Document:

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                                                                    EXHIBIT 10.4

              NON-EMPLOYEE DIRECTOR STOCK OPTION AND RETAINER PLAN

                                       OF

                       DAISYTEK INTERNATIONAL CORPORATION

Daisytek International Corporation, a corporation organized under the laws of
the State of Delaware, hereby adopts this Non-Employee Director Stock Option and
Retainer Plan. The purposes of this Plan are as follows:

(1) To further the growth, development and financial success of the Company by
providing incentives to its non-employee Directors by assisting them to become
owners of the Company's Common Stock and thus to benefit directly from its
growth, development and financial success.

(2) To enable the Company to obtain and retain the services of qualified
non-employee Directors in order to contribute to the long-range success of the
Company by providing and offering them an opportunity to become owners of the
Company's Common Stock.

                                    ARTICLE I

                                   DEFINITIONS

Whenever the following terms are used in this Plan, they shall have the meaning
specified below unless the context clearly indicates to the contrary. The
masculine pronoun shall include the feminine and neuter and the singular shall
include the plural, where the context so indicates.

Section 1.1 - Board

"Board" shall mean the Board of Directors of the Company.

Section 1.2 - Code

"Code" shall mean the Internal Revenue Code of 1986, as amended.

Section 1.3 - Committee

"Committee" shall mean the Committee appointed by the Board, as provided in
Section 6.1.

Section 1.4 - Company

"Company" shall mean Daisytek International Corporation, a Delaware corporation.

Section 1.5 - Director

"Director" shall mean a member of the Board who is not an Employee.

                                       -1-
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Section 1.6 - Effective Date

"Effective Date" shall mean the date upon which this Plan shall be approved by
the stockholders of the Company in accordance with the Company's bylaws.

Section 1.7 - Employee

"Employee" shall mean any employee (as defined in accordance with the
regulations and revenue rulings then applicable under Section 3401(c) of the
Code) of the Company, or of any corporation which is then a Parent Corporation
or a Subsidiary.

Section 1.8 - Exchange Act

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

Section 1.9 - Non-Qualified Option

"Non-Qualified Option" shall mean an Option which is not an incentive stock
option and is not qualified under Section 422 of the Code.

Section 1.10 - Officer

"Officer" shall mean an officer of the Company, as defined in Rule 16a-1(f)
under the Exchange Act, as such Rule may be amended in the future.

Section 1.11 - Option

"Option" shall mean an option to purchase Common Stock of the Company granted
under the Plan.

Section 1.12 - Optionee

"Optionee" shall mean a Director to whom an Option is granted under the Plan.

Section 1.13 - Parent Corporation

"Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

Section 1.14 - Plan

"Plan" shall mean this Non-Employee Director Stock Option and Retainer Plan of
Daisytek International Corporation.

Section 1.15 - Retainer

"Retainer" shall mean the annual cash retainer payable to each Director for
services as a member of the Board and any committee or committees of the Board.

                                       -2-
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Section 1.16 - Rule 16b-3

"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such
Rule may be amended in the future.

Section 1.17 - Secretary

"Secretary" shall mean the Secretary of the Company.

Section 1.18 - Securities Act

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

Section 1.19 - Shares

"Shares" shall mean shares of the Company's Common Stock, $.01 par value.

Section 1.20 - Subsidiary

"Subsidiary" shall mean any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

Section 1.21 - Termination

"Termination" shall mean the time when the Director no longer serves as a member
of the Board, including, but not by way of limitation, a termination by
resignation, discharge, death or retirement.

                                   ARTICLE II

                             SHARES SUBJECT TO PLAN

Section 2.1 - Shares Subject to Plan

The Shares of stock subject to this Plan shall be shares of the Company's Common
Stock, $.01 par value. The aggregate number of such Shares which may be issued
pursuant to this Plan shall be 50,000.

Section 2.2 - Unexercised Options

If any Option expires or is canceled without having been fully exercised, the
number of Shares subject to such Option but as to which such Option was not
exercised prior to its expiration or cancellation, may again be optioned
hereunder, subject to the limitations of Section 2.1.

Section 2.3 - Changes in Company's Shares

In the event that the outstanding Shares of Common Stock of the Company are
hereafter changed into or exchanged for a different number or kind of shares or
other securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend or combination of shares, appropriate adjustments shall
be made by the Committee in the number and kind of Shares which may be issued
hereunder, including adjustment to the number of Options to be issued to
Directors hereunder and adjustment to the aggregate number of Shares subject
hereto.

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                                   ARTICLE III

                      RETAINER FEES AND GRANTING OF OPTIONS

Section 3.1 - Payment of Retainer

(a) Commencing on the Effective Date, each Director may elect under the Plan to
receive payment of any Retainer (in such installments as such Retainer shall be
payable) in Shares, in lieu of cash, by submitting a written election (the
"Notice of Election") to the Company. The Notice of Election shall become
effective six months following the date of the Notice of Election or such
earlier date as may be permitted under Rule 16b-3 (the "Election Effective
Date") and, from and after the Election Effective Date, all Retainers payable to
the electing Director (whether in installments or otherwise) shall be payable in
Shares in the manner set forth herein.

(b) Each Notice of Election shall become effective on its Election Effective
Date and shall continue in effect until revoked by the electing Director in a
written notice of revocation (the "Notice of Revocation") delivered to the
Company; provided, however, that no Notice of Revocation shall become effective
until six months following the date of the Notice of Revocation or such earlier
date as may be permitted under Rule 16b-3.

(c) If no Notice of Election is submitted to the Company, all Retainers shall be
payable in cash.

Section 3.2 - Number of Shares

The number of Shares to be issued to each Director electing to have his or her
Retainer paid in Shares shall be determined by dividing the dollar amount of the
then payable Retainer by the fair market value of the Shares as of the most
recent trading day immediately prior to the date the Retainer is otherwise
payable. No fractional Shares shall be issued and any fractional Share shall be
rounded to the nearest whole Share. Subject to the terms and provisions hereof,
all Shares shall be issued in certificate form in the name of the Director (or
any designee) as promptly as practicable following the date of payment. For
purposes of this Section, fair market value shall be determined in accordance
with Section 4.2(b) below.

Section 3.3 - Eligibility

Each Director shall be granted Options in accordance with the provisions set
forth herein.

Section 3.4 - Non-Qualification of Options

                  EACH OPTION SHALL BE A NON-QUALIFIED OPTION.

Section 3.5 - Granting of Options

(a) Each person who is a Director on the Effective Date shall receive an Option
to purchase 1,000 Shares as of such date.

(b) Options shall be granted to each Director under this Plan with respect to
the Company's 1997 fiscal year and each fiscal year thereafter so long as this
Plan remains in effect, provided, however, that for each such fiscal year, the
Company's consolidated income from operations before taxes (excluding such
extraordinary, unusual or non-recurring items as the Committee shall determine
to be appropriate, in accordance with generally accepted accounting principles)
("EBT") must equal or exceed the projected EBT for such year as set forth in the
annual budget for such year approved by the Board within 90 days of the first
day of such fiscal year.

                                       -4-
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(c) No Options shall be granted to any Director in respect of the 1997 fiscal
year or any fiscal year thereafter if the Company's EBT for such fiscal year
does not equal or exceed the projected EBT for such year as aforesaid.

(d) For each fiscal year for which Options shall be granted hereunder, the
number of Options to be granted to each Director shall equal the sum of the
"Option Amount" plus the "Adjustment Amount." As used herein, the "Option
Amount" shall mean the number of Options granted to each Director hereunder for
the immediately preceding year (which shall be 1,000 for fiscal year 1996) and
the "Adjustment Amount" shall mean the product obtained by multiplying (1) the
percentage increase, if any, in the Company's EBT for such fiscal year over the
Company's EBT for the immediately preceding fiscal year by (2) the Option
Amount.

(e) Subject to the provisions set forth above, the Options to be granted to each
Director hereunder in respect of each fiscal year shall be granted to those
persons serving as Directors on the date of the Company's Annual Meeting of
Stockholders immediately following the last day of such fiscal year, provided
that such Director shall have attended at least 75% of the meetings of the Board
(which may include committee meetings) held during such fiscal year.

(f) For purposes of illustration, if the Company's fiscal 1997 EBT equals or
exceeds the projected EBT for such year, and if the Company's fiscal 1997 EBT is
10% greater than the Company's fiscal 1996 EBT, then each person serving as a
Director on the date of the Company's 1997 Annual Meeting of Stockholders (to be
held following the last day of the 1997 fiscal year) shall receive 1,100
Options, calculated as follows:

Option Amount = 1,000 = Options granted for fiscal year 1996 Adjustment Amount =
100 = 1,000 x 10% Options Granted = 1,100

                                   ARTICLE IV

                                TERMS OF OPTIONS

Section 4.1 - Option Agreement

Each Option shall be evidenced by a written Stock Option Agreement, which shall
be executed by the Optionee and an authorized Officer of the Company and which
shall contain such terms and conditions as are consistent with the Plan.

Section 4.2 - Option Price

(a) The price of the Shares subject to each Option shall be equal to 100% of the
fair market value of such Shares on the date such Option is granted.

(b) For purposes of the Plan, the fair market value of a Share of the Company's
Common Stock as of a given date shall be: (i) the closing price of a Share of
the Company's Common Stock on the principal exchange on which Shares of the
Company's Common Stock are then trading; or (ii) if such Common Stock is not
traded on an exchange but is quoted on NASDAQ or a successor quotation system,
(1) the last sales price (if the Company's Common Stock is then listed as a
National Market Issue under the NASD National Market System) or (2) the mean
between the closing representative bid and asked prices (in all other cases) for
the Company's Common Stock, in each case, on such date as reported by NASDAQ or
such successor quotation system; or (iii) if such Common Stock is not publicly
traded on an exchange and not quoted on NASDAQ or a successor quotation system,
the mean between the closing bid and asked prices for the Company's Common
Stock, on such date, as determined in good faith by the Committee; or (iv) if
the Company's Common Stock is not publicly traded, the fair market value
established by the Committee acting in good faith.

                                       -5-
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Section 4.3 - Commencement of Exercisability

(a) No Option may be exercised in whole or in part during the six months after
such Option is granted.

(b) Subject to the provisions of paragraph (c) below, each Option granted
hereunder shall be subject to the following cumulative vesting schedule:

(i) Until the date which is one year from the date of grant, the Option shall
not be vested and shall not be exercisable as to any of the shares subject
thereto;

(ii) From and after the date which is one year from the date of grant, the
Option shall vest and be exercisable as to 15% of the number of shares subject
thereto;

(iii) From and after the date which is two years from the date of grant, the
Option shall vest and be exercisable as to 50% of the original number of shares
subject thereto; and

(iv) From and after the date which is three years from the date of grant, the
Option shall be fully vested and be exercisable as to 100% of the number of
shares subject thereto.

(c) Upon the Termination of the holder of an Option, such portion of such Option
which has not then vested and become exercisable shall automatically become
fully vested and exercisable, provided, however, that such Termination shall not
be less than one year from the date of grant of such Option.

Section 4.4 - Expiration of Options

No Option may be exercised to any extent after the first to occur of the
following events:

(i) The expiration of ten years from the date the Option was granted; or

(ii) Except in the case of any Optionee who is disabled (within the meaning of
Section 22(e)(3) of the Code), the expiration of three months from the date of
the Optionee's Termination for any reason other than such Optionee's death; or

(iii) With respect to an Option held by an Optionee who is disabled (within the
meaning of Section 22(e)(3) of the Code), the expiration of one year from the
date of the Optionee's Termination for any reason other than such Optionee's
death unless the Optionee dies within said one-year period; or

(iv) The expiration of one year from the date of the Optionee's death with
respect to all Options held by such Optionee.

Section 4.5 - Adjustments in Outstanding Options

In the event that the outstanding Shares of the stock subject to Options are
changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend or
combination of shares, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares as to which all outstanding Options,
or portions thereof then unexercised, shall be exercisable, to the end that
after such event the Optionee's proportionate interest shall be maintained as
before the occurrence of such event. Such adjustment in an outstanding Option
shall be made without change in the total price applicable to the Option or the
unexercised portion of the Option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in Option price per share. Any such
adjustment made by the Committee shall be final and binding upon all Optionees,
the Company and all other interested persons.

                                       -6-
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                                    ARTICLE V

                               EXERCISE OF OPTIONS

Section 5.1 - Person Eligible to Exercise

During the lifetime of the Optionee, only such Optionee may exercise an Option
(or any portion thereof) granted to him; provided, however, that, unless
otherwise prohibited by Rule 16b-3, an Optionee may transfer all or any portion
of an Option to his spouse or immediate family member or any trust for the
benefit thereof. After the death of the Optionee, any exercisable portion of an
Option may, prior to the time when such portion becomes unexercisable under the
Plan, be exercised by his personal representative or by any person empowered to
do so under the deceased Optionee's will or under the then applicable laws of
descent and distribution.

Section 5.2 - Partial Exercise

At any time and from time to time prior to the time when any exercisable Option
or exercisable portion thereof becomes unexercisable under the Plan, such Option
or portion thereof may be exercised in whole or in part; provided, however, that
the Company shall not be required to issue fractional shares and the Committee
may, by the terms of the Option, require any partial exercise to be with respect
to a specified minimum number of shares.

Section 5.3 - Manner of Exercise

An exercisable Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary or his office of all of the following prior
to the time when such Option or such portion becomes unexercisable under the
Plan or the applicable Stock Option Agreement:

(a) Notice in writing signed by the Optionee or other person then entitled to
exercise such Option or portion, stating that such Option or portion is
exercised, such notice complying with all applicable rules established by the
Committee; and

(b)(i) Full payment (in cash or by check) for the Shares with respect to which
such Option or portion is thereby exercised; or

(ii)(A) Shares of the Company's Common Stock owned by the Optionee duly endorsed
for transfer to the Company or (B) subject to the timing requirements of Section
5.4, Shares of the Company's Common Stock issuable to the Optionee upon exercise
of the Option, with a fair market value (as determined under Section 4.2(b)) on
the date of Option exercise equal to the aggregate Option price of the Shares
with respect to which such Option or portion is thereby exercised; or

(iii) Any combination of the consideration provided in the foregoing subsections
(i) and (ii); and

(c) The payment to the Company (or other employer corporation) of all amounts
which it is required to withhold under federal, state or local law in connection
with the exercise of the Option; provided, that any combination of the following
may be used to make all or part of such payment: (i) Shares of the Company's
Common Stock owned by the Optionee duly endorsed for transfer or (ii) subject to
the timing requirements of Section 5.4, Shares of the Company's Common Stock
issuable to the Optionee upon exercise of the Option, valued in accordance with
Section 4.2(b) at the date of Option exercise; and

(d) Such representations and documents as the Committee, in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on Share certificates
and issuing stop-transfer orders to transfer agents and registrars; and

                                       -7-
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(e) In the event that the Option or portion thereof shall be exercised pursuant
to Section 5.1 by any person or persons other than the Optionee, appropriate
proof of the right of such person or persons to exercise the Option or portion
thereof.

Section 5.4 - Certain Timing Requirements

Shares of the Company's Common Stock issuable to the Optionee upon exercise of
the Option may be used to satisfy the Option price or the tax withholding
consequences of such exercise only (i) during the trading window period
following the date of release of the quarterly or annual summary statement of
sales and earnings of the Company as may be established by the Company for its
senior executives from time to time or (ii) pursuant to an irrevocable written
election by the Optionee to use Shares of the Company's Common Stock issuable to
the Optionee upon exercise of the Option to pay all or part of the Option price
or the withholding taxes made at least six months prior to the payment of such
Option price or withholding taxes.

Section 5.5 - Conditions to Issuance of Stock Certificates

The Shares of stock issuable and deliverable upon the exercise of an Option, or
any portion thereof, may be either previously authorized but unissued Shares or
issued Shares which have then been reacquired by the Company. The Company shall
not be required to issue or deliver any certificate or certificates for Shares
of stock issued in payment of any Retainer or purchased upon the exercise of any
Option or portion thereof prior to the fulfillment of all of the following
conditions:

(a) The admission of such Shares to listing on all stock exchanges on which such
class of stock is then listed; and

(b) The completion of any registration or other qualification of such Shares
under any state or federal law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body, if
any such registration or qualification may be necessary or advisable; and

(c) The obtaining of any approval or other clearance from any state or federal
governmental agency which may be necessary or advisable; and

(d) The payment to the Company (or other employer corporation) of all amounts
which it is required to withhold under federal, state or local law in connection
with the exercise of the Option; and

(e) The lapse of such reasonable period of time following the exercise of the
Option as the Secretary of the Company may establish from time to time for
reasons of administrative convenience.

                                   ARTICLE VI

                                 ADMINISTRATION

Section 6.1 - Committee

The Plan shall be administered by the Committee which shall consist of two or
more members of the Board, as the Board may appoint from time to time; provided,
however that, in the absence of such appointment, the Plan shall be administered
by the Board (in which event the term "Committee" as used herein shall mean the
Board); provided, further, however, that, notwithstanding the foregoing, the
Plan shall be construed, interpreted, implemented and administered in a manner
sufficient to comply with the provisions of Rule 16b-3, and, in particular, in
order to provide that the members of the Committee shall at all times satisfy
the requirements set forth therein.

                                       -8-
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Section 6.2 - Duties and Powers of Committee

It shall be the duty of the Committee to conduct the general administration of
the Plan in accordance with its provisions. The Committee shall have the power
to interpret the Plan and the Options and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret, amend or revoke any such rules.

Section 6.3 - Majority Rule

The Committee shall act by a majority of its members in office. The Committee
may act either by vote at a meeting or by a memorandum or other written
instrument signed by a majority of the Committee.

Section 6.4 - Compensation; Professional Assistance; Good Faith Actions

Members of the Committee shall receive such compensation for their services as
members as may be determined by the Board. All expenses and liabilities incurred
by members of the Committee in connection with the administration of the Plan
shall be borne by the Company. The Committee may employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Committee, the Company
and its Officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon all Optionees, the Company and all other interested
persons. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
the Options, and all members of the Committee shall be fully protected by the
Company in respect to any such action, determination or interpretation.

                                  ARTICLE VII

                                OTHER PROVISIONS

Section 7.1 - Options Not Transferable

Except as set forth in Section 5.1 hereof, no Option or interest or right
therein or part thereof shall be liable for the debts, contracts or engagements
of the Optionee or his successors in interest or shall be subject to disposition
by transfer, alienation, anticipation, pledge, encumbrance, assignment or any
other means whether such disposition be voluntary or involuntary or by operation
of law by judgment, levy, attachment, garnishment or any other legal or
equitable proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect; provided, however, that nothing
in this Section 7.1 shall prevent transfers by will or by the applicable laws of
descent and distribution.

Section 7.2 - Amendment, Suspension or Termination of the Plan

The Plan may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Committee; provided, however,
that no amendment or modification which requires shareholder approval under Rule
16b-3, if any, shall be effective in the absence of such approval. Neither the
amendment, suspension nor termination of the Plan shall, without the consent of
the holder of the Option, impair any rights or obligations under any Option
theretofore granted. No Option may be granted during any period of suspension
nor after termination of the Plan, and in no event may any Option be granted
under this Plan after the first to occur of the following events:

(a) March 31, 2006; or

(b) The expiration of ten years from the date the Plan is approved by the
Company's shareholders under Section 7.3.

                                       -9-
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Section 7.3 - Approval of Plan by Shareholders

This Plan will be submitted for the approval of the Company's shareholders
within 12 months after the date of the Board's initial adoption of the Plan. No
Options shall be granted prior to such shareholder approval. The Company shall
take such actions with respect to the Plan as may be necessary to satisfy the
requirements of Rule 16b- 3(b).

Section 7.4 - Effect of Plan Upon Other Option and Compensation Plans

The adoption of this Plan shall not affect any other compensation or incentive
plans in effect for the Company, any Parent Corporation or any Subsidiary.
Nothing in this Plan shall be construed to limit the right of the Company, any
Parent Corporation or any Subsidiary to (a) establish any other forms of
incentives or compensation for employees and Directors of the Company, any
Parent Corporation or any Subsidiary or (b) grant or assume options otherwise
than under this Plan in connection with any proper corporate purpose, including,
but not by way of limitation, the grant or assumption of options in connection
with the acquisition by purchase, lease, merger, consolidation or otherwise, of
the business, stock or assets of any corporation, firm or association.

Section 7.5 - Titles

Titles are provided herein for convenience only and are not to serve as a basis
for interpretation or construction of the Plan.

Section 7.6 - Conformity to Securities Laws

The Plan is intended to conform to the extent necessary with all provisions of
the Securities Act and the Exchange Act and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder, including
without limitation Rule 16b-3. Notwithstanding anything herein to the contrary,
the Plan shall be administered, and Options shall be granted and may be
exercised, only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, the Plan and Options
granted hereunder shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.

                                      -10-<PAGE>
                                                                   EXHIBIT 10.21

                             MASTER LEASE AGREEMENT

                        dated as of 9/16/99 ("AGREEMENT")

      THIS AGREEMENT, is between GENERAL ELECTRIC CAPITAL CORPORATION (together
with its successors and assigns, if any, "LESSOR") and DAISYTEK INTERNATIONAL,
INC. ("LESSEE"). Lessor has an office at ONE LINCOLN CENTRE, 5400 LBJ FREEWAY
SUITE 1280, L.B. 3, DALLAS, TX 75240. Lessee is a corporation organized and
existing under the laws of the State of Delaware. Lessee's mailing address and
chief place of business is 500 NORTH CENTRAL EXPRESSWAY, PLANO, TX 75074. This
Agreement contains the general terms that apply to the leasing of Equipment from
Lessor to Lessee. Additional terms that apply to the Equipment (term, rent,
options, etc.) shall be contained on a schedule ("SCHEDULE").

1.    LEASING:

      (a) Lessor agrees to lease to Lessee, and Lessee agrees to lease from
Lessor, the equipment ("EQUIPMENT") described in any Schedule signed by both
parties.

      (b) Lessor shall purchase Equipment from the manufacturer or supplier
("SUPPLIER") and lease it to Lessee if on or before the Last Delivery Date
Lessor receives (i) a Schedule for the Equipment, (ii) evidence of insurance
which complies with the requirements of Section 9, and (iii) such other
documents as Lessor may reasonably request. Each of the documents required above
must be in form and substance satisfactory to Lessor. Lessor hereby appoints
Lessee its agent for inspection and acceptance of the Equipment from the
Supplier. Once the Schedule is signed, the Lessee may not cancel the Schedule.

2.    TERM, RENT AND PAYMENT:

      (a) The rent payable for the Equipment and Lessee's right to use the
Equipment shall begin on the earlier of (i) the date when the Lessee signs the
Schedule and accepts the Equipment or (ii) when Lessee has accepted the
Equipment under a Certificate of Acceptance ("LEASE COMMENCEMENT DATE"). The
term of this Agreement shall be the period specified in the applicable Schedule.
The word "term" shall include all basic and any renewal terms.

      (b) Lessee shall pay rent to Lessor at its address stated above, except as
otherwise directed by Lessor. Rent payments shall be in the amount set forth in,
and due as stated in the applicable Schedule. If any Advance Rent (as stated in
the Schedule) is payable, it shall be due when the Lessee signs the Schedule.
Advance Rent shall be applied to the first rent payment and the balance, if any,
to the final rent payment(s) under such Schedule. In no event shall any Advance
Rent or any other rent payments be refunded to Lessee. If rent is not paid
within ten (10) days of its due date, Lessee agrees to pay a late charge of five
cents ($.05) per dollar on, and in addition to, the amount of such rent but not
exceeding the lawful maximum, if any. So long as Lessee maintains an Electronic
Payment System Account for the purpose of paying rent on each Rent Payment Date
specified in all Equipment Schedules governed by this Agreement, Lessor agrees
to waive any and all late charge obligations with respect to the payment of
rent. Lessee represents that the Electronic Payment System Account will have
sufficient funds to meet scheduled rent payments and any other amounts as and
when due and owing. Otherwise, if that's ever not the case, Lessee agrees to pay
a late charge of five cents ($.05) per dollar on, and in addition to, such rent
or other amount, but not exceeding the lawful maximum, if any.

3.    RENT ADJUSTMENT:

      (a) If, solely as a result of Congressional enactment of any law
(including, without limitation, any modification of, or amendment or addition
to, the Internal Revenue Code of 1986, as amended, ("CODE")), the maximum
effective corporate income tax rate (exclusive of any minimum tax rate) for
calendar-year taxpayers ("EFFECTIVE RATE") is higher than thirty-five percent
(35%) for any year during the lease term, then Lessor shall have the right to
increase such rent payments by requiring payment of a single additional sum. The
additional sum shall be equal to the product of (i) the Effective Rate
(expressed as a decimal) for such year less .35 (or, in the event that any
adjustment has been made hereunder for any previous year, the Effective Rate
(expressed as a decimal) used in calculating the next previous adjustment) times
(ii) the adjusted Termination Value (defined below), divided by (iii) the
difference between the new Effective Rate (expressed as a decimal) and one (1).
The adjusted Termination Value shall be the Termination Value (calculated as of
the first rent due in the year for
<PAGE>
which the adjustment is being made) minus the Tax Benefits that would be
allowable under Section 168 of the Code (as of the first day of the year for
which such adjustment is being made and all future years of the lease term). The
Termination Values and Tax Benefits are defined on the Schedule. Lessee shall
pay to Lessor the full amount of the additional rent payment on the later of (i)
receipt of notice or (ii) the first day of the year for which such adjustment is
being made.

      (b) Lessee's obligations under this Section 3 shall survive any expiration
or termination of this Agreement.

4.    TAXES: If permitted by law, Lessee shall report and pay promptly all
taxes, fees and assessments due, imposed, assessed or levied against any
Equipment (or purchase, ownership, delivery, leasing, possession, use or
operation thereof), this Agreement (or any rents or receipts hereunder), any
Schedule, Lessor or Lessee by any governmental entity or taxing authority during
or related to the term of this Agreement, including, without limitation, all
license and registration fees, and all sales, use, personal property, excise,
gross receipts, franchise, stamp or other taxes, imposts, duties and charges,
together with any penalties, fines or interest thereon (collectively "TAXES").
Lessee shall have no liability for Taxes imposed by the United States of America
or any state or political subdivision thereof which are on or measured by the
net income of Lessor except as provided in Sections 3 and 14(c). Lessee shall
promptly reimburse Lessor (on an after tax basis) for any Taxes charged to or
assessed against Lessor. Lessee shall show Lessor as the owner of the Equipment
on all tax reports or returns, and send Lessor a copy of each report or return
and evidence of Lessee's payment of Taxes upon request.

5.    REPORTS:

      (a) If any tax or other lien shall attach to any Equipment, Lessee will
notify Lessor in writing, within ten (10) days after Lessee becomes aware of the
tax or lien. The notice shall include the full particulars of the tax or lien
and the location of such Equipment on the date of the notice.

      (b) Lessee will deliver to Lessor, Lessee's complete financial statements,
certified by a recognized firm of certified public accountants within ninety
(90) days of the close of each fiscal year of Lessee. Lessee will deliver to
Lessor copies of Lessee's quarterly financial report certified by the chief
financial officer of Lessee, within ninety (90) days of the close of each fiscal
quarter of Lessee. Lessee will deliver to Lessor all Forms 10-K and 10-Q, if
any, filed with the Securities and Exchange Commission within thirty (30) days
after the date on which they art filed, if requested by Lessor.

      (c) Lessor may inspect any Equipment during normal business hours after
giving Lessee reasonable prior notice.

      (d) Lessee will keep the Equipment at the Equipment Location (specified in
the applicable Schedule) and will give Lessor prior written notice of any
relocation of Equipment. If Lessor asks, Lessee will promptly notify Lessor in
writing of the location of any Equipment.

      (e) If any Equipment is lost or damaged (where the estimated repair costs
would exceed the greater of ten percent (10%) of the original Equipment cost or
ten thousand and 00/100 dollars ($10,000)), or is otherwise involved in an
accident causing personal injury or property damage, Lessee will promptly and
fully report the event to Lessor in writing.

      (f) Lessee will furnish a certificate of an authorized officer of Lessee
stating that he has reviewed the activities of Lessee and that, to the best of
his knowledge, there exists no default or event which with notice or lapse of
time (or both) would become such a default within thirty (30) days after any
request by Lessor.

6.    DELIVERY, USE AND OPERATION:

      (a) All Equipment shall be shipped directly from the Supplier to Lessee.

      (b) Lessee agrees that the Equipment will be used by Lessee solely in the
conduct of its business and in a manner complying with all applicable laws,
regulations and insurance policies and Lessee shall not discontinue use of the
Equipment.

      (c) Lessee will not move any equipment from the location specified on the
Schedule, without the prior written consent of Lessor.

      (d) Lessee will keep the Equipment free and clear of all liens and
encumbrances other than those which result from acts of Lessor.

      (e) Lessor shall not disturb Lessee's quiet enjoyment of the Equipment
during the term of the Agreement unless a default has occurred and is continuing
under this Agreement.
<PAGE>
7.    MAINTENANCE:

      (a) Lessee will, at its sole expense, maintain each unit of Equipment in
good operating order and repair, normal wear and tear excepted. The Lessee shall
also maintain the Equipment in accordance with manufacturer's recommendations.
Lessee shall make all alterations or modifications required to comply with any
applicable law, rule or regulation during the term of this Agreement. If Lessor
requests, Lessee shall affix plates, tags or other identifying labels showing
ownership thereof by Lessor. The tags or labels shall be placed in a prominent
position on each unit of Equipment.

      (b) Lessee will not attach or install anything on any Equipment that will
impair the originally intended function or use of such Equipment without the
prior written consent of Lessor. All additions, parts, supplies, accessories,
and equipment ("ADDITIONS") furnished or attached to any Equipment that are not
readily removable shall become the property of Lessor. All Additions shall be
made only in compliance with applicable law. Lessee will not attach or install
any Equipment to or in any other personal or real property without the prior
written consent of Lessor.

8.    STIPULATED LOSS VALUE: If for any reason any unit of Equipment becomes
worn out, lost, stolen, destroyed, irreparably damaged or unusable ("CASUALTY
OCCURRENCES") Lessee shall promptly and fully notify Lessor in writing. Lessee
shall pay Lessor the sum of (i) the Stipulated Loss Value (see Schedule) of the
affected unit determined as of the rent payment date prior to the Casualty
Occurrence; and (ii) all rent and other amounts which are then due under this
Agreement on the Payment Date (defined below) for the affected unit. The Payment
Date shall be the next rent payment date after the Casualty Occurrence. Upon
Payment of all sums due hereunder, the term of this lease as to such unit shall
terminate.

9.    INSURANCE:

      (a) Lessee shall bear the entire risk of any loss, theft, damage to, or
destruction of, any unit of Equipment from any cause whatsoever from the time
the Equipment is shipped to Lessee.

      (b) Lessee agrees, at its own expense, to keep all Equipment insured for
such amounts and against such hazards as Lessor may reasonably require. All such
policies shall be with companies, and on terms, reasonably satisfactory to
Lessor. The insurance shall include coverage for damage to or loss of the
Equipment, liability for personal injuries, death or property damage. Lessor
shall be named as additional insured with a loss payable clause in favor of
Lessor, as its interest may appear, irrespective of any breach of warranty or
other act or omission of Lessee. The insurance shall provide for liability
coverage in an amount equal to at least ONE MILLION U.S. DOLLARS ($1,000,000.00)
total liability per occurrence, unless otherwise stated in any Schedule. The
casualty/property damage coverage shall be in an amount equal to the higher of
the Stipulated Loss Value or the full replacement cost of the Equipment. No
insurance shall be subject to any co-insurance clause. The insurance policies
shall provide that the insurance may not be altered or canceled by the insurer
until after thirty (30) days written notice to Lessor. Lessee agrees to deliver
to Lessor evidence of insurance reasonably satisfactory to Lessor.

      (c) Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make
proof of loss and claim for insurance, and to make adjustments with insurers and
to receive payment of and execute or endorse all documents, checks or drafts in
connection with insurance payments. Lessor shall not act as Lessee's
attorney-in-fact unless Lessee is in default. Lessee shall pay any reasonable
expenses of Lessor in adjusting or collecting insurance. Lessee will not make
adjustments with insurers except with respect to claims for damage to any unit
of Equipment where the repair costs are less than the lesser of ten percent
(10%) of the original Equipment cost or ten thousand and 00/100 dollars
($10,000). Lessor may, at its option, apply proceeds of insurance, in whole or
in part, to (i) repair or replace Equipment or any portion thereof, or (ii)
satisfy any obligation of Lessee to Lessor under this Agreement.

10.   RETURN OF EQUIPMENT:

      (a) At the expiration or termination of this Agreement or any Schedule,
Lessee shall perform any testing and repairs required to place the units of
Equipment in the same condition and appearance as when received by Lessee
(reasonable wear and tear excepted) and in good working order for the original
intended purpose of the Equipment. If required the units of Equipment shall be
deinstalled, disassembled and crated by an authorized manufacturer's
representative or such other service person as is reasonably satisfactory to
Lessor. Lessee shall remove installed markings that are not necessary for the
operation, maintenance or repair of the Equipment. All Equipment will be
cleaned, cosmetically acceptable, and in such condition as to be immediately
installed into use in a similar environment for which the Equipment was
originally intended to be used. All waste material and fluid must be removed
from the Equipment and disposed of in accordance with then current waste
disposal laws. Lessee shall return the units of Equipment to a location within
the continental United States as Lessor shall direct. Lessee shall obtain and
pay for a policy of transit insurance for the redelivery period in an amount
equal to the replacement value of the Equipment. The transit insurance must name
Lessor as the loss payee. The Lessee shall pay for all casts to comply with this
section (a).
<PAGE>
      (b) Until Lessee has fully complied with the requirements of Section 10(a)
above, Lessee's rent payment obligation and all other obligations under this
Agreement shall continue from month to month notwithstanding any expiration or
termination of the lease term. Lessor may terminate the Lessee's right to use
the Equipment upon ten (10) days notice to Lessee.

      (c) Lessee shall provide to Lessor a detailed inventory of all components
of the Equipment including model and serial numbers. Lessee shall also provide
an up-to-date copy of all other documentation pertaining to the Equipment. All
service manuals, blue prints, process flow diagrams, operating manuals,
inventory and maintenance records shall be given to Lessor at least ninety (90)
days and not more than one hundred twenty (120) days prior to lease termination.

      (d) Lessee shall make the Equipment available for on-site operational
inspections by potential purchasers at least one hundred twenty (120) days prior
to and continuing up to lease termination. Lessor shall provide Lessee with
reasonable notice prior to any inspection. Lessee shall provide personnel, power
and other requirements necessary to demonstrate electrical, hydraulic and
mechanical systems for each item of Equipment.

11.   DEFAULT AND REMEDIES:

      (a) Lessor may in writing declare this Agreement in default if (i) Lessee
breaches its obligation to pay rent or any other sum when due and fails to cure
the breach within ten (10) days; (ii) Lessee breaches any of its insurance
obligations under Section 9; (iii) Lessee breaches any of its other obligations
and fails to cure that breach within thirty (30) days after written notice from
Lessor; (iv) any representation or warranty made by Lessee in connection with
this Agreement shall be false or misleading in any material respect; (v) Lessee
or any guarantor or other obligor for the Lessee's obligations hereunder
("GUARANTOR") becomes insolvent or ceases to do business as a going concern;
(vi) any Equipment is illegally used; (vii) if Lessee or any Guarantor is a
natural person, any death or incompetency of Lessee or such Guarantor; or (viii)
a petition is filed by or against Lessee or any Guarantor under any bankruptcy
or insolvency laws and in the event of an involuntary petition, the petition is
not dismissed within forty-five (45) days of the filing date. The default
declaration shall apply to all Schedules unless specifically excepted by Lessor.

      (b) After a default, at the request of Lessor, Lessee shall comply with
the provisions of Section 10(a). Lessee hereby authorizes Lessor to peacefully
enter any premises where any Equipment may be and take possession of the
Equipment. Lessee shall immediately pay to Lessor without further demand as
liquidated damages for loss of a bargain and not as a penalty, the Stipulated
Loss Value of the Equipment (calculated as of the rent payment date prior to the
declaration of default), and all rents and other sums then due under this
Agreement and all Schedules. Lessor may terminate this Agreement as to any or
all of the Equipment. A termination shall occur only upon written notice by
Lessor to Lessee and only as to the units of Equipment specified in any such
notice. Lessor may, but shall not be required to, sell Equipment at private or
public sale, in bulk or in parcels, with or without notice, and without having
the Equipment present at the place of sale. Lessor may also, but shall not be
required to, lease, otherwise dispose of or keep idle all or part of the
Equipment. Lessor may use Lessee's premises for a reasonable period of time for
any or all of the purposes stated above without liability for rent, costs,
damages or otherwise. The proceeds of sale, lease or other disposition, if any,
shall be applied in the following order of priorities: (i) to pay all of
Lessor's costs, charges and expenses incurred in taking, removing, holding,
repairing and selling, leasing or otherwise disposing of Equipment; then, (ii)
to the extent not previously paid by Lessee, to pay Lessor all sums due from
Lessee under this Agreement; then (iii) to reimburse to Lessee any sums
previously paid by Lessee as liquidated damages; and (iv) any surplus shall be
retained by Lessor. Lessee shall immediately pay any deficiency in (i) and (ii)
above.

      (c) The foregoing remedies are cumulative, and any or all thereof may be
exercised instead of or in addition to each other or any remedies at law, in
equity, or under statute. Lessee waives notice of sale or other disposition (and
the time and place thereof), and the manner and place of any advertising. Lessee
shall pay Lessor's actual attorney's fees incurred in connection with the
enforcement, assertion, defense or preservation of Lessor's rights and remedies
under this Agreement, or if prohibited by law, such lesser sum as may be
permitted. Waiver of any default shall not be a waiver of any other or
subsequent default.

      (d) Any default under the terms of this or any other agreement between
Lessor and Lessee may be declared by Lessor a default under this and any such
other agreement.

12.   ASSIGNMENT: LESSEE SHALL NOT SELL, TRANSFER, ASSIGN, ENCUMBER OR SUBLET
ANY EQUIPMENT OR THE INTEREST OF LESSEE IN THE EQUIPMENT WITHOUT THE PRIOR
WRITTEN CONSENT OF LESSOR. Lessor may, without the consent of Lessee, assign
this Agreement, any Schedule or the right to enter into a Schedule. Lessee
agrees that if Lessee receives written notice of an assignment from Lessor,
Lessee will pay all rent and all other amounts payable under any assigned
Schedule to such assignee or as instructed by Lessor. Lessee also agrees to
confirm in writing receipt of the notice of assignment as may be reasonably
requested by assignee. Lessee hereby waives and agrees not to assert against any
such assignee any defense, set-off, recoupment claim or counterclaim which
Lessee has or may at any time have against Lessor for any reason whatsoever.
<PAGE>
13.   NET LEASE: Lessee is unconditionally obligated to pay all rent and other
amounts due for the entire lease term no matter what happens, even if the
Equipment is damaged or destroyed, if it is defective or if Lessee no longer can
use it. Lessee is not entitled to reduce or set-off against rent or other
amounts due to Lessor or to anyone to whom Lessor assigns this Agreement or any
Schedule whether Lessee's claim arises out of this Agreement, any Schedule, any
statement by Lessor, Lessor's liability or any manufacturer's liability, strict
liability, negligence or otherwise. Lessee's obligation to pay all rent due for
the entire lease term may be discharged only in the event of a Casualty
Occurrence with respect to which the Lessee has completely complied with and
satisfied the requirements set forth in Section 8 of this Agreement.

14.   INDEMNIFICATION:

      (a) Lessee hereby agrees to indemnify Lessor, its agents, employees,
successors and assigns (on an after tax basis) from and against any and all
losses, damages, penalties, injuries, claims, actions and suits, including legal
expenses, of whatsoever kind and nature arising out of or relating to the
Equipment or this Agreement, except to the extent the losses, damages,
penalties, injuries, claims, actions, suits or expenses result from Lessor's
gross negligence or willful misconduct ("CLAIMS"). This indemnity shall include,
but is not limited to, Lessor's strict liability in tort and Claims, arising out
of (i) the selection, manufacture, purchase, acceptance or rejection of
Equipment, the ownership of Equipment during the term of this Agreement, and the
delivery, lease, possession, maintenance, uses, condition, return or operation
of Equipment (including, without limitation, latent and other defects, whether
or not discoverable, by Lessor or Lessee and any claim for patent, trademark or
copyright infringement or environmental damage) or (ii) the condition of
Equipment sold or disposed of after use by Lessee, any sublessee or employees of
Lessee. Lessee shall, upon request, defend any actions based on, or arising out
of, any of the foregoing. If, at the expiration of the Agreement (as extended
pursuant to Section 10(b)) with respect to any Equipment, Lessee returns such
Equipment in accordance with any and all return conditions and requirements set
forth in Section 10, and in the applicable Schedule for such Equipment, then
"Claims" shall not include any losses, damages, penalties, injuries, claims,
actions, or suits to the extent they relate to such returned Equipment if they
(i) arise after termination of this Agreement with respect to such Equipment and
(ii) are attributable solely to events or circumstances that (a) occur after
such termination and (b) are not the result of any failure by Lessee, prior to
such termination, to comply with any of its obligations under this Agreement or
under the applicable Schedule for such Equipment.

      (b) Lessee hereby represents, warrants and covenants that (i) on the Lease
Commencement Date for any unit of Equipment, such unit will qualify for all of
the items of deduction and credit specified in Section C of the applicable
Schedule ("TAX BENEFITS") in the hands of Lessor, and (ii) at no time during the
term of this Agreement will Lessee take or omit to take, nor will it permit any
sublessee or assignee to take or omit to take, any action (whether or not such
act or omission is otherwise permitted by Lessor or by this Agreement), which
will result in the disqualification of any Equipment for, or recapture of, all
or any portion of such Tax Benefits.

      (c) If as a result of a breach of any representation, warranty or covenant
of the Lessee contained in this Agreement or any Schedule (i) tax counsel of
Lessor shall determine that Lessor is not entitled to claim on its Federal
income tax return all or any portion of the Tax Benefits with respect to any
Equipment, or (ii) any Tax Benefit claimed on the Federal income tax return of
Lessor is disallowed or adjusted by the Internal Revenue Service, or (iii) any
Tax Benefit is recalculated or recaptured (any determination, disallowance,
adjustment, recalculation or recapture being a "LOSS"), then Lessee shall pay to
Lessor, as an indemnity and as additional rent, an amount that shall, in the
reasonable opinion of Lessor, cause Lessor's after-tax economic yields and cash
flows to equal the Net Economic Return that would have been realized by Lessor
if such Loss had not occurred. Such amount shall be payable upon demand
accompanied by a statement describing in reasonable detail such Loss and the
computation of such amount. The economic yields and cash flows shall be computed
on the same assumptions, including tax rates as were used by Lessor in
originally evaluating the transaction ("NET ECONOMIC RETURN"). If an adjustment
has been made under Section 3 then the Effective Rate used in the next preceding
adjustment shall be substituted.

      (d) All references to Lessor in this Section 14 include Lessor and the
consolidated taxpayer group of which Lessor is a member. All of Lessor's rights,
privileges and indemnities contained in this Section 14 shall survive the
expiration or other termination of this Agreement. The rights, privileges and
indemnities contained herein are expressly made for the benefit of, and shall be
enforceable by Lessor, its successors and assigns.

15.   DISCLAIMER: LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT WITHOUT
ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES NOT MAKE, HAS
NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE
EQUIPMENT LEASED UNDER THIS AGREEMENT OR ANY COMPONENT THEREOF, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS,
QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE,
USE OR OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE.
All such risks, as between Lessor and Lessee, are to be borne by Lessee. Without
limiting the foregoing, Lessor shall have no responsibility or liability to
Lessee or any other person with respect to any of the
<PAGE>
following: (i) any liability, loss or damage caused or alleged to be caused
directly or indirectly by any Equipment, any inadequacy thereof, any deficiency
or defect (latent or otherwise) of the Equipment, or any other circumstance in
connection with the Equipment; (ii) the use, operation or performance of any
Equipment or any risks relating to it; (iii) any interruption of service, loss
of business or anticipated profits or consequential damages; or (iv) the
delivery, operation, servicing, maintenance, repair, improvement or replacement
of any Equipment. If, and so long as, no default exists under this Agreement,
Lessee shall be, and hereby is, authorized during the term of this Agreement to
assert and enforce whatever claims and rights Lessor may have against any
Supplier of the Equipment at Lessee's sole cost and expense, in the name of and
for the account of Lessor and/or Lessee, as their interests may appear.

16.   REPRESENTATIONS AND WARRANTIES OF LESSEE: Lessee makes each of the
following representations and warranties to Lessor on the date hereof and on the
date of execution of each Schedule.

      (a) Lessee has adequate power and capacity to enter into, and perform
under, this Agreement and all related documents (together, the "DOCUMENTS").
Lessee is duly qualified to do business wherever necessary to carry on its
present business and operations, including the Jurisdiction(s) where the
Equipment is or is to be located.

      (b) The Documents have been duly authorized, executed and delivered by
Lessee and constitute valid, legal and binding agreements, enforceable in
accordance with their terms, except to the extent that the enforcement of
remedies may be limited under applicable bankruptcy and insolvency laws.

      (c) No approval, consent or withholding of objections is required from any
governmental authority or entity with respect to the entry into or performance
by Lessee of the Documents except such as have already been obtained.

      (d) The entry into and performance by Lessee of the Documents will not:
(i) violate any judgment, order, law or regulation applicable to Lessee or any
provision of Lessee's Certificate of Incorporation or bylaws; or (ii) result in
any breach of, constitute a default under or result in the creation of any lien,
charge, security interest or other encumbrance upon any Equipment pursuant to
any indenture, mortgage, deed of trust, bank loan or credit agreement or other
instrument (other than this Agreement) to which Lessee is a party.

      (e) There are no suits or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or affecting
Lessee, which if decided against Lessee will have a material adverse effect on
the ability of Lessee to fulfill its obligations under this Agreement.

      (f) The Equipment accepted under any Certificate of Acceptance is and will
remain tangible personal property.

      (g) Each financial statement delivered to Lessor has been prepared in
accordance with generally accepted accounting principles consistently applied.
Since the date of the most recent financial statement, there has been no
material adverse change.

      (h) Lessee is and will be at all times validly existing and in good
standing under the laws of the State of its incorporation (specified in the
first sentence of this Agreement).

      (i) The Equipment will at all times be used for commercial or business
purposes.

17.   EARLY TERMINATION:

      (a) On or after the First Termination Data (specified in the applicable
Schedule), Lessee may, so long as no default exists hereunder, terminate this
Agreement as to all (but not less than all) of the Equipment on such Schedule as
of a rent payment date ("TERMINATION DATE"). Lessee must give Lessor at least
ninety (90) days prior written notice of the termination.

      (b) Lessee shall, and Lessor may, solicit cash bids for the Equipment on
an AS IS, WHERE IS BASIS without recourse to or warranty from Lessor, express or
implied ("AS IS BASIS"). Prior to the Termination Date, Lessee shall (i) certify
to Lessor any bids received by Lessee and (ii) pay to Lessor (A) the Termination
Value (calculated as of the rent due on the Termination Date) for the Equipment,
and (B) all rent and other sums due and unpaid as of the Termination Date.
<PAGE>
      (c) If all amounts due hereunder have been paid on the Termination Date,
Lessor shall (i) sell the Equipment on an AS IS BASIS for cash to the highest
bidder and (ii) refund the proceeds of such sale (net of any related expenses)
to Lessee up to the amount of the Termination Value. If such sale is not
consummated, no termination shall occur and Lessor shall refund the Termination
Value (less any expenses incurred by Lessor) to Lessee.

      (d) Notwithstanding the foregoing, Lessor may elect by written notice, at
any time prior to the Termination Date, not to sell the Equipment. In that
event, on the Termination Date Lessee shall (i) return the Equipment (in
accordance with Section 10) and (ii) pay to Lessor all amounts required under
Section 17(b) less the amount of the highest bid certified by Lessee to Lessor.

18.   PURCHASE OPTION:

      (a) Lessee may at lease expiration purchase all (but not less than all) of
the Equipment in any Schedule on an AS IS BASIS for cash equal to its then Fair
Market Value (plus all applicable sales taxes). Lessee must notify Lessor of its
intent to purchase the Equipment in writing at least one hundred eighty (180)
days in advance. If Lessee is in default or if the Lease has already been
terminated Lessee may not purchase the Equipment.

      (b) "Fair Market Value" shall mean the price that a willing buyer (who is
neither a lessee in possession nor a used equipment dealer) would pay for the
Equipment in an arm's-length transaction to a willing seller under no compulsion
to sell. In determining the Fair Market Value the Equipment shall be assumed to
be in the condition in which it is required to be maintained and returned under
this Agreement. If the Equipment is installed it shall be valued on an installed
basis. The costs of removal from current location shall not be a deduction from
the value of the Equipment. If Lessor and Lessee are unable to agree on the Fair
Market Value at least one hundred thirty-five (135) days before lease
expiration, Lessor shall appoint an independent appraiser (reasonably acceptable
to Lessee) to determine Fair Market Value. The independent appraiser's
determination shall be final, binding and conclusive. Lessee shall bear all
costs associated with any such appraisal.

      (c) Lessee shall be deemed to have waived this option unless it provides
Lessor with written notice of its irrevocable election to exercise the same
within fifteen (15) days after Fair Market Value is told to Lessee.

19.   MISCELLANEOUS:

      (a) LESSEE AND LESSOR UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY
OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR RELATING TO THE
SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR. THE SCOPE OF
THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY
BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING. THE WAIVER ALSO SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT,
ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
TRANSACTION OR ANY RELATED TRANSACTION. THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.

      (b) The Equipment shall remain Lessor's property unless Lessee purchases
the Equipment from Lessor and until such time Lessee shall only have the right
to use the Equipment as a lessee. Any cancellation or termination by Lessor of
this Agreement, any Schedule, supplement or amendment hereto, or the lease of
any Equipment hereunder shall not release Lessee from any then outstanding
obligations to Lessor hereunder. All Equipment shall at all times remain
personal property of Lessor even though it may be attached to real property. The
Equipment shall not become part of any other property by reason of any
installation in, or attachment to, other real or personal property .

      (c) Time is of the essence of this Agreement. Lessor's failure at any time
to require strict performance by Lessee of any of the provisions hereof shall
not waive or diminish Lessors right at any other time to demand strict
compliance with this Agreement. Lessee agrees, upon Lessor's request, to execute
any instrument necessary or expedient for filing, recording or perfecting the
interest of Lessor. All notices required to be given hereunder shall be deemed
adequately given if sent by registered or certified mail to the addressee at its
address stated herein, or at such other place as such addressee may have
specified in writing. This Agreement and any Schedule and Annexes thereto
constitute the entire agreement of the parties with respect to the subject
matter hereof. NO VARIATION OR MODIFICATION OF THIS AGREEMENT OR ANY WAIVER OF
ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED
BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO.
<PAGE>
      (d) If Lessee does not comply with any provision of this Agreement, Lessor
shall have the right, but shall not be obligated, to effect such compliance, in
whole or in part. All reasonable amounts spent and obligations incurred or
assumed by Lessor in effecting such compliance shall constitute additional rent
due to Lessor. Lessee shall pay the additional rent within five days after the
date Lessor sends notice to Lessee requesting payment. Lessor's effecting such
compliance shall not be a waiver of Lessee's default.

      (e) Any rent or other amount not paid to Lessor when due shall bear
interest, from the due date until paid, at the lesser of eighteen percent (18%)
per annum or the maximum rate allowed by law. Any provisions in this Agreement
and any Schedule that are in conflict with any statute, law or applicable rule
shall be deemed omitted, modified or altered to conform thereto.

      (f) Lessee hereby irrevocably authorizes Lessor to adjust the Capitalized
Lessor's Cost up or down by no more than ten percent (10%) within each Schedule
to account for equipment change orders, equipment returns, invoicing errors, and
similar matters. Lessee acknowledges and agrees that the rent shall be adjusted
as a result of the change in the Capitalized Lessors Cost. Lessor shall send
Lessee a written notice stating the final Capitalized Lessor's Cost, if it has
changed.

      (g) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF CONNECTICUT (WITHOUT REGARD TO THE CONFLICT OF
LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE EQUIPMENT.

      (h) Any cancellation or termination by Lessor, pursuant to the provisions
of this Agreement, any Schedule, supplement or amendment hereto, of the lease of
any Equipment hereunder, shall not release Lessee from any then outstanding
obligations to Lessor hereunder.

      (i) To the extent that any Schedule would constitute chattel paper, as
such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction, no security interest therein may be created through the
transfer or possession of this Agreement in and of itself without the transfer
or possession of the original of a Schedule executed pursuant to this Agreement
and incorporating this Agreement by reference; and no security interest in this
Agreement and a Schedule may be created by the transfer or possession of any
counterpart of the Schedule other than the original thereof, which shall be
identified as the document marked "Original" and all other counterparts shall be
marked "Duplicate".

      IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.

LESSOR:                                    LESSEE:

GENERAL ELECTRIC CAPITAL CORPORATION       DAISYTEK INTERNATIONAL, INC.

By:    /S/ PAUL HALLAUER                   By:    /S/ THOMAS J. GRAHAM
    --------------------------------           ---------------------------------

Name:  Paul Hallauer                       Name:  Thomas J. Graham
      ------------------------------             -------------------------------

Title: Senior Risk Analyst                 Title: Director of Treasury & Budget
       -----------------------------              ------------------------------

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