<PAGE>

                              GUARANTY AGREEMENT

     This GUARANTY AGREEMENT (this "GUARANTY"), dated effective as of June 4,
1999, is executed and delivered by CAIS INTERNET, INC., a Delaware corporation
("GUARANTOR"), to and in favor of NORTEL NETWORKS INC., as administrative agent
for itself and the other Lenders (as such term is hereinafter defined) (in such
capacity, together with its successors and assigns in such capacity,
"ADMINISTRATIVE AGENT").

                             W I T N E S S E T H:
                             --------------------

     A. CAIS, Inc. ("BORROWER"), the lenders named therein (together with their
successors and assigns, "Lenders") and Administrative Agent are, concurrently
herewith, entering into that certain Credit Agreement dated as of June 4, 1999
(as the same may be amended, renewed, extended, restated, replaced, substituted,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT")
and, in connection therewith, inter alia, Borrower is, concurrently herewith,
executing and delivering that certain Note dated June 4, 1999, in the original
principal amount of $30,000,000 payable to the order of Nortel Networks Inc.
(such promissory note, as it may be amended, renewed, extended, restated,
replaced, substituted, supplemented or otherwise modified from time to time, the
"Note" and, to the extent there is more than one promissory note subsequent to a
partial assignment of the Loans, the "Notes"); the Credit Agreement, the Notes
and the other Loan Documents (as such terms are defined in the Credit
Agreement), including, without limitation, any and all security agreements,
pledge agreements, assignments, guaranties, licenses, lien waivers, collection
account agreements and other agreements, documents, instruments and certificates
now or hereafter executed and/or delivered in connection therewith, and any and
all amendments, modifications, renewals, extensions, restatements and/or
supplements thereto from time to time, are hereinafter collectively called the
"Loan Documents").

     B. Guarantor has directly and indirectly benefitted and will directly and
indirectly benefit from the loans evidenced and governed by the Credit
Agreement, the Notes and the other Loan Documents and the other transactions
evidenced by and contemplated in the Loan Documents.

     C. Execution and delivery of this Guaranty is a condition to Administrative
Agent and Lenders entering into the Credit Agreement and the making of Loans
pursuant
thereto.

     NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Guarantor hereby agrees as follows:

     1.   Definitions.   Unless otherwise defined in this Guaranty, all
          -----------
capitalized terms used in this Guaranty shall have the meanings ascribed to such
terms in the Credit Agreement.

     2.   Guaranty of Indebtedness, Liabilities and Obligations.  Guarantor
          -----------------------------------------------------
hereby absolutely, unconditionally and irrevocably guarantees (a) payment and
performance to Administrative Agent and Lenders, as and when the same become due
or performable strictly in accordance with the terms

GUARANTY AGREEMENT - Page 1
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acceleration or otherwise, of any and all Obligations (as such term is defined
in the Credit Agreement), which Obligations include, without limitation, (i) any
and all interest, penalties, fees and expenses (specifically including, but not
limited to, attorneys' fees and expenses) which Borrower may now or at any time
hereafter owe to Administrative Agent or any Lender (whether or not such
interest, penalties, fees and expenses were originally contracted with
Administrative Agent or any Lender or with another or others and whether or not
such interest, penalties, fees and expenses are enforceable against Borrower)
pursuant to the Credit Agreement, any Note or any other Loan Document plus (ii)
the principal amount of any and all indebtedness, liabilities and other
obligations, whether primary, absolute, secondary, direct, indirect, fixed,
contingent, liquidated, unliquidated, secured or unsecured, matured or
unmatured, joint, several or joint and several, due or to become due and whether
arising by agreement, note, discount, acceptance, overdraft or otherwise, which
Borrower may now or at any time hereafter owe to Administrative Agent or any
Lender (whether or not such indebtedness, liabilities and obligations were
originally contracted with Administrative Agent or any Lender or with another or
others and whether or not such indebtedness, liabilities or obligations are
enforceable against Borrower) pursuant to the Credit Agreement, any Note or any
other Loan Document and (b) the faithful prompt and complete compliance by
Borrower with all terms, conditions, covenants, agreements and undertakings of
Borrower under the Credit Agreement, any Note or any other Loan Document (the
Obligations and the interest, penalties, fees, expenses, indebtedness,
liabilities and obligations, etc. referred to in clauses (a) and (b) preceding
as to which payment, performance and compliance are guaranteed pursuant to this
Guaranty are hereinafter individually and collectively called the "Guaranteed
Obligations").

     Notwithstanding that Borrower may not be liable or obligated to
Administrative Agent or any Lender for interest and/or attorneys' fees and
expenses on, or in connection with, the Guaranteed Obligations from and after
the Petition Date (as hereinafter defined) as a result of the provisions of the
federal bankruptcy laws or otherwise, the Guaranteed Obligations for which
Guarantor shall be liable and obligated under this Guaranty shall include (to
the extent permitted by law or a court of competent jurisdiction) interest
accruing on the Guaranteed Obligations at the highest rate provided for in the
Credit Agreement from and after the date on which Borrower files for protection
under the federal bankruptcy laws or from and after the date on which an
involuntary proceeding is filed against Borrower under the federal bankruptcy
laws (herein collectively referred to as the "Petition Date") and all attorneys'
fees and expenses incurred by Administrative Agent or any Lender from and after
the Petition Date in connection with the Guaranteed Obligations.

     3.   Continuing Guaranty of Payment.  This Guaranty is and shall be an
          -------------------------------
absolute, unconditional, irrevocable and continuing guaranty of payment, and not
merely of collection, and from time to time or at any time the Guaranteed
Obligations may be increased, reduced or paid in full without affecting the
liability or obligation of Guarantor with respect to indebtedness, liabilities
and obligations of Borrower to Administrative Agent or any Lender thereafter
incurred. Guarantor further agrees that this Guaranty shall continue to be
effective or be reinstated (if a release or discharge has occurred), as the case
may be, if at any time any payment (or any part thereof) to Administrative Agent
or any Lender in respect of the Guaranteed Obligations is rescinded or must
otherwise be restored by Administrative Agent or any Lender pursuant to any
bankruptcy,

GUARANTY AGREEMENT - Page 2
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insolvency, reorganization, receivership or other debtor relief granted to
Borrower or its successors or assigns. In the event that Administrative Agent or
any Lender must rescind or restore any payment received by Administrative Agent
or any Lender, respectively, in satisfaction of the Guaranteed Obligations, as
set forth herein, any prior release or discharge from the terms of this Guaranty
given to Guarantor by Administrative Agent or such Lender, respectively, shall
be without effect, and this Guaranty shall remain in full force and effect. It
is the intention of Administrative Agent, Lenders and Guarantor that Guarantor's
liabilities and obligations hereunder shall not be discharged except by the full
and complete payment and performance of the Guaranteed Obligations and then only
to the extent of such payment and performance. This Guaranty is independent of,
and in addition and without modification to and does not impair or in any way
affect any other guaranty, endorsement or other agreement executed in favor of
Administrative Agent or any Lender, and this Guaranty and Guarantor's
liabilities and obligations under this Guaranty shall not be impaired or
otherwise affected by the execution, delivery or performance by Guarantor or any
other Person of any other guaranty, endorsement or other agreement.

     4.   Absolute Guaranty.  Guarantor's liabilities and obligations under
          ------------------
this Guaranty shall be absolute and unconditional irrespective of, shall not be
released, impaired, limited, reduced, conditioned upon or otherwise affected by
and shall continue in full force and effect notwithstanding the occurrence of
any event (other than an event consisting of payment and performance of such
liabilities and obligations as provided in Paragraph 3 hereof) at any time or
from time to time, including, without limitation, any one or more of the
following events specified in clauses (a) through (o) of this Paragraph 4 below,
and neither Administrative Agent nor any Lender shall be obligated or required
to take or to refrain from taking any of such actions or inactions specified
below and shall not have any liability, obligation or duty whatsoever with
respect to such actions or inactions, it being acknowledged and agreed by
Guarantor that all of such liabilities, obligations and duties (if any) of
Administrative Agent or any Lender otherwise existing and all rights and
remedies (if any) of Guarantor with respect thereto (whether such liabilities,
obligations, duties, rights or remedies exist by virtue of agreement, common
law, equity, statute or otherwise), and each and every defense which, under
principles of guaranty or suretyship law, would otherwise operate to eliminate,
impair, condition or restrict the liabilities and obligations of Guarantor for
the Guaranteed Obligations, are hereby expressly waived by Guarantor:

               (a) the taking or accepting of any security or other guaranty for
     any or all of the Guaranteed Obligations, whether heretofore, concurrently
     herewith or hereafter;

               (b) any failure to create or perfect or properly create or
     perfect any lien, security interest or assignment intended as security, or
     any release, surrender, exchange, substitution, subordination or loss of
     any security or guaranty at any time existing in connection with any or all
     of the Guaranteed Obligations for any reason; or any suretyship defenses,
     including, without limitation, any impairment of collateral;

               (c) any partial or full release of the liability or obligation of
     Guarantor under any other guaranty whether or not similar to this Guaranty;

GUARANTY AGREEMENT - Page 3
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               (d) the entering into, delivery of, modification of, amendment to
     or waiver of compliance with the Credit Agreement, any Note or any other
     Loan Document, or any agreement, document or instrument evidencing,
     securing or otherwise affecting all or part of the Guaranteed Obligations,
     without the notification of Guarantor, the right of such notification being
     hereby specifically waived by Guarantor;

              (e) the bankruptcy, insolvency, arrangement, adjustment,
     composition, liquidation, disability, dissolution or lack of authority
     (whether corporate, partnership or trust or relating to any other entity or
     Person) of Borrower, Guarantor or any other Person at any time liable or
     obligated for the payment of any or all of the Guaranteed Obligations,
     whether now existing or hereafter arising;

               (f) any increase, reduction, renewal, extension, amendment,
     modification, repayment, refunding and/or rearrangement of the payment or
     any other terms or provisions of any or all of the Guaranteed Obligations
     at any time and from time to time, whether on one or more occasions, either
     with or without notice to or consent of Guarantor, or any adjustment,
     indulgence, forbearance or compromise that might be granted or given by
     Administrative Agent or any Lender to Borrower or Guarantor;

               (g) any neglect, delay, omission, failure or refusal of
     Administrative Agent or any Lender (i) to exercise or properly or
     diligently exercise any right or remedy with respect to any or all of the
     Guaranteed Obligations or the collection thereof or any collateral,
     security or guaranty therefor, whether under the Credit Agreement, any Note
     or any other Loan Document or otherwise, including, without limitation, to
     ensure compliance with any term or provision of the Credit Agreement or any
     other Loan Document, (ii) to take or prosecute or properly or diligently
     take or prosecute any action for the collection of any or all of the
     Guaranteed Obligations against Borrower, Guarantor or any other guarantor
     of any or all of the Guaranteed Obligations and/or any other Person, (iii)
     to foreclose or prosecute or properly or diligently foreclose or prosecute
     any action in connection with any agreement, document or instrument or
     arrangement evidencing, securing or otherwise affecting all or any part of
     the Guaranteed Obligations, including, without limitation, any failure to
     conduct a commercially reasonable foreclosure sale, or (iv) to mitigate
     damages or take any other action to reduce, collect or enforce the
     Guaranteed Obligations;

               (h) any failure of Administrative Agent or any Lender to give
     notice to Borrower and/or Guarantor of, or obtain the consent of Borrower
     and/or Guarantor with respect to,(i) the incurrence of any of the
     Guaranteed Obligations, (ii) the occurrence of any "Default" or "Event of
     Default" as such terms are defined in the Credit Agreement or any of the
     other Loan Document, (iii) demand, presentment, protest, nonpayment,
     intention to accelerate, acceleration, lack of diligence or delay in
     collection of all or any part of the Guaranteed Obligations or any other
     matter, or the absence thereof, (iv) any renewal, extension or assignment
     of the Guaranteed Obligations or any part thereof, (vi) the disposition or
     release of all or any part of any security for the Guaranteed Obligations
     (whether or not such disposition is commercially reasonable) or (vi) any
     other action taken or refrained from being

GUARANTY AGREEMENT - Page 4
<PAGE>

     taken by Administrative Agent or any Lender against Borrower, it being
     agreed that (except as may be expressly provided in the other Loan
     Documents) neither Administrative Agent nor any Lender shall be required to
     give Borrower or Guarantor any notice of any kind or to obtain Borrower's
     or Guarantor's consent under any circumstances whatsoever with respect to
     or in connection with the Guaranteed Obligations;

                (i) the unenforceability, illegality or uncollectibility of all
     or any part of the Guaranteed Obligations against Borrower by reason of (i)
     failure of consideration, (ii) breach of warranty, (iii) the act of
     creating the Guaranteed Obligations or any part thereof is ultra vires,
     (iv) the officers, directors, partners, trustees or representatives
     creating the Guaranteed Obligations acted in excess of their authority or
     lacked legal capacity, (v) the Credit Agreement, any Note or any other Loan
     Document evidencing the Guaranteed Obligations has been forged or otherwise
     is irregular or is not genuine or authentic, or (vi) failure to comply with
     the statute of frauds;

               (j) any payment by Borrower to Administrative Agent or any Lender
     is held to constitute a preferential transfer or a fraudulent conveyance or
     transfer under any applicable law, or for any reason Administrative Agent
     or any Lender is required to refund such payment or pay such amount to
     Borrower or any other Person;

               (k) any merger, reorganization, consolidation or dissolution of
   Borrower, any sale, lease or transfer of any or all of the assets of
 Borrower, or any change in name, business, location, composition, structure or
any change in the shareholders, partners or members (whether by accession,
secession, death, dissolution, transfer of assets or otherwise) of Borrower;

               (l) any failure of Administrative Agent or any Lender to notify
     Guarantor of (i)the acceptance of this Guaranty, (ii) the making of Loans
     by any Lender in reliance on this Guaranty, (iii) the failure of Borrower
     to make any payment due by Borrower to Administrative Agent or any Lender,
     or (iv) any information regarding the financial condition or prospects of
     Borrower;

               (m) any existing or future offset, claim or defense of Borrower
     against Administrative Agent or any Lender or against payment of all or any
     part of the Guaranteed Obligations, whether such offset, claim or defense
     arises in connection with the Guaranteed Obligations (or the transactions
     creating the Guaranteed Obligations) or otherwise;

               (n) any full or partial release of the liability of Borrower, any
     guarantor of all or any part of the Guaranteed Obligations or any other
     Person for all or any part of the Guaranteed Obligations, it being
     acknowledged and agreed by Guarantor that it may be required to pay the
     Guaranteed Obligations in full without assistance or support, whether from
     Borrower, any other guarantor or any other Person; or

GUARANTY AGREEMENT - Page 5
<PAGE>

               (o) any other action taken or omitted to be taken with respect to
     any of the Credit Agreement, any Note or any other Loan Document, the
     Guaranteed Obligations or the security and collateral therefor, whether or
     not such action or omission prejudices Guarantor or increases the
     likelihood that Guarantor will be required to pay all or any part of the
     Guaranteed Obligations pursuant to the terms hereof.

Without limiting the foregoing or Guarantor's liability under this Guaranty, to
the extent that Administrative Agent and Lenders (or any of them) have advanced
funds or extended credit to Borrower and do not receive payments or benefits
thereon in the amounts and at the times required or provided by or in connection
with the Credit Agreement, any Notes or any other Loan Document, Guarantor is
absolutely liable to make such payments and to confer such benefits on Lenders
on a timely basis.

     5.   Representations and Warranties.  In connection with this Guaranty,
          -------------------------------
Guarantor hereby represents and warrants to Administrative Agent and Lenders
that:

              (a) Guarantor is the parent corporation of Borrower and Guarantor
     has received and will receive a direct and indirect material benefit from
     the transactions evidenced by and contemplated in the Credit Agreement, the
     Notes and the other Loan Documents; this Guaranty is given by Guarantor in
     furtherance of the direct and indirect business interests and corporate
     purposes of Guarantor, and is necessary to the conduct, promotion and
     attainment of the businesses of Borrower and Guarantor; and the value of
     the consideration received and to be received by Guarantor is reasonably
     worth at least as much as the liability and obligation of Guarantor
     hereunder;

             (b) The execution and delivery of this Guaranty and the performance
     of and compliance with the terms hereof will not constitute a default (or
     an event which with notice or lapse of time or both would constitute a
     default) under, or result in the breach of, any material contract,
     agreement or instrument to which Guarantor is a party or which may be
     applicable to Guarantor or any of its assets;


               (c) This Guaranty, when executed and delivered by Guarantor, will
     constitute the legal, valid and binding obligation of Guarantor enforceable
     in accordance with its terms, except as limited by bankruptcy, insolvency
     or other laws of general application relating to the enforcement of
     creditors' rights and general principles of equity;

               (d) As of the date of this Guaranty, and after giving effect to
     this Guaranty and the contingent obligation evidenced by this Guaranty,
     Guarantor is not, on either an unconsolidated basis or a consolidated basis
     with Borrower and Guarantor's subsidiaries, insolvent, as such term is used
     or defined in any applicable bankruptcy, fraudulent conveyance, fraudulent
     transfer or similar law, and Guarantor has and will have assets which,
     fairly valued, exceed its indebtedness, liabilities and obligations;
     Guarantor is not executing this Guaranty with any intention to hinder,
     delay or defraud any present or future creditor or creditors of Guarantor;
     Guarantor is not engaged in any business or transaction (including,

GUARANTY AGREEMENT - Page 6
<PAGE>

     without limitation, the execution of
     this Guaranty) which will leave Guarantor with unreasonably small capital
     or assets which are unreasonably small in relation to the business or
     transactions engaged in by Guarantor, and Guarantor does not intend to
     engage in any such business or transaction; Guarantor does not intend to
     incur, nor does Guarantor believe that it will incur, debts beyond
     Guarantor's ability to repay such debts as they mature;

               (e) All acts and conditions required to be performed and
     satisfied prior to the creation and issuance of this Guaranty, and to
     constitute this Guaranty as the legal, valid and binding obligation of
     Guarantor in accordance with its terms, have been performed and satisfied
     in due and strict compliance with all applicable laws;

               (f) Guarantor is familiar with, and has independently received
      books and records regarding, the financial condition of Borrower and is
      familiar with the value of any and all collateral (if any) intended to
      secure the Guaranteed Obligations; however, Guarantor is not relying on
      such financial condition or any such collateral (if any) as an inducement
      to enter into this Guaranty; Guarantor has adequate means to obtain from
      Borrower, on a continuing basis, the information referred to in this
      clause (f) preceding and is not relying on Administrative Agent or any
      Lender to provide any such information at any time;

               (g) Guarantor has not been induced to enter into this Guaranty on
      the basis of a contemplation, belief, understanding or agreement that any
      Person other than Guarantor will be liable to pay the Guaranteed
      Obligations;

               (h) Except for the execution of the Credit Agreement, neither
      Administrative Agent, any Lender nor any other Person has made any
      representation, warranty or statement to, or promise, covenant or
      agreement with, Guarantor in order to induce Guarantor to execute this
      Guaranty;

               (i)  Borrower is a wholly-owned Subsidiary of Guarantor; and

               (j) All representations and warranties in the Credit Agreement
      relating to the Guarantor are true and correct in all material respects as
      of the date hereof, except to the extent made only as of a specific prior
      date, and on each date the representations and warranties thereunder are
      restated pursuant to any of the Loan Documents with the same force and
      effect as if such representations and warranties had been made on and as
      of such date, all of which are incorporated herein by reference.

     6.   Default.  Upon the occurrence of an Event of Default, Guarantor
          --------
shall, on demand by Administrative Agent and without further notice of dishonor
and without notice of any kind (including, without limitation, notice of
acceptance by Administrative Agent or any Lender of this Guaranty) having been
given to Borrower, Guarantor or any other Person previous to such demand,
promptly (i.e., not later than 1:00 p.m., New York, New York time, on the date
of such demand or,if such demand is made after 12:00 noon, on the next
succeeding Business Day) pay, in immediately available funds, the full unpaid
amount of the Guaranteed Obligations, or such lesser amount, if any,

GUARANTY AGREEMENT - Page 7
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as may be specifically demanded by Administrative Agent from time to time, to
Administrative Agent at Administrative Agent's Principal Office located in New
York, New York or at such other place as Administrative Agent may specify to
Guarantor in writing. If acceleration of the time for payment of any amount
payable by Borrower under or with respect to any of the Guaranteed Obligations
is stayed or otherwise delayed upon the insolvency, bankruptcy or reorganization
of Borrower, all such amounts otherwise subject to acceleration under the terms
of the Guaranteed Obligations shall nonetheless be payable by Guarantor
hereunder promptly on demand by Administrative Agent.

     7.   Cumulative Remedies; No Election.  If Guarantor is or becomes liable
          --------------------------------
or obligated for the Guaranteed Obligations, by endorsement or otherwise, other
than under this Guaranty, such liability or obligation shall not be in any
manner impaired or affected hereby, and the rights and remedies of
Administrative Agent or any Lender hereunder shall be cumulative of any and all
other rights and remedies that Administrative Agent or such Lender may ever have
against Guarantor. The exercise by Administrative Agent or any Lender of any
right or remedy hereunder or under any other agreement, document or instrument,
or at law or in equity, shall not preclude the concurrent or subsequent exercise
of any other right or remedy. Without in any way limiting the generality of the
foregoing, it is specifically understood and agreed that this Guaranty is given
by Guarantor as an additional guaranty or security to any and all other
guaranties or security heretofore, concurrently herewith or hereafter executed
and/or delivered by Guarantor to or in favor of Administrative Agent or any
Lender relating to the Guaranteed Obligations, and nothing herein shall ever be
deemed to in any way negate or replace any such other guaranties or security;
provided, however, that Administrative Agent and Lenders shall have all of their
rights and remedies under this Guaranty irrespective of anything to the contrary
contained in any such other guaranties or security. This Guaranty may be
enforced from time to time as often as occasion therefor may arise, and it is
agreed and understood that it shall not be necessary for Administrative Agent or
any Lender, in order to enforce this Guaranty against Guarantor, first to
exercise any rights or remedies against Borrower or any other Person or
institute suit or exhaust any available rights or remedies against security in
Administrative Agent's or any Lender's possession or under Administrative
Agent's or any Lender's control, or to resort to any other sources or means of
obtaining payment of the Guaranteed Obligations.

     8.   Joint and Several Obligation.  Guarantor agrees that Administrative
          ----------------------------
Agent and Lenders, in their sole discretion, may (a) bring suit against all
guarantors or other Persons liable or obligated to Administrative Agent or any
Lender or against any one or more of them, for interest, penalties, expenses,
fees, indebtedness, liabilities and obligations owed to Administrative Agent or
any Lender and apply any amounts obtained by Administrative Agent or any Lender
in such a manner as Administrative Agent or any Lender may elect, (b) bring suit
against all guarantors of the Guaranteed Obligations jointly and severally or
against any one or more of them, (c) settle fully or in part with any one or
more of such guarantors for such consideration as Administrative Agent or any
Lender may deem proper, and (d) partially or fully release one or more of such
guarantors from liability under any guaranty agreement, and that no such action
shall impair the rights of Administrative Agent or any Lender to collect the
Guaranteed Obligations (or the unpaid balance

GUARANTY AGREEMENT - Page 8
<PAGE>

thereof) from other guarantors (including, without limitation, Guarantor), or
any of them, not so sued, settled with or released.

     9. Release of Collateral, etc. If all or any part of the Guaranteed
          ---------------------------
Obligations is at any time secured, Guarantor agrees that Administrative Agent
or any Lender may, at any time and from time to time in its discretion and with
or without valuable consideration, allow substitution or withdrawal of
collateral or other security and release collateral or other security without
impairing or diminishing the liabilities or obligations of Guarantor hereunder.
Guarantor further agrees that, if Borrower or any other Person executes in favor
of Administrative Agent or any Lender any collateral agreement, mortgage, deed
of trust, collateral assignment, security agreement or other security
instrument, the exercise by Administrative Agent or any Lender of any right or
remedy thereby conferred on Administrative Agent or any Lender shall be wholly
discretionary with Administrative Agent and such Lender, respectively, and that
the exercise or failure to exercise any such right or remedy shall in no way
impair or diminish the obligation of Guarantor hereunder. Guarantor further
agrees that (except to the extent prohibited by applicable law notwithstanding
an agreement of the parties to the contrary) neither Administrative Agent nor
any Lender shall be liable for its failure to use diligence or care in the
collection of the Guaranteed Obligations, in the creation or perfection of any
lien, security interest or assignment intended as security or in preserving the
liability of any Person liable or obligated on the Guaranteed Obligations, and
Guarantor hereby waives presentment for payment, notice of nonpayment, protest
and notice thereof, and diligence in bringing suit against any Person liable on
the Guaranteed Obligations or any part thereof.

     10.  Binding Effect.  This Guaranty is for the benefit of Administrative
          ---------------
Agent and Lenders and their successors and permitted assigns, and in the event
of an assignment by Administrative Agent or any Lender or its successors or
assigns of the Guaranteed Obligations, or any part thereof, the rights and
benefits hereunder, to the extent applicable to the indebtedness, liabilities
and obligations so assigned, may be transferred with such indebtedness,
liabilities and obligations. This Guaranty is binding, not only upon Guarantor,
but upon its successors and assigns.

     11.  WAIVER OF SUBROGATION, CONTRIBUTION AND OTHER RIGHTS. UPON PAYMENT
          ----------------------------------------------------
BY GUARANTOR OF ANY SUMS IN RESPECT OF THE GUARANTEED OBLIGATIONS HEREUNDER
(INCLUDING, WITHOUT LIMITATION, ANY AMOUNTS ADVANCED TO BORROWER BY GUARANTOR),
ALL RIGHTS OF GUARANTOR AGAINST BORROWER OR ANY OTHER GUARANTOR OF THE
GUARANTEED OBLIGATIONS ARISING AS A RESULT THEREFROM BY WAY OF RIGHT OF
SUBROGATION, REIMBURSEMENT, EXONERATION, CONTRIBUTION, INDEMNIFICATION AND/OR
OTHERWISE SHALL IN ALL RESPECTS BE SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT
AND ENFORCEMENT TO THE PRIOR INDEFEASIBLE PAYMENT AND ENFORCEMENT IN FULL OF THE
GUARANTEED OBLIGATIONS. GUARANTOR SHALL NOT HAVE, AND HEREBY IRREVOCABLY WAIVES,
ANY AND ALL RIGHTS AND REMEDIES OF SUBROGATION, REIMBURSEMENT, EXONERATION,
CONTRIBUTION, INDEMNIFICATION AND/OR OTHERWISE AGAINST OR FROM BORROWER UNLESS
AND UNTIL ALL OF THE GUARANTEED OBLIGATIONS HAVE BEEN PAID

GUARANTY AGREEMENT - Page 9
<PAGE>

AND PERFORMED IN FULL. IN ADDITION TO THE FOREGOING, GUARANTOR HEREBY
IRREVOCABLY WAIVES ANY AND ALL CLAIMS OR OTHER RIGHTS AND REMEDIES IT MAY NOW
HAVE OR HEREAFTER ACQUIRE AGAINST ADMINISTRATIVE AGENT, ANY LENDER, BORROWER OR
ANY OTHER PERSON UNDER CHAPTER 34 OF THE TEXAS BUSINESS AND COMMERCE CODE, UNDER
RULES 31 AND 163 OF THE TEXAS RULES OF CIVIL PROCEDURE, UNDER SECTION 17.001 OF
THE TEXAS CIVIL PRACTICE AND REMEDIES CODE AND UNDER ANY OTHER STATUTE OF ANY
STATE OR OTHER JURISDICTION REQUIRING RECOURSE AGAINST THE PRIMARY OBLIGOR OR
IMPOSING OTHER REQUIREMENTS AS A CONDITION TO RECOURSE AGAINST A GUARANTOR IF
AND TO THE EXTENT THAT THE SAME MAY BE APPLICABLE TO THIS GUARANTY. Except as
expressly otherwise provided in this Paragraph 11, Guarantor shall have all
rights of subrogation, reimbursement, exoneration, contribution and
indemnification that may exist under currently applicable law.

     12.  Right of Setoff.   Guarantor hereby grants to Administrative Agent
          ---------------
and each Lender a right of setoff upon any and all monies, securities or other
property of Guarantor, and the proceeds therefrom, now or hereafter held or
received by or in transit to Administrative Agent or any Lender from or for the
account of Guarantor, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, and also upon any and all deposits (general or special)
and credits of Guarantor, and any and all claims of Guarantor against
Administrative Agent or any Lender at any time existing. The right of setoff
granted pursuant to this Paragraph 12 shall be cumulative of and in addition to
Administrative Agent's and each Lender's common law right of setoff.

     13.  Further Assurances.  Upon the request of Administrative Agent or any
          ------------------
Lender, Guarantor will, at any time and from time to time, duly execute and
deliver to Administrative Agent any and all such further agreements, documents
and instruments, and supply such additional information, as may be necessary or
advisable, in the reasonable opinion of Administrative Agent or any Lender, to
obtain the full benefits of this Guaranty.

     14.  Invalid Provisions.  If any provision of this Guaranty is held to be
          ------------------
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable, this Guaranty shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision there shall be added
automatically as a part of this Guaranty a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable. No provision herein or in any other Loan Document
evidencing the Guaranteed Obligations shall require the payment or permit the
collection of interest in excess of the maximum permitted by applicable law.

     15.  Modification in Writing.  No modification, consent, amendment or
          -----------------------
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor herefrom, shall be effective

GUARANTY AGREEMENT - Page 10
<PAGE>

unless the same shall be in writing and signed by a duly authorized officer of
Administrative Agent and Guarantor and then shall be effective only in the
specific instance and for the specific purpose for which given.

     16.  No Waiver, Etc.  No notice to or demand on Guarantor or
          --------------
Administrative Agent in any case shall entitle Guarantor or Administrative
Agent, respectively, to any other or further notice or demand in similar or
other circumstances. No delay or omission by Administrative Agent, any Lender or
Guarantor in exercising any right or remedy hereunder shall impair any such
right or remedy or be construed as a waiver thereof or any acquiescence therein,
and no single or partial exercise of any such right or remedy shall preclude
other or further exercise thereof or the exercise of any other right or remedy
hereunder.

     17.  Cumulative Rights.  All rights and remedies of Administrative Agent
          -----------------
and Lenders hereunder are cumulative of each other and of every other right or
remedy which Administrative Agent or any Lender may otherwise have at law or in
equity or under any other contract or document, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.

     18.  Expenses.  Guarantor agrees to pay on demand by Administrative Agent
          --------
all costs and expenses incurred by Administrative Agent or any Lender in
connection with the enforcement of the terms and provisions of this Guaranty
and, if and to the extent that Borrower is obligated therefor in accordance with
the Credit Agreement, any and all amendments, modifications, renewals,
restatements and/or supplements hereto from time to time, including, without
limitation, the reasonable fees and expenses of legal counsel to administrative
Agent. If Guarantor should breach or fail to perform any provision of this
Guaranty, Guarantor agrees to pay to Administrative Agent all costs and expenses
incurred by Administrative Agent or any Lender in the enforcement of this
Guaranty from time to time, including, without limitation, the reasonable fees
and expenses of all legal counsel to Administrative Agent and Lenders.

     19.  APPLICABLE LAW.  THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED
          ---------------
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES).

     20.  NO ORAL AGREEMENTS.  THIS GUARANTY REPRESENTS THE FINAL AGREEMENT
          ------------------
BETWEEN GUARANTOR AND ADMINISTRATIVE AGENT AND LENDERS RELATING TO THE SUBJECT
MATTER OF THIS GUARANTY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG GUARANTOR AND ADMINISTRATIVE AGENT OR
ANY LENDER. THIS GUARANTY SUPERSEDES ALL PRIOR (IF ANY) ORAL AGREEMENTS, ORAL
ARRANGEMENTS OR ORAL UNDERSTANDINGS RELATING TO THE SUBJECT MATTER OF THIS
GUARANTY, AND THIS GUARANTY SUPERSEDES ALL PRIOR (IF ANY) WRITTEN AGREEMENTS
RELATING TO THE SUBJECT MATTER OF THIS GUARANTY IF AND TO THE

GUARANTY AGREEMENT - Page 11
<PAGE>

EXTENT THAT SUCH PRIOR AGREEMENTS ARE INCONSISTENT WITH THIS GUARANTY.

     21.  Notices.  All notices and other communications required or permitted
          -------
to be given under this Guaranty shall be given or made in writing and shall be
delivered in the manner and to the addresses, and shall be deemed to have been
duly given when, specified in the Credit Agreement.

     22.  Survival.  All representations, warranties, covenants and agreements
          --------
of Guarantor in this Guaranty shall survive the execution of this Guaranty.

     23.  Counterparts.  This Guaranty may be executed in any number of
          ------------
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute one and the same Guaranty.

     24.  Limitation on Interest.  Notwithstanding anything to the contrary
          ----------------------
contained or referred to in this Guaranty, none of the terms and provisions of
this Guaranty, the Credit Agreement, the Notes or any other Loan Document shall
ever be construed to create a contract or obligation to pay interest at a rate
in excess of the Maximum Rate, and neither Administrative Agent nor any Lender
shall ever charge, receive, take, collect, reserve or apply, as interest on the
Obligations or the Guaranteed Obligations, any amount in excess of the Maximum
Rate. The parties hereto agree that any interest, charge, fee, expense or other
indebtedness, liability or obligation provided for in this Guaranty, the Credit
Agreement, the Notes or any other Loan Document which constitutes interest under
applicable law shall be, ipso facto and under any and all circumstances,limited
or reduced to an amount equal to the lesser of (a) the amount of such interest,
charge, fee, expense or other indebtedness, liability or obligation that would
be payable in the absence of this Paragraph 24 or (b) an amount, which when
added to all other interest payable under this Guaranty, the Credit Agreement,
the Notes and any other Loan Document, equals the Maximum Rate. If,
notwithstanding the foregoing, Administrative Agent or any Lender ever contracts
for, charges, receives, takes, collects, reserves or applies as interest any
amount in excess of the Maximum Rate, such amount which would be deemed
excessive interest shall be deemed a partial payment or prepayment of principal
of the Obligations and the Guaranteed Obligations and treated hereunder as such,
and if the Obligations and the Guaranteed Obligations, or applicable portions
thereof, are paid in full, any remaining excess shall promptly be paid to
Borrower, Guarantor or such other Person (as appropriate). In determining
whether the interest paid or payable, under any specific contingency, exceeds
the Maximum Rate, Guarantor, Borrower, Administrative Agent and Lenders shall,
to the maximum extent permitted by applicable law, (i) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest, (ii)
exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the Obligations and the
Guaranteed Obligations, or applicable portions thereof, so that the interest
rate does not exceed the Maximum Rate at any time during the term of the
Obligations and the Guaranteed Obligations; provided that, if the unpaid
principal balance is paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period of
existence thereof exceeds the Maximum Rate, Administrative Agent and Lenders
shall refund to Borrower, Guarantor or such

GUARANTY AGREEMENT - Page 12
<PAGE>

other Person (as appropriate) the amount of such excess and, in such event,
neither Administrative Agent nor any Lender shall be subject to any penalties
provided by any laws for contracting for, charging, receiving, taking,
collecting, receiving or applying interest in excess of the Maximum Rate.

     25.  Irrevocable Nature of Guaranty.  This Guaranty may not be revoked by
          -------------------------------
Guarantor; provided, however, in the event it shall be determined that Guarantor
shall have the right, in accordance with applicable law and notwithstanding its
express agreement herein to the contrary, to revoke this Guaranty, Guarantor may
deliver to Administrative Agent, at its address for notices set forth in the
Credit Agreement, written notice of Guarantor's intention not to be liable
hereunder for any Guaranteed Obligations arising, created or incurred after
Administrative Agent's receipt of such notice, whereupon such notice shall be
effective to the extent (but only to the extent) provided hereinbelow as to
Guarantor from and after (but not before) the time when such notice is actually
delivered to and received by and receipted for in writing by Administrative
Agent (the "Effective Revocation Time"); provided, further, however, that such
notice shall not be effective as to, and shall not in any way restrict, limit,
impair, release or otherwise affect, the indebtedness, liabilities or
obligations of Guarantor under this Guaranty with respect to (a) any Guaranteed
Obligations consisting of indebtedness, liabilities or obligations under the
Credit Agreement, the Notes or any other Loan Document, whether incurred before
or after the Effective Revocation Time (including, without limitation, any
loans, advances or extensions of credit at any time made or created under the
Credit Agreement, whether or not agreed, committed or contemplated to be made by
Administrative Agent or any Lender and whether or not discretionary with
Administrative Agent or any Lender), (b) any Guaranteed Obligations arising,
created or incurred prior to the Effective Revocation Time, (c) any amendments,
modifications, renewals, extensions, restatements and/or supplements to or of
the indebtedness, liabilities or obligations referred to in clauses (a) and (b)
preceding, whether occurring before or after the Effective Revocation Time, or
(d) any interest or costs of collection with respect to any of the indebtedness,
liabilities or obligations referred to in clauses (a), (b) or (c) preceding. Any
revocation or attempted revocation of this Guaranty, whether in whole or in
part, shall not be effective except under limited circumstances (if any), and to
the limited extent, expressly provided in this Paragraph 25.

     26.  Reinstatement of Guaranteed Obligations.  Notwithstanding anything
          ----------------------------------------
to the contrary contained in this Guaranty or any other Loan Document, if the
payment of any amount of principal of or interest with respect to the Guaranteed
Obligations, or any portion thereof, is rescinded, voided or must otherwise be
refunded by the Administrative Agent or any Lender or otherwise for any reason
whatsoever, then the Guaranteed Obligations will be automatically reinstated and
become automatically effective and in full force and effect, all to the extent
that and as though such payment so rescinded, voided or otherwise refunded had
never been made.

     27.  Covenants and Agreements.  Guarantor covenants and agrees that, as
          ------------------------
long as the Guaranteed Obligations or any part thereof are outstanding or any
Lender has any Commitment under the Credit Agreement, it will comply, strictly
in accordance with the terms thereof, with all covenants and agreements
specifically applicable to it as set forth in any one or more of the Credit
Agreement and the other Loan Documents, all of which are incorporated herein by
reference.


GUARANTY AGREEMENT - Page 13
<PAGE>

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GUARANTY AGREEMENT - Page 14
<PAGE>

     IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the
date first written above.

                                     GUARANTOR:

                                     CAIS INTERNET, INC.




                                     By:/s/ Ulysses G. Auger, II
                                        --------------------------
                                     Name: Ulysses G. Auger, II
                                     Title:   Chief Executive Officer


     The undersigned has executed this Guaranty solely for the purpose of
confirming receipt of this Guaranty and reliance on this Guaranty by
Administrative Agent and Lenders as of the date first written above.

                                     NORTEL NETWORKS INC.,
                                     as Administrative Agent




                                     By: /s/ Michael W. McCorkle
                                        -------------------------
                                     Name: Michael W. McCorkle
                                     Title:    Director, Customer Finance







GUARANTY AGREEMENT - Page 15