Document:

<PAGE>

                                                                    Exhibit 10.6

                                LOUDCLOUD, INC.

                Amended and Restated Investor Rights Agreement

                                 June 23, 2000
<PAGE>

                               TABLE OF CONTENTS
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SECTION 1.    GENERAL.........................................................   1

       1.1    Definitions.....................................................   1

SECTION 2.    REGISTRATION; RESTRICTIONS ON TRANSFER..........................   3

       2.1    Restrictions on Transfer........................................   3
       2.2    This Section 2.2 is intentionally left blank....................   4
       2.3    Piggyback Registrations.........................................   4
       2.4    Form S-3 Registration...........................................   5
       2.5    Expenses of Registration........................................   6
       2.6    Obligations of the Company......................................   7
       2.7    Termination of Registration Rights..............................   8
       2.8    Delay of Registration; Furnishing Information...................   8
       2.9    Indemnification.................................................   8
       2.10   Assignment of Registration Rights...............................  11
       2.11   Amendment of Registration Rights................................  11
       2.12   Limitation on Subsequent Registration Rights....................  11
       2.13   "Market Stand-Off" Agreement; Agreement to Furnish Information..  12
       2.14   Rule 144 Reporting..............................................  12

SECTION 3.    COVENANTS OF THE COMPANY                                          13

       3.1    Basic Financial Information and Reporting.......................  13
       3.2    Inspection Rights...............................................  14
       3.3    Confidentiality of Records......................................  14
       3.4    Reservation of Common Stock.....................................  14
       3.5    Proprietary Information and Inventions Agreement................  14
       3.6    Corporate Governance............................................  14
       3.7    Section 1202 Compliance.........................................  14
       3.8    Termination of Covenants........................................  16
       3.9    Directors and Officers Indemnification..........................  16

SECTION 4.    RIGHTS OF PARTICIPATION                                           17

       4.1    Subsequent Offerings............................................  17
       4.2    Exercise of Rights..............................................  17
       4.3    Issuance of Equity Securities to Other Persons..................  17
       4.4    Termination of Rights of Participation..........................  18
       4.5    Transfer of Rights of Participation.............................  18
       4.6    Excluded Securities.............................................  18

SECTION 5.    MISCELLANEOUS...................................................  19

       5.1    Governing Law...................................................  19
       5.2    Survival........................................................  19

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                               TABLE OF CONTENTS
                                  (continued)
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       5.3  Successors and Assigns..........................................  19
       5.4  Entire Agreement................................................  19
       5.5  Amendment and Waiver............................................  19
       5.6  Notices, Etc....................................................  20
       5.7  Delays or Omissions.............................................  20
       5.8  Counterparts....................................................  20
       5.9  Severability....................................................  20
      5.10  Aggregation of Stock............................................  20
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                                     -ii-
<PAGE>

                                LOUDCLOUD, INC.

                           INVESTOR RIGHTS AGREEMENT

     This Amended and Restated Investor Rights Agreement (the "Agreement") is
entered into as of the 23rd day of June, 2000, by and among Loudcloud, Inc., a
Delaware corporation (the "Company"), the investors set forth on Exhibit A
hereto (collectively the "Investors" and each individually as an "Investor")
and, with respect to Section 2 only, certain existing stockholders of the
Company set forth on Exhibit B hereto (collectively the "Founders" and each
individually a "Founder").

                                   RECITALS

     WHEREAS, certain investors possess information rights, rights of first
offer and registration rights granted under that certain Amended and Restated
Investor Rights Agreement dated as of November 24, 1999 (the "Prior Agreement")
between the Company, the Investors named therein (the "Prior Holders") and the
Founders;

     WHEREAS, the Company desires certain persons to purchase shares of the
Company's Series C Preferred Stock pursuant to that certain Series C Preferred
Stock Purchase Agreement (the "Series C Agreement") of even date herewith;

     WHEREAS, the Prior Holders and the Founders desire to amend and restate the
Prior Agreement and to accept the rights created herein in lieu of rights
provided by the Prior Agreement.

     NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the Company,
the Prior Holders and the Founders agree that the Prior Agreement is terminated
and superseded in its entirety by this Agreement, and all parties hereto further
agree as follows:

SECTION 1.  GENERAL

     1.1  Definitions. As used in this Agreement the following terms shall have
the following respective meanings:

          "Exchange Act" means the Securities Exchange Act of 1934, as amended.

          "Form S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.

          "Holder" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
<PAGE>

          "Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act, which is either the subject of a firm underwriting commitment or an on-line
offering pursuant to the Dutch-auction process.

          "Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.

          "Registrable Securities" means (a) Common Stock of the Company issued
or issuable upon conversion of the Shares; (b) Common Stock of the Company
issued or issuable upon conversion of shares held by the Founders and their
permitted assigns and (c) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, such above-described securities.  Notwithstanding the
foregoing, Registrable Securities shall not include any securities sold by a
person to the public pursuant to a registration statement or Rule 144 or sold in
a private transaction in which the transferor's rights under Section 2 of this
Agreement are not assigned.

          "Registrable Securities then outstanding" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.

          "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed twenty-five thousand dollars ($25,000) of a single special counsel for
the Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).

          "SEC" or "Commission" means the United States Securities and Exchange
Commission.

          "Securities Act" shall mean the Securities Act of 1933, as amended.

          "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.

          "Shares" shall mean the Company's Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock held by the Investors listed on
Exhibit A hereto and their permitted assigns.

                                      -2-

<PAGE>

SECTION 2.  REGISTRATION; RESTRICTIONS ON TRANSFER

       2.1  Restrictions on Transfer

            (a)  Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:

                 (i)    There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or

                 (ii)   (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 under the Securities Act
except in unusual circumstances.

                 (iii)  Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder to its affiliates or by a Holder which is
(A) a partnership to an affiliated partnership or to its partners or former
partners in accordance with partnership interests, (B) a corporation to its
stockholders in accordance with their interest in the corporation, (C) a limited
liability company to its members or former members in accordance with their
interest in the limited liability company, or (D) to the Holder's family member
or trust for the benefit of an individual Holder; provided that in each case the
transferee will be subject to the terms of this Agreement to the same extent as
if he were an original Holder hereunder.

            (b)  Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):

            THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
            SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
            OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
            UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
            OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
            SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
            144 OF THE ACT.

                                      -3-
<PAGE>

          THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN RESTRICTIONS
          ON TRANSFER INCLUDING A 180-DAY LOCKUP IN CONNECTION WITH AN INITIAL
          PUBLIC OFFERING AS SET FORTH IN THE INVESTOR RIGHTS AGREEMENT BETWEEN
          THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
          MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.  SUCH TRANSFER
          RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.

          (c)  The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend. It is agreed that the Company will not require opinions
of counsel for transactions made pursuant to Rule 144 under the Securities Act
except in unusual circumstances.

          (d)  Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.

     2.2  This Section 2.2 is intentionally left blank.

     2.3  Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or debt securities or with respect to corporate reorganizations or other
transactions under Rule 145 of the Securities Act) and will afford each such
Holder an opportunity to include in such registration statement all or part of
such Registrable Securities held by such Holder. Each Holder desiring to include
in any such registration statement all or any part of the Registrable Securities
held by it shall, within fifteen (15) days after the above-described notice from
the Company, so notify the Company in writing. Such notice shall state the
intended method of disposition of the Registrable Securities by such Holder. If
a Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.

          (a)  Underwriting. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such

                                      -4-
<PAGE>

underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of the Agreement, if the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that may be included
in the underwriting shall be allocated, first, to the Company; second, to the
Holders of the Registrable Securities issued or issuable upon conversion of the
Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock; and third, to the Holders of the remaining Registrable
Securities. Within each of the foregoing first, second and third tranche, the
allocation shall be on a pro rata basis based on the total number of Registrable
Securities in such tranche held by such Holders. No such reduction shall reduce
the amount of securities of the selling Holders included in the registration
below thirty percent (30%) of the total amount of securities included in such
registration, unless such offering is the Initial Offering and such registration
does not include shares of any other selling stockholders, in which event any or
all of the Registrable Securities of the Holders may be excluded in accordance
with the immediately preceding sentence and provided that the underwriter may,
at its sole discretion, limit the amount that may be offered by a Founder who is
also an officer or director of the Company at the time. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration. For any
Holder which is a partnership or corporation, the partners, retired partners and
stockholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing person shall be deemed to be a single "Holder", and any pro rata
reduction with respect to such "Holder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "Holder," as defined in this sentence.

          (b)  Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 2.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration Expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 2.5 hereof.

     2.4  Form S-3 Registration. Subject to the conditions of this Section 2.4,
if the Company shall receive a written request from the Investors holding at
least 15% of the Registrable Securities then outstanding and held by the
Investors and their permitted assigns that the Company effect a registration on
Form S-3 (or any successor to Form S-3) or any similar short-form registration
statement and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:

          (a)  promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and

                                      -5-
<PAGE>

          (b)  as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or
Holders, joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:

               (i)    if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders;

               (ii)   if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than one million dollars ($1,000,000);

               (iii)  during the period starting with the date of filing of, and
ending on the date one hundred eighty (180) days following the effective date of
the registration statement pertaining to a public offering; provided that the
Company makes reasonable good efforts to cause such registration statement to
become effective;

               (iv)   if within thirty (30) days of receipt of a written request
from Initiating Holders pursuant to Section 2.2(a), the Company gives notice to
the Holders of the Company's intention to make a public offering within ninety
(90) days; or

               (v)    if the Company shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors or President of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 2.4; provided, that such
right to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period.

          (c)  Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as registrations effected pursuant to Section
2.3.

     2.5  Expenses of Registration. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration under Section
2.3 or the first three (3) registrations under Section 2.4 herein shall be borne
by the Company. All Selling Expenses incurred in connection with any
registrations hereunder, shall be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered.

                                      -6-
<PAGE>

     2.6  Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:

          (a)  Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders holding a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to ninety (90) days or, if
earlier, until the Holder or Holders have completed the distribution related
thereto. The Company shall not be required to file, cause to become effective or
maintain the effectiveness of any registration statement that contemplates a
distribution of securities on a delayed or continuous basis pursuant to Rule 415
under the Securities Act.

          (b)  Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.

          (c)  Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.

          (d)  Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.

          (e)  In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

          (f)  Notify each Holder holding Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.

          (g)  Use its reasonable efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an

                                      -7-
<PAGE>

underwritten public offering, addressed to the underwriters, if any, and (ii) a
letter dated as of such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering
addressed to the underwriters.

     2.7  Termination of Registration Rights. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect five
(5) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire six months after the Company has
completed its Initial Offering and is subject to the provisions of the Exchange
Act if (a) such Holder (together with its affiliates, partners and former
partners) holds less than 5% of the Company's outstanding Common Stock (treating
all share of convertible Preferred Stock on an as converted basis) and (b) all
Registrable Securities held by and issuable to such Holder (and its affiliates,
partners, former partners, members and former members) may be sold under Rule
144 during any ninety (90) day period.

     2.8  Delay of Registration; Furnishing Information.

          (a)  No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.

          (b)  It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.

          (c)  The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.4 if the number of shares or the
anticipated aggregate offering price of the Registrable Securities to be
included in the registration does not equal or exceed the number of shares or
the anticipated aggregate offering price required to originally trigger the
Company's obligation to initiate such registration as specified in Section 2.4,
whichever is applicable.

     2.9  Indemnification. In the event any Registrable Securities are included
in a registration statement under Sections 2.3 or 2.4:

          (a)  To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or

                                      -8-
<PAGE>

alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law in connection with the
offering covered by such registration statement; and the Company will pay as
incurred to each such Holder, partner, officer, director, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement contained in
this Section 2.9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company, which consent shall not be unreasonably withheld,
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or controlling person of
such Holder, provided further, however, that the foregoing indemnity agreement
with respect to any preliminary prospectus shall not inure to the benefit of any
Holder or underwriter, or any person controlling such Holder or underwriter,
from whom the persons asserting any such losses, claims, damages or liabilities
purchased shares in the offering, if a copy of the prospectus provided to such
Holder or such underwriter (or such person controlling such Holder or such
underwriter) by the Company (as then amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) was not sent or
given by or on behalf of such Holder or underwriter to such person, if required
by law so to have been delivered, at or prior to the written confirmation of the
sale of the shares to such person, and if the prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage or liability.

          (b)  To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers and each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, or partner,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of

                                      -9-
<PAGE>

such other Holder in connection with investigating or defending any such loss,
claim, damage, liability or action if it is judicially determined that there was
such a Violation; provided, however, that the indemnity agreement contained in
this Section 2.9(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall the amounts payable in indemnity by a
Holder under this Section 2.9 (b) in respect of a Violation exceed the net
proceeds received by such Holder in the registered offering out of which such
Violation arises.

          (c)  Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.

          (d)  If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall the amounts payable in
indemnity by a Holder under Section 2.9 (b) and/or pursuant to this Section
2.9(d) in respect of a Violation exceed the net proceeds received by such Holder
in the registered offering out of which such Violation arises.

                                     -10-
<PAGE>

           (e)  Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.

           (f)  The obligations of the Company and Holders under this Section
2.9 shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.

     2.10  Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (a) is an
affiliate, affiliated partnership, subsidiary, parent, general partner, limited
partner, retired partner, member or retired member of a Holder, (b) is a
Holder's family member or trust for the benefit of an individual Holder, or (c)
acquires at least nine hundred thousand (900,000) shares of the Company's
outstanding Common Stock (on an as-converted basis and as adjusted for
recapitalizations, stock splits, stock dividends and the like); provided,
however, (i) the transferor shall, within ten (10) days after such transfer,
furnish to the Company written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration rights
are being assigned and (ii) such transferee shall agree to be subject to all
restrictions set forth in this Agreement.

     2.11  Amendment of Registration Rights. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of (i) the Company, (ii) Investors holding at least a majority
of the Registrable Securities held by the Investors then outstanding and (iii)
Investors holding at least a majority of the Registrable Securities issued or
issuable upon conversion of the Series B and Series C Preferred Stock. Any
amendment or waiver effected in accordance with this Section 2.11 shall be
binding upon each Holder and the Company. By acceptance of any benefits under
this Section 2, Holders of Registrable Securities hereby agree to be bound by
the provisions hereunder.

     2.12  Limitation on Subsequent Registration Rights. After the date of this
Agreement, the Company shall not, without the prior written consent of (i)
Investors holding a majority of the Registrable Securities held by the Investors
and then outstanding and (ii) Investors holding at least a majority of the
Registrable Securities issued or issuable upon conversion of the Series B and
Series C Preferred Stock, enter into any agreement with any holder or
prospective holder of any securities of the Company that would allow such holder
or prospective holder (a) to include such securities in any registration filed
under this Section 2 hereof, unless under the terms of such agreement, such
holder or prospective holder may include such securities in any such
registration only to the extent

                                     -11-
<PAGE>

that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included, or (b) to make a demand
registration to the Company.

     2.13  "Market Stand-Off" Agreement; Agreement to Furnish Information. Each
Holder hereby agrees that such Holder shall not sell, transfer, make any short
sale of, grant any option for the purchase of, or enter into any hedging or
similar transaction with the same economic effect as a sale, any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act; provided
that:

     (i)    such agreement shall apply only to the Company's Initial Offering;

     (ii)   such agreement shall not apply to any shares of Common Stock (or
other securities) purchased in the Initial Offering or purchased in the open
market following the Initial Offering; and

     (iii)  all officers and directors of the Company who hold capital stock or
rights to acquire capital stock of the Company and greater than five percent
(5%) stockholders of the Company enter into similar agreements.

     Each Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter which are consistent with
the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or the representative of the underwriters
of Common Stock (or other securities) of the Company, each Holder shall provide,
within ten (10) days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering of the Company's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in this Section 2.13 shall
not apply to a registration relating solely to employee benefit plans on Form S-
1 or Form S-8 or similar forms that may be promulgated in the future, or a
registration relating solely to a Commission Rule 145 transaction on Form S-4 or
similar forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.

     2.14  Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:

           (a)  Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;

                                     -12-
<PAGE>

          (b)  File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and

          (c)  So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.

SECTION 3.  COVENANTS OF THE COMPANY.

     3.1  Basic Financial Information and Reporting. The Company will maintain
true books and records of account in which full and correct entries will be made
of all its business transactions pursuant to a system of accounting established
and administered in accordance with generally accepted accounting principles
consistently applied, and will set aside on its books all such proper accruals
and reserves as shall be required under generally accepted accounting principles
consistently applied.

          (a)  As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred twenty (120) days thereafter, the
Company will furnish each Investor holding at least nine hundred thousand
(900,000) shares of Registrable Securities (as adjusted for recapitalizations,
stock splits, stock dividends and the like) (each, a "Major Investor") an
audited balance sheet of the Company, as at the end of such fiscal year, and an
audited statement of income and a statement of cash flows of the Company, for
such year, all prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail. Such
financial statements shall be accompanied by a report and opinion thereon by
independent public accountants of national standing selected by the Company's
Board of Directors.

          (b)  The Company will furnish each Major Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within sixty (60)
days thereafter, a balance sheet of the Company as of the end of each such
quarterly period, and a statement of income and a statement of cash flows of the
Company for such period and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles, with the exception
that no notes need be attached to such statements and year-end audit adjustments
may not have been made.

          (c)  The Company will furnish each Investor holding at least one
million one hundred thousand (1,100,000) shares of Registrable Securities (as
adjusted for recapitalizations, stock splits, stock dividends and the like) (i)
at least thirty (30) days prior to the beginning of each fiscal year an annual
budget and operating plans for such fiscal year (and as soon as available, any
subsequent revisions thereto); and (ii) as soon as practicable after the end of
each month, and in any

                                     -13-
<PAGE>

event within thirty (30) days thereafter, a balance sheet of the Company as of
the end of each such month, and a statement of income and a statement of cash
flows of the Company for such month and for the current fiscal year to date,
including a comparison to plan figures for such period, prepared in accordance
with generally accepted accounting principles consistently applied, with the
exception that no notes need be attached to such statements and year-end audit
adjustments may not have been made.

     3.2  Inspection Rights. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.

     3.3  Confidentiality of Records. Each Investor agrees to use, and to use
its reasonable commercial efforts to insure that its authorized representatives
use, the same degree of care as such Investor uses to protect its own
confidential information to keep confidential any information furnished to it
which the Company identifies as being confidential or proprietary (so long as
such information is not in the public domain), except that such Investor may
disclose such proprietary or confidential information to any partner, subsidiary
or parent of such Investor for the purpose of evaluating its investment in the
Company as long as such partner, subsidiary or parent is advised of the
confidentiality provisions of this Section 3.3.

     3.4  Reservation of Common Stock. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.

     3.5  Proprietary Information and Inventions Agreement. The Company shall
require all employees and consultants to execute and deliver the Company's
standard form of Proprietary Information and Inventions Agreement, the current
form of which has been provided to counsel for the Investors.

     3.6  Corporate Governance. As provided by applicable corporate law, the
Board of Directors will have oversight responsibilities for corporate governance
of the Company, including strategic direction, review of annual strategic plans
and budget, and executive compensation.

     3.7  Section 1202 Compliance. The Company shall:

          (a)  comply with the reporting and record keeping requirements, if
any, of Section 1202 of the Internal Revenue Code of 1986, as amended (the
"Code"), and any regulations promulgated thereunder; and

                                     -14-
<PAGE>

          (b)  not take any action that would cause the Series B Preferred Stock
(or the Common Stock issuable upon conversion thereof) to lose its status as
"qualified small business stock" within the meaning of the Code, including,
without limitation, taking any of the following actions:

               (i)    purchasing, within the two-year period beginning one year
prior to the date of issuance of any Company stock to Investors, an amount of
its own stock (within the meaning of Section 1202(c)(3) of the Code) having an
aggregate value at the time(s) of purchase exceeding five percent (5%) of the
aggregate value of all of its outstanding stock determined as of the start of
such period, except as permitted in Treasury Regulation Section 1.1202-2(b) and
(d) with respect to certain events (including termination of services, death,
disability, mental incompetency or divorce);

               (ii)   conducting any of the following businesses (as defined for
purposes of Section 1202(e)(3) of the Code):

     A.  any business involving the performance of services in the fields of
         law, accounting, actuarial science, performing arts, athletics or
         brokerage services;

     B.  any banking or insurance business;

     C.  any farming business (including the business of raising or harvesting
         trees);

     D.  any business involving the production or extraction of natural
         resources with respect to which a deduction is allowable under Section
         613 or 613A of the Code; or

     E.  any business of operating a hotel, motel, restaurant or similar
         establishment;

               (iii)  permitting more than ten percent (10%) of the value of its
assets to consist of stock issued by other companies (other than stock of
companies that qualify as subsidiaries of the Company within the meaning of
Section 1202(e)(5) of the Code or stock that is held as working capital or
reasonably expected to be sold within two years to finance research and
experimentation within the meaning of Section 1202(e)(6) of the Code);

               (iv)   permitting more than ten percent (10%) of the value of its
assets to consist of real property that is not used in the active conduct of a
qualified trade or business within the meaning of Sections 1202(e)(3), and
1202(e)(7) of the Code;

               (v)    making an election under Section 936 of the Code (relating
to the Puerto Rico and possessions tax credit) or permitting a subsidiary to
make such an election; or

               (vi)   in a single transaction or series of related transactions,
raising capital through the issuance of securities or the incurrence of
indebtedness if such transaction or series of related transactions would cause
the Company to fail to satisfy the active business requirement set forth in
Section 1202(e)(1) of the Code by virtue of holding excess cash or investment
assets.

                                     -15-
<PAGE>

     Notwithstanding anything to the contrary in this Section 3.7, the Company
shall not be obligated to take any action or refrain from taking any action
which the Company has determined, in good faith, is not in its best business
interests.

     For purposes of the foregoing, any valuation or other determination
(including, without limitation, a determination that a specific course of action
does not constitute that conduct of a business described in Section 3.7(b)(ii)
above) made by the Company's Board of Directors in good faith or for which there
was, at the time made, a reasonable basis in law or fact shall be conclusive.

     3.8   Termination of Covenants. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor upon
the earlier of (i) the effective date of the registration statement pertaining
to a firmly underwritten public offering of shares of Common Stock for a total
offering of not less than $40 million (before deduction of underwriters
commissions and expenses) (a "Qualified Offering") and (ii) upon (A) the
acquisition of the Company by another entity by means of any transaction or
series of related transactions (including, without limitation, any
reorganization, merger or consolidation) that results in the transfer of fifty
percent (50%) or more of the outstanding voting power of the Company or (B) a
sale of all or substantially all of the assets of the Company (a "Change in
Control").

     3.9   Directors and Officers Indemnification. The Company represents that
it has provisions in its certificate of incorporation or bylaws for the
indemnification of officers and directors to the full extent permitted by law
and covenants to keep such indemnification in place for so long as any
representative(s) of the holders of the Shares serves on the Company's Board of
Directors.

     3.10  Board of Directors.  The Company, the Investors and the Founders
hereby agree as follows with respect to the Company's Board of Directors:

           (a)  At the Closing (as such term is defined in the Series C
Agreement), the size of the Company's Board of Directors shall be set at five
(5) directors.

           (b)  With respect to the members of the Company's Board of Directors
that the Company's Restated Certificate of Incorporation provides are to be
elected by the holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Common Stock (voting together as a single class,
and not as separate series, and on an as-converted basis) (the "Combined Board
Members"), the Investors and the Founders hereby agree to vote all of their
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Common Stock now owned or hereafter acquired in favor of the election
of only such persons as shall be (i) designated by the holders of at least a
majority of the Common Stock (voting as a separate class), (ii) designated by
the holders of at least a majority of the Series A Preferred Stock (voting as a
separate class), and (iii) designated by the holders of at least a majority of
the Series B Preferred Stock and Series C Preferred Stock (voting together).

                                     -16-
<PAGE>

          (c)  It is agreed and understood that monetary damages would not
adequately compensate an injured party for the breach of this Section 3.10 by
any other party, that this Section 3.10 shall be specifically enforceable, and
that any breach or threatened breach of this Section 3.10 shall be the proper
subject of a temporary or permanent injunction or restraining order.  Further,
each party hereto waives any claim or defense that there is an adequate remedy
at law for such breach or threatened breach.

SECTION 4.  RIGHTS OF PARTICIPATION.

     4.1  Subsequent Offerings. Except as set forth on Exhibit A, each Major
Investor who is an "accredited investor" within the meaning of Rule 501(a) of
the Securities Act shall have a right of participation to purchase its pro rata
share of all Equity Securities, as defined below, that the Company may, from
time to time, propose to sell and issue after the date of this Agreement, other
than the Equity Securities excluded by Section 4.6 hereof. Each Major Investor's
pro rata share is equal to the ratio of (a) the number of shares of the
Company's Common Stock (including all shares of Common Stock issued or issuable
upon conversion of the Shares) which such Major Investor is deemed to be a
holder immediately prior to the issuance of such Equity Securities to (b) the
total number of shares of the Company's outstanding Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares or upon
the exercise of any outstanding warrants or options) immediately prior to the
issuance of the Equity Securities. The term "Equity Securities" shall mean (i)
any Common Stock, Preferred Stock or other security of the Company, (ii) any
security convertible, with or without consideration, into any Common Stock,
Preferred Stock or other security (including any option to purchase such a
convertible security), (iii) any security carrying any warrant or right to
subscribe to or purchase any Common Stock, Preferred Stock or other security or
(iv) any such warrant or right.

     4.2  Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give each Major Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Major Investor shall have
fifteen (15) days from the giving of such notice to agree to purchase its pro
rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Major Investor who would cause the Company to
be in violation of applicable federal securities laws by virtue of such offer or
sale.

     4.3  Issuance of Equity Securities to Other Persons. If not all of the
Major Investors elect to purchase their pro rata share of the Equity Securities,
then the Company shall promptly notify in writing the Major Investors who do so
elect and shall offer such Major Investors the right to acquire such
unsubscribed shares. The Major Investors shall have five (5) days after receipt
of such notice to notify the Company of its election to purchase all or a
portion thereof of the unsubscribed shares. If the Major Investors fail to
exercise in full the rights of first refusal, the Company shall have ninety (90)
days thereafter to sell the Equity Securities in respect of which the Major
Investor's

                                     -17-
<PAGE>

rights were not exercised, at a price and upon general terms and conditions
materially no more favorable to the purchasers thereof than specified in the
Company's notice to the Major Investors pursuant to Section 4.2 hereof. If the
Company has not sold such Equity Securities within ninety (90) days of the
notice provided pursuant to Section 4.2, the Company shall not thereafter issue
or sell any Equity Securities, without first offering such securities to the
Investors in the manner provided above.

     4.4  Termination of Rights of Participation. The rights of participation
established by this Section 4 shall not apply to, and shall terminate upon the
earlier of (i) effective date of the registration statement pertaining to the
Company's Qualified Offering and (ii) a Change in Control.

     4.5  Transfer of Rights of Participation. The rights of participation of
each Investor holding rights under this Section 4 may be transferred subject to
the same restrictions as any transfer of registration rights pursuant to Section
2.10.

     4.6  Excluded Securities. The rights of participation established by this
Section 4 shall have no application to any of the following Equity Securities:

          (a)  any Equity Securities issued or to be issued to employees,
officers or directors of, or consultants or advisors to the Company or any
subsidiary, pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board of Directors;

          (b)  any Equity Securities issued pursuant to any rights, agreements,
options and warrants outstanding or issued as of the date of this Agreement; and
any Equity Securities issued pursuant to any rights, agreements, options or
warrants granted after the date of this Agreement; provided that either the
rights of participation established by this Section 4 applied with respect to
the initial sale or grant by the Company of such rights, agreements, options or
warrants or such rights, agreements, options or warrants constituted Excluded
Securities pursuant to this Section 4.6 at the time of issuance;

          (c)  any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination;

          (d)  any Equity Securities issued in connection with any stock split,
stock dividend or recapitalization by the Company;

          (e)  shares of Common Stock issued upon conversion of the Shares;

          (f)  any Equity Securities issued pursuant to any equipment leasing
arrangement, or commercial credit arrangement from a bank or similar financial
institution and such issuances are primarily for other than non-equity financing
purposes;

          (g)  any Equity Securities that are issued by the Company pursuant to
a registration statement filed under the Securities Act; and

                                     -18-
<PAGE>

          (h)  any Equity Securities issued in connection with strategic
transactions that include a commercial relationship involving the Company and
other entities, including (i) joint ventures, manufacturing, marketing or
distribution arrangements or (ii) technology transfer or development
arrangements; provided that such strategic transactions and the issuance of
Equity Securities pursuant thereto has been approved by the Company's Board of
Directors.

SECTION 5.  MISCELLANEOUS.

     5.1  Governing Law. This Agreement shall be governed in all respects by the
laws of the State of California as applied to agreements entered into and
performed entirely in the State of California by residents thereof, without
regard to any provisions thereof relating to conflicts of laws among different
jurisdictions.

     5.2  Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Investor and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.

     5.3  Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon the
successors, assigns, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of Registrable Securities from time to time: provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes, including the payment of dividends or any redemption price.

     5.4  Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement among
the parties with regard to the subjects hereof and thereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and therein.

     5.5  Amendment and Waiver. This Agreement and any term hereof may be
amended, and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of (i) the Company, (ii) holders
of a majority of the Registrable Securities then outstanding and not sold to the
public held by the Investors provided, however, that with respect to Section 2
only, the written consent of the Company and a majority of the Registrable
Securities then outstanding and not sold to the public held by the Investors and
the Founders as a group shall be required, and (iii) holders of a majority of
the Registrable Securities issued or issuable upon a conversion of Series B and
Series C Preferred Stock; provided, however, that in the event that such
amendment or waiver adversely affects the

                                     -19-
<PAGE>

obligation and/or rights of any such Holders in a different manner than the
other Holders, such amendment or waiver shall also require the written consent
of a majority in the interest of such Holders adversely affected. Any amendment
or waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities, each future holder of all such Registrable
Securities, and the Company.

     5.6   Notices, Etc. Any notice, demand, offer, request or other
communication required or permitted to be given by either the Company or an
Investor pursuant to the terms of this Agreement shall be in writing and shall
be deemed effectively given the earlier of (i) when received, (ii) when
delivered personally, (iii) one (1) business day after being delivered by
facsimile (with receipt of appropriate confirmation), (iv) one (1) business day
after being deposited with an overnight courier service or (v) four (4) days
after being deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses provided to the Company (which the
Company agrees to disclose to the other parties upon request) or such other
address as a party may request by notifying the other in writing.

     5.7   Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Shares upon any breach or default
of the Company under this Agreement shall impair any such right, power or remedy
of such holder, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of any breach or default under this Agreement, or any
waiver on the part of any holder of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing or as provided in this Agreement.

     5.8   Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.

     5.9   Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.

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

                     [THIS SPACE INTENTIONALLY LEFT BLANK]

                                     -20-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.

COMPANY:

LOUDCLOUD, INC.

a Delaware corporation

/s/ Ben Horowitz
----------------------------------------
Signature of Authorized Signatory

Ben Horowitz, CEO
----------------------------------------
Print Name and Title

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]

<PAGE>

"FOUNDERS"

                              /s/ Marc L. Andreessen
                              -----------------------------------
                              Marc L. Andreessen

                              /s/ Benjamin A. Horowitz
                              -----------------------------------
                              Benjamin A. Horowitz

                              /s/ Timothy A. Howes
                              ------------------------------------
                              Timothy A. Howes

                              /s/ In Sik Rhee
                              ------------------------------------
                              In Sik Rhee

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]

<PAGE>

"INVESTORS"                                         ANDREESSEN 1996 LIVING TRUST

                                    /s/ Mark L. Andreessen
                                    -------------------------------------
                                    Signature of Authorized Signatory

                                    -------------------------------------
                                    Print Name and Title

                                    /s/ Charles J. Katz, Jr.
                                    -------------------------------------
                                    Katz Family Ventures, LLC

                                    /s/ Scott H. Dunlap
                                    --------------------------------------
                                    Scott Howard Dunlap

                                    /s/ Debra Ann Casados
                                    --------------------------------------
                                    Debra Ann Casados

                                    /s/ Michael I. Green
                                    --------------------------------------
                                    Michael I. Green

                                    /s/ Timothy A. Howes
                                    --------------------------------------
                                    Timothy Alan Howes

                                    /s/ Jason P. Rosenthal
                                    -------------------------------------
                                    Jason Philip Rosenthal

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE>

                                         COMPANY:

                                         LOUDCLOUD, INC.
                                         A Delaware Corporation

                                         _________________________________
                                         Signature of Authorized Signatory

                                         _________________________________
                                         Print Name and Title

                                         "INVESTORS"
                                         BENCHMARK CAPITAL
                                         PARTNERS IV, L.P.

                                         as nominee for
                                         Benchmark Capital Partners IV, L.P.
                                         Benchmark Founders' Fund IV, L.P.
                                         Benchmark Founders' Fund IV-A, L.P
                                         and related individuals

                                    By:  Benchmark Capital Management Co.
                                         IV, L.L.C.
                                         its general partner

                                    By:  /s/ Andrew S. Rachleff
                                         ---------------------------------------
                                         Managing Member

                                         FOUNDERS:

                                         _________________________________
                                         Marc Andreessen

                                         _________________________________
                                         Benjamin A. Horowitz

                                         _________________________________
                                         Timothy A. Howes

                                         _________________________________
                                         In Sik Rhee

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]

<PAGE>

"INVESTORS"                              CAPITAL RESEARCH AND
                                         MANAGEMENT COMPANY

                                         on behalf of

                                         The Growth Fund of America, Inc.

                                         /s/ [Illegible]^^
                                         ------------------------------
                                         Signature of Authorized Signatory

                                         ______________________________
                                         Print Name and Title

                                         CAPITAL RESEARCH AND
                                         MANAGEMENT COMPANY

                                         on behalf of

                                         The New Economy Fund

                                         /s/ [Illegible]^^
                                         ------------------------------
                                         Signature of Authorized Signatory

                                         ______________________________
                                         Print Name and Title

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]

<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

        LOUDCLOUD, INC.                       Emerging Technology Portfolio
                                              ----------------------------------
        A Delaware corporation                Print Name of Investor

                                              /s/ Gary Tanaka
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                                  Gary Tanaka, Attorney-in-fact
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

                AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                SIGNATURE PAGE
<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

        LOUDCLOUD, INC.                       Amerindo Internet Fund PLC
                                              ----------------------------------
        A Delaware corporation                Print Name of Investor

                                              /s/ Gary Tanaka
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                                  Gary Tanaka, Manager
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

                AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                SIGNATURE PAGE
<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

                                              Amerindo Technology
        LOUDCLOUD, INC.                        Growth Fund II Inc.
                                              ----------------------------------
        A Delaware corporation                Print Name of Investor

                                              /s/ Gary Tanaka
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                                  Gary Tanaka, Director
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

                AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                SIGNATURE PAGE

<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

        LOUDCLOUD, INC.                       Vertex Capital II LLC
                                              ----------------------------------
        A Delaware corporation                Print Name of Investor

                                              /s/ Matthew Fitzmaurice
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                                  Matthew Fitzmaurice, Manager
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

                AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                SIGNATURE PAGE

<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

        LOUDCLOUD, INC.                       Vertex Capital III LLC
                                              ----------------------------------
        A Delaware corporation                Print Name of Investor

                                              /s/ Matthew Fitzmaurice
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                                  Matthew Fitzmaurice, Manager
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

                AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                SIGNATURE PAGE

<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

        LOUDCLOUD, INC.                       James Stableford
                                              ----------------------------------
        A Delaware corporation                Print Name of Investor

                                              /s/ James Stableford
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                                  James Stableford
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

                AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                SIGNATURE PAGE

<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

        LOUDCLOUD, INC.                       Daniel F. Chapey
                                              ----------------------------------
        A Delaware corporation                Print Name of Investor

                                              /s/ Daniel F. Chapey
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                                  Daniel F. Chapey
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

                AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                SIGNATURE PAGE
<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

        LOUDCLOUD, INC.                       William F. Hartfiel
                                              ----------------------------------
        A Delaware corporation                Print Name of Investor

                                              /s/ William F. Hartfiel
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                                  William F. Hartfiel, III
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

                AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                SIGNATURE PAGE
<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

        LOUDCLOUD, INC.                       Mitchell Bartlett
                                              ----------------------------------
        A Delaware corporation                Print Name of Investor

                                              /s/ Mitchell Bartlett
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                                  Mitchell P. Bartlett
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

                AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                SIGNATURE PAGE

<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

        LOUDCLOUD, INC.                       Krista Bessinger
                                              ----------------------------------
        A Delaware corporation                Print Name of Investor

                                              /s/ Krista Bessinger
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                                  Krista Bessinger
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

                AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                SIGNATURE PAGE

<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

        LOUDCLOUD, INC.

                                              __________________________________
        A Delaware corporation                Print Name of Investor

                                              /s/ Joaquin Garcia-Larrieu
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                                  Joaquin Garcia-Larrieu
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

                AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                SIGNATURE PAGE

<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

        LOUDCLOUD, INC.
                                              __________________________________
        A Delaware corporation                Print Name of Investor

                                              /s/ Marc Weiss
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                                  Marc Weiss
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

                AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                SIGNATURE PAGE

<PAGE>

"INVESTORS"                              CHARTER GROWTH CAPITAL II,
                                         L.P.

                                    By:  CGC Partners II, L.P.

                                         /s/ Steven P. Bird
                                         -------------------------------
                                         Steven P. Bird

                                         CGC INVESTORS II QP, L.P.

                                    By:  CGC Partners II, L.P.

                                         /s/ Steven P. Bird
                                         -------------------------------
                                         Steven P. Bird

                                         CGC INVESTORS II A, L.P.

                                    By:  CGC Partners II, L.P.

                                         /s/ Steven P. Bird
                                         -------------------------------
                                         Steven P. Bird

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

        LOUDCLOUD, INC.                       Octane Capital Fund I, L.P.
                                              ----------------------------------
        A Delaware corporation                Print Name of Investor

                                              /s/ Emeric McDonald, Manager
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                              Emeric McDonald, Manager
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

         AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE

<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

        LOUDCLOUD, INC.                       Aurora Technology Fund
                                              ----------------------------------
        A Delaware corporation                Print Name of Investor

                                              /s/ Rachel E. Hyman
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                              Rachel E. Hyman, Manager
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

         AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE

<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.

        COMPANY:                              INVESTORS:

        LOUDCLOUD, INC.                       Aurora Technology Fund III
                                              ----------------------------------
        A Delaware corporation                Print Name of Investor

                                              /s/ Rachel E. Hyman
        _________________________________     ----------------------------------
        Signature of Authorized Signatory     Signature of Authorized Signatory

                                              Rachel E. Hyman, Manager
        _________________________________     ----------------------------------
        Print Name and Title                  Print Name and Title

                                              FOUNDERS:

                                              __________________________________
                                              Marc Andreessen

                                              __________________________________
                                              Benjamin A. Horowitz

                                              __________________________________
                                              Timothy A. Howes

                                              __________________________________
                                              In Sik Rhee

         AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE

<PAGE>

     "INVESTORS"                             Angel Investors II, L.P.
                                        By:  ArchAngel II, LLC its general
                                             partner

                                             /s/ J. Casey McGlynn
                                             -----------------------------
                                             J. Casey McGlynn
                                             Its Member

                                             Angel(Q) Investors II, L.P.
                                        By:  ArchAngel II, LLC its general
                                             partner

                                             /s/ J. Casey McGlynn
                                             -----------------------------
                                             J. Casey McGlynn
                                             Its Member

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE>

     "INVESTORS"                        RONALD & GAYLE CONWAY
                                        AS TRUSTEES OF THE
                                        CONWAY FAMILY TRUST
                                        DATED 9/25/96
                                        ---------------------------------
                                        Print Name of Investor

                                        /s/ Ronald Conway
                                        ---------------------------------
                                        Signature of Authorized Signatory

                                        _________________________________
                                        Print Name and Title

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE>

     "INVESTORS"                   OTHER INVESTORS

                                   INTEGRAL CAPITAL PARTNERS V, L.P.

                                   By Integral Capital Management V, LLC,
                                   its General Partner

                                   By: /s/ Glen T. Kacher
                                      ----------------------------------
                                           Glen T. Kacher, a Manager

                                   INTEGRAL CAPITAL PARTNERS V SIDE
                                   FUND, L.P.

                                   By ICP Management V, LLC, its General Partner

                                   By: /s/ Glen T. Kacher
                                      ----------------------------------
                                           Glen T. Kacher, a Manager

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE>

     "INVESTORS"                   OTHER INVESTORS

                                   CKEI, LLC

                                   By CKE Associates, LLC
                                   Its Managing Member

                                   /s/ Michael S. Ovitz
                                   ----------------------------------
                                   Michael S. Ovitz
                                   Its President

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]

<PAGE>

     "INVESTORS"                        OTHER INVESTORS

                                        Synergy Partners
                                        ---------------------------------------
                                        Print Name of Investor

                                        /s/ Jason P. Rosenthal
                                        ---------------------------------------
                                        Signature of Authorized Signatory

                                        Jason P. Rosenthal (General Partner)
                                        ---------------------------------------
                                        Print Name and Title

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE>

     "INVESTORS"                        OTHER INVESTORS

                                        Roderick M. Sherwood III
                                        ----------------------------------
                                        Print Name of Investor

                                        /s/ Roderick M. Sherwood III
                                        ----------------------------------
                                        Signature of Authorized Signatory

                                        Roderick M. Sherwood III
                                        Executive Vice President
                                        & Chief Financial Officer
                                        ----------------------------------
                                        Print Name and Title

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE>

     "INVESTORS"                        OTHER INVESTORS

                                        Innovation Investments, LLC
                                        ----------------------------------
                                        Print Name of Investor

                                        /s/ Eric Greenberg
                                        ----------------------------------
                                        Signature of Authorized Signatory

                                        Eric Greenberg, MNG. Member
                                        ----------------------------------
                                        Print Name and Title

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]

<PAGE>

     "INVESTORS"                        OTHER INVESTORS

                                        Leonard Armato
                                        ----------------------------------
                                        Print Name of Investor

                                        /s/ Leonard Armato
                                        ----------------------------------
                                        Signature of Authorized Signatory

                                        __________________________________
                                        Print Name and Title

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]

<PAGE>

     "INVESTORS"                        OTHER INVESTORS

                                        Shaquille O'Neal
                                        ----------------------------------
                                        Print Name of Investor

                                        /s/ Shaquille O'Neal
                                        ----------------------------------
                                        Signature of Authorized Signatory

                                        ----------------------------------
                                        Print Name and Title

        [AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]

<PAGE>

                                   EXHIBIT A

                             SCHEDULE OF INVESTORS

Michael G. Mohr or Marc L. Andreessen (Trustees), Andreessen 1996 Living Trust

Eric Hahn              (Mr. Hahn shall have a right of participation under
                       Section 4 with respect to 25% of the shares held by Mr.
                       Hahn.)

Michael Homer Trust    (Mr. Homer shall have no rights of participation under
                       Section 4).

WS Investment Company 99B and affiliated individuals

Benchmark Capital Partners IV, L.P., as nominee for Benchmark Capital Partners
IV, L.P.,
Benchmark Founders' Fund IV, L.P., Benchmark Founders' Fund IV-A, L.P. and
related individuals

Ben Horowitz

Timothy A. Howes

In Sik Rhee

Jonathan Heiliger

Attractor Ventures LLC

Paul Santinelli, Jr.

Angel (Q) Investors II, L.P.

David Weiden

Capital Research and Management Company on behalf of The Growth Fund of America,
Inc.

Capital Research and Management Company on behalf of The New Economy Fund

Amerindo Investment Advisors

Amerindo Technology Growth Fund II Inc.

Amerindo Internet Fund PLC

<PAGE>

Emerging Technology Portfolio

Vertex Capital II, LLC

Vertex Capital III, LLC

William F. Hartfiel, III

Marc Weiss

Mitchell P. Bartlett

Daniel Chapey

James Stableford

Krista Bessinger

Joaquin Garcia Larrieu

Charter Growth Capital II, L.P.

CGC Investors II QP, L.P.

CGC Investors II A, L.P.

Octane Capital Fund I, L.P.

Aurora Technology Fund III, LLC

Aurora Technology Fund, LLC

Angel Investors II, L.P.

Ronald & Gayle Conway as Trustees of the Conway Family Trust Dated 9/25/96

Integral Capital Partners V, L.P.

Integral Capital Partners V Side Fund, L.P.

CKEI, LLC

Katz Family Ventures, LLC

<PAGE>

Scott Howard Dunlap

Debra Ann Casados

Michael I. Green

Jason Philip Rosenthal

Synergy Partners

Roderick M. Sherwood III & Gretchen W. Sherwood JTWROS

Innovation Investments, LLC

Shaquille O'Neal

Leonard Armato

<PAGE>

                                   EXHIBIT B

                             SCHEDULE OF FOUNDERS

Marc Andreessen

Benjamin A. Horowitz

Timothy A. Howes

In Sik Rhee<PAGE>

                                                                    EXHIBIT 10.7

================================================================================

                               LOUDCLOUD, INC.,

                                   as Issuer

                                      and

                      STATE STREET BANK AND TRUST COMPANY
                              OF CALIFORNIA, N.A.

                              __________________

                                   Indenture

                         Dated as of February 9, 2000

                              __________________

                      13% Senior Discount Notes due 2005

================================================================================
<PAGE>

                             CROSS-REFERENCE TABLE
                             ---------------------

<TABLE>
<CAPTION>
TIA Sections                                                             Indenture Sections
------------                                                             ------------------
<S>                                                                      <C>
(S) 310(a)(1)...........................................................        6.10
       (a)(2)...........................................................        6.10
       (b)..............................................................        6.08
(S) 313(c)..............................................................        6.06; 9.02
(S) 314(a)..............................................................        3.17; 9.02
       (a)(4)...........................................................        3.16; 9.02
       (c)(1)...........................................................        9.03
       (c)(2)...........................................................        9.03
       (e)..............................................................        9.04
(S) 315(b)..............................................................        6.05; 9.02
(S) 316(a)(1)(A)........................................................        5.05
       (a)(1)(B)........................................................        5.04
       (b)..............................................................        5.07
(S) 317(a)(1)...........................................................        5.08
       (a)(2)...........................................................        5.09
(S) 318(a)..............................................................        9.01
       (c)..............................................................        9.01
</TABLE>

Note:  The Cross-Reference Table shall not for any purpose be deemed to be a
       part of the Indenture.
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                                                                  Page
                                                                                                                  ----

         <S>                                                                                                      <C>
         RECITALS OF THE COMPANY..................................................................................  1

                                       ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE

         SECTION 1.01.  Definitions...............................................................................  1
         SECTION 1.02.  Incorporation by Reference of Trust Indenture Act......................................... 28
         SECTION 1.03.  Rules of Construction..................................................................... 28

                                                       ARTICLE TWO THE NOTES

         SECTION 2.01.  Form and Dating........................................................................... 29
         SECTION 2.02.  Restrictive Legends....................................................................... 30
         SECTION 2.03.  Execution, Authentication and Denominations............................................... 32
         SECTION 2.04.  Registrar and Paying Agent................................................................ 33
         SECTION 2.05.  Paying Agent to Hold Money in Trust....................................................... 34
         SECTION 2.06.  Transfer and Exchange..................................................................... 34
         SECTION 2.07.  Book-Entry Provisions for Global Notes.................................................... 35
         SECTION 2.08.  Special Transfer Provisions............................................................... 37
         SECTION 2.09.  Replacement Notes......................................................................... 40
         SECTION 2.10.  Outstanding Notes......................................................................... 40
         SECTION 2.11.  Temporary Notes........................................................................... 41
         SECTION 2.12.  Cancellation.............................................................................. 41
         SECTION 2.13.  CUSIP Numbers............................................................................. 41
         SECTION 2.14.  Defaulted Interest........................................................................ 41
         SECTION 2.15.  Issuance of Additional Notes.............................................................. 42

                                                      ARTICLE THREE COVENANTS

         SECTION 3.01.  Payment of Notes.......................................................................... 42
         SECTION 3.02.  Maintenance of Office or Agency........................................................... 42
         SECTION 3.03.  Limitation on Indebtedness................................................................ 43
         SECTION 3.04.  Limitation on Restricted Payments......................................................... 46
         SECTION 3.05.  Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries... 50
         SECTION 3.07.  Limitation on Issuances of Guarantees by Restricted Subsidiaries.......................... 53
</TABLE>
_________________

Note: The Table of Contents shall not for any purposes be deemed to be a part of
      the Indenture.
<PAGE>

                                      ii

<TABLE>
         <S>                                                                                      <C>
         SECTION 3.08.  Limitation on Transactions with Stockholders and Affiliates...............53
                        -----------------------------------------------------------
         SECTION 3.09.  Limitation on Liens.......................................................55
                        -------------------
         SECTION 3.10.  Limitation on Asset Sales.................................................56
                        -------------------------
         SECTION 3.11.  Repurchase of Notes upon a Change of Control..............................57
                        --------------------------------------------
         SECTION 3.13.  Existence.................................................................57
                        ---------
         SECTION 3.14.  Payment of Taxes and Other Claims.........................................58
                        ---------------------------------
         SECTION 3.15.  Maintenance of Properties and Insurance...................................58
                        ---------------------------------------
         SECTION 3.16.  Notice of Defaults........................................................58
                        ------------------
         SECTION 3.17.  Compliance Certificates...................................................59
                        -----------------------
         SECTION 3.18.  Commission Reports and Reports to Holders.................................59
                        -----------------------------------------
         SECTION 3.19.  Waiver of Stay, Extension or Usury Laws...................................60
                        ---------------------------------------
         SECTION 3.20.  Limitation on Sale-Leaseback Transactions.................................60
                        -----------------------------------------
         SECTION 3.21.  Calculation of Original Issue Discount....................................61
                        --------------------------------------
         SECTION 3.22.  Payment of Additional Interest............................................61
                        ------------------------------

                                                  ARTICLE FOUR
                                             SUCCESSOR CORPORATION

         SECTION 4.01.  When Company May Merge, Etc...............................................62
                        ---------------------------
         SECTION 4.02.  Successor Substituted.....................................................63
                        ---------------------

                                                   ARTICLE FIVE
                                               DEFAULT AND REMEDIES

         SECTION 5.01.  Events of Default.........................................................63
                        -----------------
         SECTION 5.02.  Acceleration..............................................................65
                        ------------
         SECTION 5.03.  Other Remedies............................................................65
                        --------------
         SECTION 5.04.  Waiver of Past Defaults...................................................66
                        -----------------------
         SECTION 5.05.  Control by Majority.......................................................66
                        -------------------
         SECTION 5.06.  Limitation on Suits.......................................................66
                        -------------------
         SECTION 5.07.  Rights of Holders to Receive Payment......................................67
                        ------------------------------------
         SECTION 5.08.  Collection Suit by Trustee................................................67
                        --------------------------
         SECTION 5.09.  Trustee May File Proofs of Claim..........................................67
                        --------------------------------
         SECTION 5.10.  Priorities................................................................68
                        ----------
         SECTION 5.11.  Undertaking for Costs.....................................................68
                        ---------------------
         SECTION 5.12.  Restoration of Rights and Remedies........................................68
                        ----------------------------------
         SECTION 5.13.  Rights and Remedies Cumulative............................................68
                        ------------------------------
         SECTION 5.14.  Delay or Omission Not Waiver..............................................69
                        ----------------------------

                                                   ARTICLE SIX
                                                     TRUSTEE
</TABLE>
<PAGE>

                                      iii

<TABLE>
         <S>                                                                <C>
         SECTION 6.01.  General.............................................69
                        -------
         SECTION 6.02.  Certain Rights of Trustee...........................69
                        -------------------------
         SECTION 6.03.  Individual Rights of Trustee........................70
                        ----------------------------
         SECTION 6.04.  Trustee's Disclaimer................................70
                        --------------------
         SECTION 6.05.  Notice of Default...................................70
                        -----------------
         SECTION 6.06.  Reports by Trustee to Holders.......................71
                        -----------------------------
         SECTION 6.07.  Compensation and Indemnity..........................71
                        --------------------------
         SECTION 6.08.  Replacement of Trustee..............................72
                        ----------------------
         SECTION 6.09.  Successor Trustee by Merger, Etc....................73
                        --------------------------------
         SECTION 6.10.  Eligibility.........................................73
                        -----------
         SECTION 6.11.  Money Held in Trust.................................73
                        -------------------
         SECTION 6.12.  Withholding Taxes...................................73
                        -----------------

                                        ARTICLE SEVEN
                                    DISCHARGE OF INDENTURE

         SECTION 7.01.  Termination of Company's Obligations................73
                        ------------------------------------
         SECTION 7.02.  Defeasance and Discharge of Indenture...............74
                        -------------------------------------
         SECTION 7.03.  Defeasance of Certain Obligations...................76
                        ---------------------------------
         SECTION 7.04.  Application of Trust Money..........................78
                        --------------------------
         SECTION 7.05.  Repayment to Company................................78
                        --------------------
         SECTION 7.06.  Reinstatement.......................................79
                        -------------

                                        ARTICLE EIGHT
                             AMENDMENTS, SUPPLEMENTS AND WAIVERS

         SECTION 8.01.  Without Consent of Holders..........................79
                        --------------------------
         SECTION 8.02.  With Consent of Holders.............................80
                        -----------------------
         SECTION 8.03.  Revocation and Effect of Consent....................81
                        --------------------------------
         SECTION 8.04.  Notation on or Exchange of Notes....................82
                        --------------------------------
         SECTION 8.05.  Trustee to Sign Amendments, Etc.....................82
                        -------------------------------
         SECTION 8.06.  Conformity with Trust Indenture Act.................82
                        -----------------------------------

                                        ARTICLE NINE
                                       MISCELLANEOUS

         SECTION 9.01.  Trust Indenture Act of 1939.........................82
                        ---------------------------
         SECTION 9.02.  Notices.............................................82
                        -------
         SECTION 9.03.  Certificate and Opinion as to Conditions Precedent..83
                        --------------------------------------------------
         SECTION 9.04.  Statements Required in Certificate..................84
                        ----------------------------------
         SECTION 9.05.  Rules by Trustee, Paying Agent or Registrar.........84
                        -------------------------------------------
         SECTION 9.06.  Payment Date Other Than a Business Day..............84
                        --------------------------------------
         SECTION 9.07.  Governing Law.......................................84
                        -------------
</TABLE>
<PAGE>

                                      iv

<TABLE>
         <S>                                                                <C>
         SECTION 9.08.  No Adverse Interpretation of Other Agreements.......84
                        ---------------------------------------------
         SECTION 9.09.  No Recourse Against Others..........................85
                        --------------------------
         SECTION 9.10.  Successors..........................................85
                        ----------
         SECTION 9.11.  Duplicate Originals.................................85
                        -------------------
         SECTION 9.12.  Separability........................................85
                        ------------
         SECTION 9.13.  Table of Contents, Headings, Etc....................85
                        --------------------------------

                                        ARTICLE TEN
                                         REDEMPTION

         SECTION 10.01.  Right of Redemption................................85
                         -------------------
         SECTION 10.02.  Notices to Trustee.................................86
                         ------------------
         SECTION 10.03. [Reserved]..........................................86
         SECTION 10.04.  Notice of Redemption...............................86
                         --------------------
         SECTION 10.05.  Effect of Notice of Redemption.....................87
                         ------------------------------
         SECTION 10.06.  Deposit of Redemption Price........................87
                         ---------------------------
         SECTION 10.07.  Payment of Notes Called for Redemption.............87
                         --------------------------------------
</TABLE>
<PAGE>

               INDENTURE, dated as of February 9, 2000, between LOUDCLOUD, INC.,
a Delaware corporation (the "Company"), and STATE STREET BANK AND TRUST COMPANY
                             -------
OF CALIFORNIA, N.A., a national banking association (the "Trustee").

                            RECITALS OF THE COMPANY

               The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance initially of up to $66,000,000
aggregate principal amount at maturity of the Company's 13% Senior Discount
Notes due 2005 (the "Notes") issuable as provided in this Indenture. The Company
                     -----
has agreed to issue and sell a total of 66,000 Units (the "Units"), each of
                                                           -----
which consists of one Note and one warrant (each a "Warrant"), each Warrant
                                                    -------
entitling the holder thereof to purchase 35.39448485 shares of Common Stock, par
value $0.001 per share, of the Company. The Notes and Warrants included in each
Unit will become separately transferable upon the earliest to occur of (i) the
date that is six months following the Closing Date, (ii) the commencement of the
Exchange Offer pursuant to the Notes Registration Rights Agreement, (iii) the
date the Shelf Registration Statement (as defined herein) is declared effective,
(iv) a Redemption Date or (v) such date as determined by Morgan Stanley & Co.
Incorporated in its sole discretion (the "Separation Date"). All things
                                          ---------------
necessary to make this Indenture a valid agreement of the Company, in accordance
with its terms, have been done, and the Company has done all things necessary to
make the Notes, when executed by the Company and authenticated and delivered by
the Trustee hereunder and duly issued by the Company, the valid obligations of
the Company as hereinafter provided.

               This Indenture is subject to, and shall be governed by, the
provisions of the Trust Indenture Act of 1939, as amended, that are required to
be a part of and to govern indentures qualified under the Trust Indenture Act of
1939, as amended.

                     AND THIS INDENTURE FURTHER WITNESSETH

               For and in consideration of the premises and the purchase of the
Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders, as follows.

                                  ARTICLE ONE
                  DEFINITIONS AND INCORPORATION BY REFERENCE

               SECTION 1.01.  Definitions.
                              -----------

               "Accreted  Value" means,  for any Specified  Date,  the amount
provided below for each $1,000 principal amount at maturity of Notes:
<PAGE>

                                       2

          (i)    if the Specified Date occurs on one of the following dates
     (each, a "Semi-Annual Accrual Date"), the Accreted Value will equal the
               ------------------------
     amount set forth below for such Semi-Annual Accrual Date:

                      Semi-Annual              Accreted
                     Accrual Date                Value

                   August 15, 2000              $729.88

                   February 15, 2001            $777.32

                   August 15, 2001              $827.84

                   February 15, 2002            $881.65

                   August 15, 2002              $938.96

                   February 15, 2003          $1,000.00

          (ii)   if the Specified Date occurs before the first Semi-Annual
     Accrual Date, the Accreted Value will equal the sum of (a) $683.89 and (b)
     an amount equal to the product of (1) the Accreted Value for the first
     Semi-Annual Accrual Date less $683.89 multiplied by (2) a fraction, the
     numerator of which is the number of days from the Closing Date to the
     Specified Date, using a 360-day year of twelve 30-day months, and the
     denominator of which is the number of days from the Closing Date to the
     first Semi-Annual Accrual Date, using a 360-day year of twelve 30-day
     months;

          (iii)  if the Specified Date occurs between two Semi-Annual Accrual
     Dates, the Accreted Value will equal the sum of (a) the Accreted Value for
     the Semi-Annual Accrual Date immediately preceding such Specified Date and
     (b) an amount equal to the product of (1) the Accreted Value for the
     immediately following Semi-Annual Accrual Date less the Accreted Value for
     the immediately preceding Semi-Annual Accrual Date multiplied by (2) a
     fraction, the numerator of which is the number of days from the immediately
     preceding Semi-Annual Accrual Date to the Specified Date, using a 360-day
     year of twelve 30-day months, and the denominator of which is 180; or

          (iv)   if the Specified Date occurs after the last Semi-Annual Accrual
     Date, the Accreted Value will equal $1,000.

          "Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Restricted Subsidiary or assumed in connection with
an Asset Acquisition and
<PAGE>

                                       3

not Incurred in connection with, or in anticipation of, such Person becoming a
Restricted Subsidiary or such Asset Acquisition.

          "Adjusted Consolidated Net Income" means, for any period, the
consolidated net income (or loss) of the Company and its Restricted Subsidiaries
for such period determined on a consolidated basis in accordance with GAAP;
provided that there shall be excluded therefrom (without duplication):

          (i)    the net income (or loss) of any Person that is not a Restricted
     Subsidiary, except, to the extent of the amount of dividends or other
     distributions actually paid to the Company or any of its Restricted
     Subsidiaries by such Person during such period;

          (ii)   the net income (or loss) of any Person accrued prior to the
     date it becomes a Restricted Subsidiary or is merged into or consolidated
     with the Company or any of its Restricted Subsidiaries or all or
     substantially all of the property and assets of such Person are acquired by
     the Company or any of its Restricted Subsidiaries;

          (iii)  the net income of any Restricted Subsidiary to the extent that
     the declaration or payment of dividends or similar distributions by such
     Restricted Subsidiary of such net income is not at the time permitted by
     the operation of the terms of its charter or any agreement, instrument,
     judgment, decree, order, statute, rule or governmental regulation
     applicable to such Restricted Subsidiary;

          (iv)   any gains or losses (on an after-tax basis) attributable to
     sales of assets outside the ordinary course of business;

          (v)    except for purposes of calculating the amount of Restricted
     Payments that may be made pursuant to clause (C) of the first paragraph of
     Section 3.04, any amount paid or accrued as dividends on Preferred Stock of
     the Company or any Restricted Subsidiary owned by Persons other than the
     Company and any of its Restricted Subsidiaries;

          (vi)   all extraordinary gains and extraordinary losses;

          (vii)  any compensation expense paid or payable solely with Capital
     Stock (other than Disqualified Stock) of the Company or any options,
     warrants or other rights to acquire Capital Stock (other than Disqualified
     Stock) of the Company;

          (viii) the cumulative effect of a change in accounting principles
     since the Closing Date; and
<PAGE>

                                       4

          (ix)   the tax effect of any of the items described in clauses (i)
     through (viii) above.

          "Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Company and its Restricted Subsidiaries (to the extent not already
taken into account, less applicable depreciation, amortization and other
valuation reserves), except to the extent resulting from write-ups of capital
assets (excluding write-ups in connection with accounting for acquisitions and
write-ups under Financial Accounting Standards No. 115 in conformity with GAAP),
after deducting therefrom (i) all current liabilities of the Company and its
Restricted Subsidiaries (excluding intercompany items) and (ii) all goodwill,
trade names, trademarks, patents, unamortized debt discount and expense and
other like intangibles, all as set forth on the most recent quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in conformity with GAAP and filed with the Commission or provided to
the Trustee pursuant to Section 3.18.

          "Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.

          "Agent" means any Registrar, Paying Agent, authenticating agent or co-
Registrar.

          "Agent Members" has the meaning provided in Section 2.07(a).

          "Applicable Premium" means, with respect to a Note at any Redemption
Date, the greater of (i) 1.0% of the Accreted Value of such Note on such
Redemption Date and (ii) the excess of (A) the present value at such Redemption
Date of (x) the principal amount at the Stated Maturity of the Notes plus (y)
all required remaining scheduled interest payments due on such Note through the
Stated Maturity of the Notes, computed using a discount rate equal to the
Treasury Rate plus 50 basis points, over (B) the Accreted Value of such Note on
such Redemption Date. Calculation of the Applicable Premium shall be made by the
Company or on behalf of the Company by such Person as the Company shall
designate; provided that such calculation shall not be a duty or obligation of
the Trustee. The Company shall cause notice of the Applicable Premium to be
delivered in writing to the Trustee.

          "Asset Acquisition" means (i) an investment by the Company or any of
its Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary or shall be merged into or consolidated
with the Company or any of its Restricted Subsidiaries; provided that such
Person's primary business is related, ancillary or
<PAGE>

                                       5

complementary to the businesses of the Company and its Restricted Subsidiaries
on the date of such investment (ii) an acquisition by the Company or any of its
Restricted Subsidiaries of the property and assets of any Person other than the
Company or any of its Restricted Subsidiaries that constitute substantially all
of a division or line of business of such Person; provided that the property and
assets acquired are related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such acquisition.

          "Asset Disposition" means the sale or other disposition by the Company
or any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Restricted Subsidiaries.

          "Asset Sale" means any sale, transfer or other disposition (including
by way of merger, consolidation or sale-leaseback transaction, or by way of any
loss of or damage to, or any condemnation or other taking of, property for which
the Company or any Restricted Subsidiary receives insurance proceeds, or
proceeds of a condemnation award or other compensation) in one transaction or a
series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of:

          (i)    all or any of the Capital Stock of any Restricted Subsidiary;

          (ii)   all or substantially all of the property and assets of an
     operating unit or business of the Company or any of its Restricted
     Subsidiaries; or

          (iii)  any other property and assets of the Company or any of its
     Restricted Subsidiaries outside the ordinary course of business of the
     Company or such Restricted Subsidiary

and, in each case, that is not governed by the provisions of Article Four;
provided that "Asset Sale" shall not include (a) sales or other dispositions of
inventory, receivables and other current assets, (b) sales, transfers or other
dispositions of assets constituting a Permitted Investment or a Restricted
Payment permitted to be made under Section 3.04, (c) sales, transfers or other
dispositions of assets with a fair market value not in excess of $2 million in
any transaction or series of related transactions, (d) the grant of any Lien
permitted under this Indenture, (e) dispositions of obsolete equipment, (f)
sales or other dispositions of assets for consideration at least equal to the
fair market value of the assets sold or disposed of, to the extent that the
consideration received would constitute property or assets of the kind described
in clause (B) of the second paragraph of Section 3.10, or (g) sale-leaseback
transactions permitted to be made under Section 3.20.
<PAGE>

                                       6

                  "Average Life" means, at any date of determination with
respect to any debt security, the quotient obtained by dividing (i) the sum of
the products of (a) the number of years from such date of determination to the
dates of each successive scheduled principal payment of such debt security and
(b) the amount of such principal payment by (ii) the sum of all such principal
payments.

                  "Board of Directors" means the Board of Directors of the
Company or any duly authorized committee of such Board of Directors.

                  "Board Resolution" means a copy of a resolution, certified by
the Secretary or Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.

                  "Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in The City of New York, or in the city of
the Corporate Trust Office of the Trustee, are authorized by law to close.

                  "Capital Stock" means, with respect to any Person, any and all
shares, interests (including limited liability company interests and partnership
interests), participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.

                  "Capitalized Lease" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such Person.

                  "Capitalized Lease Obligations" means the discounted present
value of the rental obligations under a Capitalized Lease.

                  "Change of Control" means the occurrence of one or more of the
following events:

                  (i)   any sale, lease, exchange or other transfer (in one
         transaction or a series of related transactions) of all or
         substantially all of the assets of the Company and its Subsidiaries,
         taken as a whole, to any "person" or "group" (as defined in Sections
         13(d) and 14(d)(2) of the Exchange Act);

                  (ii)  the approval by the holders of Capital Stock of the
         Company of any plan or proposal for the liquidation or dissolution of
         the Company (whether or not otherwise in compliance with the provisions
         of the Indenture);
<PAGE>

                                       7

                  (iii)   any "person" or "group", as defined in Sections 13(d)
         and 14(d)(2) of the Exchange Act (other than one or more Permitted
         Holders), shall become the ultimate "beneficial owner" (as defined in
         Rule 13d-3 under the Exchange Act) of shares representing more than 35%
         of the aggregate ordinary voting power represented by the issued and
         outstanding Voting Stock of the Company or any successor to all or
         substantially all of its assets; or

                  (iv)    during any period of 24 consecutive months,
         individuals who at the beginning of such period constituted the Board
         of Directors of the Company (together with any new directors whose
         election to the Board of Directors or whose nomination for election by
         the stockholders of the Company was approved by a vote of a majority of
         the directors then still in office who were either directors at the
         beginning of such period or whose election or nomination for election
         was previously so approved) cease for any reason to constitute a
         majority of the Board of Directors then in office.

                  "Closing Date" means the date on which the Notes are
originally issued under this Indenture.

                  "Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body performing
such duties at such time.

                  "Common Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's common stock, whether now
outstanding or issued after the date of this Indenture, including, without
limitation, all series and classes of such common stock.

                  "Company" means the party named as such in the first paragraph
of this Indenture until a successor replaces it pursuant to Article Four of this
Indenture and thereafter means the successor.

                  "Company Order" means a written request or order signed in the
name of the Company (i) by its Chairman, a Vice Chairman, its President or a
Vice President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary
or an Assistant Secretary and delivered to the Trustee; provided, however, that
such written request or order may be signed by any two of the officers or
directors listed in clause (i) above in lieu of being signed by one of such
officers or directors listed in such clause (i) and one of the officers listed
in clause (ii) above.

                  "Consolidated EBITDA" means, for any period, Adjusted
Consolidated Net Income for such period plus, to the extent such amount was
deducted in calculating such Adjusted Consolidated Net Income, (i) Consolidated
Interest Expense, (ii) Consolidated Income
<PAGE>

                                       8

Tax Expense, (iii) depreciation expense, (iv) amortization expense and (v) all
other non-cash items to the extent they reduce Adjusted Consolidated Net Income
(other than items that will require cash payments and for which an accrual or
reserve is, or is required by GAAP to be, made), less all non-cash items to the
extent they increase Adjusted Consolidated Net Income (including the partial or
entire reversal of reserves taken in prior periods), all as determined on a
consolidated basis for the Company and its Restricted Subsidiaries in accordance
with GAAP; provided that, if any Restricted Subsidiary is not a Wholly Owned
Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not
otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount
of the Adjusted Consolidated Net Income attributable to such Restricted
Subsidiary multiplied by (B) the percentage ownership interest in the income of
such Restricted Subsidiary not owned on the last day of such period by the
Company or any of its Restricted Subsidiaries.

                  "Consolidated Fixed Charges" means, with respect to the
Company and its Restricted Subsidiaries for any period, the sum of:

                  (1)   Consolidated Interest Expense, plus

                  (2)   the product of (x) all dividend payments on any series
         of Preferred Stock of the Company and its Restricted Subsidiaries
         (other than dividends paid in Capital Stock other than Disqualified
         Stock) paid or required to be paid or accrued during such period times
         (y) a fraction, the numerator of which is one and the denominator of
         which is one minus the then current effective consolidated federal,
         state and local tax rate of such Person, plus

                  (3)   Consolidated Income Tax Expense, plus

                  (4)   one-third of the rental expense with respect to
          operating leases.

                  "Consolidated Income Tax Expense" for any period means the
consolidated provision for income taxes of the Company and its Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with GAAP.

                  "Consolidated Interest Expense" means, for any period, the
aggregate amount of interest in respect of Indebtedness (including, without
limitation, amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting; all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with Interest Rate Agreements;
and Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Company and its Restricted Subsidiaries during such
<PAGE>

                                       9

period; excluding, however, (i) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated
Net Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in connection
with the offering of the Units, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with GAAP.

                  "Consolidated Leverage Ratio" means, on any Transaction Date,
the ratio of (i) the aggregate amount of Indebtedness of the Company and its
Restricted Subsidiaries on a consolidated basis outstanding on such Transaction
Date to (ii) four times the aggregate amount of Consolidated EBITDA for the then
most recent fiscal quarter for which financial statements of the Company have
been filed with the Commission or provided to the Trustee pursuant to Section
3.18 (such fiscal quarter period being the "Quarter"); provided that, in making
the foregoing calculation, (A) pro forma effect shall be given to any
Indebtedness to be Incurred or repaid on the Transaction Date; (B) pro forma
effect shall be given to Asset Dispositions and Asset Acquisitions (including
giving pro forma effect to the application of proceeds of any Asset Disposition)
that occur from the beginning of the Quarter through the Transaction Date (the
"Reference Period"), as if they had occurred and such proceeds had been applied
on the first day of such Reference Period; and (C) pro forma effect shall be
given to asset dispositions and asset acquisitions (including giving pro forma
effect to the application of proceeds of any asset disposition) that have been
made by any Person that has become a Restricted Subsidiary or has been merged
with or into the Company or any Restricted Subsidiary during such Reference
Period and that would have constituted Asset Dispositions or Asset Acquisitions
had such transactions occurred when such Person was a Restricted Subsidiary as
if such asset dispositions or asset acquisitions were Asset Dispositions or
Asset Acquisitions that occurred on the first day of such Reference Period;
provided that to the extent that clause (B) or (C) of this sentence requires
that pro forma effect be given to an Asset Acquisition or Asset Disposition,
such pro forma calculation shall be based upon the full fiscal quarter
immediately preceding the Transaction Date of the Person, or division or line of
business of the Person, that is acquired or disposed of for which financial
information is available.

                  "Consolidated Net Worth" means, at any date of determination,
consolidated stockholders' equity as set forth on the most recently available
quarterly or annual consolidated balance sheet of the Company and its Restricted
Subsidiaries (which shall be as of a date not more than 90 days prior to the
date of such computation, and which shall not take into account Unrestricted
Subsidiaries), less any amounts attributable to Disqualified Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory notes receivable from the sale
of the Capital Stock of the Company or any of its Restricted Subsidiaries, each
item to be determined in conformity with
<PAGE>

                                      10

GAAP (excluding the effects of foreign currency exchange adjustments under
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 52).

                  "Corporate Trust Office" means the office of the Trustee at
which the corporate trust business of the Trustee shall, at any particular time,
be principally administered, which office is, at the date of this Indenture,
located at State Street Bank and Trust Company of California, N.A., 633 West 5th
Street, 12th Floor, Los Angeles, CA 90071, Attention: Corporate Trust
Administration (Loudcloud, Inc. 13% Senior Discount Notes due 2005).

                  "Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement.

                  "Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.

                  "Depositary" means The Depository Trust Company, its nominees,
and their respective successors.

                  "Disqualified Stock" means any class or series of Capital
Stock of any Person that by its terms or otherwise is (i) required to be
redeemed prior to the Stated Maturity of the Notes, (ii) redeemable at the
option of the holder of such class or series of Capital Stock at any time prior
to the Stated Maturity of the Notes or (iii) convertible into or exchangeable
for Capital Stock referred to in clause (i) or (ii) above or Indebtedness having
a scheduled maturity prior to the Stated Maturity of the Notes; provided that
any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or "change of control" occurring prior to the Stated Maturity of the Notes shall
not constitute Disqualified Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are not materially more favorable to
the holders of such Capital Stock than the provisions contained in Section 3.10
and Section 3.11 and such Capital Stock, and the agreements or instruments
governing the redemption rights thereof, specifically provide that such Person
will not repurchase or redeem any such stock pursuant to such provision prior to
the Company's repurchase of such Notes as are required to be repurchased
pursuant to Section 3.10 and Section 3.11.

                  "Event of Default" has the meaning provided in Section 5.01.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

                  "Exchange Notes" means any securities of the Company
containing terms identical to the Notes (except that such Exchange Notes shall
be registered under the Securities
<PAGE>

                                      11

Act) that are issued and exchanged for the Notes pursuant to the Notes
Registration Rights Agreement and this Indenture.

                  "Excess Proceeds" has the meaning provided in Section 3.10.

                  "fair market value" means the price that would be paid in an
arm's-length transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer under no compulsion to buy,
as determined in good faith by the Board of Directors, whose determination shall
be conclusive if evidenced by a Board Resolution.

                  "Foreign Subsidiary" means any Restricted Subsidiary that is
an entity which is controlled foreign corporation under Section 957 of the
Internal Revenue Code.

                  "GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Closing Date, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession. All ratios and computations contained or referred
to in this Indenture shall be computed in conformity with GAAP applied on a
consistent basis, except that calculations made for purposes of determining
compliance with the terms of the covenants and with other provisions of this
Indenture shall be made without giving effect to (i) the amortization of any
expenses incurred in connection with the offering of the Units and (ii) except
as otherwise provided, the amortization of any amounts required or permitted by
Accounting Principles Board Opinion Nos. 16 and 17.

                  "Global Notes" has the meaning provided in Section 2.01.

                  "Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any other
Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services (unless such purchase arrangements are on arm's-length
terms and are entered into in the ordinary course of business), to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.

                  "Guaranteed  Indebtedness" has the meaning provided in Section
3.07.
<PAGE>

                                      12

                  "Holder" or "Noteholder" means the registered holder of any
Note.

                  "Incur" means, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an "Incurrence" of Acquired Indebtedness; provided that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.

                  "Indebtedness" means, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in (i) or (ii) above or (v), (vi)
or (vii) below) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than 12 months after the
date of placing such property in service or taking delivery and title thereto or
the completion of such services, except Trade Payables, (v) all Capitalized
Lease Obligations of such Person, (vi) all Indebtedness of other Persons secured
by a Lien on any asset of such Person, whether or not such Indebtedness is
assumed by such Person; provided that the amount of such Indebtedness shall be
the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness, (vii) all Indebtedness of
other Persons Guaranteed by such Person to the extent such Indebtedness is
Guaranteed by such Person and (viii) to the extent not otherwise included in
this definition, obligations under Currency Agreements and Interest Rate
Agreements, except if such agreements (a) are designed solely to protect the
Company or its Restricted Subsidiaries against fluctuations in foreign currency
exchange rates or interest rates and (b) do not increase the Indebtedness of the
obligor outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder. The amount of Indebtedness of
any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency giving
rise to the obligation, provided (A) that the amount outstanding at any time of
any Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at the time of its issuance as determined in
conformity with GAAP, (B) that money borrowed and set aside at the time of the
Incurrence of any Indebtedness in order to prefund the payment of the interest
on such Indebtedness shall not be deemed to be "Indebtedness" so long as such
money is held to secure the payment of such interest, (C) that Indebtedness
shall not include any liability for federal, state, local or other taxes
<PAGE>

                                      13

and (D) that Indebtedness shall not include any liability in respect of worker's
compensation, performance, surety, appeal or similar bonds, completion or
similar guarantees arising in the ordinary course of business.

                  "Indenture" means this Indenture as originally executed or as
it may be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.

                  "Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.

                  "Interest Payment Date" means each semiannual interest payment
date on February 15 and August 15, of each year, commencing August 15, 2003.

                  "Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement, option or future contract or other
similar agreement or arrangement.

                  "Investment" in any Person means any direct or indirect
advance, loan or other extension of credit (including, without limitation, by
way of Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable on the balance sheet of the Company or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or use of others), or any purchase or acquisition of Capital Stock, bonds,
notes, debentures or other similar instruments issued by, such Person and shall
include (i) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary and (ii) the retention of the Capital Stock (or any other Investment)
by the Company or any of its Restricted Subsidiaries, of (or in) any Person that
has ceased to be a Restricted Subsidiary, including without limitation, by
reason of any transaction permitted by clause (iii) of Section 3.06. For
purposes of the definition of "Unrestricted Subsidiary" and Section 3.04, (a)
the amount of or a reduction in an Investment shall be equal to the fair market
value thereof at the time such Investment is made or reduced and (b) in the
event the Company or a Restricted Subsidiary makes an Investment by transferring
assets to any Person and as part of such transaction receives Net Cash Proceeds,
the amount of such Investment shall be the fair market value of the assets less
the amount of Net Cash Proceeds so received.

                  "Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof or any agreement to give any security interest).

                  "Moody's" means Moody's Investors Service, Inc. and its
successors.
<PAGE>

                                      14

                  "Net Cash Proceeds" means (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale, (iv) amounts required to be paid to any Person (other
than the Company or any of its Restricted Subsidiaries) owning a beneficial
interest in the assets or properties the subject of such Asset Sale, and (v)
appropriate amounts to be provided by the Company or any Restricted Subsidiary
as a reserve against any liabilities associated with such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as determined
in conformity with GAAP and (b) with respect to any issuance or sale of Capital
Stock, the proceeds of such issuance or sale in the form of cash or cash
equivalents, including payments in respect of deferred payment obligations (to
the extent corresponding to the principal, but not interest, component thereof)
when received in the form of cash or cash equivalents and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of attorney's fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.

                  "Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.

                  "Notes" means any of the securities, as defined in the first
paragraph of the recitals hereof, that are authenticated and delivered under
this Indenture. For all purposes of this Indenture, the term "Notes" shall
include the Notes initially issued on the Closing Date, any Exchange Notes to be
issued and exchanged for any Notes pursuant to the Notes Registration Rights
Agreement and this Indenture and any other Notes issued after the Closing Date
under this Indenture. For purposes of this Indenture, all Notes shall vote
together as one series of Notes under this Indenture.

                  "Notes Registration Rights Agreement" means the Notes
Registration Rights Agreement, dated as of the Closing Date, among the Company
and State Street Bank and Trust Company of California, N.A. as Trustee on behalf
of the holders of the Notes and certain permitted assigns specified therein.
<PAGE>

                                      15

          "Offer to Purchase" means an offer to purchase Notes by the Company
from the Holders commenced by mailing a notice to the Trustee and each Holder
stating, in addition to any CUSIP, CINS of ISIN number required by Section 2.13:

          (i)   the covenant pursuant to which the offer is being made and that
     all Notes validly tendered will be accepted for payment on a pro rata
     basis;

          (ii)  the purchase price and the date of purchase (which shall be a
     Business Day no earlier than 30 days nor later than 60 days from the date
     such notice is mailed) (the "Payment Date");

          (iii) that any Note not tendered will continue to accrue interest (or
     original issue discount) pursuant to its terms;

          (iv)  that, unless the Company defaults in the payment of the purchase
     price, any Note accepted for payment pursuant to the Offer to Purchase
     shall cease to accrue interest (or original issue discount) on and after
     the Payment Date;

          (v)   that Holders electing to have a Note purchased pursuant to the
     Offer to Purchase will be required to surrender the Note, together with the
     form entitled "Option of the Holder to Elect Purchase" on the reverse side
     of the Note completed, to the Paying Agent at the address specified in the
     notice prior to the close of business on the Business Day immediately
     preceding the Payment Date;

          (vi)  that Holders will be entitled to withdraw their election if the
     Paying Agent receives, not later than the close of business on the third
     Business Day immediately preceding the Payment Date, a telegram, facsimile
     transmission or letter setting forth the name of such Holder, the principal
     amount at maturity of Notes delivered for purchase and a statement that
     such Holder is withdrawing his election to have such Notes purchased; and

          (vii) that Holders whose Notes are being purchased only in part will
     be issued new Notes equal in principal amount to the unpurchased portion of
     the Notes surrendered; provided that each Note purchased and each new Note
     issued shall be in a principal amount at maturity of $1,000 or an integral
     multiple thereof.

On the Payment Date, the Company shall (i) accept for payment on a pro rata
basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii)
deposit with the Paying Agent money sufficient to pay the purchase price of all
Notes or portions thereof so accepted; and (iii) deliver, or cause to be
delivered, to the Trustee all Notes or portions thereof so accepted together
with an Officers' Certificate specifying the Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the Holders
of Notes so
<PAGE>

                                      16

accepted payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail to such Holders a new Note equal in principal
amount at maturity to any unpurchased portion of the Note surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
at maturity of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of an Offer to Purchase as soon as practicable after the
Payment Date. The Trustee shall act as the Paying Agent for an Offer to
Purchase. The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that the Company is required to
repurchase Notes pursuant to an Offer to Purchase.

          "Officer" means, with respect to the Company, (i) the Chairman of the
Board, the President, any Vice President, the Chief Financial Officer, and (ii)
the Treasurer or any Assistant Treasurer, or the Secretary or any Assistant
Secretary.

          "Officers' Certificate" means a certificate signed by one Officer
listed in clause (i) of the definition thereof and one Officer listed in clause
(ii) of the definition thereof, or by two Officers listed in clause (i) of the
definition thereof. Each Officers' Certificate (other than certificates provided
pursuant to TIA Section 314(a)(4)) shall include the statements provided for in
TIA Section 314(e).

          "Offshore Global Note" has the meaning provided in Section 2.01.

          "Offshore Physical Notes" has the meaning provided in Section 2.01.

          "Opinion of Counsel" means a written opinion signed by legal counsel
who may be an employee of or counsel to the Company. Each such Opinion of
Counsel shall include the statements provided for in TIA Section 314(e) to the
extent required by law.

          "Pari Passu Indebtedness" has the meaning provided in Section 3.10.

          "Paying Agent" has the meaning provided in Section 2.04, except that,
for the purposes of Article Eight, the Paying Agent shall not be the Company or
a Subsidiary of the Company or an Affiliate of any of them. The term "Paying
Agent" includes any additional Paying Agent.

          "Payment Date" has the meaning specified in the definition of "Offer
to Purchase."

          "Permitted Holders" means (1) Marc Andreessen, Benjamin Horowitz, In
Sik Rhee, Timothy A. Howes, Benchmark Capital Management Co., and their
respective Affiliates and, (2) in the case of each of Marc Andreessen, Benjamin
Horowitz, In Sik Rhee and Timothy A. Howes, members of his immediate family and
his or their lineal descendants, any trust for his
<PAGE>

                                      17

or their benefit or controlled by him or them provided that each person in this
clause (2) other than Marc Andreessen, Benjamin Horowitz, In Sik Rhee and
Timothy A. Howes shall only be deemed a "Permitted Holder" to the extent such
person's capital stock of the Company was received, directly or indirectly, from
Marc Andreessen, Benjamin Horowitz, In Sik Rhee or Timothy A. Howes,
respectively.

          "Permitted Investment" means:

          (i)   an Investment in the Company or a Restricted Subsidiary or a
     Person which will, upon the making of such Investment, become a Restricted
     Subsidiary or be merged or consolidated with or into or transfer or convey
     all or substantially all its assets to, the Company or a Restricted
     Subsidiary; provided that such person's primary business is related,
     ancillary or complementary to the businesses of the Company and its
     Restricted Subsidiaries on the date of such Investment; and provided
     further that any Investment in a Foreign Subsidiary is reasonably related
     to the business of such Foreign Subsidiary conducted in jurisdictions other
     than the United States or any state, territory or political subdivision
     thereof, as determined in good faith by an officer of the Company, provided
     further that no Investments may be made under this clause (i) in a
     Restricted Subsidiary, other than a Subsidiary Guarantor (or a Person that
     will become such a Restricted Subsidiary) that has Acquired Indebtedness
     outstanding;

          (ii)  Temporary Cash Investments;

          (iii) payroll, travel, relocation and similar advances to cover
     matters that are expected at the time of such advances ultimately to be
     treated as expenses in accordance with GAAP and relocation loans in the
     ordinary course of business secured by real property;

          (iv)  Investments received in connection with the sale or disposition
     of a Person, asset or business;

          (v)   stock, obligations or securities received in satisfaction of
     judgments or the settlements of disputes or in connection with any
     bankruptcy or similar reorganization of the affairs of any Person;

          (vi)  Investments in prepaid expenses, negotiable instruments held for
     collection and lease, utility and worker's compensation, performance and
     other deposits;

          (vii) Interest Rate Agreements and Currency Agreements designed solely
     to protect the Company or its Restricted Subsidiaries against fluctuations
     in interest rates or foreign currency exchange rates;
<PAGE>

                                      18

          (viii) Strategic Investments; and

          (ix)   loans or advances to officers or employees of the Company or
     any Restricted Subsidiary that do not in the aggregate exceed $5 million at
     any time outstanding.

          "Permitted Liens" means:

          (i)    Liens for taxes, assessments, governmental charges or claims
     that are being contested in good faith by appropriate legal proceedings
     promptly instituted and diligently conducted and for which a reserve or
     other appropriate provision, if any, as shall be required in conformity
     with GAAP shall have been made;

          (ii)   statutory and common law Liens of landlords and carriers,
     warehousemen, mechanics, suppliers, materialmen, repairmen or other similar
     Liens arising in the ordinary course of business and with respect to
     amounts not overdue for a period in excess of 30 days or being contested in
     good faith by appropriate legal proceedings promptly instituted and
     diligently conducted and for which a reserve or other appropriate
     provision, if any, as shall be required in conformity with GAAP shall have
     been made;

          (iii)  Liens incurred or deposits made in the ordinary course of
     business in connection with workers' compensation, unemployment insurance
     and other types of social security;

          (iv)   Liens incurred or deposits made to secure the performance of
     tenders, bids, leases, statutory or regulatory obligations, bankers'
     acceptances, surety and appeal bonds, government contracts, performance and
     return-of-money bonds and other obligations of a similar nature incurred in
     the ordinary course of business (exclusive of obligations for the payment
     of borrowed money);

          (v)    easements, rights-of-way, municipal and zoning ordinances and
     similar charges, encumbrances, title defects or other irregularities that
     do not materially interfere with the ordinary course of business of the
     Company or any of its Restricted Subsidiaries;

          (vi)   leases or subleases granted to others that do not materially
     interfere with the ordinary course of business of the Company and its
     Restricted Subsidiaries, taken as a whole;

          (vii)  Liens encumbering property or assets under construction arising
     from progress or partial payments by a customer of the Company or its
     Restricted Subsidiaries relating to such property or assets;
<PAGE>

                                      19

          (viii)  any interest or title of a lessor in the property subject to
     any Capitalized Lease or operating lease;

          (ix)    Liens arising from filing Uniform Commercial Code financing
     statements regarding leases;

          (x)     Liens on property of, or on shares of Capital Stock or
     Indebtedness of, any Person existing at the time such Person becomes, or
     becomes a part of, any Restricted Subsidiary and Liens on property existing
     at the time of the acquisition thereof; provided that such Liens do not
     extend to or cover any property or assets of the Company or any Restricted
     Subsidiary other than the property or assets acquired;

          (xi)    Liens in favor of the Company or any Restricted Subsidiary;

          (xii)   Liens securing reimbursement obligations with respect to
     letters of credit that encumber documents and other property relating to
     such letters of credit and the products and proceeds thereof;

          (xiii)  Liens in favor of customs and revenue authorities arising as a
     matter of law to secure payment of customs duties in connection with the
     importation of goods;

          (xiv)   Liens encumbering customary initial deposits and margin
     deposits, and other Liens that are within the general parameters customary
     in the industry and incurred in the ordinary course of business, in each
     case, securing Indebtedness under Interest Rate Agreements and Currency
     Agreements and forward contracts, options, future contracts, futures
     options or similar agreements or arrangements designed solely to protect
     the Company or any of its Restricted Subsidiaries from fluctuations in
     interest rates, currencies or the price of commodities;

          (xv)    Liens arising out of conditional sale, title retention,
     consignment or similar arrangements for the sale of goods entered into by
     the Company or any of its Restricted Subsidiaries in the ordinary course of
     business;

          (xvi)   Liens on property or assets that secure Indebtedness with an
     aggregate principal amount not in excess of $5 million at any time
     outstanding; and

          (xvii)  Liens on or sales of receivables;

          (xviii) Liens arising from the rendering of a final judgment or order
     against the Company or any Restricted Subsidiary that do not give rise to
     an Event of Default;
<PAGE>

                                      20

                  (xix)  deposits made in the ordinary course of business to
         secure liability to insurance carriers, and Liens on the proceeds of
         insurance granted to insurance carriers solely to secure the payment of
         financed premiums;

                  (xx)   Liens arising by virtue of any common law, statutory or
         contractual provision relating to bankers' liens, rights of set-off or
         similar rights and remedies as to deposit or securities accounts
         maintained in the ordinary course of business;

                  (xxi)  Liens in favor of a trustee under any indenture
         securing amounts due to the trustee in connection with its services
         under such indenture; and

                  (xxii) Liens arising under licensing agreements for use of
         intellectual property entered into in the ordinary course of business.

                  "Person" means an individual, a corporation, a partnership, a
     limited liability company, an association, a trust or any other entity or
     organization, including a government or political subdivision or an agency
     or instrumentality thereof.

                  "Physical Notes" has the meaning provided in Section 2.01.

                  "Preferred Stock" means, with respect to any Person, any and
     all shares, interests, participations or other equivalents (however
     designated, whether voting or non-voting) of such Person's preferred or
     preference stock, whether now outstanding or issued after the date of this
     Indenture, including, without limitation, all series and classes of such
     preferred or preference stock.

                  "principal" of a debt security, including the Notes, means the
     principal amount due on the Stated Maturity as shown on such debt security.

                  "Private Placement Legend" means the legend initially set
     forth on the Notes in the form set forth in Section 2.02.

                  "Public Equity Offering" means an underwritten primary public
     offering of Common Stock of the Company pursuant to an effective
     registration statement under the Securities Act in which the Company
     receives gross proceeds (before deducting underwriters' discounts and
     commissions), of at least Fifty Million Dollars ($50,000,000); provided
     that a Public Equity Offering shall not be deemed to have occurred unless
     and until the Company shall have received aggregate gross proceeds from the
     sale of Common Stock (or Preferred Stock convertible into Common Stock so
     long as it has been converted into Common Stock) after the Closing Date of
     at least $100 million.

                  "QIB" means a "qualified institutional buyer" as defined in
     Rule 144A.
<PAGE>

                                      21

          "Redemption Date", when used with respect to any Note to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.

          "Redemption Price", when used with respect to any Note to be redeemed,
means the price at which such Note is to be redeemed pursuant to this Indenture.

          "Registrar" has the meaning provided in Section 2.04.

          "Registration" has the meaning provided in Section 3.18.

          "Registration Statement" means the Registration Statement as defined
and described in the Notes Registration Rights Agreement.

          "Regular Record Date" for the interest payable on any Interest Payment
Date means February 1 or August 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.

          "Regulation S" means Regulation S under the Securities Act.

          "Released Indebtedness" means, with respect to any Asset Sale, (i)
Indebtedness of the Company or any Restricted Subsidiary which is assumed by the
purchaser or any affiliate thereof in connection with such Asset Sale; provided
that the Company or such Restricted Subsidiary receives written, unconditional,
valid and enforceable releases from each creditor, no later than the closing
date of such Asset Sale and (ii) Indebtedness of a Restricted Subsidiary that is
no longer a Restricted Subsidiary as a result of such Asset Sale; provided that
neither the Company nor any other Restricted Subsidiary thereafter Guarantees
such Indebtedness.

          "Released Liabilities" has the meaning provided in Section 3.10.

          "Repurchase Offer" has the meaning provided in the Warrant Agreement
dated as of the Closing Date between the Company and State Street Bank and Trust
Company of California, N.A. relating to the Warrants.

          "Responsible Officer", when used with respect to the Trustee, means
any officer in the Corporate Trust Office of the Trustee or any other officer of
the Trustee customarily performing functions similar to those performed by any
of such officers and also means, with respect to a particular corporate trust
matter, any other officer of the Trustee to whom such matter is referred because
of his or her knowledge of and familiarity with the particular subject.

          "Restricted Payments" has the meaning provided in Section 3.04.
<PAGE>

                                      22

          "Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.

          "Rule 144A" means Rule 144A under the Securities Act.

          "Rule 144A Availability Date" means the date on which the offering
memorandum is available in accordance with Section 7.2 of the Unit Purchase
Agreement, dated as the Closing Date, by and between the Company and Morgan
Stanley & Co. Incorporated.

          "Security Register" has the meaning provided in Section 2.04.

          "Securities Act" means the Securities Act of 1933, as amended.

          "Semi-Annual Accrual Date" has the meaning specified in the definition
of "Accreted Value."

          "Separation Date" has the meaning provided in the recitals to this
Indenture.

          "Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Notes Registration Rights Agreement.

          "Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.

          "S&P" means Standard & Poor's Ratings Group, a division of The McGraw-
Hill Companies, and its successors.

          "Specified Date" means any Redemption Date, any Payment Date for an
Offer to Purchase or any date on which the Notes first become due and payable
after an Event of Default.

          "Stated Maturity" means (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
<PAGE>

                                      23

          "Strategic Investment" means an investment in any Person (other than
(x) an Unrestricted Subsidiary of the Company or (y) a Restricted Subsidiary (or
Person that will become a Restricted Subsidiary) that is not a Subsidiary
Guarantor that has Acquired Indebtedness outstanding) whose primary business is
related, ancillary or complementary to the business of the Company and its
Restricted Subsidiaries to promote or significantly benefit the businesses of
the Company and its Restricted Subsidiaries on the date of such Investment, in
each case as determined by the Board of Directors of the Company (such
determination shall be conclusive and evidenced by a Board Resolution).

          "Strategic Subordinated Indebtedness" means Indebtedness of the
Company Incurred to finance an Asset Acquisition, which Indebtedness by its
terms, or by the terms of any agreement or instrument pursuant to which such
Indebtedness is Incurred,

          (1)  is expressly made subordinate in right of payment to the Notes,
     and

          (2)  provides that no payment of principal or premium, or interest on
     or any other payment with respect to, such Indebtedness may be made prior
     to the payment in full of all of the Company's obligations under the Notes;
     provided that such Indebtedness may provide for and be repaid at any time
     from the proceeds of a capital contribution or the sale of Capital Stock
     (other than Disqualified Stock) of the Company after the Incurrence of such
     Indebtedness.

          "Subordinated Indebtedness" means Indebtedness of the Company or any
Subsidiary Guarantor as to which the payment of principal of (and premium, if
any) and interest and other payment obligations in respect of such Indebtedness
shall be subordinate to the prior payment in full of the Notes or the Note
Guarantee to at least the following extent:

          (1)  no payments of principal of (or premium, if any) or interest on,
     or otherwise due in respect of such Indebtedness, may be permitted for so
     long as any default in the payment of principal (or premium, if any) or
     interest on the Notes exists;

          (2)  in the event that any other default that with the passing of time
     or the giving of notice, or both, would constitute an Event of Default with
     respect to the Notes, upon notice by the holders of 25% or more in
     principal amount of the Notes to the Trustee, the Trustee shall have the
     right to give notice to the Company and the holders of such Indebtedness
     (or trustees or agents therefor) of a payment blockage, and thereafter no
     payments of principal of (or premium, if any) or interest on or otherwise
     due in respect of such Indebtedness may be made for a period of 179 days
     from the date of such notice; and

          (3)  such Indebtedness may not (x) provide for payments of principal
     of such Indebtedness at the Maturity thereof or by way of a sinking fund
     applicable thereto or by
<PAGE>

                                      24

     way of any mandatory redemption, defeasance, retirement or repurchase
     thereof by the Company or any Subsidiary Guarantor (including any
     redemption, retirement or repurchase which is contingent upon events or
     circumstances, but excluding any retirement required by virtue of
     acceleration of such Indebtedness upon an event of default thereunder), in
     each case prior to the final maturity date of the Notes or (y) permit
     redemption or other retirement (including pursuant to an offer to purchase
     made by the Company) of such other Indebtedness at the option of the holder
     thereof prior to the final maturity date of the Notes, other than a
     redemption or other retirement at the option of the holder of such
     Indebtedness (including pursuant to an offer to purchase made by the
     Company) which is conditioned upon a change of control of the Company
     pursuant to provisions substantially similar to a "Change of Control" and
     which shall provide that such Indebtedness will not be repurchased pursuant
     to such provisions prior to the Company's repurchase of the Notes required
     to be repurchased by the Company pursuant to Section 3.11; provided,
     however, that any Indebtedness which would constitute Subordinated
     Indebtedness but for provisions thereof giving holders thereof the right to
     require the Company or a Restricted Subsidiary to repurchase or redeem such
     Subordinated Indebtedness upon the occurrence of an asset sale occurring
     prior to the final maturity of the Notes shall not constitute Subordinated
     Indebtedness if such provisions applicable to such Subordinated
     Indebtedness are no more favorable to the holders of such Indebtedness than
     the provisions applicable to the Notes contained in Section 3.10 and such
     provisions applicable to such Indebtedness specifically provide that the
     Company and its Restricted Subsidiaries will not repurchase or redeem any
     such Indebtedness pursuant to such provisions prior to the repurchase of
     such Notes as are required to be repurchased pursuant to Section 3.10;
     provided that this clause (3) shall not apply to convertible Subordinated
     Indebtedness as long as the provisions for payment of principal and
     redemption at the option of the holder of such convertible Subordinated
     Indebtedness are at market terms in the written opinion of a nationally
     recognized investment bank.

          "Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.

          "Subsidiary Guarantor" means any Restricted Subsidiary that (i)
executes and delivers a supplemental indenture to this Indenture providing for a
Guarantee of payment of the Notes by such Restricted Subsidiary, and (ii) waives
and will not in any manner whatsoever claim or take the benefit or advantage of,
any rights of reimbursement, indemnity or subrogation or any other rights
against the Company or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Subsidiary Guarantee.

          "Temporary Cash Investment" means any of the following:
<PAGE>

                                      25

          (i)   direct obligations of the United States of America or any agency
     thereof or obligations fully and unconditionally guaranteed by the United
     States of America or any agency thereof with, except for U.S. Government
     Obligations deposited in a defeasance trust pursuant to Article Seven, with
     maturities of one year or less from the date of acquisition;

          (ii)  time deposit accounts, certificates of deposit, money market
     deposits and eurodollar time deposits maturing within one year of the date
     of acquisition thereof issued by a bank or trust company which is organized
     under the laws of the United States of America, any state thereof or any
     foreign country recognized by the United States of America, and which bank
     or trust company has capital, surplus and undivided profits aggregating in
     excess of $50 million (or the foreign currency equivalent thereof) and has
     outstanding debt which is rated "A" (or such similar equivalent rating) or
     higher by at least one nationally recognized statistical rating
     organization (as defined in Rule 436 under the Securities Act) or any
     money-market fund sponsored by a registered broker dealer or mutual fund
     distributor;

          (iii) repurchase obligations with a term of not more than 30 days for
     underlying securities of the types described in clauses (i) and (ii) above
     entered into with a financial institution meeting the qualifications
     described in clause (ii) above;

          (iv)  commercial paper, maturing not more than one year after the date
     of acquisition, issued by a corporation (other than an Affiliate of the
     Company) organized and in existence under the laws of the United States of
     America, any state thereof or any foreign country recognized by the United
     States of America with a rating at the time as of which any investment
     therein is made of "P-1" (or higher) according to Moody's or "A-1" (or
     higher) according to S&P;

          (v)   securities with maturities of one year or less from the date of
     acquisition issued or fully and unconditionally guaranteed by any state,
     commonwealth or territory of the United States of America, or by any
     political subdivision or taxing authority thereof, and rated at least "A"
     by S&P or Moody's; and

          (vi)  money market funds at least 95% of the assets of which
     constitute Temporary Cash Investments of the kinds described in clauses (i)
     through (v) of this definition;

provided that with respect to any Foreign Subsidiary, Temporary Cash Investments
shall also mean those investments that are comparable to clauses (i) through
(vi) above in such Foreign Subsidiary's country of organization or countries
where it conducts business operations.
<PAGE>

                                      26

The Trustee is hereby authorized, in making or disposing of any investment
permitted by this definition, to deal with itself (in its individual capacity)
or with any one or more of its Affiliates, whether it or such Affiliate is
acting as an agent of the Trustee or for any third person or dealing as
principal for its own account.

          "TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended (15 U.S. Code (S)(S) 77aaa-77bbb), as in effect on the date this
Indenture was executed, except as provided in Section 8.06.

          "Trade Payables" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries arising
in the ordinary course of business in connection with the acquisition of goods
or services.

          "Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.

          "Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) that
has become publicly available at least two Business Days prior to the Redemption
Date (or, if such Statistical Release is no longer published, any publicly
available source or similar market data)) most nearly equal to the period from
the Redemption Date to the Stated Maturity of the Notes; provided, however, that
if the period from the Redemption Date to the Stated Maturity of the Notes is
not equal to the constant maturity of the United States Treasury security for
which a weekly average yield is given, the Treasury Rate shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of the United States securities for which such yields are
given, except that if the period from the Redemption Date to the Stated Maturity
of the Notes is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.

          "Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article Six of this Indenture and thereafter means such successor.

          "Unit" has the meaning provided in the recitals to this Indenture.

          "United States Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as amended and as codified in Title 11 of the United States Code, as
amended from time to time hereafter, or any successor federal bankruptcy law.
<PAGE>

                                      27

          "U.S. Global Note" has the meaning provided in Section 2.01.

          "U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.

          "U.S. Physical Notes" has the meaning provided in Section 2.01.

          "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below; and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under Section 3.04 and (C) if
applicable, the Incurrence of Indebtedness and the Investment referred to in
clause (A) of this proviso would be permitted under Section 3.03 and Section
3.04. The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that (i) no Default or Event of Default shall
have occurred and be continuing at the time of or after giving effect to such
designation and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately after such designation would, if Incurred at such time,
have been permitted to be Incurred (and shall be deemed to have been Incurred)
for all purposes of this Indenture. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee
a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
<PAGE>

                                      28

          "Voting Stock" means with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.

          "Warrant" has the meaning provided in the recitals to this Indenture.

          "Wholly Owned" means, with respect to any Subsidiary of any Person,
the ownership of all of the outstanding Capital Stock of such Subsidiary (other
than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) by such Person or one or more Wholly Owned
Subsidiaries of such Person.

          SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
                        -------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:

          "indenture notes" means the Notes;

          "indenture note holder" means a Holder or a Noteholder;

          "indenture to be qualified" means this Indenture;

          "indenture trustee" or "institutional trustee" means the Trustee; and

          "obligor" on the indenture securities means the Company or any other
     obligor on the Notes.

          All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.

          SECTION 1.03. Rules of Construction. Unless the context otherwise
                        ---------------------
requires:

          (i)   a term has the meaning assigned to it;

          (ii)  an accounting term not otherwise defined has the meaning
     assigned to it in accordance with GAAP;

          (iii) "or" is not exclusive;

          (iv)  words in the singular include the plural, and words in the
     plural include the singular;
<PAGE>

                                      29

                  (v)      provisions apply to successive events and
         transactions;

                  (vi)     "herein," "hereof" and other words of similar import
         refer to this Indenture as a whole and not to any particular Article,
         Section or other subdivision;

                  (vii)    all computations based on GAAP contained in this
         Indenture shall be computed in accordance with the definition of GAAP
         set forth in Section 1.01; and

                  (viii)   all references to Sections or Articles refer to
         Sections or Articles of this Indenture unless otherwise indicated.

                                  ARTICLE TWO
                                   THE NOTES

                  SECTION  2.01.  Form and Dating.  The Notes and the Trustee's
                                  ---------------
certificate of authentication shall be substantially in the form annexed hereto
as Exhibit A with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture. The Notes may
have notations, legends or endorsements required by law, stock exchange or
securities depository agreements to which the Company is subject or usage. The
Company shall approve the form of the Notes and any notation, legend or
endorsement on the Notes. Each Note shall be dated the date of its
authentication.

                  The terms and provisions contained in the form of the Notes
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.

                  Notes issued and sold to Morgan Stanley & Co. Incorporated
pursuant to the terms of the Unit Purchase Agreement by and among the Company
and Morgan Stanley & Co. Incorporated and dated February 6, 2000, and Notes
transferred to Institutional Accredited Investors pursuant to Section 2.08(a)
shall be issued in the form of permanent certificated Notes in registered form
in substantially the form set forth in Exhibit A (the "U.S. Physical Notes").
                                                       -------------------

                  Following the Rule 144A Availability Date, Notes transferred
in reliance on Rule 144A shall be issued in the form of one or more permanent
global Notes in registered form, substantially in the form set forth in Exhibit
A (collectively, the "U.S. Global Notes"), deposited with the Trustee, as
                      -----------------
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided.

                  Following (i) the Rule 144A Availability Date, and (ii) the
Separation Date, Notes transferred in offshore transactions in reliance on
Regulation S shall be issued in the form of one
<PAGE>

                                      30

or more global Notes in registered form substantially in the form set forth in
Exhibit A (the "Offshore Global Notes") deposited with the Trustee, as custodian
                ---------------------
for the Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided.

                  Notes issued pursuant to Section 2.07 in exchange for
interests in the Offshore Global Note shall be in the form of permanent
certificated Notes in registered form substantially in the form set forth in
Exhibit A (the "Offshore Physical Notes").
                -----------------------

                  The Offshore Physical Notes and U.S. Physical Notes are
sometimes collectively herein referred to as the "Physical Notes". The U.S.
                                                  --------------
Global Notes and the Offshore Global Notes are sometimes referred to herein as
the "Global Notes".
     ------------

                  The aggregate principal amount of the Global Notes may from
time to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.

                  The definitive Notes shall be typed, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the Officers executing such Notes, as
evidenced by their execution of such Notes.

                  SECTION 2.02. Restrictive Legends. Unless and until a Note is
                                -------------------
exchanged for an Exchange Note or sold in connection with an effective
Registration pursuant to the Notes Registration Rights Agreement, the U.S.
Global Notes and each U.S. Physical Note shall bear the following legend on the
face thereof:

         THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
         1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
         OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
         BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
         BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
         "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
         SECURITIES ACT), OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" AS
         DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
         SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS
         NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION
         IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
         THAT IT WILL NOT, WITHIN TWO YEARS AFTER THE INITIAL SALE OF THE NOTES,
         RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO LOUDCLOUD, INC.
         (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) AFTER THE RULE 144A
         AVAILABILITY DATE, TO A QUALIFIED
<PAGE>

                                      31

         INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
         ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
         INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
         SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
         RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF
         WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS
         IN RESPECT OF AN AGGREGATE ACCRETED VALUE OF NOTES AT THE TIME OF
         TRANSFER OF LESS THAN $500,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE
         COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT,
         (D) AFTER THE RULE 144A AVAILABILITY DATE AND THE SEPARATION DATE,
         OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
         RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
         REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
         AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
         THE SECURITIES ACT, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
         TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
         OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE
         TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE
         BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
         TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED
         TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
         PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
         CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
         MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
         PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
         REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
         TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE
         THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
         THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
         REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
         RESTRICTIONS.

                  Each Global Note, whether or not an Exchange Note, shall also
bear the following legend on the face thereof:

         UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
         THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR
         REGISTRATION OF TRANSFER, EXCHANGE
<PAGE>

                                      32

         OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
         CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
         REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER
         REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
         REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
         COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER
         ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
         DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
         VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
         OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

         TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
         BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
         SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE
         SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
         SET FORTH IN SECTION 2.08 OF THE INDENTURE.

                  Prior to the Separation Date, each Note shall bear the
following legend on the face thereof:

         THIS NOTE IS INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF
         WHICH CONSISTS OF ONE NOTE AND ONE WARRANT INITIALLY ENTITLING THE
         HOLDER THEREOF TO PURCHASE 35.39448485 SHARES OF COMMON STOCK, PAR
         VALUE $0.001 PER SHARE, OF LOUDCLOUD, INC. (A "WARRANT"). PRIOR TO THE
         CLOSE OF BUSINESS UPON THE EARLIEST TO OCCUR OF (i) AUGUST 9, 2000,
         (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE NOTES,
         (iii) THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT WITH RESPECT
         TO THE NOTES OR (iv) A REDEMPTION DATE OR (v) SUCH DATE AS DETERMINED
         BY MORGAN STANLEY & CO. INCORPORATED IN ITS SOLE DISCRETION, THE NOTES
         EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED
         SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER
         WITH, THE WARRANTS.

                  SECTION 2.03.  Execution, Authentication and Denominations.
                                 -------------------------------------------
Subject to Article Three, the aggregate principal amount at maturity of Notes
which may be authenticated and delivered under this Indenture is unlimited. The
Notes shall be executed by two Officers of the Company. The signature of any of
these Officers on the Notes may be by facsimile or manual signature in the name
and on behalf of the Company.
<PAGE>

                                      33

                  If an Officer whose signature is on a Note no longer holds
that office at the time the Trustee or authenticating agent authenticates the
Note, the Note shall be valid nevertheless.

                  A Note shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.

                  At any time and from time to time after the execution of this
Indenture, the Trustee or an authenticating agent shall upon receipt of a
Company Order authenticate for original issue Notes in the aggregate principal
amount specified in such Company Order; provided that the Trustee shall be
entitled to receive an Officers' Certificate and an Opinion of Counsel of the
Company in connection with such authentication of Notes. Such Company Order
shall specify the amount of Notes to be authenticated and the date on which the
original issue of Notes is to be authenticated and in case of an issuance of
Notes pursuant to Section 2.15, shall certify that such issuance is in
compliance with Article Three.

                  The Trustee may appoint an authenticating agent to
authenticate Notes. An authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such authenticating agent. An authenticating
agent has the same rights as an Agent to deal with the Company or an Affiliate
of the Company.

                  The Notes shall be issuable only in registered form without
coupons and only in denominations of $1,000 in principal amount at maturity and
any integral multiple of $1,000 in excess thereof.

                  SECTION 2.04.  Registrar and Paying Agent.  The Company shall
                                 --------------------------
maintain an office or agency where Notes may be presented for registration of
transfer or for exchange (the "Registrar"), an office or agency where Notes may
                               ---------
be presented for payment (the "Paying Agent") and an office or agency where
                               ------------
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served, which shall be in the Borough of Manhattan, The City of
New York. The Company shall cause the Registrar to keep a register of the Notes
and of their transfer and exchange (the "Security Register"). The Company may
                                         -----------------
have one or more co-Registrars and one or more additional Paying Agents.

                  The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall give
prompt written notice to the Trustee of the name and address of any such Agent
and any change in the address of such Agent. If the Company fails to maintain a
Registrar, Paying Agent and/or agent for service of notices and demands, the
Trustee shall act as such Registrar, Paying Agent and/or agent for service of
notices and demands. The Company may remove any Agent upon written notice to
such Agent and the
<PAGE>

                                      34

Trustee; provided that no such removal shall become effective until (i) the
acceptance of an appointment by a successor Agent to such Agent as evidenced by
an appropriate agency agreement entered into by the Company and such successor
Agent and delivered to the Trustee or (ii) notification to the Trustee that the
Trustee shall serve as such Agent until the appointment of a successor Agent in
accordance with clause (i) of this proviso. The Company, any Subsidiary of the
Company, or any Affiliate of any of them may act as Paying Agent, Registrar or
co-Registrar, and/or agent for service of notice and demands.

                  The Company initially appoints the Trustee as Registrar,
Paying Agent, authenticating agent and agent for service of notice and demands.
The Trustee shall preserve in as current a form as is reasonably practicable the
most recent list available to it of the names and addresses of Holders and shall
otherwise comply with TIA (S) 312(a). If, at any time, the Trustee is not the
Registrar, the Registrar shall make available to the Trustee on or before each
Interest Payment Date and at such other times as the Trustee may reasonably
request, the names and addresses of the Holders as they appear in the Security
Register.

                  SECTION 2.05.  Paying Agent to Hold Money in Trust.  Not later
                                 -----------------------------------
than 10:30 a.m. Eastern Time, on each due date of the principal, premium, if
any, and interest on any Notes, the Company shall deposit with the Paying Agent
money in immediately available funds sufficient to pay such principal, premium,
if any, and interest so becoming due. The Company shall require each Paying
Agent other than the Trustee to agree in writing that such Paying Agent shall
hold in trust for the benefit of the Holders or the Trustee all money held by
the Paying Agent for the payment of principal of, premium, if any, and interest
on the Notes (whether such money has been paid to it by the Company or any other
obligor on the Notes), and such Paying Agent shall promptly notify the Trustee
of any default by the Company (or any other obligor on the Notes) in making any
such payment. The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee and account for any funds disbursed, and the
Trustee may at any time during the continuance of any payment default, upon
written request to a Paying Agent, require such Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed. Upon doing so,
the Paying Agent shall have no further liability for the money so paid over to
the Trustee. If the Company or any Subsidiary of the Company or any Affiliate of
any of them acts as Paying Agent, it will, on or before each due date of any
principal of, premium, if any, or interest on the Notes, segregate and hold in a
separate trust fund for the benefit of the Holders a sum of money sufficient to
pay such principal, premium, if any, or interest so becoming due until such sum
of money shall be paid to such Holders or otherwise disposed of as provided in
this Indenture, and will promptly notify the Trustee of its action or failure to
act.

                  SECTION 2.06.  Transfer and Exchange.  The Notes are issuable
                                 ---------------------
only in registered form. The Notes shall initially be issued as part of an issue
of Units, each of which consists of one Note and one Warrant. Prior to the
Separation Date, the Notes may not be transferred or exchanged separately from,
but may be transferred or exchanged only together with, the Warrants issued in
connection with the Notes. A Holder may transfer a Note only by
<PAGE>

                                      35

written application to the Registrar stating the name of the proposed transferee
and otherwise complying with the terms of this Indenture. No such transfer shall
be effected until, and such transferee shall succeed to the rights of a Holder
only upon, final acceptance and registration of the transfer by the Registrar in
the Security Register. Prior to the registration of any transfer by a Holder as
provided herein, the Company, the Trustee, and any agent of the Company shall
treat the person in whose name the Note is registered as the owner thereof for
all purposes whether or not the Note shall be overdue, and neither the Company,
the Trustee, nor any such agent shall be affected by notice to the contrary.
Furthermore, any Holder of a Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent) and that ownership of a beneficial interest in the
Note shall be required to be reflected in a book entry. When Notes are presented
to the Registrar or a co-Registrar with a request to register the transfer or to
exchange them for an equal principal amount of Notes of other authorized
denominations (including an exchange of Notes for Exchange Notes), the Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transactions are met; provided that no exchanges of Notes
for Exchange Notes shall occur until a Registration Statement shall have been
declared effective by the Commission and that any Notes that are exchanged for
Exchange Notes shall be canceled by the Trustee. To permit registrations of
transfers and exchanges in accordance with the terms hereof, the Company shall
execute and the Trustee shall authenticate Notes at the Registrar's request. No
service charge shall be made for any registration of transfer or exchange or
redemption of the Notes, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or other similar governmental
charge payable upon exchanges pursuant to Section 2.11 or 8.04).

                  The Registrar shall not be required (i) to issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the date of the mailing of a notice of redemption of
Notes selected for redemption under Section 10.03 and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of or
exchange any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.

                  SECTION 2.07.  Book-Entry Provisions for Global Notes. (a) The
                                 --------------------------------------
U.S. Global Note and Offshore Global Note initially shall (i) be registered in
the name of the Depositary for such Global Notes or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such Depositary
and (iii) bear legends as set forth in Section 2.02.

                  Members of, or participants in, the Depositary ("Agent
                                                                   -----
Members") shall have no rights under this Indenture with respect to any Global
-------
Note held on their behalf by the Depositary, or the Trustee as its custodian, or
under the Global Note, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing
<PAGE>

                                      36

herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.

                  (b) Transfers of a Global Note shall be limited to transfers
of such Global Note in whole, but not in part, to the Depositary, its successors
or their respective nominees. Interests of beneficial owners in a Global Note
may be transferred in accordance with the rules and procedures of the Depositary
and the provisions of Section 2.08. In addition, U.S. Physical Notes and
Offshore Physical Notes shall be transferred to all beneficial owners in
exchange for their beneficial interests in the U.S. Global Note or the Offshore
Global Note, respectively, (i) if the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for the U.S. Global Note or the
Offshore Global Note, as the case may be, and a successor depositary is not
appointed by the Company within 90 days of such notice, (ii) if an Event of
Default has occurred and is continuing and the Registrar has received a request
therefor from the Depositary or (iii) in accordance with the rules and
procedures of the Depositary and the provisions of Section 2.08.

                  (c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.

                  (d) In connection with any transfer of a portion of the
beneficial interests in a Global Note to beneficial owners pursuant to paragraph
(b) of this Section, the Registrar shall reflect on its books and records the
date and a decrease in the principal amount of the Global Note in an amount
equal to the principal amount of the beneficial interest in the Global Note to
be transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more U.S. Physical Notes or Offshore Physical
Notes, as the case may be, of like tenor and amount.

                  (e) In connection with the transfer of the entire U.S. Global
Note or Offshore Global Note to beneficial owners pursuant to paragraph (b) of
this Section, the U.S. Global Note or Offshore Global Note, as the case may be,
shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and make available for
delivery, to each beneficial owner identified by the Depositary in exchange for
its beneficial interest in the U.S. Global Note or Offshore Global Note, as the
case may be, an equal aggregate principal amount of U.S. Physical Notes or
Offshore Physical Notes, as the case may be, of authorized denominations.
<PAGE>

                                      37

                  (f) Any U.S. Physical Note delivered in exchange for an
interest in the U.S. Global Note pursuant to paragraph (b), (d) or (e) of this
Section shall, except as otherwise provided by paragraph (e) of Section 2.08,
bear the legend regarding transfer restrictions applicable to the U.S. Physical
Note set forth in Section 2.02.

                  (g) Any Offshore Physical Note delivered in exchange for an
interest in the Offshore Global Note pursuant to paragraph (b), (d) or (e) of
this Section shall, except as otherwise provided by paragraph (e) of Section
2.08, bear the legend regarding transfer restrictions applicable to the Offshore
Physical Note set forth in Section 2.02.

                  (h) The registered holder of a Global Note may grant proxies
and otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.

                  SECTION 2.08. Special Transfer Provisions.  Unless and until a
                                ---------------------------
Note is exchanged for an Exchange Note or sold in connection with an effective
Registration Statement pursuant to the Notes Registration Rights Agreement, the
following provisions shall apply:

                  (a)  Transfers to Institutional Accredited Investors.  The
                       -----------------------------------------------
         following  provisions  shall apply with respect to the  registration of
         any proposed transfer of a Note to any Institutional Accredited
         Investor unless the transfer is governed by Section 2.08(b), (c) or
         (d):

                       (i)  The Registrar shall register the transfer of any
                  Note, whether or not such Note bears the Private Placement
                  Legend, if (x) the requested transfer is after the time period
                  referred to in Rule 144(k) under the Securities Act or (y) the
                  proposed transferee has delivered to the Registrar (A) a
                  certificate substantially in the form of Exhibit C hereto and
                  (B) if the aggregate Accreted Value of the Notes at the time
                  of transfer is less than $500,000, an opinion of counsel
                  acceptable to the Company that such transfer is in compliance
                  with the Securities Act.

                       (ii) If the proposed transferor is an Agent Member
                  holding a beneficial interest in the U.S. Global Note, upon
                  receipt by the Registrar of (x) the documents, if any,
                  required by paragraph (i) and (y) instructions given in
                  accordance with the Depositary's and the Registrar's
                  procedures, the Registrar shall reflect on its books and
                  records the date and a decrease in the principal amount at
                  maturity of the U.S. Global Note in an amount equal to the
                  principal amount at maturity of the beneficial interest in the
                  U.S. Global Note to be transferred, and the Company shall
                  execute, and the Trustee shall authenticate and make available
                  for delivery, one or more U.S. Physical Certificates of like
                  tenor and amount.
<PAGE>

                                      38

                  (b) Transfers to QIBs. The following provisions shall apply
                      -----------------
         with respect to the registration of any proposed transfer of a U.S.
         Physical Note or an interest in the U.S. Global Note to a QIB unless
         the transfer is governed by Section 2.08(c) or (d):

                      (i)  Following the Rule 144A Availability Date, if the
                  Note to be transferred consists of (x) U.S. Physical Notes,
                  the Registrar shall register the transfer if such transfer is
                  being made by a proposed transferor who has checked the box
                  provided for on the form of Note stating, or has otherwise
                  advised the Company and the Registrar in writing, that the
                  sale has been made in compliance with the provisions of Rule
                  144A to a transferee who has signed the certification provided
                  for on the form of Note stating, or has otherwise advised the
                  Company and the Registrar in writing, that it is purchasing
                  the Note for its own account or an account with respect to
                  which it exercises sole investment discretion and that it and
                  any such account is a QIB within the meaning of Rule 144A, and
                  is aware that the sale to it is being made in reliance on Rule
                  144A and acknowledges that it has received such information
                  regarding the Company as it has requested pursuant to Rule
                  144A or has determined not to request such information and
                  that it is aware that the transferor is relying upon its
                  foregoing representations in order to claim the exemption from
                  registration provided by Rule 144A or (y) an interest in the
                  U.S. Global Note, the transfer of such interest may be
                  effected only through the book entry system maintained by the
                  Depositary.

                      (ii) If the proposed transferee is an Agent Member, and
                  the Note to be transferred consists of U.S. Physical Notes,
                  upon receipt by the Registrar of the documents referred to in
                  clause (i) and instructions given in accordance with the
                  Depositary's and the Registrar's procedures, the Registrar
                  shall reflect on its books and records the date and an
                  increase in the principal amount at maturity of the U.S.
                  Global Note in an amount equal to the principal amount at
                  maturity of the U.S. Physical Notes, to be transferred, and
                  the Trustee shall cancel the U.S. Physical Note so
                  transferred.

                  (c) Transfers of Interests in the Offshore Global Note or
                      -----------------------------------------------------
         Unlegended Offshore Physical Notes. The following provisions shall
         ----------------------------------
         apply with respect to any transfer of interests in the Offshore Global
         Note or unlegended Offshore Physical Notes. The Registrar shall
         register the transfer of any such Note without requiring any additional
         certification.

                  (d) Transfers to Non-U.S. Persons.  The following provisions
                      -----------------------------
         shall apply with respect to any transfer of a Note to a Non-U.S.
         Person:

                      (i) Following (i) the Rule 144A Availability Date and (ii)
                  the Separation Date, the Registrar shall register any proposed
                  transfer of a Note to a
<PAGE>

                                      39

                  Non-U.S. Person upon receipt of a certificate substantially in
                  the form of Exhibit D hereto from the proposed transferor.

                           (ii)  (a)  If the proposed transferor is an Agent
                  Member holding a beneficial interest in the U.S. Global Note,
                  upon receipt by the Registrar of (x) the documents, if any,
                  required by paragraph (i) and (y) instructions in accordance
                  with the Depositary's and the Registrar's procedures, the
                  Registrar shall reflect on its books and records the date and
                  a decrease in the principal amount at maturity of the U.S.
                  Global Note in an amount equal to the principal amount at
                  maturity of the beneficial interest in the U.S. Global Note to
                  be transferred, and (b) if the proposed transferee is an Agent
                  Member, upon receipt by the Registrar of instructions given in
                  accordance with the Depositary's and the Registrar's
                  procedures, the Registrar shall reflect on its books and
                  records the date and an increase in the principal amount at
                  maturity of the Offshore Global Note in an amount equal to the
                  principal amount at maturity of the U.S. Physical Notes or the
                  U.S. Global Note, as the case may be, to be transferred, and
                  the Trustee shall cancel the Physical Note, if any, so
                  transferred or decrease the amount of the U.S. Global Note.

                  (e) Private Placement Legend. Upon the transfer, exchange or
                      ------------------------
         replacement of Notes not bearing the Private Placement Legend, the
         Registrar shall deliver Notes that do not bear the Private Placement
         Legend. Upon the transfer, exchange or replacement of Notes bearing the
         Private Placement Legend, the Registrar shall deliver only Notes that
         bear the Private Placement Legend unless either (i) the circumstances
         contemplated by paragraphs (a)(i)(x) or (d)(i) of this Section 2.08
         exist or (ii) there is delivered to the Registrar an Opinion of Counsel
         reasonably satisfactory to the Company and the Trustee to the effect
         that neither such legend nor the related restrictions on transfer are
         required in order to maintain compliance with the provisions of the
         Securities Act.

                  (f) General. By its acceptance of any Note bearing the Private
                      -------
         Placement Legend, each Holder of such a Note acknowledges the
         restrictions on transfer of such Note set forth in this Indenture and
         in the Private Placement Legend and agrees that it will transfer such
         Note only as provided in this Indenture. The Registrar shall not
         register a transfer of any Note unless such transfer complies with the
         restrictions on transfer of such Note set forth in this Indenture. In
         connection with any transfer of Notes, each Holder agrees by its
         acceptance of the Notes to furnish the Registrar or the Company such
         certifications, legal opinions or other information as either of them
         may reasonably require to confirm that such transfer is being made
         pursuant to an exemption from, or a transaction not subject to, the
         registration requirements of the Securities Act; provided that the
         Registrar shall not be required to determine (but may rely on a
         determination made by the Company with respect to) the sufficiency of
         any such certifications, legal opinions or other information.
<PAGE>

                                      40

                  The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.07 or this Section
2.08. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.

                  SECTION  2.09.  Replacement Notes.  If a mutilated Note is
                                  -----------------
surrendered to the Trustee or if the Holder claims that the Note has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Note of like tenor and amount and bearing a number
not contemporaneously outstanding; provided that the requirements of this
Section 2.09 are met. If required by the Trustee or the Company, an indemnity
bond must be furnished that is sufficient in the judgment of both the Trustee
and the Company to protect the Company, the Trustee or any Agent from any loss
that any of them may suffer if a Note is replaced. The Company may charge such
Holder for its expenses and the expenses of the Trustee in replacing a Note. In
case any such mutilated, lost, destroyed or wrongfully taken Note has become or
is about to become due and payable, the Company in its discretion may pay such
Note instead of issuing a new Note in replacement thereof.

                  Every replacement Note is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.

                  SECTION 2.10. Outstanding Notes. Notes outstanding at any time
                                -----------------
are all Notes that have been authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described in
this Section 2.10 as not outstanding.

                  If a Note is replaced pursuant to Section 2.09, it ceases to
be outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Note is held by a bona fide purchaser.

                  If the Paying Agent (other than the Company or an Affiliate of
the Company) holds on the maturity date money sufficient to pay Notes payable on
that date, then on and after that date such Notes cease to be outstanding and
interest on them shall cease to accrue.

                  A Note does not cease to be outstanding because the Company or
one of its Affiliates holds such Note, provided, however, that, in determining
whether the Holders of the requisite principal amount of the outstanding Notes
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder, Notes owned by the Company or any other obligor upon the Notes
or any Affiliate of the Company or of such other obligor shall be disregarded
and deemed not to be outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes which a
Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's
<PAGE>

                                      41

right so to act with respect to such Notes and that the pledgee is not the
Company or any other obligor upon the Notes or any Affiliate of the Company or
of such other obligor.

          SECTION 2.11. Temporary Notes. Until definitive Notes are ready for
                        ---------------
delivery, the Company may prepare and the Trustee shall authenticate temporary
Notes. Temporary Notes shall be substantially in the form of definitive Notes
but may have insertions, substitutions, omissions and other variations
determined to be appropriate by the Officers executing the temporary Notes, as
evidenced by their execution of such temporary Notes. If temporary Notes are
issued, the Company will cause definitive Notes to be prepared without
unreasonable delay. After the preparation of definitive Notes, the temporary
Notes shall be exchangeable for definitive Notes upon surrender of the temporary
Notes at the office or agency of the Company designated for such purpose
pursuant to Section 3.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Notes the Company shall execute and
the Trustee shall authenticate and make available for delivery in exchange
therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall be entitled to the
same benefits under this Indenture as definitive Notes.

          SECTION 2.12. Cancellation. The Company at any time may deliver to the
                        ------------
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee for cancellation any Notes previously authenticated
hereunder which the Company has not issued and sold. The Registrar and the
Paying Agent shall forward to the Trustee any Notes surrendered to them for
transfer, exchange or payment. The Trustee shall cancel all Notes surrendered
for transfer, exchange, payment or cancellation in accordance with its normal
procedure.

          SECTION 2.13. CUSIP Numbers. The Company in issuing the Notes may use
                        -------------
"CUSIP", "CINS" or "ISIN" numbers (if then generally in use), and the Trustee
shall use CUSIP, CINS or ISIN numbers, as the case may be, in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice shall state that no representation is made as to the correctness of such
numbers either as printed on the Notes or as contained in any notice of
redemption or exchange and that reliance may be placed only on the other
identification numbers printed on the Notes, and any such redemption shall not
be affected by any defect or omission of such numbers. The Company will promptly
notify the Trustee of any change in the "CUSIP", "CINS" or "ISIN" numbers.

          SECTION 2.14. Defaulted Interest. If the Company defaults in a payment
                        ------------------
of interest on the Notes, it shall pay, or shall deposit with the Paying Agent
money in immediately available funds sufficient to pay the defaulted interest,
plus (to the extent lawful) any interest payable on the defaulted interest, to
the Persons who are Holders on a subsequent special record date. A special
record date, as used in this Section 2.14 with respect to the payment of any
defaulted interest, shall mean the 15th day next preceding the date fixed by the
Company for the payment of defaulted interest, whether or not such day is a
Business Day. At least 15 days before
<PAGE>

                                      42

the subsequent special record date, the Company shall mail to each Holder and to
a Responsible Officer of the Trustee a notice that states the subsequent special
record date, the payment date and the amount of defaulted interest to be paid.

          SECTION 2.15. Issuance of Additional Notes. The Company may, subject
                        ----------------------------
to Article Three of this Indenture, issue additional Notes under this Indenture.
The Notes issued on the Closing Date and any additional Notes subsequently
issued shall be treated as a single class for all purposes under this Indenture.

                                 ARTICLE THREE
                                   COVENANTS

          SECTION 3.01. Payment of Notes. The Company shall pay the principal
                        ----------------
of, premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes and this Indenture. An installment of principal, premium,
if any, or interest shall be considered paid on the date due if the Trustee or
Paying Agent (other than the Company, a Subsidiary of the Company, or any
Affiliate of any of them) holds on that date money designated for and sufficient
to pay the installment. If the Company or any Subsidiary of the Company or any
Affiliate of any of them, acts as Paying Agent, an installment of principal,
premium, if any, or interest shall be considered paid on the due date if the
entity acting as Paying Agent complies with the last sentence of Section 2.05.
As provided in Section 5.09, upon any bankruptcy or reorganization procedure
relative to the Company, the Trustee shall serve as the Paying Agent and
conversion agent, if any, for the Notes.

          The Company shall pay interest on overdue principal, premium, if any,
and interest on overdue installments of interest, to the extent lawful, at the
rate per annum specified in the Notes.

          SECTION 3.02. Maintenance of Office or Agency. The Company will
                        -------------------------------
maintain in the Borough of Manhattan, The City of New York an office or agency
where Notes may be surrendered for registration of transfer or exchange or for
presentation for payment and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 9.02.

          The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided
that no such designation or rescission shall
<PAGE>

                                      43

in any manner relieve the Company of its obligation to maintain an office or
agency in the Borough of Manhattan, The City of New York for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.

          The Company hereby initially designates the Corporate Trust Office of
State Street Bank and Trust Company, N.A., an Affiliate of the Trustee, located
in the Borough of Manhattan, The City of New York, as such office of the Company
in accordance with Section 2.04.

          SECTION 3.03. Limitation on Indebtedness. (a) The Company will not,
                        --------------------------
and will not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness (other than the Notes and Indebtedness existing on the Closing
Date); provided that the Company or any Subsidiary Guarantor may Incur
Indebtedness if, after giving effect to the Incurrence of such Indebtedness and
the receipt and application of the proceeds therefrom, the Consolidated Leverage
Ratio would be greater than zero and less than 6:1.

          Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries (except as specified below) may Incur each and all of the
following:

          (i)   Indebtedness of the Company or any Subsidiary Guarantor
     outstanding at any time in an aggregate principal amount not to exceed the
     greater of (a) $50 million less any amount of such Indebtedness permanently
     paid as provided under Section 3.10; and (b) 85% of consolidated revenues
     of the Company and its Restricted Subsidiaries for the most recently ended
     fiscal quarter for which financial information is available; provided that
     revenues of Foreign Subsidiaries shall be excluded to the extent used to
     Incur Indebtedness under clause (xi) below;

          (ii)  Indebtedness owed (A) to the Company evidenced by a promissory
     note or (B) to any Restricted Subsidiary; provided that any event which
     results in any such Restricted Subsidiary ceasing to be a Restricted
     Subsidiary or any subsequent transfer of such Indebtedness (other than to
     the Company or another Restricted Subsidiary) shall be deemed, in each
     case, to constitute an Incurrence of such Indebtedness not permitted by
     this clause (ii);

          (iii)  Indebtedness issued in exchange for, or the net proceeds of
     which are used to refinance or refund, then outstanding Indebtedness (other
     than Indebtedness Incurred under clause (i), (ii), (iv), (vi), (viii), (xi)
     or (xii) of this paragraph of this Section 3.03, it being understood
     Indebtedness Incurred under any of such clauses may be refinanced under
     such clauses) and any refinancings thereof in an amount not to exceed the
     amount so refinanced or refunded (plus premiums, accrued interest, any
     fees, costs, expenses, underwriting discounts or commissions paid or
     payable with respect to the Indebtedness
<PAGE>

                                      44

     Incurred pursuant to this clause (iii)); provided that (a) Indebtedness the
     proceeds of which are used to refinance or refund the Notes or Indebtedness
     that is pari passu with, or subordinated in right of payment to, the Notes
     or any Subsidiary Guarantee shall only be permitted under this clause (iii)
     if (x) in case the Notes are refinanced in part or the Indebtedness to be
     refinanced is pari passu with the Notes, such new Indebtedness, by its
     terms or by the terms of any agreement or instrument pursuant to which such
     new Indebtedness is outstanding, is expressly made pari passu with, or
     subordinate in right of payment to, the remaining Notes or the Subsidiary
     Guarantee, or (y) in case the Indebtedness to be refinanced is subordinated
     in right of payment to the Notes or a Subsidiary Guarantee, such new
     Indebtedness, by its terms or by the terms of any agreement or instrument
     pursuant to which such new Indebtedness is issued or remains outstanding,
     is expressly made subordinate in right of payment to the Notes or such
     Subsidiary Guarantee at least to the extent that the Indebtedness to be
     refinanced is subordinated to the Notes or such Subsidiary Guarantee, (b)
     such new Indebtedness, determined as of the date of Incurrence of such new
     Indebtedness, does not mature prior to the Stated Maturity of the
     Indebtedness to be refinanced or refunded and the Average Life of such new
     Indebtedness is at least equal to the remaining Average Life of the
     Indebtedness to be refinanced or refunded; and (c) such new Indebtedness is
     Incurred by the Company or by the Restricted Subsidiary who is the obligor
     on the Indebtedness to be refinanced or refunded;

          (iv) Indebtedness (A) in respect of performance, surety or appeal or
     similar bonds, competition or similar guarantees provided in the ordinary
     course of business, and (B) arising from agreements providing for
     indemnification, adjustment of purchase price or similar obligations, or
     from Guarantees or letters of credit, surety bonds or performance bonds
     securing any obligations of the Company or any of its Restricted
     Subsidiaries pursuant to such agreements, in any case Incurred in
     connection with the disposition of any business, assets or Restricted
     Subsidiary (other than Guarantees of Indebtedness Incurred by any Person
     acquiring all or any portion of such business, assets or Restricted
     Subsidiary for the purpose of financing such acquisition), in a principal
     amount not to exceed the gross proceeds actually received by the Company or
     any Restricted Subsidiary in connection with such disposition;

          (v)  Indebtedness of the Company or any Subsidiary Guarantor to the
     extent the net proceeds thereof are promptly (A) used to purchase Notes
     tendered in an Offer to Purchase made as a result of a Change in Control or
     (B) deposited to defease the Notes as set forth in Article Seven;

          (vi) Guarantees of the Notes and Guarantees of Indebtedness of the
     Company or any Subsidiary Guarantor by any Restricted Subsidiary provided
     the Guarantee of such Indebtedness is permitted by and made in accordance
     with Section 3.07;
<PAGE>

                                      45

          (vii)  Indebtedness (including Guarantees) of the Company, any
     Subsidiary Guarantor or any Foreign Subsidiary Incurred to finance the cost
     (including the cost of design, development, acquisition, construction,
     installation, improvement, transportation or integration) to acquire
     telecommunications and data transmission equipment, computer-related
     equipment and, in each case, related software licenses (including
     acquisitions by way of Capitalized Lease and acquisitions of the Capital
     Stock of a Person that becomes a Restricted Subsidiary to the extent of the
     fair market value of the telecommunications and data transmission
     equipment, computer-related equipment and software licenses so acquired) by
     the Company, such Restricted Subsidiary or such Foreign Subsidiary after
     the Closing Date;

          (viii) Indebtedness of the Company not to exceed, at any one time
     outstanding, two times (A) the Net Cash Proceeds received by the Company
     after the Closing Date from the issuance and sale of its Capital Stock
     (other than Disqualified Stock, until such time as such Disqualified Stock
     has been converted into or exchanged for Capital Stock that is not
     Disqualified Stock) to a Person that is not a Subsidiary of the Company, to
     the extent (I) such Net Cash Proceeds have not been used pursuant to clause
     (C)(3) of the first paragraph or clause (iii), (iv) or (vi) of the second
     paragraph of Section 3.04 to make a Restricted Payment and (II) if such Net
     Cash Proceeds are used to consummate a transaction pursuant to which the
     Company Incurs Acquired Indebtedness, the amount of such Net Cash Proceeds
     exceeds one-half of the amount of Acquired Indebtedness so Incurred;
     provided that such Indebtedness does not mature prior to the Stated
     Maturity of the Notes and has an Average Life longer than the Notes;

          (ix)   Acquired Indebtedness of (a) any Restricted Subsidiary,
     provided such Acquired Indebtedness consists solely of Capitalized Lease
     Obligations, (b) any Subsidiary Guarantor or Foreign Subsidiary and (c) any
     Restricted Subsidiary, provided that 90% of the consideration paid by the
     Company and its Restricted Subsidiaries for the acquisition of such
     Restricted Subsidiary (other than such Acquired Indebtedness) was made in
     Capital Stock (other than Disqualified Stock) of the Company or the
     proceeds from the sale of such Capital Stock;

          (x)    Strategic Subordinated Indebtedness;

          (xi)   Indebtedness of Foreign Subsidiaries outstanding at any time in
     an aggregate principal amount not to exceed the greater of (a) $50 million,
     less any amount of such Indebtedness permanently repaid as provided under
     Section 3.10 and (b) 85% of the combined revenues of such Foreign
     Restricted Subsidiaries for the most recently ended fiscal quarter for
     which financial information is available; provided that such revenues shall
     be excluded to the extent used to Incur Indebtedness under clause (i)
     above;
<PAGE>

                                      46

          (xii)  Subordinated Indebtedness of the Company or any Subsidiary
     Guarantor (in addition to Indebtedness permitted under clauses (i) through
     (ix) above) in an aggregate amount outstanding at any time not to exceed
     $100 million, plus after the occurrence of a Public Equity Offering an
     additional $200 million principal amount of convertible Subordinated
     Indebtedness, less any amount of such Indebtedness permanently repaid as
     provided under Section 3.10; and

          (xiii) Indebtedness of the Company or any Restricted Subsidiary in an
     aggregate principal amount outstanding at any time not to exceed $50
     million, less any amount of such Indebtedness permanently repaid as
     provided under Section 3.10.

          (b)    Notwithstanding any other provision of this Section 3.03,
the maximum amount of Indebtedness that the Company, a Restricted Subsidiary or
a Subsidiary Guarantor may Incur pursuant to this Section 3.03 shall not be
deemed to be exceeded, with respect to any outstanding Indebtedness due solely
to the result of fluctuations in the exchange rates of currencies.

          (c)    For purposes of determining any particular amount of
Indebtedness under this Section 3.03, (1) Guarantees, Liens or obligations with
respect to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (2) any Liens
granted pursuant to the equal and ratable provisions referred to in Section 3.09
shall not be treated as Indebtedness. For purposes of determining compliance
with this Section 3.03, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in paragraph
(a) above, the Company, in its sole discretion, shall classify, and from time to
time may reclassify, and divide among different clauses or among such clauses
and the first paragraph of this covenant, such item of Indebtedness and such
Indebtedness will be treated as having been Incurred as so specified.

          (d)    The Company will not, and will not permit any Subsidiary
Guarantor to, incur any Indebtedness that is contractually subordinated in right
of payment to any other Indebtedness of the Company or such Subsidiary Guarantor
unless such Indebtedness is also contractually subordinated in right of payment
to the Notes or such Subsidiary Guarantor's Subsidiary Guarantee on
substantially identical terms.

          SECTION 3.04. Limitation on Restricted Payments. The Company will not,
                        ---------------------------------
and will not permit any Restricted Subsidiary to, directly or indirectly, (i)
declare or pay any dividend or make any distribution on or with respect to its
Capital Stock (other than (x) dividends or distributions payable solely in
shares of its Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to acquire shares of such Capital Stock and (y) pro
rata dividends or distributions on Common Stock of Restricted Subsidiaries other
than Subsidiary Guarantors held by minority stockholders) held by Persons other
than the Company or any of its Restricted Subsidiaries, (ii) purchase, redeem,
retire or otherwise acquire for value any shares of
<PAGE>

                                      47

Capital Stock of (A) the Company or any Subsidiary Guarantor (including options,
warrants or other rights to acquire such shares of Capital Stock) held by any
Person or (B) a Restricted Subsidiary other than a Subsidiary Guarantor
(including options, warrants or other rights to acquire such shares of Capital
Stock) held by any Affiliate of the Company (other than a Restricted Subsidiary,
provided that any minority interest in such Restricted Subsidiary is not held by
an Affiliate of the Company) or any holder (or any Affiliate of such holder) of
5% or more of the Capital Stock of the Company, (iii) make any voluntary or
optional principal payment, or voluntary or optional redemption, repurchase,
defeasance, or other acquisition or retirement for value, of Indebtedness of the
Company that is subordinated in right of payment to the Notes or Indebtedness of
a Subsidiary Guarantor that is subordinated to a Subsidiary Guarantee or (iv)
make any Investment, other than a Permitted Investment, in any Person (such
payments or any other actions described in clauses (i) through (iv) above being
collectively "Restricted Payments") if, at the time of, and after giving effect
              -------------------
to, the proposed Restricted Payment: (A) a Default or Event of Default shall
have occurred and be continuing, (B) the Company could not Incur at least $1.00
of Indebtedness under the first paragraph of Section 3.03(a) or (C) the
aggregate amount of all Restricted Payments (the amount, if other than in cash,
to be determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a Board Resolution) made after the Closing
Date shall exceed the sum of (1) cumulative Consolidated EBITDA since the
beginning of the fiscal quarter of the Company next following the Closing Date
through the last day of the last full fiscal quarter ending immediately
preceding the Transaction Date for which quarterly or annual financial
statements have been filed with the Commission or provided to the Trustee
pursuant to Section 3.17, minus (2) two times the cumulative Consolidated Fixed
Charges of the Company since the beginning of the fiscal quarter of the Company
next following the Closing Date through the last day of the last full fiscal
quarter ending immediately preceding the Transaction Date for which quarterly or
annual financial statements have been filed with the Commission or provided to
the Trustee pursuant to Section 3.18, plus (3) the aggregate Net Cash Proceeds
received by the Company after the Closing Date from the issuance and sale
permitted by this Indenture of its Capital Stock (other than Disqualified Stock)
to a Person who is not a Subsidiary of the Company, including an issuance or
sale permitted by this Indenture of Indebtedness or Disqualified Stock of the
Company for cash subsequent to the Closing Date upon the conversion of such
Indebtedness or Disqualified Stock into Capital Stock (other than Disqualified
Stock, until such time as such Disqualified Stock has been converted into or
exchanged for Capital Stock that is not Disqualified Stock) of the Company, or
from the issuance to a Person who is not a Subsidiary of the Company of any
options, warrants or other rights to acquire Capital Stock of the Company (in
each case, exclusive of any Disqualified Stock or any options, warrants or other
rights that are redeemable at the option of the holder, or are required to be
redeemed, prior to the Stated Maturity of the Notes), in each case except to the
extent such Net Cash Proceeds are used to (x) Incur Indebtedness pursuant to
clause (viii) of the second paragraph under Section 3.03 or (y) acquire a
Restricted Subsidiary with Acquired Indebtedness of that Restricted Subsidiary,
other than a Subsidiary Guarantor (or a Person that will become such a
Restricted Subsidiary), plus (4) an amount equal to the net reduction in
Investments (other than reductions in Permitted
<PAGE>

                                      48

Investments and Investments made pursuant to clause (vi) of the second paragraph
of Section 3.04) in any Person resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other transfers of
assets, in each case to the Company or any Restricted Subsidiary or from the Net
Cash Proceeds from the sale of any such Investment (except, in each case, to the
extent any such payment or proceeds are included in the calculation of
Consolidated EBITDA), or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed, in each case, the amount of Investments
previously made by the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary.

          The foregoing provision shall not be violated by reason of:

          (i)   the payment of any dividend within 60 days after the date of
     declaration thereof if, at said date of declaration, such payment would
     comply with the foregoing paragraph;

          (ii)  the redemption, repurchase, defeasance or other acquisition or
     retirement for value of Indebtedness that is subordinated in right of
     payment to the Notes or any Subsidiary Guarantee including premium, if any,
     and accrued and unpaid interest, with the proceeds of, or in exchange for,
     Indebtedness Incurred under clause (iii) of the second paragraph of Section
     3.03(a);

          (iii) the repurchase, redemption or other acquisition of Capital Stock
     of the Company or any Subsidiary Guarantor (or options, warrants or other
     rights to acquire such Capital Stock) in exchange for, or out of the
     proceeds of a substantially concurrent offering of, shares of Capital Stock
     (other than Disqualified Stock) of the Company or such Subsidiary Guarantor
     (or options, warrants or other rights to acquire such Capital Stock);

          (iv)  the making of any principal payment or the repurchase,
     redemption, retirement, defeasance or other acquisition for value of
     Indebtedness which is subordinated in right of payment to the Notes or any
     Subsidiary Guarantee in exchange for, or out of the proceeds of a
     substantially concurrent offering of, shares of the Capital Stock (other
     than Disqualified Stock) of the Company or a Subsidiary Guarantor (or
     options, warrants or other rights to acquire such Capital Stock);

          (v)   payments or distributions, to dissenting stockholders pursuant
     to applicable law, pursuant to or in connection with a consolidation,
     merger or transfer of assets that complies with the provisions of Article
     Four;

          (vi)  Investments in any Person; provided that the aggregate amount of
     such Investments under this clause (vi) does not exceed (a) $10 million,
     plus (b) the amount of

<PAGE>

                                      49

     Net Cash Proceeds received by the Company after the Closing Date from the
     sale of its Capital Stock (other than Disqualified Stock, until such time
     as such Disqualified Stock has been converted into or exchanged for Capital
     Stock that is not Disqualified Stock) to a Person who is not a Subsidiary
     of the Company, except to the extent such Net Cash Proceeds are used to
     Incur Indebtedness pursuant to clause (viii) of Section 3.03 or to make
     Restricted Payments pursuant to clause (c)(3) of the first paragraph, or
     clauses (iii) or (iv) of this paragraph, of this Section 3.04, plus (c) the
     net reduction in Investments made pursuant to this clause (vi) resulting
     from distributions on or repayments of such Investments, including payments
     of interest on Indebtedness, dividends, repayments of loans or advances, or
     other distributions or other transfers of assets, in each case to the
     Company or any Restricted Subsidiary, or from the Net Cash Proceeds from
     the sale or other disposition of any such Investment (except, in each case,
     to the extent of any gain on such sale or disposition that would be
     included in the calculation of Consolidated EBITDA), from the release of
     any Guarantee or from such Person becoming a Restricted Subsidiary (valued
     in each case as provided in the definition of "Investments"); provided that
     the net reduction in any such Investments shall not exceed the amount of
     such Investments in such Person;

          (vii)  Investments acquired in exchange for Capital Stock (other than
     Disqualified Stock) of the Company;

          (viii) the declaration or payment of dividends on Capital Stock (other
     than Disqualified Stock) of the Company in an aggregate annual amount not
     to exceed 6% of the Net Cash Proceeds received by the Company after the
     Closing Date from such sale of Capital Stock;

          (ix)   the purchase, redemption, retirement or other acquisition for
     value of shares of Capital Stock of the Company or options to purchase such
     shares, held by directors, employees or officers, or former directors,
     employees or officers, of the Company or a Restricted Subsidiary (or their
     estates or beneficiaries under their estates), upon the death, disability,
     retirement, termination of employment or pursuant to the terms of any
     agreement under which such shares of Capital Stock or options were issued;
     provided that the aggregate consideration paid for such purchase,
     redemption, retirement or other acquisition for value of such shares or
     options after the Closing Date does not exceed $2 million in any calendar
     year (unless such repurchases are made with the proceeds of insurance
     policies and the shares are purchased from the executors, administrators,
     testamentary trustees, heirs, legatees or beneficiaries); provided that
     amounts not paid for any such purchase, redemption or other acquisition or
     retirement in any fiscal year may be accumulated and paid in any subsequent
     fiscal year;

          (x)   repurchases of Warrants pursuant to a Repurchase Offer;
<PAGE>

                                      50

          (xi)   any purchase of any fractional shares of Common Stock of the
     Company in connection with an exercise of warrants or the conversion of
     Capital Stock or Indebtedness of the Company; provided that (x) the
     aggregate amount of payments under this clause (xi) does not exceed $5
     million and (y) such purchase is in compliance with Section 3.08;

          (xii)  the acquisition of Capital Stock of the Company by the Company
     to the extent of, and in connection with, the cashless exercise of any
     options, warrants or similar rights issued by the Company; and

          (xiii) other Restricted Payments in an aggregate amount not to exceed
     $2 million;

provided that, except in the case of clauses (i) and (iii), no Default or Event
of Default shall have occurred and be continuing or occur as a consequence of
the actions or payments set forth therein.

          Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (ii) thereof, an
exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (iii) or (iv) thereof and an Investment referred to in clause (vii)
thereof), and the Net Cash Proceeds from any issuance of Capital Stock referred
to in clauses (iii), (iv) or (vi), shall be included in calculating whether the
conditions of clause (C) of the first paragraph of this Section 3.04 have been
met with respect to any subsequent Restricted Payments. In the event the
proceeds of an issuance of Capital Stock of the Company are used for the
redemption, repurchase or other acquisition of the Notes, or Indebtedness that
is pari passu with the Notes, then the Net Cash Proceeds of such issuance shall
be included for this Section 3.04 only to the extent such proceeds are not used
for such redemption, repurchase or other acquisition of Indebtedness.

          SECTION 3.05. Limitation on Dividend and Other Payment Restrictions
                        -----------------------------------------------------
Affecting Restricted Subsidiaries. The Company will not, and will not permit any
---------------------------------
Restricted Subsidiary to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Restricted Subsidiary to (i) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.

          The foregoing provisions shall not restrict any encumbrances or
restrictions:
<PAGE>

                                      51

          (i)   existing on the Closing Date in this Indenture or any other
     agreements in effect on the Closing Date, and any amendments, extensions,
     refinancings, renewals or replacements of such agreements; provided that
     the encumbrances and restrictions in any such amendments, extensions,
     refinancings, renewals or replacements are no less favorable in any
     material respect to the Holders than those encumbrances or restrictions
     that are then in effect and that are being extended, refinanced, renewed or
     replaced;

          (ii)  existing under or by reason of applicable law;

          (iii) existing with respect to any Person or the property or assets of
     such Person acquired by the Company or any Restricted Subsidiary, existing
     at the time of such acquisition and not incurred in contemplation thereof,
     which encumbrances or restrictions are not applicable to any Person or the
     property or assets of any Person other than such Person or the property or
     assets of such Person so acquired;

          (iv)  in the case of clause (iv) of the first paragraph of this
     Section 3.05, (A) that restrict in a customary manner the subletting,
     assignment or transfer of any property or asset that is a lease, license,
     conveyance or contract or similar property or asset, (B) existing by virtue
     of any transfer of, agreement to transfer, option or right with respect to,
     or Lien on, any property or assets of the Company or any Restricted
     Subsidiary not otherwise prohibited by this Indenture, (C) arising or
     agreed to in the ordinary course of business, not relating to any
     Indebtedness, and that do not, individually or in the aggregate, detract
     from the value of property or assets of the Company or any Restricted
     Subsidiary in any manner material to the Company or (D) purchase money
     obligations for property or assets acquired after the Closing Date and to
     the extent permitted under this Indenture by such Restricted Subsidiary
     restricting the transfer of such property or assets or the proceeds
     thereof;

          (v)   with respect to a Restricted Subsidiary and imposed pursuant to
     an agreement that has been entered into for the sale or disposition of all
     or substantially all of the Capital Stock of, or property and assets of,
     such Restricted Subsidiary;

          (vi)  contained in the terms of any Indebtedness or any agreement
     pursuant to which such Indebtedness was issued if (A) except with respect
     to Indebtedness of Foreign Subsidiaries, the encumbrance or restriction
     applies only in the event of a payment default or a default with respect to
     a financial covenant contained in such Indebtedness or agreement, (B) the
     encumbrance or restriction is not materially more disadvantageous to the
     Holders of the Notes than is customary in comparable financings (as
     determined by the Company) and (C) the Company determines that any such
     encumbrance or restriction will not materially affect the Company's ability
     to make principal or interest payments on the Notes;
<PAGE>

                                      52

          (vii)  contained in the terms of any Indebtedness of any Subsidiary
     Guarantor or any agreement pursuant to which such Indebtedness was issued
     if (A) the encumbrance or restriction is not materially more
     disadvantageous to the Holders of the Notes than is customary in comparable
     financings (as determined by the Company) and (B) the Company determines
     that any such encumbrance or restriction will not materially affect the
     Company's ability to make principal or interest payments on the Notes;

          (viii) restrictions on cash or other deposits or net worth imposed by
     customers under contracts entered into in the ordinary course of business;

          (ix)   any encumbrances or restrictions of the type referred to in
     clauses (iii), (vi) or (vii) of this Section 3.05 imposed by any
     amendments, modifications, renewals, restatements, supplements, refundings,
     replacements or refinancings of the contracts referred to in such clauses;
     provided that such amendments, modifications, renewals, restatements,
     supplements, refundings, replacements or refinancings are no less favorable
     in any material respect to the Holders than those contained in the
     contracts prior to such amendment, modification, renewal, restatement,
     supplement, refunding, replacement or refinancing;

          (x)    imposed pursuant to contracts for the sale of assets with
     respect to the transfer of the assets to be sold pursuant to such contract;
     and

          (xi)   customary provisions in joint venture agreements and other
     similar agreements, provided that the primary business of such joint
     venture or other Person is related, ancillary or complementary to the
     businesses of the Company and its Restricted Subsidiaries on the date of
     such agreement.

Nothing contained in this Section 3.05 shall prevent the Company or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in Section 3.09 or (2) restricting the sale
or other disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Indebtedness of the Company or any of its
Restricted Subsidiaries.

          SECTION 3.06. Limitation on the Issuance and Sale of Capital Stock of
                        -------------------------------------------------------
Restricted Subsidiaries. The Company will not sell, and will not permit any
-----------------------
Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of
Capital Stock of a Restricted Subsidiary (including options, warrants or other
rights to purchase shares of such Capital Stock) except (i) to the Company or a
Wholly Owned Restricted Subsidiary; (ii) issuances of director's qualifying
shares, to the extent required by applicable law; (iii) if, immediately after
giving effect to such issuance or sale, such Restricted Subsidiary would no
longer constitute a Restricted Subsidiary and any Investment in such Person
remaining after giving effect to such issuance or sale would have been permitted
to be made under Section 3.04 if made on the date of such
<PAGE>

                                      53

issuance or sale; or (iv) sales or issuances of Common Stock of a Restricted
Subsidiary, provided that (x) the Company or such Restricted Subsidiary applies
the Net Cash Proceeds, if any, of any such sale in accordance with clause (A) or
(B) of Section 3.10 and (y) any Investment in such Person remaining after giving
effect to such sale or issuance would have been permitted to be made under 3.04
if made on the date of sale or issuance.

          SECTION 3.07. Limitation on Issuances of Guarantees by Restricted
                        ---------------------------------------------------
Subsidiaries. The Company will not permit any Restricted Subsidiary, directly or
------------
indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Notes ("Guaranteed
                                                       ----------
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
------------
and delivers a supplemental indenture to this Indenture providing for a
Guarantee (a "Subsidiary Guarantee") of payment of the Notes by such Restricted
              --------------------
Subsidiary, and (ii) such Restricted Subsidiary waives and will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee until the Notes have been paid in
full. If the Guaranteed Indebtedness is (A) pari passu with the Notes, then the
Guarantee of such Guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Subsidiary Guarantee or (B) subordinated to the Notes, then
the Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the Notes.

          Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary may provide by its terms that it shall be automatically
and unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the Company's
and each Restricted Subsidiary's Capital Stock in, or all or substantially all
the assets of, such Restricted Subsidiary (which sale, exchange or transfer is
not prohibited by this Indenture) or (ii) the release or discharge of the
Guarantee which resulted in the creation of such Subsidiary Guarantee, except a
discharge or release by or as a result of payment under such Guarantee; provided
in the case of this clause (ii) such Restricted Subsidiary has no other
Indebtedness outstanding that was permitted to be Incurred because it was a
Subsidiary Guarantor.

          SECTION 3.08. Limitation on Transactions with Stockholders and
                        ------------------------------------------------
Affiliates. The Company will not, and will not permit any Restricted Subsidiary
----------
to, directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any holder (or any
Affiliate of such holder) of 5% or more of any class of Capital Stock of the
Company or with any Affiliate of the Company or any Restricted Subsidiary,
except upon fair and reasonable terms no less favorable to the Company or such
Restricted Subsidiary than could be obtained, at the time of such transaction
or, if such transaction is pursuant to a written agreement, at the time of the
<PAGE>

                                      54

execution of the agreement providing therefor, in a comparable arm's-length
transaction with a Person that is not such a holder or an Affiliate.

          The foregoing limitation does not limit, and shall not apply to:

          (i)    transactions (A) approved by a majority of the disinterested
     members of the Board of Directors or (B) for which the Company or a
     Restricted Subsidiary delivers to the Trustee a written opinion of a
     nationally recognized investment banking, accounting or appraisal firm
     stating that the transaction is fair to the Company or such Restricted
     Subsidiary from a financial point of view;

          (ii)   any transaction solely between the Company and any of its
     Restricted Subsidiaries or solely between Restricted Subsidiaries;

          (iii)  the payment of reasonable and customary regular fees to
     directors of the Company who are not employees of the Company;

          (iv)   any payments or other transactions pursuant to any tax-sharing
     agreement between the Company and any other Person with which the Company
     files a consolidated tax return or with which the Company is part of a
     consolidated group for tax purposes;

          (v)    any Permitted Investments or Restricted Payments not prohibited
     by Section 3.04;

          (vi)   the granting of stock options on Capital Stock of the Company
     (other than Disqualified Stock) or similar rights on Capital Stock of the
     Company (other than Disqualified Stock) to employees and directors pursuant
     to plans approved by the Board of Directors;

          (vii)  any transaction entered into for the purpose of granting or
     altering registration rights or other rights with respect to any Capital
     Stock of the Company granted to investors in the Company; or

          (viii) indemnification arrangements entered into by the Company or any
     of its Restricted Subsidiaries in the ordinary course of business and
     approved by the Board of Directors.

Notwithstanding the foregoing, any transaction or series of related transactions
covered by the first paragraph of this Section 3.08 and not covered by clauses
(ii) through (viii) of this paragraph, the aggregate amount of which exceeds $2
million in value, must be approved or determined to be fair in the manner
provided for in clause (i)(A) or (B) above.
<PAGE>

                                      55

          SECTION 3.09. Limitation on Liens. The Company will not, and will not
                        -------------------
permit any Restricted Subsidiary to, create, Incur, assume or suffer to exist
any Lien on any of its assets or properties of any character (including, without
limitation, licenses), or any shares of Capital Stock or Indebtedness of any
Restricted Subsidiary, without making effective provision for all of the Notes
and all other amounts due under this Indenture to be directly secured equally
and ratably with (or, if the obligation or liability to be secured by such Lien
is subordinated in right of payment to the Notes, prior to) the obligation or
liability secured by such Lien.

          The foregoing limitation does not apply to:

          (i)    Liens existing on the Closing Date;

          (ii)   Liens granted after the Closing Date on any assets or Capital
     Stock of the Company or its Restricted Subsidiaries securing the Notes or
     created in favor of the Holders;

          (iii)  Liens with respect to the assets of a Restricted Subsidiary
     granted by such Restricted Subsidiary to the Company or a Wholly Owned
     Restricted Subsidiary to secure Indebtedness owing to the Company or such
     other Restricted Subsidiary;

          (iv)   Liens securing Indebtedness which is Incurred to refinance
     secured Indebtedness; provided that such Liens do not extend to property or
     assets of the Company or any Restricted Subsidiary other than the property
     or assets securing the Indebtedness being refinance;

          (v)    Permitted Liens;

          (vi)   Liens (including extensions and renewals thereof) upon real or
     personal property acquired after the Closing Date; provided that (a) such
     Lien is created solely for the purpose of securing Indebtedness Incurred,
     in accordance with Section 3.03, to (1) finance the cost (including the
     cost of design, development, acquisition, construction, installation,
     improvement, transportation or integration) of the item of property or
     assets (including indefeasible rights of use, multiple investment units and
     other similar rights) subject thereto and such Lien is created prior to, at
     the time of or within 210 days after the later of the acquisition, the
     completion of construction or the commencement of full operation of such
     property or (2) to refinance any Indebtedness previously so secured, (b)
     the principal amount of the Indebtedness secured by such Lien does not
     exceed 100% of such cost and (c) any such Lien shall not extend to or cover
     any property or assets other than such item of property or assets and any
     improvements on such item and any proceeds of such item, any accession
     thereto, replacements thereof or substitutions therefor, and any such
     improvements;
<PAGE>

                                      56

          (vii)  Liens on cash set aside at the time of the Incurrence of any
     Indebtedness, or government securities purchased with such cash, in either
     case to the extent such cash or government securities prefund the payment
     of interest on such Indebtedness and are held in an escrow account or
     similar arrangement to be applied for such purpose;

          (viii) Liens to secure any Indebtedness Incurred pursuant to clause
     (i) of Section 3.03; or

          (ix)   Liens on property or assets of Foreign Subsidiaries to secure
     any Indebtedness of such Foreign Subsidiaries Incurred pursuant to clause
     (xi) of Section 3.03.

          SECTION  3.10.  Limitation on Asset Sales. The Company shall not, and
                          -------------------------
shall not permit any Restricted Subsidiary to, consummate any Asset Sale, unless
(i) the consideration received by the Company or such Restricted Subsidiary
(including any Released Indebtedness and including by way of relief from or by
any other Person assuming responsibilities for any liabilities other than
Indebtedness ("Released Liabilities")) is at least equal to the fair market
               --------------------
value of the assets sold or disposed of; provided that this clause (i) shall not
apply to any sale, transfer or other disposition arising from foreclosure,
condemnation or similar action with respect to any assets and (ii) at least 75%
of the consideration received (including any Released Indebtedness and Released
Liabilities) consists of cash, Temporary Cash Investments or Released
Indebtedness and Released Liabilities.

          In the event and to the extent that the Net Cash Proceeds received by
the Company or any of its Restricted Subsidiaries from one or more Asset Sales
occurring on or after the Closing Date in any period of 12 consecutive months
exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the
date closest to the commencement of such 12-month period for which a
consolidated balance sheet of the Company and its Subsidiaries has been filed
with the Commission or provided to the Trustee pursuant to Section 3.18), then
the Company shall or shall cause the relevant Restricted Subsidiary to (i)
within 12 months after the date Net Cash Proceeds so received exceed 10% of
Adjusted Consolidated Net Tangible Assets (A) apply an amount equal to such
excess Net Cash Proceeds to permanently repay unsubordinated Indebtedness of the
Company or any Subsidiary Guarantor or Indebtedness of any other Restricted
Subsidiary, in each case owing to a Person other than the Company or any of its
Restricted Subsidiaries or (B) invest an equal amount, or the amount not so
applied pursuant to clause (A) (or enter into a definitive agreement committing
to so invest within 12 months after the date of such agreement), in property or
assets (other than current assets) of a nature or type or that are used in a
business (or in a company having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the property
and assets of, or the business of, the Company and its Restricted Subsidiaries
existing on the date of such investment (as determined in good faith by the
Board of Directors, whose determination shall be conclusive and evidenced by a
Board Resolution) and (ii) apply (no later than the end of the 12-month
<PAGE>

                                      57

period referred to in clause (i)) such excess Net Cash Proceeds (to the extent
not applied pursuant to clause (i)) as provided in the following paragraph of
this Section 3.10. The amount of such excess Net Cash Proceeds required to be
applied (or to be committed to be applied) during such 12-month period as set
forth in clause (i) of the preceding sentence and not applied as so required by
the end of such period shall constitute "Excess Proceeds."
                                         ---------------

          If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section 3.10 totals at least $5 million, the Company must commence, not later
than the fifteenth Business Day of such month, and consummate an Offer to
Purchase from the Holders (and if required by the terms of any Indebtedness that
is pari passu with the Notes ("Pari Passu Indebtedness"), from the holders of
                               -----------------------
such Pari Passu Indebtedness) on a pro rata basis an aggregate Accreted Value of
Notes (and principal amount of Pari Passu Indebtedness) equal to the Excess
Proceeds on such date, at a purchase price equal to 100% of the Accreted Value
of the Notes on the relevant Payment Date (and 100% of the principal amount of
Pari Passu Indebtedness), plus, in each case, accrued interest (if any) to the
Payment Date. To the extent that the Accreted Value of the Notes tendered
pursuant to an Offer to Purchase is less than the Excess Proceeds, the Company
may use such deficiency for general corporate purposes not prohibited by, and in
accordance with, this Indenture. Upon completion of such Offer to Purchase, the
amount of Excess Proceeds shall be reset to zero.

          For purposes of the first paragraph of this Section 3.10, securities
received by the Company or any Restricted Subsidiary in any Asset Sale that are
converted by the Company or such Restricted Subsidiary into cash within 90 days
after such Asset Sale shall be deemed to be cash.

          SECTION 3.11. Repurchase of Notes upon a Change of Control. The
                        --------------------------------------------
Company must commence, within 30 days of the occurrence of a Change of Control,
and consummate an Offer to Purchase for all Notes then outstanding, at a
purchase price equal to 101% of the Accreted Value thereof on the relevant
Payment Date, plus accrued interest (if any) to the Payment Date.

          SECTION 3.12.  Use of Proceeds.  The Company will not and will not
                         ---------------
permit any of its Subsidiaries to, use in excess of $5 million of the proceeds
raised from the issuance of the Units for the purpose of entering into
Investments in joint ventures or Persons other than Restricted Subsidiaries.

          SECTION 3.13.  Existence. Subject to Articles Three and Four of this
                         ---------
Indenture, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and the existence of
each Restricted Subsidiary in accordance with the respective organizational
documents of the Company and each Restricted Subsidiary and the rights (whether
pursuant to charter, partnership certificate, agreement, statute or otherwise),
<PAGE>

                                      58

material licenses and franchises of the Company and each Restricted Subsidiary;
provided that the Company shall not be required to preserve any such right,
license or franchise, or the existence of any Restricted Subsidiary, if the
maintenance or preservation thereof is no longer desirable in the conduct of the
business of the Company and its Restricted Subsidiaries taken as a whole.

          SECTION 3.14.  Payment of Taxes and Other Claims. The Company will pay
                         ---------------------------------
or discharge and shall cause each of its Restricted Subsidiaries to pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent (i) all material taxes, assessments and governmental charges levied
or imposed upon (a) the Company or any such Restricted Subsidiary, (b) the
income or profits of any such Restricted Subsidiary which is a corporation or
(c) the property of the Company or any such Restricted Subsidiaries and (ii) all
material lawful claims for labor, materials and supplies that, if unpaid, might
by law become a lien upon the property of the Company or any such Restricted
Subsidiary; provided that the Company shall not be required to pay or discharge,
or cause to be paid or discharged, any such tax, assessment, charge or claim the
amount, applicability or validity of which is being contested in good faith by
appropriate proceedings and for which adequate reserves have been established.

          SECTION 3.15.  Maintenance of Properties and Insurance.  The Company
                         -----------------------------------------
will cause all properties used or useful in the conduct of its business or the
business of any of its Restricted Subsidiaries, to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly conducted at all times; provided that nothing in this
Section 3.15 shall prevent the Company or any such Restricted Subsidiary from
discontinuing the use, operation or maintenance of any of such properties or
disposing of any of them, if such discontinuance or disposal is, in the judgment
of the Company, desirable in the conduct of the business of the Company or such
Restricted Subsidiary.

          The Company will provide or cause to be provided, for itself and its
Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, with reputable insurers or with
the government of the United States of America, or an agency or instrumentality
thereof, in such amounts, with such deductibles and by such methods as shall be
customary for corporations similarly situated in the industry in which the
Company or such Restricted Subsidiary, as the case may be, is then conducting
business.

          SECTION 3.16.  Notice of Defaults. In the event that the Company
                         ------------------
becomes aware of any Default or Event of Default the Company, promptly after it
becomes aware thereof, will give written notice thereof to the Trustee.
<PAGE>

                                      59

          SECTION 3.17.  Compliance Certificates. (a) The Company shall deliver
                         -----------------------
to the Trustee, within 45 days after the end of each fiscal quarter (90 days
after the end of the last fiscal quarter of each year), an Officers' Certificate
stating whether or not the signers know of any Default or Event of Default that
occurred during such fiscal quarter. In the case of the Officers' Certificate
delivered within 90 days of the end of the Company's fiscal year, such
certificate shall contain a certification from the principal executive officer,
principal financial officer or principal accounting officer that a review has
been conducted of the activities of the Company and its Restricted Subsidiaries
and the Company's and its Restricted Subsidiaries' performance under this
Indenture and whether or not, to the knowledge of such Officers, the Company has
complied with all conditions and covenants under this Indenture. For purposes of
this Section 3.17, such compliance shall be determined without regard to any
period of grace or requirement of notice provided under this Indenture. If they
do know of such a Default or Event of Default, the certificate shall describe
any such Default or Event of Default and its status. The first certificate to be
delivered pursuant to this Section 3.17(a) shall be for the first fiscal quarter
beginning after the execution of this Indenture.

          (b) So long as (and to the extent) not prohibited by the then current
recommendations of the American Institute of Certified Public Accountants, the
Company shall use its commercially reasonable efforts to deliver to the Trustee,
within 90 days after the end of the Company's fiscal year, a certificate signed
by the Company's independent certified public accountants stating (i) that their
audit examination has included a review of the terms of this Indenture and the
Notes as they relate to financial calculations and computations, (ii) that they
have read the most recent Officers' Certificate delivered to the Trustee
pursuant to paragraph (a) of this Section 3.17 and (iii) whether, in connection
with their audit examination, anything came to their attention that caused them
to believe that the Company was not in compliance with any of the terms,
covenants, provisions or conditions of Article Three and Section 4.01 of this
Indenture as they pertain to financial calculations and computations and, if any
Default or Event of Default has come to their attention, specifying the nature
and period of existence thereof; provided that such independent certified public
accountants shall not be liable in respect of such statement by reason of any
failure to obtain knowledge of any such Default or Event of Default that would
not come to the attention of such accountants in the course of an audit
examination conducted in accordance with generally accepted auditing standards
in effect at the date of such examination. The first certificate to be delivered
pursuant to this Section 3.17(b) shall be for the fiscal year ending December
31, 2000.

          (c) Within 90 days of the end of each of the Company's fiscal years,
the Company shall deliver to the Trustee a list of all Significant Subsidiaries.
The Trustee shall have no duty with respect to any such list except to keep it
on file and available for inspection by the Holders.

          SECTION 3.18.  Commission Reports and Reports to Holders. At all times
                         -----------------------------------------
from and after the earlier of (i) the date of the commencement of a registered
exchange offer for the
<PAGE>

                                      60

Notes by the Company or the effectiveness of the Shelf Registration Statement
pursuant to and in accordance with the terms of the Notes Registration Rights
Agreement (the "Registration") and (ii) the date that is 24 months from the
Closing Date, in either case, whether or not the Company is then required to
file reports with the Commission, the Company shall file with the Commission all
such reports and other information as it would be required to file with the
Commission by Sections 13(a) or 15(d) under the Securities Exchange Act of 1934
if it were subject thereto. The Company shall supply the Trustee and each Holder
or shall supply to the Trustee for forwarding to each such Holder, without cost
to such Holder, copies of such reports and other information. Delivery of such
reports, information and documents to the Trustee is for informational purposes
only and the Trustee's receipt of such shall not constitute constructive notice
of any information contained therein or determinable from information (including
mathematical calculations) contained therein, including the Company's compliance
with any of its covenants hereunder (as to which the Trustee is entitled to rely
exclusively on Officers' Certificates). In addition, at all times prior to the
earlier of the date of the Registration and the date that is 24 months from the
Closing Date, the Company shall, at its cost, deliver to each Holder of the
Notes quarterly and annual financial statements substantially equivalent to
those which would be included in reports required to be filed under the Exchange
Act. In addition, after the Rule 144A Availability Date and at all times prior
to the Registration, upon the request of any Holder or any prospective purchaser
of the Notes designated by a Holder, the Company shall supply to such Holder or
such prospective purchaser the information required under Rule 144A under the
Securities Act. The Company also shall comply with the other provisions of TIA
Section 314(a). The Company shall notify the Trustee and each Holder upon the
occurrence of the Rule 144A Availability Date.

          SECTION  3.19. Waiver of Stay, Extension or Usury Laws. The Company
                         ---------------------------------------
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of, premium, if any, or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or that may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.

          SECTION 3.20.  Limitation on Sale-Leaseback Transactions. The Company
                         -----------------------------------------
will not, and will not permit any Restricted Subsidiary to, enter into any sale-
leaseback transaction involving any of its assets or properties whether now
owned or hereafter acquired, whereby the Company or a Restricted Subsidiary
sells or transfers such assets or properties and then or thereafter leases such
assets or properties or any part thereof or any other assets or properties
<PAGE>

                                      61

which the Company or such Restricted Subsidiary, as the case may be, intends to
use for substantially the same purpose or purposes as the assets or properties
sold or transferred.

          The foregoing restriction does not apply to any sale-leaseback
     transaction if:

          (i)   the lease is for a period, including renewal rights, of not in
     excess of three years;

          (ii)  the lease secures or relates to industrial revenue or pollution
     control bonds;

          (iii) the transaction is solely between the Company and any Wholly
     Owned Restricted Subsidiary or solely between Wholly Owned Restricted
     Subsidiaries;

          (iv)  the Company or such Restricted Subsidiary, within 12 months
     after the sale or transfer of any assets or properties is completed,
     applies an amount not less than the net proceeds received from such sale in
     accordance with clause (A) or (B) of Section 3.10; or

          (v)   the sale-leaseback transaction is consummated within 180 days
         after the purchase of the assets subject to such transaction.

          SECTION 3.21.  Calculation of Original Issue Discount. The Company
                         --------------------------------------
shall file with the Trustee promptly at the end of each calendar year (i) a
written notice specifying the amount of original issue discount (including daily
rates and accrual periods) accrued on outstanding Notes as of the end of such
year and (ii) such other specific information relating to such original issue
discount as may then be relevant under the Internal Revenue Code of 1986, as
amended from time to time and requested by the Trustee.

          SECTION 3.22.  Payment of Additional Interest. If additional interest
                         ------------------------------
is payable because the Company fails to have an offering memorandum available or
fails to consummate the exchange offer or cause the registration statement to be
declared, each as described on the reverse of the form of the Notes attached
hereto as Exhibit A, the Company shall deliver to the Trustee a certificate to
that effect stating (i) the amount of such additional interest that is payable
and (ii) the date on which such interest is payable. Unless and until a
Responsible Officer of the Trustee receives at the Corporate Trust Office such a
certificate, the Trustee may assume without inquiry that no such interest is
payable. If the Company has paid additional interest directly to the persons
entitled to it, the Company shall deliver to the Trustee a certificate setting
forth the particulars of such payment.
<PAGE>

                                      62

                                 ARTICLE FOUR

                             SUCCESSOR CORPORATION

          SECTION 4.01.  When Company May Merge, Etc. The Company shall not
                         ---------------------------
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions) to, any Person or permit any Person to merge with or into the
Company unless:

          (i)   the Company shall be the continuing Person, or the Person (if
     other than the Company) formed by such consolidation or into which the
     Company is merged or that acquired or leased such property and assets of
     the Company shall be a corporation organized and validly existing under the
     laws of the United States of America or any jurisdiction thereof and shall
     expressly assume, by a supplemental indenture, executed and delivered to
     the Trustee, all of the obligations of the Company on all of the Notes and
     under this Indenture;

          (ii)  immediately after giving effect to such transaction, no Default
     or Event of Default shall have occurred and be continuing;

          (iii) immediately after giving effect to such transaction on a pro
     forma basis, the Company or any Person becoming the successor obligor of
     the Notes shall have a Consolidated Net Worth equal to or greater than the
     Consolidated Net Worth of the Company immediately prior to such
     transaction, provided that this clause (iii) shall only apply to a sale of
     less than all of the assets of the Company;

          (iv)  immediately after giving effect to such transaction on a pro
     forma basis the Company, or any Person becoming the successor obligor of
     the Notes, as the case may be, could Incur at least $1.00 of Indebtedness
     under the first paragraph of Section 3.03; provided that this clause (iv)
     shall not apply to a consolidation, merger or sale of all (but not less
     than all) of the assets of the Company if all Liens and Indebtedness of the
     Company or any Person becoming the successor obligor on the Notes, as the
     case may be, and its Restricted Subsidiaries outstanding immediately after
     such transaction would, if Incurred at such time, have been permitted to be
     Incurred (and all such Liens and Indebtedness, other than Liens and
     Indebtedness of the Company and its Restricted Subsidiaries outstanding
     immediately prior to the transaction, shall be deemed to have been
     Incurred) for all purposes of this Indenture;

          (v)   the Company delivers to the Trustee an Officers' Certificate
     (attaching the arithmetic computations to demonstrate compliance with
     clauses (iii) and (iv) above) and Opinion of Counsel, in each case stating
     that such consolidation, merger or transfer and
<PAGE>

                                      63

     such supplemental indenture complies with this provision and that all
     conditions precedent provided for herein relating to such transaction have
     been complied with; and

          (vi)  each Subsidiary Guarantor, unless such Subsidiary Guarantor is
     the Person with which the Company has entered into a transaction under this
     Section 4.01, shall have by amendment to its Subsidiary Guarantee confirmed
     that its Subsidiary Guarantee shall apply to obligations of the Company or
     the Person becoming the successor obligor of the Notes in accordance with
     the Notes and the Indenture;

provided, however, that clauses (iii) and (iv) above do not apply if, in the
good faith determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose of
such transaction is to change the state of incorporation of the Company, and
that any such transaction shall not have as one of its purposes the evasion of
the foregoing limitations.

          SECTION 4.02.  Successor Substituted. Upon any consolidation or
                         ---------------------
merger, or any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 4.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein and thereafter the predecessor corporation shall be
relieved of all obligations and covenants under this Indenture and the Notes;
provided that the Company shall not be released from its obligation to pay the
principal of, premium, if any, or interest on the Notes in the case of a lease
of all or substantially all of its property and assets.

                                 ARTICLE FIVE

                             DEFAULT AND REMEDIES

          SECTION 5.01.  Events of Default. An "Event of Default" shall occur
                         -----------------       ----------------
with respect to the Notes if:

          (a)  the Company defaults in the payment of principal of (or premium,
     if any, on) any Note when the same becomes due and payable at maturity,
     upon acceleration, redemption or otherwise;

          (b)  the Company defaults in the payment of interest on any Note when
     the same becomes due and payable, and such default continues for a period
     of 30 days;
<PAGE>

                                      64

          (c) the Company defaults in the performance, or breaches the
     provisions of Article Four or the fails to make or consummate an Offer to
     Purchase in accordance with Section 3.10 or Section 3.11;

          (d) the Company or any Subsidiary Guarantor defaults in the
     performance of or breaches any other covenant or agreement in this
     Indenture or under the Notes (other than a default specified in clause (a),
     (b) or (c) above) and such default or breach continues for a period of 30
     consecutive days after written notice by the Trustee or the Holders of 25%
     or more in aggregate principal amount at maturity of the Notes;

          (e) there occurs with respect to any issue or issues of Indebtedness
     of the Company, any Subsidiary Guarantor or any Significant Subsidiary
     having an outstanding principal amount of $5 million or more in the
     aggregate for all such issues of all such Persons, whether such
     Indebtedness now exists or shall hereafter be created, (I) an event of
     default that has caused the holder thereof to declare such Indebtedness to
     be due and payable prior to its Stated Maturity and such Indebtedness has
     not been discharged in full or such acceleration has not been rescinded or
     annulled within 60 days of such acceleration and/or (II) the failure to
     make a principal payment at the final (but not any interim) fixed maturity
     and such defaulted payment shall not have been made, waived or extended
     within 60 days of such payment default;

          (f) any final judgment or order (not covered by insurance) for the
     payment of money in excess of $5 million in the aggregate for all such
     final judgments or orders against all such Persons (treating any
     deductibles, self-insurance or retention as not so covered) shall be
     rendered against the Company, any Subsidiary Guarantor or any Significant
     Subsidiary and shall not be paid or discharged, and there shall be any
     period of 60 consecutive days following entry of the final judgment or
     order that causes the aggregate amount for all such final judgments or
     orders outstanding and not paid or discharged against all such Persons to
     exceed $5 million during which a stay of enforcement of such final judgment
     or order, by reason of a pending appeal or otherwise, shall not be in
     effect;

          (g) a court having jurisdiction in the premises enters a decree or
     order for (A) relief in respect of the Company, any Subsidiary Guarantor or
     any Significant Subsidiary in an involuntary case under any applicable
     bankruptcy, insolvency or other similar law now or hereafter in effect, (B)
     appointment of a receiver, liquidator, assignee, custodian, trustee,
     sequestrator or similar official of the Company, any Subsidiary Guarantor
     or any Significant Subsidiary or for all or substantially all of the
     property and assets of the Company, any Subsidiary Guarantor or any
     Significant Subsidiary or (C) the winding up or liquidation of the affairs
     of the Company, any Subsidiary Guarantor or any Significant Subsidiary and,
     in each case, such decree or order shall remain unstayed and in effect for
     a period of 60 consecutive days; or
<PAGE>

                                      65

          (h) the Company, any Subsidiary Guarantor or any Significant
     Subsidiary (A) commences a voluntary case under any applicable bankruptcy,
     insolvency or other similar law now or hereafter in effect, or consents to
     the entry of an order for relief in an involuntary case under any such law,
     (B) consents to the appointment of or taking possession by a receiver,
     liquidator, assignee, custodian, trustee, sequestrator or similar official
     of the Company, any Subsidiary Guarantor or any Significant Subsidiary or
     for all or substantially all of the property and assets of the Company, any
     Subsidiary Guarantor or any Significant Subsidiary or (C) effects any
     general assignment for the benefit of creditors.

          SECTION 5.02.  Acceleration. If an Event of Default (other than an
                         ------------
Event of Default specified in clause (g) or (h) of Section 5.01 that occurs with
respect to the Company) occurs and is continuing under this Indenture, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes, then outstanding, by written notice to the Company (and to the Trustee if
such notice is given by the Holders), may, and the Trustee at the request of
such Holders shall, declare the Accreted Value of, premium, if any, and accrued
interest on the Notes to be immediately due and payable. Upon a declaration of
acceleration, such Accreted Value of, premium, if any, and accrued interest
shall be immediately due and payable. In the event of a declaration of
acceleration because an Event of Default set forth in clause (e) of Section 5.01
has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (e) shall be remedied or cured by the
Company or the relevant Significant Subsidiary or waived by the holders of the
relevant Indebtedness within 60 days after the declaration of acceleration with
respect thereto. If an Event of Default specified in clause (g) or (h) of
Section 5.01 occurs with respect to the Company, the Accreted Value of, premium,
if any, and accrued interest on the Notes then outstanding shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder.

          At any time after such a declaration of acceleration, but before a
judgment or decree for the payment of the money due has been obtained by the
Trustee, the Holders of at least a majority in principal amount of the
outstanding Notes by written notice to the Company and to the Trustee, may waive
all past Defaults and rescind and annul such declaration of acceleration and its
consequences if (i) all existing Events of Default, other than the non-payment
of the principal of, premium, if any, and accrued interest on the Notes that
have become due solely by such declaration of acceleration, have been cured or
waived and (ii) the rescission would not conflict with any judgment or decree of
a court of competent jurisdiction.

          SECTION 5.03.  Other Remedies. If an Event of Default occurs and is
                         --------------
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of, premium, if any, or interest
on the Notes or to enforce the performance of any provision of the Notes or this
Indenture.
<PAGE>

                                      66

          The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding.

          SECTION  5.04. Waiver of Past Defaults. Subject to Sections 5.02, 5.07
                         -----------------------
and 8.02, the Holders of at least a majority in principal amount of the
outstanding Notes, by notice to the Trustee, may waive an existing Default or
Event of Default and its consequences, except a Default in the payment of
principal of, premium, if any, or interest on any Note as specified in clause
(a) or (b) of Section 5.01 or in respect of a covenant or provision of this
Indenture which cannot be modified or amended without the consent of the holder
of each outstanding Note affected. Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereto.

          SECTION 5.05.  Control by Majority. The Holders of at least a majority
                         -------------------
in aggregate principal amount of the outstanding Notes may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee. However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders of Notes not joining in the giving of such direction and may take any
other action it deems proper that is not inconsistent with any such direction
received from Holders of Notes.

          SECTION 5.06.  Limitation on Suits. A Holder may not institute any
                         -------------------
proceeding, judicial or otherwise, with respect to this Indenture or the Notes,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder unless:

          (i)   the Holder gives the Trustee written notice of a continuing
     Event of Default;

          (ii)  the Holders of at least 25% in aggregate principal amount of
     outstanding Notes make a written request to the Trustee to pursue the
     remedy;

          (iii) such Holder or Holders offer the Trustee indemnity satisfactory
     to the Trustee against any costs, liability or expense;

          (iv)  the Trustee does not comply with the request within 60 days
     after receipt of the request and the offer of indemnity; and

          (v)   during such 60-day period, the Holders of a majority in
     aggregate principal amount of the outstanding Notes do not give the Trustee
     a direction that is inconsistent with the request.
<PAGE>

                                      67

          For purposes of Section 5.05 of this Indenture and this Section 5.06,
the Trustee shall comply with TIA Section 316(a) in making any determination of
whether the Holders of the required aggregate principal amount of outstanding
Notes have concurred in any request or direction of the Trustee to pursue any
remedy available to the Trustee or the Holders with respect to this Indenture or
the Notes or otherwise under the law.

          A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.

          SECTION 5.07.  Rights of Holders to Receive Payment. Notwithstanding
                         ------------------------------------
any other provision of this Indenture, the right of any Holder of a Note to
receive payment of the Accreted Value of, premium, if any, or interest on, such
Note or to bring suit for the enforcement of any such payment, on or after the
due date expressed in the Notes, shall not be impaired or affected without the
consent of such Holder.

          SECTION 5.08.  Collection Suit by Trustee. If an Event of Default in
                         --------------------------
payment of principal, premium or interest specified in clause (a), (b) or (c) of
Section 5.01 occurs and is continuing, the Trustee may recover judgment in its
own name and as trustee of an express trust against the Company or any other
obligor of the Notes for the whole amount of principal, premium, if any, and
accrued interest remaining unpaid, together with interest on overdue principal,
premium, if any, and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate specified
in the Notes, and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.

          SECTION 5.09.  Trustee May File Proofs of Claim. The Trustee may file
                         --------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.07) and the Holders allowed in any judicial proceedings relative to
the Company (or any other obligor of the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable upon conversion or exchange
of the Notes or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 6.07. Nothing herein contained shall be
deemed to empower the Trustee to authorize or consent to, or accept or adopt on
behalf of any Holder, any plan of reorganization, arrangement, adjustment or
composition affecting the Notes
<PAGE>

                                      68

or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.

          SECTION 5.10.  Priorities.  If the Trustee collects any money pursuant
                         ----------
 to this Article Five, it shall pay out the money in the following order:

          First:  to the Trustee for all amounts due under Section 6.07;

          Second: to Holders for amounts then due and unpaid for principal of,
     premium, if any, and interest on the Notes in respect of which or for the
     benefit of which such money has been collected, ratably, without preference
     or priority of any kind, according to the amounts due and payable on such
     Notes for principal, premium, if any, and interest, respectively; and

          Third: to the Company, or as a court of competent jurisdiction may
direct.

          The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this Section
5.10.

          SECTION 5.11.  Undertaking for Costs. In any suit for the enforcement
                         ---------------------
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court may require any party
litigant in such suit to file an undertaking to pay the costs of the suit, and
the court may assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in the suit having due regard to the merits
and good faith of the claims or defenses made by the party litigant. This
Section 5.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 5.07 of this Indenture, or a suit by Holders of more than
10% in principal amount of the outstanding Notes.

          SECTION 5.12.  Restoration of Rights and Remedies. If the Trustee or
                         ----------------------------------
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then,
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Company, Trustee and the Holders shall continue as though no
such proceeding had been instituted.

          SECTION 5.13.  Rights and Remedies Cumulative. Except as otherwise
                         ------------------------------
provided with respect to the replacement or payment of mutilated, destroyed,
lost or wrongfully taken Notes in Section 2.09, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
<PAGE>

                                      69

remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.

          SECTION 5.14.  Delay or Omission Not Waiver. No delay or omission of
                         ----------------------------
the Trustee or of any Holder to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein. Every right and remedy
given by this Article Five or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.

                                  ARTICLE SIX
                                    TRUSTEE

          SECTION 6.01.  General. The duties and responsibilities of the Trustee
                         -------
shall be as provided by the TIA and as set forth herein. Notwithstanding the
foregoing, no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it. Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Article Six.

          SECTION 6.02.  Certain Rights of Trustee. Subject to TIA Sections
                                 -------------------------
315(a) through (d):

          (i)   the Trustee may conclusively rely and shall be protected in
     acting or refraining from acting upon any resolution, certificate,
     statement, instrument, opinion, report, notice, request, direction,
     consent, order, bond, debenture, note, other evidence of indebtedness or
     other paper or document (whether in its original or facsimile form)
     believed by it to be genuine and to have been signed or presented by the
     proper person. The Trustee need not investigate any fact or matter stated
     in the document;

          (ii)  before the Trustee acts or refrains from acting, it may require
     an Officers' Certificate and/or an Opinion of Counsel, which shall conform
     to Section 9.03 or Section 9.04, as the case may be. The Trustee shall not
     be liable for any action it takes or omits to take in good faith in
     reliance on such certificate or opinion;

          (iii) the Trustee may act through attorneys and agents and shall not
     be responsible for the misconduct or negligence of any agent appointed with
     due care;
<PAGE>

                                      70

          (iv)  the Trustee shall be under no obligation to exercise any of the
     rights or powers vested in it by this Indenture at the request or direction
     of any of the Holders, unless such Holders shall have offered to the
     Trustee reasonable security or indemnity against the costs, expenses and
     liabilities that might be incurred by it in compliance with such request or
     direction;

          (v)   the Trustee shall not be liable for any action it takes or omits
     to take in good faith that it believes to be authorized or within its
     rights or powers or for any action it takes or omits to take in accordance
     with the direction of the Holders of a majority in principal amount at
     maturity of the outstanding Notes relating to the time, method and place of
     conducting any proceeding for any remedy available to the Trustee, or
     exercising any trust or power conferred upon the Trustee, under this
     Indenture; provided that the Trustee's conduct does not constitute gross
     negligence or bad faith;

          (vi)  whenever in the administration of this Indenture the Trustee
     shall deem it desirable that a making be proved or established prior to
     taking, suffering or omitting any action hereunder, the Trustee (unless
     other evidence be herein specifically prescribed) may, in the absence of
     bad faith on its part, conclusively rely upon an Officer's Certificate; and

          (vii) the Trustee shall not be bound to make any investigation into
     the facts or matters stated in any resolution, certificate, statement,
     instrument, opinion, report, notice, request, direction, consent, order,
     bond, debenture, note, other evidence of indebtedness or other paper or
     document, but the Trustee, in its discretion, may make such further inquiry
     or investigation into such facts or matters as it may see fit, and, if the
     Trustee shall determine to make such further inquiry or investigation, it
     shall be entitled to examine the books, records and premises of the Company
     personally or by agent or attorney.

          SECTION 6.03.  Individual Rights of Trustee. The Trustee, in its
                         ----------------------------
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Company or its Affiliates with the same rights it
would have if it were not the Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to TIA Sections 310(b) and 311.

          SECTION 6.04.  Trustee's Disclaimer. The Trustee (i) makes no
                         --------------------
representation as to the validity or adequacy of this Indenture or the Notes,
(ii) shall not be accountable for the Company's use or application of the
proceeds from the Notes and (iii) shall not be responsible for any statement in
the Notes other than its certificate of authentication.

          SECTION 6.05.  Notice of Default.  If any Default or any Event of
                         -----------------
Default occurs and is continuing and if such Default or Event of Default is
actually known to a Responsible
<PAGE>

                                      71

Officer of the Trustee, the Trustee shall mail to each Holder in the manner and
to the extent provided in TIA Section 313(c) notice of the Default or Event of
Default within 45 days after it occurs, unless such Default or Event of Default
has been cured; provided, however, that, except in the case of a default in the
payment of the principal of, premium, if any, or interest on any Note, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders.

          SECTION 6.06.  Reports by Trustee to Holders. Within 60 days after
                         -----------------------------
each May 15, beginning with May 15, 2000 the Trustee shall mail to each Holder
as provided in TIA Section 313(c) a brief report dated as of such May 15, if
required by TIA Section 313(a).

          SECTION 6.07.  Compensation and Indemnity. The Company shall pay to
                         --------------------------
the Trustee such compensation as shall be agreed upon in writing for its
services. The compensation of the Trustee shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses and advances
incurred or made by the Trustee. Such expenses shall include the reasonable
compensation and expenses of the Trustee's agents and counsel.

          The Company shall indemnify each of the Trustee and any predecessor
Trustee for, and hold it harmless against, any and all claim, damage, loss or
liability or expense, including taxes (other than taxes based upon, measured by
or determined by the income of the Trustee) incurred by it without negligence or
bad faith on its part in connection with the acceptance or administration of
this Indenture and its duties under this Indenture and the Notes, including the
costs and expenses of defending itself against any claim or liability and of
complying with any process served upon it or any of its officers in connection
with the exercise or performance of any of its powers or duties under this
Indenture and the Notes.

          To secure the Company's payment obligations in this Section 6.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust to pay principal of, premium, if any, and interest on particular
Notes.

          If the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in clause (g) or (h) of Section
5.01, the expenses and the compensation for the services will be intended to
constitute expenses of administration under Title 11 of the United States
Bankruptcy Code or any applicable federal or state law for the relief of
debtors.

          The provisions of this Section 6.07 shall survive the termination of
this Indenture.
<PAGE>

                                      72

          SECTION 6.08.  Replacement of Trustee. A resignation or removal of the
                         ----------------------
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section
6.08.

          The Trustee may resign at any time by so notifying the Company in
writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Trustee in writing and may appoint a successor
Trustee with the consent of the Company. The Company may remove the Trustee if:
(i) the Trustee is no longer eligible under Section 6.10; (ii) the Trustee is
adjudged a bankrupt or an insolvent; (iii) a receiver or other public officer
takes charge of the Trustee or its property; or (iv) the Trustee becomes
incapable of acting.

          If the Trustee resigns or is removed, or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company. If
the successor Trustee does not deliver its written acceptance required by the
next succeeding paragraph of this Section 6.08 within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the Holders
of a majority in principal amount of the outstanding Notes may, at the expense
of the Company, petition any court of competent jurisdiction for the appointment
of a successor Trustee.

          A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
6.07, (i) the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, (ii) the resignation or removal of the retiring
Trustee shall become effective and (iii) the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder.

          If the Trustee is no longer eligible under Section 6.10, any Holder
who satisfies the requirements of TIA Section 310(b) may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.

          The Company shall give notice of any resignation and any removal of
the Trustee and each appointment of a successor Trustee to all Holders. Each
notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office.

          Notwithstanding replacement of the Trustee pursuant to this Section
6.08, the Company's obligation under Section 6.07 shall continue for the benefit
of the retiring Trustee.
<PAGE>

                                      73

          SECTION 6.09.  Successor Trustee by Merger, Etc. If the Trustee
                         --------------------------------
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business (including the administration of this
Indenture) to, another corporation or national banking association, the
resulting, surviving or transferee corporation or national banking association
without any further act shall be the successor Trustee with the same effect as
if the successor Trustee had been named as the Trustee herein.

          SECTION 6.10.  Eligibility. This Indenture shall always have a
                         -----------
Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee
(or, in the case of a subsidiary of a bank holding company, its parent) shall
have a combined capital and surplus of at least $25,000,000 as set forth in its
most recent published annual report of condition.

          SECTION 6.11.  Money Held in Trust.  The Trustee shall not be liable
                         -------------------
for interest on any money received by it except as the Trustee may agree with
the Company. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law and except for money held in
trust under Article Seven of this Indenture.

          SECTION 6.12.  Withholding Taxes. The Trustee, as agent for the
                         -----------------
Company, shall exclude and withhold from each payment of principal and interest
and other amounts due hereunder or under the Notes any and all withholding taxes
applicable thereto as required by law. The Trustee agrees to act as such
withholding agent and, in connection therewith, whenever any present or future
taxes or similar charges are required to be withheld with respect to any amounts
payable in respect of the Notes, to withhold such amounts and timely pay the
same to the appropriate authority in the name of and on behalf of the holders of
the Notes, that it will file any necessary withholding tax returns or statements
when due. The Company or the Trustee shall, as promptly as possible after the
payment of the taxes described above, deliver to each holder of a Note
appropriate documentation showing the payment thereof, together with such
additional documentary evidence as such holders may reasonably request from time
to time.

                                 ARTICLE SEVEN
                            DISCHARGE OF INDENTURE

          SECTION 7.01.  Termination of Company's Obligations.  Except as
                         ------------------------------------
otherwise provided in this Section 7.01, the Company may terminate its
obligations under the Notes and this Indenture if:

          (i)  all Notes previously authenticated and delivered (other than
     destroyed, lost or stolen Notes that have been replaced or Notes that are
     paid pursuant to Section 3.01 or Notes for whose payment money or
     securities have theretofore been held in trust and thereafter repaid to the
     Company, as provided in Section 7.05) have been delivered to the Trustee
     for cancellation and the Company has paid all sums payable by it hereunder;
     or
<PAGE>

                                      74

          (ii) (A) the Notes mature within one year, (B) the Company irrevocably
     deposits in trust with the Trustee during such one-year period, under the
     terms of an irrevocable trust agreement in form and substance satisfactory
     to the Trustee, as trust funds solely for the benefit of the Holders for
     that purpose, money or U.S. Government Obligations sufficient (in the
     opinion of a nationally recognized firm of independent public accountants
     expressed in a written certification thereof delivered to the Trustee),
     without consideration of any reinvestment of any interest thereon, to pay
     principal, premium, if, any, and interest on the Notes to maturity and to
     pay all other sums payable by it hereunder, (C) no Default or Event of
     Default with respect to the Notes shall have occurred and be continuing on
     the date of such deposit, (D) such deposit will not result in a breach or
     violation of, or constitute a default under, this Indenture or any other
     agreement or instrument to which the Company is a party or by which it is
     bound and (E) the Company has delivered to the Trustee an Officers'
     Certificate and an Opinion of Counsel, in each case stating that all
     conditions precedent provided for herein relating to the satisfaction and
     discharge of this Indenture have been complied with.

          With respect to the foregoing clause (i), the Company's obligations
under Section 6.07 shall survive. With respect to the foregoing clause (ii), the
Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.09, 2.14, 3.01, 3.02, 6.07, 6.08, 7.04, 7.05 and 7.06 shall survive until the
Notes are no longer outstanding. Thereafter, only the Company's obligations in
Sections 6.07, 7.05 and 7.06 shall survive. After any such irrevocable deposit,
the Trustee upon request shall acknowledge in writing the discharge of the
Company's obligations under the Notes and this Indenture except for those
surviving obligations specified above.

          SECTION 7.02.  Defeasance and Discharge of Indenture. The Company will
                         -------------------------------------
be deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the 123rd day after the date of the deposit referred to
in clause (A) of this Section 7.02, and the provisions of this Indenture will no
longer be in effect with respect to the Notes, and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same, except
as to (i) rights of registration of transfer and exchange, (ii) substitution of
apparently mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of
Holders to receive payments of principal thereof and interest thereon, (iv) the
Company's obligations under Section 3.02, (v) the rights, obligations and
immunities of the Trustee hereunder and (vi) the rights of the Holders as
beneficiaries of this Indenture with respect to the property so deposited with
the Trustee payable to all or any of them; provided that the following
conditions shall have been satisfied:

          (A)  with reference to this Section 7.02, the Company has irrevocably
     deposited or caused to be irrevocably deposited with the Trustee (or
     another trustee satisfying the requirements of Section 6.10 of this
     Indenture) and conveyed all right, title and interest for the benefit of
     the Holders, under the terms of an irrevocable trust agreement in form and
     substance satisfactory to the Trustee as trust funds in trust, specifically
     pledged to the
<PAGE>

                                      75

          Trustee for the benefit of the Holders as security for payment of the
     principal of, premium, if any, and interest, if any, on the Notes, and
     dedicated solely to, the benefit of the Holders, in and to (1) money in an
     amount, (2) U.S. Government Obligations that, through the payment of
     interest, premium, if any, and principal in respect thereof in accordance
     with their terms, will provide, not later than one day before the due date
     of any payment referred to in this clause (A), money in an amount or (3) a
     combination thereof in an amount sufficient, in the opinion of a nationally
     recognized firm of independent public accountants expressed in a written
     certification thereof delivered to the Trustee, to pay and discharge,
     without consideration of the reinvestment of such interest and after
     payment of all federal, state and local taxes or other charges and
     assessments in respect thereof payable by the Trustee, the principal of,
     premium, if any, and accrued interest on the outstanding Notes at the
     Stated Maturity of such principal or interest; provided that the Trustee
     shall have been irrevocably instructed to apply such money or the proceeds
     of such U.S. Government Obligations to the payment of such principal,
     premium, if any, and interest with respect to the Notes;

          (B)  such deposit will not result in a breach or violation of, or
     constitute a default under, this Indenture or any other agreement or
     instrument to which the Company is a party or by which it is bound;

          (C)  immediately after giving effect to such deposit on a pro forma
     basis, no Default or Event of Default shall have occurred and be continuing
     on the date of such deposit or during the period ending on the 123rd day
     after such date of deposit;

          (D)  the Company shall have delivered to the Trustee (1) either (x) a
     ruling directed to the Trustee received from the Internal Revenue Service
     to the effect that the Holders will not recognize income, gain or loss for
     federal income tax purposes as a result of the Company's exercise of its
     option under this Section 7.02 and will be subject to federal income tax on
     the same amount and in the same manner and at the same times as would have
     been the case if such option had not been exercised or (y) an Opinion of
     Counsel to the same effect as the ruling described in clause (x) above
     accompanied by a ruling to that effect published by the Internal Revenue
     Service, unless there has been a change in the applicable federal income
     tax law since the date of this Indenture such that a ruling from the
     Internal Revenue Service is no longer required and (2) an Opinion of
     Counsel to the effect that (x) the creation of the defeasance trust does
     not violate the Investment Company Act of 1940 and (y) after the passage of
     123 days following the deposit (except, with respect to any trust funds for
     the account of any Holder who may be deemed to be an "insider" for purposes
     of the United States Bankruptcy Code, after one year following the
     deposit), the trust funds will not be subject to the effect of Section 547
     of the United States Bankruptcy Code or Section 15 of the New York Debtor
     and Creditor Law in a case commenced by or against the Company under either
     such statute, and either (I) the trust funds will no longer remain the
     property of the Company (and therefore will
<PAGE>

                                      76

     not be subject to the effect of any applicable bankruptcy, insolvency,
     reorganization or similar laws affecting creditors' rights generally) or
     (II) if a court were to rule under any such law in any case or proceeding
     that the trust funds remained property of the Company, (a) assuming such
     trust funds remained in the possession of the Trustee prior to such court
     ruling to the extent not paid to the Holders, the Trustee will hold, for
     the benefit of the Holders, a valid and perfected security interest in such
     trust funds that is not avoidable in bankruptcy or otherwise except for the
     effect of Section 552(b) of the United States Bankruptcy Code on interest
     on the trust funds accruing after the commencement of a case under such
     statute and (b) the Holders will be entitled to receive adequate protection
     of their interests in such trust funds if such trust funds are used in such
     case or proceeding;

          (E)  if the Notes are then listed on a national securities exchange,
     the Company shall have delivered to the Trustee an Opinion of Counsel to
     the effect that such deposit defeasance and discharge will not cause the
     Notes to be delisted; and

          (F)  the Company has delivered to the Trustee an Officers' Certificate
     and an Opinion of Counsel, in each case stating that all conditions
     precedent provided for herein relating to the defeasance contemplated by
     this Section 7.02 have been complied with.

          Notwithstanding the foregoing, prior to the end of the 123-day (or one
year) period referred to in clause (D)(2)(y) of this Section 7.02, none of the
Company's obligations under this Indenture shall be discharged. Subsequent to
the end of such 123-day (or one year) period with respect to this Section 7.02,
the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.09, 2.14, 3.01, 3.02, 6.07, 6.08, 7.05 and 7.06 shall survive until the Notes
are no longer outstanding. Thereafter, only the Company's obligations in
Sections 6.07, 7.05 and 7.06 shall survive. If and when a ruling from the
Internal Revenue Service or an Opinion of Counsel referred to in clause (D)(1)
of this Section 7.02 is able to be provided specifically without regard to, and
not in reliance upon, the continuance of the Company's obligations under Section
3.01, then the Company's obligations under such Section 3.01 shall cease upon
delivery to the Trustee of such ruling or Opinion of Counsel and compliance with
the other conditions precedent provided for herein relating to the defeasance
contemplated by this Section 7.02.

          After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Notes and this Indenture except for those surviving obligations in the
immediately preceding paragraph.

          SECTION 7.03.  Defeasance of Certain Obligations. The Company may omit
                         ---------------------------------
to comply with any term, provision or condition set forth in clauses (iii) and
(iv) under Section 4.01 and Sections 3.03 through 3.11 and Section 3.20, clause
(c) under Section 5.01 with respect to such clauses (iii) and (iv) under Section
4.01 and Sections 3.10 and 3.11, clause (d) under
<PAGE>

                                      77

Section 5.01 with respect to Sections 3.03 through 3.09 and 3.20 and clauses (e)
and (f) under Section 5.01 shall be deemed not to be Events of Default, in each
case with respect to the outstanding Notes if:

          (i)    with reference to this Section 7.03, the Company has
     irrevocably deposited or caused to be irrevocably deposited with the
     Trustee (or another trustee satisfying the requirements of Section 6.10)
     and conveyed all right, title and interest to the Trustee for the benefit
     of the Holders, under the terms of an irrevocable trust agreement in form
     and substance satisfactory to the Trustee as trust funds in trust,
     specifically pledged to the Trustee for the benefit of the Holders as
     security for payment of the principal of, premium, if any, and interest, if
     any, on the Notes, and dedicated solely to, the benefit of the Holders, in
     and to (A) money in an amount, (B) U.S. Government Obligations that,
     through the payment of interest and principal in respect thereof in
     accordance with their terms, will provide, not later than one day before
     the due date of any payment referred to in this clause (i), money in an
     amount or (C) a combination thereof in an amount sufficient, in the opinion
     of a nationally recognized firm of independent public accountants expressed
     in a written certification thereof delivered to the Trustee, to pay and
     discharge, without consideration of the reinvestment of such interest and
     after payment of all federal, state and local taxes or other charges and
     assessments in respect thereof payable by the Trustee, the principal of,
     premium, if any, and interest on the outstanding Notes on the Stated
     Maturity of such principal or interest; provided that the Trustee shall
     have been irrevocably instructed to apply such money or the proceeds of
     such U.S. Government Obligations to the payment of such principal, premium,
     if any, and interest with respect to the Notes;

          (ii)   such deposit will not result in a breach or violation of, or
     constitute a default under, this Indenture or any other agreement or
     instrument to which the Company is a party or by which it is bound;

          (iii)  no Default or Event of Default shall have occurred and be
     continuing on the date of such deposit;

          (iv)   the Company has delivered to the Trustee an Opinion of Counsel
     to the effect that (A) the creation of the defeasance trust does not
     violate the Investment Company Act of 1940, (B) the Trustee, for the
     benefit of the Holders, has a valid first-priority security interest in the
     trust funds, (C) the Holders will not recognize income, gain or loss for
     federal income tax purposes as a result of such deposit and defeasance of
     certain obligations and will be subject to federal income tax on the same
     amount and in the same manner and at the same times as would have been the
     case if such deposit and defeasance had not occurred and (D) after the
     passage of 123 days following the deposit (except, with respect to any
     trust funds for the account of any Holder who may be deemed to be an
     "insider" for purposes of the United States
<PAGE>

                                      78

     Bankruptcy Code, after one year following the deposit), the trust funds
     will not be subject to the effect of Section 547 of the United States
     Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law in a
     case commenced by or against the Company under either such statute, and
     either (1) the trust funds will no longer remain the property of the
     Company (and therefore will not be subject to the effect of any applicable
     bankruptcy, insolvency, reorganization or similar laws affecting creditors'
     rights generally) or (2) if a court were to rule under any such law in any
     case or proceeding that the trust funds remained property of the Company,
     (x) assuming such trust funds remained in the possession of the Trustee
     prior to such court ruling to the extent not paid to the Holders, the
     Trustee will hold, for the benefit of the Holders, a valid and perfected
     security interest in such trust funds that is not avoidable in bankruptcy
     or otherwise (except for the effect of Section 552(b) of the United States
     Bankruptcy Code on interest on the trust funds accruing after the
     commencement of a case under such statute), (y) the Holders will be
     entitled to receive adequate protection of their interests in such trust
     funds if such trust funds are used in such case or proceeding and (z) no
     property, rights in property or other interests granted to the Trustee or
     the Holders in exchange for, or with respect to, such trust funds will be
     subject to any prior rights of holders of other Indebtedness of the Company
     or any of its Subsidiaries;

          (v)  if the Notes are then listed on a national securities exchange,
     the Company shall have delivered to the Trustee an Opinion of Counsel to
     the effect that such deposit defeasance and discharge will not cause the
     Notes to be delisted; and

          (vi) the Company has delivered to the Trustee an Officers' Certificate
     and an Opinion of Counsel, in each case stating that all conditions
     precedent provided for herein relating to the defeasance contemplated by
     this Section 7.03 have been complied with.

          SECTION 7.04.  Application of Trust Money. Subject to Section 7.06,
                         --------------------------
the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 7.01, 7.02 or 7.03, as the
case may be, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with the Notes and this Indenture to the
payment of principal of, premium, if any, and interest on the Notes; but such
money need not be segregated from other funds except to the extent required by
law.

          SECTION 7.05.  Repayment to Company. Subject to Sections 6.07, 7.01,
                         --------------------
7.02 and 7.03, the Trustee and the Paying Agent shall promptly pay to the
Company upon request set forth in an Officers' Certificate any excess money held
by them at any time and thereupon shall be relieved from all liability with
respect to such money. The Trustee and the Paying Agent shall pay to the Company
upon request any money held by them for the payment of principal, premium, if
any, or interest that remains unclaimed for two years; provided that the Trustee
or such Paying Agent before being required to make any payment may cause to be
published at the expense of the Company once in a newspaper of general
circulation in the City of New York or
<PAGE>

                                      79

mail to each Holder entitled to such money at such Holder's address (as set
forth in the Security Register) notice that such money remains unclaimed and
that after a date specified therein (which shall be at least 30 days from the
date of such publication or mailing) any unclaimed balance of such money then
remaining will be repaid to the Company. After payment to the Company, Holders
entitled to such money must look to the Company for payment as general creditors
unless an applicable law designates another Person, and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.

          SECTION 7.06.  Reinstatement. If the Trustee or Paying Agent is unable
                         -------------
to apply any money or U.S. Government Obligations in accordance with Section
7.01, 7.02 or 7.03, as the case may be, by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company's
obligations under this Indenture and the Notes shall be revived and reinstated
as though no deposit had occurred pursuant to Section 7.01, 7.02 or 7.03, as the
case may be, until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with Section
7.01, 7.02 or 7.03, as the case may be; provided that, if the Company has made
any payment of principal of, premium, if any, or interest on any Notes because
of the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money or
U.S. Government Obligations held by the Trustee or Paying Agent.

                                 ARTICLE EIGHT
                      AMENDMENTS, SUPPLEMENTS AND WAIVERS

          SECTION 8.01.  Without Consent of Holders. The Company, when
                         --------------------------
authorized by a resolution of its Board of Directors, and the Trustee may amend
or supplement this Indenture or the Notes without notice to or the consent of
any Holder:

          (1)  to cure any ambiguity, defect or inconsistency in this Indenture;
     provided that such amendments or supplements shall not adversely affect the
     interests of the Holders in any material respect;

          (2)  to comply with Article Four;

          (3)  to comply with any requirements of the Commission in connection
     with the qualification of this Indenture under the TIA;

          (4)  to evidence and provide for the acceptance of appointment
     hereunder or thereunder by a successor Trustee; or
<PAGE>

                                      80

          (5)  to make any change that, in the good faith opinion of the Board
     of Directors as evidenced by a Board Resolution, does not materially and
     adversely affect the rights of any Holder.

          SECTION 8.02.  With Consent of Holders. Subject to Sections 5.04 and
                         -----------------------
5.07 and without prior notice to the Holders, the Company, when authorized by
its Board of Directors (as evidenced by a Board Resolution), and the Trustee may
amend this Indenture and the Notes with the written consent of the Holders of a
majority in aggregate principal amount at maturity of the Notes then
outstanding, and the Holders of a majority in aggregate principal amount at
maturity of the Notes then outstanding by written notice to the Trustee may
waive future compliance by the Company with any provision of this Indenture or
the Notes.

          Notwithstanding the provisions of this Section 8.02, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 5.04, may not:

          (i)    change the Stated Maturity of the principal of, or any
     installment of interest on, any Note,

          (ii)   reduce the Accreted Value of, or premium, if any, or interest
     on, any Note,

          (iii)  change the place or currency of payment of principal of, or
     premium, if any, or interest on, any Note or adversely affect any right of
     repayment at the option of any Holder of any Note,

          (iv)   impair the right to institute suit for the enforcement of any
     payment on or after the Stated Maturity (or, in the case of a redemption,
     on or after the Redemption Date) of any Note,

          (v)    reduce the above-stated percentage of outstanding Notes the
     consent of whose Holders is necessary to modify or amend this Indenture,

          (vi)   waive a Default in the payment of principal of, premium, if
     any, or interest on the Notes,

          (vii)  modify any of the provisions of this Section 8.02, except to
     increase any such percentage or to provide that certain other provisions of
     this Indenture cannot be modified or waived without the consent of the
     Holder of each outstanding Note affected thereby,

          (viii) reduce the percentage or aggregate principal amount at maturity
     of outstanding Notes the consent of whose Holders is necessary for waiver
     of compliance with certain provisions of this Indenture or for waiver of
     certain defaults,
<PAGE>

                                      81

          (ix)   release any Subsidiary Guarantor from its Subsidiary Guarantee,
     except as provided in this Indenture, or

          (x)    change the optional redemption prices of the Notes from that
     stated under Section 10.01.

          It shall not be necessary for the consent of the Holders under this
Section 8.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.

          After an amendment, supplement or waiver under this Section 8.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Company will
mail supplemental indentures to Holders upon request. Any failure of the Company
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture or waiver.

          SECTION 8.03.  Revocation and Effect of Consent. Until an amendment or
                         --------------------------------
waiver becomes effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the Note of the consenting Holder, even if notation
of the consent is not made on any Note. However, any such Holder or subsequent
Holder may revoke the consent as to its Note or portion of its Note. Such
revocation shall be effective only if the Trustee receives the notice of
revocation before the date the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver shall become effective on receipt
by the Trustee of written consents from the Holders of the requisite percentage
in principal amount of the outstanding Notes.

          The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those persons who were
Holders at such record date (or their duly designated proxies) and only those
persons shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.

          After an amendment, supplement or waiver becomes effective, it shall
bind every Holder unless it is of the type described in any of clauses (i)
through (x) of Section 8.02. In case of an amendment or waiver of the type
described in clauses (i) through (x) of Section 8.02, the amendment or waiver
shall bind each Holder who has consented to it and every subsequent Holder of a
Note that evidences the same indebtedness as the Note of the consenting Holder.
<PAGE>

                                      82

          SECTION 8.04.  Notation on or Exchange of Notes. If an amendment,
                         --------------------------------
supplement or waiver changes the terms of a Note, the Trustee may require the
notation on the Note about the changed terms and return it to the Holder and the
Trustee may place an appropriate notation on any Note thereafter authenticated.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for the Note shall issue and the Trustee shall authenticate a new Note
that reflects the changed terms.

          SECTION 8.05.  Trustee to Sign Amendments, Etc. The Trustee shall be
                         -------------------------------
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Eight is authorized or permitted by this
Indenture. Subject to the preceding sentence, the Trustee shall sign such
amendment, supplement or waiver if the same does not adversely affect the rights
of the Trustee. The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

          SECTION 8.06.  Conformity with Trust Indenture Act. Every supplemental
                         -----------------------------------
indenture executed pursuant to this Article Eight shall conform to the
requirements of the TIA as then in effect.

                                 ARTICLE NINE
                                 MISCELLANEOUS

          SECTION 9.01.  Trust Indenture Act of 1939. Prior to the effectiveness
                         ---------------------------
of the Registration Statement, this Indenture shall incorporate and be governed
by the provisions of the TIA that are required to be part of and to govern
indentures qualified under the TIA. After the effectiveness of the Registration
Statement, this Indenture shall be subject to the provisions of the TIA that are
required to be a part of this Indenture and shall, to the extent applicable, be
governed by such provisions.

          SECTION 9.02.  Notices. Any notice or communication shall be
                         -------
sufficiently given if in writing and delivered in person or mailed by first
class mail addressed as follows:

          if to the Company:
          -----------------

               Loudcloud, Inc.
               615 Tasman Drive
               Sunnyvale, CA 94089
<PAGE>

                                      83

          if to the Trustee:
          -----------------

               State Street Bank and Trust Company of California, N.A.
               633 West 5/th/ Street, 12/th/ Floor
               Los Angeles, CA  90071
               Attention: Corporate Trust Administration (Loudcloud, Inc. 13%
               Senior Discount Notes due 2005)

          The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.

          Any notice or communication mailed to a Holder shall be mailed to him
at his address as it appears on the Security Register by first class mail and
shall be sufficiently given to him if so mailed within the time prescribed.
Copies of any such communication or notice to a Holder shall also be mailed to
the Trustee and each Agent at the same time.

          Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. Except for a
notice to the Trustee, which is deemed given only when received, and except as
otherwise provided in this Indenture, if a notice or communication is mailed in
the manner provided in this Section 9.02, it is duly given, whether or not the
addressee receives it.

          Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.

          In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.

          SECTION 9.03.  Certificate and Opinion as to Conditions Precedent.
                         --------------------------------------------------
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:

          (i)  an Officers' Certificate stating that, in the opinion of the
     signers, all conditions precedent, if any, provided for in this Indenture
     relating to the proposed action have been complied with; and
<PAGE>

                                      84

          (ii) an Opinion of Counsel in form and substance reasonably
     satisfactory to the Trustee stating that, in the opinion of such Counsel,
     all such conditions precedent have been complied with; provided, however,
     that, with respect to matters of fact, an Opinion of Counsel may rely on an
     Officers' Certificate or certificates of public officials.

          SECTION 9.04.  Statements Required in Certificate. Each certificate
                         ----------------------------------
with respect to compliance with a condition or covenant provided for in this
Indenture shall include:

          (i)    a statement that each person signing such certificate has read
     such covenant or condition and the definitions herein relating thereto;

          (ii)   a brief statement as to the nature and scope of the examination
     or investigation upon which the statements contained in such certificate
     are based;

          (iii)  a statement that, in the opinion of each such person, he has
     made such examination or investigation as is necessary to enable him to
     express an informed opinion as to whether or not such covenant or condition
     has been complied with; and

          (iv)   a statement as to whether or not, in the opinion of each such
     person, such condition or covenant has been complied with; provided that
     with respect to matters of fact, an opinion may rely on an officer's
     certificate or certificates of public officials.

          SECTION 9.05.  Rules by Trustee, Paying Agent or Registrar. The
                         -------------------------------------------
Trustee may make reasonable rules for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.

          SECTION 9.06.  Payment Date Other Than a Business Day. If an Interest
                         --------------------------------------
Payment Date, Redemption Date, Payment Date, Stated Maturity or date of maturity
of any Note shall not be a Business Day, then payment of principal of, premium,
if any, or interest on such Note, as the case may be, need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Payment Date, or Redemption
Date or at the Stated Maturity or date of maturity of such Note; provided that
no interest shall accrue for the period from and after such Interest Payment
Date, Redemption Date, Payment Date, Stated Maturity or date of maturity, as the
case may be.

          SECTION 9.07.  Governing Law. The laws of the State of New York shall
                         -------------
govern this Indenture and the Notes. The Trustee, the Company and the Holders
agree to submit to the jurisdiction of the courts of the State of New York in
any action or proceeding arising out of or relating to this Indenture or the
Notes.

          SECTION 9.08.  No Adverse Interpretation of Other Agreements. This
                         ---------------------------------------------
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or any
<PAGE>

                                      85

Subsidiary of the Company. Any such indenture, loan or debt agreement may not be
used to interpret this Indenture.

          SECTION 9.09. No Recourse Against Others. No recourse for the payment
                        --------------------------
of the principal of, premium, if any, or interest on any of the Notes, or for
any claim based thereon or otherwise in respect thereof, and no recourse under
or upon any obligation, covenant or agreement of the Company contained in this
Indenture, or in any of the Notes, or because of the creation of any
Indebtedness represented thereby, shall be had against any incorporator or
against any past, present or future partner, stockholder, other equity holder,
officer, director, employee or controlling person, as such, of the Company or of
any successor Person, either directly or through the Company or any successor
Person, whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Notes.

          SECTION 9.10. Successors.  All agreements of the Company in this
                        ----------
Indenture and the Notes shall bind its successors. All agreements of the Trustee
in this Indenture shall bind its successor.

          SECTION 9.11. Duplicate Originals.  The parties may sign any number of
                        -------------------
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

          SECTION 9.12. Separability.  In case any provision in this Indenture
                        ------------
or in be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

          SECTION 9.13. Table of Contents, Headings, Etc. The Table of Contents,
                        --------------------------------
Cross-Reference Table and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
and provisions hereof.

                                  ARTICLE TEN
                                  REDEMPTION

          SECTION 10.01. Right of Redemption. The Company may redeem all, but
                         -------------------
not less than all, of the Notes at a Redemption Price equal to the sum of (i)
the Accreted Value on the Redemption Date, plus (ii) accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date that is prior to the Redemption Date
to receive interest due on an Interest Payment Date), plus (iii) the Applicable
Premium.
<PAGE>

                                      86

          SECTION 10.02.  Notices to Trustee.  If the Company elects to redeem
                          ------------------
Notes pursuant to Section 10.01, it shall notify the Trustee in writing of the
Redemption Date.

          The Company shall give each notice provided for in this Section 10.02
in an Officers' Certificate at least 45 days before the Redemption Date (unless
a shorter period shall be satisfactory to the Trustee).

          SECTION 10.03. [Reserved]

          SECTION 10.04. Notice of Redemption. With respect to any redemption of
                         --------------------
Notes pursuant to Section 10.01, at least 30 days but not more than 60 days
before a Redemption Date, the Company shall mail a notice of redemption by first
class mail to each Holder whose Notes are to be redeemed.

          The notice shall identify the Notes (including CUSIP, CINS or
ISIN numbers) to be redeemed and shall state:

          (i)   the Redemption Date;

          (ii)  the Redemption Price;

          (iii) the name and address of the Paying Agent;

          (iv)  that Notes called for redemption must be surrendered to the
     Paying Agent in order to collect the Redemption Price;

          (v)   that, unless the Company defaults in making the redemption
     payment, interest (or original issue discount) on Notes called for
     redemption ceases to accrue on and after the Redemption Date and the only
     remaining right of the Holders is to receive payment of the Redemption
     Price plus accrued interest to the Redemption Date upon surrender of the
     Notes to the Paying Agent; and

          (vi)  that, if any Note contains a CUSIP, CINS or ISIN number as
     provided in Section 2.13, no representation is being made as to the
     correctness of the CUSIP, CINS or ISIN number either as printed on the
     Notes or as contained in the notice of redemption and that reliance may be
     placed only on the other identification numbers printed on the Notes.

          At the Company's request (which request may be revoked by the Company
at any time prior to the time at which the Trustee shall have given such notice
to the Holders), made in writing to the Trustee at least 45 days (or such
shorter period as shall be satisfactory to the Trustee) before a Redemption
Date, the Trustee shall give the notice of redemption in the name
<PAGE>

                                      87

and at the expense of the Company. If, however, the Company gives such notice to
the Holders, the Company shall concurrently deliver to the Trustee an Officers'
Certificate stating that such notice has been given.

          SECTION 10.05. Effect of Notice of Redemption. Once notice of
                         ------------------------------
redemption is mailed, Notes called for redemption become due and payable on the
Redemption Date and at the Redemption Price. Upon surrender of any Notes to the
Paying Agent, such Notes shall be paid at the Redemption Price, plus accrued
interest, if any, to the Redemption Date.

          Notice of redemption shall be deemed to be given when mailed, whether
or not the Holder receives the notice. In any event, failure to give such
notice, or any defect therein, shall not affect the validity of the proceedings
for the redemption of Notes held by Holders to whom such notice was properly
given.

          SECTION 10.06. Deposit of Redemption Price. On or prior to any
                         ---------------------------
Redemption Date, the Company shall deposit with the Paying Agent (or, if the
Company is acting as its own Paying Agent, shall segregate and hold in trust as
provided in Section 2.05) money sufficient to pay the Redemption Price of and
accrued interest on all Notes to be redeemed on that date other than Notes
called for redemption on that date that have been delivered by the Company to
the Trustee for cancellation.

          SECTION 10.07. Payment of Notes Called for Redemption. If notice of
                         --------------------------------------
redemption has been given in the manner provided above, the Notes shall become
due and payable on the Redemption Date at the Redemption Price stated therein,
together with accrued interest to such Redemption Date, and on and after such
date (unless the Company shall default in the payment of such Notes at the
Redemption Price and accrued interest to the Redemption Date, in which case the
principal, until paid, shall bear interest from the Redemption Date at the rate
prescribed in the Notes), such Notes shall cease to accrue interest. Upon
surrender of any Note for redemption in accordance with a notice of redemption,
such Note shall be paid and redeemed by the Company at the Redemption Price,
together with accrued interest, if any, to the Redemption Date; provided that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders registered as such at the close of business
on the relevant Regular Record Date.
<PAGE>

                                  SIGNATURES

          IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.

                                             LOUDCLOUD, INC.

                                             By: /s/ Charles J. Katz, Jr.
                                                --------------------------------
                                                Name: Charles J. Katz, Jr.
                                                Title: Executive Vice President

                                             STATE STREET BANK AND
                                             TRUST COMPANY OF CALIFORNIA, N.A.

                                             By: /s/ Stephen Rivero
                                                --------------------------------
                                                Name:  Stephen Rivero
                                                Title: Warrant Agent

<PAGE>

                                                                       EXHIBIT A

                                [FACE OF NOTE]

                                LOUDCLOUD, INC.

                       13% Senior Discount Note Due 2005

                                                       [CUSIP] [CINS] __________

No.                                                                   $_________

          After February 9, 2000, ________________ , _______________ of the
Company at 615 Tasman Drive, Sunnyvale, CA 94089 will promptly make available to
the Holders, upon request, the issue price, the amount of original issue
discount under Section 1273 of the Internal Revenue Code (for each $1,000
principal amount), the issue price and the yield to maturity.

          LOUDCLOUD, INC., a Delaware corporation (the "Company", which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to ________, or its registered assigns, the principal
sum of ______________ ($______) on February 15, 2005.

          Interest Payment Dates: February 15 and August 15, commencing August
15, 2003.

          Regular Record Dates:  February 1 and August 1.

          Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
<PAGE>

          IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.

                                         LOUDCLOUD, INC.

                                         By:____________________________________
                                              Name:  Benjamin A. Horowitz
                                              Title: Chief Executive Officer and
                                                   President

                                         By:____________________________________
                                            Name:  Charles J. Katz, Jr.
                                            Title: Executive Vice President

                   (Trustee's Certificate of Authentication)

          This is one of the 13% Senior Discount Notes due 2005 described in the
within-mentioned Indenture.

Date:                                    STATE STREET BANK AND TRUST
                                         COMPANY OF CALIFORNIA, N.A.,
                                         as Trustee

                                         By:____________________________________
                                            Authorized Signatory
<PAGE>

                                      A-3

                            [REVERSE SIDE OF NOTE]

                                LOUDCLOUD, INC.

                       13% Senior Discount Note due 2005

1.  Principal and Interest.
    ----------------------

          The Company will pay the principal of this Note on February 15, 2005.

          The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate per annum
shown above.

          Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the February 1 or August 1 immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
August 15, 2003; provided that no interest shall accrue on the principal amount
of this Note prior to February 15, 2003 and no interest shall be paid on this
Note prior to August 15, 2003, except as provided in the next two paragraphs.

          Unless such requirement is waived by Morgan Stanley & Co.
Incorporated, if an offering memorandum is not prepared in final form by the
Company, on or before February 15, 2001 in accordance with the terms of the Unit
Purchase Agreement by and between the Company and Morgan Stanley & Co.
Incorporated, dated February 6, 2000, interest (in addition to the accrual of
original issue discount during the period ending February 15, 2003 and in
addition to the interest otherwise due on the Notes after such date) will accrue
at an annual rate of 0.5% of Accreted Value on the preceding Semiannual Accrual
Date of the Notes and will accrue at an additional annual rate of 0.25% each
quarter thereafter payable in cash semiannually, in arrears, on each February 15
and August 15, commencing August 15, 2001 until the offering memorandum is
available or the exchange offer is consummated or the shelf registration
statement is declared effective in accordance with the Notes Registration Rights
Agreement. This is in addition to any other right that the holders of the Notes
may have.

          If an exchange offer registered under the Securities Act is not
consummated and a shelf registration statement under the Securities Act with
respect to resales of the Notes is not declared effective by the Commission, on
or before February 9, 2002 in accordance with the terms of the Notes
Registration Rights Agreement interest (in addition to the accrual of original
issue discount during the period ending February 15, 2003 and in addition to the
interest otherwise due on the Notes after such date) will accrue, at an annual
rate of .5% of Accreted Value on the preceding Semiannual Accrual Date on the
Notes from February 9, 2002, payable in cash semiannually, in arrears, on each
February 15 and August 15, commencing August 15, 2002, until
<PAGE>

                                      A-4

the exchange offer is consummated or the shelf registration statement is
declared effective. The Holder of this Note is entitled to the benefits of such
Notes Registration Rights Agreement.

          From and after February 15, 2003, interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from February 15, 2003; provided that, if there is no existing
default in the payment of interest and this Note is authenticated between a
Regular Record Date referred to on the face hereof and the next succeeding
Interest Payment Date, interest shall accrue from such Interest Payment Date.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.

          The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
a rate per annum that is 2% in excess of the rate otherwise payable.

2.  Method of Payment.
    -----------------

          The Company will pay interest (except defaulted interest) on the
principal amount of the Notes as provided above on each February 15 and August
15 to the persons who are Holders (as reflected in the Security Register at the
close of business on such February 1 and August 1 immediately preceding the
Interest Payment Date), in each case, even if the Note is canceled on
registration of transfer or registration of exchange after such record date;
provided that, with respect to the payment of principal, the Company will make
payment to the Holder that surrenders this Note to a Paying Agent on or after
February 15, 2005.

          The Company will pay principal, premium, if any, and as provided
above, interest in money of the United States that at the time of payment is
legal tender for payment of public and private debts. However, the Company may
pay principal, premium, if any, and interest by its check payable in such money.
It may mail an interest check to a Holder's registered address (as reflected in
the Security Register). If a payment date is a date other than a Business Day at
a place of payment, payment may be made at that place on the next succeeding day
that is a Business Day and no interest shall accrue for the intervening period.

3.  Paying Agent and Registrar.
    --------------------------

          Initially, the Trustee will act as authenticating agent,
Paying Agent and Registrar. The Company may change any authenticating agent,
Paying Agent or Registrar without notice. The Company, any Subsidiary or any
Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar.
<PAGE>

                                      A-5

4.  Indenture; Limitations.
    ----------------------

          The Company issued the Notes under an Indenture dated as of February
9, 2000 (the "Indenture"), between the Company and State Street Bank and Trust
Company of California, N.A. (the "Trustee"). Capitalized terms herein are used
as defined in the Indenture unless otherwise indicated. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Notes are subject to all such terms,
and Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.

          The Notes are general obligations of the Company.

5.  Repurchase upon Change in Control.
    ---------------------------------

          Upon the occurrence of any Change of Control, each Holder shall have
the right to require the repurchase of its Notes by the Company in cash pursuant
to the offer described in the Indenture at a purchase price equal to 101% of the
Accreted Value thereof plus accrued interest, if any, to the date of purchase
(the "Change of Control Payment").

          A notice of such Change of Control will be mailed within 30 days after
any Change of Control occurs to each Holder at his last address as it appears in
the Security Register. Notes in original denominations larger than $1,000 may be
sold to the Company in part. On and after the Change of Control Payment Date,
interest ceases to accrue and the original issue discount ceases to accrete on
Notes or portions of Notes surrendered for purchase by the Company, unless the
Company defaults in the payment of the Change of Control Payment.

6.  Denominations; Transfer; Exchange.
    ---------------------------------

          The Notes are in registered form without coupons in denominations of
$1,000 of principal amount at maturity and multiples of $1,000 in excess
thereof. A Holder may register the transfer or exchange of Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer or exchange of any Notes selected for redemption. Also, it
need not register the transfer or exchange of any Notes for a period of 15 days
before a selection of Notes to be redeemed is made.

7.  Persons Deemed Owners.
    ---------------------

          A Holder shall be treated as the owner of a Note for all purposes.
<PAGE>

                                      A-6

8.  Unclaimed Money.
    ---------------

          If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.

9.  Discharge Prior to Maturity.
    ---------------------------

          If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to maturity, the Company will be
discharged from the Indenture and the Notes, except in certain circumstances for
certain sections thereof, and (b) to the Stated Maturity, the Company will be
discharged from certain covenants set forth in the Indenture.

10.  Amendment; Supplement; Waiver.
     -----------------------------

          Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Notes then outstanding, and any existing default or
compliance with any provision may be waived with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding. Without
notice to or the consent of any Holder, the parties thereto may amend or
supplement the Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency and make any change that does not materially
and adversely affect the rights of any Holder.

11.  Restrictive Covenants.
     ---------------------

          The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, use the proceeds from Asset Sales,
engage in transactions with Affiliates or merge, consolidate or transfer
substantially all of its assets. Within 45 days after the end of each fiscal
quarter (90 days after the end of the last fiscal quarter of each year), the
Company must report to the Trustee on compliance with such limitations.

12.  Successor Persons.
     -----------------

          When a successor person or other entity assumes all the obligations of
its predecessor under the Notes and the Indenture, the predecessor person will
be released from those obligations.
<PAGE>

                                      A-7

13.  Defaults and Remedies.
     ---------------------

                  The following events constitute "Events of Default" under the
Indenture:

                  (a)      default in the payment of principal of (or premium,
         if any, on) any Note when the same becomes due and payable at maturity,
         upon acceleration, redemption or otherwise;

                  (b)      default in the payment of interest on any Note when
         the same becomes due and payable, and such default continues for a
         period of 30 days;

                  (c)      default in the performance, or breach of the
         provisions of Article Four or the failure to make or consummate an
         Offer to Purchase in accordance with Section 3.10 or Section 3.11;

                  (d)      default in the performance of or breach of any other
         covenant or agreement of the Company in the Indenture or under the
         Notes (other than a default specified in clause (a), (b) or (c) above)
         and such default or breach continues for a period of 30 consecutive
         days after written notice by the Trustee or the Holders of 25% or more
         in aggregate principal amount at maturity of the Notes;

                  (e)      there occurs with respect to any issue or issues of
         Indebtedness of the Company, any Subsidiary Guarantor or any
         Significant Subsidiary having an outstanding principal amount of $5
         million or more in the aggregate for all such issues of all such
         Persons, whether such Indebtedness now exists or shall hereafter be
         created, (I) an event of default that has caused the holder thereof to
         declare such Indebtedness to be due and payable prior to its Stated
         Maturity and such Indebtedness has not been discharged in full or such
         acceleration has not been rescinded or annulled within 60 days of such
         acceleration and/or (II) the failure to make a principal payment at the
         final (but not any interim) fixed maturity and such defaulted payment
         shall not have been made, waived or extended within 60 days of such
         payment default;

                  (f)      any final judgment or order (not covered by
         insurance) for the payment of money in excess of $5 million in the
         aggregate for all such final judgments or orders against all such
         Persons (treating any deductibles, self-insurance or retention as not
         so covered) shall be rendered against the Company, and Subsidiary
         Guarantor or any Significant Subsidiary and shall not be paid or
         discharged, and there shall be any period of 60 consecutive days
         following entry of the final judgment or order that causes the
         aggregate amount for all such final judgments or orders outstanding and
         not paid or discharged against all such Persons to exceed $5 million
         during which a stay of enforcement of such final judgment or order, by
         reason of a pending appeal or otherwise, shall not be in effect;
<PAGE>

                                      A-8

                  (g)      a court having jurisdiction in the premises enters a
         decree or order for (A) relief in respect of the Company, and
         Subsidiary Guarantor or any Significant Subsidiary in an involuntary
         case under any applicable bankruptcy, insolvency or other similar law
         now or hereafter in effect, (B) appointment of a receiver, liquidator,
         assignee, custodian, trustee, sequestrator or similar official of the
         Company, and Subsidiary Guarantor or any Significant Subsidiary or for
         all or substantially all of the property and assets of the Company, and
         Subsidiary Guarantor or any Significant Subsidiary or (C) the winding
         up or liquidation of the affairs of the Company, and Subsidiary
         Guarantor or any Significant Subsidiary and, in each case, such decree
         or order shall remain unstayed and in effect for a period of 60
         consecutive days; or

                  (h)      the Company, and Subsidiary Guarantor or any
         Significant Subsidiary (A) commences a voluntary case under any
         applicable bankruptcy, insolvency or other similar law now or hereafter
         in effect, or consents to the entry of an order for relief in an
         involuntary case under any such law, (B) consents to the appointment of
         or taking possession by a receiver, liquidator, assignee, custodian,
         trustee, sequestrator or similar official of the Company, and
         Subsidiary Guarantor or any Significant Subsidiary or for all or
         substantially all of the property and assets of the Company, and
         Subsidiary Guarantor or any Significant Subsidiary or (C) effects any
         general assignment for the benefit of creditors.

                  If an Event of Default (other than an Event of Default
specified in clauses (g) or (h) of Section 5.01 of the Indenture that occurs
with respect to the Company) occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes may declare all the
Notes to be due and payable. If a bankruptcy or insolvency default with respect
to the Company occurs and is continuing, the Notes automatically become due and
payable. Holders may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Notes. Subject to certain limitations, Holders of
at least a majority in principal amount of the Notes then outstanding may direct
the Trustee in its exercise of any trust or power.

14.  Trustee Dealings with Company.
     -----------------------------

                  The Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from and perform services for
the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.

15.  No Recourse Against Others.
     --------------------------

                  No incorporator or any past, present or future partner,
stockholder, other equity holder, officer, director, employee or controlling
person as such, of the Company or of any successor Person shall have any
liability for any obligations of the Company under
<PAGE>

                                      A-9

the Notes or the Indenture or for any claim based on, in respect of or by reason
of, such obligations or their creation. Each Holder by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.

16.  Authentication.
     --------------

                  This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on the other side
of this Note.

17.  Abbreviations.
     -------------

                  Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).

                  The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to Loudcloud,
Inc., 615 Tasman Drive, Sunnyvale, CA 94089, Attention: Chief Financial Officer.

18.  Redemption.
     ----------

                  The Company may redeem all, but not less than all, of the
Notes at a Redemption Price equal to the sum of (i) the Accreted Value on the
Redemption Date, plus (ii) accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date that is prior to the Redemption Date to receive interest due
on an Interest Payment Date), plus (iii) the Applicable Premium.

                  Notice of any optional redemption will be mailed at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at his last address as it appears in the Security Register.
On and after the Redemption Date, interest ceases to accrue and the original
issue discount ceases to accrete on Notes or portions of Notes called for
redemption, unless the Company defaults in the payment of the Redemption Price.
<PAGE>

                                      A-10

                           [FORM OF TRANSFER NOTICE]

                  FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto

Insert Taxpayer Identification No.
----------------------------------

__________________________________________________________________
Please print or typewrite name and address including zip code of assignee

__________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing attorney to transfer said Note on the books of the Company with full
power of substitution in the premises.

                    [THE FOLLOWING PROVISION TO BE INCLUDED
                    ON ALL NOTES OTHER THAN EXCHANGE NOTES,
                           OFFSHORE GLOBAL NOTES AND
                           OFFSHORE PHYSICAL NOTES]

                  In connection with any transfer of this Note occurring prior
to the date which is the earlier of (i) the date the shelf registration
statement with respect to resales of the Notes is declared effective or (ii) the
end of the period referred to in Rule 144(k) under the Securities Act, the
undersigned confirms that without utilizing any general solicitation or general
advertising that:

                                  [Check One]
                                   ---------
[_] (a) this Note is being transferred after the Rule 144A Availability Date in
        compliance with the exemption from registration under the Securities Act
        of 1933, as amended, provided by Rule 144A thereunder.

                                      or
                                      --

[_] (b) this Note is being transferred other than in accordance with (a) above
        and documents are being furnished which comply with the conditions of
        transfer set forth in this Note and the Indenture.
<PAGE>

                                      A-11

If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.

Date:__________            _____________________________________________________
                             NOTICE: The signature to this assignment must
                             correspond with the name as written upon the face
                             of the within-mentioned instrument in every
                             particular, without alteration or any change
                             whatsoever.

TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.

                  The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.

Dated:_______________          ________________________________________________
                                 NOTICE:  To be executed by an executive officer

                           Signature Guarantee:  ______________________________
<PAGE>

                                      A-12

                      OPTION OF HOLDER TO ELECT PURCHASE

                  If you wish to have this Note purchased by the Company
pursuant to Section 3.10 or Section 3.11 of the Indenture, check the Box: [_]

                  If you wish to have a portion of this Note purchased by the
Company pursuant to Section 3.10 or Section 3.11 of the Indenture, state the
amount (in principal amount at maturity): $___________________.

Date:__________

Your Signature:________________________________________________________________
              (Sign exactly as your name appears on the other side of this Note)

Signature Guarantee:______________________________
<PAGE>

                                                                       EXHIBIT B

                              Form of Certificate
                              -------------------

                                                                 __________,___
State Street Bank and
  Trust Company of California, N.A.
633 West 5/th/ Street, 12/th/ Floor
Los Angeles, CA  90071
Attention:  Corporate Trust Administration (Loudcloud, Inc. 13% Senior Discount
Notes due 2005)

Loudcloud, Inc.
615 Tasman Drive
Sunnyvale, CA  94089
Attention:  Chief Financial Officer

                     Re:   Loudcloud, Inc. (the "Company")
                           13% Senior Discount Notes
                           due 2005 (the "Notes")
                           -------------------------------------

Dear Sirs:

                This letter relates to U.S. $_____ principal amount at maturity
of Notes represented by a Note (the "Legended Note") which bears a legend
outlining restrictions upon transfer of such Legended Note. Pursuant to Section
2.01 of the Indenture (the "Indenture") dated as of February 9, 2000 relating to
the Notes, we hereby certify that we are (or we will hold such securities on
behalf of) a person outside the United States to whom the Notes could be
transferred in accordance with Rule 904 of Regulation S promulgated under the
U.S. Securities Act of 1933, as amended. Accordingly, you are hereby requested
to exchange the legended certificate for an unlegended certificate representing
an identical principal amount at maturity of Notes, all in the manner provided
for in the Indenture.

                You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.

                                                       Very truly yours,

                                                       [Name of Holder]

                                                       By:_____________________
                                                          Authorized Signature
<PAGE>

                                                                       EXHIBIT C

                           Form of Certificate to Be
                         Delivered in Connection with
                Transfers to Institutional Accredited Investors
                -----------------------------------------------

                                                  ________,___

State Street Bank and
  Trust Company of California, N.A.
633 West 5/th/ Street, 12/th/ Floor
Los Angeles, CA  90071
Attention:  Corporate Trust Administration (Loudcloud, Inc. 13% Senior Discount
Notes due 2005)

Loudcloud, Inc.
615 Tasman Drive
Sunnyvale, CA  94089
Attention: Chief Financial Officer

                   Re:     Loudcloud, Inc. (the "Company")
                           13% Senior Discount Notes due 2005 (the "Notes")
                           ------------------------------------------------

Dear Sirs:

               In connection with our proposed purchase of $_____ aggregate
principal amount at maturity of the Notes, we confirm that:

               1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture dated
as of February 9, 2000, relating to the Notes (the "Indenture") and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with, such restrictions and conditions
and the Securities Act of 1933, as amended (the "Securities Act").

               2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Notes, we will do so only (A) to the Company
or any subsidiary thereof, (B) following the Rule 144A Availability Date (as
defined in the Indenture), in accordance with Rule 144A under the Securities Act
to a "qualified institutional buyer" (as defined therein), (C) to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you and to the Company a signed letter substantially in the form of this letter,
<PAGE>

                                      C-2

(D) outside the United States in accordance with Rule 904 of Regulation S under
the Securities Act, (E) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act, or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.

               3. We understand that, on any proposed resale of any Notes, we
will be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that the Notes purchased by us will bear a legend to the
foregoing effect.

               4. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.

               5. We are acquiring the Notes purchased by us for our own account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.

               You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.

                                                      Very truly yours,

                                                      [Name of Transferee]

                                                      By:_____________________
                                                         Authorized Signature
<PAGE>

                                                                       EXHIBIT D

                       Form of Certificate to Be Delivered
                          in Connection with Transfers
                            Pursuant to Regulation S
                          ----------------------------

                                 ________,___

State Street Bank and
  Trust Company of California, N.A.
633 West 5/th/ Street, 12/th/ Floor
Los Angeles, CA  90071
Attention:  Corporate Trust Administration (Loudcloud, Inc. 13% Senior Discount
Notes due 2005)

Loudcloud, Inc.
615 Tasman Drive
Sunnyvale, CA 94089
Attention:  Chief Financial Officer

                   Re:  Loudcloud, Inc. (the "Company")
                        13% Senior Discount Notes due 2005 (the "Notes")
                        -----------------------------------------------

Dear Sirs:

                  In connection with our proposed sale of U.S.$ aggregate
principal amount at maturity of the Notes, we confirm that, following (i) the
Rule 144A Availability Date and (ii) the Separation Date (as such terms are
defined in the Indenture relating to the Notes), such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:

                  (1)  the offer of the Notes was not made to a person in the
         United States;

                  (2)  at the time the buy order was originated, the transferee
         was outside the United States or we and any person acting on our behalf
         reasonably believed that the transferee was outside the United States;
<PAGE>

                                       D-2

                  (3) no directed selling efforts have been made by us in the
         United States in contravention of the requirements of Rule 903(b) or
         Rule 904(b) of Regulation S, as applicable; and

                  (4) the transaction is not part of a plan or scheme to evade
         the registration requirements of the U.S. Securities Act of 1933.

                  You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.

                                                  Very truly yours,

                                                  [Name of Transferor]

                                                  By:________________________
                                                     Authorized Signature

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