Document:

<PAGE>

                                                                   Exhibit 10.10
                                  RIDER NO. 1
                                       To
                              LEASE SCHEDULE NO. 1
                                       To
                                MASTER AGREEMENT
                          Dated As Of December 4, 1998

               This Rider No. 1 (the "Rider") is entered into between BancBoston
     Leasing Inc. ("Lessor") and American TeleSource International, Inv.
     ("Lessee"), is contemporaneous with and amends the above-referenced Lease
     Schedule together with all riders and amendments thereto, (the "Lease
     Schedule") which incorporates the terms and conditions of above-referenced
     Master Agreement by and between Lessor and Lessee (the "Master Agreement").
     It is the intention of Lessor and Lessee that, upon execution, this Rider
     shall constitute a part of the Lease Schedule and the Master Agreement.

     IN CONSIDERATION OF the mutual covenants and promises as hereinafter set
forth, Lessor and Lessee hereby agree as follows:

1.   All capitalized terms used in this Rider shall, unless otherwise defined,
     have the meanings set forth in the Lease Schedule. The terms of this Rider
     shall apply only to the equipment (the "Equipment") set forth on the Lease
     Schedule.

2.   To add a new Section 8 to the Lease Schedule, as follows:

          "8. Tax Indemnification. In the event any of the Equipment
          is, at any time during the Term of the Lease, located
          outside the United States (the "Foreign Equipment"), Lessee
          agrees to pay, indemnify and hold Lessor harmless from any
          of the following Taxes, as hereinafter defined, attributable
          to the Foreign Equipment or the Lease as it relates thereto:
          (a) any sales, use, excise, import or export, value added,
          or similar tax or duty and any other tax or duty not based
          on Lessor's net income, and (b) any taxes required to be
          withheld or deducted from any payment required under the
          Lease from the Lessee and all such taxes and any additional
          amounts which the Lessor specifies as necessary to preserve
          the after-tax yield the Lessor would have received if such
          taxes were not imposed shall be paid by the Lessee; and (c)
          all government permit fees, license fees, customs fees or
          similar fees levied upon the Foreign Equipment or the Lease.
          All foregoing fees and taxes shall be referred to as Taxes.
          The Taxes to be paid pursuant to this Section are in
          addition to any other payment due under the Lease. The
          obligations and indemnities of Lessee under this Section 8
          shall continue in full force and effect, and shall survive,
          notwithstanding the expiration or other termination of this
          Master Agreement or the Lease Schedule".

     The terms and conditions of this Rider shall prevail where there may be
conflicts or inconsistencies with the terms and conditions of the Lease Schedule
as it applies to the Equipment.

     IN WITNESS WHEREOF, Lessor and Lessee, by their duly authorized
representatives, have executed and delivered this Rider which is intended to
take effect as a sealed instrument as of the date of the Lease Schedule.

Accepted and Agreed to at Boston, Massachusetts
BANCBOSTON LEASING INC                            AMERICAN TELESOURCE
                                                  INTERNATIONAL, INC.
By: _______________________________            By: /s/ H. Douglas Saathoff
Title: ____________________________            Title:  CFO

                                      33
<PAGE>

                              LEASE SCHEDULE NO. 1
                                       TO
                                MASTER AGREEMENT
                          Date as Of December 4, 1998

This is Counterpart No. 2 of 2 which has been serially numbered and manually
executed.  To the extent that this document constitutes chattel paper under
Article 9 of the Uniform Commercial Code of the Commonwealth of Massachusetts,
no security interest in this document may be created through transfer or
possession of any counterpart other than Counterpart No. 1.

     This Lease Schedule dated as of the 21/st/ day of January, 1999 is attached
to and made a part of that certain Master Agreement ("Master Agreement") dated
December 4, 1998 between BANCBOSTON LEASING INC ("Lessor") and American
Telesource International, Inc. ("Lessee").

I.   Equipment Location:

12500 Network Blvd. Suite 407
San Antonio, TX 78249

<TABLE>
<CAPTION>
Equipment Description:

Invoice 192047
                                        Equipment                               Acquisition
Quantity  Manufacturer/Supplier  Description                               Cost
<S>                              <C>                                       <C>            <C>
     1    Network Equipment                  INSTALLATION                       $xxxxx
          Technologies, Inc.                 INSTALLATION

Invoice 192048

     1    Network Equipment                  P2P-0192D                                    $xxxxx
          Technologies, Inc.                 POWER SUPPLY, 48-60VDC, DC
     3                                       P2L-0148N                                    $xxxxx
                                       MOD.TRK,E3,NRDN     95

     1                                       P2L-015OR                                    $xxxxxx
                                       MOD,ACS,MAIN,TXN,RDNT
     8                                       P2L-0115                                     $xxxxxx
                             MOD,PR,E1,CE+75 TXN,NRDNT
     1                                       P2N-0606D                                    $xxxxxxx
                                       PROMINA 2000, DC, MULTISRVC
     1                                       P2R-0700U                                    $xxxxxxx
                                       P2000 REMOTEACCESS UNIT,
                                       120VAC
     1                                       P2S-278ML                                    $xxxxxxx
                                       PVP, FMS/CMS S/W ADD-ONS-LIC
     1                                       P2S-301ML                                    $xxxxxxx
                                       PVP, FMS, OMS FMS FOUNDATION
     1                                       P2SW-0600                                    $xxxxxxx
                                       PROMINA 2000 S/W-INITIAL
                                       LICENSE

Invoice 192050
     1    Network Equipment                  097013L-009                                  $xxxxxxx
          Technologies, Inc.                 PS, STAGING SERVICES

Invoice 192051
     1    Network equipment                  EOS-GXT ONLINE DBL CONV            $xxxxx
          Technologies, Inc.                 LIEBERT GXT1500-RT-120 UPS
     1                                       EOS-CISCO760                       $xxxxx
                                 CISCO 766M ISDN ROUTER
     2                                       EOS-US ROBOTICS V.34               $xxxxx
                                 US ROBOTICS SPORTSTER 33.6 MODEM
                                       V3
     2                                       EOS-LMR4TA-01                      $xxxxx
                                 LANTRONIX LMR8TA-01 MIN HUB 8R
     3                                       EOS-LRSI-T-01                      $xxxxx
                                 LANTRONIX REMOTE ACCESS SERVER
     2                                       EOS-ADTRAN TSU 100 V.35                      $xxxxx
                                 ADTRAN TSU 100 V3.5 CSU/DSU
     1                                       EOS-A21UFE1A9P SUN ULTRA           $xxxxx
                                 SUN ULTRA 5 MDL 270 128MB 4GB FLOP
     1                                       EOS-X7121A SUN MONITOR                       $xxxxx
                                       SUN X7121A 21" COLOR MONITOR
     1                                       EOS-X1032A SUN ETHERNET            $xxxxx
                                       SUN X470A ADAPTER & X1032A
                                       INSTALL
     1                                       EOS-SG-XTAP8MM-010A TAPE           $xxxxx
                                       SUN SG-XTAP*MM-010A U/14GB
                                       8M
     1                                       EOS-SOLS-251-C SOLARIS                       $xxxxx
                                       SUN X3856A CABLE W/PWR SOLARIS 2.5.1.
     1                                       NET HANDLING FEE                             $xxxxx

Invoice 192056
     1    Network Equipment                  INSTALL                                      $xxxxx
          Technologies Inc,                  INSTALLATION

Invoice 192284
     1    Network Equipment                  PS, STAGING SERVICES               $xxxxx
          Technologies, Inc.

Invoice 192285
     1    Network Equipment                  EXPORT                                       $xxxxx
          Technologies, Inc.                 EXPORT SERVICES

Invoice 193015
     1    Network Equipment                  EOS-J1128AB                                  $xxxxxx
          Technologies, Inc.                 HP OPENVIEW VER.4.1/250 OR
                                       LESS IP
     1                                       EOS-SUPPORT UDATE LTU                        $xxxxx
                                 HP PHONE/SAME DAY SYS
                                       SUPPORT 1 YR
     1                                       EOS-HP 5.01 CD-ROM                 $xxxxx
                                       HP NETWORK NODE MANAGER
                                       5.01 CD-ROM
     1                                       EOS-UPDATE CD-ROM                  $xxxxx
                                       HP SUPPORT FOR CD-ROM ONE
                                       YEAR
     1                                       EOS-HP 5.01 DOC FOR UNIX           $xxxxx
                                       HP NETWORK NODE MGR 5.01
                                       DOCUMENT
     1                                       EOS0HP 5.0X DOC FOR UNIX           $xxxxx
                                       PHONE SUPPORT FOR HP NODE
                                        MGR
     1                                       EOS-NET SHUTDOWN SOFTWARE                    $xxxxx
                                       UPS SHUTDOWN S/W FOR SUN
                                       SOLARIS
Invoice 193079
     1    Network Equipment                  PS-TAC                             $xxxxx
          Technologies, Inc.                 ANNUAL TAC&PARTS
                                       MAINTENANCE

     Equipment Location:

     Roberto Rodriguez Saavadra
     Andador 21 No.7
     Col. Benito Juarez
     Nvo. Laredo, Tamps 88274
     R.F.C.-ROSR-540630-9J7

     Equipment Description:

Invoice 192049

     1    Network Equipment                  P2P-01920                               $xxxxx
          Technologies, Inc.                 POWER SUPPLY, 115-23 VAC, AC
     3                                       P2L-0148N                               $xxxxx
                                       MOD.TRK,E3,NRDNT
     1                                       P2L-0150R                               $xxxxx
                                       MOD,ACS MAIN, TXN, RDNT
     8                                       P2L-0155N                               $xxxxx
                                       MOD, PR, E1, CE+75 TXN, NRDNT
     1                                       P2N-0606A                               $xxxxx
                                       PROMINA 2000, AC, MULTISRVC
     1                                       P2R-0700U                               $xxxxx
                                       P2000REMOTE ACCESS UNIT,
                                       120VAC
     1                                       P2SW-0600                               $xxxxx
                                       PROMINA 2000 S/W-INITIAL
                                       LICENSE
     2                                       P2A-129AU                               $xxxxx
                                       CBL, POWER, 115V

Invoice 192048

          1.                                 PSL-0148N                               $xxxxx
                                       MOD.TRK,E3,NRDNT

                                 Texas Up-Front Tax (7.75%)                     $xxxxxx

                                                  Total Acquisition Cost:  $xxxxxxx
</TABLE>

2.   Lease Term: thirty-six (36) months commencing on 4/15/99.
                                                      -------

3.   Rent: The rent during this Lease Term shall be payable in that number of
     consecutive payments and in the amount indicated below. The first rent
     payment is due on April 15, 1999 subsequent payments are due on the 15/th/
     day of each subsequent month.

     Payment No.         Monthly Rent
     -----------         ------------
        1-36             $16,634.36 n advance plus applicable taxes
                              (amount to be paid on the fifteen of each month)

4.   Purchase Option Price:  $1.00

5.   Security Interest; Remedies: Lessor and Lessee agree that this Lease
     Schedule constitutes a lease intended as security within the meaning of
     Article 9 of the Uniform Commercial Code ("UCC") as adopted by
     Massachusetts. Accordingly, Lessee hereby assigns and grants to Lessor a
     lien, claim and continuing security interest in the Equipment, additions,
     replacements and proceeds thereof including, without limitation, proceeds

xxxxx - Confidential treatment requested by registrant. Omitted materials filed
        separately with the Commission.

                                      34
<PAGE>

     of all insurance policies. Such lien, claim and continuing security
     interest shall secure the payment and performance of all obligations of
     Lessee to Lessor under this Lease Schedule as well as all other obligations
     and indebtedness of Lessee to Lessor, whether direct or indirect, absolute
     or contingent, due or to become due, now existing or hereafter arising. In
     connection with the foregoing, Lessor shall hold legal title to, but not
     beneficial ownership of, the Equipment as additional security for the
     obligations of Lessee under this Lease Schedule. Any reference in the
     Master Agreement to "title" to the Equipment as held by Lessor shall mean,
     for purposes of this Lease Schedule, legal title.

     Upon the occurrence of an Event of Default, without limiting any of the
     rights of Lessor under Section 12 of the Master Agreement, Lessor may
     pursue the rights and remedies of a secured party under the UCC of
     Massachusetts or any other jurisdiction, and recover such other actual
     damages as may be incurred by Lessor. In addition, Lessor may sell, lease
     or otherwise dispose of any or all of the Equipment, whether or not in the
     possession of Lessor, at public or private sale and with or without notice
     to Lessee, which notice is hereby expressly waived by Lessee, to the extent
     permitted by, and not inconsistent with, applicable law.

7.   Terms of Schedule: Lessor and Lessee agree that this Lease Schedule shall
     constitute a lease of the Equipment described in Section 1 above subject to
     the terms and conditions of which are hereby incorporated by reference in
     this Lease Schedule and made a part hereof to the same extent as if such
     terms and conditions were set forth in full herein. Terms used in this
     Lease Schedule and not otherwise defined herein shall have the meanings set
     forth in the Master Agreement. In the event of a conflict between the
     Master Agreement and the Lease Schedule, the terms and conditions of this
     Lease Schedule shall prevail.

     IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Schedule to be
     duly executed by their authorized representatives as of this 15/th/ day of
                                                                  -----
     April, 1999.
     -----  ----

     ACCEPTED AT BOSTON, MASSACHUSETTS

     LESSOR                                  LESSEE
     BANCBOSTON LEASING INC.                 AMERICAN TELESOURCE INT'L., INC

     By: /s/ Angela Petrone                  By: /s/ H. Douglas Saathoff
         ----------------------------            -----------------------------

     Title: Assistant Vice President         Title: Chief Financial Officer
            -------------------------               --------------------------

                                      35
<PAGE>

                                                               February 19, 1999

BancBoston Leasing Inc.
100 Federal Street
Mail Stop 01-09-01
Attn.: Angela Petrone
Boston, MA 02110

              RE: Master Agreement dated December 4, 1998 between
                  American TeleSource International, Inc. and BancBoston
              Leasing Inc. (Master Agreement")
              -------------------------------

Dear Ms. Petrone:

This letter is written to acknowledge and confirm certain matters relating to
the leasing of certain capital equipment manufactured by Network Equipment
Technologies, Inc. ("NET") which BancBoston Leasing Inc. as lessor ("Lessor")
has agreed to lease to American TeleSource International, Inc. ("Lessee")
pursuant to the Master Agreement, and specifically Lease Schedule No. 1 dated
February 19, 1999 to the Master Agreement (" Lease Schedule 1").

Lessee acknowledges that it agreed, at Lessor's request, to make a ten percent
(10%) security deposit based upon the Acquisition Cost relating to the Equipment
subject to Lease Schedule 1.  Lessee erroneously made said security deposit to
NET rather than to Lessor.  Further, the amount which Lessee paid to NET was
based upon its information and belief that the Acquisition Cost for the subject
Equipment was $426,975.00, so that the ten percent (10%) security deposit Lessee
forwarded to NET was $42,697.50.  In fact, the Acquisition Cost relating to the
Equipment subject to Schedule No. 1  was $493,174.33, so that the original ten
percent (10%) security deposit should have been in the amount of $49,317.33.  In
effect, the security deposit that Lessee made to NET was short $6,619.83.

Lessee forwards to BBL herewith said $6,619.83 shortfall, via Check #24544, and
                                                                     -----
acknowledges and agrees that NET should forward the balance of $42,697.50 to
Lessor, thereby providing Lessor with the agreed upon amount of ten percent
(10%) of the Acquisition Cost for schedule 1, or $49,317.33.

The $49,317.33, ten percent (10%) security deposit, will be held by Lessor
and/or an affiliate of Lessor in an interest bearing cash collateral account
pursuant to a Pledge Agreement of even date herewith by and between Lessor and
Lessee, with the interest remitted semi-annually to Lessee directly by Lessor.

Lessee further recognizes that Lessor will fund to NET the amount of $493,174.33
the total amount of the Acquisition Cost of the Equipment relating to schedule
1; and Lessee will remit monthly lease payments to Lessor pursuant to Schedule
1.

                         AMERICAN TELSOURCE INTERNATIONAL, INC.

                         /s/  H. Douglas Saathoff
                         By:  H. Douglas Saathoff
                         Its: CFO

                                      36
<PAGE>

                     CERTIFICATE OF ACCEPTANCE AND WAIVER
                            To LEASE SCHEDULE NO. 1
              Dated as of January 21, 1999 (the "Lease Schedule")
   To Master Agreement dated as of December 4, 1998 (the "Master Agreement")
        Between American TeleSource International, Inc. ("Lessee") and
                       BancBostonLeasing Inc. (Lessor")

1.   EQUIPMENT ACCEPTANCE ; LEASE COMMENCEMENT:
     -----------------------------------------

In order to induce Lessor to commence the Lease Term of the Lease Schedule and
to agree to pay the vendor of the Equipment the Equipment Cost thereof when due,
Lessee hereby certifies, covenants and represents: (a) that the Equipment has
been delivered but not yet fully installed at the location(s) specified on the
Lease Schedule, (b) that Lessee nevertheless desires to accept the Equipment for
all purposes under the Lease Schedule as of the date hereof (the "Commencement
Date"), to commence as of the date hereof the Lease Term including all of
Lessee's obligations under the Lease Schedule and the Master Agreement, and to
instruct Lessor to pay promptly the vendor of the Equipment the Equipment Cost
thereof, (c) that, notwithstanding that the Equipment has not yet been fully
installed, Lessee irrevocably waives any and all rights to revoke, reject,
repudiate or cancel the Lease Schedule and, as between Lessee and Lessor (but
not as between Lessee and vendor), Lessee hereby waives any and all rights to
inspect and reject the Equipment as nonconforming or for any other reason; (d)
that rent including Monthly rent for all the Equipment shall commence on the
Commencement Date and shall not be subject to abatement, offset, reduction,
defense, counterclaim, or recoupment for any reason whatsoever.  Lessee hereby
authorizes and instructs Lessor to insert the payment dates and the Lease Term
commencement date, if applicable, in the Lease Schedule.

Lessee: AMERICAN TELESOURCE INTERNATIONAL,INC.

By: /s/ H. Douglas Saathoff

Name: H. Douglas Saathoff

Title:  CFOS

Date: March 29, 1999
            --

                                      37
<PAGE>

PLEDGE AGREEMENT

     This Agreement is made as of the 21/st/ day of January, 1999 among American
TeleSource International, Inc., a Texas corporation with its principal place of
business at 12500 Network Blvd., San Antonio, TX 78249 (The "Lessee") and
BancBoston Leasing Inc., a Massachusetts corporation with its principal place of
business at 100 Federal Street, Boston, MA 02110 ("Lessor" and "Agent").

     WHEREAS, the Lessor is providing certain leasing accommodations to the
Lessee pursuant to and evidenced by a Master Agreement dated as of December 4,
1998, and all Lease Schedules, Exhibits, and Riders thereto (the "Master
Agreement"); and

     WHEREAS, in consideration of such accommodations, the Lessee has agreed to
secure payment and performance of all obligations arising under the Master
Agreement by granting the Lessor a first lien and continuing security interest
in cash in an amount of not less than ten percent (10%) of the Acquisition Cost
of the Equipment leased under the master Agreement (subject to adjustment to be
negotiated by the Lessor and the Lessee for future lease schedules if and to the
extent that the total amount secured by this Pledge Agreement exceeds
$900,000.00) excluding interest earned thereon (the "cash Collateral").

NOW THEREFORE, for the mutual considerations herein contained, the parties
hereby agree as follows:

     1.   Cash collateral.  The term "Cash Collateral" as used herein shall mean
          ---------------
all Cash Collateral delivered to the Lessor pursuant to this Agreement and all
additions, substitutions, accessions, and proceeds thereto and thereof.

     2.   Pledge.  As collateral security for the payment and performance in
          ------
full of any and all obligations, indebtedness, and liabilities, and direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Lessee to the Lessor under the Master Agreement and
under any other agreement executed in connection therewith (all of the foregoing
collectively, the "Obligations"), the Lessee hereby pledges and assigns all of
its right, title, and interest, and grants a first lien and continuing security
interest to the Lessor, in the Cash Collateral.

     3.   Future Pledges.  To the extent the Lessor extends additional
          --------------
leasing accommodations to the Lessee, the Lessee agrees to pledge and deposit
with the Lessor, or at its direction, additional cash, to be additional Cash
Collateral, subject to the lien and security interest granted herein and to the
terms and provisions of this Agreement in such kinds and amounts as the parties
may agree.

     4.   Cash Collateral Account.  The Lessor shall, directly or through its
          -----------------------
agents, deposit the Cash Collateral in an interest-bearing First Rate Account
("Account ") with BancBoston.  The Account shall be in the name of "BancBoston
Leasing Inc., Agent, as Collateral Pledge for American TeleSource International,
Inc., Collateral Account", and shall be administered by the agents or employees
of Agent and/or BankBoston.  Any notices given with respect to the Collateral or
the Account shall be sent to Lessor.  Lessor's security interest in and to the
Cash Collateral shall extend only to the principal sum deposited by the Lessee,
and any and all interest which may accrue on the Account ("Interest") shall be
remitted semi-annually to the Lessee directly by BankBoston.  In the event that
Lessor receives any payment of or in respect of Interest on the Account, it
shall hold such payment in trust for the benefit of the Lessee and shall
immediately upon receipt notify the Lessee thereof and remit such payment to the
Lessee in accordance with the Lessee's written instructions.  Any interest
earned on such Interest payments received by Lessor while in Lessor's possession
or under its control shall also belong to the Lessee and be held in trust by
Lessor for the Lessee and shall be remitted to the Lessee along with the
original Interest payment.  In no event shall Lessor or BankBoston be entitled
to deduct, withhold, credit or set off any Interest or interest thereon against
any amounts owing from the Lessee to Lessor or BankBoston, respectively, under
this Agreement or any other agreement.

                                      38
<PAGE>

     5.   Return of Collateral.  The Cash Collateral shall be held in the
          --------------------
Account until the Obligations shall no longer be outstanding, whereupon Lessor
shall assign and deliver to the Lessee such of the Cash Collateral, with
interest earned thereon, as has not been applied by Lessor pursuant to the terms
hereof and which is held by Lessor or by Agent on Lessor's behalf.

     6.   Remedies Upon Default.  Upon an Event on Default, as hereinafter
          ---------------------
defined, either (i) Lessor, at its option, may transfer at any time to itself or
its nominee, or (ii) Agent, at Lessor's option and direction, shall transfer to
Lessor or Lessor's nominee any or all of the Cash Collateral and hold same as
security hereunder or apply it to any of the Obligations in such order and
manner as the Lessor may determine, all at the Lessor's sole discretion.

     7.   Representations, Warranties and Covenants of the Lessee.
          -------------------------------------------------------

  7.1  The Lessee represents and warrants that it is a corporation duly
organized, existing, and in good standing under the laws of the State of Texas
and is duly qualified and in good standing in every other state where to nature
of its properties or the conduct of its business requires such qualification,
except where the failure to be so qualified would not have a material adverse
effect on the Lessee's business or financial condition.

  7.2  The Lessee represents and warrants that the execution, delivery, and
performance of and under this Agreement are within the Lessee's corporate
powers, have been duly authorized, and are not in contravention of law or the
terms of the Lessee's charter, bylaws, or other incorporation papers, or of any
indenture, agreement, or undertaking to which it is a party or by which it is
bound.

  7.3  The Lessee represents  and warrants that it is the legal and equitable
owner of the Cash Collateral and holds same free and clear of all liens,
charges, encumbrances, and security interests of every kind and nature
whatsoever, and the Lessee covenants that it will not assign this Agreement or
any interest herein or in the Cash Collateral or any part thereof, or otherwise
pledge, encumber, or grant any option with respect to the Cash Collateral or any
part thereof, except with the prior written consent of the Lessor.

  7.4  The Lessee represents and warrants that it has good right and legal
authority to assign, deliver, and/or create a security interest in the Cash
Collateral in the manner hereby provided or contemplated, and the Lessee
covenants that it will defend its title to the Cash Collateral against all
claims of all persons or entities.

  7.5  The Lessee covenants that it shall not make or allow to be made any
withdrawals of cash constituting Cash Collateral, or any part thereof, including
the income and proceeds therefrom other than as expressly set forth in this
Agreement.

  7.6  The Lessee covenants that it shall at all reasonable times and from time
to time, following reasonable notice given to the Lessee by Lessor, allow the
Lessor, by or through any of its officer, agents, attorneys, or accountants, to
examine, inspect, or make copies or extracts from the Lessee's books and records
at Lessor's sole expense.

  7.7  The Lessee covenants that it shall at all times do, make, execute, and
deliver all such additional and further acts and instruments as the Lessor may
at any time reasonably request in connection with the administration and
enforcement of this Agreement or relative to the Cash Collateral, in order to
vest more completely in and assure or make available to the Lessor any of the
Cash Collateral and rights herewith or hereafter granted, assigned, or
transferred to the Lessor, and to carry into effect the provisions and intent of
this Agreement.

     8.   Attorney-in-Fact.  The Lessor is hereby irrevocably appointed by the
          ----------------
Lessee as the Lessee's attorney-in-fact for the purposes of carrying out the
provisions of this Agreement and taking any action and executing any

                                      39
<PAGE>

instrument which the Lessor may deem necessary or advisable to accomplish the
purposes hereof upon the Lessee's failure to take such action or execute such
instrument as and when required by this Agreement.

     9.   Default.  An event of default ("Event of Default") shall exist
          -------
hereunder if:

     (a)  the Lessee breaches any of the foregoing warranties and covenants and
          such breach continues for ten (10) days following receipt of notice
          from Lessor;

     (b)  the Lessee from and after the date hereof does or attempts to
          encumber, sell, transfer, or otherwise dispose of any of the Cash
          Collateral or any interest therein without the prior written consent
          of the Lessor;

     (c)  any of the Cash Collateral is attached or levied upon or seized in any
          legal proceeding or is held by virtue of any lien or distress, and
          such attachment, levy or seizure continues from ten (10) days
          following receipt of notice from Lessor to remove same;

     (d)  the Lessee or any maker, endorser, guarantor, or surety of or for any
          of the Obligations makes or has made any representation or warranty
          herein, or in the Master Agreement, or in any financial statement
          delivered pursuant to the Master Agreement, which is or was false or
          materially misleading when made;

     (e)  the Lessee fails to pay or perform when due any of the Obligations and
          such failure is not cured within the applicable grace period; and/or

     (f)  any of the following occurs: the death, dissolution, termination of
          existence, insolvency, business failure, appointment of a receiver for
          any part of the property, assignment for the benefit of creditors, or
          the commencement of any proceeding under any bankruptcy or insolvency
          laws, of, by, or against the Lessee or nay maker, endorser, guarantor,
          or surety of or for any of the Obligations.

     10.  Waivers.  The Lessee waives presentment, notice, protest, notice of
          -------
acceptance of this agreement, notice of any leasing or other financial
accommodations extended, extensions granted, collateral received or delivered,
or any other action taken in reliance thereon, all demands and notices in
connection with the delivery, acceptance, performance, or enforcement of any
Obligation as to which any of the Cash Collateral is pledged, and all other
demands and notices of any description (other than notice of default), and
assents to any extension or postponement of the time of payment or any other
such indulgence, or any substitution, exchange, or release of collateral, and to
the addition or re Master Agreement of any party or person primarily or
secondarily liable for any of the Obligations.

     11.  Rights and Remedies of the Lessor.  Upon the occurrence of an Event of
          ---------------------------------
Default, or at any time thereafter, without further notice or demand, the Lessor
may declare this Agreement to be in default and shall thereafter have, in
addition to all other rights and remedies, the rights and remedies of a secured
party under the Uniform Commercial Code of Massachusetts and of any and all
other applicable jurisdictions.  Right is expressly granted to the Lessor to
apply the Cash Collateral to the Obligations in such order and manner as the
Lessor may determine and all at the Lessor's sole discretion.

     12.  Miscellaneous
          -------------

     12.1 No delay or omission on the part of the Lessor in exercising any

                                      40
<PAGE>

right, power, privilege, or remedy hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power, privilege, or
remedy by the Lessor preclude any other or further exercise thereof or the
exercise of any other right, power or remedy.

     12.2  No waiver of any right, power, privilege, or remedy shall be
effective unless in writing and signed by the Lessor, and such waiver on one
occasion shall not be construed as a bar to or waiver of any right, power,
privilege, or remedy on any other occasion.

     12.3  All remedies of the Lessor are cumulative and are not exclusive
of any other remedy provided in law or equity.

     12.4  This Agreement shall not be amended or modified, nor shall any of the
Collateral be released nor shall the pledge or security interest created hereby
be extended, except by a writing signed by the Lessee and the Lessor.

     12.5  Any notice required to be given by the Lessee, Lessor/Agent
hereunder shall be deemed adequately given if hand delivered or if sent
(returned receipt requested) by overnight mail or by certified U.S. mail to any
other parts at its address stated herein or at such other place as such party
may designate in writing to the other parties.  Notice shall be effective on the
earlier of (i) actual receipt or (ii) the day after deposit in overnight mail or
the third day-after deposit in U.S. mail.

     12.6  All terms not defined herein shall have the meanings set forth in the
Master Agreement.

     13.   Termination.  This Agreement shall terminate when all the Obligations
           -----------
secured hereby have been fully paid and performed.  At such time, the Collateral
shall be distributed as provided in Section 5 above.

     14.   Severability.  The provisions of this Agreement are severable, and if
           ------------
any clause or provision shall be held invalid and unenforceable in whole or in
part in any jurisdiction, then such invalidity or inenforceability shall affect
only such clause or provision or part hereof in such jurisdiction and shall not
in any manner affect such clause or provision in any other jurisdiction or any
other clause or provision of this Agreement in any jurisdiction.

     15.   Successors and Assigns.  This Agreement and the terms, covenants, and
           ----------------------
conditions hereof shall inure to the benefit of the successors and assigns of
the Lessor.  The Lessee shall not assign any of its rights or obligations
herein.

     16.   Law and Jurisdiction.  The validity and interpretation of this
           --------------------
Agreement and the rights and obligations of the parties shall be governed by the
laws of the Commonwealth of Massachusetts (without reference to the choice of
law doctrine thereof), and the Lessee irrevocably consents to the jurisdiction
of the courts of the Commonwealth of Massachusetts and of nay federal court
located therein in connection with any action or proceeding arising out of or
related to this agreement.

     IN WITNESS WHEREOF, the Lessee has caused this Agreement to be duly
executed as an instrument under seal as of the day and year first written above.

                                        AMERICAN TELESOURCE INTERNATIONAL, INC.

                                                By:
                                                     -------------------------
                                                Title:
                                                       -----------------------

Agreed to and Accepted:

BANCBOSTON LEASING INC.

By:
   -------------------------
Title:
      ----------------------

                                      41
<PAGE>

MASTER LEASE AGREEMENT

          This MASTER AGREEMENT, dated as of the 4/th/ day of December, 1998,
which together with all riders and amendments now or hereafter executed and made
a part hereof (the "Master Agreement"), is made at Boston, Massachusetts by and
between BANCBOSTON LEASING INC. ("Lessor"), a Massachusetts corporation with its
principal place of business at 100 Federal Street, Boston, Massachusetts 02110
and American Telesource International, Inc. ("Lessee"), a Texas corporation with
its principal place of business at 12500 Network Blvd., San Antonio, TX 78249.

Section 1.  LEASE.  In consideration of the premises, the Lessee hereby leases
from the Lessor the Equipment described in the Lease Schedule attached hereto
and agrees to pay rent and perform the terms and conditions set forth herein.
Throughout this Lease, "rent" means (a) the amounts set forth in the Lease
Schedule as "Monthly Rent", (b) all taxes set forth in Section 8 below, and (c)
all other monetary amounts due hereunder.

Section 2.  TERM AND PURCHASE OPTION.  Lessee shall signify its acceptance of
the Equipment by promptly executing and delivering to Lessor a Certificate of
Acceptance.  This Lease will start on the day Lessee accepts physical possession
of the Equipment from the vendor of the equipment as set forth in the Lease
Schedule ("Vendor"), provided, Lessor is not bound hereunder until Lessor's
authorized officer signs this Lease.  Once the Lease begins it will continue for
the Term, which shall be the number of full months shown on the Lease Schedule
(initial term) plus the interim term (the number of days from the starting date
through the last day of the month in which such start occurs).  At the end of
the Term, Lessee shall purchase the Equipment for the amount set forth in the
Lease Schedule.

Section 3.  RENT.  Lessee agrees to pay Lessor rent throughout the Term monthly
in advance for the initial term at the Monthly Rent as set forth in the Lease
Schedule, and monthly in arrears at 1/30 of the Monthly Rent for each day of the
interim term.  Rent is due on the 1/st/ of each month.  If all or any part of a
payment is not received within ten (10) days of its due date, Lessor will charge
Lessee 1.5% per month interest on such amount beginning with such due date (or,
if less in either case, the maximum amount permitted by law).  Lessor intends
that the rents, fees and charges to be paid by Lessee hereunder conform to all
provisions of law; however, should any such amounts be in excess of the
applicable amounts allowed by law, upon notice thereof Lessor will promptly
refund such excess to Lessee.

Section 4.  DELIVERY, SELECTION AND PURCHASE OF EQUIPMENT.  Lessee agrees that
Lessor is not responsible for delivery or installation of the Equipment.  Lessee
will not have any claim against Lessor if the manufacturer, supplier or Vender
delays in delivery or installation.  Lessee agrees that LESSOR DID NOT SELECT,
MANUFACTURE, SUPPLY OR INSPECT THE EQUIPMENT AND HAS NO EXPERTISE REGARDING THE
EQUIPMENT.  LESSEE SELECTED THE EQUIPMENT BASED ON LESSEE'S OWN JUDGEMENT.
LESSOR IS BUYING THE EQUIPMENT AT LESSEE'S REQUEST ONLY FOR THE PURPOSE OF
LEASING IT TO LESSEE.  Lessee represents that before signing this Lease (i) it
approved the supply contract (if any) between Lessor and Vendor and (ii) it has
been advised in writing that Lessee may have rights against the Vender under a
supply contract and that Lessee may contact the Vendor to determine the extent
of these rights.  To the extent transferable, Lessor hereby transfers all
warranties of Vendor or manufacturer to Lessee.

Section 5.  NO WARRANTIES.  Lessee agrees that: (A) LESSOR IS LEASING THE
EQUIPMENT TO LESSEE "WHERE IS, AS IS AND "WITH ALL FAULTS".  LESSOR DISCLAIMS
ANY REPRESENTATION, GUARANTY OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING ANY
IMPLIED WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE
REGARDING THE EQUIPMENT; (B) Lessor will not be liable for any loss or injury
caused to Lessee or any other person or property (including lost profits and
consequential, incidental or special damages) caused by the Equipment or its
failure to operate properly;

                                      42
<PAGE>

(C) IF THE EQUIPMENT DOES NOT WORK AS REPRESENTED BY THE VENDOR, OR IF THE
VENDOR OR ANY OTHER PERSON FAILS TO PROVIDE ANY SERVICE OR IF THE EQUIPMENT IS
UNSATISFACTORY FOR ANY OTHER REASON, LESSEE WILL MAKE ANY CLAIM SOLELY AGAINST
THE VENDOR OR OTHER PERSON AND WILL MAKE NO CLAIM AGAINST LESSOR; and (D) Lessor
makes no representation and disclaims any warranty that the Equipment is "Year
2000 Compliant", that is, that any computer application or other systems, if
any, which may be contained or included in the Equipment will be able to
recognize and perform properly, date sensitive functions involving certain dates
prior to and any date after, December 31, 1999.

Lessee shall not assert any defenses against Lessor or its assignees arising
from the condition of the Equipment, or the use or intended use of the
Equipment.

Section 6.  USE, REPAIRS AND SERVICE.  LESSEE CERTIFIES THAT THE EQUIPMENT WILL
BE USED SOLELY FOR BUSINESS OF COMMERCIAL PURPOSES AND NOT FOR PERSONAL, FAMILY
OR HOUSEHOLD PURPOSES.  The Equipment shall be located at the address set forth
in the Lease Schedule, which shall be located in the continental U.S., or such
other location consented to in writing by the Lessor.  Lessee will not make any
alterations to the Equipment and will not allow it to be used by anyone except
Lessee or Lessee's employees.  Lessee will keep the equipment in good working
order and in accordance with its manufacturer's service standards, ordinary wear
and tear excepted, will service the Equipment as recommended by its
manufacturer, will enter into any maintenance contract required by the
manufacturer or supplier at its own cost and expense, and will permit its
possession, use and operation only in accordance with the law, applicable
regulations, and the terms of Lessee's insurance policies.  All replacement
parts and additions will automatically become Lessor's property, but will be
transferred to Lessee, together with the Equipment, at the end of the Term for
the purchase price set forth in the Lease Schedule.

Section 7.  LOSS; DAMAGE; INSURANCE.  Lessee assumes all risk of loss of the
Equipment.  Lessee will keep the Equipment insured against all risks of loss in
an amount not less than its replacement cost (listing Lessor as loss payee and
additional insured) and against public liability in an amount satisfactory to
Lessor (listing Lessor as additional insured).  Lessee will provide upon the
acceptance of each item of Equipment, and as requested subsequently, a
certificate of insurance or such other evidence of coverage.  In the event of
loss, theft, destruction, damage, condemnation or other taking of the Equipment,
Lessee shall at Lessor's option (i) replace the Equipment with like equipment in
good repair and condition or (ii) pay to the Lessor (1) past due rent, (2) all
future rent to become due during the unexpired Term discounted to present value
at 5%, and (3) all other amounts due under this Agreement.

Section 8.  TAXES AND OTHER FEES.  Lessee agrees this is a "net" lease and will
pay when due (or reimburse Lessor upon demand), and on a net after-tax basis
shall indemnify and defend Lessor against (a) all filing, services,
administrative and user fees, all taxes, assessments, levies, excises, fees and
all other governmental charges that are at anytime imposed or levied upon or
assessed against (i) the Equipment, (ii) any rent or other sum payable hereunder
(other than any net income tax measured solely by the net income of the Lessor)
or (iii) this Lease or the leasehold created herein, or which arise in respect
of any use, operation or possession of the Equipment and (b) all penalties and
similar charges, whether penal or administrative; and all other fees of any kind
which may be charged regarding the leasing, use or ownership of the Equipment
with respect to the Term.  Lessee shall also reimburse Lessor for any and all
costs (including reasonable attorney's fees) incurred in connection with any tax
or fee described in this Section 8.  Lessee's obligations set forth in this
Section 8 will survive and continue after the end of the Term.

Section 9.  INDEMNIFICATION.  Lessee agrees to defend Lessor against,
indemnify, and reimburse Lessor for (on an after-tax basis) all claims, actions,
suits, proceedings, costs, expenses and damages and liabilities in any way
relating to or arising out of this Agreement or any Schedule, including, but not
limited to, any claim or demand

                                      43
<PAGE>

based upon STRICT OR ABSOLUTE LIABILITY IN TORT, any violation of environmental
regulations or patent, trademark or other comparable infringements. Lessee shall
also reimburse Lessor for all attorney's fees and expenses (whether or not
litigation is commenced) incurred in connection with such claims or demands.
Lessee's obligations set forth in this Section 9 will survive and continue after
the end of the Term.

Section 10.  TITLE.  The Equipment will remain at all times, sole and exclusive
property of Lessor and, if requested by Lessor, Lessee agrees to affix
identifying marks to the Equipment designating the ownership by Lessor.  The
Equipment is considered personal property, and Lessee will not permit it to
become affixed to real estate.  If Lessor requests, Lessee will provide
recordable waivers of any landlord's or mortgagee's interest in the Equipment.
Lessee shall keep the Equipment at all times free and clear from all liens,
security interests or encumbrances of any nature except those created hereunder
or those arising under operation of law incurred in the ordinary course of
business which are not delinquent or are being contested in good faith.  Upon
request of Lessor, Lessee shall execute any documents or instruments which may
be necessary or appropriate to confirm, to record or to give notice of ownership
including financing statements under the Uniform Commercial Code.

Section 11.  SURRENDER TO LESSOR.  Immediately upon the expiration of the
Initial Term or any Extended Term or at any other termination of this Master
Agreement, Lessee shall surrender the Equipment to Lessor in good repair and
working order, reasonable wear and tear excepted, by assembling and delivering
the Equipment, ready for shipment, to a place or carrier, as Lessor may
designate, within the state in which the Equipment was originally delivered to
Lessee or to which the Equipment was thereafter moved with the written consent
of Lessor.  All costs of removal, assembly, packing, and delivery of such
equipment to the place designated by Lessor shall be borne by Lessee.

Section 12.  DEFAULT AND REMEDIES.   Lessee agrees that Lessee will be in
default if (a) Lessee fails to pay rent as required hereunder and such failure
continues after Lessor gives Lessee five (5) days written notice; (b) Lessee
fails to maintain insurance as required herein and such failure continues for
ten (10) days following written notice from Lessor; (c) Lessee does not comply
with any other term of this Lease or any Schedule and such failure to comply
continues after Lessor has given Lessee thirty 930) days written notice; (d) the
Equipment is taken or encumbered by any security interest, encumbrance, lien or
charge, choate or inchoate; (e) Lessee dies, sells all or substantially all of
its assets, or goes out of business; (f) Lessee becomes insolvent, makes or
consents to an assignment for the benefit of creditors or to the appointment of
a receiver or trustee; (g) a petition is filed by or against Lessee under the
Bankruptcy Code; (h) any information supplied to Lessor directly or indirectly
by Lessee or Lessee's agents, including all financial information, is not true,
correct and complete; (i) Lessee breaches any term of any loan, credit agreement
or other material obligation; or (j) any party to any guaranty, letter of
credit, subordination or credit agreement or other undertaking ("Undertaking"),
given for the benefit of Lessor and obtained in connection with this Master
Agreement or Lease Schedule, breaches, fails to continue, contests, or purports
to terminate or to disclaim the Undertaking; or such the Undertaking becomes
unenforceable; or a guarantor of this Master Agreement or any Lease Schedule
shall die, cease to exist or terminate its independent operations; or any event
or condition set forth in subsections (f), (g), (h), or (i) of this Section 12
shall occur with respect to any guarantor or other person responsible, in whole
or n part, for payment or performance of this Master Agreement or any Lease
Schedule.

If any of these defaults occurs, Lessee agrees that Lessor may take one or more
of the following actions, in addition to other actions available under law or
equity (including without limitation all remedies available under the Uniform
Commercial Code): (A) Lessor may cancel this Lease and/or recover damages
against Lessee, not as a penalty but as a liquidation for all purposes of what
is due to Lessor, including: (1) past due rent, (2) all future rent to become
due during the unexpired term discounted to present value at 5%, (3) all late
fees and any other charges, reimbursements or payments due and to become due,
(4) reasonable attorney's fees and all costs and expenses incurred in
repossessing, storing, repairing, refurbishing, leasing or selling the
equipment; and (5) the amounts indemnified in Section 8 (provided, no amount
shall be duplicated); and/or (B) Lessor may obtain a court order permitting

                                      44
<PAGE>

repossession.  Lessee will be liable for any deficiency following repossession
and sale.  If notice of sale is required to be given to Lessee, Lessee agrees
ten (10) days prior to notice is sufficient.  Lessor may also sue for the
amounts listed in clause "A" above without first remarketing the Equipment, and
Lessee waives any rights under any law that provides otherwise.

Section 13.  ASSIGNMENT.  Lessor may assign any or all of its interest under
this Lease and/or the Equipment to a new owner or secured party at any time
without prior notice to Lessee, and such new owner or secured party may also
assign its rights.  Lessee agrees that the new owner or secured party will have
the same rights Lessor had under this Lease but will not have to perform any of
Lessor's obligations 9in which case Lessor will retain those obligations).
Lessee also agrees that the rights of the new owner or secured party will not be
subject to any claims, defenses or set-offs that lessee may have against Lessor
or any other person and that  any assignment by Lessor would not materially
change Lessee's obligations under this Lease or substantially increase Lessee's
burdens or risks or constitute a delegation of material performance.  LESSEE MAY
NOT ASSIGN (TRANSFER) ANY OF ITS INTERESTS UNDER THE LEASE TO ANY OTHER PERSON
OR SUBLEASE ANY OF THE EQUIPMENT WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR,
ANY ATTEMPTED SUBLEASE OR ASSIGNMENT WILL BE VOID AND IS A DEFAULT HEREUNDER.

Section 14.  REPRESENTATIONS AND WARRANTIES.  Lessee represents and warrants
that (i) Lessee is duly organized, validly existing and in good standing in the
jurisdiction of its organization and each jurisdiction in which it conducts
business, (ii) this Agreement and each Schedule have been and will be duly
authorized and upon execution by Lessee shall constitute the legal, valid and
binding obligation of Lessee enforceable against Lessee in accordance with its
terms, (iii) there are no pending or threatened actions or proceedings before
any court, arbitrator or administrative agency that would have a material
adverse effect on Lessee's business, (iv) Lessee is not in default under any
obligation for borrowed money or for the deferred purchase price of property,
any lease agreement or any other agreement; (v) the financial and other
information that Lessee has submitted, or will submit, is or will at the time of
the submission be accurate and true; and (vi) Lessee has reviewed the relevant
areas within its business and has developed or is developing a program to become
on a timely basis "Year 2000 Compliant", and from time to time, at the request
of Lessor, Lessee shall provide to Lessor such updated information or
documentation as is requested regarding the status of its efforts to become year
2000 Compliant.

Section 15.  FINANCIAL STATEMENTS.  Lessee shall annually, within ninety (90)
days after the close of its fiscal year, furnish to Lessor financial statements
of Lessee, including a balance sheet as of the close of such year and statements
of income and retained earnings for such year, prepared in accordance with
generally accepted accounting principles, consistently applied from year to
year, and certified by independent public accountants for Lessee reasonably
acceptable to Lessor.  If requested by Lessor, Lessee shall also provide
quarterly financial statements of Lessee, similarly prepared for each of the
first three quarters of each fiscal year, certified (subject to normal year-end
audit adjustments) by the chief financial officer of Lessee and furnished to
Lessor within forty-five (45) days following the end of each quarter, and such
other financial information as may be reasonably requested by Lessor.

Section 16.  NON-CANCELABLE AGREEMENT: NO OFFSET.  NEITHER THIS AGREEMENT NOR
ANY SCHEDULE MAY BE CANCELED FOR ANY REASON WHATSOEVER.  LESSEE SHALL NOT BE
ENTITLED TO ANY ABATEMENT OF ANY PAYMENT DUE HEREUNDER OR ANY SCHEDULE, NOR TO
ANY DEFENSE, REDUCTION, OFFSET, COUTERCLAIM, RECOUPMENT OR DEDUCTION FOR ANY
REASON WHATSOEVER NOR TO ANY EXCUSE FROM THE PERFORMANCE OF ANY OF ITS
OBLIGATIONS UNDER THIS LEASE OR ANY SCHEDULE.  LESSEE'S OBLIGATIONS HEREUNDER
ARE ABSOLUTE AND UNCONDITIONAL.

Section 17.  LESSOR'S PAYMENT; POWER OF ATTORNEY. If Lessee fails to perform
any obligation hereunder, Lessor may at its option (but without any obligation
to anyone to do so) perform such obligation, and

                                      45
<PAGE>

Lessee shall reimburse Lessor on demand for any costs incurred plus interest at
the rate of 18% per annum or, if lower, the maximum rate allowable by law from
the date of any such payment by Lessor. Lessee irrevocably appoints Lessor as
Lessee's attorney-in-fact to do any act that Lessee is obligated to do under
this Agreement and to exercise any and all rights and powers as Lessee might
exercise with respect to the Equipment.

Section 18.  PLACE FOR SUIT; JURY WAIVER.  Lessee agrees that: this Lease will
be governed by the internal laws of the Commonwealth of Massachusetts, LESSEE
WAIVES TRAIL BY JURY AND CONSENTS TO PERSONAL JURISDICTION IN THE STATE AND
FEDERAL COURTS IN MASSACHUSETTS; ANY LEGAL PAPERS FOR ANY LAW SUIT WILL BE
PROPERLY SERVED IF MAILED BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, WITH
DELIVERY TO LESSEE; and ANY LAWSUIT ARISING OUT OF THIS LEASE, REGARDLESS OF WHO
FILES THE SUIT, MUST BE BROUGHT ONLY IN THE STATE OR FEDERAL COURTS IN
MASSACHUSETTS AND NOT ELSEWHERE, UNLESS LESSOR AGREES IN WRITING OR ELECTS
OTHERWISE.

Section 19.  GENERAL.  Any notice to Lessor under this Lease shall be in writing
and shall be deemed given if mailed by registered or certified mail, return
receipt requested, or by overnight courier via a nationally recognized provider
of such services, to Lessor at the address listed on the front page of this
Lease, Attention: Contract Manager, Angela Petrone, Vendor Finance, or if to
Lessee, mailed first class to the address similarly shown unless changed in
writing. Notice to Lessee of a Lessor assignment constitutes such change of
address.  Notices shall be effective upon receipt.  This Lease constitutes the
entire agreement between Lessor and Lessee and supersedes any prior oral or
written agreements.  This Lease shall be binding upon and inure to the benefit
of the parties hereto and their permitted successors and assigns.  This Lease
nay not be modified, amended or terminated except by a writing signed by Lessee
and an Executive Officer of Lessor.  For the purposes of any arbitration, court
proceeding, audit, accounting or otherwise, Lessee agree that any copy,
reproduction or image (electronic or otherwise) kept of this Lease by Lessor in
the ordinary course of business shall be conclusive, final and binding upon the
parties hereto and evidence for all purposes.

Section 20.  NON-WAIVER.  Lessor's failure to require performance by Lessee of
any of the provisions of the Lease shall not be a waiver thereof.

Section 21.  CAPTIONS.  Captions in this Lease are for convenience only.  Lessee
certifies that Lessee has read ALL TWENTY-ONE (21) Sections of this Lease and
all applicable Schedules and agrees to all terms herein.

LESSEE: AMERICAN TELESOURCE         Accepted At Boston, Massachusetts
      INTERNATIONAL, INC.           LESSOR: BANCBOSTON LEASING INC.

Printed Name: H. Douglas Saathoff

By:/s/ H. Douglas Saathoff          By:__________________________________

Title:VP Finance                    Title:_______________________________

Date: 12/7/98                       Date:________________________________

                                      46<PAGE>

                                                                     Exhibit 4.1
                           NETWORK TELESYSTEMS, INC.

                                1993 STOCK PLAN

                    (as amended through December 20, 1996)

     1.   Purposes of the Plan.  The purposes of this Stock Plan are to attract
          --------------------
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business.  Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.  Stock purchase rights may also be granted
under the Plan.

     2.   Definitions.  As used herein, the following definitions shall apply:
          -----------

          (a) "Administrator" means the Board or any of its Committees appointed
               -------------
pursuant to Section 4 of the Plan.

          (b) "Board" means the Board of Directors of the Company.
               -----

          (c) "Code" means the Internal Revenue Code of 1986, as amended.
               ----

          (d) "Committee"  means a Committee appointed by the Board of Directors
               ---------
in accordance with Section 4 of the Plan.

          (e) "Common Stock" means the Common Stock of the Company.
               ------------

          (f) "Company" means Network Telesystems, Inc., a California
               -------
corporation.

          (g) "Consultant" means any person, including an advisor, who is
               ----------
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.

          (h) "Continuous Status as an Employee or Consultant"  means that the
               ----------------------------------------------
employment or consulting relationship is not interrupted or terminated by the
Company, any Parent or Subsidiary.  Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of:  (i) any leave of
absence approved by the Board, including sick leave, military leave, or any
other personal leave; provided, however, that for purposes of Incentive Stock
Options, any such leave may not exceed ninety (90) days, unless reemployment
upon the expiration of such leave is guaranteed by contract (including certain
Company policies) or statute; provided, further, that on the ninety-first (91st)
day of any such leave (where reemployment is not guaranteed by contract or
statute) the Optionee's Incentive Stock Option shall automatically convert to a
Nonstatutory Stock Option (ii) transfers between locations of the Company or
between the Company, its Parent, its Subsidiaries or its successor.
<PAGE>

          (i) "Employee" means any person, including officers and directors,
               --------
employed by the Company or any Parent or Subsidiary of the Company.  The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.

          (j) "Exchange Act" means the Securities Exchange Act of 1934, as
               ------------
amended.

          (k) "Fair Market Value" means, as of any date, the value of Common
               -----------------
Stock determined as follows:

               (i)   If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported, as quoted
on such exchange or system for the last market trading day prior to the time of
determination) as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;

               (ii)  If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
or;

               (iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

          (l) "Incentive Stock Option" means an Option intended to qualify as an
               ----------------------
incentive stock option within the meaning of Section 422 of the Code.

          (m) "Nonstatutory Stock Option" means an Option not intended to
               -------------------------
qualify as an Incentive Stock Option.

          (n) "Officer" means a person who is an officer of the Company within
               -------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

          (o) "Option" means a stock option granted pursuant to the Plan.
               ------

          (p) "Optioned Stock" means the Common Stock subject to an Option or a
               --------------
Stock Purchase Right.

          (q) "Optionee" means an Employee or Consultant who receives an Option
               --------
or Stock Purchase Right.

          (r) "Parent" means a "parent corporation", whether now or hereafter
               ------
existing, as defined in Section 424(e) of the Code.

          (s) "Plan" means this 1993 Stock Plan.
               ----

          (t) "Restricted Stock" means shares of Common Stock acquired pursuant
               ----------------
to a grant of a Stock Purchase Right under Section 11 below.

                                      -2-
<PAGE>

          (u) "Share" means a share of the Common Stock, as adjusted in
               -----
accordance with Section 12 below.

          (v) "Stock Purchase Right" means the right to purchase Common Stock
               --------------------
pursuant to Section 11 below.

          (w) "Subsidiary" means a "subsidiary corporation", whether now or
               ----------
hereafter existing, as defined in Section 424(f) of the Code.

     3.   Stock Subject to the Plan.  Subject to the provisions of Section 12 of
          -------------------------
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 1,500,000 shares of Common Stock.  The shares may be
authorized, but unissued, or reacquired Common Stock.

          If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.

     4.   Administration of the Plan.
          --------------------------

          (a) Initial Plan Procedure.  Prior to the date, if any, upon which the
              ----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a committee appointed by the Board.

          (b) Plan Procedure After the Date, if any, Upon Which the Company
              -------------------------------------------------------------
Becomes Subject to the Exchange Act.
-----------------------------------

               (i)   Administration With Respect to Directors and Officers.
                     -----------------------------------------------------
With respect to grants of Options or Stock Purchase Rights to Employees who are
also officers or directors of the Company, the Plan shall be administered by (A)
the Board if the Board may administer the Plan in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") with
respect to a plan intended to qualify thereunder as a discretionary plan, or (B)
a committee designated by the Board to administer the Plan, which committee
shall be constituted in such a manner as to permit the Plan to comply with Rule
16b-3 with respect to a plan intended to qualify thereunder as a discretionary
plan. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.

               (ii)  Multiple Administrative Bodies.  If permitted by Rule
                     ------------------------------
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.

               (iii) Administration With Respect to Consultants and Other
                     ----------------------------------------------------
Employees.  With respect to grants of Options or Stock Purchase Rights to
---------
Employees or Consultants who are neither directors nor officers of the Company,
the Plan shall be administered by (A) the Board or (B) a committee designated by
the Board, which committee shall be constituted in such a manner as to satisfy
the legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws, of the Code, and of
any applicable stock exchange (the "Applicable Laws").  Once appointed, such

                                      -3-
<PAGE>

Committee shall continue to serve in its designated capacity until otherwise
directed by the Board.  From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.

          (c) Powers of the Administrator.  Subject to the provisions of the
              ---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:

               (i)    to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;

               (ii)   to select the Consultants and Employees to whom Options
and Stock Purchase Rights may from time to time be granted hereunder;

               (iii)  to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;

               (iv)   to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;

               (v)    to approve forms of agreement for use under the Plan;

               (vi)   to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder;

               (vii)  to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock;

               (viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;

               (ix)   to determine the terms and restrictions applicable to
Stock Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights; and

               (x)    to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.

          (d) Effect of Administrator's Decision.  All decisions, determinations
              ----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options or Stock Purchase Rights.

     5.   Eligibility.
          -----------

          (a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants.  Incentive Stock Options may be granted
only to Employees.  An Employee or Consultant

                                      -4-
<PAGE>

who has been granted an Option or Stock Purchase Right may, if otherwise
eligible, be granted additional Options or Stock Purchase Rights.

          (b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option.  However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.

          (c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.

          (d) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his or her right or the Company's right to
terminate his or her employment or consulting relationship at any time, with or
without cause.

          (e) The following limitations shall apply to grants of Options to
Officers:

              (i)   no Officer shall be granted in any fiscal year of the
Company, Options to purchase more than 50,000 Shares, provided that, a newly-
hired Officer may in addition receive a one-time grant of up to 400,000 Shares
upon acceptance of employment with the Company; and

              (ii)  over the remaining term of the Plan, no Officer shall be
granted Options to purchase more than 600,000 Shares.

     The foregoing limitations set forth in this Section 5(e) are intended to
satisfy the requirements applicable to Options intended to qualify as
"performance-based compensation" (within the meaning of Section 162(k) of the
Code).  In the event the Administrator determines that such limitations are not
required to qualify Options as performance-based compensation, the Administrator
may modify or eliminate such limitations.

     6.   Term of Plan.  The Plan shall become effective upon the earlier to
          ------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 18 of the Plan.  It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.

     7.   Term of Option.  The term of each Option shall be the term stated in
          --------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof.  However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.

     8.   Option Exercise Price and Consideration.
          ---------------------------------------

          (a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:

                                      -5-
<PAGE>

              (i)  In the case of an Incentive Stock Option

                   (A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.

                   (B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.

              (ii) In the case of a Nonstatutory Stock Option

                   (A) granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.

                   (B) granted to any person, the per Share exercise price shall
be no less than 85% of the Fair Market Value per Share on the date of grant.

          (b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price, or
(6) any combination of the foregoing methods of payment.  In making its
determination as to the type of consideration to accept, the Board shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.

     9.   Exercise of Option.
          ------------------

          (a) Procedure for Exercise; Rights as a Shareholder.  Any Option
              -----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.

              An Option may not be exercised for a fraction of a Share.

              An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or

                                      -6-
<PAGE>

cause to be issued) such stock certificate promptly upon exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.

              Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

          (b) Termination of Employment or Consulting Relationship.  In the
              ----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company (but not in the event of an Optionee's change of
status from Employee to Consultant (in which case an Employee's Incentive Stock
Option shall automatically convert to a Nonstatutory Stock Option on the ninety-
first (91st) day following such change of status) or from Consultant to
Employee), such Optionee may, but only within such period of time as is
determined by the Administrator, of at least thirty (30) days, with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that Optionee was entitled
to exercise it at the date of such termination.  To the extent that Optionee was
not entitled to exercise the Option at the date of such termination, or if
Optionee does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.

          (c) Disability of Optionee.  If an Optionee ceases to be an Employee
              ----------------------
or Consultant as a result of the Optionee's disability, the Optionee may
exercise an Option to the extent the Option is vested on the date of
termination, but only within twelve (12) months from the date of such
termination (and in no event later than the expiration date of the term of such
Option as set forth in the option agreement dated).  If such disability is not a
"disability" as such term is defined in Section 22(e)(3) of the Code, in the
case of an Incentive Stock Option such Incentive Stock Option shall
automatically cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option on the day three months
and one day following such termination.  If, on the date of termination, the
Optionee is not vested as to the entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan.  If, after termination,
the Option is not exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

          (d) Death of Optionee.  In the event of termination of an Optionee's
              -----------------
Continuous Status as an Employee or Consultant as a result of the death of an
Optionee, the Option may be exercised, at any time within twelve (12) months
following the date of death (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death.  To the extent that Optionee was not entitled to
exercise the Option at the date of death, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.

          (e) Rule 16b-3.  Options granted to persons subject to Section 16(b)
              ----------
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.

          (f) Buyout Provisions.  The Administrator may at any time offer to buy
              -----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

                                      -7-
<PAGE>

     10.  Non-Transferability of Options and Stock Purchase Rights.  Options and
          --------------------------------------------------------
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.

     11.  Stock Purchase Rights.
          ---------------------

          (a) Rights to Purchase.  Stock Purchase Rights may be issued either
              ------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan.  After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed sixty (60) days from the date
upon which the Administrator made the determination to grant the Stock Purchase
Right.  The offer shall be accepted by execution of a Restricted Stock purchase
agreement in the form determined by the Administrator.  Shares purchased
pursuant to the grant of a Stock Purchase Right shall be referred to herein as
"Restricted Stock."

          (b) Repurchase Option.  Unless the Administrator determines otherwise,
              -----------------
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
Disability).  The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company.  The repurchase option shall lapse at such rate as the Committee
may determine, but at a minimum rate of 20% per year.

          (c) Other Provisions.  The Restricted Stock purchase agreement shall
              ----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.  In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.

          (d) Rights as a Shareholder.  Once the Stock Purchase Right is
              -----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company.  No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 12
of the Plan.

     12.  Adjustments Upon Changes in Capitalization or Merger.
          ----------------------------------------------------

          (a) Changes in Capitalization.  Subject to any required action by the
              -------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration."  Such adjustment

                                      -8-
<PAGE>

shall be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option or Stock Purchase Right.

          (b) Dissolution or Liquidation.  In the event of the proposed
              --------------------------
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action.  To the extent it has
not been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.

          (c) Merger.  In the event of a merger of the Company with or into
              ------
another corporation, the Option or Stock Purchase Right shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation.  If, in such event, the
Option or Stock Purchase Right is not assumed or substituted, the Option or
Stock Purchase Right shall terminate as of the date of the closing of the
merger.  For the purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the merger, the option or right
confers the right to purchase, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right immediately prior to the merger, the
consideration (whether stock, cash, or other securities or property) received in
the merger by holders of Common Stock for each Share held on the effective date
of the transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger
was not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger.

     13.  Time of Granting Options and Stock Purchase Rights.  The date of grant
          --------------------------------------------------
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board.  Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant.

     14.  Amendment and Termination of the Plan.
          -------------------------------------

          (a) Amendment and Termination.  The Board may at any time amend,
              -------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent.  In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.

          (b) Effect of Amendment or Termination.  Any such amendment or
              ----------------------------------
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.

                                      -9-
<PAGE>

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

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

     16.  Reservation of Shares.  The Company, during the term of this Plan,
          ---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

          The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.

     17.  Agreements.  Options and Stock Purchase Rights shall be evidenced by
          ----------
written agreements in such form as the Board shall approve from time to time.

     18.  Shareholder Approval.  Continuance of the Plan shall be subject to
          --------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted.  Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.

     19.  Information to Optionees and Purchasers.  The Company shall provide to
          ---------------------------------------
each Optionee and to each individual who acquired Shares pursuant to the Plan,
during the period such Optionee or purchaser has one or more Options or Stock
Purchase Rights outstanding, and, in the case of an individual who acquired
Shares pursuant to the Plan, during the period such individual owns such Shares,
copies of annual financial statements.  The Company shall not be required to
provide such statements to key employees whose duties in connection with the
Company assure their access to equivalent information.

                                      -10-

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