock;

                           (e) The Company will keep its assets and those of its
subsidiaries that are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, extended coverage, and
explosion insurance in amounts customary for companies in similar businesses
similarly situated; and the Company will maintain, with financially sound and
reputable insurers, insurance against other hazards, risks, and liabilities to
persons and property to the extent and in the manner customary for companies in
similar businesses similarly situated;

                                       20
<PAGE>   23
                           (f) The Company will keep true records and books of
account in which full, true, and correct entries will be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis;

                           (g) The Company will promptly advise the Board of
Directors of any event which represents or is reasonably likely to result in a
Material Adverse Effect, and of each suit or proceeding commenced or threatened
against the Company which, if adversely determined, is reasonably likely to have
a Material Adverse Effect. The Company will promptly advise the Board of
Directors of any adverse developments relating to the Company's products or
services, and any suit or proceeding commenced or threatened which is related to
the Company's products or services which, if adversely determined, in the
reasonable judgment of the Company, is reasonably likely to have a Material
Adverse Effect;

                           (h) The compensation and other benefit arrangements
of any senior management of the Company shall be adjusted from time to time only
by the Compensation Committee;

                           (i) All transactions by and between the Company and
any officer or key employee of the Company or persons controlling, controlled
by, under common control with or otherwise affiliated with or members of the
families of such officer or key employee (including compensation matters covered
by Section 3.7(h) hereof), shall be conducted on an arm's-length basis, shall be
on terms and conditions no less favorable to the Company than could be obtained
from unrelated persons and shall be approved in advance by a majority of the
Board of Directors, including the Investors' Nominees, after full disclosure of
the terms thereof;

                           (j) The Company shall maintain in full force and
effect its corporate existence, rights, and franchises and all licenses and
other rights to use patents, processes, licenses, trademarks, trade names, or
copyrights owned or possessed by it or any subsidiary and deemed by the Company
to be necessary to the conduct of its business; and

                  The Company will retain independent public accountants of
recognized national standing who shall certify the Company's financial
statements at the end of each fiscal year. In the event the services of the
Company's independent public accountants, or any firm of independent public
accountants hereafter employed by the Company are terminated, the Company will
promptly thereafter notify the Investors and will request the firm of
independent public accountants whose services are terminated to deliver to the
Investors a letter from such firm setting forth the reasons for the termination
of their services. In the event of such termination, the Company will promptly
thereafter engage another firm of independent public accountants of recognized
national standing. In its notice to the Investors the Company shall state
whether the change of accountants was recommended or approved by the Board of
Directors of the Company or any committee thereof.

                                       21
<PAGE>   24
         4. COVENANT OF THE INVESTORS. The Investors agree that, prior to the
earlier of (i) the consummation of a Qualified Public Offering or (ii) August
20, 2003, they or their Permitted Transferees will not transfer any of their
shares to a Direct Competitor (as defined below) of the Company. For purposes of
this Section 4, the term Direct Competitor shall mean a person engaged in
information technology consulting or services in the same geographic areas as
the Company and which provides services that are competitive with those of the
Company. Nothing in this Section 4 shall prohibit transfers by any Investor to a
Permitted Transferee.

         5. MISCELLANEOUS.

                  5.1 Survival of Covenants. Each of the parties hereto agrees
that each covenant and agreement made by it in this Agreement or in any
certificate, instrument or other document delivered pursuant to this Agreement
is material, shall be deemed to have been relied upon by the other parties and,
except as provided herein, shall remain operative and in full force and effect
after the date hereof regardless of any investigation. This Agreement shall not
be construed so as to confer any right or benefit upon any Person other than the
parties hereto and their respective successors and permitted assigns to the
extent contemplated herein.

                  5.2 Legend on Securities. The Company and the Investors
acknowledge and agree that the following legend shall be typed on each
certificate evidencing any of the securities issued hereunder held at any time
by any of the Investors or their Permitted Transferees:

         THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT, OR (ii) AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED,
OR (iii) THE WRITTEN ACKNOWLEDGEMENT OF THE ISSUER, WHICH ACKNOWLEDGEMENT WILL
NOT BE UNREASONABLY WITHHELD, THAT A SALE IS PURSUANT TO A VALID EXEMPTION FROM
THE REGISTRATION REQUIREMENTS UNDER SUCH ACT.

         THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN
INVESTORS' RIGHTS AGREEMENT DATED ON OR ABOUT AUGUST 20, 1999 AND A STOCK
RESTRICTION AGREEMENT DATED ON OR ABOUT AUGUST 20, 1999, INCLUDING THEREIN
CERTAIN RESTRICTIONS ON TRANSFER. COMPLETE AND CORRECT COPIES OF THESE
AGREEMENTS ARE AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY
AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.

                  5.3 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including Permitted Transferees of any securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,

                                       22
<PAGE>   25
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.

                  5.4 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware, exclusive of the provisions
thereof governing conflicts of laws.

                  5.5 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                  5.6 Titles and Subtitles; Gender. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. The use in this
Agreement of the masculine pronoun in reference to a party hereto shall be
deemed to include the feminine member, and vice versa as the context may
require.

                  5.7 Notices. Any notice, request, demand or other
communication required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery to the party to be
notified, upon the date of transmittal of services via telecopy to the party to
whom notice is being given, or on the fifth day after deposit in the United
States Post Office, by registered or certified mail, with postage and fees
prepaid, return receipt requested, and addressed to the other party to:

                           (a) if to the Company, c/o BDS Business Center, Inc.,
628 Hebron Avenue, Building Two, Suite 502, Glastonbury, Connecticut 06033,
attention to President, with a copy to Testa, Hurwitz & Thibeault, LLP, 125 High
Street, Boston, Massachusetts 02110-2704, attention to Linda DeRenzo, Esq., or
such other address designated by the Company to the Investors and the other
parties hereto in writing;

                           (b) if to the Investors, to each Investor at the
mailing address as shown on the signature pages hereto, with a copy to Brobeck,
Phleger & Harrison LLP, 1633 Broadway, 47th Floor, New York, New York 10019,
attention to Alexander D. Lynch, Esq., or at such other address designated by an
Investor to the Company and the other Investors in writing.

                  5.8 Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.

                  5.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
sixty-six and two-thirds percent (66.67%) of the Series A Redeemable Preferred
Stock and the Common Stock issued or issuable upon conversion of the Series B
Convertible Preferred Stock, voting together as a single class. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any

                                       23
<PAGE>   26
securities purchased under the Purchase Agreement then outstanding, each future
holder of all such securities, and the Company.

                  5.10 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.

                  5.11 Aggregation of Stock. All shares of Preferred Stock held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.

                  5.12 Entire Agreement; Amendment; Waiver. This Agreement and
the documents referred to herein constitute the entire agreement among the
parties with regard to the subjects hereof and thereof.

                  [Remainder of Page Intentionally Left Blank]

                                       24
<PAGE>   27
                  IN WITNESS WHEREOF, the parties have caused this Investors'
Rights Agreement to be duly executed and delivered as of the date first above
written.

                                  THE COMPANY:

                                  BDS BUSINESS CENTER, INC.

                                  By: /s/ John M. Hughes
                                  Name: John M. Hughes
                                  Title: Chief Executive Officer

                                  Address:    628 Hebron Avenue
                                              Building Two, Suite 502
                                              Glastonbury, CT  06033

                                  THE INVESTORS:

                                  MORGAN STANLEY VENTURE PARTNERS III, L.P.

                                  By:      Morgan Stanley Venture Partners III,
                                           L.L.C., its General Partner

                                  By:      Morgan Stanley Venture Capital III,
                                           Inc., its Institutional Managing
                                           Member

                                  By: /s/ Noah Walley
                                  Name:    Noah Walley
                                  Title:   Vice President

                                  Address:          1221 Avenue of the Americas
                                                    New York, NY  10020
                                                    Fax:  (212) 762-8424

                                  MORGAN STANLEY VENTURE INVESTORS III, L.P.

                                  By:      Morgan Stanley Venture Partners III,
                                           L.L.C., its General Partner
<PAGE>   28
                                  By:      Morgan Stanley Venture Capital III,
                                           Inc., its Institutional Managing
                                           Member

                                  By:      /s/ Noah Walley
                                  Name:    Noah Walley
                                  Title:   Vice President

                                  Address:          1221 Avenue of the Americas
                                                    New York, NY  10020
                                                    Fax:  (212) 762-8424

                                  THE MORGAN STANLEY VENTURE PARTNERS
                                    ENTREPRENEUR FUND, L.P.

                                  By:      Morgan Stanley Venture Partners III,
                                           L.L.C., its General Partner

                                  By:      Morgan Stanley Venture Capital III,
                                           Inc., its Institutional Managing
                                           Member

                                  By: /s/ Noah Walley
                                  Name:    Noah Walley
                                  Title:   Vice President

                                  Address:          1221 Avenue of the Americas
                                                    New York, NY  10020
                                                    Fax:  (212) 762-8424

                                  J.H. WHITNEY III, L.P.

                                  By:  J.H. Whitney Equity Partners III, LLC,
                                          its General Partner

                                  By: /s/ Peter Huff
                                  Name: Peter Huff
                                  Title:

                                  Address:

                                       2
<PAGE>   29
                                  WHITNEY STRATEGIC PARTNERS III, L.P.

                                  By:  J.H. Whitney Equity Partners III, LLC
                                          its General Partner

                                  By: /s/ Peter Huff
                                  Name:  Peter Huff
                                  Title:

                                  Address:

                                  CANAAN EQUITY L.P.

                                  By:      Canaan Equity Partners L.L.C

                                  By: /s/ Gregory Kopchinsky
                                  Name: Gregory Kopchinsky
                                  Title:   Member/Manager

                                  Address:          105 Rowayton Avenue
                                                    Rowayton, CT  06853

                                  JAMES C. FURNIVALL

                                  /s/ James C. Furnivall

                                  Address:          c/o Canaan Partners
                                                    105 Rowayton Avenue
                                                    Rowayton, CT  06853

                                  EARL MIX

                                  /s/ Earl Mix

                                  Address:          c/o Canaan Partners
                                                    105 Rowayton Avenue
                                                    Rowayton, CT  06853

                                       3
<PAGE>   30
                                  ERIC A. YOUNG

                                  /s/ Eric A. Young

                                  Address:       c/o Canaan Partners
                                                 2884 Sand Hill Road, Suite 115
                                                 Menlo Park, CA  94025

                                  THE RYAN ANDERSON YOUNG
                                  IRREVOCABLE TRUST DTD 7/28/95

                                  By: /s/ Eric A. Young
                                  Name:    Eric A. Young
                                  Title:   Trustee

                                  By: /s/ Jean Amrhein Young
                                  Name:    Jean Amrhein Young
                                  Title:   Trustee

                                  Address:       c/o Canaan Partners
                                                 2884 Sand Hill Road, Suite 115
                                                 Menlo Park, CA  94025

                                  THE CONNOR ERICKSON YOUNG
                                  IRREVOCABLE TRUST DTD 7/28/95

                                  By: /s/ Eric A. Young
                                  Name:    Eric A. Young
                                  Title:   Trustee

                                  By: /s/ Jean Amrhein Young
                                  Name:    Jean Amrhein Young
                                  Title:   Trustee

                                  Address:       c/o Canaan Partners
                                                 2884 Sand Hill Road, Suite 115
                                                 Menlo Park, CA  94025

                                       4
<PAGE>   31
                                  GREGORY KOPCHINSKY

                                  /s/ Gregory Kopchinsky

                                  Address:          c/o Canaan Partners
                                                    105 Rowayton Avenue
                                                    Rowayton, CT  06853

                                  REGENCY ONE, LLC

                                  By:

                                  By: /s/ Morton Handel
                                  Name: Morton Handel
                                  Title: Member

                                  JB VENTURES, LLC

                                  By:

                                  By: /s/ Ronald Jarvis
                                  Name: Ronald Jarvis
                                  Title: Member

                                  R. NELSON GRIEBEL

                                  /s/ R. Nelson Griebel

                                  MICHAEL R. LEZENSKI

                                  /s/ Michael R. Lezenski

                                       5<PAGE>   1

                                                                     EXHIBIT 4.2

         THIS WARRANT AND THE UNITS ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

                          WARRANT TO PURCHASE LLC UNITS

                                                                 August 8, 1998

         THIS WARRANT CERTIFIES THAT, for good and valuable consideration,
ASCEND COMMUNICATIONS, INC. ("Holder") is entitled to purchase the Initial
Number of paid and nonassessable units (the "Units") of BLUESTAR COMMUNICATIONS,
LLC (the "Company") at the price of One Dollar ($1.00) per Unit (the "Warrant
Price"), as adjusted pursuant to Article 2 of this Warrant, subject to the
provisions and upon the terms and conditions set forth in this Warrant. The
Initial Number at any time is the number equal to the total principal amount of
the advances (the "Aggregate Principal") made under the $1,000,000 Secured
Promissory Note, dated as of the date hereof, issued by the Company to the order
of Holder (the "Note"); provided, however, that, upon the Company conversion
from a limited liability company to a corporation, this Warrant shall be
substituted for a new warrant issued by the Company which entitles Holder to
purchase at the Warrant Price the number of shares of common stock of the
Company determined by dividing the Aggregate Principal by the then Warrant Price
and multiplying The resulting sum by one tenth.

         ARTICLE 1. EXERCISE.

         1.1 Method of Exercise. Holder may exercise this Warrant by delivering
a duly executed Notice of Exercise in substantially the form attached as
Appendix 1 to the principal office of the Company. Unless Holder is exercising
the conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Units being purchased.

         1.2 Conversion Right. In lieu of exercising this Warrant as specified
in Section 1.1, Holder may from time to time convert this Warrant, in whole or
in part, into a number of Units determined by dividing (a) the aggregate Fair
Market Value of the Units issuable upon exercise of this Warrant minus the
aggregate Warrant Price of such Units by (b) the Fair Market Value of one Unit.
The Fair Market Value of the Units shall be determined pursuant to Section 1.3.

         1.3 Fair Market Value. If the Units are traded in a public market, the
Fair Market Value of the Units shall be the closing price of the Units reported
for the business day

                                       1

<PAGE>   2

immediately before Holder delivers its Notice of Exercise to the Company. If the
Units are not traded in a public market, the Managers of the Company shall
determine Fair Market Value in its reasonable good faith judgment.

         1.4 No Rights as a Member. This Warrant does not entitle Holder to any
voting rights as a shareholder of the Company prior to the exercise hereof.

         1.5 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder a letter
indicating Holder's interest in the Company and, if this Warrant has not been
fully exercised or converted and has not expired, a new Warrant representing the
Units not so acquired.

         1.6 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company,
and, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.

         1.7 Merger or Consolidation of the Company. Upon the closing of any
Acquisition, the successor entity shall assume the obligations of this Warrant,
and this Warrant shall be exercisable for the same securities, cash, and
property as would be payable for the Units issuable upon exercise of the
unexercised portion of this Warrant as if such Units were outstanding on the
record date for the Acquisition and subsequent closing. The Warrant Price shall
be adjusted accordingly.

         1.8 Automatic Exercise. If, as of the last day of the term hereof, this
Warrant has not been fully exercised, then as of such date this Warrant shall be
automatically converted, in full, in accordance with Section 1.2, without any
action or notice by the Holder.

         ARTICLE 2. ADJUSTMENTS TO THE SHARES.

         2.1 Unit Distribution. If the Company distributes Units pro-rata to
Members for no consideration, then upon exercise of this Warrant, for each Unit
acquired, Holder shall receive, without cost to Holder, the total number and
kind of securities to which Holder would have been entitled had Holder owned the
Units of record as of the date the dividend or subdivision occurred.

         2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Units if this Warrant had been exercised
immediately before such reclassification, exchange, substitution, or other
event.

                                       2
<PAGE>   3

The Company or its successor shall promptly issue to Holder a new Warrant for
such new securities or other property. The new Warrant shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this section shall
similarly apply to successive reclassifications, exchanges, substitutions, or
other events.

         2.3 Adjustments for Combinations, Etc. If the outstanding Units are
combined or consolidated, by reclassification or otherwise, into a lesser number
of Units, the Warrant Price shall be proportionately increased and the number of
Units acquirable hereunder shall be proportionately decreased.

         2.4 No Impairment. The Company shall not, by amendment of its Operating
Agreement or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article 2 against impairment. If the Company takes any action
affecting the Units or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Units issuable upon exercise of this Warrant
shall be adjusted upward in such a manner that the aggregate Warrant Price of
this Warrant is unchanged.

         2.5 Fractional Units. No fractional Units shall be issuable upon
exercise or conversion of the Warrant and the number of Units to be issued shall
be rounded down to the nearest whole Unit. If a fractional Unit interest arises
upon any exercise or conversion of the Warrant, the Company shall eliminate such
fractional Unit interest by paying Holder an amount computed by multiplying the
fractional interest by the Fair Market Value of a full Unit.

         2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant
Price and the number of Units acquirable hereunder, the Company, at its expense,
shall promptly compute such adjustment and furnish Holder with a certificate of
its Chief Financial Officer setting forth such adjustment and the facts upon
which such adjustment is based. The Company shall, upon written request, furnish
Holder a certificate setting forth the Warrant Price in effect on the date
thereof and the number of Units acquirable hereunder on such date and the series
of adjustments leading to such Warrant Price and Unit number.

         ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY

         3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder that all Units which may be issued upon the exercise of
the purchase

                                       3
<PAGE>   4

right represented by this Warrant, shall, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable, and free of any liens and
encumbrances except for restrictions on transfer provided for herein or under
applicable federal and state securities laws.

         3.2 Notice of Certain Events. If the Company proposes at any time (a)
to distribute Units pro-rata to its members; (b) to offer for subscription pro
rata to the holders of any class or series of its stock any additional Units of
any class or series or other rights; (c) to effect any reclassification or
recapitalization of common stock; or (d) to merge or consolidate with or into
any other corporation, or sell, lease, license, or convey all or substantially
all of its assets, or to liquidate, dissolve or wind up, then, in connection
with each such event, the Company shall give Holder (1) prompt prior written
notice of the date on which a record will be taken for such dividend,
distribution, or subscription rights (and specifying the date on which the
holders of Units will be entitled thereto) or for determining rights to vote, if
any, in respect of the matters referred to in (c) and (d) above; and (2) in the
case of the matters referred to in (c) and (d) above, prompt prior written
notice of the date when the same will take place (and specifying the date on
which the holders of Units will be entitled to exchange their common stock for
securities or other property deliverable upon the occurrence of such event).

         3.3 Information Rights. So long as the Holder holds this Warrant and/or
any of the Units, the Company shall deliver to the Holder:

             (a) as soon as practicable after the end of each calendar month,
and in any event within thirty (30) days thereafter, an unaudited balance sheet
of the Company as of the end of such month, cash flow statements and an
unaudited statement of operations of the Company for the portion of the Fiscal
Year ended with such month prepared and certified by the chief financial officer
of the Company, subject, however, to the exclusion of footnotes and to normal
year-end audit adjustments, and a comparison of such statements to the Company's
operating plan or budget then in effect;

             (b) as soon as practicable after the end of each Fiscal Year, and
in any event within ninety (90) days thereafter, a copy of its audited financial
statements accompanied by a report thereon by a firm of independent certified
public accountants selected by the Company, which report shall state that such
financial statements fairly present the Company's financial position at the end
of such Fiscal Year;

             (c) as soon as available, and in any event, prior to the
commencement of each Fiscal Year, a budget and business plan for the Company for
such Fiscal Year;

             (d) promptly upon their becoming available, one copy of each
report, notice or proxy statement sent by the Company to its Members generally
and of each regular or periodic report or registration statement, prospectus or
written communication (other than transmittal letters) filed by the Company with
the Securities and Exchange Commission or any securities exchange on which the
Company's securities are listed; and

                                       4
<PAGE>   5

             (e) with reasonable promptness, such other information as from time
to time may be reasonably requested by Holder.

The Company's delivery obligations under this section shall terminate upon the
Company becoming a Reporting Company.

         ARTICLE 4. MISCELLANEOUS.

         4.1 Term. The term of this Warrant shall commence on the date hereof
and terminate on at 5:00 p.m., Pacific Time on the tenth (10) anniversary of the
date hereof.

         4.2 Legends. This Warrant and the Units shall be imprinted with a
legend in substantially the following form:

         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
         AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
         WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
         RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
         CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

         4.3 Compliance with Securities Laws on Transfer. This Warrant and the
Units issuable upon exercise of this Warrant may not be transferred or assigned
in whole or in part without compliance with applicable federal and state
securities laws by the transferor and the transferee (including, without
limitation, the delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company, as reasonable requested by the Company).

         4.4 Transfer Procedure. Subject to the provisions of Section 4.3,
Holder may transfer this Warrant or the Units issuable upon exercise of this
Warrant by giving the Company notice setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee. Unless the Company is a
Reporting Company, it shall have the right to refuse to transfer this Warrant or
the Units to any person who directly competes with the Company and/or its
subsidiaries.

         4.5 Notices. All notices and other communications from the Company
to the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished by the Company or the
Holder, as the case may be, in writing by the Company or the Holder from time to
time.

                                       5

<PAGE>   6

         4.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.

         4.7 Attorneys' Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.

         4.8 Remedies. Company stipulates that the remedies at law of Holder in
the event of any default or threatened default by Company in the performance of
or compliance with any of the terms of this Warrant are not and will not be
adequate to the fullest extent permitted by law, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.

         4.9 No Original Issue Discount. The Company and the Holder hereby
acknowledge and agree that this is part of an investment unit within the meaning
of Section 1273(c)(2) of the Internal Revenue Code of 1986, as amended, which
includes the loans made by the Holder to the Company pursuant to the Secured
Promissory Note, dated as of the date hereof (the "Loan"). The Company and the
Holder further agree as between the Company and the Holder that the fair market
value of this Warrant is equal to Five Hundred Dollars ($500) and that, pursuant
to Treas. Reg. Sub. 1.1273-2(h), Five Hundred Dollars ($500) of the issue price
of the investment unit shall be allocable to this Warrant and the balance shall
be allocable to the Loan. The Company and the Holder agree to prepare their
federal income tax returns in a manner consistent with the foregoing agreement
and, pursuant to Treas. Reg. Sub. 1.1273, the original issue discount on the
loan shall be considered to be zero.

         4.10 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.

         4.11 Conversion. This Warrant is issued in connection with the
conversion of the Company into a corporation, this Warrant shall be exchanged
for a new warrant which is substantially identical to the terms hereof, but
which also includes registration rights provisions reasonably acceptable to
Holder; provided that the final registration rights shall be determined in
consultation with any underwriters employed by the Company.

                                       6
<PAGE>   7

                                       BLUESTAR COMMUNICATIONS, LLC.

                                       By /s/ Fredjoseph Goldner

                                       Title: CEO/President

REVIEWED AND AGREED TO:
ASCEND COMMUNICATIONS, INC.

By /s/Michael F. Ashby
Title: CFO

                                       7
<PAGE>   8

                                   APPENDIX 1

                               NOTICE OF EXERCISE

         1. The undersigned hereby elects to purchase ___________ Units of
Bluestar Communications, LLC pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such Units in full.

         2. The undersigned hereby elects to convert the attached Warrant into
Units in the manner specified in the Warrant. This conversion is exercised with
respect to _____________________ of the Units covered by the Warrant.

         [Strike paragraph 1 that does not apply.]

         3. Please issue a certificate or certificates representing said Units
in the name of the undersigned or in such other name as is specified below:

                      -------------------------------------
                                     (Name)

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

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

         4. The undersigned represents it is acquiring the Units solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.

                                              --------------------------------
                                              (Signature)

                                              -----------------------
                                              (Date)

                                       8

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