Document:

<PAGE>

                                                              Exhibit 10.43(o-2)

                   ACCESSION AGREEMENT AND SECOND AMENDMENT TO
                        AMD INC. SUBORDINATION AGREEMENT

          THIS ACCESSION AGREEMENT AND SECOND AMENDMENT (this "Amendment"),
dated 3 June 2002, is made among ADVANCED MICRO DEVICES, INC., a corporation
organised and existing under the laws of the State of Delaware, United States of
America, with its chief executive office and principal place of business at One
AMD Place, Sunnyvale, California 94088, United States of America ("AMD Inc.");
AMD SAXONY HOLDING GMBH, Dresden, registered in the Commercial Register of the
Dresden County Court, HRB 13931 ("AMD Holding," together with AMD Inc.,
collectively, the "Sponsors"); AMD SAXONY LLC, a limited liability company
organised and existing under the laws of the State of Delaware, United States of
America ("AMD Saxony LLC"); AMD SAXONY ADMIN GMBH, with its seat in Dresden
("AMD Admin," together with AMD Saxony LLC, collectively, the "Additional
Partner Companies"); DRESDNER BANK LUXEMBOURG S.A., as Agent (and successor to
DRESDNER BANK AG ("Dresdner") in such capacity) under the Loan Agreement dated
11 March 1997, as amended (as so amended, the "Loan Agreement") (in such
capacity, the "Agent") for the Banks from time to time party thereto; and
Dresdner, as Security Agent under such Loan Agreement (in such capacity, the
"Security Agent") for the Secured Parties referred to therein.

                              W I T N E S S E T H:

          WHEREAS, AMD Saxony Manufacturing GmbH, Dresden (proposed to be known
as "AMD Saxony LLC & Co. KG" following the Conversion Effective Date),
registered in the Commercial Register of the Dresden Country Court ("AMD
Saxonia"), has been formed for the purpose of constructing, owning and operating
(i) the Plant and (ii) the integrated Design Center (the construction, ownership
and operation of the Plant and the Design Center hereinafter called the
"Project");

          WHEREAS, pursuant to the Conversion Documents, AMD Saxonia proposes to
change its legal form to a Kommanditgesellschaft (a limited partnership
organised under the laws of the Federal Republic of Germany) with AMD Holding
and AMD Admin as its sole limited partners (Kommanditisten) and AMD Saxony LLC
as its sole general partner (Komplementar);

          WHEREAS, with effect from the Conversion Effective Date, AMD Saxonia
wishes, with the consent of the Sponsors and Additional Partner Companies to,
among other things, modify the interest rate on Sponsors' Loans and Revolving
Loans and to increase the amount of the Revolving Loan Facility; and

          WHEREAS, with effect from the Conversion Effective Date, the
Additional Partner Companies desire to accede to, and the Sponsors, the
Additional Partner Companies, the Agent and the Security Agent desire to amend
and supplement, the AMD Inc. Subordination Agreement dated 11 March 1997 by and
among AMD Inc., AMD Holding, Dresdner Bank AG, as Security Agent, and Dresdner
Bank Luxembourg S.A., as Agent, as amended by the First Amendment to the AMD
Inc. Subordination Agreement dated 20 February, 2001 (as amended,

<PAGE>

the "AMD Inc. Subordination Agreement"), on the terms and subject to the
conditions of this Amendment;

          NOW, THEREFORE, the Sponsors, the Additional Partner Companies, the
Agent (for itself and on behalf of the Banks), and the Security Agent (on behalf
of the Secured Parties), agree as follows:

                                   ARTICLE I
                                    Accession

Section 1.1  With effect from the Conversion Effective Date, the Additional
Partner Companies hereby accede to the AMD Inc. Subordination Agreement, and the
Sponsors, the Agent and the Security Agent hereby consent to such accession.

                                   ARTICLE II
                                   Definitions

Section 2.1  Definitions. Capitalized terms not otherwise defined in this
Amendment are used with the definitions assigned to them in the AMD Inc.
Subordination Agreement or the Sponsor's Support Agreement, as the case may be.

          In addition, the following terms when used in this Amendment shall
have the following meaning:

          "Agreed Terms" means, in respect of any document, that document
substantially in the form thereof which has been initialed (for the purposes of
identification) by or on behalf of AMD Saxonia and the Agent.

          "Conversion Documents" means the following agreements and documents,
each in the Agreed Terms: (i) the Certificate of Formation of AMD Saxony LLC;
(ii) the AMD Admin Articles of Association; (iii) the Formation Protocol for AMD
Admin; (iv) the Application to the Commercial Register for Formation of AMD
Admin; (v) the Resolution of AMD Holding as Shareholder of AMD Admin for Section
181 German Civil Code Release; (vi) the List of Shareholders for AMD Admin;
(vii) the AMD Saxony LLC Agreement; (viii) the AMD Saxonia Partnership
Agreement; (ix) the Assignment and Trust Agreement between AMD Holding and AMD
Saxony LLC; (x) the Purchase and Assignment Agreement between AMD Holding and
AMD Admin; (xi) the Resolution of AMD Holding as Shareholder of AMD Saxonia for
Transfer of Fractional Share to AMD Saxony LLC; (xii) the Notification to AMD
Saxonia of Assignment of Fractional Share to AMD Admin; (xiii) the List of
Shareholders of AMD Saxonia (reflecting addition of AMD Admin); (xiv) the
Resolution of AMD Holding and AMD Saxony LLC as Shareholders of AMD Saxonia for
Transfer of Fractional Share to AMD Admin; (xv) the Notification to AMD Saxonia
of Assignment of Fractional Share to AMD Saxony LLC; (xvi) the List of
Shareholders of AMD Saxonia (reflecting addition of AMD Saxony LLC); (xvii) the
Resolution of AMD Holding, AMD Admin and AMD Saxony LLC as Shareholders of AMD
Saxonia Approving Conversion to Limited Partnership; (xviii) the Resolution of
AMD Inc. as Shareholder of AMD Holding Approving Conversion of AMD Saxonia;
(xix) Application to the Commercial Register for Conversion of AMD Saxonia to
Limited Partnership; (xx) Application to the Real Estate Register for Change in
AMD Saxonia's

                                       2

<PAGE>

Name; (xxi) the Transfer Agreement for Transfer Back Of Fractional Share between
AMD Holding and AMD Saxony LLC; (xxii) Application to the Commercial Register
for Transfer Back of Fractional Share by AMD Saxony LLC to AMD Holding; (xxiii)
Power of Attorney regarding Removal of AMD Saxony LLC as General Partner of AMD
Saxonia; and (xxiv) any other agreement or document designated by the AMD
Companies (with the consent of the Agent) in addition to or in substitution for
any of the above-named documents or agreements as a "Conversion Document."

          "Sponsors' Support Agreement" means the Sponsors' Support Agreement
between the Sponsors, the Additional Partner Companies, the Agent and the
Security Agent dated 11 March 1997, as amended by the First Amendment to
Sponsors' Support Agreement dated 6 February 1998, the Second Amendment to
Sponsors' Support Agreement dated 29 June 1999, the Third Amendment to Sponsors'
Support Agreement dated 20 February 2001 and the Accession Agreement and Fourth
Amendment to Sponsors' Support Agreement dated of even date herewith, and as the
same may at any time be amended or modified in accordance with the terms thereof
and in effect.

Section 2.2 Construction. In this Amendment, unless the context requires
otherwise, references to Sections and Schedules are to Sections and Schedules of
the AMD Inc. Subordination Agreement. Section headings are inserted for
reference only and shall be ignored in construing this Amendment.

                                  ARTICLE III
                                   Amendments

Section 3.1 With effect from the Conversion Effective Date, the AMD Inc.
Subordination Agreement will be amended and restated in its entirety in the form
attached as Appendix A.

                                   ARTICLE IV
                                  Miscellaneous

Section 4.1 Representations and Warranties. Each of the Sponsors and Additional
Partner Companies hereby represents and warrants, as of the date hereof and as
of the Conversion Effective Date, that:

(i)  Organisation; Corporate Power. It is duly incorporated and validly
existing under the laws of the jurisdiction of its organisation, and has all
necessary power and authority to execute and deliver this Amendment and,
following the Conversion Effective Date, to consummate the transactions
contemplated by the AMD Inc. Subordination Agreement, as amended hereby;

(ii) Corporate Authority; No Conflict. The execution and delivery by it of this
Amendment, and the performance by it, following the Conversion Effective Date,
of its obligations under the AMD Inc. Subordination Agreement, as amended by
this Amendment, have been duly authorised by all necessary corporate action
(including any necessary shareholder action) on its part, and do not and will
not (i) violate any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination, or award presently in effect having
applicability to it, or of its charter or by-laws; or (ii) result in a breach
of, result in a mandatory prepayment or acceleration of indebtedness evidenced
by or secured by, or constitute a default under, any

                                       3

<PAGE>

indenture or loan or credit agreement, or any other agreement or instrument to
which it is a party or by which it or its properties may be bound, or require
the creation or imposition of any encumbrance of any nature upon or with respect
to any of the properties now owned or hereafter acquired by it; and

(iii) Valid and Binding Obligations. Following the Conversion Effective Date,
the AMD Inc. Subordination Agreement, as amended by this Amendment, shall
constitute its legal, valid and binding obligation, enforceable against it in
accordance with its terms; subject, however, to applicable bankruptcy,
insolvency, reorganisation, moratorium, or similar laws affecting creditors'
rights generally and, as to enforceability, by general equitable principles.

Section 4.2       Miscellaneous.

(i)   This Amendment is limited as specified and, except as expressly herein
provided, shall not constitute a modification, amendment or waiver of any other
provision of the AMD Inc. Subordination Agreement or any provision of any other
Operative Document. Except as specifically amended by this Amendment, the AMD
Inc. Subordination Agreement shall remain in full force and effect and is hereby
ratified and confirmed.

(ii)  This Amendment shall be an Operative Document under and for purposes of
the Sponsors' Support Agreement.

(iii) This Amendment has been executed in the English language.

(iv)  This Amendment may be executed in any number of counterparts and by
different parties on separate counterparts which when taken together shall
constitute one agreement.

(v)   Sections 19, 20, and 21 of the AMD Inc.  Subordination  Agreement shall
apply, mutatis mutandis, to this Amendment,  as if set out herein in full.

                [Remainder of this page intentionally left blank]

                                       4

<PAGE>

                  IN WITNESS WHEREOF, each of the parties set out below has
caused this Amendment to be duly executed and delivered by its respective
officer or agent thereunto duly authorised as of the date first above written.

                                     ADVANCED MICRO DEVICES, INC.

                                     By: /s/ Robert J. Rivet
                                        ----------------------------------------
                                     Its Senior Vice President and Chief
                                        ----------------------------------------
                                         Financial Officer
                                        ----------------------------------------

                                     AMD SAXONY HOLDING GMBH

                                     By: /s/ Hans-Raimund Deppe
                                        ----------------------------------------
                                     Dr. Hans-Raimund Deppe
                                     Its Managing Director (Geschaftsfuhrer)

                                     AMD SAXONY LLC

                                     By: /s/ Hans-Raimund Deppe
                                        ----------------------------------------
                                     Dr. Hans-Raimund Deppe
                                     Its Manager

                                     AMD SAXONY ADMIN GMBH

                                     By: /s/ Hans-Raimund Deppe
                                        ----------------------------------------
                                     Dr. Hans-Raimund Deppe
                                     Its Managing Director (Geschaftsfuhrer)

                                     DRESDNER BANK LUXEMBOURG S.A.
                                     as Agent

                                     By: /s/ Prellwitz
                                        ----------------------------------------
                                     Its Signatory under power of attorney
                                        ----------------------------------------

                                     DRESDNER BANK AG
                                     as Security Agent

                                     By: /s/ Prellwitz
                                        ----------------------------------------
                                     Its Signatory under power of attorney
                                        ----------------------------------------

                   [Signature page to the Accession Agreement
            and Second Amendment to AMD Inc. Subordination Agreement]

                                       5

<PAGE>

                                   APPENDIX A
                              AMENDED AND RESTATED
                        AMD INC. SUBORDINATION AGREEMENT

                                      A-1

<PAGE>

                                                            Amended and Restated

                        AMD INC. SUBORDINATION AGREEMENT

THIS AMD INC. SUBORDINATION AGREEMENT, dated 11 March 1997, as amended, is made
between ADVANCED MICRO DEVICES, INC., a corporation organised and existing under
the laws of the State of Delaware, United States of America, with its chief
executive office and principal place of business at One AMD Place, Sunnyvale,
California 94088, United States of America ("AMD Inc."); AMD SAXONY HOLDING
GMBH, Dresden, registered in the Commercial Register of the Dresden County Court
HRB 13931 ("AMD Holding"; and, together with AMD Inc., collectively, the
"Sponsors"); AMD SAXONY LLC, a limited liability company organised and existing
under the laws of the State of Delaware, United States of America ("AMD Saxony
LLC"); AMD SAXONY ADMIN GMBH, with its seat in Dresden ("AMD Admin" and together
with AMD Saxony LLC, collectively, the "Additional Partner Companies"); DRESDNER
BANK LUXEMBOURG S.A., as Agent (and successor to DRESDNER BANK AG ("Dresdner")
in such capacity) under the Loan Agreement referred to below (in such capacity,
the "Agent") and DRESDNER, as Security Agent under such Loan Agreement (in such
capacity, the "Security Agent") for the Secured Parties referred to below.

                              W I T N E S S E T H:
                              - - - - - - - - - -

WHEREAS, AMD Saxony Manufacturing GmbH, registered in the Commercial Register of
the Dresden County Court (proposed to be known as "AMD Saxony LLC & Co KG"
following the Conversion Effective Date) ("AMD Saxonia"), has been formed for
the purpose of constructing, owning, and operating (i) the Plant and (ii) the
integrated Design Center (the construction, ownership, and operation of the
Plant and the Design Center being hereinafter called the "Project");

WHEREAS, in order to finance the construction of the Plant and the Design
Center, and start-up costs of the operation of the Plant, (i) the Sponsors have
made substantial subordinated loans to, and AMD Holding has made substantial
equity investments in, AMD Saxonia, and (ii) AMD Saxonia has entered into a
Syndicated Loan Agreement, dated 11 March 1997, as amended (the "Loan
Agreement"), with the banks from time to time party thereto (hereinafter
collectively called the "Banks" and individually called a "Bank"), Dresdner, as
Paying Agent (in such capacity, the "Paying Agent"), providing, inter alia, for
a senior secured term facility aggregating up to DM 1,500,000,000 (one billion
five hundred million Deutsche Marks);

WHEREAS, pursuant to the Conversion Documents, AMD Saxonia has changed its legal
form to a Kommanditgesellschaft (a limited partnership organised under the laws
of the Federal Republic of Germany) with AMD Holding and AMD Admin as its sole
limited partners (Kommanditisten) and AMD Saxony LLC as its sole general partner
(Komplementar);

WHEREAS, the Sponsors and Additional Partner Companies are entering this
Agreement with the Agent and the Security Agent for the benefit of the Banks and
the Paying Agent (hereinafter collectively called the "Secured Parties" and
individually called a "Secured Party"), for the purpose, among other things, of
providing (i) certain assurances with respect to the completion of the Project,
and (ii) certain undertakings to and for the benefit of the Secured Parties; and

WHEREAS, in extending or continuing to extend credit to AMD Saxonia under the
Loan Agreement, the Banks are relying on the undertakings of the Sponsors and
Additional Partner Companies contained herein;

<PAGE>

NOW, THEREFORE, the Sponsors, the Additional Partner Companies, the Agent (for
itself and on behalf of and the Banks), and the Security Agent (on behalf of the
Secured Parties), agree as follows:

SECTION 1. Definitions. Unless otherwise defined herein, terms used herein have
the meanings assigned to such terms in the Sponsors' Support Agreement. In
addition, the following terms (whether or not underlined) when used in this
Agreement, including its preamble and recitals, shall, except where the context
otherwise requires, have the following meanings (such meanings to be equally
applicable to the singular and plural forms thereof):

         "Additional Partner Companies" has the meaning assigned to such term in
the introduction to this Agreement.

         "Agent" has the meaning assigned to such term in the introduction to
this Agreement.

         "Agreement" means this AMD Inc. Subordination Agreement, as the same
may at any time be amended or modified in accordance with the terms hereof and
in effect.

         "AMD Admin" has the meaning assigned to such term in the introduction
to this Agreement.

         "AMD Holding" has the meaning assigned to such term in the introduction
to this Agreement.

         "AMD Inc." has the meaning assigned to such term in the introduction to
this Agreement.

         "AMD Saxonia" has the meaning assigned to such term in the first
recital of this Agreement.

         "AMD Saxony LLC" has the meaning assigned to such term in the
introduction to this Agreement.

         "Bank" and "Banks" have the respective meanings assigned to such term
in the second recital of this Agreement.

         "Dresdner" has the meaning assigned to such term in the introduction to
this Agreement.

         "Junior Liabilities" means all obligations and liabilities of AMD
Holding and the Additional Partner Companies to AMD Inc., howsoever created,
arising, or evidenced, whether direct or indirect, absolute or contingent or now
or hereafter existing, or due or to become due.

         "Loan Agreement" has the meaning assigned to such term in the second
recital of this Agreement.

         "Loan Agreement Termination Date" means the first date on or as of
which (i) all Primary Secured Obligations under the Loan Agreement have been
paid in full, and (ii) the Banks have no commitments under or in connection with
the Loan Agreement.

         "Paying Agent" has the meaning assigned to that term in the second
recital of this Agreement.

         "Project" has the meaning assigned to such term in the first recital to
this Agreement.

         "Security Agent" has the meaning assigned to such term in the
introduction to this Agreement.

         "Secured Parties" and "Secured Party" have the respective meanings
assigned to such terms in the fourth recital of this Agreement.

                                       2

<PAGE>

         "Senior Liabilities" means all obligations and liabilities of AMD
Holding or any Additional Partner Company to the Agent, the Security Agent, any
Bank, the Paying Agent, or either Guarantor under or arising out of any
Financing Document, howsoever created, arising, or evidenced, whether direct or
indirect, absolute or contingent or now or hereafter existing, or due or to
become due, it being expressly understood and agreed that the term "Senior
Liabilities" shall include, without limitation, any and all interest accruing on
any of the Senior Liabilities after the commencement of any proceedings referred
to in Section 4 hereof, notwithstanding any provision or rule of law which might
restrict the rights of the Security Agent, as against AMD Holding, any
Additional Partner Company, or any other Person, to collect such interest.

         "Sponsors" has the meaning assigned to such term in the introduction to
this Agreement.

         "Sponsors' Support Agreement" means the Sponsors' Support Agreement
between the Sponsors, the Additional Partner Companies, the Agent and the
Security Agent dated 11 March 1997, as amended by the First Amendment to
Sponsors' Support Agreement dated 6 February 1998, the Second Amendment to
Sponsors' Support Agreement dated 29 June 1999, the Third Amendment to Sponsors'
Support Agreement dated 20 February 2001 and the Accession Agreement and Fourth
Amendment to Sponsors' Support Agreement dated of even date herewith, and as the
same may at any time be amended or modified in accordance with the terms thereof
and in effect.

In this Agreement, unless the context requires otherwise, any reference to an
Operative Document or a Project Agreement (including, in each case, any
reference thereto as being in the form set out in a Schedule to the Loan
Agreement) shall be a reference to such Document or Agreement as it shall have
been, or from time to time be, amended, varied, re-issued, replaced, novated or
supplemented, in each case, in accordance with its terms and this Agreement. For
the avoidance of doubt, any reference in the Agreement to stated capital
(Stammkapital), capital reserves or any other similar term relating to the
capital structure of a German limited liability company shall, following the
Conversion Effective Date (as defined in the Sponsors' Support Agreement), be
deemed to be a reference to the capital (Haftsummen and Pflichteinlagen) or
capital reserves of a limited partnership under German law, save to the extent
the context requires otherwise.

In this Agreement, unless the context requires otherwise, (i) any statutory
provisions shall be construed as references to those provisions as amended,
modified, re-enacted, or replaced from time to time; (ii) words importing a
gender include every gender; (iii) references to Sections and Schedules are to
Sections of and Schedules to this Agreement; and (iv) references to this
Agreement include its Schedules. Section headings are inserted for reference
only and shall be ignored in construing this Agreement. A time of day, unless
otherwise specified, shall be construed as a reference to Frankfurt am Main
time.

SECTION 2. Obligations of AMD Inc. AMD Inc. will, from time to time, promptly
notify the Security Agent of the creation of any Junior Liabilities pursuant to
the Sponsors' Loan Agreement.

SECTION 3. Subordination. Except as expressly provided in this Agreement, or as
the Agent (acting on the instructions of an Instructing Group) may hereafter
otherwise expressly consent in writing, the payment of all Junior Liabilities
shall be postponed and subordinated to the payment in full of all Senior
Liabilities, and no payments or other distributions whatsoever in respect of any
Junior Liabilities shall be made, nor shall any property or assets of AMD
Holding or any Additional Partner Company be applied to the purchase or other
acquisition or retirement of any Junior Liabilities; provided, however, that as
long as no Event of Default nor any Unmatured Event of Default nor with respect
to AMD Inc. any event which is of the type described in Section 11.1 (e), (f),
(g) or (h) of the AMD Inc. 1999 Loan and Security Agreement has occurred and is
continuing, there are excepted from the terms of the provisions of this Section
3 (without duplication):

                                       3

<PAGE>

         (i)     those payments to AMD Inc. made by AMD Holding pursuant to
                 Article II of the Management Service Agreement or pursuant to
                 Article IV of the AMD Holding Wafer Purchase Agreement, in
                 either case without duplication and to the extent not paid by
                 AMD Saxonia pursuant thereto;

         (ii)    [intentionally left blank]; and

         (iii)   those payments to AMD Inc. made by AMD Holding in accordance
                 with Section 6.3 of the Sponsors' Support Agreement;

         and provided, further, that there are excepted from the terms of the
         foregoing provisions of this Section 3:

         (A)     distributions in respect of the Junior Liabilities to the
                 extent such distributions constitute non cash credits expressly
                 permitted to be made under the Management Service Agreement or
                 the AMD Holding Wafer Purchase Agreement; and

         (B)     performance by AMD Holding of its obligations (other than
                 payment obligations, if any) under the AMD Holding Wafer
                 Purchase Agreement, the AMD Holding Research Agreement, or the
                 License Agreement.

Moreover, if the AMD Holding Wafer Purchase Agreement or the Management Service
Agreement terminates for any reason whatsoever, AMD Holding shall be entitled to
credit the amounts payable thereunder against the amounts receivable by it
thereunder strictly in accordance with the terms and provisions of each such
Operative Document.

SECTION 4. Bankruptcy, Insolvency, etc. In the event of any dissolution, winding
up, liquidation, reorganization, or other similar proceedings relating to AMD
Holding or an Additional Partner Company, or to their respective creditors, as
such, or to their respective property (whether voluntary or involuntary, partial
or complete, and whether in bankruptcy, insolvency, compromise proceedings or
any other marshalling of the assets and liabilities of AMD Holding or an
Additional Partner Company, or any sale of all or substantially all of the
assets of AMD Holding or an Additional Partner Company or otherwise), the Senior
Liabilities shall first be paid in full before AMD Inc. shall be entitled to
receive and to retain any payment or distribution in respect of the Junior
Liabilities, and in order to implement the foregoing, (a) AMD Inc. hereby
irrevocably agrees that in such event all payments and distributions of any kind
or character in respect of the Junior Liabilities to which AMD Inc. would be
entitled if the Junior Liabilities were not subordinated pursuant to this
Agreement, shall be made directly to the Security Agent; (b) upon the
commencement and during the continuance of any proceedings referred to in this
Section 4, the Security Agent shall have the right to require AMD Inc. to claim,
enforce, prove, or vote in respect of the Junior Liabilities in such manner as
is directed by the Security Agent and is permitted by applicable law, including,
without limitation, to direct that all payments and distributions of any kind or
character in respect of the Junior Liabilities to which AMD Inc. would be
entitled if the Junior Liabilities were not subordinated pursuant to this
Agreement, shall be made directly to the Security Agent; provided, that if the
Security Agent shall not have required AMD Inc. to claim, enforce, prove, or
vote in respect of any of the Junior Liabilities on or before the day which is
10 Business Days before a date on which the failure to so claim, enforce, prove,
or vote would invalidate or otherwise materially adversely affect the rights of
AMD Inc., AMD Inc. shall have the right to claim, enforce, prove, or vote in
respect of such Junior Liabilities in AMD Inc.'s sole discretion; and (c) AMD
Inc. hereby irrevocably agrees that, for purposes hereof, the Security Agent
may, at its sole discretion for purposes hereof, in the name of AMD Inc. or
otherwise, demand, sue for, collect, receive, and receipt for any and all such
payments or distributions, and file, prove, and vote, or consent in any such
proceedings with respect to, any and all claims of AMD Inc. relating to the
Junior Liabilities. Notwithstanding anything to the contrary in the foregoing,
this Section 4 shall not apply with respect to Junior Liabilities of AMD Saxony
LLC to AMD Inc. which arise following a Substitution.

                                       4

<PAGE>

SECTION 5. Payments Not to be Commingled. In the event that AMD Inc. receives
any payment or other distribution of any kind or character from AMD Holding, or
an Additional Partner Company, or from any other source whatsoever in respect of
any of the Junior Liabilities, other than as expressly permitted by the terms of
this Agreement, such payment or other distribution shall not be commingled with
other assets of AMD Inc. and shall be promptly turned over by AMD Inc. to the
Security Agent. AMD Inc. will mark its books and records, and cause AMD Holding
or the applicable Additional Partner Company, as the case may be, to mark its
books and records, as to clearly indicate that the Junior Liabilities are
subordinated in accordance with the terms of this Agreement, and will cause to
be clearly inserted in any instrument which at any time evidences any of the
Junior Liabilities a statement to the effect that the payment thereof is
subordinated in accordance with the terms of this Agreement. AMD Inc. will
execute such further documents or instruments and take such further action as
the Security Agent may reasonably request from time to time to carry out the
intent of this Agreement.

SECTION 6. Application of Payments; No Subrogation. All payments and
distributions received by the Security Agent in respect of the Junior
Liabilities in accordance with the terms thereof, to the extent received in or
converted into cash, may be applied by the Security Agent first to the payment
of any and all expenses (including reasonable attorneys' fees and legal
expenses) paid or incurred by the Security Agent in enforcing this Agreement or
in endeavouring to collect or realize upon any of the Junior Liabilities or any
security therefor in accordance with the terms hereof, and any balance thereof
shall, solely as between AMD Inc. and the Security Agent, be applied by the
Security Agent, in the manner provided by the Loan Agreement, toward the payment
of the Senior Liabilities remaining unpaid; but, as between AMD Holding and its
creditors or an Additional Partner Company and its creditors, no such payments
or distributions of any kind or character shall be deemed to be payments or
distributions in respect of the Senior Liabilities; and, notwithstanding any
such payments or distributions received by the Security Agent in respect of the
Junior Liabilities and so applied by the Security Agent toward the payment of
the Senior Liabilities, AMD Inc. shall be subrogated to the then-existing rights
of the Agent, the Security Agent, and the Banks, if any, in respect of the
Senior Liabilities only at such time as the Agent, the Security Agent, and the
Banks, shall have received payment of the full amount of the Senior Liabilities,
as provided for in Section 9, or (ii) this Agreement shall terminate pursuant to
Section 15. Each Secured Party shall, at AMD Inc.'s request and expense made
after such time, execute and deliver to AMD Inc. appropriate documents (without
recourse or warranty whatsoever) to evidence the transfer by subrogation to AMD
Inc. of an interest in the Senior Liabilities resulting from the application of
payments in the manner contemplated by this Section 6. The obligations of the
Secured Parties under the preceding sentence shall survive any termination of
this Agreement.

SECTION 7. Waivers by AMD Inc. AMD Inc. hereby waives: (a) notice of acceptance
by the Agent, the Security Agent, or any Bank, of this Agreement; (b) notice of
the existence or creation or non-payment of all or any of the Senior
Liabilities; and (c) all diligence in collection or protection of or realization
upon the Senior Liabilities or any thereof or any security therefor.

SECTION 8. Obligations of AMD Inc. AMD Inc. will not, without the prior written
consent of the Security Agent: (a) transfer or assign, or attempt to enforce or
collect, any Junior Liabilities or any rights in respect thereof except as
expressly permitted to be paid pursuant to Section 3 above; provided, that
nothing in this Agreement shall be deemed to prevent AMD Inc. from seeking
damages, equitable relief, or otherwise enforcing any rights it may have against
AMD Holding or any Additional Partner Company arising out of (x) any tort or
infringement of AMD Inc. tangible or intangible property rights (including
without limitation rights under applicable patent, copyright and trade secret
laws and similar principles) to the extent, but only to the extent, such tort or
infringement arises after the date of termination of the AMD Holding Wafer
Purchase Agreement or (y) any breach by AMD Holding of its obligations under the
License Agreement to the extent, but only to the extent, that such breach arises
after the date of termination of the AMD Holding Wafer Purchase Agreement; (b)
take any collateral security for any Junior Liabilities or (c) commence, or join
with any other

                                       5

<PAGE>

creditor commencing, any bankruptcy, reorganisation, or insolvency proceedings
with respect to AMD Holding or any Additional Partner Company. Nothing in this
Agreement shall prevent AMD Inc. from forgiving all or any portion of the Junior
Liabilities or from converting all or any portion of such Junior Liabilities
into, or exchanging such Junior Liabilities for, equity of AMD Holding or equity
of AMD Saxony LLC, and any such equity shall not be deemed to be a distribution
or payment on such Junior Liabilities for purposes of this Agreement.

SECTION 9. Continuing Subordination. This Agreement shall in all respects be a
continuing agreement and shall remain in full force and effect (notwithstanding,
without limitation, the dissolution of AMD Inc. or that at any time or from time
to time all Senior Liabilities may have been paid in full), but shall
automatically terminate on the Loan Agreement Termination Date.

SECTION 10. Rights of the Agent, the Security Agent, and the Banks. The Agent,
the Security Agent, and each Bank may, from time to time, at its sole discretion
and without notice to AMD Inc., take any or all of the following actions without
affecting its or their rights under this Agreement: (a) retain or obtain a
security interest in any property of any Person to secure any of the Senior
Liabilities; (b) retain or obtain the primary or secondary obligations of any
other obligor or obligors with respect to any of the Senior Liabilities; (c)
extend or renew for one or more periods (whether or not longer than the original
period), alter or exchange any of the Senior Liabilities, or release or
compromise any obligation of any nature of any obligor with respect to any of
the Senior Liabilities; (d) compromise, settle, release, renew, extend, indulge,
amend, change, waive, modify, or supplement in any respect any of the terms or
conditions of any of the Operative Documents; and (e) release its lien on or
security interest in, or surrender, release, or permit any substitution or
exchange for, all or any part of any property securing any of the Senior
Liabilities, or extend or renew for one or more periods (whether or not longer
than the original period) or release, compromise, alter, or exchange any
obligations of any nature of any obligor with respect to any such property.

SECTION 11. Transfer of Obligations; Enforcement. The Security Agent, the Agent,
or any Bank may, from time to time, without notice to AMD Inc., but subject
however, to the provisions of Section 26 of the Loan Agreement, assign or
transfer any or all of the Senior Liabilities or any interest therein; and,
notwithstanding any such assignment or transfer or any subsequent assignment or
transfer thereof, such Senior Liabilities shall be and remain Senior Liabilities
for purposes of this Agreement, and every immediate and successive assignee or
transferee of any of the Senior Liabilities or of any interest therein, shall,
to the extent of the interest of any such assignee or transferee in the Senior
Liabilities, be entitled to the benefits of this Agreement to the same extent as
if such assignee or transferee were the transferor. The rights of the Secured
Parties hereunder shall be exercisable solely by the Security Agent on behalf of
the Secured Parties, unless either the Security Agent is not able pursuant to
applicable law to realize the practical benefits of such rights on behalf of the
Secured Parties or the limitations set forth in this sentence would otherwise
materially adversely affect the rights of the Secured Parties hereunder.

SECTION 12. Additional Provisions. None of the Agent, the Security Agent, or the
Banks shall be prejudiced in its rights under this Agreement by any act or
failure to act of any of AMD Holding, any Additional Partner Company, or AMD
Inc., or any noncompliance of AMD Holding, any Additional Partner Company, or
AMD Inc. with any agreement or obligation, regardless of any knowledge thereof
which the Agent, the Security Agent, or such Bank may have or with which the
Agent, the Security Agent, or such Bank may be charged; and no action of the
Agent, the Security Agent, or any Bank permitted hereunder shall in any way
affect or impair the rights of the Agent, the Security Agent, or any Bank, and
the obligations of AMD Inc., under this Agreement. For the purposes of this
subordination, Senior Liabilities shall include all obligations of AMD Holding
and the Additional Partner Companies under or in connection with any of the
Operative Documents to the Agent, the Security Agent, and each Bank,
notwithstanding any right or power of any AMD Holding, any Additional Partner
Company, or anyone else to assert any claim or defence as to the invalidity or
unenforceability of any such obligation, and no such claim or defence shall
affect or impair the agreements and obligations of AMD Inc. hereunder; provided,
however, that Senior Liabilities shall

                                       6

<PAGE>

not include any obligations or liabilities of AMD Holding or any Additional
Partner Company which a court of competent jurisdiction shall have determined
(which determination shall be final and unappealable) are invalid or
unenforceable.

SECTION 13. Cumulative Remedies; Modifications in Writing. The remedies provided
for herein are cumulative and are not exclusive of any remedies that may be
available to the Agent or the Security Agent at law, in equity, or otherwise. No
amendment, modification, supplement, termination, or waiver of or to any
provision of this Agreement, or consent to any departure by AMD Inc., an
Additional Partner Company, or AMD Holding therefrom, shall be effective unless
the same shall be in writing and signed by or on behalf of the Agent and the
Security Agent.

SECTION 14. Severability of Provisions. In case any provision of this Agreement
is invalid or unenforceable, the validity or enforceability of the remaining
provisions hereof shall remain unaffected. The parties hereto shall have an
obligation to replace any invalid provision by a valid provision which
approximates best the economic purpose of the invalid provision.

SECTION 15. Termination. This Agreement and the obligations of the parties
hereunder shall terminate on the Loan Agreement Termination Date; provided, that
such obligations shall automatically revive and be reinstated if and to the
extent that AMD Holding or any Additional Partner Company shall subsequently
have obligations to any of the Secured Parties under or arising out of any of
the Financing Documents.

SECTION 16. Assignment. This Agreement shall be binding upon and shall inure to
the benefit of each party hereto and their respective successors and assigns;
provided, however, that the Security Agent, the Agent, and the Banks may
transfer their rights under this Agreement, subject, however, to the provisions
of Section 26 of the Loan Agreement; provided, further, that none of AMD Inc.,
an Additional Partner Company or AMD Holding shall have the right to transfer or
assign its rights under this Agreement without the prior written consent of the
Agent and the Security Agent; and provided, further, that AMD Holding or an
Additional Partner Company may assign this Agreement to the Security Agent as
security for the obligations of AMD Holding under the Loan Agreement and the
other Operative Documents. Notwithstanding any such assignment or transfer or
any subsequent assignment or transfer thereof, Senior Liabilities shall be and
remain Senior Liabilities for the purposes of this Agreement, and every
immediate and successive assignee or transferee of any of the Senior Liabilities
or of any interest therein shall, to the extent of the interest of such assignee
or transferee in the Senior Liabilities, be entitled to the benefits of this
Agreement to the same extent as if such assignee or transferee were the
transferor, subject, however, to the provisions of Section 11; provided,
however, that, in addition to its rights under Section 11, unless the Security
Agent (acting on the instructions of an Instructing Group) shall otherwise
consent in writing, the Security Agent shall have an unimpaired right, prior and
superior to that of any such assignee or transferee, to enforce this Agreement
for the benefit of the Secured Parties as to those of the Senior Liabilities
which have not been so assigned or transferred.

SECTION 17. Notice. All notices, demands, instructions, and other communications
required or permitted to be given to or made upon any party hereto shall be in
writing and shall be personally delivered or sent by registered or certified
mail, postage pre-paid, return receipt requested, or by pre-paid telex, TWX, or
telegram, or by pre-paid courier service, or by telecopier, and shall be deemed
to be given for purposes of this Agreement on the day that such writing is
delivered or sent to the intended recipient thereof in accordance with the
provisions of this Section 17. Unless otherwise specified in a notice sent or
delivered in accordance with the foregoing provisions of this Section 17,
notices, demands, instructions, and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective telex, TWX or telecopier numbers) indicated
below.

                                      7

<PAGE>

To the Security Agent:

Dresdner Bank AG, as Security Agent
Ostra Allee 9
01067 Dresden
Attention: Betreuung Unternehmenskunden
Facsimile No.: (49) 351 489-1300

To the Agent:

Dresdner Bank Luxembourg S.A., as Agent
26, rue du Marche-aux-Herbes
L-2097 Luxembourg
Attention: Direktion
Facsimile No.: (352) 4760-824

To AMD Inc.:

Advanced Micro Devices, Inc.
One AMD Place
Sunnyvale, California  94088
Attention: General Counsel
Facsimile No.: (1) (408)774 7399

To AMD Holding:

AMD Saxony Holding GmbH
Wilschdorfer Landstrasse 101
01109 Dresden
Attention: Geschaftsfuhrer
Facsimile No.: (49) 351 277 91300

To AMD Saxony LLC:

One AMD Place
Mailstop 150
Sunnyvale, CA 94088
Attention: Manager
Facsimile No.: (408) 774 7399

To AMD Admin:

Wilschdorfer Landstrasse 101
01109 Dresden
Attention: Geschaftsfuhrer
Facsimile No.: (49) 351 277 91300

SECTION 18. Relationship to Other Agreements. The rights of the Agent and the
Security Agent pursuant to this Agreement are in addition to any other rights or
remedies which the Agent and the

                                       8

<PAGE>

Security Agent may have under statutory law or other agreements between one or
more of the Agent, the Security Agent, the Banks, AMD Inc., AMD Holding, and the
Additional Partner Companies. Where such rights and remedies are in conflict
with the provision of this Agreement, the provision of this Agreement shall
prevail.

SECTION 19. Governing Law. The form and execution of this Agreement and all
rights and obligations of the parties arising hereunder shall be governed by the
Laws of the Federal Republic of Germany.

SECTION 20. Jurisdiction. AMD Inc., AMD Holding and the Additional Partner
Companies hereby submit to the exclusive jurisdiction of the courts in Frankfurt
am Main for any dispute arising out of or in connection with this Agreement. AMD
Inc. and AMD Saxony LLC state that Advanced Micro Devices GmbH,
Rosenheimerstrasse 143b, 81671 Munich, Germany, Tel.: +49 89 450 530,
Fax: +49 89 906 490, is their accredited agent for service of process and hereby
undertakes to maintain an agent for service in Germany. The foregoing submission
to jurisdiction shall not (and shall not be construed so as to) limit the rights
of the Agent or the Security Agent to take suits, actions, or proceedings
against a Sponsor or an Additional Partner Company to enforce any judgment
rendered by the courts in Frankfurt am Main in any other court or entity of
competent jurisdiction where such Sponsor or Additional Partner Company has
assets, nor shall the taking of suits, actions, or proceedings to enforce any
such judgment in one or more jurisdictions preclude the taking of enforcement
proceedings in any other jurisdiction, whether concurrently or not.

SECTION 21. Use of English Language. This Agreement has been executed in the
English language. All certificates, reports, notices, and other documents and
communications given or delivered pursuant to this Agreement shall be in the
English language and, if reasonably requested by the Agent, a certified German
translation thereof shall be furnished promptly thereafter. In the event of any
inconsistency, the English language version of any such document shall control.

SECTION 22. Operative Document. This Agreement is an Operative Document executed
pursuant to the Loan Agreement.

                [Remainder of this page intentionally left blank]

                                       9

<PAGE>

         IN WITNESS WHEREOF, each of the parties set out below has caused this
Agreement to be duly executed and delivered by its respective officer or agent
thereunto duly authorised as of the date first above written.

                               ADVANCED MICRO DEVICES, INC.

                               By:______________________________________________

                               Its _____________________________________________

                               AMD SAXONY HOLDING GMBH

                               By:______________________________________________

                               Its Managing Director

                               AMD SAXONY LLC

                               By:______________________________________________

                               Its Manager

                               AMD SAXONY ADMIN GMBH

                               By:______________________________________________

                               Its Managing Director

                               DRESDNER BANK LUXEMBOURG S.A.

                               as Agent

                               By:______________________________________________

                               Its _____________________________________________

                               DRESDNER BANK AG
                               as Security Agent

                               By:______________________________________________

                               Its _____________________________________________

            [Signature page to the AMD Inc. Subordination Agreement]

                                       10<PAGE>

                                                                     Exhibit 4.1

                         MERCURY INTERACTIVE CORPORATION
                        1998 EMPLOYEE STOCK PURCHASE PLAN

       (Amended and Restated as of May 24, 2000 and Amended by the Board
                    on July 31, 2001 and February 12, 2002)

     1.  Purpose. The purpose of the Plan is to provide employees of Mercury
         -------
Interactive Corporation and its Designated Subsidiaries with an opportunity to
purchase Common Stock of Mercury Interactive Corporation through accumulated
payroll deductions. It is the intention of Mercury Interactive Corporation to
have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of
the Internal Revenue Code of 1986, as amended. The provisions of the Plan shall,
accordingly, be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code.

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

         (a) "Board" means the Board of Directors of Mercury Interactive
              -----
Corporation.

         (b) "Code" means the U.S. Internal Revenue Code of 1986, as amended.
              ----

         (c) "Common Stock" means the Common Stock of Mercury Interactive
              ------------
Corporation.

         (d) "Company" means Mercury Interactive Corporation, a Delaware
              -------
corporation and (where the context so requires), its Designated Subsidiaries.

         (e) "Compensation" means all regular straight time earnings, and all
              ------------
payments for overtime, shift premium, incentive compensation, incentive
payments, bonuses, commissions or other compensation.

         (f) "Designated Subsidiaries" means the Subsidiaries which have been
              -----------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan. As of the date of adoption of the Plan, the Designated
Subsidiaries are Mercury Interactive (Israel) Ltd, Mercury Interactive (Europe)
N.V., Mercury Interactive France S.A.R.L., Mercury Interactive GmbH, and Mercury
Interactive (UK) Ltd. Additional Designated Subsidiaries, as added by the Board,
shall be listed in Appendix I to the Plan.

         (g) "Employee" means any individual who is an employee of the Company
              --------
or its Designated Subsidiary for purposes of U.S. income tax withholding under
the Code whose customary employment is at least twenty (20) hours per week and
more than five months in any calendar year (including Employees of a Designated
Subsidiary who would, if subject to US. income tax, be an employee for such
purposes). For purposes of the Plan, the employment relationship shall be
treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship will be deemed to have
terminated on the 91st day of such leave.

         (h) "Exercise Date" means the date one day prior to the date 6 months
              -------------
from any Offering Date. [see 7/31/01 Board Amendment]

         (i) "Offering Date" means the first day of each Offering Period of the
              -------------
Plan. The first Offering Date under the Plan will be May 20, 1998.

<PAGE>

         (j) "Offering Period" means a 6-month period beginning on the Offering
              ---------------
Date and ending on the Exercise Date. [see 7/31/01 Board Amendment]

         (k) "Plan" means this 1998 Employee Stock Purchase Plan as amended and
              ----
restated effective May 24, 2000.

         (l) "Subsidiary" means a corporation, domestic or foreign, of which
              ----------
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.

         (m) "Trading Day" means a day on which national stock exchanges and
              -----------
the Nasdaq National Market are open for trading.

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

         (a) Any Employee as defined in Section 2 who shall be employed by the
Company on the date his or her participation in the Plan is effective shall be
eligible to participate in the Plan, subject to limitations imposed by Section
423(b) of the Code.

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

     4.  Offering Periods. The Plan shall be implemented by consecutive 6-month
         ----------------
Offering Periods with a new Offering Period commencing on February 16 and August
16 of each year; except that the initial Offering Period shall be short Offering
Period commencing on May 20, 1998 and ending on August 14, 1998. (the "Initial
Offering Period"). The Plan shall continue thereafter until terminated in
accordance with Section 20 hereof. Subject to the requirements of Section 19,
the Board shall have the power to change the duration of Offering Periods with
respect to future offerings without stockholder approval if such change is
announced at least 10 days prior to the scheduled beginning of the first
Offering Period to be affected. [see 7/31/01 Board Amendment]

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

         (a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions on a form
provided by the Company and filing it with the Company's payroll office at least
10 business days prior to the applicable Offering Date, unless a later time for
filing the subscription agreement is set by the Board for all eligible Employees
with respect to a given offering. [see 2/8/01 Board Amendment]

         (b) Payroll deductions for a participant shall commence on the first
payroll following the Offering Date and shall end on the Exercise Date of the
offering to which such authorization is applicable, unless sooner terminated by
the participant as provided in Section 10.

<PAGE>

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

         (a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each payday during the
Offering Period in an amount not exceeding 15% nor less than one percent of his
or her Compensation. The aggregate of such payroll deductions during any
Offering Period shall not exceed 15% of his or her aggregate Compensation during
said Offering Period.

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

         (c) A participant may discontinue his or her participation in the Plan
as provided in Section 10, or may decrease (but not increase) the rate or amount
of his or her payroll deductions during the Offering Period (within the
limitations of Section 6(a)) by completing and filing with the Company a new
subscription agreement authorizing a decrease in the rate or amount of payroll
deductions; provided, however, that a participant may not decrease the rate or
amount of his or her payroll deductions more than once in any one month. The
change in rate shall be effective 15 days following the Company's receipt of the
new authorization or such shorter period as may be permitted by the Company.
Subject to the limitations of Section 6(a), a participant's subscription
agreement shall remain in effect for successive Offering Periods unless revised
as provided herein or terminated as provided in Section 10.

         (d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions may be decreased to zero percent by the Administrator at such
time during any Offering Period which is scheduled to end during the current
calendar year that the aggregate of all payroll deductions accumulated with
respect to such Offering Period and any other Offering Period ending within the
same calendar year equal $21,250. Payroll deductions shall recommence at the
rate provided in such participant's subscription agreement at the beginning of
the first Offering Period which is scheduled to end in the following calendar
year, unless terminated by the participant as provided in Section 10.

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

     7.  Grant of Option.
         ---------------

         (a) Subject to Sections 7(c) and 7(d) below, on the Offering Date of
each Offering Period, each eligible Employee participating in such Offering
Period shall be granted an option to purchase on each Exercise Date during such
Offering Period (at the per share option price) up to a number of shares of the
Company's Common Stock determined by dividing such Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the lower of (i) 85% of the fair market value
of a share of the Company's Common Stock on the Offering Date or (ii) 85% of the
fair market value of a share of the Company's Common Stock on the Exercise Date;
provided, however, that the maximum number of shares an Employee may purchase
during each Offering

<PAGE>

Period shall be determined at the Offering Date by dividing $25,000 by the fair
market value of a share of the Company's Common Stock on the Offering Date, and
provided further that such purchase shall be subject to the limitations set
forth in Sections 3(b) and 12 hereof. Exercise of each option during each
Offering Period shall occur as provided in Section 8, unless the participant has
withdrawn pursuant to Section 10, and each option shall expire at midnight on
the last day of the applicable Offering Period. Fair market value of a share of
the Company's Common Stock shall be determined as provided in Section 7(b)
herein.

         (b) Subject to Sections 7(c) and 7(d) below, the option price per
share of the shares offered in a given Offering Period shall be the lower of:
(i) 85% of the fair market value of a share of the Common Stock of the Company
on the Offering Date; or (ii) 85% of the fair market value of a share of the
Common Stock of the Company on the Exercise Date. The fair market value of the
Company's Common Stock on a given date shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per share shall be the closing price of the
Common Stock for such date, as reported by the Nasdaq National Market, or, in
the event the Common Stock is listed on a stock exchange, the fair market value
per share shall be the closing price on such exchange on such date, as reported
in the Wall Street Journal. In the event the Offering Date or the Exercise Date
occurs on a weekend or legal holiday, the fair market value shall be based on
the closing bid price on the next Trading Day.

         (c) Notwithstanding Sections 7(a) and 7(b) above, (i) each eligible
Employee participating in the Initial Offering Period shall be granted an option
to purchase (at the per share option price) up to a number of shares of the
Company's Common Stock determined by dividing such Employee's payroll deductions
accumulated prior to the Exercise Date and retained in the Participant's account
as of the Exercise Date by 85% of the fair market value of a share of the
Company's Common Stock on the Exercise Date; provided, however, that the maximum
number of shares an Employee may purchase during the Initial Offering Period
shall be determined at the Offering Date by dividing $25,000 by the fair market
value of a share of the Company's Common Stock on the Offering Date, and
provided further that such purchase shall be subject to the limitations set
forth in Sections 3(b) and 12 hereof and (ii) the option price per share of the
shares offered in the Initial Offering Period shall be 85% of the fair market
value of a share of the Common Stock of the Company on the Exercise Date.

         (d) Notwithstanding anything to the contrary contained herein, in the
event that during any Offering Period the accounting rules relating to
noncompensatory treatment of employee stock purchase plans under section 423 of
the Code change so as to require, in the written opinion of the Company's
independent public accountants, that the Company recognize a compensatory charge
to earnings with respect to options granted during such Offering Period, the
Board may, in its discretion, take any steps necessary to reduce or eliminate
such charge to earnings. Such steps may include (without limitation) (i)
amending the Plan to provide that the Exercise Price for any Offering Period
(including the current Offering Period) shall be equal to 85% of the fair market
value of a share of the Common Stock of the Company on the Exercise Date only or
(ii) immediately terminating the Offering Period and returning all payroll
deductions withheld to participants prior to the Exercise Date. The Board will
advise participants of any accounting-related amendment that affects pricing no
less than 5 business days prior to the Exercise Date of the affected Offering
Period. No prior notice will be required in the event of an accounting-related
termination of the Offering Period provided that payroll deductions are returned
to the participant as promptly as practicable after the termination.

     8.  Exercise of Option. Unless a participant withdraws from the Plan as
         ------------------
provided in Section 10, his or her option for the purchase of shares will be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the

<PAGE>

applicable option price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased and any amount remaining in the
participant's account after an Exercise Date shall be held in the account until
the Exercise Date of the next Offering Period, unless the Offering Period has
been oversubscribed or the Plan has terminated with such Exercise Date, in which
case such amount shall be refunded to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.

     9.  Delivery. As promptly as practicable after the Exercise Date, the
         --------
Company shall arrange the delivery to each participant, as appropriate, of a
certificate representing the shares purchased upon exercise of his or her
option. Any cash remaining to the credit of a participant's account under the
Plan after a purchase by him or her of shares at the termination of each
Offering Period which is insufficient to purchase a full share of Common Stock
of the Company shall be applied to the participant's account for the next
Offering Period. [see 7/31/01 Board Amendment]

     10. Withdrawal; Termination of Employment.
         -------------------------------------

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

         (b) Upon a participant's ceasing to be an Employee prior to an
Exercise Date for any reason, including retirement or death, or upon termination
of a participant's employment relationship (as described in Section 2(g)), the
payroll deductions credited to such participant's account during the Offering
Period but not yet used to exercise the option will be returned to such
participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 14, and such participant's remaining option or
options will be automatically terminated.

         (c) In the event an Employee fails to remain an Employee of the
Company for at least 20 hours per week during an Offering Period in which the
Employee is a participant, he or she will be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to his or her account will be
returned to such participant and such participant's remaining option or options
terminated.

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

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

     12. Stock.
         -----

         (a) Subject to Section 18 of the Plan, the maximum number of Shares
reserved and available for issuance pursuant to the Plan is 2,500,000*. If any
Shares that have been optioned under the Plan cease to be subject to an option
(other than through exercise of the option), or if any option granted hereunder
is forfeited, the Shares that were subject to such option shall again be
available for

<PAGE>

distribution in connection with future grants under the Plan. Notwithstanding
the previous sentence, if Shares subject to an option are used for tax
withholding, only the net number of Shares issued to the participant in the
transaction shall be considered to be "issued" under the Plan, and the remaining
Shares that were subject to such option shall again be available for
distribution in connection with future option grants under the Plan.

     If on a given Exercise Date the number of shares with respect to which
options are to be exercised exceeds the number of shares then available under
the Plan (after deduction of all shares for which options have been exercised or
are then outstanding), the Board shall make a pro rata allocation of the shares
remaining available for option grant in as uniform a manner as shall be
practicable or, subject to the restrictions of Section 423 of the Code, take
such other steps to reallocate Shares as it determines shall be equitable. The
Company shall give written notice of such reduction or reallocation to each
Employee affected thereby and shall similarly reduce the rate of payroll
deductions, if necessary.

         (b) The participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.

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

     13. Administration. The Plan shall be administered by the Board of
         --------------
Directors of the Company or a committee appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties. Members of the Board
who are eligible Employees are permitted to participate in the Plan.

     14. Designation of Beneficiary.
         --------------------------

         (a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of the
Offering Period but prior to delivery to him or her of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to an Exercise Date.

         (b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.

     15. Transferability. Neither payroll deductions credited to a participant's
         ---------------
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 14 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with Section 10.

<PAGE>

     16. Use of Funds. All payroll deductions received or held by the Company
         ------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.

     17. Reports. Individual accounts will be maintained for each participant in
         -------
the Plan. Statements of account will be given to participating Employees
annually, which statements will set forth the amounts of payroll deductions, the
per share purchase price, the number of shares purchased and the remaining cash
balance, if any.

     18. Adjustments Upon Changes in Capitalization. Subject to any required
         ------------------------------------------
action by the stockholders of the Company, the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but have not yet been placed under option (collectively, the
"Reserves") as well as the price per share of Common Stock covered by each
option under the Plan which has not yet been exercised, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of any
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.

     In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each option under the
Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, to shorten the Offering Period then in
progress by setting a new Exercise Date (the "New Exercise Date"). If the Board
shortens the Offering Period then in progress in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify
each participant in writing, at least 5 business days prior to the New Exercise
Date, that the Exercise Date for his or her option has been changed to the New
Exercise Date and that his or her option has been changed to the New Exercise
Date and that his or her option will be exercised automatically on the New
Exercise Date, unless prior to such date he or she has withdrawn from the
Offering Period as provided in Section 10. For purposes of this paragraph, an
option granted under the Plan shall be deemed to be assumed if, following the
sale of assets or merger the option confers the right to purchase, for each
share of option stock subject to the option immediately prior to the sale of
assets or merger the consideration (whether stock, cash or other securities or
property) received in the sale of assets or merger by holders of Common Stock
for each share of Common Stock held on the effective date of the transaction
(and if such holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of
Common Stock); provided, however, that if such consideration received in the
sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation and the participant, provide
for the consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
sale of assets or merger.

<PAGE>

     The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.

     19. Amendment or Termination.
         ------------------------

         (a) The Board may at any time and for any reason terminate or amend
the Plan. Except as provided in Section 7(c) and Section 18, no such termination
can affect options previously granted, provided that the Plan may be terminated
by the Board on any Exercise Date if the Board determines that the termination
of the Plan is in the best interests of The Company and its stockholders. Except
as provided in Section 7(c) and Section 18 no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law or regulation), the
Company shall obtain stockholder approval in such a manner and to such a degree
as required.

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

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

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

     As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.

     22. Term of Plan. The Plan shall become effective on May 20, 1998 and
         ------------
terminate on August 16, 2008 unless sooner terminated under Section 19.

<PAGE>

                                    EXHIBIT A
                                    ---------

                         MERCURY INTERACTIVE CORPORATION

                        1998 EMPLOYEE STOCK PURCHASE PLAN

                             SUBSCRIPTION AGREEMENT

[ ]  Original Application                        Offering Date:
                                                               -----------------
[ ]  Decrease in Payroll Deduction Rate

[ ]  Change of Beneficiary

1.                                hereby elects to participate in the Mercury
     ----------------------------
     Interactive Corporation 1998 Employee Stock Purchase Plan (the "Stock
     Purchase Plan") and subscribes to purchase shares of the Company's Common
     Stock in accordance with this Subscription Agreement and the Stock Purchase
     Plan.

2.   I hereby authorize payroll deductions from each paycheck in the amount of
       % of my Compensation on each payday (not to be less than one percent and
     --
     not to exceed 15%) during the Offering Period in accordance with the Stock
     Purchase Plan. (Please note that no fractional percentages are permitted).
     Such deductions are to continue for succeeding Offering Periods under the
     Stock Purchase Plan until I give written instructions for a decrease in or
     termination of such deductions.

3.   I understand that said payroll deductions shall be accumulated for the
     purchase of shares of Common Stock at the applicable purchase price
     determined in accordance with the Stock Purchase Plan. I further understand
     that, except as otherwise set forth in the Stock Purchase Plan, shares will
     be purchased for me automatically on each Exercise Date unless I otherwise
     withdraw from the Stock Purchase Plan by giving written notice to the
     Company for such purpose and any amounts not used to purchase shares will
     be applied to the next Offering Period.

4.   Shares purchased for me under the Stock Purchase Plan should be issued in
     the name(s) of:
                    ------------------------------------------------------------

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

5.   I acknowledge that, under the Internal Revenue Code, there are special tax
     "holding period" rules that govern the tax consequences of buying and
     selling shares under the Stock Purchase Plan. I understand that if I
     dispose of shares purchased under the Plan within two years of the Offering
     Date (i.e., the first day of the Offering Period) or within one year of the
     Exercise Date (i.e., the date the shares are purchased), I will be treated
     for federal income tax purposes as having received ordinary income at the
     time of the sale equal to the difference between my purchase price and the
     market value of the stock on the Exercise Date. Any amount in excess of
                               --------------------
     that difference will be treated as capital gain. I hereby agree to notify
     the Company in writing within 30 days after the date of any such
     disposition.

<PAGE>

     I further understand that if I hold the shares for both the two-year and
     one-year holding periods described above, at the time I dispose of the
     shares I will be treated for federal income tax purposes as having received
     ordinary income in an amount equal only to the lesser of (1) the difference
     between my purchase price and the market value of the stock on the Offering
                                                                 ---------------
     Date or (2) the difference between my purchase price and the actual sale
     ----
     price for my stock. Any additional gain I receive on the sale will be
     treated as capital gain.

6.   I have received a copy of the Company's most recent prospectus which
     describes the Stock Purchase Plan and a copy of the complete "Mercury
     Interactive Corporation 1998 Employee Stock Purchase Plan." I understand
     that my participation in the Stock Purchase Plan is in all respects subject
     to the terms of the Plan.

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

8.   In the event of my death, I hereby designate the following as my
     beneficiary(ies) to receive all payments and shares due me under the Stock
     Purchase Plan:

<TABLE>
<CAPTION>
<S>   <C>
NAME (Please print):
                     ----------------------------------------------------------------------------------------
                     (First)                                (Middle)                                   (Last)

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

NAME (Please print):
                     ----------------------------------------------------------------------------------------
                     (First)                                (Middle)                                   (Last)

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

NAME (Please print):
                     ----------------------------------------------------------------------------------------
                     (First)                                (Middle)                                   (Last)

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

Employee's Social Security Number:
                                   --------------------------------------------------------------------------

Employee's Address:
                            ---------------------------------------------------------------------------------

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

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

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

Dated:
       ----------------------------    ----------------------------------------------------------------------
                                       Signature of Employee
</TABLE>

<PAGE>

                                    EXHIBIT B
                                    ---------

                         MERCURY INTERACTIVE CORPORATION

                        1998 EMPLOYEE STOCK PURCHASE PLAN

                              NOTICE OF WITHDRAWAL

     The undersigned participant in the Offering Period of the Mercury
Interactive Corporation 1998 Employee Stock Purchase Plan which began on
           , 200  (the "Offering Date") hereby notifies the Company that he or
-------- --     -
she hereby withdraws from the Offering Period. He or she hereby directs the
Company to pay to the undersigned as promptly as possible all the payroll
deductions credited to his or her account with respect to such Offering Period.
The undersigned understands and agrees that his or her remaining option or
options for such Offering Period will be automatically terminated. The
undersigned understands further that no further payroll deductions will be made
for the purchase of shares in the current Offering Period and the undersigned
shall be eligible to participate in succeeding Offering Periods only by
delivering to the Company a new Subscription Agreement.

                                      Name and Address of Participant

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

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

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

                                      Signature

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

                                      Date:
                                            ------------------------------------

<PAGE>

                                    EXHIBIT C
                                    ---------

                         MERCURY INTERACTIVE CORPORATION

                        1998 EMPLOYEE STOCK PURCHASE PLAN

                       NOTICE OF SALE OR OTHER DISPOSITION

To:  Mercury Interactive Corporation

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

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

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

     Attn:
           --------------------------------

     This notice is to inform the Company of sales or other dispositions of
stock acquired under the 1998 Employee Stock Purchase Plan, so that the Company
can fulfill its tax reporting obligations. This form must be completed and
submitted to the Company whenever you sell stock acquired under the Plan, even
if you no longer are employed by the Company. If you need assistance in
completing this form, contact the Human Resources Department.

1.  Employee Name:
                   -------------------------------------------------------------

2.  Number of Shares Sold or Disposed of:
                                          --------------------------------------

3.  Date(s) these Shares were purchased under the Plan:
                                                        ------------------------

4.  Date of Sale or other Disposition:
                                       -----------------------------------------

5.  Type of Disposition:  Sale     Gift     Other (describe)
                               --       --                   --

6.  Stock Price per Share at Sale or Disposition: $
                                                   -----------------------------

7.  Amount Received on Sale or Disposition: $
                                             -----------------------------------

                                      ------------------------------------------
                                                   Employee Signature

<PAGE>

                                APPENDIX I TO THE
                                -----------------
                        1998 EMPLOYEE STOCK PURCHASE PLAN
                        ---------------------------------

                            "Designated Subsidiaries"
                            -------------------------
                     Of Mercury Interactive Corporation as
                     -------------------------------------
                 Approved by the Board as of November 6, 2001:
                 ---------------------------------------------

Mercury Interactive (Australia) Pty Ltd., organized under laws of Australia

Mercury Interactive Canada Inc., organized under the laws of Canada

Mercury Interactive Aps, organized under the laws of Denmark

Mercury Interactive Oy, organized under the laws of Finland

Mercury Interactive France SARL, organized under the laws of France

Mercury Interactive Germany GmbH, organized under the laws of Germany

Mercury Interactive (Hong Kong) Limited, organized under the laws of Hong Kong

Mercury Interactive (Israel) Limited, organized under the laws of Israel

Mercury Interactive Srl, organized under the laws of Italy

Mercury Interactive Japan K.K., organized under the laws of Japan

Mercury Interactive (Korea) Co. Ltd., organized under the laws of Korea

Mercury Interactive B.V., organized under the laws of the Netherlands

Mercury Interactive (Europe) B.V., organized under the laws of the Netherlands

Mercury Interactive (Singapore) Pte Ltd., organized under the laws of Singapore

Mercury Interactive SA (Pty) Ltd., organized under the laws of South Africa

Mercury Interactive Spain, organized under the laws of Spain

Mercury Interactive Nordic AB, organized under the laws of Sweden

Mercury Interactive Switzerland, organized under the laws of Switzerland

Mercury Interactive (UK) Limited, organized under the laws of the United Kingdom

Freshwater Software, Inc., incorporated under the laws of California

<PAGE>

               Amendments to the Mercury Interactive Corporation
                       1998 Employee Stock Purchase Plan
           (as approved by the Board of Directors on February 8, 2001)

     Effective as of February 8, 2001, the Board of Directors of Mercury
Interactive Corporation approved the following amendment to paragraph 5(a) of
the 1998 Employee Stock Purchase Plan:

     RESOLVED: That employees of this Corporation shall be allowed to file a
     --------
     completed subscription agreement with the Company on or before one business
     day prior to the applicable Offering Date.

<PAGE>

                Amendments to the Mercury Interactive Corporation
                       1998 Employee Stock Purchase Plan
            (as approved by the Board of Directors on July 31, 2001)

     Effective as of July 31, 2001, the Board of Directors of Mercury
Interactive Corporation approved the following amendments to the 1998 Employee
Stock Purchase Plan (the "Plan"), in order to change the Offering Periods from 6
months to 24 months as permitted by Section 4 of the Plan:

Paragraph 2. Definitions. The following sub-paragraphs of Section 2 are hereby
             -----------
amended and replaced in their entirety with the following:

     "(h) "Exercise Date" means the date one day prior to the date 6 months, 12
           -------------
months, 18 months or 24 months after the Offering Date on each Offering Period."

     "(j) "Offering Period" means a period of 24 months consisting of four
           ---------------
6-month Exercise Periods during which options granted pursuant to the Plan may
be exercised."

The following definition is hereby inserted as sub-paragraph (n) of Section 2:

     "(n) "Exercise Period" means a period commencing on an Offering Date on the
           ---------------
day after an Exercise Date and terminating one day prior to the date 6 months
later."

Paragraph 4. Offering Periods. Paragraph 4 is hereby amended and replaced in its
             ----------------
entirety with the following:

          "4. Offering Periods. The Plan shall be implemented by overlapping
              ----------------
     24-month Offering Periods with a new Offering Period commencing on February
     16 and August 16 of each year. The Plan shall continue thereafter until
     terminated in accordance with Section 20 hereof. Subject to the
     requirements of Section 19, the Board shall have the power to change the
     duration of Offering Periods with respect to future offerings without
     stockholder approval if such change is announced at least 10 days prior to
     the scheduled beginning of the first Offering Period to be affected. In the
     event that the fair market value of the Company's Common Stock is lower on
     an Exercise Date than it was on the first Offering Date for that Offering
     Period, all Employees participating in the Plan on the Exercise Date shall
     be deemed to have withdrawn from the Offering Period immediately after the
     exercise of their option on such Exercise Date and to have enrolled as
     participants in a new Offering Period which begins on or about the day
     following such Exercise Date. For these purposes, the automatic transfer to
     a "Low Price Offering Period" described above shall not be a change in the
     duration of the Offering Period."

Paragraph 9. Delivery. Paragraph 9 is hereby amended and replaced in its
             --------
entirety with the following:

          "9. Delivery. As promptly as practicable after the Exercise Date, the
              --------
     Company shall arrange the delivery to each participant, as appropriate, of
     a certificate representing the shares purchased upon exercise of his or her
     option. Any cash remaining to the credit of a participant's account under
     the Plan after a purchase by him or her of shares at the termination of
     each Exercise Period which is insufficient to purchase a full share of
     Common Stock of the Company shall be applied to the participant's account
     for the next Exercise Period."

<PAGE>

                Amendments to the Mercury Interactive Corporation
                       1998 Employee Stock Purchase Plan
          (as approved by the Board of Directors on February 12, 2002)

     RESOLVED: That the reservation of an additional 500,000 shares of the
     --------
     Corporation's Common Stock for issuance under this Corporation's 1998
     Employee Stock Purchase Plan is hereby approved.

     RESOLVED FURTHER: That the officers of this Corporation are authorized to
     ----------------
     take such actions and execute such documents, within the scope of the
     foregoing resolutions, as are reasonable and necessary to carry out the
     intent and accomplish the purposes of these resolutions.

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