Document:

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                                                                    EXHIBIT 10.6

[LEVEL(3) COMMUNICATIONS LOGO]

                          GENERAL TERMS AND CONDITIONS
                            FOR DELIVERY OF SERVICE

These Terms and Conditions for Delivery of Service are applicable to Customer
Orders executed by Customer for Services delivered by Level 3 Communications,
LLC ("Level 3"), and are incorporated into each Customer Order. The Terms and
Conditions include these General Terms and Conditions for Delivery of Service
and all terms and conditions attached hereto which relate to any Service
provided by Level 3 to Customer. These Terms and Conditions are applicable to
sales of Services originating or terminating in the United States.

DEFINITIONS
-----------

CONFIDENTIAL INFORMATION: Licensed Software, and all source code, source
documentation, inventions, know-how, and ideas, updates and any documentation
and information related to the Licensed Software, and any non-public
information regarding the business of a party provided to either party by the
other party where such information is marked or otherwise communicated as being
"proprietary" or "confidential" or the like, or where such information is, by
its nature, confidential.

COMMITTED DATA RATE: A commitment made by Customer (where applicable)
obligating it to order and pay for a minimum amount of a Level 3 Service
expressed in Megabits per second (Mbps).

CUSTOMER: The person, firm or corporation so named on the Customer Order.

CUSTOMER ORDER: A request for Level 3 Service submitted by the Customer for
acceptance by Level 3.

FACILITIES: Any and all devices supplied by Level 3 used to deliver Services,
including but not limited to all terminal and other equipment, wires, lines,
circuits, ports, routers, switches, channel service units, data service units,
cabinets, racks, private rooms and the like. Facilities shall not include any
such devices sold to Customer by Level 3 and paid for by Customer or owned by
Customer or any third party.

LICENSED SOFTWARE: Computer software, in object code format only, the use of
which is required for use of Service ordered by Customer.

PREMISES: The location(s) occupied by Customer or its end users to which
Service will be delivered by Level 3. Premises does not include Space as
defined below.

REVENUE COMMITMENT: A commitment made by Customer obligating it to order and
pay for a minimum volume of Services during an agreed term.

SERVICE: A service offered by Level 3 pursuant to a Customer Order.

SPACE: The location(s) within Level 3 gateways into which Customer is permitted
to colocate telecommunications or internet equipment pursuant to a colocation
Customer Order accepted by Level 3.

TARGET INSTALL DATE: A written communication from Level 3 to Customer
indicating the date which it is anticipated that Services will be available to
Customer.

SECTION 1. CUSTOMER ORDERS
--------------------------

1.1 SUBMISSION OF CUSTOMER ORDERS. To order any Service, Customer may submit to
Level 3 an order form for Services, completed with Level 3's assistance
("Customer Order") requesting the provision of Service. Level 3's delivery of a
Target Install Date, respecting such Service shall constitute Level 3's
acceptance of the Customer Order. The Customer Order and its backup detail
shall set forth the Service, the Premises and/or Space, the prices to be
charged for Services and any applicable term and/or Revenue Committed.

1.2 UNDERTAKING OF LEVEL 3. If Level 3 issues a Target Install Date respecting
Services, Level 3 will furnish such Services in accordance with the Terms and
Conditions and any Customer Orders.

SECTION 2. BILLING AND PAYMENT
------------------------------

2.1 PAYMENT OF BILLS. Level 3 bills all charges incurred by Customer on a
monthly basis. Level 3 bills in advance for all Services to be provided during
the ensuing month, except for charges which are dependent upon usage of Service,
which are billed in arrears. Billing for partial months will be prorated based
on a Calendar month. All bills are due upon receipt, and become past due thirty
(30) days later. The unpaid balance of any past due bills shall bear interest at
a rate of 1.5% per month (prorated on a daily basis beginning on the past due
date), or the highest rate allowed by law, whichever is less.

To the extent Customer orders any service designated as "Burstable," the
following billing method shall apply: Customer will be billed as set forth above
for its Committed Data Rate. In addition, over each month, Customer's usage of
the Service will be sampled by Level 3 in five minute inbound and outbound
averages. At the end of the month, the top ten percent of the

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inbound and outbound averages shall be discarded. The highest of the resulting
ninetieth percentile for inbound and outbound traffic will be compared to the
Committed Data Rate. If the ninetieth percentile of either inbound or outbound
traffic is higher than the Committed Data Rate, Customer will, in addition to
being billed for its Committed Data Rate, be billed for its utilization of the
Service that exceeds their Committed Data Rate, which shall be billed at the
contracted-for price per Mbps.

2.2  TAXES AND FEES.  Except for taxes based on Level 3's net income and ad
valorem, personal and real property taxes imposed on Level 3's property,
Customer shall be responsible for payment of all sales, use, gross receipts,
excise, access, bypass, franchise or other local, state and federal taxes,
fees, charges, or surcharges, however designated, imposed on or based upon the
provision, sale or use of the Services.

2.3  REGULATORY AND LEGAL CHANGES.  In the event of any change in applicable
law, regulation, decision, rule or order that materially increases the costs or
other terms of delivery of Service, Level 3 and Customer agree to negotiate
regarding the rates to be charged to Customer to reflect such increase in cost
and, in the event that the parties are unable to reach agreement respecting new
rates within thirty (30) days after Level 3's delivery of written notice
requesting renegotiation, then (a) Level 3 may pass such increased costs through
to Customer, and (b) Customer may terminate the affected Customer Order without
termination liability upon sixty (60) days' prior written notice.

2.4  DISPUTED BILLS.  In the event that Customer disputes any portion of a
Level 3 bill, Customer must pay the undisputed portion of the bill and submit a
written claim for the disputed amount. All claims must be submitted to Level 3
within sixty (60) days of receipt of billing for those Services. Customer
acknowledges that it is able to and that it is reasonable to require Customer
to dispute bills within that time, and Customer therefore waives the right to
dispute charges not disputed within the time set forth above.

2.5  CREDIT APPROVAL AND DEPOSITS.  Customer shall provide Level 3 with credit
information as requested, and delivery of Service is subject to credit
approval. Level 3 may require Customer to make a deposit (which will not exceed
Customer's estimated charges for two months' Service) as a condition to Level
3's acceptance of any Customer Order, or as a condition to Level 3's
continuation of Service, which deposit shall be held by Level 3 as security for
payment of Customer's charges. At such time as the provision of Service to
Customer is terminated, the amount of the deposit will be credited to
Customer's account and any credit balance which may remain will be refunded.

2.6  FRAUDULENT USE OF SERVICES.  Customer is responsible for all charges
attributable to Customer incurred respecting the Services, even if incurred as
the result of fraudulent or unauthorized use of the Services, unless Level 3
has actual knowledge of the same and fails to notify Customer thereof. Level 3
may, but is not obligated to, detect or report unauthorized or fraudulent use
of Services.

SECTION 3.  DISCONTINUANCE OF CUSTOMER ORDERS

3.1  DISCONTINUANCE OF CUSTOMER ORDER BY LEVEL 3.  Level 3 may terminate any
Customer Order and discontinue Service without liability:

A.   If Customer fails to pay a past due balance for Services within thirty
(30) days of written notice thereof provided by Level 3;

B.   If Customer violates any law, rule, regulation or policy of any government
authority having jurisdiction over the Services; If Customer makes a material
misrepresentation in any submission of information in a Customer Order or other
submission of information to Level 3; If Customer engages in any fraudulent use
of the Services; or if a court or other government authority having
jurisdiction over the Services prohibits Level 3 from furnishing the Services;

C.   If Customer fails to cure its breach of any provision of these Terms and
Conditions or any Customer Order within thirty (30) days written notice thereof
provided by Level 3;

D.   If Customer files bankruptcy, for reorganization, or fails to discharge an
involuntary petition therefore within sixty (60) days;

E.   If Customer's use of the Services materially exceeds Customer's credit
limit, unless within fourteen (14) days written notice thereof by Level 3,
Customer provides adequate security for payment for the Services.

3.2  EFFECT OF DISCONTINUANCE.  Upon Level 3's discontinuance of Service to
Customer, Level 3 may, in addition to all other remedies that may be available
to Level 3 at law or in equity, assess and collect from Customer any applicable
termination charge.

3.3  RESUMPTION OF SERVICE.  If Service has been discontinued by Level 3 and
Customer requests that Service be restored, Level 3 shall have the sole and
absolute discretion to restore such Service. Nonrecurring charges, with the
exception of any charges for the build-out of Colocation Space already paid by
Customer, may apply to restoration of Service.

3.4  DISCONTINUANCE OF CUSTOMER ORDER BY CUSTOMER.  Customer shall have the
right to terminate any Customer Order and discontinue Service prior to the end
of the agreed term with respect to which a Customer Order has been executed
without payment of any applicable termination charge if: (i) such Service is

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Unavailable (as defined below) on two or more separate occasions of more than
eight (8) hours each in any 30 day period, and (ii) following written notice
thereof from Customer to Level 3, Level 3 has an Unavailability event of more
than 12 hours at any time within the 12 month period immediately following said
notice. For purposes of the foregoing, Unavailability shall mean the period of
time beginning when Customer reports an outage in its Service to the Level 3
Customer Service and Support Organization (1-877-4LEVEL3) and shall end when
the Service is operative. Unavailability shall not apply to any outage which is
caused by Customer, Customer's end users or any third party, which results from
failure of power or equipment provided by Customer or others, which occurs or
continues during any period in which Level 3 is not given access to the
Premises or the Space, or which results from maintenance events. Customer must
exercise its right to terminate under this Section, in writing, no later than
thirty (30) days after the Unavailability event giving rise to a right of
termination hereunder.

SECTION 4. DELIVERY OF SERVICES

4.1  LEVEL 3 ACCESS TO PREMISES AND SPACE. Customer shall allow Level 3 access
to the Premises to the extent reasonably determined by Level 3 for the
installation, inspection and scheduled or emergency maintenance of Facilities
relating to the Service. Level 3 shall notify Customer two (2) business days in
advance of any regularly scheduled maintenance that will require access to the
Premises. Level 3 retains the right to access any Space for any legitimate
business purpose.

4.2  LEVEL 3 FACILITIES. Level 3 will use reasonable efforts to provide and
maintain the Facilities in good working order. Customer shall not and shall not
permit others to rearrange, disconnect, remove, attempt to repair, or otherwise
tamper with any of the Facilities. If the same occurs without first obtaining
Level 3's written approval, in addition to being a breach by Customer of
Customer's obligations hereunder, Customer shall (1) pay level 3 the cost to
repair any damage to the Facilities caused thereby; and (2) be responsible for
the payment of service charges in the event that maintenance or inspection of
the Facilities is required as a result of Customer's breach of this Section. In
no event shall Level 3 be liable to Customer or any other person for
interruption of Service or for any other loss, cost or damage caused or related
to improper use or maintenance of the Facilities, unless the same is caused by
the negligence of Level 3, and then only to the extent of Section 5.2.

4.3  TITLE AND POWER. Title to all Facilities (except as otherwise agreed)
shall remain with Level 3. The electric power consumed by such Facilities on
the Premises shall be provided by and maintained at the expense of Customer,
Electric power to the Space shall be provided by Level 3.

4.4  CUSTOMER-PROVIDED EQUIPMENT. Level 3 may install certain Customer provided
communications equipment upon installation of Service and the Facilities, but
unless otherwise agreed by Level 3 in writing. Level 3 shall not thereafter be
responsible for the operation or maintenance of any Customer provided
communication equipment. Level 3 shall not be responsible for the transmission
or reception of signals by Customer-provided equipment or for the quality of,
or defects in such transmission.

4.5  REMOVAL OF FACILITIES. Customer agrees to allow Level 3 to remove all
Facilities from the Premises:
A. after termination of the Service in connection with which the Facilities
were used; and
B. for repair, replacement or otherwise as Level 3 may determine is necessary,
but Level 3 shall use reasonable efforts to minimize disruptions to the Service
caused thereby.

At the time of such removal, the Facilities shall be in the same condition as
when installed, normal wear and tear excepted. Customer shall reimburse Level 3
for the depreciated cost of any Facilities not in such condition.

4.6  SERVICE SUBJECT TO AVAILABILITY. The furnishing of Service is subject to
the availability thereof, on a continuing basis, and is limited to the capacity
of Level 3 to provide the Service as well as the capacity which Level 3 may
obtain from other carriers to furnish Service from time to time as required at
the sole discretion of Level 3. Nothing in these Terms and Conditions shall be
construed to obligate Customer to submit, or Level 3 to accept, Customer
Orders. In the event Service becomes unavailable pursuant to this paragraph
4.6, Customer shall have the right set forth in Section 3.4 of these Terms and
Conditions.

SECTION 5. OBLIGATIONS AND LIABILITY LIMITATION

5.1  OBLIGATIONS OF THE CUSTOMER. Customer shall be responsible for:

A.   The payment of all charges applicable to the Service;
B.   Damage or loss of the Facilities installed on the Premises or in the Space
(unless caused by the negligence or willful misconduct of the employees or
agents of Level 3);
C.   Providing the level of power, heating and air conditioning necessary to
maintain the proper environment on the Premises for the provision of Service;
D.   Providing a safe place to work and complying with all laws and regulations
regarding the working conditions on the Premises;

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E.  Granting Level 3 or its employees access to the Premises as set forth in
Section 4.1 of these Terms and Conditions; and

F.  Keeping Level 3's Facilities located on Premises free and clear of any liens
or encumbrances.

5.2  LIABILITY. Except as provided in Section 8.4, the liability of Level 3 for
damages arising out of the furnishing of or the failure to furnish Service,
including but not limited to mistakes, omissions, interruptions, delays,
tortious conduct, representations, errors, or other defects, whether caused by
acts of commission or omission, shall be limited to the extension of credit
allowances or refunds due under any applicable Service Level Agreement. Except
as provided in Section 8.4, the extension of such credit allowances or refunds
shall be the sole remedy of Customer and the sole liability of Level 3.

5.3  NO SPECIAL DAMAGES. Notwithstanding any other provision hereof, neither
party shall be liable for any indirect, incidental, special, consequential,
exemplary or punitive damages (including but not limited to damages for lost
profits or lost revenues), whether or not caused by the acts or omissions or
negligence of its employees or agents, and regardless of whether such party has
been informed of the possibility or likelihood of such damages.

6.4  DISCLAIMER OF WARRANTIES. LEVEL 3 MAKES NO WARRANTIES OR REPRESENTATIONS,
EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTORY OR
OTHERWISE, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
USE, EXCEPT THOSE EXPRESSLY SET FORTH IN ANY APPLICABLE SERVICE LEVEL AGREEMENT.

SECTION 6. SOFTWARE TERMS

6.1  LICENSE. If and to the extent that Customer requires the use of Licensed
Software in order to use the Service supplied under any Customer Order,
Customer shall have a nonexclusive, nontransferable (except pursuant to
paragraph 8.2 hereof) license to use such Licensed Software only and solely to
the extent required to permit delivery of the Service. Customer may not claim
title to or any ownership interest in any Licensed Software (or any derivations
or Improvements thereto), and Customer shall execute any documentation
reasonably required by Level 3 to memorialize Level 3's existing and continued
ownership of the Licensed Software.

6.2  RESTRICTIONS. Customer agrees that it shall not:

A.  copy the Licensed Software except for emergency backup purposes or as
    permitted by the express written consent of Level 3:

B.  reverse engineer, decompile or disassemble the Licensed Software;

C.  sell, lease, license or sublicense the Licensed Software; or

D.  create, write or develop any derivative software or any other software
    program based on the Licensed Software.

SECTION 7. CONFIDENTIAL INFORMATION

7.1  DISCLOSURE AND USE. Any Confidential Information disclosed by either party
shall be kept by the receiving party in strict confidence and not disclose to
any third party (except as authorized by these Terms and Conditions) without
the disclosing party's express written consent. Each party agrees to treat all
Confidential Information of the other in the same manner as it treats its own
proprietary information, but in no case will the degree of care be less than
reasonable care.

7.2  RESTRICTED USE. Each party agrees:

A.  to use Confidential Information only for the purposes of performance of any
Customer Order or as otherwise expressly permitted by these Terms and
Conditions;

B.  not to make copies of Confidential Information or any part thereof except
for purposes consistent with these Terms and Conditions; and

C.  to reproduce and maintain on any copies of any Confidential Information
such proprietary legends or notices (whether of disclosing party or a third
party) as are contained in or on the original or as the disclosing party may
otherwise reasonably request.

7.3  EXCEPTIONS. Notwithstanding the foregoing, each party's confidentiality
obligations hereunder shall not apply to information which:

A.  is already known to the receiving party;

B.  becomes publicly available without fault of the receiving party;

C.  is rightfully obtained by the receiving party from a third party without
restriction as to disclosure, or is approved for release by written
authorization of the disclosing party;

D.  is developed independently by the receiving party without use of the
disclosing party's Confidential Information;

E.  is required to be disclosed by law.

7.4  PUBLICITY. This agreement grants no right to use any party's or its
affiliates' trademarks, service marks or trade names or to otherwise refer to
the other party in any marketing, promotional or advertising materials or
activities. Neither party shall issue any publication or press release relating
to, or otherwise disclose the existence of, or the terms and conditions of any
contractual relationship between Level 3 and Customer, except as may be
required by law.

7.6  REMEDIES. Notwithstanding any other section of these Terms and Conditions,
the non-breaching party

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shall be entitled to seek equitable relief to protect its interests, including
but not limited to preliminary and permanent injunctive relief. Nothing stated
herein shall be construed to limit any other remedies available to the parties.

7.6  SURVIVAL. The obligations of confidentiality and limitation of use shall
survive the termination of any applicable Customer Order.

SECTION 8. GENERAL TERMS

8.1  FORCE MAJEURE. Neither party shall be liable, nor shall any credit
allowance or other remedy be extended, for any failure of performance or
equipment due to causes beyond such party's reasonable control, including but
not limited to: acts of God, fire, flood or other catastrophes; any law, order,
regulation, direction, action or request of any governmental entity or agency,
or any civil or military authority; national emergencies, insurrections, riots,
wars; unavailability of rights-of-way or materials; or strikes, lock-outs, work
stoppages, or other labor difficulties. In the event any of the foregoing
occur and Level 3 is unable to deliver the Service for fourteen (14)
consecutive days, Customer shall not be obligated to pay Level 3 for the
affected Service for so long as Level 3 is unable to deliver them, provided,
however, that the term of the Customer Order respecting those Services shall be
extended for a period of time equal to the period of time for which Level 3 was
unable to provide and Customer was not required to pay for the affected Service.

8.2  ASSIGNMENT OR TRANSFER. Except with respect to a merger or sale of
substantially all of Customer's assets. Customer may not transfer, sublease or
assign the use of Service without the express prior written consent of Level 3,
and then only when such transfer or assignment can be accomplished without
interruption of the use or location of Service. Level 3 will not unreasonably
withhold its consent. These Terms and Conditions shall apply to any transferees
or assignees. Customer shall remain liable for the payment of all charges due
under each Customer Order.

8.3  NOTICES. Notices hereunder shall be deemed properly given when delivered,
if delivered in person, or when sent via facsimile, overnight courier,
electronic mail or when deposited with the U.S. Postal Service, (a) with
respect to Customer, the address listed on any Customer Order, or (b) with
respect to Level 3, to: Contracts Administration, Level 3 Communications, LLC,
1450 Infinite Drive, Louisville, CO 80027. Customer shall notify Level 3 of any
changes to its addresses listed on any Customer Order.

8.4  INDEMNIFICATION BY LEVEL 3. Level 3 shall indemnify, defend and hold
Customer harmless from any claim, loss, damage, expense or liability (including
attorney's fees and court costs) (hereafter "Claims") made against Customer for
property damage, patent infringement or personal injury caused by Level 3's
negligence or willful misconduct.

8.5  INDEMNIFICATION BY CUSTOMER. Customer shall indemnify, defend and hold
Level 3 harmless from Claims (including Claims for patent infringement) (i)
made against Level 3 by any end user of Customer in connection with the
delivery or consumption of Service, (ii) made against Level 3 arising out of
any commission or negligent omission by Customer in connection with the
Service, or (iii) arising from Customer's negligence or willful misconduct.

8.6  APPLICATION OF TARIFFS. Level 3 may elect or be required to file with the
appropriate regulatory agency tariffs respecting the delivery of certain
Service. In the event that such tariffs are filed respecting Service ordered by
Customer, then (to the extent such provisions are not inconsistent with the
terms of a Customer Order) the terms set forth in the applicable tariff shall
govern Level 3's delivery of, and Customer's consumption or use of, such
Service.

8.7  CONTENTS OF COMMUNICATIONS Level 3 does not monitor and shall have no
liability or responsibility for the content of any communications transmitted
via the Service, and Customer shall hold Level 3 harmless from any and all
claims (including claims by governmental entities seeking to impose penal
sanctions) related to such content attributable to Customer or its agents,
employees or end users.

8.8  ENTIRE UNDERSTANDING. These Terms and Conditions, including any Customer
Orders executed hereunder, constitute the entire understanding of the parties
related to the subject matter hereof. In the event of any conflict between
these Terms and Conditions and the terms and conditions of any Customer Order,
these Terms and Conditions shall control. These Terms and Conditions shall be
governed and construed in accordance with the laws of the state of Colorado.

8.9  NO WAIVER. No failure by either party to enforce any rights hereunder
shall constitute a waiver of such right(s).

<PAGE>   6
                        ADDITIONAL TERMS AND CONDITIONS
                            FOR PRIVATE LINE SERVICE

The following additional terms and conditions are applicable where, pursuant to
a Customer Order, Customer orders metropolitan (local), city to city (within
the United States) and international (from the United States to another
country) private line, non-switchable circuits (the "Private Line Services").

1.   Any state or federal tariffs applicable to the Private Line Services to be
delivered under any Customer Order are incorporated into the terms thereof.
Level 3's pricing to Customer for Private Line Services may, if required, be
subject to PUC or other regulatory approval.

2.   The nonrecurring charges and monthly recurring rates for the Private Line
Services provided by Level 3 are shall be set forth in each Customer Order.

3.   The rates and other charges set forth in each Customer Order are
established in reliance on the term commitment made therein, and Customer shall
pay the same in accordance therewith. In the event that Customer terminates
Services ordered in any Customer Order which is accepted by Level 3 or in the
event that the delivery of Services is terminated due to a failure of Customer
to satisfy the requirements set forth in these Terms and Conditions prior to
the end of the agreed term, Customer shall (unless Customer has made a Revenue
Commitment) pay a termination charge equal to the percentage of the monthly
recurring charges for the terminated Private Line Services calculated as
follows:

A.   100% of the monthly recurring charge that would have been incurred for the
Private Line Service for months 1-12 of the agreed term; plus

B.   75% of the monthly recurring charge that would have been incurred for the
Private Line Service for months 13-24 of the agreed term; plus

C.   50% of the monthly recurring charge that would have been incurred for the
Private Line Service for months 25 through the end of the agreed term.

In the event that a Revenue Commitment is made and is then being satisfied by
Customer, Customer may terminate, rearrange or reconfigure the Private Line
Services ordered under a Customer Order without payment of the termination
charge specified above; PROVIDED, HOWEVER, that Customer shall be responsible
for payment of Level 3's then-current standard nonrecurring charges applicable
to such termination, rearrangement or reconfiguration.

4.   Level 3 makes the Service Level Agreements in the attached Exhibit "A"
respecting Private Line Service.

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<PAGE>   7

                     Standard Service Level Agreement (SLA)
                     INTERNATIONAL/US NATIONAL PRIVATE LINE

International/National Private Line service will be backed by a Standard
Service Level Agreement that has two components: a Service Delivery SLA and a
Network Performance SLA.

NOTE: The total number of credits per month for both Service Delivery is
limited to four days.

SERVICE DELIVERY SLA

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
US On-net City                                     Standard Service Delivery Intervals
US NPLS and IPL
-------------------------------------------------------------------------------------------------------------
                             NX84K, DS1, E1*                DS3                            OC3/OC12
-------------------------------------------------------------------------------------------------------------
                             US NPLS        IPL             US NPLS       IPL              US NPLS     IPL
-------------------------------------------------------------------------------------------------------------
<S>                          <C>            <C>             <C>           <C>              <C>         <C>
On-Net                       20 working     20 working      30 working    30 working       40 working  30
                             days           days            days          days             days
-------------------------------------------------------------------------------------------------------------
Off-Net building             30 working     60 working      45 working    60 working       60 working  ICB
within SSA                   days           days            days          days             days
(either end)
-------------------------------------------------------------------------------------------------------------
Off-net building             30 working     60 working      45 working    60 working       70 working   ICB
outside SSA                  days           days            days          days             days
(within 50 miles)
(either end)
-------------------------------------------------------------------------------------------------------------

<CAPTION>
-------------------------------------------------------------------------------------------------------------
US Domestic Served                         Standard Service Delivery Intervals
Off-net City
--------------------------------------------------------------------------------------------------------------
                                     DS1                D83                  OC3
--------------------------------------------------------------------------------------------------------------
<S>                           <C>                       <C>                  <C>
One side of the circuit       30 working days           45 working days      60 working days (70 days
is served by an off-net                                                      would apply if the customer
city POP                                                                     location served by the
                                                                             gateway city is outside of
                                                                             the SSA)
--------------------------------------------------------------------------------------------------------------
</TABLE>

 * Off-net building must have DS3 local service availability in order to support

** E1 delivery is available in NYC only and is dependent upon local
   availability of E1 delivery

o    Single toll-free number to reach Level 3 Customer Service for all customer
     issues, including technical, billing, and product inquiries.

o    Mean Time to Respond - Within 30 minutes

o    2 hour calendar month Average Time To Repair (ATTR)

If Level 3 fails to meet any of the guarantees above, Level 3 will review all
reported failures at the end of the month, and calculate the applicable credits:

-    Any customer inquiry to the Level 3 Customer Service Center that results
     in a Time to Respond of >30 minutes will result in a one day service
     credit when the customer notifies Level 3 of the failure.

-    ATTR is calculated as a monthly average. All reported customer trouble
     tickets will be totaled over the month, then the average time to close
     each ticket will be calculated. If the ATTR is greater than 2 hours, the
     customer will receive a one day service credit.

-    Credits will only be applied to events where the Customer reports a
     failure to the Level 3 Customer Care organization. Customers must report
     any Service Delivery failures within five business days of the event.

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<PAGE>   8
NETWORK PERFORMANCE SLA

o   99.99% Service Availability

o   Target Bit Error Rate(1)

        End-to-end link (Level 3 on-net)       <1 x 10(-11) at T1 Rate
                                               (equivalent rate for DS0 1x10(-6)
        End-to-end link (Non-Level 3 access)   <1 x 10(-7) (dependent on local
                                               supplier)

o   Target Severely Errored Seconds(2)

    End-to-end link (Level 3 fiber access)     <0.008%
    End-to-end link (Non-Level 3 access)       <0.013% (Dependent on local
                                               supplier)

    >   Availability refers to customer's access point to the Level 3 Backbone
        Network, including their Level 3 provided local access circuit.

    >   Availability does not include regularly scheduled or emergency
        maintenance events, or customer caused outages or disruptions.

    >   Customers may report service unavailability events of longer than 15
        consecutive minutes to Level 3 customer service within 48 hours of the
        event. If the event is confirmed by Level 3 customer service, the
        customer will receive a pro-rated service credit that equals the time
        of the unavailability.

NOTES:

>   All measurements are based on monthly averages.

>   These guarantees only apply to the Level 3 Network (including the Local
    Access to the customer). They do not apply to off-net city circuits which
    do not transit the Level 3 Backbone Network (or the portion the circuit
    which does not transit the Level 3 Bankbone)

>   This SLA does not apply to periods of regularly scheduled or emergency
    maintenance that Level 3 performs on its network or associated hardware and
    software.

>   Credits will only be applied to events where the Customer reports a network
    performance failure to the Level 3 Customer Care organization.

>   Customers must report any Network Performance failures (unavailability or
    delay) within 48 hours (two business days) of the service affecting event
    in order to receive a credit. Customers must report any Service Delivery
    failures within five business days of the event.

--------------
(1) Bit Error Rate Figure excludes periods of more than 10 seconds having error
    rates equal to, or worse than 1x10(-3)

(2) Severely Errored Seconds have bit error rates, to, or worse than 1x10(-3)
<PAGE>   9
                        ADDITIONAL TERMS AND CONDITIONS
                        FOR TELEPHONY AND IP COLOCATION

The following terms and conditions are applicable where, pursuant to a
Customer Order, Customer orders the use of space within Level 3 gateways to be
used for the purpose of colocating telecommunications equipment or equipment
used for connection to the internet (the "Space").

1.   Customer is granted the right to occupy the Space identified in a Customer
Order. Customer shall be permitted reasonable access to the Space subject to
any and all rules, regulations and access requirements imposed by Level 3
governing such access. Customer may submit multiple Customer Orders requesting
use of different Space, each of which shall be governed by the terms hereof.

2.   Customer shall be permitted to use the Space only for placement and
maintenance of communications equipment. The nonrecurring and monthly recurring
charges for the Space and any Services ordered by Customer shall be set forth
in each Customer Order. Customer hereby agrees, within six (6) months of
ordering such Space, to use the Space for placement and maintenance of
telecommunications or internet access equipment. In the event Customer fails to
fill said Space as set forth herein, Level 3 has the right to reclaim the
proportion of Space not being used exclusively as indicated above, if the same
is not cured within forty-five (45) days' prior notice thereof to Customer.
Customer agrees to immediately vacate such recaptured Space and Level 3 shall
reduce the Colocation fees allocated to such recaptured Space. Customer further
agrees that no refunds shall be made to Customer regarding such recaptured
Space.

3.   Level 3 shall perform such janitorial services, environmental systems
maintenance, power plant maintenance and other actions as are reasonably
required to maintain the gateway in which the Space is located in a condition
which is suitable for the placement of telecommunications and internet access
equipment. Customer shall maintain the Space in an orderly and safe condition,
and shall return the Space to Level 3 at the conclusion of the term set forth
in the Customer Order in the same condition (reasonable wear and tear excepted)
as when such Space was delivered to Customer. EXCEPT AS EXPRESSLY STATED HEREIN
OR IN ANY CUSTOMER ORDER, THE SPACE SHALL BE DELIVERED AND ACCEPTED "AS IS" BY
CUSTOMER, AND NO REPRESENTATION HAS BEEN MADE BY LEVEL 3 AS TO THE FITNESS OF
THE SPACE OF CUSTOMER'S INTENDED PURPOSES.

4.   The term of use of the Space shall begin on the later to occur of the date
requested by Customer or the date that Level 3 completes the build-out of the
Space. Customer's use of the Space beyond the initial term shall be on a
month-to-month basis, unless Customer and Level 3 have agreed in writing to a
renewal of the right to use such Space. Customer hereby agrees to pay for the
Space and any related Services for the term of this Agreement. The rates and
other charges set forth in each Customer Order are established in reliance on
the term commitment made therein. In the event that Customer terminates a
Customer Order for Space which is accepted by Level 3 or in the event that the
Customer Order is terminated due to a failure of Customer to satisfy the
requirements set forth herein or in the Customer Order prior to the end of the
agreed term, Customer shall pay a termination charge equal to the costs
incurred by Level 3 in returning the Space to a condition suitable for use by
other parties, plus the percentage of the monthly recurring fees for the
terminated Space calculated as follows:

a.      100% of the monthly recurring fees that would have been charged for
the Space for months 1-12 of the agreed term; plus

b.      75% of the monthly recurring fees that would have been charged for the
Space for months 13-24 of the agreed term; plus

c.      50% of the monthly recurring fees that would have been charged for the
Space for months 25 through the end of the agreed term.

In the event that a Revenue Commitment is made and is then being satisfied by
Customer, Customer may terminate the Space ordered pursuant to a Customer Order
without payment of the termination charge specified above; PROVIDED, HOWEVER,
that Customer shall be responsible for payment of Level 3's then-current
standard nonrecurring charges applicable to such termination.

5.   Level 3 shall use reasonable efforts to complete the build-out and make
the Space available to Customer on or before the date requested by Customer. In
the event that Level 3 fails to complete the build-out within sixty (60) days
of the date requested by Customer, then Customer may terminate its rights to
use such Space and receive a refund of any fees paid for the use or build-out
of such Space.

6.   Customer shall abide by any posted or otherwise communicated rules
relating to use of, access to, or

                                  Page 9 of 18

<PAGE>   10
security measures respecting the Space. Customers use of the Space will be
immediately terminated in the event Customer or any of its agents or employees
is found in Level 3's gateway with any firearms, drugs, alcohol or is found
engaging in any criminal activity, eavesdropping, foreign intelligence, card
selling or slamming. Persons found engaging in any such activity or in
possession of the aforementioned prohibited items will be immediately escorted
from the gateway. In the event that unauthorized parties gain access to the
Space through access cards, keys or other access devices provided to Customer,
Customer shall be responsible for any damages incurred as a result thereof.
Customer shall be responsible for the cost of replacing any security devices
lost or stolen after delivery thereof to Customer. In addition, Level 3 shall
have the right to terminate Customer's use of the Space or the Services in the
event that: (a) Level 3's rights to use the facility within which the Space is
located terminates or expires for any reason; (b) Customer has violated the
terms hereof or of any Customer Order submitted hereunder; (c) Customer makes
any material alterations to the Space without first obtaining the written
consent of Level 3; (d) Customer allows personnel or contractors to enter the
Space who have not been approved by Level 3 in advance; or (e) Customer
violates any posted or otherwise communicated rules relating to use of or
access to the Space. With respect to items (b), (c), (d) and (e) immediately
above, unless the same interferes or has the potential to interfere with other
Level 3 Colocation customers, Level 3 shall provide Customer a written notice
of the foregoing and a 10-day opportunity to cure the same before terminating
Customer's rights to the Space.

7.   Customer may sublease the Space under the following conditions: i) all
proposed sublessees must be approved, in writing, by Level 3 in Level 3's sole
discretion; ii) Customer hereby guarantees that all Sublessees shall abide by
all terms and conditions set forth between Customer and Level 3; iii) Customer
shall indemnify, defend and hold Level 3 harmless from all claims brought
against Level 3 arising from any act or omission of any subcontractor and iv)
any sublessee shall be considered customer's agent and all of sublessees' acts
and omissions and usage of the Space or Services hereunder shall be
attributable to Customer for the purposes of these Terms and Conditions.

8.   Level 3 reserves the right to change the location or configuration of the
Space, provided, however, that Level 3 shall not arbitrarily or
discriminatorily require such changes. Level 3 and Customer shall work in good
faith to minimize any disruption in Customer's services that may be caused by
such changes in location or configuration of the Space.

9.   Prior to occupancy and during the term of use of any Space, Customer shall
procure and maintain the following minimum insurance coverage; (a) Workers'
Compensation in compliance with all applicable statutes of appropriate
jurisdiction. Employer's Liability with limits of $500,000 each accident; (b)
Commercial General Liability with combined single limits of $1,000,000 each
occurrence; and (c) "All Risk" Property insurance covering all of Customers
personal property located in the Space. Customer's Commercial General Liability
policy shall be endorsed to show Level 3 (and any underlying property owner, as
requested by Level 3) as an additional insured. All policies shall provide that
Customer's insurers waive all rights of subrogation against Level 3. Customer
shall furnish Level 3 with certificates of insurance demonstrating that
Customer has obtained the required insurance coverages prior to occupancy of
the Space. Such certificates shall contain a statement that the insurance
coverage shall not be materially changed or cancelled without at least thirty
(30) days prior written notice to Level 3. Customer shall require any
contractor entering the Space on its behalf to procure and maintain the same
types, amounts and coverage extensions as required of Customer above.

10.  Customer may order and pay for Level 3 to perform certain limited ("remote
hands") maintenance services on Customer's equipment within the space, which
shall be performed in accordance with Customer's directions. "Remote hands"
maintenance services includes power cycling equipment. Level 3 shall in no
event be responsible for the repair, configuration or tuning of equipment, or
for installation of Customer's equipment (although Level 3 will provide
reasonable assistance to Customer in such installation).

                                 Page 10 of 18
<PAGE>   11
                      ADDITIONAL TERMS AND CONDITIONS FOR
              DEDICATED, RAPID ACCESS AND DIAL UP INTERNET ACCESS

The following additional terms and conditions are applicable where pursuant to
a Customer Order, Customer orders dedicated, rapid access and/or dial-up
Internet Access Service (the "Internet Access Services").

1. Any state or federal tariffs applicable to the Internet Access Services to
be delivered under any Customer Order are incorporated into the terms thereof.
The Internet Access Services shall at all times be used in compliance with
Level 3's then-current Acceptable Use Policy and Privacy Policy, as amended by
Level 3 from time to time and which are available through Level 3's web site.

2. The nonrecurring charges and monthly recurring rates for the Internet Access
Services provided by Level 3 to Customer are set forth in each Customer Order.

3. The rates and other charges set forth in each Customer Order are established
in reliance on the term and/or volume commitment made therein, and Customer
agrees to pay the same. In the event that Customer terminates Internet Access
Services ordered in any Customer Order which is accepted by Level 3 or in the
event that the delivery of Internet Access Services is terminated due to a
failure of Customer to satisfy the requirements set forth herein or in the
Customer Order prior to the end of the agreed term, Customer shall (unless
Customer has made a Revenue Commitment) pay a termination charge equal to the
percentage of the monthly recurring charges for the terminated Internet Access
Services calculated as follows:

a. 100% of the monthly recurring charge that would have been incurred for the
Internet Access Service for months 1-12 of the agreed term; plus

b. 75% of the monthly recurring charge that would have been incurred for the
Internet Access Service for months 13-24 of the agreed terms; plus

c. 50% of the monthly recurring charge that would have been incurred for the
Internet Access Service for months 25 through the end of the agreed term.

Customer may, in the event that a Revenue Commitment is made and is then being
satisfied by Customer, terminate, rearrange or reconfigure the Internet Access
Services ordered under a Customer Order without payment of the termination
charge specified above; PROVIDED, HOWEVER, that Customer shall be responsible
for payment of Level 3's then-current standard nonrecurring charges applicable
to such termination, rearrangement or reconfiguration.

4. Level 3 provides only access to the Internet; Level 3 does not operate or
control the information, services, opinions or other content of the Internet.
Customer agrees that it shall make no claim whatsoever against Level 3 relating
to the content of the Internet or respecting any information, product, service
or software ordered through or provided by virtue of the Internet.

5. This Section 5 applies only to Customers who order Dial-Up Internet Access
Services, the Dial-Up Internet Access Services shall be used only by an
officer, director, employee or agent ("Employee") of Customer. Customer shall
assure that each Employee accessing the Dial-Up Internet Access Service abides
by these Terms and Conditions. Prior to any Employee accessing Dial-Up Internet
Access Services, such Employee will be required to accurately complete an
on-line registration process. During this registration process, each Employee
will be required to identify himself/herself through some means satisfactory to
Level 3. Pursuant to the registration process, by clicking an "ACCEPT" icon,
each Employee will (i) agree to accurately complete the registration; (ii)
agree to abide by all of the provisions, terms, limitations, conditions and
restrictions of these Terms and Conditions; and (iii) agree to use the Dial-Up
Internet Access Services in accordance with any requirements set forth in the
online registration process and for the legitimate business purposes of
Customer only. Each Employee will also receive a password which such Employee
will agree to keep in strict confidence and which will be required whenever
accessing the Dial-Up Internet Access Services.

6. If Customer orders Burstable Dedicated Internet Access Services pursuant to
a Customer Order, the Customer shall be permitted to make two (2) changes to
its Committed Data Rate each contract year, provided that such change be to a
higher Committed Data Rate.

7. This Section 7 applies only to Customers who order Dedicated Internet Access
and Rapid Access Services. Level 3 makes the following Service Level Agreements
attached as Exhibit "A" respecting Dedicated Internet Access and Rapid Access
Service.

                                 Page 11 of 18
<PAGE>   12

                     Standard Service Level Agreement (SLA)
                                   Release 1
                           INTERNET DEDICATED ACCESS

Dedicated Internet Access service will be backed by a Standard Service Level
Agreement that has two components: a Service Delivery SLA and a Network
Performance SLA.

NOTE: The total number of credits per month for both Service Delivery and
Network Performance is limited to four days.

SERVICE DELIVERY SLA

-     30 Calendar Day Installation Guarantee for Customers buying Dedicated
      Internet Access in speeds from 64 Kbps -- 1.544 Kbps within the Standard
      Service Area.
-     45 Calendar Day Installation Guarantee for Customers buying Dedicated
      Internet Access in speeds from 3 Mbps -- 45 Mbps within the Standard
      Service Area.
-     Single toll-free number to reach Level 3 Customer Service for all
      customer issues, including technical, billing, and product inquiries.
-     Time to Respond -- Within 30 minutes
-     2 hour calendar month Average Time to Repair (ATTR)

If level 3 fails to meet any of the guarantees above, Level 3 will review all
reported failures at the end of the month, and calculate the applicable credits:

>     Any customer inquiry to the Level 3 Customer Service Center that results
      in a Time to Respond of >30 minutes will result in a one day service
      credit when the customer notifies Level 3 of the failure.

>     ATTR is calculated as a monthly average. All reported customer trouble
      tickets will be totaled over the month, then the average time to close
      each ticket will be calculated. If the ATTR is greater than 2 hours, the
      customer will receive a one day service credit.

>     Credits will only be applied to events where the Customer reports a
      failure to the Level 3 Customer Care organization. Customers must report
      any Service Delivery failures within five business days of the event.

NETWORK PERFORMANCE SLA
-     SERVICE AVAILABILITY

      >     Availability refers to customer's access point to the Level 3
            internet network, including their Level 3 provided local access
            circuit, and the customer's port.

      >     Unavailability Events are defined as any outage of the Level 3
            provided local access circuit and the customer's port of longer
            than 15 consecutive minutes.

      >     The Availability Guarantee does not extend to the performance of
            Internet networks controlled by other companies, or traffic
            exchange points (including NAPs and MAEs) which are controlled by
            other companies.

      >     Availability does not include regularly scheduled or emergency
            maintenance events, or customer caused outages or disruptions.

      >     Customers may report service unavailability events of longer than
            15 consecutive minutes, to Level 3 customer service within 48 hours
            of the event. If the event is confirmed by Level 3 customer
            service, the customer will receive a pro-rated service credit that
            equals the time of the unavailability.

                                 Page 12 of 18

<PAGE>   13
o   40 MS ONE-WAY DELAY GUARANTEE

    >   The Delay guarantee refers to the average delay parameters among the
        Level 3 Gateway sites in the United States. It does not extend to the
        customer's local access circuit, transit or peering connections, or to
        circuits to the traffic exchange points, including NAPs and MAEs.

    >   Delay is measured as the average delay, over a calendar month, of
        traffic between all major Gateways on the Level 3 U.S. Internet network.

    >   Level 3 will publicly report the Average Monthly Delay measurement for
        the Level 3 U.S. Internet Network at the end of every month.

    >   If the customer reports that Level 3 has failed to meet the Delay
        guarantee, and this is confirmed by Level 3 customer service, the
        customer will be issued one day service credit.

NOTES:

>   All measurements are based on monthly averages.

>   These guarantees only apply to the Level 3 Internet Network. They do not
    apply to NAP or transit connections, or to any traffic once it leaves the
    Level 3 network.

>   This SLA does not apply to periods of regularly scheduled or emergency
    maintenance that Level 3 performs on its network or associated hardware and
    software.

>   Credits will only be applied to events where the Customer reports a network
    performance failure to the Level 3 Customer Care organization.

>   Customers must report any Network Performance failures (unavailability or
    delay) within 48 hours (two business days) of the service affecting event
    in order to receive a credit. Customers must report any Service Delivery
    failures within five business days of the event.
<PAGE>   14
                      ADDITIONAL TERMS AND CONDITIONS FOR
            MANAGED MODEM-DEDICATED, QUICKSTART AND TRANSIT SERVICES

The following additional terms and conditions are applicable where, pursuant to
a Customer Order Customer orders services required to allow access to
"Dedicated Services," "Dedicated Service with QuickStart" and "Transit
Services" as offered by Level 3 (the "Managed Modem Services") ordered by
Customer under any Customer Order.

1.  Any state or federal tariffs applicable to the Managed Modem Services to be
delivered under any Customer Order are incorporated into the terms thereof. The
Managed Modem Services shall at all times be used in compliance with Level 3's
then-current Acceptable Use Policy and Privacy Policy, as amended by Level 3
from time to time and which are available through Level 3's web site.

2.  In the event Customer orders "Dedicated Service," end user traffic will be
routed through and aggregated in Level 3's facility, sent to the Customer's
Premises via a dedicated circuit, and then routed to its final destination by
Customer. In the event that Customer orders "Transit Services," End User
traffic will be routed to Level 3's facility and then routed to its final
destination by Level 3 via the Internet. Dedicated Service with "QuickStart"
will initially be provisioned to the Customer in the same fashion as Transit
Services, until such time as Level 3 has provisioned the dedicated circuit to
send end user traffic from Level 3's facility to the Customer's Premises.
QuickStart will then be migrated to standard Dedicated Service. Customers
ordering Dedicated Services will be required to make a portion of the Premises
available to Level 3 for the placement of equipment necessary to provide such
Dedicated Services. For Dedicated Service, all Customer CPE as well as the
private line necessary to support this service will be ordered, installed and
managed by Level 3. Any telephone numbers assigned to Customer for the purpose
of providing Managed Modem Services hereunder shall be property of Level 3;
PROVIDED, however, that Level 3 shall be obligated to release such numbers to
Customer upon expiration or termination hereof if and only if Customer is then
in compliance with all of the terms contained herein or in the General Terms
and Conditions.

3.  Section 1.1 of the General Terms and Conditions for Delivery of Service
notwithstanding, a Customer order for Managed Modem Service shall be accepted
by Level 3 once Level 3 has provisioned and tested the ports. Customer's
billing respecting said ports shall commence once tested and found to be
functioning properly by Level 3 notwithstanding Customer's: i) refusal to
accept the ports or ii) Customer's refusal to acknowledge communications by
Level 3 to Customer respecting the ports. Termination liability shall apply
once a Customer Order for these Services is accepted by Level 3.

4.  Customer shall have the option to purchase twenty percent (20%) port
overage from Level 3. If ordered, Level 3 shall provision an additional twenty
percent (20%) of ports over the number of ports actually ordered by Customer to
accept Customer traffic in the event Customer's traffic bursts and its usage
exceeds the capacity of the ports actually ordered. In the event Customer
chooses not to purchase twenty percent (20%) port overage from Level 3, if the
Customer's traffic bursts as set forth above, Customer will get a busy signal
in the event its ordered capacity is exceeded.

5.  Customer must utilize all Managed Modem ports provisioned hereunder at no
less than fifty percent (50%) of the capacity of such port. Customer agrees to
allow Level 3 to monitor Customer's utilization of the ports provisioned
herein. In the event Customer is Under-Utilizing (as defined below) such ports,
Level 3 retains the right to reclaim such ports after which Customer shall have
no further right to use the ports Under-Utilized. Termination liability shall
apply to any ports reclaimed pursuant to this paragraph.

For the purpose of this Section, "Under-Utilization" shall mean the use of less
than fifty percent (50%) of the capacity of any given port for any sixty (60)
day period as determined by Level 3. Under-Utilization shall not be applicable
to the first sixty (60) day period immediately following the provisioning of
any Managed Modem port.

6.  The nonrecurring charges and monthly recurring rates for the Managed Modem
Services provided by Level 3 to Customer shall be set forth in each Customer
Order. Level 3 will dedicate the specified number of ports to Customer in the
Level 3 facilities as identified in each Customer Order. Customer may be
responsible for additional monthly charges if Customer's use of the Managed
Modem Services requires and utilizes more ports than the number committed to
and ordered by Customer.

7.  The rates and other charges set forth in each Customer Order are
established in reliance on the term commitment made therein, and Customer
agrees to pay the same. In the event that Customer terminates Managed Modem
Services ordered in any Customer Order which is accepted by Level 3 or in the
event that the delivery of Managed Modem Services is terminated due to a
failure of Customer to satisfy the requirements set forth herein or in the
Customer Order prior to the end of the agreed term, Customer shall (unless
Customer

                                 Page 14 of 18
<PAGE>   15
has made a Revenue Commitment) pay a termination charge equal to the percentage
of the monthly recurring charges for the terminated Managed Modern Services
calculated as follows:

a. 100% of the monthly recurring charge that would have been incurred for the
Managed Modem Service for months 1-12 of the agreed term; plus

b. 75% of the monthly recurring charge that would have been incurred for the
Managed Modem Service for months 13-24 of the agreed term; plus

c. 50% of the monthly recurring charge that would have been incurred for the
Managed Modem Service for months 25 through the end of the agreed term.

Customer may, in the event that a Revenue Commitment is made and is then being
satisfied by Customer, terminate, rearrange or reconfigure the Managed Modem
Services ordered under a Customer Order without payment of the termination
charge specified above; PROVIDED, HOWEVER, that Customer shall be responsible
for payment of Level 3's then-current standard nonrecurring charges for such
termination, rearrangement or reconfiguration.

8. Level 3 provides only access to the Internet; Level 3 does not operate or
control the information, services, opinions or other content of the Internet.
Customer agrees that it shall make no claim whatsoever against Level 3 relating
to the content of the Internet or respecting any information, product, service
or software ordered through or provided by virtue of the Internet.

9. Level 3 makes the Service Level Agreement attached as Exhibit "A" respecting
Managed Modem Services.

                                 Page 15 of 18

<PAGE>   16
                     Standard Service Level Agreement (SLA)
                                   Release 1
                                 MANAGED MODEM

Managed Modem service will be backed by a Service Delivery SLA.

NOTE: The total number of credits per month is limited to four days.

SERVICE DELIVERY SLA

-    30 Calendar Day Installation Guarantee for Customers buying Managed Modem
     service in speeds from 64 Kbps - 1.544 Kbps within the Standard Service
     Area.

-    45 Calendar Day Installation Guarantee for Customers buying Managed Modem
     service in speeds from 3 Mbps - 45 Mbps within the Standard Service Area.

-    Single toll-free number to reach Level 3 Customer Service for all customer
     issues, including technical, billing, and product inquiries.

-    Time to Respond - Within 30 minutes

-    2 hour calendar month Average Time To Repair (ATTR)

If Level 3 fails to meet any of the guarantees above, Level 3 will review all
reported failures at the end of the month, and calculate the applicable credits:

-    Any customer inquiry to the Level 3 Customer Service Center that results
     in a Time to Respond of >30 minutes will result in a one day service
     credit when the customer notifies Level 3 of the failure.

-    ATTR is calculated as a monthly average. All reported customer trouble
     tickets will be totaled over the month, then the average time to close
     each ticket will be calculated. If the ATTR is greater than 2 hours, the
     customer will receive a one day service credit.

-    Credit will only be applied to events where the Customer reports a failure
     to the Level 3 Customer Care organization. Customers must report any
     Service Delivery failures within five business days of the event.

                                 Page 16 of 18

<PAGE>   17
                      ADDITIONAL TERMS AND CONDITIONS FOR
                                 IP CROSSROADS

The following additional terms and conditions are applicable where, pursuant to
a Customer Order, Customer orders IP CrossRoads.

1.   Any state or federal tariffs applicable to the IP CrossRoads Services to
be delivered under any Customer Order are incorporated into the terms thereof.
The IP CrossRoads Services shall at all times be used in compliance with Level
3's then-current Acceptable Use Policy and Privacy Policy, as amended by Level
3 from time to time and which are available through Level 3's web site.

2.   The nonrecurring charges and monthly recurring rates for the IP CrossRoads
Services provided by Level 3 to Customer are set forth in each Customer Order.

3.   The rates and other charges set forth in each Customer Order are
established in reliance on the term and/or volume commitment made therein, and
Customer agrees to pay the same. In the event that Customer terminates IP
CrossRoads Services ordered in any Customer Order which is accepted by Level 3
or in the event that the delivery of IP CrossRoads Services is terminated due
to a failure of Customer to satisfy the requirements set forth herein or in the
Customer Order prior to the end of the agreed term, Customer shall (unless
Customer has made a Revenue Commitment) pay a termination charge equal to the
percentage of the monthly recurring charges for the terminated IP CrossRoads
Services calculated as follows:

a.   100% of the monthly recurring charge that would have been incurred for the
IP CrossRoads Service for months 1-12 of the agreed term; plus

b.   75% of the monthly recurring charge that would have been incurred for the
IP CrossRoads Service for months 13-24 of the agreed term; plus

c.   50% of the monthly recurring charge that would have been incurred for the
IP CrossRoads Service for months 25 through the end of the agreed term.

Customer may, in the event that a Revenue Commitment is made and is then being
satisfied by Customer, terminate, rearrange or reconfigure the IP CrossRoads
Services ordered under a Customer Order without payment of the termination
charge specified above: PROVIDED, HOWEVER, that Customer shall be responsible
for payment of Level 3's then-current standard nonrecurring charges applicable
to such termination, rearrangement or reconfiguration.

4.   Level 3 provides only access to the Internet; Level 3 does not operate or
control the information, services, opinions or other content of the internet.
Customer agrees that it shall make no claim whatsoever against Level 3 relating
to the content of the Internet or respecting any information, product, service
or software ordered through or provided by virtue of the Internet.

5.   If Customer orders IP CrossRoads Services pursuant to a Customer Order,
the Customer shall be permitted to make two (2) changes to its Commitment Data
Rate each contract year, provided that such change be to a higher Committed
Data Rate.

6.   Level 3 reserves the right, but does not undertake the obligation, to
provide any Customer or potential customer bound by a Nondisclosure Agreement
access to a list of (i) Level 3's Customers which are connected to the IP
Crossroads Intra-Gateway Exchange Network Platform; and/or (ii) Autonomous
Systems Internet Networks connected to the IP Crossroads On-Net Transport
Network Platform. By this Agreement, Customer consents to such disclosures.

Level 3 makes no guarantee of any Customer's willingness to exchange Internet
traffic with any other customer. Level 3 will, however, use reasonable efforts
to arrange an introduction between customers or prospective customers bound by
a Nondisclosure Agreement to facilitate an agreement between them respecting
the exchange of Internet traffic.

Level 3 undertakes no obligations and accepts no liability for the
configuration, management, performance or any other issue relating to
Customer's routers or other customer provided equipment used for access to or
the exchange of traffic in connection with Level 3's IP Crossroads Service.

7.   Level 3 makes the Service Level Agreement attached as Exhibit "A"
respecting IP Crossroads Service.

                                 Page 17 of 18
<PAGE>   18

[LEVEL (3) COMMUNICATIONS LOGO]

SERVICE LEVEL AGREEMENT

Level 3 IP CrossRoads Service is backed by the following Service Level
Agreement. If the Level 3 Obligation is missed, the credit set forth below will
be issued to the Customer when requested.

<TABLE>
--------------------------------------------------------------------------------
<S>                                                                        <C>
INSTALLATION - Level 3 guarantees installation of IP CrossRoads            1 day
Service in Level 3's standard service area, within the following time
frames upon Level 3's acceptance of a Customer order:

20 business days or less for Ethernet port speeds of 10Mbps, 100Mbps, or
1000Mbps terminating in Level 3 Colocation
--------------------------------------------------------------------------------

RESPONSE TIME - Level 3's response time to any issue reported to and       1 day
confirmed by Level 3 Customer Service will be 30 minutes or less. As
soon as an issue is reported, Level 3 will open a trouble ticket.

RESOLUTION TIME - Level 3's mean time to resolve ("MTTR") Customer         1 day
issues relating to the technical performance or nonperformance of
Level 3's IP CrossRoads Service will be 2 hours or less, on a monthly
average basis. MTTR is calculated by taking the monthly aggregate of
time to close all trouble tickets relating to the technical
performance of Level 3's IP CrossRoads Service, divided by the number
of trouble tickets opened that month.

The Response Time and Resolution Time Obligations are depicted on the
timeline below:

                  <--- 30 min.--->  <------------- 2 hrs. ---------->
------------------------------------------------------------------------->
Customer     Customer        Response Time                Resolution Time
 Issue       Notifies        (ticket opened)              (ticket closed)
             Level 3

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

100% SERVICE AVAILABILITY - Service Unavailability means an IP             1 day
CrossRoads outage was confirmed by Level 3 Customer Service. This
outage is reported by a Customer within 48 hours of the outage, which
relates to the Customer's access point on the Level 3 Internet
Network, including the Customer's Level 3-provided port and local
access circuit. Service Unavailability does not include outages
associated with maintenance events, customer-caused outages or
disruptions, the performance of Internet networks controlled by other
companies, or traffic exchange points that are controlled by other
companies. Customers will receive credits, calculated monthly as an
aggregate of all Service Unavailability events in 15-minute
increments.
--------------------------------------------------------------------------------

DELAY GUARANTEES - 40 ms one-way. Delay refers to the one-way average      1 day
delay over a calendar month of traffic between all major gateways on
the Level 3 U.S. Internet Network. Delay does not apply to Customer's
local access circuit, transit or peering connections, circuits to the
traffic exchange points, maintenance events, or to customer-caused
outages or disruptions. Customer may obtain a report from Level 3 if
there is a question whether a delay has occurred. This request must be
made within five (5) days from the last day of the month in question.
--------------------------------------------------------------------------------
</TABLE>

     Contact Level 3 Customer Service toll-free at: 1-877-4LEVEL3 (877-453-8353)
for all issues, including technical, billing, and product inquiries.

THE TOTAL NUMBER OF CREDITS PER MONTH IS LIMITED TO FIVE (5) DAYS. CUSTOMER MUST
  REQUEST CREDITS WITHIN FIVE DAYS OF THE END OF ANY MONTH TO RECEIVE CREDITS.

                                 Page 18 of 18<PAGE>   1
                                                                     EXHIBIT 4.2

                            VIRAGE LOGIC CORPORATION
                RESTATED AND AMENDED INVESTORS' RIGHTS AGREEMENT

        This Restated and Amended Investors' Rights Agreement (this "AGREEMENT")
is made and entered into as of December 3, 1999 by and among Virage Logic
Corporation, a California corporation (the "COMPANY"), the persons and entities
listed on Exhibit A attached hereto (the "INVESTORS") and the persons listed on
Exhibit B attached hereto (the "SHAREHOLDERS").

                                    RECITALS

        A. Certain of the Investors (the "PRIOR INVESTORS") are holders of
outstanding shares of the Company's Series B Preferred Stock ("SERIES B STOCK")
issued by the Company to such Prior Investors pursuant to a Series B Preferred
Stock Purchase Agreement by and among the Company and the Prior Investors dated
July 7, 1998, as amended from time to time (the "SERIES B AGREEMENT"), and have
also been granted certain information and registration rights and rights of
first refusal under an Investors' Rights Agreement by and among the Company and
the Series B Investors dated July 7, 1998 (the "PRIOR RIGHTS AGREEMENT").

        B. Certain investors (the "SERIES C INVESTORS") have agreed to purchase
shares of the Company's Series C Preferred Stock ("SERIES C STOCK") pursuant to
a certain Series C Preferred Stock Purchase Agreement by and among the Company
and such Series C Investors dated of even date herewith, as amended from time to
time (the "SERIES C AGREEMENT"). The Series C Agreement provides that as a
condition to the Series C Investors' purchase of Series C Stock thereunder, the
Company will enter into this Agreement and the Series C Investors will be
granted the rights set forth herein.

        C. The Company and the undersigned parties hereto desire to enter into
this Agreement in order to amend, restate and replace the Prior Investors'
rights and obligations under the Prior Rights Agreement with the rights and
obligations set forth in this Agreement. Section 4.2 of the Prior Rights
Agreement provides that the Prior Rights Agreement may be amended by the written
consent of the holders of a majority of the "Investors' Shares" (as defined in
Section 4.2 of the Prior Rights Agreement) and the undersigned parties to this
Agreement hold a majority of the Investors' Shares, as defined in the Prior
Rights Agreement.

        NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:

        1. INFORMATION RIGHTS.

               1.1 Financial Information. The Company covenants and agrees that,
commencing on the date of this Agreement, for so long as any Investor holds at
least 300,000 shares of Series B Stock issued under the Series B Agreement
and/or 300,000 shares of Series C Stock issued under the Series C Agreement
and/or the equivalent number (on an as-converted

                                      -1-

<PAGE>   2
basis) of shares of Common Stock of the Company issued upon the conversion of
such shares of Series B Stock or Series C Stock ("CONVERSION STOCK") the Company
will:

                      (a) Annual Reports. Furnish to such Investor, as soon as
practicable and in any event within 90 days after the end of each fiscal year of
the Company, annual financial statements including a consolidated Balance Sheet
as of the end of such fiscal year, a consolidated Statement of Income and a
consolidated Statement of Cash Flows of the Company and its subsidiaries for
such year, and a Statement of Shareholders' Equity for such year, setting forth
in each case in comparative form the figures from the Company's previous fiscal
year (if any), all prepared in accordance with generally accepted accounting
principles and practices and audited by nationally recognized independent
certified public accountants; provided that notwithstanding the foregoing, with
respect to the initial audited annual financial statements of the Company to be
furnished hereunder, the Company shall have 180 days to furnish such financial
statements to such Investor, and

                      (b) Quarterly Reports. Furnish to such Investor as soon as
practicable, and in any case within forty-five (45) days of the end of each
fiscal quarter of the Company (except the last quarter of the Company's fiscal
year), quarterly unaudited financial statements, including an unaudited Balance
Sheet, an unaudited Statement of Income and an unaudited Statement of Cash
Flows;

               1.2 Confidentiality. Each Investor agrees to hold all information
received pursuant to this Section 1 in confidence, and not to use or disclose
any of such information to any third party, except to the extent such
information may be made publicly available by the Company.

               1.3 Termination of Certain Rights. The Company's obligations
under Section 1.1 above will terminate upon the closing of the Company's initial
public offering of Common Stock pursuant to an effective registration statement
filed under the U.S. Securities Act of 1933, as amended (the "Securities Act").

        2. REGISTRATION RIGHTS.

               2.1 Definitions. For purposes of this Section 2:

                      (a) Registration. The terms "REGISTER," "REGISTRATION" and
"REGISTERED" and 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.

                      (b) Demand Registrable Securities. The term "DEMAND
REGISTRABLE SECURITIES" means: (1) all the shares of Common Stock of the Company
issued or issuable upon the conversion of any shares of Series B Stock issued
under the Series B Agreement or any shares of Series C Stock issued under the
Series C Agreement as such agreement(s) may hereafter be amended from time to
time; and (2) any shares of Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security

                                      -2-

<PAGE>   3
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, all such shares of Common Stock described in
clause (1) of this subsection (b); excluding in all cases, however, any Demand
Registrable Securities sold by a person in a transaction in which rights under
this Section 2 are not assigned in accordance with this Agreement or any Demand
Registrable Securities sold to the public or sold pursuant to Rule 144
promulgated under the Securities Act.

                      (c) Demand Registrable Securities. The number of shares of
"DEMAND REGISTRABLE SECURITIES THEN OUTSTANDING" shall mean the number of shares
of Common Stock which are Demand Registrable Securities and (1) are then issued
and outstanding or (2) are then issuable pursuant to the exercise or conversion
of then outstanding and then exercisable options, warrants or convertible
securities.

                      (d) Additional Registrable Securities. The term
"ADDITIONAL REGISTRABLE SECURITIES" means: (1) all the shares of Common Stock of
the Company issued or issuable upon the conversion of the shares of Series A
Stock now held by the Shareholders and set forth in Exhibit B attached hereto;
(2) the shares of Common Stock now held by the Shareholders and set forth in
Exhibit B attached hereto (the shares of Series A Stock and Common Stock held by
the Shareholders are sometimes referred to herein as the "SHAREHOLDERS'
SHARES"); and (3) any shares of 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, all such shares of Common Stock described in
clause (1) or (2) of this subsection (d); excluding in all cases, however, any
Additional Registrable Securities sold by a person in a transaction in which
rights under this Section 2 are not assigned in accordance with this Agreement
or any Additional Registrable Securities sold to the public or sold pursuant to
Rule 144 promulgated under the Securities Act.

                      (e) Registrable Securities. "REGISTRABLE SECURITIES" shall
mean Demand Registrable Securities and Additional Registrable Securities.

                      (f) Holder. For purposes of this Section 2 and Sections 3
and 4 hereof, the term "HOLDER" means any person owning of record Registrable
Securities that have not been sold to the public or pursuant to Rule 144
promulgated under the Securities Act or any assignee of record of such
Registrable Securities to whom rights under this Section 2 have been duly
assigned in accordance with this Agreement; provided, however, that for purposes
of this Agreement, a record holder of shares of Series A Stock, Series B Stock,
or Series C Stock convertible into such Registrable Securities shall be deemed
to be the Holder of such Registrable Securities; provided, further, that a
holder of Additional Registrable Securities (as defined in Section 2.1(d)) shall
not be a Holder with respect to such Additional Registrable Securities for
purposes of Sections 2.2, 2.4 or 3 of this Agreement; and provided, further,
that the Company shall in no event be obligated to register shares of Series A
Stock, Series B Stock, or Series C Stock and that Holders of Registrable
Securities will not be required to convert their shares of Series A Stock,
Series B Stock, or Series C Stock into Common Stock in order to exercise the

                                      -3-

<PAGE>   4
registration rights granted hereunder, until immediately before the closing of
the offering to which the registration relates.

                      (g) Form S-3. The term "FORM S-3" means such form under
the Securities Act as is 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.

                      (h) SEC. The term "SEC" OR "COMMISSION" means the U.S.
Securities and Exchange Commission.

               2.2 DEMAND REGISTRATION.

                      (a) Request by Holders. If the Company shall receive at
any time after the earlier of (i) July 5, 2002, or (ii) six (6) months after the
effective date of the Company's initial public offering of its securities
pursuant to a registration filed under the Securities Act, a written request
from the Holders of at least 2,100,000 shares (on a common equivalent basis) of
the Demand Registrable Securities that the Company file a registration statement
under the Securities Act covering the registration of Demand Registrable
Securities pursuant to this Section 2.2, then the Company shall, within ten (10)
business days of the receipt of such written request, give written notice of
such request "REQUEST NOTICE") to all Holders, and effect, as soon as
practicable, the registration under the Securities Act of all Demand Registrable
Securities which Holders request to be registered and included in such
registration by written notice given by such Holders to the Company within
twenty (20) days after receipt of the Request Notice, subject only to the
limitations of this Section 2.2; provided that the Demand Registrable Securities
requested by all Holders to be registered pursuant to such request must either
(i) be at least fifty percent (50%) of all Demand Registrable Securities then
outstanding or (ii) have an anticipated aggregate public offering price (before
any underwriting discounts and commissions) of not less than $5,000,000 (or
$10,000,000 if such requested registration is the initial public offering of the
Company's stock registered under the Securities Act).

                      (b) Underwriting. If the Holders initiating the
registration request under this Section 2.2 ("INITIATING HOLDERS") intend to
distribute the Demand Registrable Securities covered by their request by means
of an underwriting, then they shall so advise the Company as a part of their
request made pursuant to this Section 2.2 and the Company shall include such
information in the written notice referred to in subsection 2.2(a). In such
event, the right of any Holder to include his Demand Registrable Securities in
such registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Demand Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder) to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the managing
underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 2.2, if the underwriter(s)
advise(s) the Company in writing that marketing factors require a limitation of
the number of securities to be underwritten then the Company shall so advise all

                                      -4-

<PAGE>   5
Holders of Demand Registrable Securities which would otherwise be registered and
underwritten pursuant hereto, and the number of Demand Registrable Securities
that may be included in the underwriting shall be reduced as required by the
underwriter(s) and allocated among the Holders of Demand Registrable Securities
on a pro rata basis according to the number of Demand Registrable Securities
then outstanding held by each Holder requesting registration (including the
Initiating Holders); provided, however, that the number of shares of Demand
Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Demand Registrable
Securities excluded and withdrawn from such underwriting shall be withdrawn from
the registration.

                      (c) Limitations. The Company is obligated to effect only
two (3) such registrations pursuant to this Section 2.2. The Company shall not
be obligated to effect a registration pursuant to this Section 2.2 during the
six month period commencing with the effective date of any registration of the
Company filed under the Securities Act.

                      (d) Deferral. Notwithstanding the foregoing, if the
Company shall furnish to Holders requesting the filing of a registration
statement pursuant to this Section 2.2, a certificate signed by the President or
Chief Executive Officer 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 shareholders for such registration statement to be filed and
it is therefore essential to defer the filing of such registration statement,
then the Company shall have the right to defer such filing for a period of not
more than 120 days after receipt of the request of the Initiating Holders;
provided, however, that the Company may not utilize this right more than once in
any twelve (12) month period.

                      (e) Expenses. All expenses incurred in connection with a
registration pursuant to this Section 2.2, including without limitation all
registration and qualification fees, printers and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders (but excluding
underwriters' discounts and commissions), shall be borne by the Company. Each
Holder participating in a registration pursuant to this Section 2.2 shall bear
such Holder's proportionate share (based on the total number of shares sold in
such registration other than for the account of the Company) of all discounts,
commissions or other amounts payable to underwriters or brokers in connection
with such offering and the fees and disbursements of any counsel for the
participating Holders. Notwithstanding the foregoing, the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to this Section 2.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Demand Registrable Securities to be
registered, unless the Holders of a majority of the Demand Registrable
Securities then outstanding agree to forfeit their right to one (1) demand
registration pursuant to this Section 2.2 (in which case such right shall be
forfeited by all Holders of Demand Registrable Securities); provided, further,
however, that if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business, or prospects of the Company
not known to the Holders at the time of their request for such registration and
have withdrawn their request for registration with reasonable promptness after
learning of such

                                      -5-

<PAGE>   6
material adverse change, then the Holders shall not be required to pay any of
such expenses and shall retain their rights pursuant to this Section 2.2.

               2.3 Piggyback Registrations. The Company shall notify all Holders
of Registrable Securities in writing at least thirty (30) days prior to filing
any registration statement under the Securities Act for purposes of effecting 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 any registration
under Section 2.2 or Section 2.4 of this Agreement or to any employee benefit
plan or a corporate reorganization) and will afford each such Holder an
opportunity to include in such registration statement all or any part of the
Registrable Securities then held by such Holder. Each Holder desiring to include
in any such registration statement all or any part of the Registrable Securities
held by such Holder shall, within twenty (20) days after receipt of the
above-described notice from the Company, so notify the Company in writing, and
in such notice shall inform the Company of the number of Registrable Securities
such Holder wishes to include in such registration statement. 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 a registration statement under which
the Company gives notice under this Section 2.3 is for an underwritten offering,
then the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder's Registrable Securities 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
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriter(s) selected for such underwriting.
Notwithstanding any other provision of this Agreement, if the managing
underwriter determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, first to
shareholders exercising any demand registration rights, second to the Company,
third, to each of the Holders requesting inclusion of their Demand Registrable
Securities in such registration statement on a pro rata basis based on the total
number of Demand Registrable Securities then held by each such Holder, and
fourth to each of the Holders requesting inclusion of their Additional
Registrable Securities in such registration statement on a pro rata basis based
on the total number of Additional Registrable Securities then held by each such
Holder; provided, however, that the right of the underwriters to exclude shares
from the registration and underwriting as described above shall be restricted so
that the number of Demand Registrable. Securities included in any such
registration is not reduced below twenty-five percent (25%) of the shares
included in the registration except for a registration relating to the Company's
initial public offering, from which all Demand Registrable Securities may be
excluded. If any Holder

                                      -6-

<PAGE>   7
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
shareholders 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 persons 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) Expenses. All expenses incurred in connection with a
registration pursuant to this Section 2.3 (excluding underwriters' and brokers'
discounts and commissions), including, without limitation all federal and "blue
sky" registration and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company.

               2.4 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders of Demand Registrable Securities a written request or
requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Demand
Registrable Securities owned by such Holder or Holders, then the Company will:

                      (a) Notice. Promptly give written notice of the proposed
registration and the Holder's or Holders' request therefor, and any related
qualification or compliance, to all other Holders of Demand Registrable
Securities; and

                      (b) Registration. 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' Demand Registrable Securities as are
specified in such request, together with all or such portion of the Demand
Registrable Securities of any other Holder or Holders joining in such request as
are specified in a written request given within twenty (20) days after receipt
of such written notice from the Company; provided, however, the Company shall
not be obligated to effect any such registration, qualification or compliance
pursuant to this Section 2.4:

                         (1) if Form S-3 is not available for such offering;

                         (2) if the Holders, together with the holders of any
        other securities of the Company entitled to inclusion in such
        registration, propose to sell Demand Registrable Securities and such
        other securities (if any) at an aggregate price to the public of less
        than $1,000,000 (after deduction of commissions and expenses);

                         (3) if the Company shall furnish to the Holders a
        certificate signed by the President or Chief Executive Officer of the
        Company stating that in the good faith judgment of the Board of
        Directors of the Company, it would be seriously

                                      -7-

<PAGE>   8
        detrimental to the Company and its shareholders 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 no more than once during any twelve month period for a period
        of not more than 120 days after receipt of the request of the Holder or
        Holders under this Section 2.4;

                         (4) if the Company has, within the six (6) month period
        immediately preceding the date of such request, already effected one (1)
        registration on Form S-3 for the Holders pursuant to this Section 2.4;
        or

                         (5) in any particular jurisdiction in which the Company
        would be required to qualify to do business or to execute a general
        consent to service of process in effecting such registration,
        qualification or compliance.

Subject to the foregoing, the Company shall file a Form S-3 registration
statement covering the Demand Registrable Securities and other securities so
requested to be registered pursuant to this Section 2.4 as soon as practicable
after receipt of the request or requests of the Holders for such registration.

                      (c) Expenses. The Company shall pay all expenses incurred
in connection with each registration requested pursuant to this Section 2.4
(excluding underwriters' or brokers' discounts and commissions), including
without limitation all filing, registration and qualification, printers' and
accounting fees and the reasonable fees and disbursements of one counsel for the
selling Holder or Holders and counsel for the Company.

                      (d) Not Demand Registration. Form S-3 registrations shall
not be deemed to be demand registrations as described in Section 2.2 above.

               2.5 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities under this Agreement, 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 reasonable, diligent
        efforts to cause such registration statement to become effective, and,
        upon the request of the Holders of a majority of the Registrable
        Securities registered thereunder, keep such registration statement
        effective for up to ninety (90) days.

                (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.

                (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

                                      -8-

<PAGE>   9
        disposition of the Registrable Securities owned by them that are
        included in such registration.

                (d) Use reasonable, diligent 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 of 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) Furnish, at the request of any Holder requesting
        registration of Registrable Securities, on the date that such
        Registrable Securities are delivered to the underwriters for sale, if
        such securities are being sold through underwriters, or, if such
        securities are not being sold through underwriters, on the date that the
        registration statement with respect to such securities becomes
        effective, (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 underwritten
        public offering and reasonably satisfactory to a majority in interest of
        the Holders requesting registration, addressed to the underwriters, if
        any, and to the, Holders requesting registration of Registrable
        Securities and (ii) a "comfort" 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 and
        reasonably satisfactory to a majority in interest of the Holders
        requesting registration, addressed to the underwriters, if any, and to
        the Holders requesting registration of Registrable Securities.

               2.6 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2.2, 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 timely effect
the registration of their Registrable Securities.

                                      -9-

<PAGE>   10
               2.7 Delay of Registration. 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.

               2.8 Indemnification. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:

                      (a) By the Company. 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 Securities Exchange Act of 1934,
as amended, (the "1934 ACT"), against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (each a "VIOLATION"):

                         (i) any untrue statement or alleged untrue statement of
        a material fact contained in such registration statement, including any
        preliminary prospectus or final prospectus contained therein or any
        amendments or supplements thereto;

                         (ii) the omission or alleged omission to state therein
        a material fact required to be stated therein, or necessary to make the
        statements therein not misleading; or

                         (iii) any violation or alleged violation by the Company
        of the Securities Act, the 1934 Act, any federal or state securities law
        or any rule or regulation promulgated under the Securities Act, the 1934
        Act or any federal or state securities law in connection with the
        offering covered by such registration statement;

and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 2.8(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.

                      (b) By Selling Holders. To the extent permitted by law,
each selling Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company

                                      -10-

<PAGE>   11
within the meaning of the Securities Act, any underwriter and any other Holder
selling securities under such registration statement or any of such other
Holders partners, directors or officers or any person who controls such Holder
within the meaning of the Securities Act or the 1934 Act, 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,
partner or director, officer or controlling person of such other Holder may
become subject under the Securities Act, the 1934 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 expressly
for use in connection with such registration; and each such Holder will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person, underwriter or other Holder,
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this subsection 2.8(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, and provided further that the total amounts payable in indemnity by a
Holder under this Section 2.8(b) in respect of any Violation shall not exceed
the net proceeds received by such Holder in the registered offering out of which
such Violation arises.

                      (c) Notice. Promptly after receipt by an indemnified party
under this Section 2.8 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 2.8,
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 conflict of 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 prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.8, 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 2.8.

                      (d) Defect Eliminated in Final Prospectus. The foregoing
indemnity agreements of the Company and Holders are subject to the condition
that, insofar as they relate to any Violation made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "FINAL
PROSPECTUS"), such indemnity agreement shall not inure to the benefit of any
person if a copy of

                                      -11-

<PAGE>   12
the Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.

                      (e) Contribution. In order to provide for just and
equitable contribution to joint liability under the Securities Act in any case
in which either (i) any Holder exercising rights under this Agreement, or any
controlling person of any such Holder, makes a claim for indemnification
pursuant to this Section 2.8 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 2.8 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling Holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 2.8; then, and in each such case, the Company and
such Holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that such Holder is responsible for the portion represented
by the percentage that the public offering price of its Registrable Securities
offered by and sold under the registration statement bears to the public
offering price of all securities offered by and sold under such registration
statement, and the Company and other selling Holders are responsible for the
remaining portion; provided, however, that, in any such case, (A) no such Holder
will be required to contribute any amount in excess of the public offering price
of all such Registrable Securities offered and sold by such Holder pursuant to
such registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.

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

               2.9 "MARKET STAND-OFF." Each Holder hereby agrees that it shall
not, to the extent requested by the Company or an underwriter of securities of
the Company, sell or otherwise transfer or dispose of any Registrable Securities
or other shares of stock of the Company then owned by such Holder (other than to
donees or partners of the Holder who agree to be similarly bound) for up to one
hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act, provided however that:

                         (a) such agreement shall be applicable only to the
        first such registration statement of the Company which covers securities
        to be sold on its behalf to the public in an underwritten offering but
        not to Registrable Securities sold pursuant to such registration
        statement; and

                         (b) all executive officers and directors of the Company
        then holding Common Stock of the Company enter into similar agreements.

                                      -12-

<PAGE>   13
In order to enforce the foregoing covenant, the Company shall have the right to
place restrictive legends on the certificates representing the shares subject to
this Section and to impose stop transfer instructions with respect to the
Registrable Securities and such other shares of stock of each Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.

               2.10 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to:

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

                         (b) Use reasonable, diligent efforts to file with the
        Commission in a timely manner all reports and other documents required
        of the Company under the Securities Act and the 1934 Act (at any time
        after it has become subject to such reporting requirements); and

                         (c) So long as a Holder owns any Registrable
        Securities, to furnish to the Holder forthwith upon request a written
        statement by the Company as to its compliance with the reporting
        requirements of said Rule 144 (at any time after 90 days after the
        effective date of the first registration statement filed by the Company
        for an offering of its securities to the general public), and of the
        Securities Act and the 1934 Act (at any time after it has become subject
        to the reporting requirements of the 1934 Act), a copy of the most
        recent annual or quarterly report of the Company, and such other reports
        and documents of the Company as a Holder may reasonably request in
        availing itself of any rule or regulation of the Commission allowing a
        Holder to sell any such securities without registration (at any time
        after the Company has become subject to the reporting requirements of
        the 1934 Act).

               2.11 TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall
have no obligations pursuant to Sections 2.2 through 2.4 with respect to: (i)
any request or requests for registration made by any Holder on a date more than
five (5) years after the closing date of the Company's initial public offering;
or (ii) any Registrable Securities proposed to be sold by a Holder in a
registration pursuant to Section 2.2, 2.3 or 2.4 if, in the opinion of counsel
to the Company addressed in writing to the Holder, all such Registrable
Securities proposed to be sold by a Holder may be sold in a three-month period
without registration under the Securities Act pursuant to Rule 144 under the
Securities Act.

        3. RIGHT OF FIRST REFUSAL.

               3.1 GENERAL. For so long as any Investor holds at least 100,000
shares of Series B Stock issued under the Series B Agreement and/or at least
300,000 shares of Series C

                                      -13-

<PAGE>   14
Stock issued under the Series C Agreement and/or the equivalent number (on an
as-converted basis) of shares of Conversion Stock (each such Investor being
hereinafter referred to as a "RIGHTS HOLDER"), such Rights Holder shall have the
right of first refusal to purchase such Rights Holders Pro Rata Share (as
defined below), of all (or any part) of any "New Securities" (as defined in
Section 3.2) that the Company may from time to time issue or offer to sell after
the date of this Agreement. A Rights Holders "PRO RATA SHARE" for purposes of
this right of first refusal is the ratio of (a) the number of Demand Registrable
Securities as to which such Rights Holder is the Holder (and/or is deemed to be
the Holder under Section 2.1(f)), to (b) the number of "COMMON STOCK EQUIVALENTS
Outstanding," which shall be the sum of (i) the total number of shares of Common
Stock then outstanding plus (ii) the total number of shares of Common Stock
issuable upon conversion of all shares of Preferred Stock or other securities
convertible into or exchangeable for shares of Common Stock that are then
outstanding plus (iii) the total number of shares of Common Stock that are
issuable upon the exercise of then outstanding warrants, options or other rights
to purchase or acquire (x) shares of Common Stock or (y) securities convertible
into or exchangeable for shares of Common Stock (assuming the full conversion or
exchange into Common Stock of all such warrants, options or other rights to
purchase or acquire securities convertible into or exchangeable for shares of
Common Stock).

               3.2 NEW SECURITIES. "NEW SECURITIES" shall mean any Common Stock
or Preferred Stock of the Company, whether now authorized or not, and rights,
options or warrants to purchase such Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible or
exchangeable into such Common Stock or Preferred Stock; provided however, that
the term "New Securities" does not include:

                         (i) a cumulative total from inception up to 7,390,281
        shares of the Company's Common Stock (and/or options or warrants
        therefor) issued to employees, officers, directors, contractors,
        advisors or consultants of the Company pursuant to incentive agreements
        or plans approved by the Board of Directors of the Company;

                         (ii) any shares of Series C Preferred Stock issued
        under the Series C Agreement, as such agreement may be amended;

                         (iii) any securities issuable upon conversion of or
        with respect to any then outstanding shares of Series A Stock, Series B
        Stock, or Series C Stock of the Company;

                         (iv) any securities issuable upon exercise or
        conversion of any securities, if such securities were first offered to
        the Rights Holders hereunder,

                         (v) shares of the Company's Common Stock or Preferred
        Stock issued in connection with any stock split or stock dividend;

                         (vi) securities offered by the Company to the public
        pursuant to a registration statement filed under the Securities Act;

                                      -14-

<PAGE>   15
                         (vii) shares of Common Stock (or options, warrants, or
        rights therefor) which are issued to equipment lessors, landlords,
        financial institutions and other providers of goods and services to the
        Company pursuant to agreements or other arrangements approved by the
        Board; provided, that at the time of each such issuance, such shares of
        Common Stock (or options, warrants, or rights therefor), together with
        all like issuances since the date of this Agreement (net of any
        repurchases of such shares by the Company and net of any such expired or
        terminated options, warrants or rights), shall not exceed one and five
        tenths percent (1.5%) of the Common Stock Equivalents Outstanding at the
        time of such issuance;

                         (viii) securities issued pursuant to the acquisition of
        another corporation or entity by the Company by consolidation, merger,
        purchase of all or substantially all of the assets, or other
        reorganization in which the Company acquires, in a single transaction or
        Series of related transactions, all or substantially all of the assets
        of such other corporation or entity or fifty percent (50%) or more of
        the voting power of such other corporation or entity or fifty percent
        (50%) or more of the equity ownership of such other entity.

               3.3 PROCEDURES. In the event that the Company proposes to
undertake an issuance of New Securities, it shall give to each Rights Holder
written notice of its intention to issue New Securities (the "NOTICE"),
describing the type of New Securities and the price and the general terms upon
which the Company proposes to issue such New Securities. Each Rights Holder
shall have ten (10) days from the date of mailing of any such Notice to agree in
writing to purchase such Rights Holder's Pro Rata Share of such New Securities
for the price and upon the general terms specified in the Notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased (not to exceed such Rights Holders Pro Rata Share). If any
Rights Holder fails to so agree in writing within such ten (10) day period to
purchase such Rights Holder's full Pro Rata Share of an offering of New
Securities (a "NONPURCHASING HOLDER"), then such Nonpurchasing Holder shall
forfeit the right hereunder to purchase that part of his Pro Rata Share of such
New Securities that he did not so agree to purchase and the Company shall
promptly give each Rights Holder who has timely agreed to purchase his full Pro
Rata Share of such offering of New Securities (a "PURCHASING HOLDER") written
notice of the failure of any Nonpurchasing Holder to purchase such Nonpurchasing
Rights Holder's full Pro Rata Share of such offering of New Securities (the
"OVERALLOTMENT NOTICE"). Each Purchasing Holder shall have a right of
overallotment such that such Purchasing Holder may agree to purchase a portion
of the Nonpurchasing Holders' unpurchased Pro Rata Shares of such offering on a
pro rata basis according to the relative Pro Rata Shares of the Purchasing
Rights Holders, at any time within five (5) days after receiving the
Overallotment Notice.

               3.4 FAILURE TO EXERCISE. In the event that the Rights Holders
full to exercise in full the right of first refusal within such ten (10) plus
five (5) day period, then the Company shall have 90 days thereafter to sell the
New Securities with respect to which the Rights Holders' rights of first refusal
hereunder were not exercised, at a price and upon general terms not materially
more favorable to the purchasers thereof than specified in the Company's Notice
to the

                                      -15-

<PAGE>   16
Rights Holders. In the event that the Company has not issued and sold the New
Securities within such 90 day period, then the Company shall not thereafter
issue or sell any New Securities without again first offering such New
Securities to the Rights Holders pursuant to this Section 3.

               3.5 TERMINATION. This right of first refusal shall terminate (i)
immediately before the closing of the first underwritten sale of Common Stock of
the Company to the public pursuant to a registration statement filed with, and
declared effective by, the SEC under the Securities Act, covering the offer and
sale of Common Stock to the public at an offering price of at least $6.00 per
share (such offering price being subject to proportional adjustment to reflect
subdivisions, combinations, stock dividends and similar transactions affecting
the number of outstanding shares of Common Stock) for an aggregate gross public
offering price (calculated after deduction of underwriters' discounts and
commissions) of at least $25,000,000, or (ii) upon (a) the acquisition of all or
substantially all the assets of the Company or (b) an acquisition of the Company
by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) or more of the voting
power of the corporation or other entity surviving such transaction pursuant to
this Section 3.

        4. ASSIGNMENT AND AMENDMENT.

               4.1 ASSIGNMENT. Notwithstanding anything herein to the contrary:

                      (a) Information Rights; Refusal Rights. The rights of an
Investor under Sections 1.1 or 3 hereof may be assigned only to a party who
acquires from an Investor (or an Investor's permitted assigns) at least that
number of shares of Series B Stock, Series C Stock and/or an equivalent number
(on an as-converted basis) of shares of Conversion Stock described in Sections
1.1 or 3 hereof, respectively.

                      (b) Registration Rights. The registration rights of a
Holder under Section 2 hereof may be assigned to a person who either (i)
acquires at least 100,000 shares of Demand Registrable Securities, (ii) acquires
at least 100,000 shares of Additional Registrable Securities, (iii) acquires all
of the Demand Registrable Securities or Additional Registrable Securities owned
by the transferor, or (iv) is a partner or retired partner of a transferor that
is a partnership, or a shareholder of a transferor that is a corporation, or the
estate of any such partner or shareholder, or (with respect to a transfer by
gift, will or intestate succession) is the spouse, lineal descendant or ancestor
of a transferor who is a natural person (or a trust for any of the foregoing);
provided, however, that the Company is given written notice by the assigning
party at the time of such assignment gating the name and address of the assignee
and identifying the securities of the Company as to which the rights are being
assigned; and provided further that any such assignee shall receive such
assigned rights subject to all the terms and conditions of this Agreement,
including without limitation the provisions of this Section 4.

               4.2 AMENDMENT OF RIGHTS. Subject to Section 4.3, any provision of
this Agreement 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 the

                                      -16-

<PAGE>   17
Company and Investors (and/or any of their permitted successors or assigns)
holding shares of Series B Stock, Series C Stock and/or Conversion Stock
representing and/or convertible into a majority of all the Investors' Shares (as
defined below); provided, however, that the piggyback registration rights
granted to the Shareholders under Section 2.3 of this Agreement may not be
eliminated or materially and adversely changed without the additional written
consent of persons holding a majority of the Shareholders' Shares and/or shares
of Common Stock issued upon conversion thereof (calculated on an as converted to
Common Stock basis); and provided further that the grant to third parties of
piggyback registration rights under Section 2.3 hereof on a pari passu basis
with the piggyback registration rights of the Shareholders' Shares under Section
2.3 shall not be deemed to be a material and adverse change to the piggyback
registration rights of the Shareholders under this Agreement. As used herein,
the term "INVESTORS' SHARES" shall mean the shares of Common Stock then issuable
upon conversion of all then outstanding shares of Series B Stock issued under
the Series B Agreement, plus all then outstanding shares of Series C Stock
issued under the Series C Agreement, plus all then outstanding shares of
Conversion Stock that were issued upon the conversion of any shares of Series B
Stock issued under the Series B Agreement, plus all then outstanding shares of
Conversion Stock that were issued upon the conversion of any shares of Series C
Stock issued under the Series C Agreement. Any amendment or waiver effected in
accordance with this Section 4.2 shall be binding upon each Investor, each
Holder, each permitted successor or assignee of such Investor or Holder and the
Company.

               4.3 NEW INVESTORS. Notwithstanding anything herein to the
contrary, if pursuant to Section 2.2 of the Series C Agreement, additional
parties may purchase shares of Series C Stock as "New Investors" thereunder,
then each such New Investor shall become a party to this Agreement as an
"Investor" hereunder, without the need any consent, approval or signature of any
Investor when such New Investor has both: (i) purchased shares of Series C Stock
under the Series C Agreement and paid the Company all consideration payable for
such shares and (ii) executed one or more counterpart signature pages to this
Agreement as an "Investor", with the Company's consent.

        5. ADDITIONAL COVENANTS.

               5.1 DEBT INCURRED. The Company shall obtain the written consent
of holders of fifty-five percent (55%) of the Series A Stock, Series B Stock,
and Series C Stock, voting together as a single class, which consent shall not
be unreasonably withheld, prior to incurring any indebtedness for money borrowed
in excess of $500,000; provided that such restriction shall not apply to lines
of credit with commercial banks and equipment leases entered into by the
Company. This covenant shall terminate upon the same terms and conditions set
forth in Section 3.5 hereto.

               5.2 EQUITY ISSUANCE. From the date of this Agreement until
January 1, 2000, the Company shall obtain the written consent of holders of
fifty-five percent (55%) of the Series A Stock, Series B Stock, and Series C
Stock, voting together as a single class, which consent shall not be
unreasonably withheld, prior to issuing any equity securities of the Company (or
options, warrants or rights therefor) to either Shareholder.

                                      -17-

<PAGE>   18
        6. GENERAL PROVISIONS.

               6.1 NOTICES. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if deposited in the U.S. mail by registered or
certified mail, return receipt requested, postage prepaid, as follows:

                         (a) if to an Investor, at such Investors respective
        address as set forth on Exhibit A hereto.

                         (b) if to the Company, at 46501 Landing Parkway,
        Fremont, CA 94538.

                         (c) if to a Shareholder, at such Shareholder's address
        as set forth on Exhibit B hereto.

Any party hereto (and such party's permitted assigns) may by notice so given
change its address for future notices hereunder. Notice shall conclusively be
deemed to have been given when personally delivered or when deposited in the
mail in the manner set forth above.

               6.2 ENTIRE AGREEMENT. This Agreement, together with all the
Exhibits hereto, constitutes and contains the entire agreement and understanding
of the parties with respect to the subject matter hereof and supersedes the
Prior Rights Agreement and any and all prior negotiations, correspondence,
agreements, understandings, duties or obligations between the parties respecting
the subject matter hereto. This Agreement will amend and restate the Prior
Rights Agreement to read as set forth herein, when parties having the right to
so amend and restate the Prior Rights Agreement have duly executed it.

               6.3 GOVERNING LAW. This Agreement shall be governed by and
construed exclusively in accordance with the internal laws of the State of
California as applied to agreements among California residents entered into and
to be performed entirely within California, excluding that body of law relating
to conflict of laws and choice of law.

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

               6.5 THIRD PARTIES. Nothing in this Agreement, express or implied,
is intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.

               6.6 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section
4.1, the provisions of this Agreement shall inure to the benefit of, and shall
be binding upon, the successors and permitted assigns of the parties hereto.

                                      -18-

<PAGE>   19
               6.7 CAPTIONS. The captions to sections of this Agreement have
been inserted for identification and reference purposes only and shall not be
used to construe or interpret this Agreement.

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

               6.9 COSTS AND ATTORNEYS' FEES. In the event that any action, suit
or other proceeding is instituted concerning or arising out of this Agreement or
any transaction contemplated hereunder, the prevailing party shall recover all
of such party's costs and attorneys' fees incurred in each such action, suit or
other proceeding, including any and all appeals or petitions therefrom.

               6.10 ADJUSTMENTS FOR STOCK SPLITS, ETC. Wherever in this
Agreement there is a reference to a specific number of shares of Common Stock or
Preferred Stock of the Company of any class or series, then, upon the occurrence
of any subdivision, combination or stock dividend of such class or Series of
stock, the specific number of shares so referenced in this Agreement shall
automatically be proportionally adjusted to reflect the affect on the
outstanding shares of such class or Series of stock by such subdivision,
combination or stock dividend.

               6.11 AGGREGATION OF STOCK. All shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.

                  [Remainder of Page Intentionally Left Blank]

                                      -19-

<PAGE>   20
        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.

THE COMPANY:
VIRAGE LOGIC CORPORATION
By: /s/ ADAM KABLANIAN
    -------------------------------
    Adam Kablanian, President

THE SHAREHOLDERS:

/s/ ADAM KABLANIAN                                /S/ ALEXANDER SHUBAT
-------------------------------                   -----------------------------
Adam Kablanian                                    Alexander Shubat

                                 THE INVESTORS:
                                 By:
                                     ------------------------------------------
                                                     [Sign Here]
                                 Name:
                                      -----------------------------------------
                                                    [Please Print]
                                 Title:
                                       ----------------------------------------
                                             [Please Print (if applicable)]
                                 Company Name:
                                              ---------------------------------
                                                  [Please Print (if applicable)]

      [SIGNATURE PAGE TO RESTATED AND AMENDED INVESTORS' RIGHTS AGREEMENT]

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