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                                                                   EXHIBIT 10.60

                               PROTECTIVE WARRANT

      THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
      UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
      OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE
      UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
      AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
      PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
      PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT
      PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
      OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
      REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN
      OBLIGATIONS OF THE COMPANY SET FORTH IN A STOCK PURCHASE AGREEMENT, DATED
      AS OF FEBRUARY 22, 2001, BETWEEN APPLIEDTHEORY CORPORATION AND CRESCENT
      INTERNATIONAL LTD. A COPY OF THE PORTION OF THE AFORESAID AGREEMENT
      EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM APPLIEDTHEORY
      CORPORATION'S EXECUTIVE OFFICES.

                                                                          [DATE]

            Warrant to Purchase Shares of Common Stock of AppliedTheory
Corporation (hereinafter a "Protective Warrant"), up to a total number
determined in accordance with Section 2(b) hereof.

            AppliedTheory Corporation, an entity organized and existing under
the laws of the State of Delaware (the "Company"), hereby agrees that Crescent
International Ltd. (the "Investor") or any other Warrant Holder is entitled, on
the terms and conditions set forth below, to purchase from the Company at any
time during the Exercise Period (as defined below) up to a total number,
determined in accordance with Section 2(b) hereof, of fully paid and
nonassessable shares of Common Stock, par value $0.01 per share, of the Company
(the "Common Stock"), as the same may be adjusted from time to time pursuant to
Section 7 hereof, at the Exercise Price (as defined below), as the same may be
adjusted pursuant to Section 7 hereof. The resale of the shares of Common Stock
or other securities issuable upon exercise or exchange of this Protective
Warrant is subject to the provisions of the Registration Rights Agreement (as
defined below).

            Section 1.  Definitions.

                        "Aggregate Exercise Price" shall mean, with respect to
any exercise (in whole or in part) of this Protective Warrant, the Exercise
Price multiplied by the total number of shares of Common Stock for which this
Protective Warrant is being exercised.

                        "Agreement" shall mean the Stock Purchase Agreement,
dated as of February 22, 2001, between the Company and the Investor.
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                        "Capital Shares" shall mean the Common Stock and any
shares of any other class of common stock whether now or hereafter authorized,
having the right to participate in the distribution of dividends (as and when
declared) or assets (upon liquidation of the Company).

                        "Cash-Out Price" shall mean, with respect to any
exercise (in whole or in part) of this Protective Warrant, the product of (x)
the Closing Price of one share of Common Stock on the Trading Day immediately
preceding the Exercise Date multiplied by (y) the number of shares of Common
Stock for which the Company elects the Cash-Out Option.

                        "Exercise Date" shall mean with respect to any exercise
(in whole or in part) of this Protective Warrant either (i) the date this
Protective Warrant, the Exercise Notice and the Aggregate Exercise Price are
received by the Company or (ii) the date advanced copy of the Exercise Notice is
sent by facsimile to the Company, provided that this Protective Warrant, the
original Exercise Notice, and the Aggregate Exercise Price are received by the
Company within five Trading Days thereafter and provided further that if this
Protective Warrant the original Exercise Notice and the Aggregate Exercise Price
are not received within five Trading Days in accordance with clause (ii) above,
the Exercise Date for this clause (ii) shall be the date that the Company
receives this Protective Warrant, the original Exercise Notice and the Aggregate
Exercise Price.

                        "Exercise Notice" shall mean with respect to any
exercise (in whole or in part) of this Protective Warrant the exercise form
attached hereto as Exhibit A, duly executed by the Warrant Holder.

                        "Exercise Period" shall mean the period beginning on the
Effective Date applicable to the corresponding Sale and continuing until
the two-year period thereafter; provided that such period shall be extended one
day for each day after such Effective Date, that any Registration Statement is
not effective during the period the Registration Statement is required to be
effective pursuant to the Registration Rights Agreement.

                        "Exercise Price" as of the date hereof shall mean $0.01
per share of Common Stock, subject to the adjustments provided for in
Section 7 of this Protective Warrant.

                        "Per Share Protective Warrant Value" shall mean, with
respect to any exercise (in whole or in part) of this Protective Warrant, the
difference resulting from subtracting the Exercise Price from the Closing Price
of one share of Common Stock on the Trading Day immediately preceding the
Exercise Date.

                        "Registration Rights Agreement" shall mean the
registration rights agreement, dated February 22, 2001 between the Company and
the Investor.

                        "Warrant Holder" shall mean the Investor or any assignee
or transferee of all or any portion of this Protective Warrant.

                        Other capitalized terms used but not defined herein
shall have their respective meanings set forth in the Agreement.


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            Section 2.  Exercisability.

                        (a) Timing. If the Purchase Price on the Effective Date
applicable to the corresponding Sale is lower than the Purchase Price on the
Sale Date with respect to such Sale, this Protective Warrant shall become
immediately exercisable, subject to clause (c) below.

                        (b) Number of Shares. The number of shares of Common
Stock for which this Protective Warrant is exercisable (the "Protective Warrant
Shares") shall be determined by subtracting (x) the Investment Amount with
respect to the applicable Sale divided by the Purchase Price on the Sale Date
from (y) the Investment Amount with respect to the applicable Sale divided by
the Purchase Price on the Effective Date applicable to the Sale Date.

                        (c) Cash Payment in Lieu of Issuance of Shares. In the
event that the Warrant Holder exercises this Protective Warrant (in whole or in
part) in accordance with Section 3 hereof, then the Company may, in lieu of
issuing shares of Common Stock pursuant to such exercise, pay to the Investor
the Cash-Out Price for any or all of the shares of Common Stock purchasable by
the Investor through the exercise of this Protective Warrant (such payment, the
"Cash-Out Option"). For avoidance of doubt, the Company may elect such Cash-Out
Option in the event that, inter alia, the number of Protective Warrant Shares
plus the number of First Sale Shares and Subsequent Sale Shares exceeds the
number of shares registered pursuant to Section 1.1(a) of the Registration
Rights Agreement.

                        (d) Notice of Cash Payment in Lieu of Issuance of
Shares. In the event that the Company elects the "Cash-Out Option" the Company
shall promptly give notice to the Investor of such election on the Trading Day
following surrender of the items described in Section 3(a)(i) or delivery by
facsimile of the Exercise Notice described in Section 3(a)(ii). Such notice from
the Company shall set forth the number of shares of Common Stock for which the
Company elects the Cash-Out Option.

                        (e) Method of Cash-Out; Effect of Cash-Out. In the event
that the Company elects the Cash-Out Option, then in lieu of delivering stock
certificates as provided in Section 5 hereof, the Company shall deliver by wire
transfer of immediately available funds to an account designated by the Investor
as soon as practicable after delivery by the Company of notice of its election
of the Cash-Out Option and in any event within two Trading Days thereafter, the
Cash-Out Price for any and all shares of Common Stock for which the Company
elects the Cash-Out Option.

            Section 3.  Exercise; Cashless Exercise.

                        (a) Method of Exercise. This Protective Warrant may be
exercised in whole or in part (but not as to a fractional share of Common
Stock), at any time and from time to time during the Exercise Period, by the
Warrant Holder by (i) the surrender of this Protective Warrant, the Exercise
Notice and the Aggregate Exercise Price to the Company at the address set forth
in Section 12 hereof or (ii) the delivery by facsimile of an executed and
completed Exercise Notice to the Company and delivery to the Company within five
Trading Days thereafter of this Protective Warrant, the original Exercise Notice
and the Aggregate Exercise Price.


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                        (b) Payment of Aggregate Exercise Price. Subject to
paragraph (c) below, payment of the Aggregate Exercise Price shall be made by
check or bank draft payable to the order of the Company or by wire transfer to
an account designated by the Company. If the amount of the payment received by
the Company is less than the Aggregate Exercise Price, the Warrant Holder will
be notified of the deficiency and shall make payment in that amount within five
Trading Days of such notice. In the event the payment exceeds the Aggregate
Exercise Price, the Company will refund the excess to the Warrant Holder within
three Trading Days of both the receipt of such payment and the knowledge of such
excess.

                        (c) Cashless Exercise. As an alternative to payment of
the Aggregate Exercise Price in accordance with Section 3(b) above, the Warrant
Holder may elect to effect a cashless exercise by so indicating on the Exercise
Notice and including a calculation of the number of shares of Common Stock to be
issued upon such exercise in accordance with the terms hereof (a "Cashless
Exercise"). In the event of a Cashless Exercise, the Warrant Holder shall
surrender this Protective Warrant for that number of shares of Common Stock
determined by (i) multiplying the number of Protective Warrant Shares for which
this Protective Warrant is being exercised by the Per Share Protective Warrant
Value and (ii) dividing the product by the Closing Price of one share of the
Common Stock on the Trading Day immediately preceding the Exercise Date.

                        (d) Replacement Protective Warrant. In the event that
the Protective Warrant is not exercised in full, the number of Protective
Warrant Shares shall be reduced by the number of such Protective Warrant Shares
for which this Protective Warrant is exercised, and the Company, at its expense,
shall forthwith issue and deliver to the Warrant Holder a new Protective Warrant
of like tenor in the name of the Warrant Holder or as the Warrant Holder may
request, reflecting such adjusted number of Protective Warrant Shares.

            Section 4. Ten Percent Limitation. At no time may the Warrant Holder
exercise this Protective Warrant such that the number of Protective Warrant
Shares to be received pursuant to such exercise aggregated with all other shares
of Common Stock then owned by the Warrant Holder beneficially or deemed
beneficially owned (as such term is defined in Rule 13(d) under the Exchange
Act) by the Warrant Holder and its affiliates would result in the Warrant Holder
and its affiliates owning more than 9.9% of all of such Common Stock as would be
outstanding on such Exercise Date, as determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.

            Section 5.  Delivery of Stock Certificates.

                        (a) Subject to the terms and conditions of this
Protective Warrant, as soon as practicable after the exercise of this Protective
Warrant in full or in part, and in any event within five Trading Days
thereafter, the Company at its expense (including, without limitation, the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Warrant Holder, or as the Warrant Holder lawfully may
direct, a certificate or certificates for the number of validly issued, fully
paid and non-assessable Protective Warrant Shares to which the Warrant Holder
shall be entitled on such exercise, together with any other stock or other
securities or property (including cash, where applicable) to which the Warrant
Holder is entitled upon such exercise in accordance with the provisions hereof;
provided, however, that


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any such delivery to a location outside of the United States also shall be made
within five Trading Days after the exercise of this Protective Warrant in full
or in part.

                        (b) This Protective Warrant may not be exercised as to
fractional shares of Common Stock. In the event that the exercise of this
Protective Warrant, in full or in part, would result in the right to acquire any
fractional share of Common Stock, then in such event such fractional share shall
be considered a whole share of Common Stock and shall be added to the number of
Protective Warrant Shares issuable to the Investor upon exercise of this
Protective Warrant.

            Section 6.  Representations, Warranties and Covenants of the
Company.

                        (a) The Company shall take all necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation for the legal and valid issuance of this Protective Warrant and the
Protective Warrant Shares to the Warrant Holder.

                        (b) At all times during the Exercise Period, the Company
shall take all steps reasonably necessary and within its control to insure that
the Common Stock remains listed or quoted on the Principal Market.

                        (c) The Protective Warrant Shares, when issued in
accordance with the terms hereof, will be duly authorized and, when paid for or
issued in accordance with the terms hereof, shall be validly issued, fully paid
and non-assessable.

                        (d) The Company has authorized and reserved for issuance
to the Warrant Holder the requisite number of shares of Common Stock to be
issued pursuant to this Protective Warrant. The Company at all times shall
reserve and keep available, solely for issuance and delivery as Protective
Warrant Shares hereunder, such shares of Common Stock as from time to time shall
be issuable as Protective Warrant Shares, and accordingly shall adjust the
number of such shares of Common Stock promptly upon the occurrence of any of the
events specified in Section 7 hereof.

            Section 7. Adjustment of the Exercise Price. The Exercise Price and,
accordingly, the number of Protective Warrant Shares issuable upon exercise of
the Protective Warrant, shall be subject to adjustment from time to time upon
the happening of certain events as follows:

                        (a) Reclassification, Consolidation, Merger or Mandatory
Share Exchange; Sale, Transfer or Lease of Assets. If the Company, at any time
while this Protective Warrant is unexpired and not exercised in full, (i)
reclassifies or changes its Outstanding Capital Shares (other than a change in
par value, or from par value to no par value per share, or from no par value per
share to par value, or as a result of a subdivision or combination of
outstanding securities issuable upon exercise of this Protective Warrant) or
(ii) consolidates, merges or effects a mandatory share exchange (x) with or into
another corporation (other than a merger or mandatory share exchange with
another corporation in which the Company is a continuing corporation and that
does not result in any reclassification or change, other than a change in par
value, or from par value to no par value per share, or from no par value per
share to par value) or (y) as a result of a subdivision or combination of
Outstanding Capital Shares issuable upon exercise of this Protective Warrant or
(iii) sells, transfers or leases all or substantially all of its


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assets, then in any such event the Company, or such successor or purchasing
corporation, as the case may be, shall, without payment by the Warrant Holder of
any additional consideration therefor amend this Protective Warrant or issue a
new warrant providing that the Warrant Holder shall have rights not less
favorable to the Warrant Holder than those then applicable to this Protective
Warrant and to receive upon exercise under such amendment of this Protective
Warrant or new warrant, in lieu of each share of Common Stock theretofore
issuable upon exercise of this Protective Warrant hereunder, the kind and amount
of shares of stock, other securities, money or property receivable upon such
reclassification, change, consolidation, merger, mandatory share exchange,
lease, sale or transfer by the holder of one share of Common Stock issuable upon
exercise of this Protective Warrant had this Protective Warrant been exercised
immediately prior to such reclassification, change, consolidation, merger,
mandatory share exchange or sale or transfer (without giving effect to the
limitation on ownership set forth in Section 4 hereof) and an appropriate
provision for the foregoing shall be made by the Company as part of any such
event. Such amended Protective Warrant or new warrant shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 7. The provisions of this Section 7(a)
shall similarly apply to successive reclassifications, changes, consolidations,
mergers, mandatory share exchanges, sales, transfers and leases.

                        (b) Subdivision or Combination of Shares; Stock
Dividends. If the Company, at any time while this Protective Warrant is
unexpired and not exercised in full, shall subdivide its Common Stock, combine
its Common Stock, pay a dividend in its Capital Shares, or make any other
distribution of its Capital Shares, then the Exercise Price shall be adjusted,
as of the date the Company shall take a record of the holders of its Capital
Shares for the purpose of effecting such subdivision, combination or dividend or
other distribution (or if no such record is taken, as of the effective date of
such subdivision, combination, dividend or other distribution), to that price
determined by multiplying the Exercise Price in effect immediately prior to such
subdivision, combination, dividend or other distribution by a fraction:

                                    (i) the numerator of which shall be the
total number of Outstanding Capital Shares immediately prior to such
subdivision, combination, dividend or other distribution, and

                                    (ii) the denominator of which shall be the
total number of Outstanding Capital Shares immediately after such subdivision,
combination, dividend or other distribution. The provisions of this Section 7(b)
shall not apply under any of the circumstances for which an adjustment is made
pursuant to Section 7(a).

                        (c) Liquidating Dividends, Etc. If the Company, at any
time while this Protective Warrant is unexpired and not exercised in full, makes
a distribution of its assets or evidences of indebtedness to the holders of its
Capital Shares as a dividend in liquidation or by way of return of capital or
other than as a dividend payable out of earnings or surplus legally available
for dividends under applicable law or any distribution to such holders made in
respect of the sale of all or substantially all of the Company's assets, or any
spin-off of any of the Company's lines of business, divisions or subsidiaries
(other than under the circumstances provided for in the foregoing subsections
(a) and (b)), then the Warrant Holder shall be entitled to receive upon such
exercise of the Protective Warrant in addition to the Protective Warrant


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<PAGE>   7
Shares receivable in connection therewith, and without payment of any
consideration other than the Exercise Price, an amount in cash equal to the
value of such distribution per Capital Share multiplied by the number of
Protective Warrant Shares that, on the record date for such distribution, are
issuable upon such exercise of the Protective Warrant (without giving effect to
the limitation on ownership set forth in Section 4 hereof), and an appropriate
provision therefor shall be made by the Company as a part of any such
distribution. No further adjustment shall be made following any event that
causes a subsequent adjustment in the number of Protective Warrant Shares
issuable. The value of a distribution that is paid in other than cash shall be
determined in good faith by the Board of Directors of the Company.

                        (d) Adjustment of Number of Shares. Upon each adjustment
of the Exercise Price pursuant to any provisions of this Section 7, the number
of Protective Warrant Shares issuable hereunder at the option of the Warrant
Holder shall be calculated, to the nearest one hundredth of a whole share,
multiplying the number of Protective Warrant Shares issuable prior to an
adjustment by a fraction:

                                    (i) the numerator of which shall be the
Exercise Price before any adjustment pursuant to this Section 7; and

                                    (ii) the denominator of which shall be the
Exercise Price after such adjustment.

                        (e) Other Action Affecting Capital Shares. In the event
after the date hereof the Company shall take any action affecting the number of
Outstanding Capital Shares, other than an action specifically described in any
of the foregoing subsections (a) through (c) hereof, inclusive, (including
without limitation a subdivision or combination of Common Stock, or the payment
of a dividend in its Capital Shares or any other distribution), that in the
reasonable opinion of the Warrant Holder would have a materially adverse effect
upon the rights of the Warrant Holder at the time of exercise of the Protective
Warrant, the Exercise Price shall be adjusted in such manner and at such time as
the Board of Directors on the advice of the Company's independent public
accountants shall in good faith determine to be equitable in the circumstances.

                        (f) Notice of Certain Actions. In the event the Company
shall, at a time while the Protective Warrant is unexpired and outstanding, take
any action pursuant to subsections (a) through (e) of this Section 7 that may
result in an adjustment of the Exercise Price, the Company shall notify the
Warrant Holder of such action 10 days in advance of its effective date in order
to afford to the Warrant Holder an opportunity to exercise the Protective
Warrant prior to such action becoming effective.

                        (g) Notice of Adjustments. Whenever the Exercise Price
or number of Protective Warrant Shares shall be adjusted pursuant to Section 7
hereof, the Company shall promptly deliver by facsimile with the original
delivered by express courier service in accordance with Section 12 hereof; a
certificate, which shall be signed by the Company's President or a Vice
President and by its Treasurer or Assistant Treasurer or its Secretary or
Assistant Secretary, setting forth in reasonable detail the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a


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<PAGE>   8
description of the basis on which the Company's Board of Directors made any
determination hereunder), and the Exercise Price and number of Protective
Warrant Shares purchasable at that Exercise Price after giving effect to such
adjustment.

            Section 8. No Impairment. The Company will not, by amendment of its
Certificate or By-Laws or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Protective Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Warrant
Holder against impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any Protective Warrant Shares
above the amount payable therefor on such exercise, and (b) will take all such
action as may be reasonably necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable Protective Warrant
Shares on the exercise of this Protective Warrant.

            Section 9. Rights As Stockholder. Prior to exercise of this
Protective Warrant and except as provided in Section 7 hereof, the Warrant
Holder shall not be entitled to any rights as a stockholder of the Company with
respect to the Protective Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of stockholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company shall mail to
each Warrant Holder, at least ten days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.

            Section 10. Replacement of Protective Warrant. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of the Protective Warrant and, in the case of any such loss, theft
or destruction of the Protective Warrant, upon delivery of an indemnity
agreement or security reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, on surrender and cancellation of such
Protective Warrant, the Company at its expense will execute and deliver, in lieu
thereof, a new Protective Warrant of like tenor.

            Section 11. Restricted Securities.

                        (a) Registration or Exemption Required. This Protective
Warrant has been issued in a transaction exempt from the registration
requirements of the Securities Act in reliance upon Section 4(2) of the
Securities Act. This Protective Warrant and the Protective Warrant Shares
issuable upon exercise of this Protective Warrant may not be resold except
pursuant to an effective registration statement or an exemption to the
registration requirements of the Securities Act and applicable state laws.


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<PAGE>   9
                        (b) Legend. Any replacement Protective Warrants issued
pursuant to Section 2 hereof and any Protective Warrant Shares issued upon
exercise hereof, shall bear the following legend:

                        "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
                        BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
                        AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
                        APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
                        RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION
                        REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
                        SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST
                        OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
                        ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED
                        OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN
                        EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
                        ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM,
                        OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS
                        CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF
                        THE COMPANY SET FORTH IN A STOCK PURCHASE AGREEMENT,
                        DATED AS OF FEBRUARY 22, 2001, BETWEEN APPLIEDTHEORY
                        CORPORATION AND CRESCENT INTERNATIONAL LTD. A COPY OF
                        THE PORTION OF THE AFORESAID AGREEMENT EVIDENCING SUCH
                        OBLIGATIONS MAY BE OBTAINED FROM APPLIEDTHEORY
                        CORPORATION'S EXECUTIVE OFFICES."

                              Removal of such legend shall be in accordance with
the legend removal provisions in the Agreement.

                        (c) No Other Legend or Stock Transfer Restrictions. No
legend other than the one specified in paragraph (b) of this Section 11 has been
or shall be placed on the share certificates representing the Protective Warrant
Shares and no instructions or "stop transfer orders," so called, "stock transfer
restrictions" or other restrictions have been or shall be given to the Company's
transfer agent with respect thereto other than as expressly set forth in this
Section 11.

                        (d) Assignment. Assuming the conditions of Section 11(a)
above regarding registration or exemption have been satisfied, the Warrant
Holder may, upon the prior written consent of the Company, which consent shall
not be unreasonably withheld, sell, transfer, assign, pledge or otherwise
dispose of this Protective Warrant, in whole or in part. The Warrant Holder
shall deliver a written notice to the Company substantially in the form of the
assignment form attached hereto as Exhibit B (the "Assignment Notice"),
indicating the person or persons to whom this Protective Warrant shall be
assigned and the respective number of warrants to be assigned to each assignee.
The Company shall effect the assignment within ten (10) days of receipt of such
Assignment Notice, and shall deliver to the assignee(s) designated by the
Warrant Holder a Protective Warrant or Protective Warrants of like tenor and
terms for the specified number of shares.


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<PAGE>   10
                        (e) Investor's Compliance. Nothing in this Section 11
shall affect in any way the Investor's obligations under any agreement to comply
with all applicable securities laws upon resale of the Common Stock.

            Section 12. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and shall be deemed duly given (i) upon delivery if hand delivered at
the address designated below (if delivered on a business day during normal
business hours where such notice is to be received) or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received), (ii) on the fifth business
day after deposit into the mail, if deposited in the mail, registered or
certified, return receipt requested, postage prepaid, addressed to the address
designated below, (iii) upon delivery delivered by reputable express courier
service to the address designated below, or (iv) upon confirmation of
transmission if transmitted by facsimile to the facsimile number designated
below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received). The addresses and facsimile numbers for such
communications shall be:

            if to the Company:

                        AppliedTheory Corporation
                        1500 Broadway
                        New York, NY 10036
                        Attention:      Robert F. Mechur, Esq., General Counsel
                        Telephone:      (315) 453-2912, ext. 5229
                        Facsimile:      (315) 479-0824

            with a copy (which shall not constitute notice) to:

                        Dewey Ballantine LLP
                        1301 Avenue of the Americas
                        Attention:      Frank E. Morgan II, Esq.
                        Telephone:      (212) 259-8320
                        Facsimile:      (212) 259-6333

            if to the Investor:

                        Crescent International Ltd.
                        c/o GreenLight (Switzerland) SA
                        84, av Louis-Casai
                        P.O. Box 42
                        1216 Geneva, Cointrin
                        Switzerland
                        Attention:      Mel Craw/Maxi Brezzi
                        Telephone:      +41 22 791 71 69
                        Facsimile:      +41 22 929 53 94


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<PAGE>   11
            with a copy (which shall not constitute notice) to:

                        Clifford Chance Rogers & Wells LLP
                        200 Park Avenue
                        New York, NY  10166
                        Attention:  Sara P. Hanks, Esq./Earl S. Zimmerman, Esq.
                        Telephone:  (212) 878-8000
                        Facsimile:  (212) 878-8375

                        Either party hereto may from time to time change its
address or facsimile number for notices under this Section 12 by giving at
least ten (10) days' prior written notice of such changed address or facsimile
number to the other party hereto.

            Section 13. Miscellaneous. This Protective Warrant and any term
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. The headings in this Protective Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.


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<PAGE>   12
                        IN WITNESS WHEREOF, this Protective Warrant was duly
executed by the undersigned, thereunto duly authorized, as of the date first
set forth above.



APPLIEDTHEORY CORPORATION


By:
            Name:
            Title:



Attested:


By:
            Name:
            Title:      Secretary


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