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                            COMPAQ FINANCIAL SERVICES


                      MASTER LEASE AND FINANCING AGREEMENT


This Master Lease and Financing Agreement (together with Exhibits A through E
attached hereto and hereby made a part hereof, this "Master Agreement"), dated
as of November 1, 1999, is entered into by and between Compaq Financial Services
Corporation, a Delaware corporation ("Lessor"), and AppliedTheory Corporation, a
Delaware ("Lessee"). Capitalized terms used in this Master Agreement without
definition have the meanings ascribed to them in Section 31.


1. PURPOSE OF MASTER AGREEMENT. The purpose of this Master Agreement is to set
forth the general terms and conditions upon which (a) Lessor shall lease to
Lessee and Lessee shall lease from Lessor items of Hardware, Software or both
(such Hardware and Software being collectively referred to as "Equipment", and
each such lease of Equipment being referred to as a "Lease"), and (b) Lessor
shall provide financing to Lessee (each such financing transaction being
referred to as a "Financing") for software program license fees, maintenance
fees, fees for other services and other one-time charges ("Financed Items")
Lessee desires to finance hereunder. In connection with its execution of this
Master Agreement, Lessee shall deliver to Lessor an Officer's Certificate in
form and substance acceptable to Lessor, executed by a duly authorized officer
of Lessee and certifying as to, among other things, Lessee's authority to enter
into this Master Agreement and Leases and Financings hereunder and the authority
of Lessee's officers or representatives specified therein to execute this Master
Agreement and all other Fundamental Agreements.


2. ALTERNATIVE COMMENCEMENT PROCEDURES. Subject to the other terms and
conditions contained in this Master Agreement and the applicable Schedule or
Advance Pricing Agreement, Lessee may, at its option, enter into individual
Leases and Financings with Lessor under either or both of the following
procedures:


      A. TRADITIONAL PROCEDURE. (a) Execution of Schedule. Lessor and Lessee
mutually agree to enter into a Lease, a Financing or both by executing a
Schedule in the form of Exhibit A with such changes as Lessor and Lessee shall
have agreed to as conclusively evidenced by their execution thereof. Each such
Schedule shall specifically identify (by serial number or other identifying
characteristics) the items of Equipment to be leased under such Schedule (other
than items of System Software, which shall be deemed to be items of Software
leased under the Schedule pursuant to which the related items of Hardware are
leased), and the Financed Items to be financed under such Schedule. Each
Schedule, when executed by both Lessee and Lessor, together with this Master
Agreement, shall constitute a separate and distinct Lease, a separate and
distinct Financing, or a separate and distinct Lease and a separate and distinct
Financing, as the case may be, enforceable according to its terms. In the event
of any conflict between the terms of this Master Agreement and such Schedule,
the provisions of the Schedule shall govern.

      (b) Acceptance; Initial Term of Leases and Term of Financings. Lessee
shall accept the Equipment subject to a Lease and the Financed Items subject to
a Financing in accordance with Section 3. The Initial Term of each Lease and, if
applicable, the Term of any related Financing evidenced by a Schedule executed
pursuant to this Section 2.A shall begin on the Acceptance Date of the Equipment
subject to such Lease and shall continue for the period described in the
applicable Schedule. The Term of each Financing evidenced by a Schedule executed
pursuant to this Section 2.A that is unrelated to any Lease shall begin on the
Acceptance Date for the related Financed Items and shall continue for the period
described in the applicable Schedule.

      (c) Adjustments to Schedule. Lessee acknowledges that the Total Cost of
Equipment and Financed Items and the related Rent payments set forth in any
Schedule executed pursuant to this Section 2.A may be estimates, and if the
final invoice from the Seller specifies a Total Cost that is more or less than
the estimated Total Cost set forth in the Schedule, Lessee hereby authorizes
Lessor to adjust the applicable Total Cost and Rent payment on the Schedule to
reflect the final invoice amount (the "Final Invoice Amount"). However, if the
Final Invoice Amount exceeds the estimated Total Cost by more than 5%, Lessor
will notify Lessee and obtain Lessee's prior written approval of the
aforementioned adjustments. If Lessee fails to so approve any such adjustments
within 15 days of Lessor's request, then the affected Schedule shall terminate
without penalty to either Lessor or Lessee and Lessee shall be solely
responsible for all obligations arising under the applicable Purchase Documents,
including, without limitation, the obligation to purchase equipment and pay
Financed Items. All references in this Master Agreement and any Schedule to
Total Cost and Rent shall mean the amounts thereof specified in the applicable
Schedule, as adjusted pursuant to this paragraph. Lessee also acknowledges that
the Equipment and Financed Items described in a Schedule may differ from the
description of the Equipment and Financed Items set forth in the related
Acceptance Certificate and actually accepted by Lessee. Lessee hereby authorizes
Lessor to conform the description of the Equipment and Financed Items set forth
in any Schedule to the description thereof in the related Acceptance
Certificate. All references in the Master Agreement and any Schedule to the
Equipment subject to a Lease and the Financed Items subject to a Financing shall
mean the Equipment and Financed Items described in the applicable Schedule, as
conformed to the related Acceptance Certificate pursuant to this paragraph.

      B. FUNDING CONSOLIDATION PROCEDURE. (a) Execution of Advance Pricing
Agreement. Lessor and Lessee mutually agree to enter into one or more Leases,
Financings or both by executing, from time to time, an Advance Pricing Agreement
in the form of Exhibit B with such changes as Lessor and Lessee shall have
agreed to as conclusively evidenced by their execution thereof. Subject to the
following provisions of this Section 2.B, such Advance Pricing Agreement shall
constitute a commitment on the part of Lessor, during the Commitment Period
specified therein (i) to purchase Equipment of the type(s) described therein and
enter into one or more Leases of the same with Lessee at the lease rates set
forth therein, and (ii) to fund Financed Items of the type(s) described therein
and enter into one or more Financings of the same with Lessee at the financing
rates set forth therein; provided, however, that Lessor shall under no
circumstances be obligated to purchase Equipment or fund Financed Items if (x)
such purchase or funding would require Lessor to expend moneys in excess of the
Amount Available specified in the Advance Pricing Agreement less the aggregate
amount previously paid or committed to be paid by Lessor to acquire Equipment or
fund Financed Items during such Commitment Period, or (y) any Lessee Default
shall have occurred and be continuing under any Lease or Financing or any event
shall have occurred and be continuing which, with the giving of notice or the
passage of time or both, would constitute a Lessee Default under any Lease or
Financing, or (z) Lessee shall have failed to deliver to Lessor any financial
statements in accordance with the provisions of paragraph (f) below or any
material adverse change shall have occurred in Lessee's financial or operating
condition, as determined by Lessor in its sole discretion, after the date of the
last financial statements of Lessee delivered to Lessor prior to the execution
and delivery of such Advance Pricing Agreement.

      (b) Lessor's Purchase of Equipment and Funding of Financed Items. Subject
to the provisions of this Section 2.B and the applicable Advance Pricing
Agreement, Lessor shall, at Lessee's request made during the Commitment Period
specified in such Advance Pricing Agreement (i) purchase Equipment of the
type(s) described therein and enter into a Lease of such Equipment with Lessee,
and (ii) fund Financed Items of the type(s) described therein and enter into a
Financing with Lessee relating to such Financed Items. Until such time as Lessee
shall have executed and delivered to Lessor a Consolidating Schedule in
accordance with paragraph (d) below, each such Lease or Financing shall be
governed by the terms of this Master Agreement, the applicable Advance Pricing
Agreement and the Acceptance Certificate executed and delivered to Lessor by
Lessee pursuant to paragraph (c) below. Each such Acceptance Certificate shall
specifically identify (by serial number or other identifying characteristics)
the items of Equipment to be leased thereunder (other than items of System
Software, which shall be deemed to be items of Software leased together with the
related items of Hardware) and the Financed Items to be financed thereunder.
Until Lessee shall have executed and delivered to Lessor a Consolidating
Schedule, each such Acceptance Certificate, when executed and delivered by
Lessee and accepted by Lessor, together with this Master Agreement and the
applicable Advance Pricing Agreement, shall constitute a separate and distinct
Lease, a separate and distinct Financing, or a separate and distinct Lease and a
separate and distinct Financing, as the case may be, enforceable according to
its terms. In the event of any conflict among the terms of such documents, the
provisions of such Acceptance Certificate shall control over conflicting
provisions in such Advance Pricing Agreement or this Master Agreement and the
provisions of such Advance Pricing Agreement shall control over conflicting
provisions in this Master Agreement.

      (c) Acceptance; Initial Term of Leases and Term of Financing.
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Lessee shall accept the Equipment subject to a Lease and the Financed Items
subject to a Financing in accordance with Section 3. The Initial Term of each
Lease and, if applicable, the Term of any related Financing evidenced by an
Advance Pricing Agreement and an Acceptance Certificate shall begin on the
Acceptance Date of the Equipment subject to such Lease and shall continue for
the period determined pursuant to such Advance Pricing Agreement. The Term of
each Financing evidenced by an Advance Pricing Agreement and an Acceptance
Certificate that is unrelated to any Lease shall begin on the Acceptance Date
for the related Financed Items and shall continue for the period determined
pursuant to such Advance Pricing Agreement.


      (d) Periodic Consolidation of Leases and Financings. All Leases and
Financings commenced during a Consolidation Period (as specified in the
applicable Advance Pricing Agreement) pursuant to this Section 2.B shall be
consolidated into a single Schedule (a "Consolidating Schedule") in the form of
Exhibit C with such changes as Lessor and Lessee shall have agreed to as
conclusively evidenced by their execution thereof. Lessor shall prepare and
deliver to Lessee a Consolidating Schedule as of the close of each applicable
Consolidation Period. Lessee agrees to execute and deliver each Consolidating
Schedule to Lessor within 10 days after its receipt thereof from Lessor. From
and after Lessee's execution and delivery to Lessor of a Consolidating Schedule,
the Consolidating Schedule shall supersede the applicable Acceptance
Certificates and the Advance Pricing Agreement with respect to all Leases and
Financings commenced during the Consolidation Period to which such Consolidating
Schedule relates, and all such Leases shall be deemed to be a single, separate
and distinct Lease and all such Financings shall be deemed to be a single,
separate and distinct Financing, in each case governed by such Consolidating
Schedule and this Master Agreement and enforceable in accordance with its terms.
In the event of any conflict between the terms of this Master Agreement and such
Consolidating Schedule, the provisions of the Consolidating Schedule shall
govern.

      (e) Failure of Lessee to Deliver Consolidating Schedule. If Lessee fails
to execute and deliver to Lessor any Consolidating Schedule within 10 days after
its receipt thereof, Lessor may exercise its rights and remedies under Section
21 and 22 of this Master Agreement arising as a result of such failure, either
immediately or at any time during the Initial Term of the Leases or the Term of
the Financings to which such Consolidating Schedule relates. No delay in
exercising such rights or remedies shall operate as a waiver thereof. Lessee
acknowledges and agrees that Rent with respect to such Leases and Financings
shall be payable in the amounts and at the times determined pursuant to the
applicable Advance Pricing Agreement and Acceptance Certificates, regardless of
whether Lessee shall have received such Consolidating Schedule from Lessor or
executed and delivered the same to Lessor as of the time any such payment is
due.

      (f) Financial Statements. Lessee shall, at all times during which any
Advance Pricing Agreement is effective, deliver to Lessor its quarterly and
annual financial statements no later then 45 days after the end of each of
Lessee's fiscal quarters or 90 days after the end of each of Lessee's fiscal
years, as applicable. Such annual financial statements shall be audited and
certified by Lessee's independent certified public accountants.

3. ACCEPTANCE OF EQUIPMENT AND FINANCED ITEMS. (a) General. Lessee shall
unconditionally and irrevocably accept all Equipment under a Lease and, if
applicable, all related Financed Items subject to a Financing as soon as such
Equipment is delivered and inspected by Lessee or, if acceptance requirements
for such Equipment, related Financed Items or both are specified in the
applicable Purchase Documents, as soon as such requirements are met. Lessee
shall evidence such acceptance by executing and delivering to Lessor a properly
completed Acceptance Certificate in substantially the form of (i) Exhibit D if
the Lease or the Lease and the related Financing, as the case may be, is
evidenced by a Schedule executed pursuant to Section 2.A, or (ii) Exhibit E if
the Lease or the Lease and the related Financing, as the case may be, is being
commenced pursuant to an Advance Pricing Agreement executed pursuant to Section
2.B. Lessee agrees (y) to inspect all Equipment as soon as reasonably
practicable after the delivery thereof to Lessee or, if acceptance requirements
for such Equipment or any related Financed Items are specified in the applicable
Purchase Documents, as soon as reasonably practicable after being advised by the
Supplier that such requirements have been met, and (z) to complete, execute and
deliver to Lessor such Acceptance Certificate as soon as reasonably practicable
after its satisfactory completion of such inspection. In the case of a Financing
of Financed Items unrelated to any Equipment subject to a Lease, Lessee shall
unconditionally and irrevocably accept such Financed Items as soon as it shall
have become liable to pay for such Financed Items, and shall complete, execute
and deliver to Lessor an Acceptance Certificate in substantially the form of
Exhibit D or Exhibit E (as applicable) as soon as reasonably practicable
thereafter.

      (b) E-mail Acceptance. For its convenience and at its option, Lessee may
accept Equipment and Financed Items by electronic mail in accordance with this
paragraph, in lieu of the execution and physical delivery of Acceptance
Certificates provided for in paragraph (a) above. Subject to the terms and
conditions set forth below, a Valid E-mail Acceptance Certificate shall
constitute an original and authentic written Acceptance Certificate, duly
executed and delivered by an authorized representative of Lessee. A "Valid
E-mail Acceptance Certificate" means an electronic facsimile of an Acceptance
Certificate in substantially the form of Exhibit D or Exhibit E (as applicable)
properly completed and sent by an Authorized Lessee Representative from his or
her Authorized Lessee E-mail Address to an Authorized Lessor E-mail Address by
an electronic mail message confirming Lessee's acceptance of the Equipment or
Financed Items described therein. Upon request, Lessor shall provide to Lessee
electronic file copies of Exhibits D and E for Lessee's use under this
paragraph. The Authorized Lessee Representatives and their corresponding
Authorized Lessee E-mail Addresses and the Lessee Acceptance Confirmation Fax
Number are as specified in Section 29 or as designated by Lessee in a written
notice executed by a duly authorized officer of Lessee and delivered to Lessor
in accordance with Section 29. The Authorized Lessor E-mail Address(es) are
specified in Section 29. Lessee may unilaterally modify any of the Authorized
Lessee Representatives and Authorized Lessee E-mail Addresses and the Lessee
Acceptance Confirmation Fax Number by written notice of the modification
executed by a duly authorized officer of Lessee and delivered to Lessor in
accordance with Section 29. Lessor may unilaterally modify any Authorized Lessor
E-mail Address by written notice of the modification executed by a duly
authorized officer of Lessor and delivered to Lessee in accordance with Section
29. Upon Lessor's receipt of a Valid E-mail Acceptance Certificate from Lessee,
Lessor shall transmit to Lessee by confirmed facsimile transmission to the
Lessee Acceptance Confirmation Fax Number, a notice acknowledging Lessor's
receipt of the Valid E-mail Acceptance Certificate from Lessee. A Valid E-mail
Acceptance Certificate shall become effective and constitute Lessee's
unconditional and irrevocable acceptance of the Equipment or Financed Items
described therein, as of the Acceptance Date specified therein, at the end of
the second business day following the day on which Lessor shall have transmitted
such notice unless Lessee shall have delivered a written notice to Lessor in
accordance with Section 29 revoking such Valid E-mail Acceptance Certificate
prior to the end of such second business day. Lessor's transmission of such
notice shall constitute Lessor's acknowledgement and acceptance of the Valid
E-mail Acceptance Certificate. Lessee expressly waives any claim or defense that
any Valid E-mail Acceptance Certificate which was sent and became effective in
accordance with the above procedures does not constitute an original and
authentic written Acceptance Certificate, duly executed and delivered by Lessee.

4. LESSEE'S END-OF-LEASE-TERM OPTIONS; AUTOMATIC EXTENSION. Lessee shall have
the following options in respect of each Lease at the end of each of the Initial
Term, any Renewal Term and any optional extension of the Initial Term or any
Renewal Term:

      A. PURCHASE OPTION. Lessee may elect, by delivering to Lessor an
End-of-Term Notice at least 90 days prior to the expiration of the Initial Term,
any Renewal Term or any optional extension of the Initial Term or any Renewal
Term, to purchase any or all Units of Equipment then subject to such Lease
(other than items of Software that may not be sold by Lessor under the terms of
any applicable License Agreement) for an amount equal to the Fair Market Value
of such Units of Equipment as of the end of the Then Applicable Term, provided
no Lessee Default shall have occurred and be continuing. In the event of such an
election, Lessee shall pay such amount to Lessor, in immediately available
funds, on or before the last day of the Then Applicable Term. If Lessee shall
have so elected to purchase any of the Units of Equipment, shall have so paid
the applicable purchase price and shall have fulfilled the terms and conditions
of this Master Agreement, then on the last day of the Then Applicable Term (i)
the Lease with respect to such Units of Equipment shall terminate and, except as
provided in Section 27, Lessee shall be relieved of all of its obligations in
favor of Lessor with respect to such Units of Equipment, and (ii) Lessor shall
transfer all of its interest in such Units of Equipment to Lessee "AS IS, WHERE
IS," without any warranty, express or implied, from Lessor, other than the
absence of any liens or claims by or through Lessor. In the event Lessor and
Lessee are unable to agree on


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the Fair Market Value of any Units of Equipment, Lessor and Lessee shall, at
Lessee's expense, select an independent appraiser to conclusively determine such
amount.

      B. RENEWAL OPTION. Lessee may elect, by delivering to Lessor an
End-of-Term Notice at least 90 days prior to the expiration of the Initial Term,
any Renewal Term, or any optional extension of the Initial Term or any Renewal
Term, to renew the Lease with respect to any or all Units of Equipment then
subject to such Lease (other than items of Software that may not be re-released
by Lessor under the terms of any applicable License Agreement) for an amount
equal to the Fair Rental Value of such Units of Equipment as of the end of the
Then Applicable Term. In the event of such an election, Lessee shall enter into
a mutually agreeable renewal agreement with Lessor ("Renewal Agreement") on or
before the last day of the Then Applicable Term confirming the Units of
Equipment as to which the Lease is to be renewed, the period for which the Lease
is to be renewed (the "Renewal Term"), and the amount of Rent and the times at
which such Rent is to be payable during the Renewal Term. In the event Lessor
and Lessee are unable to agree on the Fair Rental Value of any Units of
Equipment, Lessor and Lessee shall, at Lessee's expense, select an independent
appraiser to conclusively determine such amount.

      C. RETURN. Lessee may elect, by delivering to Lessor an End-of-Term Notice
at least 90 days prior to the expiration of the Initial Term, any Renewal Term
or any optional extension of the Initial Term or any Renewal Term, to return any
or all of the Units of Equipment then subject to such Lease in accordance with
Section 9 of this Master Agreement.

      D. OPTIONAL EXTENSION. Lessee may elect, by omitting to deliver to Lessor
an End-of-Term Notice at least 90 days prior to the expiration of the Initial
Term or any Renewal Term, to extend the Initial Term or such Renewal Term, as
the case may be. In that event, the Initial Term or such Renewal Term shall,
without any additional notice or documentation, be automatically extended for
successive calendar months with respect to all items of Equipment then subject
to such Lease through the end of the calendar month falling at least 90 days
after the date Lessee shall have delivered to Lessor an End-of-Term Notice with
respect to such Lease. For each calendar month that the Then Applicable Term of
such Lease is so extended, Lessee shall pay to Lessor Rent in an amount equal to
the monthly Rent payment in effect immediately prior to such extension (or the
appropriate pro rata portion of the Rent payment then in effect in the case of
Rent payable other than on a monthly basis), and all other provisions of this
Master Agreement and the applicable Schedule shall continue to apply.

      If Lessee shall have delivered to Lessor an End-of-Term Notice with
respect to a Lease, but shall have subsequently failed to comply with its
obligations arising from its elections specified therein (e.g., Lessee shall
have failed, on or before the last day of the Then Applicable Term (i) to pay
Lessor the purchase price for Equipment to be purchased in accordance with
Section 4.A above (ii) to execute a Renewal Agreement with respect to Equipment
as to which the Lease is to be renewed in accordance with Section 4.B above, or
(iii) to return to Lessor Equipment to be returned in accordance with Section
4.C above), then the Then Applicable Term of such Lease shall, without any
additional notice or documentation, be automatically extended for successive
calendar months with respect to all items of Equipment as to which Lessee shall
have so failed to comply with its obligations through the end of the calendar
month in which Lessee shall have complied with such obligations. For each
calendar month that the Then Applicable Term of any Lease is so extended, Lessee
shall pay to Lessor Rent in an amount equal to the monthly Rent payment in
effect immediately prior to such extension (or the appropriate pro rata portion
of the Rent payment then in effect in the case of Rent payable other than on a
monthly basis), and all other provisions of this Master Agreement and the
applicable Schedule shall continue to apply. Notwithstanding any of the
provisions of this Section 4 to the contrary, if any Lessee Default shall have
occurred and be continuing at any time during the last 90 days of the Then
Applicable Term of any Lease, Lessor may cancel any Renewal Term or optional or
other automatic extension of the Then Applicable Term immediately upon written
notice to Lessee.

5. RENT; LATE CHARGES; ADVANCE RENT. As rent ("Rent") for the Equipment under
any Lease and the Financed Items under any Financing, Lessee agrees to pay the
amounts specified in the applicable Schedule on the due dates specified in the
applicable Schedule. Lessee agrees to pay Lessor interest on any Rent payment or
other amount due hereunder that is not paid within 10 days of its due date, at
the rate of 1-1/2% per month (or such lesser rate as is the maximum rate
allowable under applicable law). Lessee shall pay to Lessor, with respect to
each Lease or Financing, the Advance Rent specified on the applicable Schedule,
if any. Any payment of Advance Rent shall be credited against the first Rent
payment payable by Lessee under the applicable Schedule and any excess Advance
Rent will be credited against the last Rent payment(s) payable by Lessee with
respect to the Initial Term of the applicable Lease or Financing. Advance Rent
shall be refunded to Lessee without interest only if Lessor declines to sign the
applicable Schedule.

6. LEASES AND FINANCINGS NON-CANCELABLE; NET LEASES; WAIVER OF DEFENSES TO
PAYMENT. IT IS SPECIFICALLY UNDERSTOOD AND AGREED THAT EACH LEASE AND FINANCING
HEREUNDER SHALL BE NON-CANCELABLE, AND THAT EACH LEASE HEREUNDER IS A NET LEASE.
LESSEE AGREES THAT IT HAS AN ABSOLUTE AND UNCONDITIONAL OBLIGATION TO PAY ALL
RENT AND OTHER AMOUNTS WHEN DUE. LESSEE IS NOT ENTITLED TO ABATE OR REDUCE RENT
OR ANY OTHER AMOUNT DUE, OR TO SET OFF ANY CHARGE AGAINST ANY SUCH AMOUNT.
LESSEE HEREBY WAIVES ANY RECOUPMENT, CROSS-CLAIM, COUNTERCLAIM OR ANY OTHER
DEFENSE AT LAW OR IN EQUITY TO ANY RENT PAYMENT OR OTHER AMOUNT DUE WITH RESPECT
TO ANY LEASE OR FINANCING, WHETHER ANY SUCH DEFENSE ARISES OUT OF THIS MASTER
AGREEMENT, ANY SCHEDULE, ANY CLAIM BY LESSEE AGAINST LESSOR, LESSOR'S ASSIGNEES
OR SUPPLIER, OR OTHERWISE. IF THE EQUIPMENT OR ANY FINANCED ITEM IS NOT PROPERLY
INSTALLED, DOES NOT OPERATE OR INTEGRATE AS REPRESENTED OR WARRANTED BY SUPPLIER
OR IS UNSATISFACTORY FOR ANY REASON WHATSOEVER, LESSEE SHALL MAKE ANY CLAIM ON
ACCOUNT THEREOF SOLELY AGAINST SUPPLIER AND SHALL NEVERTHELESS PAY ALL SUMS DUE
WITH RESPECT TO EACH LEASE AND EACH FINANCING.

7. ASSIGNMENT OF PURCHASE DOCUMENTS. Lessee assigns to Lessor all of Lessee's
right, title and interest in and to (a) the Equipment described in each
Schedule, and (b) the Purchase Documents relating to such Equipment. Such
assignment of the Purchase Documents is an assignment of rights only; nothing in
this Master Agreement shall be deemed to have relieved Lessee of any obligation
or liability under any of the Purchase Documents, except that, as between Lessee
and Lessor, Lessor shall pay for the Equipment within 30 days after Lessee's
delivery to Lessor of a properly completed and executed Acceptance Certificate
and all other documentation necessary to establish Lessee's acceptance of such
Equipment under the related Lease. Lessee represents and warrants that it has
reviewed and approved the Purchase Documents. In addition, if Lessor shall so
request, Lessee shall deliver to Lessor a document acceptable to Lessor whereby
Seller acknowledges and provides any required consent to such assignment. For
the avoidance of doubt, Lessee covenants and agrees that it shall at all times
during the Total Term of each Lease comply in all respects with the terms of any
License Agreement relating to any Equipment leased thereunder. IT IS ALSO
SPECIFICALLY UNDERSTOOD AND AGREED THAT NEITHER SUPPLIER NOR ANY SALESPERSON OF
SUPPLIER IS AN AGENT OF LESSOR, NOR ARE THEY AUTHORIZED TO WAIVE OR ALTER ANY
TERMS OF THIS MASTER AGREEMENT OR ANY SCHEDULE.

8. ASSIGNMENT OF SUPPLIER WARRANTIES. To the extent permitted, Lessor hereby
assigns to Lessee, for the Total Term of any Lease, all Equipment warranties
provided by any Supplier in the applicable Purchase Documents. Lessee shall have
the right to take any action it deems appropriate to enforce such warranties
provided such enforcement is pursued in Lessee's name and at its expense. In the
event Lessee is precluded from enforcing any such warranty in its name, Lessor
shall, upon Lessee's request, take reasonable steps to enforce such warranty. In
such circumstances, Lessee shall, promptly upon demand, reimburse Lessor for all
out-of-pocket expenses incurred by Lessor in enforcing the Supplier warranty.
Any recovery resulting from any such enforcement efforts shall be divided among
Lessor and Lessee as their interests may appear.

9. EQUIPMENT RETURN REQUIREMENTS. On or before the last day of the Total Term of
each Lease (and any other time Lessee is required to return Equipment to Lessor
under the terms of this Master Agreement or any Schedule), Lessee shall pack the
Equipment to be returned to Lessor in


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accordance with the manufacturer's guidelines and deliver such Equipment to
Lessor at any destination within the continental United States designated by
Lessor. In the case of any item of Software to be returned to Lessor, Lessee
shall also deliver to Lessor the original Certificate of Authenticity issued by
the licensor of such Software, if any. Alternatively, Lessee may deliver any
such Certificate of Authenticity to Lessor on or at any time after the
Acceptance Date for such Software. All dismantling, packaging, transportation,
in-transit insurance and shipping charges shall be borne by Lessee. All
Equipment shall be returned to Lessor in the same condition and working order as
when delivered to Lessee, reasonable wear and tear excepted, and shall qualify
for maintenance service by the Supplier at its then standard rates for Equipment
of that age, if available. Lessee shall be responsible for, and shall reimburse
Lessor promptly on demand for, any cost incurred by Lessor to qualify the
Equipment for the Supplier's maintenance service or, if not available, to return
the Equipment to good working condition.

10. EQUIPMENT USE AND MAINTENANCE. Lessee is solely responsible for the
selection, installation, operation and maintenance of the Equipment and all
costs related thereto, including shipping charges. Lessee shall at all times
operate and maintain the Equipment in good working order, repair, condition and
appearance, and in accordance with the manufacturer's specifications and
recommendations. On reasonable prior notice to Lessee, Lessor and Lessors agents
shall have the right, during Lessee's normal business hours, to enter the
premises where the Equipment is located for the purpose of inspecting the
Equipment and observing its use. If Lessor shall have provided to Lessee any
tags or identifying labels, Lessee shall, at its expense, affix and maintain in
a prominent position on each item of Equipment such tags or labels to indicate
Lessor's ownership of the Equipment. Except in the case of PC Equipment and
Software, Lessee shall, at its expense, enter into and maintain and enforce at
all times during the Total Term of each Lease a maintenance agreement to service
and maintain the related Equipment, upon terms and with a provider reasonably
acceptable to Lessor.

11. EQUIPMENT OWNERSHIP; LIENS; LOCATION. As between Lessor and Lessee, Lessor
is the sole owner of the Equipment and has sole title thereto. Lessee shall not
make any representation to any third-party inconsistent with Lessor's sole
ownership of the Equipment. Lessee covenants that it will not pledge or
encumber the Equipment or Lessor's interest in the Equipment in any manner
whatsoever nor create or permit to exist any levy, lien or encumbrance thereof
or thereon except those created by or through Lessor. The Equipment shall remain
Lessor's personal property whether or not affixed to realty and shall not become
a fixture or be made to become a part of any real property on which it is placed
without Lessor's prior written consent. Lessee shall maintain the Equipment so
that it may be removed from any building in which it is placed without any
damage to the building or the Equipment. Lessee may relocate any Equipment from
the Equipment Location specified in the applicable Schedule to another of its
business locations within the United States upon prior written notice to Lessor
specifying the new Equipment Location, provided Lessee remains in possession and
control of the Equipment.

12. ALTERATIONS AND ADDITIONS TO EQUIPMENT. Lessee shall make no alterations or
additions to the Equipment, except those that (a) will not void any warranty
made by the Supplier of the Equipment, result in the creation of any security
interest, lien or encumbrance on the Equipment or impair the value or use of the
Equipment either at the time made or at the end of the Total Term of the
applicable Lease, and that are readily removable without damage to the Equipment
("Optional Additions"), or (b) are required by any applicable law, regulation or
order. All additions to the Equipment or repairs made to the Equipment, except
Optional Additions, become a part thereof and Lessor's property at the time
made; Optional Additions which have not been removed prior to the return of the
Equipment shall become Lessor's property upon such return.

13. INSURANCE. Lessee agrees to keep the Equipment insured at Lessee's expense
against all risks of loss from any cause whatsoever, including without
limitation, theft and damage. Lessee agrees that such insurance shall name
Lessor as a loss payee and cover not less than the Stipulated Loss Value of the
Equipment. Lessee also agrees that it shall carry commercial general liability
insurance in an amount not less than $2,000,000 total liability per occurrence
and cause Lessor and its affiliates to be named additional insureds under such
insurance. Each policy shall provide that the insurance cannot be canceled
without at least 30 days prior written notice to Lessor. Lessee shall provide to
Lessor (a) on or prior to the Acceptance Date for each Lease, and from time to
time thereafter, certificates of insurance evidencing such insurance coverage
throughout the Total Term of each Lease, and (b) upon Lessor's request, copies
of the insurance policies. If Lessee fails to provide Lessor with such evidence,
then Lessor will have the right, but not the obligation, to purchase such
insurance protecting Lessor at Lessee's expense. Lessee's expense shall include
the full premium paid for such insurance and any customary charges, costs or
fees of Lessor. Lessee agrees to pay such amounts in substantially equal
installments allocated to each Rent payment (plus interest on such amounts at
the rate of 1-1/2% per month or such lesser rate as is the maximum rate
allowable under applicable law).

14. RISK OF LOSS. In the event any Casualty Loss shall occur, on the next Rent
payment date Lessee shall, at its option (a) pay Lessor the Stipulated Loss
Value of the Equipment suffering the Casualty Loss, or (b) substitute and
replace each item of Equipment suffering the Casualty Loss with an item of
Substitute Equipment. If Lessee shall elect to pay the Stipulated Loss Value of
the Equipment suffering a Casualty Loss, upon Lessor's receipt in full of such
payment the applicable Lease shall terminate as it relates to such Equipment
and, except as provided in Section 27, Lessee shall be relieved of all
obligations under the applicable Lease as it relates to such Equipment. If
Lessee shall elect to replace Equipment suffering a Casualty Loss with items of
Substitute Equipment (i) the applicable Lease shall continue in full force and
effect without any abatement of Rent with such Substitute Equipment thereafter
being deemed to be Equipment leased thereunder, and (ii) Lessee shall deliver to
Lessor a bill of sale or other documentation, in either case in form and
substance satisfactory to Lessor, in which Lessee shall represent and warrant
that it has transferred to Lessor good and marketable title to all Substitute
Equipment, free and clear of all liens, encumbrances and claims of others. Upon
Lessor's receipt of such payment of Stipulated Loss Value in full, or such bill
of sale or other documentation, as the case may be, Lessor shall transfer to
Lessee all of Lessor's interest in the Equipment suffering the Casualty Loss "AS
IS, WHERE IS," without any warranty, express or implied, from Lessor, other than
the absence of any liens or claims by or through Lessor. In the event of any
repairable damage to any Equipment, the Lease shall continue with respect to
such Equipment without any abatement of Rent and Lessee shall at its expense
promptly cause such Equipment to be repaired to the condition it is required to
be maintained in pursuant to Section 10. Lessee shall notify Lessor of any
Casualty Loss or repairable damage to any Equipment as soon as reasonably
practicable after the date of any such occurrence.

15. TAXES. Lessor shall report and pay all Taxes now or hereafter imposed or
assessed by governmental body, agency or taxing authority upon the purchase,
ownership, delivery, installation, leasing, rental, use or sale of the
Equipment, the Rent or other charges payable hereunder, or otherwise upon or in
connection with any Lease or Financing, whether assessed on Lessor or Lessee,
other than any such Taxes required by-law to be reported and paid by Lessee.
Lessee shall promptly reimburse Lessor for all such Taxes paid by Lessor,
together with any penalties or interest in connection therewith attributable to
Lessee's acts or failure to act, excluding (a) Taxes on or measured by the
overall gross or net income or items of tax preference of Lessor, (b) as to any
Lease or the related Equipment, Taxes attributable to the period after the
return of such Equipment to Lessor, and (c) Taxes imposed as a result of a sale
or other transfer by Lessor of any portion of its interest in any Lease or
Financing or in any Equipment except for a sale or other transfer to Lessee or a
sale or other transfer occurring after and during the continuance of any Lessee
Default.

16. GENERAL INDEMNITY. Lessee shall indemnify and hold harmless Lessor, its
employees, officers, directors, agents and assignees and, if requested by
Lessor, defend Lessor, its employees, officers, directors, agents and assignees,
from and against any and all Claims arising directly or indirectly out of or in
connection with any matter involving this Master Agreement, the Equipment or any
Lease or Financing, including but not limited to (a) the selection, manufacture,
purchase, acceptance, rejection, ownership, delivery, lease, financing,
possession, maintenance, use, condition, return or operation of any Equipment or
Financed Items or the enforcement of Lessor's rights under any Lease or
Financing; (b) any latent defect or other defect in any Equipment or Financed
Item, whether or not discoverable by Lessor or by Lessee; (c) any patent,
trademark or copyright infringement involving any Equipment or Financed Item;
(d) the condition of any Equipment or Financed Item arising or existing at any
time during the Total Term of any Lease or the Term of any Financing; and (e)
any breach by Lessee of any representation, warranty or covenant contained in
any


                                       4
<PAGE>   5
Fundamental Agreement. Notwithstanding the foregoing, Lessee shall have no
obligation to indemnify or defend against any Claim arising solely as a result
of Lessor's gross negligence or willful misconduct.

17. TAX BENEFIT INDEMNITY. Each Lease is entered into on the assumption that
Lessor is the owner of the Equipment for tax purposes and is entitled to certain
federal and state tax benefits available to an owner of Equipment (collectively,
"Tax Benefits"), including without limitation, accelerated cost recovery system
deductions for 5-year property and deductions for interest incurred by Lessor to
finance the purchase of Equipment available under the Code. Lessee represents,
warrants and covenants to Lessor that (a) Lessee is not a tax-exempt entity
(as defined in Section 168(h) of the Code), (b) all Equipment will be used
solely within the United States, and (c) Lessee will take no position
inconsistent with the assumption that Lessor is the owner of the Equipment for
federal and state tax purposes. If, due to any act or omission of Lessee or any
party acting through Lessee, or the breach or inaccuracy of any representation,
warranty or covenant of Lessee contained in any Fundamental Agreement, Lessor
reasonably determines that it cannot claim, is not allowed to claim, loses or
must recapture any or all of the Tax Benefits otherwise available with respect
to the Equipment subject to any Lease (a "Tax Loss"), then Lessee shall,
promptly upon demand, pay to Lessor an amount sufficient to provide Lessor the
same after-tax rate of return and aggregate after-tax cash flow through the end
of the Then Applicable Term of such Lease that Lessor would have realized but
for such Tax Loss.

18. COVENANT OF QUIET ENJOYMENT. So long as no Lessee Default exists, and no
event shall have occurred and be continuing which, with the giving of notice or
the passage of time or both, would constitute a Lessee Default, neither Lessor
nor any party acting or claiming through Lessor, by assignment or otherwise,
will disturb Lessee's quiet enjoyment of the Equipment during the Total Term of
the related Lease.

19. DISCLAIMERS AND LESSEE WAIVERS. LESSEE LEASES THE EQUIPMENT FROM LESSOR "AS
IS, WHERE IS". IT IS SPECIFICALLY UNDERSTOOD AND AGREED THAT (A) EXCEPT AS
EXPRESSLY SET FORTH IN SECTION 18, LESSOR MAKES ABSOLUTELY NO REPRESENTATIONS OR
WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO THE DESIGN, COMPLIANCE WITH
SPECIFICATIONS, QUALITY, OPERATION, OR CONDITION OF ANY EQUIPMENT OR FINANCED
ITEMS (OR ANY PART THEREOF), THE MERCHANTABILITY OR FITNESS OF EQUIPMENT OR
FINANCED ITEMS FOR A PARTICULAR PURPOSE, OR ISSUES REGARDING PATENT
INFRINGEMENT, TITLE AND THE LIKE; (B) LESSOR SHALL NOT BE DEEMED TO HAVE MADE,
BE BOUND BY OR LIABLE FOR, ANY REPRESENTATION, WARRANTY OR PROMISE MADE BY THE
SUPPLIER OF ANY EQUIPMENT OR FINANCED ITEMS (EVEN IF LESSOR IS AFFILIATED WITH
SUCH SUPPLIER); (C) LESSOR SHALL NOT BE LIABLE FOR ANY FAILURE OF ANY EQUIPMENT
OR FINANCED ITEMS OR ANY DELAY IN THE DELIVERY OR INSTALLATION THEREOF; (D)
LESSEE HAS SELECTED ALL EQUIPMENT AND FINANCED ITEMS WITHOUT LESSOR'S
ASSISTANCE; AND (E) LESSOR IS NOT A MANUFACTURER OF ANY EQUIPMENT. IT IS FURTHER
AGREED THAT LESSOR SHALL HAVE NO LIABILITY TO LESSEE, LESSEE'S CUSTOMERS, OR ANY
THIRD PARTIES FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES
ARISING OUT OF THIS MASTER AGREEMENT OR ANY SCHEDULE OR CONCERNING ANY EQUIPMENT
OR FINANCED ITEMS, OR FOR ANY DAMAGES BASED ON STRICT OR ABSOLUTE TORT LIABILITY
OR, EXCEPT TO THE EXTENT CONSTITUTING A LESSOR DEFAULT, LESSOR'S NEGLIGENCE;
PROVIDED, HOWEVER, THAT NOTHING IN THIS MASTER AGREEMENT SHALL DEPRIVE LESSEE OF
ANY RIGHTS IT MAY HAVE AGAINST ANY PERSON OTHER THAN LESSOR. LESSOR AND LESSEE
AGREE THAT THE LEASES AND THE FINANCINGS SHALL BE GOVERNED BY THE EXPRESS
PROVISIONS OF THIS MASTER AGREEMENT AND THE OTHER FUNDAMENTAL AGREEMENTS AND NOT
BY THE CONFLICTING PROVISIONS OF ANY OTHERWISE APPLICABLE LAW. ACCORDINGLY, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, LESSEE WAIVES THE RIGHT TO (1) CANCEL OR
REPUDIATE THIS MASTER AGREEMENT, (2) REVOKE ACCEPTANCE OF OR REJECT THE
EQUIPMENT, (3) CLAIM A SECURITY INTEREST IN THE EQUIPMENT, (4) SELL OR DISPOSE
OF THE EQUIPMENT UPON REJECTION OR REVOCATION, (5) SEEK "COVER" IN SUBSTITUTION
FOR A LEASE FROM LESSOR, AND (6) CLAIM AN AGENCY RELATIONSHIP BETWEEN SUPPLIER
AND LESSOR.

20. LESSEE WARRANTIES. Lessee represents, warrants and covenants to Lessor that:
(a) ALL EQUIPMENT WILL BE USED FOR BUSINESS PURPOSES ONLY AND NOT FOR PERSONAL,
FAMILY OR HOUSEHOLD PURPOSES; (b) Lessee is duly organized, validly existing and
in good standing under applicable law; (c) Lessee has the power and authority to
enter into each of the Fundamental Agreements; (d) all Fundamental Agreements
are enforceable against Lessee in accordance with their terms and do not violate
or create a default under any instrument or agreement binding on Lessee: (e)
there are no pending or threatened actions or proceedings before any court or
administrative agency that could have a material adverse effect on Lessee or any
Fundamental Agreement, unless such actions are disclosed to Lessor and consented
to in writing by Lessor; (x) Lessee shall comply in all material respects with
all laws and regulations the violation of which could have a material adverse
effect upon the Equipment or Lessee's performance of its obligations under any
Fundamental Agreement; (g) each Fundamental Agreement shall be effective against
all creditors of Lessee under applicable law, including fraudulent conveyance
and bulk transfer laws, and shall raise no presumption of fraud; and (h) all
financial statements and other related information furnished by Lessee shall be
prepared in accordance with generally accepted accounting principles and shall
fairly present Lessee's financial position as of the dates given on such
statements.

21. DEFAULT. Any of the following shall constitute a default by Lessee (a
"Lessee Default") under this Master Agreement and all Leases and Financings: (a)
Lessee fails to pay any Rent payment or any other amount payable to Lessor under
this Master Agreement or any Schedule within 10 days after its due date; or (b)
Lessee defaults on or breaches any of the other terms and conditions of any
Material Agreement, and fails to cure such breach within 10 days after written
notice thereof from Lessor; or (c) any representation or warranty made by Lessee
in any Material Agreement proves to be incorrect in any material respect when
made or reaffirmed; or (d) Lessee or Guarantor sells or otherwise disposes
of all or substantially all of its assets, consolidates with or merges with or
into any entity or incurs a substantial amount of indebtedness other than in the
ordinary course of its business (unless consented to in advance by Lessor); or
(e) Lessee or Guarantor dissolves or otherwise terminates its existence, ceases
to do business, or becomes insolvent or fails generally to pay its debts as they
become due; or (x) any Equipment is levied against, seized or attached; or (g)
Lessee or Guarantor makes an assignment for the benefit of creditors; or (h) a
proceeding under any bankruptcy, reorganization, arrangement of debt, insolvency
or receivership law is filed by or against Lessee or Guarantor (and, if such
proceeding is involuntary, it is not dismissed within 60 days after the filing
thereof) or Lessee or Guarantor takes any action to authorize any of the
foregoing matters; or (i) any letter of credit or guaranty issued in support of
a Lease or Financing is revoked, breached, cancelled or terminated (unless
consented to in advance by Lessor); or (j) any Guarantor fails to fulfil its
obligations in favor of Lessor pursuant to its guaranty.

      Any of the following shall constitute a default by Lessor (a "Lessor
Default") under this Master Agreement and (i) the applicable Lease(s) or
Financing(s) in the case of a Lessor Default described in clauses (w) or (x)
below, or (ii) all Leases and Financings in the case of a Lessor Default
described in clauses (y) or (z) below: (w) Lessor breaches its covenant of quiet
enjoyment set forth in Section 18 and fails or is unable to cure such breach
within 10 days after written notice thereof from Lessee; or (x) Lessor fails to
pay Seller (or in the case of Financed Items, Lessee or such other party as
Lessee or Seller shall have directed in writing) for any Equipment or Financed
Items within 30 days after Lessor's receipt of a properly completed and executed
Acceptance Certificate and all other documentation necessary to establish
Lessee's acceptance of such Equipment or Financed Items under a Lease or
Financing, respectively, and such failure continues for more than 10 days after
written notice thereof from Lessee; or (y) Lessor makes an assignment for the
benefit of creditors; or (z) a proceeding under any bankruptcy, reorganization,
arrangement of debt, insolvency or receivership law is filed by or against
Lessor (and, if such proceeding is involuntary, it is not dismissed within 60
days after the filing thereof).

22. REMEDIES. If a Lessee Default occurs, Lessor may, in its sole discretion,
exercise one or more of the following remedies: (a) declare all amounts due and
to become due under any or all Leases and Financings to be


                                       5
<PAGE>   6
immediately due and payable; or (b) terminate this Master Agreement or any Lease
or Financing; or (c) take possession of, or render unusable, any Equipment
wherever the Equipment may be located, without demand or notice and without any
court order or other process of law, but not in violation of the law, in
accordance with Lessee's reasonable security procedures, and no such action
shall constitute a termination of any Lease; or (d) require Lessee to deliver
the Equipment to a location specified by Lessor; or (e) declare the Stipulated
Loss Value for any or all Equipment to be due and payable as liquidated damages
for loss of a bargain and not as a penalty and in lieu of any further Rent
payments under the applicable Lease or Leases; or (x) proceed by court action to
enforce performance by Lessee of any Lease or Financing and/or to recover all
damages and expenses incurred by Lessor by reason of any Lessee Default; or (g)
terminate any other agreement that Lessor may have with Lessee; or (h) exercise
any other right or remedy available to Lessor at law or in equity. In the event
of a Lessee Default, Lessee shall pay Lessor all reasonable costs and expenses
that Lessor may incur to maintain, safeguard or preserve the Equipment, and
other reasonable expenses incurred by Lessor in enforcing any of the terms,
conditions or provisions of this Master Agreement (including reasonable legal
fees and collection agency costs). Upon repossession or surrender of any
Equipment, Lessor shall lease, sell or otherwise dispose of the Equipment in a
commercially reasonable manner and apply the net proceeds thereof to the amounts
owed to Lessor hereunder, which shall be the Stipulated Loss Value with regard
to such but only after deducting (i) in the case of a sale, the estimated Fair
Market Value of the Equipment sold as of the scheduled expiration of the Then
Applicable Term of the related Lease, (ii) in the case of a lease, the rent due
for any period beyond the scheduled expiration of the Then Applicable Term of
the related Lease, and (iii) in either case, all expenses (including reasonable
legal fees and costs) reasonably incurred by Lessor in connection therewith;
provided, however, that lessee shall remain liable to Lessor for any deficiency
that remains after any sale or lease of such Equipment. Any proceeds of any sale
or lease of such Equipment in excess of the amounts owed to Lessor hereunder
shall be retained by Lessor. Lessee agrees that with respect to any notice of a
sale required by law to be given, 10 days' notice shall constitute reasonable
notice. Upon payment of all past due Rent and the Stipulated Loss Value as
provided in clause (e) above, together with interest at the rate of 1-1/2 % per
month (or such lesser rate as is the maximum rate allowable under applicable
law) from the date declared due until paid, Lessor will transfer to Lessee all
of Lessors interest in the Equipment for which such Rent and Stipulated Loss
Value has been paid, which transfer shall be on an "AS IS, WHERE IS" basis,
without any warranty, express or implied, from Lessor, other than the absence of
any liens or claims by or through Lessor. These remedies are cumulative of every
other right or remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise, and may be enforced concurrently therewith or
from time to time.

      If a Lessor Default occurs, Lessee's sole and exclusive remedy shall be to
recover by appropriate legal proceedings any direct damages suffered by Lessee
as a result of such Lessor Default and any reasonable and necessary expenses
(including, without limitation, court costs and reasonable legal fees) incurred
by Lessee in connection therewith.

23. PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee fails to perform any of its
obligations hereunder, Lessor may perform any act or make any payment that
Lessor deems reasonably necessary for the maintenance and preservation of the
Equipment and Lessors interests therein; provided, however, that the performance
of any act or payment by Lessor shall not be deemed a waiver of, or release
Lessee from, the obligation at issue. All sums so paid by Lessor, together with
expenses (including legal fees and costs) incurred by Lessor in connection
therewith, shall be paid to Lessor by Lessee immediately upon demand.

24. TRUE LEASE; SECURITY INTEREST; MAXIMUM RATE. Each Lease is intended to be a
"Finance Lease" as defined in Article 2A of the UCC, and Lessee hereby
authorizes Lessor to file a financing statement to give public notice of
Lessor's ownership of the Equipment. Lessee, by its execution of each Schedule,
acknowledges that Lessor has informed it that (a) the identity of Seller is set
forth in the applicable Schedule, (b) Lessee is entitled under Article 2A to the
promises and warranties, including those of any third party, provided to Lessor
in connection with, or as a part of, the applicable Purchase Documents, and (c)
Lessee may communicate with Seller and receive an accurate and complete
statement of the promises and warranties, including any disclaimers and
limitations of them or of remedies. If (i) notwithstanding the express intention
of Lessor and Lessee to enter into a true lease, any Lease is ever deemed by a
court of competent jurisdiction to be a lease intended for security, or (ii)
Lessor and Lessee enter into a Lease with the intention that it be treated as a
lease intended as security by so providing in the applicable Schedule, or (iii)
Lessor and Lessee enter into a Financing, then to secure payment and performance
of Lessee's obligations under this Master Agreement and all Leases and
Financings, Lessee hereby grants Lessor a purchase money security interest in
the related Equipment and Financed Items and in all attachments, accessories,
additions, substitutions, products, replacements, rentals and proceeds
(including, without limitation, insurance proceeds) thereto as well as a
security interest in any other equipment financed pursuant to this Master
Agreement or any other agreement between Lessor and Lessee (collectively, the
"Collateral"). In any such event, notwithstanding any provisions contained in
this Master Agreement or in any Schedule, neither Lessor nor any Assignee shall
be entitled to receive, collect or apply as interest any amount in excess of the
maximum rate or amount permitted by applicable law. In the event Lessor or any
Assignee ever receives, collects or applies as interest any amount in excess of
the maximum amount permitted by applicable law, such excess amount shall be
applied to the unpaid principal balance and any remaining excess shall be
refunded to Lessee. In determining whether the interest paid or payable under
any specific contingency exceeds the maximum rate or amount permitted by
applicable law, Lessor and Lessee shall, to the maximum extent permitted under
applicable law, characterize any non-principal payment as an expense or fee
rather than as interest, exclude voluntary prepayments and the effect thereof,
and spread the total amount of interest over the entire term of this Master
Agreement and all Leases and Financings.

25. ASSIGNMENT. Lessor shall have the unqualified right to sell, assign, pledge,
transfer, mortgage or otherwise convey any part of its interest in this Master
Agreement, any Schedule or any Equipment, in whole or in part, without prior
notice to or the consent of Lessee. If any Lease is assigned, Lessee shall (a)
unless otherwise specified by Lessor and the Assignee, pay all amounts due under
the applicable Schedule to such Assignee, notwithstanding any defense, setoff or
counterclaim whatsoever that Lessee may have against Lessor or Assignee; (b) not
permit the applicable Schedule to be amended or the terms thereof waived without
the prior written consent of the Assignee; (c) not require the Assignee to
perform any obligations of Lessor, other than those that are expressly assumed
in writing by such Assignee; and (d) execute such acknowledgments thereto as may
be requested by Lessor or the Assignee. It is further agreed that (i) each
Assignee shall be entitled to all of Lessor's rights, powers and privileges
under the applicable Lease or Financing, to the extent assigned; (ii) any
Assignee may reassign its rights and interests under the applicable Lease or
Financing with the same force and effect as the assignment described herein; and
(iii) any payments received by the Assignee from Lessee with respect to the
assigned portion of the Lease or Financing shall, to the extent thereof,
discharge the obligations of Lessee to Lessor with respect to the assigned
portion of the Lease or Financing. Lessee acknowledges that any assignment or
transfer by Lessor or any Assignee shall not materially change Lessee's
obligations under the assigned Lease or Financing.

      Upon Lessor's prior written consent, which shall not be unreasonably
withheld, Lessee may sublet the Equipment to another end user other than another
leasing company or other competitor of Lessor. No such sublease shall relieve
Lessee of its obligations under the Lease and Lessee shall be responsible for
all costs and expenses associated with such sublease, including, without
limitation, additional Taxes or any Tax Loss suffered by Lessor. Lessee may
permit use of the Equipment by its affiliates or independent contractors at the
Equipment Location provided it does not relinquish possession and control of the
Equipment. Lessee may not assign, transfer or otherwise dispose of this Master
Agreement, any Lease or Financing, any Equipment or any interest therein.

26. FURTHER ASSURANCES. Lessee agrees to promptly execute and deliver to Lessor
such further documents and take such further action as Lessor may require in
order to more effectively carry out the intent and purpose of this Master
Agreement and any Schedule. Without limiting the generality of the foregoing,
Lessee agrees (a) to furnish to Lessor from time to time, its certified
financial statements, officer's certificates and appropriate resolutions,
opinions of counsel and such other information and documents as Lessor may
reasonably request, and (b) to execute and timely deliver to Lessor any
financing statements or other documents that Lessor deems necessary to perfect
or protect Lessor's security interest in the Collateral or to evidence Lessor's
interest in the Equipment. If Lessee fails to execute any document referred to
in clause (b) of the preceding sentence, Lessor or Lessor's agent is hereby
authorized to sign and file the same as Lessee's agent.


                                       6
<PAGE>   7
It is also agreed that Lessor or Lessor's agent may file as a financing
statement, any lease document (or copy thereof, where permitted by law) that
Lessor deems appropriate to perfect or protect Lessor's security interest in the
Collateral or to evidence Lessor's interest in the Equipment. Upon demand,
Lessee will promptly reimburse Lessor for any filing or recordation fees or
expenses (including legal fees and costs) incurred by Lessor in perfecting or
protecting its interests in the Equipment.

27. TERM OF MASTER AGREEMENT; SURVIVAL. This Master Agreement shall commence and
be effective upon the execution hereof by both parties and shall continue in
effect until terminated by either party by 30 days' prior written notice to the
other. However, no termination of this Master Agreement pursuant to the
preceding sentence shall be effective with respect to any Lease or Financing
that commenced prior to such termination until the expiration or termination of
such Lease or Financing and the satisfaction by Lessee of all of its obligations
hereunder with respect thereto. All representations, warranties and covenants
made by Lessee hereunder shall survive the termination of this Master Agreement
and shall remain in full force and effect. All of Lessor's rights, privileges
and indemnities under this Master Agreement or any Lease or Financing, to the
extent they are fairly attributable to events or conditions occurring or
existing on or prior to the expiration or termination of such Lease or
Financing, shall survive such expiration or termination and be enforceable by
Lessor and Lessor's successors and assigns.

28. WAIVER OF JURY TRIAL. LESSEE AND LESSOR HEREBY EXPRESSLY WAIVE ANY RIGHT TO
DEMAND A JURY TRIAL WITH RESPECT TO ANY ACTION OR PROCEEDING INSTITUTED BY
LESSOR OR LESSEE IN CONNECTION WITH THIS MASTER AGREEMENT OR ANY FUNDAMENTAL
AGREEMENT.

29. NOTICES. All notices, requests, demands, waivers and other communications
required or permitted to be given under this Master Agreement or any other
Fundamental Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or mailed via certified mail or a nationally
recognized overnight courier service, or sent by confirmed facsimile
transmission, addressed as follows (or such other address or fax number as
either party shall so notify the other):

If to Lessor:


Compaq Financial Services Corporation
100 Woodbridge Center Drive, Suite 202
Woodbridge, New Jersey  07095
Attn:  Vice President, Operations and Credit
Fax:  (888) 202-4271
Authorized Lessor E-mail Address:  electronicacceptance@compaq.com


If to Lessee:


Applied Theory Corporation
125 Elwood Davis Road
Syracuse, New York  13212
Attn:  Angelo Gencarelli
Fax:  315-461-8010


Authorized Lessee Representatives and Authorized Lessee E-mail Addresses:
_________________________________________________________________________
Lessee Acceptance Confirmation Fax Number:

30.   MISCELLANEOUS.

(a) GOVERNING LAW. THIS MASTER AGREEMENT AND EACH LEASE AND FINANCING SHALL BE
GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE
STATE OF NEW JERSEY.

(b) CONSENT TO JURISDICTION. Lessor and Lessee consent to the jurisdiction of
any local, state or Federal court located within the State of New Jersey, and
waive any objection relating to improper venue or forum non conveniens to the
conduct of any proceeding in any such court.

(c) CREDIT REVIEW. Lessee consents to a reasonable credit review by Lessor for
each Lease and Financing.

(d) CAPTIONS AND REFERENCES. The captions contained in this Master Agreement and
any Schedule are for convenience only and shall not affect the interpretation of
this Master Agreement. All references in this Master Agreement to Sections and
Exhibits refer to Sections hereof and Exhibits hereto unless otherwise
indicated.

(e) ENTIRE AGREEMENT; AMENDMENTS. This Master Agreement and all other
Fundamental Agreements executed by both Lessor and Lessee constitute the entire
agreement between Lessor and Lessee relating to the leasing of the Equipment and
the financing of Financed Items, and supersede all prior agreements relating
thereto, whether written or oral, and may not be amended or modified except in a
writing signed by the parties hereto.

(f) NO WAIVER. Any failure of Lessor to require strict performance by Lessee, or
any written waiver by Lessor of any provision hereof, shall not constitute
consent or waiver of any other breach of the same or any other provision hereof.

(g) LESSOR AFFILIATES. Lessee understands and agrees that Compaq Financial
Services Corporation or any affiliate or subsidiary thereof may, as lessor,
execute Advance Pricing Agreements and Schedules under this Master Agreement, in
which event the terms and conditions of the applicable Advance Pricing Agreement
or Schedule and this Master Agreement as it relates to the lessor under such
Advance Pricing Agreement or Schedule shall be binding upon and shall inure to
the benefit of such entity executing such Advance Pricing Agreement or Schedule
as lessor, as well as any successors or assigns of such entity.

(h) INVALIDITY. If any provision of this Master Agreement or any Schedule shall
be prohibited by or invalid under law, such provision shall be ineffective only
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Master Agreement
or such Schedule.

(i) COUNTERPARTS. This Master Agreement may be executed in counterparts, which
collectively shall constitute one document.

(j) LESSOR RELIANCE. Lessor may act in reliance upon any instruction, instrument
or signature reasonably believed by Lessor in good faith to be genuine. Lessor
may assume that any employee of Lessee who executes any document or gives any
written notice, request or instruction has the authority to do so.

31. DEFINITIONS. All capitalized terms used in this Master Agreement have the
meanings set forth below or in the Sections of this Master Agreement referred to
below:

      "ACCEPTANCE DATE" means, as to any Lease or Financing, the date Lessee
shall have accepted the Equipment or Financed Items subject to such Lease or
Financing in accordance with Section 3.

      "ADVANCE PRICING AGREEMENT" means an Advance Pricing Agreement executed by
Lessor and Lessee pursuant to Section 2.B.

      "ADVANCE RENT" means, as to any Lease, Rent paid by Lessee in advance of
the Acceptance Date for the related Equipment or otherwise intended to be
treated as "Advance Rent" under this Master Agreement and the applicable
Schedule.

      "AMOUNT AVAILABLE" has the meaning specified in an Advance Pricing
Agreement.

      "ASSIGNEE" means any assignee of all or any portion of Lessor's interest
in this Master Agreement, any Schedule or any Equipment, whether such assignee
received the assignment of such interest from Lessor or a previous assignee of
such interest.

      "CASUALTY LOSS" means, with respect to any Equipment, the condemnation,
taking, loss, destruction, theft or damage beyond repair of such


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<PAGE>   8
Equipment.

      "CASUALTY VALUE" means, as to any Equipment, an amount determined as of
the date of the Casualty Loss or Lessee Default in question pursuant to a "Table
of Casualty Values" attached to the applicable Schedule or, if no "Table of
Casualty Values" is attached to the applicable Schedule, an amount equal to the
sum of (i) the present value as of the date of the Casualty Loss or Lessee
Default in question (discounted at 5% per annum, compounded monthly) of all Rent
payments payable after such date through the scheduled date of expiration of the
Then Applicable Term, plus (ii) the present value as of the date of the Casualty
Loss or Lessee Default in question (discounted at 5% per annum, compounded
monthly, from the scheduled date of expiration of the Then Applicable Term) of
an amount determined by multiplying the applicable casualty percentage specified
below by the Total Cost of such Equipment. The applicable casualty percentage
shall be 35% for Equipment having an Initial Term of less than 24 months; 30%
for Equipment having an Initial Term of 24 months or greater, but less than 36
months; 25% for Equipment having an Initial Term of 36 months or greater, but
less than 48 months; and 20% for Equipment having an Initial Term of 48 months
or greater.

      "CLAIMS" means all claims, actions, suits, proceedings, costs, expenses
(including, without limitation, court costs, witness fees and attorneys' fees),
damages, obligations, judgments, orders, penalties, fines, injuries, liabilities
and losses, including, without limitation, actions based on Lessor's strict
liability in tort.

      "CODE" means the Internal Revenue Code of 1986, as amended.

      "COLLATERAL" has the meaning specified in Section 24.

      "COMMITMENT PERIOD" means the period during which Lessor will purchase
Equipment and fund Financed Items and enter into a Lease or Financing of the
same with Lessee pursuant to Section 2.B and an Advance Pricing Agreement at the
rates set forth in such Advance Pricing Agreement, which period shall be
specified in such Advance Pricing Agreement.

      "CONSOLIDATING SCHEDULE" has the meaning specified in Section 2.B(d).

      "CONSOLIDATION PERIOD" has the meaning specified in an Advance Pricing
Agreement.

      "DAILY RENT" means, as to any Lease or Financing, an amount equal to the
per diem Rent payable under the applicable Schedule (calculated on the basis of
a 360 day year and 30 day months).

      "END-OF-TERM NOTICE" means, as to any Lease, a written notice delivered by
Lessee to Lessor at least 90 days prior to the end of the Initial Term, any
Renewal Term or any optional extension of the Initial Term or any Renewal Term
setting forth Lessee's elections pursuant to Section 4 with respect to the
Equipment subject to such Lease. Each End-of-Term Notice shall specify with
particularity the Units of Equipment to be purchased by Lessee (if any), as to
which the Lease is to be renewed (if any) and that are to be returned to Lessor
(if any).

      "EQUIPMENT LOCATION" means, as to any Equipment, the address at which such
Equipment is located from time to time, as originally specified in the
applicable Schedule and as subsequently specified in a notice delivered to
Lessor pursuant to Section 11, if applicable.

      "EQUIPMENT" has the meaning specified in Section 1.

      "FAIR MARKET VALUE" means the total price that would be paid for any
specified Equipment in an arm's length transaction between an informed and
willing buyer (other than a used equipment dealer) under no compulsion to buy
and an informed and willing seller under no compulsion to sell. Such total price
shall not be reduced by the costs of removing such Equipment from its current
location or moving it to a new location.

      "FAIR RENTAL VALUE" means the amount of periodic rent that would be
payable for any specified Equipment in an arm's length transaction between an
informed and willing lessee and an informed and willing lessor, neither under
compulsion to lease. Such amount shall not be reduced by the costs of removing
such Equipment from its current location or moving it to a new location.

      "FINAL INVOICE AMOUNT" has the meaning set forth in Section 2.A (c).

      "FINANCED ITEM" has the meaning specified in Section 1.

      "FINANCING" has the meaning specified Section 1.

      "FIRST PAYMENT DATE" means, as to any Lease or Financing, the date the
first Rent payment with respect to the Initial Term of such Lease or the Term of
such Financing (as applicable) is due, as determined pursuant to the terms of
the applicable Schedule.

      "FUNDAMENTAL AGREEMENTS" means, collectively, this Master Agreement, each
Advance Pricing Agreement, each Schedule and Acceptance Certificate and all
other related instruments and documents.

      "FUNDING DATE" means, with respect to any Financed Item, the date Lessor
makes funds available to the Seller of such Financed Item to pay for the same or
to Lessee to reimburse Lessee for its payment of the same.

      "GUARANTOR" means any guarantor of all or any portion of Lessee's
obligations under this Master Agreement or any Lease or Financing.

      "HARDWARE" means items of tangible equipment.

      "INITIAL TERM" means, as to any Lease, the initial term thereof as
specified in the related Schedule.

      "LEASE" has the meaning specified in Section 1.

      "LESSEE" has the meaning specified in the preamble hereof.

      "LESSEE DEFAULT" has the meaning specified in Section 21.

      "LESSOR" has the meaning specified in the preamble hereof.

      "LESSOR DEFAULT" has the meaning specified in Section 21.

      "LICENSE AGREEMENT" means any license agreement or other document granting
the purchaser the right to use Software or any technical information,
confidential business information or other documentation relating to Hardware or
Software, as amended, modified or supplemented by any other agreement between
the licensor and Lessor.

      "MASTER AGREEMENT" has the meaning specified in the preamble hereof.

      "MATERIAL AGREEMENTS" means, collectively, all Fundamental Agreements, all
other material agreements by and between Lessor and Lessee, and any application
for credit, financial statement, or financial data required to be provided by
Lessee in connection with any Lease or Financing.

      "OPTIONAL ADDITIONS" has the meaning specified in Section 12.

      "PC EQUIPMENT" means, collectively, personal computers (e.g.,
workstations, desktops and notebooks) and related items of peripheral equipment
(e.g., monitors, printers and docking stations).

      "PURCHASE DOCUMENTS" means, as to any Equipment, any purchase order,
contract, bill of sale, License Agreement, invoice and/or other documents that
Lessee has, at any time, approved, agreed to be bound by or entered into with
any Supplier of such Equipment relating to the purchase, ownership, use or
warranty of such Equipment.

      "RENEWAL AGREEMENT" has the meaning specified in Section 4.


                                       8
<PAGE>   9
      "RENEWAL TERM" has the meaning specified in Section 4.

      "RENT" has the meaning specified in Section 5.

      "SCHEDULE" means, unless the context shall otherwise require (a) in the
case of a Lease or Financing commenced pursuant to Section 2.A, a Schedule
executed by Lessor and Lessee pursuant to Section 2.A(a), and (b) in the case of
a Lease or Financing commenced pursuant to Section 2.B, (i) prior to Lessee's
execution and delivery to Lessor of a Consolidating Schedule pursuant to Section
2.B(d) relating to such Lease or Financing, the applicable Certificate of
Acceptance together with the applicable Advance Pricing Agreement, and (ii) from
and after Lessee's execution and delivery to Lessor of a Consolidating Schedule
pursuant to Section 2.B(d) relating to such Lease or Financing, such
Consolidating Schedule.

      "SELLER" means, as to any Equipment, the seller of such Equipment, and as
to any Financed Item, the provider thereof, in either case as specified in the
applicable Schedule.

      "SOFTWARE" means copies of computer software programs owned or licensed by
Lessor.

      "STIPULATED LOSS VALUE" means, as to any Equipment, an amount equal to the
sum of (i) all Rent and other amounts due and owing with respect to such
Equipment as of the date of payment of such amount, plus (ii) the Casualty Value
of such Equipment.

      "SUBSTITUTE EQUIPMENT" means, as to any item of Hardware or Software
subject to a Lease, a substantially equivalent or better item of Hardware or
Software having equal or greater capabilities and equal or greater Fair Market
Value manufactured or licensed by the same manufacturer or licensor as such item
of Hardware or Software subject to a Lease. The determination of whether any
item of Equipment is substantially equivalent or better than an item of
Equipment subject to a Lease shall be based on all relevant facts and
circumstances, but shall minimally require, in the case of a computer, that each
of processor, hard-drive, random access memory and CD ROM drive, if applicable,
be equivalent or better.

      "SUPPLIER" means (a) as to any Equipment, the Seller and the manufacturer
or licensor of such Equipment collectively, or where the context requires, any
of them, and (b) as to any Financed Item, the Seller thereof.

      "SYSTEM SOFTWARE" means an item of Software that is pre-loaded on an item
of Hardware purchased by Lessor for lease hereunder for which the relevant
Purchase Documents specify no purchase price separate from the aggregate
purchase price specified for such items of Hardware and Software.

      "TAXES" means all license and registration fees and all taxes, fees,
levies, imposts, duties, assessments, charges and withholding of any nature
whatsoever, however designated (including, without limitation, any value added,
transfer, sales, use, gross receipts, business, occupation, excise, personal
property, real property, stamp or other taxes).

      "TAX BENEFITS" has the meaning specified in Section 17.

      "TAX LOSS" has the meaning specified in Section 17.

      "TERM" means, as to any Financing, the term thereof as specified in the
related Schedule.

      "THEN APPLICABLE TERM" means, as to any Lease, the term of the Lease in
effect at the time of determination, whether it be the Initial Term, any Renewal
Term or any optional or other automatic extension of the Initial Term or any
Renewal Term pursuant to Section 4.

      "TOTAL COST" means (a) as to any Lease, the total acquisition cost to
Lessor of the Equipment subject to such Lease as set forth in the applicable
Purchase Documents, including related delivery, installation, taxes and other
charges which Lessor has agreed to pay and treat as a portion of such
acquisition cost, if any, and (b) as to any Financing, the total amount of the
Financed Items subject to such Financing.

      "TOTAL TERM" means, as to any Lease, the aggregate term of such Lease,
including the Initial Term, any Renewal Term and any optional or other automatic
extension of the Initial Term or any Renewal Term pursuant to Section 4.

      "UCC" means the Uniform Commercial Code as enacted and in effect in any
applicable jurisdiction.

      "UNIT OF EQUIPMENT" means, as to the Equipment leased pursuant to any
Schedule (a) each individual item of PC Equipment leased pursuant to such
Schedule, and (b) all Equipment leased pursuant to such Schedule other than PC
Equipment taken as a whole.

      "VALID E-MAIL ACCEPTANCE CERTIFICATE" has the meaning specified in Section
3(b).

32. LESSEE ACKNOWLEDGES THAT NEITHER THIS MASTER AGREEMENT NOR ANY OTHER
FUNDAMENTAL AGREEMENT MAY BE AMENDED OR MODIFIED EXCEPT BY A WRITING SIGNED BY
LESSOR AND LESSEE.
LESSEE INITIALS:  S_________.

IN WITNESS WHEREOF, LESSOR AND LESSEE HAVE EXECUTED THIS MASTER AGREEMENT ON THE
DATES SPECIFIED BELOW.


LESSOR:


COMPAQ FINANCIAL SERVICES CORPORATION


BY: /s/ John Sullivan
    -------------------------------------------------------

        John Sullivan, Director - Operations
    ------------------------------------------------------
                      NAME AND TITLE

        12/20/99
    ------------------------------------------------------
                          DATE





LESSEE:


APPLIEDTHEORY CORPORATION


BY: /s/ Angelo A. Gencarelli III
    ------------------------------------------------------

        Angelo A. Gencarelli III
    ------------------------------------------------------
                  NAME AND TITLE

       11/8/00
    ------------------------------------------------------
                           DATE



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