Document:

<PAGE>

                                                                    EXHIBIT 10.5

                                                                  EXECUTION COPY

                     _____________________________________

                            SOUTH AMERICAN CROSSING

                     _____________________________________

                              PROJECT DEVELOPMENT

                                      AND

                             CONSTRUCTION CONTRACT

                                    BETWEEN

                           ALCATEL SUBMARINE NETWORKS

                                      AND

                          SOUTH AMERICAN CROSSING LTD.

                     _____________________________________

                           Dated as of July 30, 1999

                     _____________________________________
<PAGE>

                               TABLE OF CONTENTS

                          GENERAL TERMS AND CONDITIONS

<TABLE>
<CAPTION>
Article                                                                                   PAGE
-------                                                                                   ----
<S>                                                                                       <C>
1   Provision of System..................................................................   1
2   Documents Forming the Entire Contract................................................   1
3   Definitions..........................................................................   2
4   Contract Price.......................................................................  17
5   Terms of Payment by Purchaser........................................................  21
6   Contract Variations..................................................................  24
6A  Optional Upgrades....................................................................  25
6B  Construction Options for the Trans-Andes Crossing....................................  29
6C  Optional Branching Unit..............................................................  30
7   Responsibilities for Permits; Compliance with Laws; Purchaser Access Rights..........  30
8   Route Survey.........................................................................  32
9   Acceptance...........................................................................  33
10  Warranty.............................................................................  37
11  Contractor Support; Use of Segment for Restoration Protection........................  42
12  Purchaser's Obligations..............................................................  43
13  Termination for Default..............................................................  44
14  Termination for Convenience..........................................................  46
15  Suspension...........................................................................  48
16  Title and Risk of Loss...............................................................  49
17  Force Majeure........................................................................  49
18  Intellectual Property................................................................  50
19  Infringement.........................................................................  56
20  Safeguarding of Information and Technology...........................................  57
21  Export Control.......................................................................  58
22  Liquidated Damages...................................................................  58
23  Limitation of Liability/Indemnification..............................................  60
24  Counterparts.........................................................................  61
25  Design and Performance Responsibility; Subcontractors................................  61
26  Product Changes......................................................................  63
27  Risk and Insurance...................................................................  63
28  Plant and Work Rules.................................................................  66
29  Right of Access and Review...........................................................  66
30  Quality Assurance; First Application.................................................  67
31  Documentation........................................................................  68
32  Training.............................................................................  68
33  Settlement of Disputes/Arbitration...................................................  68
34  Applicable Law.......................................................................  70
35  Notices..............................................................................  71
36  Publicity and Confidentiality......................................................... 71
</TABLE>

                                      -i-
<PAGE>

<TABLE>
<S>                                                                                  <C>

37  Assignment...................................................................... 72
38  Relationship of the Parties..................................................... 73
39  Successors Bound................................................................ 73
40  Article Captions; Joint Drafting................................................ 73
41  Severability.................................................................... 73
42  *............................................................................... 74
43  Survival of Obligations......................................................... 74
44  Non-Waiver...................................................................... 74
45  Language........................................................................ 74
46  Entire Agreement................................................................ 74
</TABLE>

Exhibit A      Route Segments
Exhibit B      Form of Parent Guaranty
*
Exhibit D      Forms of Opinion for Contractor and Guarantor
Exhibit E      Form of Payment Escrow Agreement
Exhibit F      First Use System Elements and Subsystems and Deliverable Software
Exhibit G      Subcontractors
Exhibit H      Intellectual Property
Exhibit I      Landing Licenses
Exhibit J      Examples of Contractor Permits
Exhibit K      Examples of Owner Permits

* Material omitted and separately filed with the Commission under an
  application for confidential treatment.

                                     -ii-

<PAGE>

                            PROJECT DEVELOPMENT AND
                             CONSTRUCTION CONTRACT

           This Project Development and Construction Contract ("Contract") is
corporation organized and existing under the laws of France, and having its
principal office in Clichy Cedex, France, (hereinafter "Contractor") and (ii)
                                                        ----------
South American Crossing Ltd., a corporation organized and existing under the
laws of Bermuda, and having its principal office in Hamilton, Bermuda
(hereinafter "Purchaser").
              ---------

           WHEREAS, Purchaser desires to establish a fiber optic cable system,
to be known as the South American Crossing Cable System (hereinafter, and as
more fully defined herein, the "System"), which will be used to provide service
among the Segments as described in Exhibit A hereto;

           WHEREAS, Contractor is in the business of designing, constructing,
installing, supplying, delivering and manufacturing fiber optic cable systems
and is familiar with the general business of the fiber optic cable system
industry;

           WHEREAS, Purchaser seeks to purchase and own the System and wishes to
engage Contractor to perform the Work and Upgrade Work; and

           WHEREAS, Contractor is willing to perform the Work and Upgrade Work
on a turn-key, fixed-price basis in accordance with and subject to the terms
hereof.

           NOW, THEREFORE, in consideration of the premises and for other good
and valuable considerations, receipt of which is hereby acknowledged, it has
been agreed as follows:

Article 1  Provision of System
------------------------------

           In consideration of the Contract Price and the Upgrade Prices, the
Contractor hereby agrees to perform the Work and the Upgrade Work, on a turn-
key, fixed price basis, and to provide the Purchaser with the System meeting the
System Performance Requirements on or before the Scheduled RFS Date(s) and the
System Upgrades meeting the requirements of Article 6A, all in accordance with
the terms hereof.

           Contractor understands that a part of the System comprising portions
of the Trans-Andean Crossing is intended to be installed by another
contractor(s). The Contractor agrees to reasonably cooperate with Purchaser and
such other contractor(s), as necessary, including with respect to (i) and
carrying out installation and (ii) Contractor's and each such contractor's
obligation to formulate testing procedures.

Article 2  Documents Forming the Entire Contract
------------------------------------------------

           This Contract consists of these commercial Terms and Conditions,
Exhibits A through K, and the following documents (in the form of attachments,
including appendices, attached hereto), which shall be read and construed as
part of the Contract:
<PAGE>

     Commercial Volume

     .    Provisioning Schedule, Section 2
     .    Upgrade Provisioning Schedule, Section 3
     .    Billing Schedule, Section 4
     .    Upgrade Billing Schedule, Section 5
     .    Plan of Work, Section 6
     .    Upgrade Plan of Work, Section 7
     .    Invoice Format, Section 8
     .    Form of Contractor's certificate, Section 9
     .    Progress Schedule, Section 10
     .    Upgrade Progress Schedule, Section 11

     Technical Volume (includes Route Information)

           In the event of any inconsistency between the Terms and Conditions
and the above listed documents, the Terms and Conditions shall prevail. The
documents listed above have no order of precedence.

Article 3  Definitions
----------------------

           Terms used herein which are not defined herein, but which have common
meanings when used in the telecommunications industry, shall have such common
meanings when used herein. Definitions are as described in the specific
Articles. Except as otherwise defined the following definitions shall apply
throughout the Contract:

           AAA has the meaning set forth in Sub-Article 33(B).

           Acceptance Testing means (i) with respect to a Segment, a Phase or
     the System, the tests described in the System Commissioning and Acceptance
     section of the Technical Volume or developed pursuant to such section by
     mutual agreement of the Parties and designed to verify that such Segment,
     such Phase or the System meets the applicable Performance Requirements and
     (ii) with respect to any System Upgrade, the tests described in the System
     Commissioning and Acceptance section of the Technical Volume or developed
     pursuant to such section by mutual agreement of the Parties and designed to
     verify that the System Upgrade meets the applicable Performance
     Requirements.

           Access Rights means all ownership, easement, wayleaves and/or other
     property rights, from both private and governmental entities, both on land
     and below the surface of the water (including, without limitation,
     agreements to use borepipes, conduits and ducts, install manholes and to
     lease space in cable stations) necessary to access, use and occupy cable
     stations and the sites for cable stations (including, without limitation,
     to land and install the submarine cable and related equipment and to bring
     such cable from the ocean to the cable stations) in order for the Purchaser
     to own, operate and maintain the System.
<PAGE>

                                                                               3

          Actual Knowledge means the actual knowledge of any executives with
     management responsibility for the Contract.

          Assignment has the meaning set forth in Sub-Article 37(A).

          Bank Escrow Agent means The Chase Manhattan Bank, in its capacity as
     escrow agent under the Payment Escrow Agreement, and its successors in such
     capacity.

          Bankruptcy Event means an event specified in Sub-Article 13(A)(3) or
     13(A)(4) with Contractor as the "other Party".

          Billing Milestones means the billing milestones set forth in the
     Technical Volume.

          Billing Schedule means a billing schedule attached hereto as Section 4
     to the Commercial Volume.

          Buenos Aires Telehouse means a telehouse located in Buenos Aires,
     Argentina in which Purchaser has obtained Purchaser Access Rights.

          Certificate of Commercial Acceptance means a certificate issued by
     Purchaser in accordance with Sub-Article 9(D) to Contractor certifying that
     a Segment, the System or a System Upgrade is Ready for Commercial
     Acceptance.

          Certificate of Final Acceptance means a certificate issued by
     Purchaser in accordance with Sub-Article 9(E) to Contractor certifying that
     a Phase; the System or a System Upgrade is Ready for Final Acceptance.

          Certificate of Provisional Acceptance means a certificate issued by
     Purchaser in accordance with Sub-Article 9(C) to Contractor certifying that
     a Segment, the System or a System Upgrade is Ready for Provisional
     Acceptance.

          CIF means cost, insurance and freight, as defined in Incoterms.

          Colombia Branching Unit means a branching unit (as described in the
     Technical Volume) located off the coast of Colombia, which interconnects
     Segments G, H and I.

          Code means the Internal Revenue Code of 1986, as amended from time to
     time.

          Commissioning Report means a written report from Contractor
     demonstrating that the System (or a Segment, if Purchaser agrees to accept
     it) is Ready for Commercial Acceptance or Provisional Acceptance, as the
     case may be, and has passed all Acceptance Testing and all other acceptance
     and performance requirements set forth in the System Commissioning and
     Acceptance section of the Technical Volume.

          Confidential Information has the meaning set forth in Sub-Article
     36(B).
<PAGE>

                                                                               4

          Contract means this agreement, specifically consisting of the
     documents described in Article 2, and shall be deemed to include any
     amendments thereto or Contract Variations pursuant to Article 6 (Contract
     Variations).

          Contract Countries means U.S. Virgin Islands, Brazil, Argentina,
     Chile, Peru, Colombia, Panama and Uruguay or any political subdivision
     thereof or taxing authority therein.

          Contract Price means the Initial Contract Price, plus any variations
     pursuant to Article 6 (Contract Variations), Article 6B (Construction
     Options for the Trans-Andean Crossing), Article 6C (Optional Branching
     Unit), Taxes as set forth in Sub-Article 4(B) and other adjustments to the
     Contract Price provided for in this Contract.

          Contract Taxes has the meaning set forth in Sub-Article 4(B)(1).

          Contract Variation has the meaning set forth in Sub-Article 6(A).

          Contractor means the entity that executed this Contract as the
     Contractor and that will be responsible for the performance of the Work
     (and if applicable, Upgrade Work) under this Contract and shall include its
     permitted successors and/or assigns.

          Contractor Permits means (i) all permits that the Contractor needs to
     conduct its business, (ii) all Permits which the Contractor must obtain in
     order to carry out its operations to perform the Work and (iii) minor and
     routine construction and building Permits such as licenses to install
     electricity and plumbing. Exhibit J hereto contains a list of sample
     Contractor Permits; provided that such list is not meant to be complete or
                         --------
     exclusive.

          Cook's Crossing means (i) the Supplies contained in the Ft. Amador
     (PAC) Cable Station, and the St. Croix (SAC) Cable Station, and (ii) the
     transmission facility (owned by an affiliate of purchaser) connecting the
     Ft. Amador (PAC) Cable Station, the St. Croix (PAC) Cable Station, and the
     Venezuela (PAC) Cable Station; designed and constructed by TSSL for an
     affiliate of Purchaser as a fully integrated and working Segment of the
     System.

          Cook's Crossing Upgrade shall have the meaning set forth in Sub-
     Article 6A(A).

          Dark Fiber shall mean fiber optic cable meeting the criteria of ITU
     G.655 and having the ability to connect to associated repeaters,
     regeneration equipment, transmission equipment, terminal equipment or other
     Supplies, consisting of four fiber pairs, installed in all or any portion
     designated by Purchaser (with notice to Contractor) of the Purchaser Access
     Rights, which cable shall not come with any associated repeaters,
     regeneration equipment, transmission equipment, terminal equipment or other
     supplies, all as more fully described in the Technical Volume.
<PAGE>

                                                                               5

          Date of Commercial Acceptance, Provisional Acceptance or Final
     Acceptance means the date set forth in the Certificate of Commercial
     Acceptance, Certificate of Provisional Acceptance or Certificate of Final
     Acceptance, as the case may be; provided, that for purposes of Article 21
                                     --------
     (Liquidated Damages) only, such date shall be deemed to be the date that
     Purchaser receives a complete Commissioning Report or an Upgrade
     Commissioning Report, as the case may be, demonstrating that a Segment, a
     Phase, the System or a System Upgrade, as the case may be, is Ready for
     Commercial Acceptance, Ready for Provisional Acceptance or Ready for Final
     Acceptance in accordance with Article 9 (Acceptance).

          Default means an Event of Default or any event, condition or
     occurrence which with the giving of notice or passage of time or both would
     be an Event of Default.

          Deliverable Software has the meaning set forth in Sub-Article 18(C).

          Deliverable Software Escrow has the meaning set forth in Sub-Article
     18(H).

          Deliverable Technical Material has the meaning set forth in Sub-
     Article 18(B).

          Dispute Account means the Dispute Account to be created under the
     Payment Escrow Agreement.

          Event of Default has the meaning set forth in Sub-Article 13(A).

          Excluded Tax means a Tax described in any of the following clauses:

          (i)   any franchise, excess profits, net worth, capital or capital
     gains Tax, as well as any Tax on doing business or imposed on net or gross
     income or receipts (including minimum and alternative minimum Taxes
     measured by any items of Tax preference), but in each case excluding Taxes
     that are or are in the nature of sales, use, excise, license, stamp,
     rental, ad valorem, value added or property Taxes (other than property
     taxes on property owned by the Contractor and not intended to be
     incorporated into the System);

          (ii)  any Taxes imposed by a jurisdiction other than one in which (a)
     the Contractor is or is treated as engaged in activities contemplated by or
     in fulfillment of the Contract or (b) the Purchaser or its affiliates has a
     nexus to such jurisdiction and the Tax imposed is attributable to that
     nexus;

          (iii) Taxes imposed on the Contractor as a result of Contractor's
     gross negligence or willful misconduct; or

          (iv)  any import duty, other import related charges, sales or use tax,
     VAT or property tax imposed by any Non-Contract Country in respect of
     Supplies brought into such Non-Contract Country for testing, modification
     or other similar purposes prior to being installed or used outside such
     Non-Contract Country.
<PAGE>

                                                                               6

          Expedited Upgrade has the meaning set forth in Sub-Article 6A(L).

          Final Commissioning Report and Final Upgrade Commissioning Report
     means a written report from Contractor demonstrating that the System (or a
     Segment) is Ready for Final Acceptance and has passed all Acceptance
     Testing and all other acceptance and performance requirements set forth in
     the System Commissioning and Acceptance section of the Technical Volume.

          Final Survey Report means the final survey report described in the
     Technical Volume.

          FOB means free on board as defined in the International Chamber of
     Commerce, Guide to Incoterms (1990).

          Ft. Amador (PAC) Cable Station (or the Panama (PAC) Cable Station)
     means the cable station located in Ft. Amador, Panama which is part of the
     Pan American Crossing submarine cable system, which is owned by an
     affiliate of Purchaser.

          Force Majeure has the meaning set forth in Sub-Article 17(A).

          Guarantor means Alcatel, a French corporation and the ultimate parent
     company of the Contractor.

          Guaranty means the guaranty to be entered into by the Guarantor in
     favor of the Purchaser, to be substantially in the form of Exhibit B
     hereto.

          Incoterms means the International Chamber of Commerce, Guide to
     Incoterms (1990).

          Information has the meaning set forth in Sub-Article 20(A).

          Initial Contract Price has the meaning set forth in Sub-Article
     4(A)(1).

          Initial Upgrade Price has the meaning set forth in Sub-Article
     4(A)(2).

          Intellectual Property has the meaning set forth in Sub-Article 18(A).

          Landing Country(ies) means each country in which the System connects
     to a cable station.

          Landing Licenses means, in the United States, a License to Land and
     Operate a Submarine Cable System pursuant to the Submarine Cable Landing
     Act, 47 U.S.C. 34-39 and in the other Landing Countries, the comparable
     licenses, which licenses are specifically described in Exhibit I hereto.

          Las Toninas Cable Station means the System cable station to be located
     in Las Toninas, Argentina.
<PAGE>

                                                                               7

          Laws means any laws, ordinances, regulations, rules, orders,
     proclamations, requirements of governmental authorities or treaties.

          Manufacturing Materials has the meaning set forth in Sub-Article
     13(B).

          Non-Contract Countries means all countries, or any political
     subdivision thereof or taxing authority therein, other than the Contract
     Countries.

          Non-Ship Costs has the meaning set forth in Sub-Article 10(A)(2).

          Notice of Termination has the meaning set forth in Sub-Article 14(A).

          Option Branching Unit shall mean *

          Optional Branching Unit Price has the meaning set forth in Article 6C.

          Optional TAC Segments means Segments E-1, E-2 and E-3.

          Owner Permits means all Permits required to be obtained from
     governmental authorities pursuant to Laws that the Purchaser needs to own
     and operate the System and which the Purchaser would have had to obtain if
     it were constructing the System itself. Exhibit K contains a sample list of
     Owner Permits; provided that such list is not meant to be complete or
                    --------
     exclusive.

          Party(ies) means either of the Purchaser and/or the Contractor, as
     appropriate.

          Payment Escrow Agreement means that escrow agreement to be entered
     into among the Contractor, Purchaser, and the Bank Escrow Agent,
     substantially in the form of Exhibit E hereto, with such changes therein as
     are reasonably requested by the Bank Escrow Agent, as amended modified or
     supplemented from time to time.

          Performance Requirements means (i) with respect to a Segment, a Phase
     or the System, the applicable System Performance Requirements set forth or
     to be developed by mutual agreement pursuant to the Transmission
     Performance section of the System Description section of the Technical
     Volume, (ii) with respect to any System Upgrade, the System Performance
     Requirements set forth in or to be developed by mutual agreement pursuant
     to the Technical Volume or (iii) in each case, such other Segment, Phase,
     System or System Upgrade performance levels as mutually agreed by the
     Parties, including the System acceptance limits included in the impairment
     budgets.

          Permits means all Access Rights, permits, pipeline and cable crossing
     agreements, approvals, "no objections", permissions-in-principle,
     authorizations,

 *  Material omitted and separately filed with the Commission under an
    application for confidential treatment.
<PAGE>

                                                                               8

     consents, customs clearances, registrations, certificates, rights-of-way,
     certificates of occupancy, licenses, including without limitation, export
     and import licenses and similar authorizations, landing permits, orders,
     vessel and crew authorizations/visas, permission for the operation of
     navigational aids and radio systems and similar authorizations necessary to
     complete the Work and operate and maintain the System (other than any of
     the foregoing (i) relating to the ownership, operation and maintenance by
     Purchaser of the System and not necessary until after the System is Ready
     for Final Acceptance, (ii) which is or would be needed by Purchaser to
     engage in any business outside the business of developing, owning and
     operating a submarine cable system or (iii) which is or would be needed at
     any time by any purchaser or lessee of capacity on the System). Permits
     include all of the foregoing whether required to be obtained from
     governmental entities or private parties. The term Permits includes all
     Contractor Permits and all Owner Permits.

          Phase 1 means Segments C and D and, if the Phase 1 Option is elected,
     Segment E-1, all as more fully described in the Technical Volume hereto.

          Phase 1 Option has the meaning set forth in Sub-Article 6B(A).

          Phase 2 means Segments A, B and Cook's Crossing, and if the Phase 2
     Option is elected, Segment E-2, as more fully described in the Technical
     Volume hereto.

          Phase 2 Option has the meaning set forth in Sub-Article 6B(B).

          Phase 3 means Segments E-1, E-2, E-3, F, G and H, or, if the Phase 1
     Option is elected, Segments E-2, E-3, F, G and H, or, if the Phase 2 Option
     is elected, Segments E-3, F, G and H, as more fully described in the
     Technical Volume.

          Plan of Work means the Plan of Work attached as Section 6 to the
     Commercial Volume.

          Provisioning Schedule means the price schedule attached hereto in
     Section 2 to the Commercial Volume.

          Purchaser means South American Crossing Ltd. and shall include its
     permitted successors and assigns.

          Purchaser Access Rights means, with respect to the Trans-Andes
     Crossing, the rights of way, duct space, and space and infrastructure in
     both equipment huts and telehouses obtained by Purchaser or its affiliates
     necessary for Contractor to install the Supplies, all as more fully
     described in the Technical Volume.

          Purchaser Hindrance has the meaning set forth in Article 12 hereof.

          Purchaser Permits means, collectively, all Landing Licenses.
<PAGE>

                                                                               9

          Ready for Commercial Acceptance means

          (i)   for any Segment, that

                (a)  if the Phase including such Segment is not at the same time
                     also Ready for Commercial Acceptance, the Purchaser has
                     consented, in its sole discretion, to accept such Segment
                     as Ready for Commercial Acceptance,

                (b)  such Segment has been substantially completed and has the
                     ability to carry commercial traffic between the two landing
                     points of such Segment meeting performance criteria of ITU-
                     T G.826 as defined in the System Performance section of the
                     Technical Volume and has line monitoring and protection
                     switching capability,

                (c)  Contractor has tested and provided for STM-1
                     interconnectivity capability to the Segment terminal
                     equipment according to ITU-T G.826 or, if a different
                     interface rate is used, an equivalent standard,

                (d)  Contractor has substantially performed its obligations
                     under Article 18 (Intellectual Property) then required to
                     be performed by it, and

                (e)  all Permits are obtained for such Segment, and

          (ii)  for any Phase, that

                (a)  such Phase has been substantially completed and has the
                     ability to carry commercial traffic operating at 20 Gb/s
                     per fiber pair on two fiber pair between the various
                     landing points of such Phase meeting performance criteria
                     of ITU-T G.826 as defined in the System Performance section
                     of the Technical Volume, has line monitoring and per
                     Segment protection switching capability and has network
                     management capability,

                (b)  Contractor has tested and provided for STM-1
                     interconnectivity capability to the System terminal
                     equipment according to ITU-T G.826 or if a different
                     interface rate is used, an equivalent standard,

                (c)  Contractor has substantially performed its obligations
                     under Article 18 (Intellectual Property) then required to
                     be performed by it;

                (d)  all Permits are obtained for such Phase; and
<PAGE>

                                                                              10

                (e)  in the case of Phase 3, the System is also ready for
                     Commercial Acceptance; and

          (iii)  for the System, that

                (a)  the System has been substantially completed and has the
                     ability to carry commercial traffic throughout the System
                     (operating at 20 Gb/s per fiber pair on two fiber pair)
                     meeting performance criteria of ITU-T G.826 as defined in
                     the System Performance section of the Technical Volume, has
                     line monitoring and per Segment protection switching
                     capability and has network management capability,

                (b)  Contractor has tested and provided for STM-1
                     interconnectivity capability to the System terminal
                     equipment according to ITU-T G.826, or, if a different
                     interface rate is used, an equivalent standard,

                (c)  Contractor has substantially performed its obligations
                     under Article 18 (Intellectual Property) then required to
                     be performed by it,

                (d)  all Permits are obtained for such Phase, and

                (e)  in the case of Phase 3, the System is also ready for
                     Commercial Acceptance, and

          (iv)  for any System Upgrade, the System is Ready for Commercial
                Acceptance at the capacity specified for such System Upgrade.
<PAGE>

                                                                              11

          Ready for Final Acceptance means

          (i)   for any Phase, that

                (a)(I)   such Phase has successfully and continuously (other
                         than by reason of Force Majeure in which case the test
                         period shall be extended for a time period agreed
                         between the Parties) functioned in compliance with the
                         System Performance Requirements during the period of
                         ninety (90) consecutive days after the Date of
                         Provisional Acceptance, or

                (II)     if such Phase shall have failed to meet the System
                         Performance Requirements at any time during such period
                         (other than by reason of Force Majeure), the Contractor
                         has corrected such failure and such Phase has
                         successfully and continuously (other than by reason of
                         Force Majeure in which case the test period shall be
                         extended for a time period agreed between the Parties)
                         functioned in compliance with the System Performance
                         Requirements for such additional period of time not to
                         exceed ninety (90) days (and not to end prior to the
                         date ninety (90) days after the Date of Provisional
                         Acceptance) as reasonably determined by the Purchaser
                         as being sufficient to confirm that such failure has
                         been corrected and that no other failures are likely to
                         appear, and

                (b)      all deficiencies noted in the Certificate of
                         Provisional Acceptance have been corrected (other than
                         minor deficiencies which will not affect the operation
                         of such Phase, in respect of which an equitable
                         adjustment to the Contract Price will be made),

                (c)      Contractor has complied in all material respects with
                         Article 18 (Intellectual Property), and

                (d)      in the case of Phase 3 the System is also Ready for
                         Final Acceptance and meets the criteria of clause (ii)
                         below, and

          (ii)  for the System, that

                (a)(I)   the System has successfully and continuously (other
                         than by reason of Force Majeure in which case the test
                         period shall be extended for a time period agreed
                         between the Parties) functioned in compliance with the
                         System Performance Requirements during the period of
                         ninety (90) consecutive days after the Date of
                         Provisional Acceptance, or

                (II)     if the System shall have failed to meet the System
                         Performance Requirements at any time during such period
                         (other than by reason
<PAGE>

                                                                              12

                         of Force Majeure), the Contractor has corrected such
                         failure and the System has successfully and
                         continuously (other than by reason of Force Majeure in
                         which case the test period shall be extended for a time
                         period agreed between the Parties) functioned in
                         compliance with the System Performance Requirements for
                         such additional period of time not to exceed ninety
                         (90) days (and not to end prior to the date ninety (90)
                         days after the Date of Provisional Acceptance) as
                         reasonably determined by the Purchaser as being
                         sufficient to confirm that such failure has been
                         corrected and that no other failures are likely to
                         appear,

                (b)      all deficiencies noted in the Certificate of
                         Provisional Acceptance have been corrected (other than
                         minor deficiencies which will not affect the operation
                         of the System, in respect of which an equitable
                         adjustment to the Contract Price will be made), and

                (c)      Contractor has complied in all material respects with
                         Article 18 (Intellectual Property), and

          (iii) for any System Upgrade, that

                (a)(I)   the System Upgrade has successfully functioned in
                         compliance with the System Performance Requirements
                         during the period of ninety (90) days after the Date of
                         Provisional Acceptance of the System Upgrade, or

                (II)     if the System Upgrade shall have failed to meet the
                         System Performance Requirements during such period, the
                         Contractor has corrected such failure and the System
                         Upgrade has successfully functioned in compliance with
                         the System Performance Requirements for such additional
                         period of time not to exceed ninety (90) days as
                         reasonably determined by the Purchaser as sufficient to
                         confirm that such failure has been corrected, and

                (b)      all deficiencies noted in the Certificate of
                         Provisional Acceptance have been corrected (other than
                         minor deficiencies which will not affect the operation
                         of the System, in respect of which an equitable
                         adjustment of the Contract Price will be made), and

                (c)      Contractor has complied in all material respects with
                         Article 18 (Intellectual Property).

          Ready for Provisional Acceptance means

          (i)   with respect to any Segment,
<PAGE>

                                                                              13

                (a)      if the Phase including such Segment is not, at the same
                         time, also Ready for Provisional Acceptance, the
                         Purchaser has consented, in its sole discretion, to
                         accept such Segment as Ready for Provisional
                         Acceptance,

                (b)      such Segment is complete in all material respects (and
                         in any event is Ready for Commercial Acceptance),

                (c)      the results of Acceptance Testing of such Segment
                         demonstrate that such Segment has satisfied the System
                         Performance Requirements,

                (d)      Contractor has substantially performed its obligations
                         under Article 18 (Intellectual Property) then required
                         to be performed by it,

                (e)      all Permits are obtained for such Segment, and

          (ii)  with respect to any Phase, such Phase is complete in all
                material respects (and in any event is Ready for Commercial
                Acceptance), all Segments of such Phase are Ready for
                Provisional Acceptance with per Segment protection capability,
                line monitoring and network management capability, and, in the
                case of Phase 3, the System is also Ready for Provisional
                Acceptance,

          (iii) with respect to the System, the System is complete in all
                material respects (and in any event is Ready for Commercial
                Acceptance), all Segments are Ready for Provisional Acceptance
                with per Segment protection capability, line monitoring and
                network management capability and self-healing ring protection
                capability, and

          (iv)  with respect to any System Upgrade, the results of Acceptance
                Testing of such System Upgrade demonstrate that such System
                Upgrade is complete in all material respects and is sufficient
                to realize the Performance Requirements.

          Representatives has the meaning set forth in Article 36(B).

          Retainage means (a) in the case of the System, an amount equal to
        * of the Initial Contract Price and (b) in the case of each System
     Upgrade, an amount equal to * of the Initial Upgrade Price.

          Retesting has the meaning set forth in Sub-Article 9(B)(3).

          Route Survey means the route survey described in the Technical Volume.

  * Material omitted and separately filed with the Commission under an
    application for confidential treatment.
<PAGE>

                                                                              14

          Santiago Telehouse means a telehouse located in Santiago, Chile in
     which Purchaser has obtained Purchaser Access Rights.

          Scheduled Phase 1 RFS Date has the meaning set forth in Sub-Article
     9(A).

          Scheduled Phase 2 RFS Date has the meaning set forth in Sub-Article
     9(A).

          Scheduled Phase 3 RFS Date has the meaning set forth in Sub-Article
     9(A).

          Scheduled RFS Date(s) means any of the Scheduled Phase 1 RFS Date,
     Phase 2 RFS Date and/or Scheduled System RFS Date.

          Scheduled System RFS Date has the meaning set forth in Sub-Article
     9(A).

          Scheduled Upgrade Date means for any System Upgrade, the date by which
     the Contractor agrees such System Upgrade will be Ready for Provisional
     Acceptance or Commercial Acceptance.

          Segment means any of Segments A through I and Cook's Crossing.

          Segment A means the four fiber pair Segment of the System from the St.
     Croix (SAC) Cable Station to Fortaleza, Brazil and landing in Fortaleza in
     a location capable of interconnecting with major telecommunications
     carriers.

          Segment B means the four fiber pair Segment of the System from
     Fortaleza, Brazil to Rio de Janeiro, Brazil and landing in Rio de Janeiro
     in a location capable of interconnecting with major telecommunications
     carriers.

          Segment C means the four fiber pair Segment of the System from Rio de
     Janeiro, Brazil to Santos, Brazil and landing in Santos in a location
     capable of interconnecting with major telecommunications carriers.

          Segment D means the four fiber pair Segment of the System from Santos,
     Brazil to the Las Toninas Cable Station and, if elected, the Optional
     Branching Unit.

          Segment E-Base means the four fiber pair Segment of the System from
     the Las Toninas Cable Station to the Buenos Aires Telehouse to the Santiago
     Telehouse to the Valparaiso Cable Station.

          Segment E-1 means the four fiber pair Segment from the Las Toninos
     Cable Station connecting to the Buenos Aires Telehouse.

          Segment E-2 means the four fiber pair Segment from the Buenos Aires
     Telehouse connecting to the Santiago Telehouse.
<PAGE>

                                                                              15

          Segment E-3 means the four fiber pair Segment connecting the Santiago
     Telehouse to the Valparaiso Cable Station.

          Segment F means the four fiber pair Segment of the System from the
     Valparaiso Cable Station to Lurin, Peru and landing in Lurin in locations
     capable of interconnecting with major telecommunications carriers.

          Segment G means the four fiber pair Segment of the System from Lurin,
     Peru to the Colombia Branching Unit.

          Segment H means the four fiber pair Segment of the System from the
     Colombia Branching Unit to Buenaventura, Columbia and landing in
     Buenaventura in a location capable of interconnecting with major
     telecommunications carriers.

          Segment I means the four fiber pair Segment of the System from the
     Colombia Branching Unit to the Ft. Amador (PAC) Cable Station.

          Ship Costs has the meaning set forth in Sub-Article 10(A)(2).

          Ship Period has the meaning set forth in Sub-Article 10(A).

          Software Escrow Agreement has the meaning set forth in Sub-Article
     18(H).

          St. Croix (PAC) Cable Station means the cable station located in St.
     Croix, Virgin Islands which is connected to the Pan American Crossing
     submarine cable system, which is owned by an affiliate of Purchaser.

          St. Croix (SAC) Cable Station means the cable station to be
     provisioned in St. Croix, Virgin Islands by the Contractor and which will
     be located adjacent to the St. Croix (PAC) Cable Station and interconnected
     to it.

          Subcontractor means a contractor, vendor, supplier, licensor or other
     person having a direct or indirect contract with the Contractor or with any
     other Subcontractor of the Contractor who has been hired specifically to
     assist the Contractor in certain specified areas of its performance of its
     obligations under this Contract including, without limitation, performance
     of any part of the Work.

          Supplies means any and all materials, plant, machinery, equipment,
     hardware and items supplied by the Contractor under this Contract.

          Suspension means a suspension in all or part of the Work pursuant to
     Sub-Article 15(A) or 15(B).

          System means the fiber optic cable system as described in Exhibit A
     and the Technical Volume.
<PAGE>

                                                                              16

          System Performance Requirements has the meaning set forth in the
     Technical Volume.

          System Upgrade has the meaning set forth in Sub-Article 6A(A).

          TAC Options means the Phase 1 Option and/or the Phase 2 Option.

          TAC Segments means Segments E-Base and/or E-1, E-2 and E-3, as the
     case may be.

          Tax means any tax, duty, levy, charge or custom (including, without
     limitation, any sales or use tax, VAT or octroi duty relating to the
     Contract items and fiscal stamps connected with Contract legalization)
     imposed or collected by any taxing authority or agency (domestic or
     foreign).

          Technical Volume means the Technical Volume attached hereto.

          Trans-Andes Crossing means that portion of the System that connects
     the Las Toninas Cable Station, the Buenos Aires Telehouse, the Santiago
     Telehouse and the Valparaiso Cable Station, as more fully described in the
     Technical Volume.

          Transferee means any entity to which purchaser assigns rights
     hereunder pursuant to Sub-Article 37(C) hereof.

          TSSL means Tyco Submarine Systems Ltd., a Delaware corporation.

          Upgrade Billing Schedule means the billing schedule attached hereto as
     Section 5 to the Commercial Volume.

          Upgrade Commissioning Report means a written report from Contractor
     demonstrating that a System Upgrade is Ready for Commercial Acceptance or
     Provisional Acceptance, as the case may be, and has passed all Acceptance
     Testing and all other acceptance and performance requirements set forth in
     the System Commissioning and Acceptance section of the Technical Volume.

          Upgrade Option Period has the meaning set forth in Sub-Article 6A(B).

          Upgrade Period has the meaning set forth in Sub-Article 6A(E).

          Upgrade Plan of Work means the plan of work attached hereto as Section
     7 to the Commercial Volume.

          Upgrade Price means, for any System Upgrade, the Initial Upgrade Price
     for such System Upgrade, plus any variations pursuant to Article 6
     (Contract Variations), Taxes as set forth in Sub-Article 4(B) and other
     adjustments to such Upgrade Price provided for in this Contract.
<PAGE>

                                                                              17

          Upgrade Provisioning Schedule means the provisioning schedule attached
     hereto as Section 3 to the Commercial Volume.

          Upgrade Warranty Period has the meaning set forth in Sub-Article
     10(A).

          Upgrade Work means the activities and services to be performed or
     provided by Contractor under Article 6A (Optional Upgrades).

          *

          Valparaiso Cable Station means the System cable station located in
     Valparaiso, Chile.

          Venezuela (PAC) Cable Station means the cable station located in
     Venezuela which is part of the Pan American Crossing submarine cable
     system, which is owned by an affiliate of Purchaser.

          Warranty Period has the meaning set forth in Sub-Article 10(A).

          Work means all activities and services (other than the activities and
     services specified in this Contract to be provided by Purchaser) necessary
     to be performed or provided in developing, planning, engineering,
     designing, manufacturing, constructing, delivering, installing and testing
     the System until the System is Ready for Final Acceptance, including
     without limitation, designating, coordinating and obtaining all Permits,
     except for the Purchaser Permits, provided that Work shall not include
     obtaining Purchaser Access Rights. Whether or not used in conjunction with
     the term "Supplies", the term "Work" shall always be deemed to include the
     provision of the relevant Supplies, unless the context requires otherwise.

          Year 2000 Compliant means, when used with respect to any software or
     materials, that such software or materials will operate accurately and,
     without interruption, accept, possess and in all manner retain full
     functionality when referring to, or involving, any year or date in the
     twentieth or twenty first centuries.

Article 4  Contract Price
-------------------------

     A.    Contract Price

  * Material omitted and separately filed with the Commission under an
    application for confidential treatment.
<PAGE>

                                                                              18

           1.  The initial Contract Price for the Work, in United States Dollars
               (US$) is a fee of $743,163,751 (the "Initial Contract Price")
               which is composed of the Phase 1 price of *, the Phase 2 price of
               * and the Phase 3 price of *. The Initial Contract price may also
               be reduced pursuant to the provisions of paragraph C of Article
               6B. The Initial Contract Price does not include the cost of
               optional upgrades which are described in Article 6A (Optional
               Upgrades), Article 6B (Construction Options for the Trans-Andes
               Crossing), Article 6C (Optional Branching Unit), any contract
               variations as provided for in Article 6 (Contract Variations) or
               any Taxes. The Initial Contract Price includes all charges for
               CIF and all costs and expenses incurred in obtaining all Permits
               (including Access Rights but not including Purchaser Access
               Rights).

           2.  The initial Upgrade Price for any Upgrade Work, in United States
               Dollars (US$) is the fixed fee set forth in Sub-Article 6A(G),
               payable as set forth in Section 5 of the Commercial Volume (the
               "Initial Upgrade Price"). No Initial Upgrade Price includes the
               cost of any contract variations as provided for in Article 6
               (Contract Variations) or any Taxes.

          3.   (a)  The Provisioning Schedule sets forth the Contractor's
                    breakdown of the Initial Contract Price among various
                    aspects of the Work. If the actual cost of any aspect of the
                    Work is greater or less than that set forth in the
                    Provisioning Schedule, such fact shall not cause any change
                    in the Initial Contract Price.

               (b)  At its discretion, the Purchaser may direct the Contractor
                    to deliver either Universal Joints conforming to qualified
                    Universal Jointing Consortium Technology or Contractor
                    proprietary joints as spares, in such quantities as provided
                    in the Provisioning Schedule; such direction may be given
                    during the course of the Work, but not later than such date
                    as the Parties shall mutually agree, and such direction,
                    whichever spare joint type is selected, shall not cause any
                    change in the Initial Contract Price.

           4.  Without the prior written consent of the Purchaser, which consent
               shall not be unreasonably withheld or delayed, the Contractor
               shall not arrange for any

               (a)  Access Right which requires payments to be made by the
                    Purchaser or made after the System is Ready for Provisional
                    Acceptance, or

               (b)  Permit which requires aggregate payments in excess of
                    $250,000 to be made by Purchaser or made after the System is
                    Ready for Provisional Acceptance.

  * Material omitted and separately filed with the Commission under an
    application for confidential treatment.
<PAGE>

                                                                              19

           5.  The Contractor and the Purchaser will share equally the costs and
               expenses of the Payment Escrow Agent.

     B.    Taxes, Levies and Duties

           1.  The Initial Contract Price and each Initial Upgrade Price, as
               stated in Sub-Article 4(A) above, excludes any Tax. The Contract
               Price and each Upgrade Price shall without duplication be
               adjusted for any Tax imposed on or in connection with this
               Contract (including, without limitation, the execution and
               delivery of this Contract, the Work, the Upgrade Work and the
               Supplies, but excluding any Excluded Taxes) (any such Taxes,
               other than Excluded Taxes, are hereinafter referred to as
               "Contract Taxes"). Contractor has provided a good faith estimate
               of the Contract Taxes payable by the Purchaser; it being
               understood that the Contractor shall have no liability under this
               Contract or otherwise to the Purchaser for any errors or
               omissions in such estimate or any losses arising therefrom. The
               Contractor shall be responsible for any Excluded Tax that might
               be incurred by the Contractor as well as any Tax described in
               clause (iv) of the definition of Excluded Tax.

           2.  The Purchaser will be ultimately responsible for the payment of
               all Contract Taxes (including, without limitation, Contract Taxes
               that are VAT, octroi duties relating to Contract items and fiscal
               stamps, etc. connected with Contract legalizations to the
               authorities in their countries). In the case of any Contract
               Taxes paid by the Contractor, the Contractor shall submit payment
               on the Purchaser's behalf and Contractor will be reimbursed by
               the Purchaser in accordance with Article 5 (Terms of Payment by
               Purchaser).

           3.  The Contractor agrees to use reasonable efforts, including,
               without limitation, by registering for VAT and any applicable
               sales Taxes in any country, state or other jurisdiction where
               legally required, to cooperate with and assist Purchaser in its
               efforts (i) to have Supplies which are the subject of this
               Contract made exempt from Contract Taxes, whether in the
               manufacture of the Supplies or related to the importation or
               location or installation of the Supplies, (ii) to request
               revisions, drawbacks, remissions, reclassifications or the like
               to the jurisdictions identified by the Purchaser; or (iii) to
               reduce or eliminate Contract Taxes (including the provision of
               applicable certifications and forms) and to obtain any available
               refunds of Contract Taxes, provided that the Contractor shall not
                                          --------
               be required to act other than in accordance with the relevant
               Laws then in force. The Purchaser shall reimburse the Contractor,
               in accordance with Article 5, for any reasonable costs (including
               the reasonable fees and expenses of legal counsel, accountants
               and other advisors) incurred by the Contractor under this Sub-
               Article 4(B)(3), provided that Purchaser was notified and has
                                --------
               consented to the incurrence of such costs, fees and
<PAGE>

                                                                              20

               expenses. Contractor shall not be required to cooperate with and
               assist Purchaser in its efforts under this Sub-Article 4(B)(3) or
               to take any action hereunder which in the Contractor's good faith
               judgment would incur any costs or if in Contractor's good faith
               judgment it would be advisable to obtain the advice of counsel,
               accountants or other advisors prior to cooperating with or
               assisting purchaser or taking any action, unless in each case,
               Purchaser has agreed to reimburse Contractor under the foregoing
               proviso.

           4.  Prior to the Date of Provisional Acceptance with respect to a
               Phase, the System or any System Upgrade, the Contractor shall
               provide evidence of having made all payments for Taxes included
               in the Contract Price or Upgrade Price or described in clause
               (iv) of the definition of Excluded Taxes, other than VAT due on
               payments of the Contract Price or Upgrade Price made on or after
               the Date of Provisional Acceptance of the System or System
               Upgrade, which evidence shall be provided within sixty (60) days
               of the date of each such payment.

           5.  As part of Work or any Upgrade Work, the Contractor shall obtain
               at its expense, on Purchaser's behalf, any import license or
               other official authorization and carry out all customs
               formalities necessary for the importation or exportation of goods
               in connection with such Work or Upgrade Work. With respect to
               each Contract Country, the Purchaser agrees to be the Importer or
               Exporter of Record or designate an Importer or Exporter of
               Record/Consignee on its behalf, unless, in either case, in the
               Purchaser's reasonable opinion such action could expose the
               Purchaser to a possible material burden or risk. Purchaser must
               provide a Letter of Authorization from any third party designate
               stating it agrees to be the Importer or Exporter of Record on
               Purchaser's behalf and identify the name and address of the
               designated Importer or Exporter of Record.

           6.  The Supplies to be installed or held on land shall be delivered
               to the agreed point at the named place of destination and shall
               be consigned to the Purchaser.

     C.    Withholding Tax

           1.  If withholding for any Tax is required in respect of any payment
               to the Contractor, the Purchaser shall (i) withhold the
               appropriate amount from such payment, (ii) pay such amount to the
               relevant authorities in accordance with the applicable Laws and
               (iii) in the case of any such withholding in respect of a
               Contract Tax (other than any withholding that would not have been
               required if the Contractor had satisfied its other Tax payment
               obligations) and subject to the Contractor's satisfying the
               obligations set forth in the last sentence of this Sub-Article
               4(C)(1), pay the Contractor an additional amount such that the
               net amount received by
<PAGE>

                                                                              21

               the Contractor is the amount the Contractor would have received
               in the absence of such withholding. In such a case, the Purchaser
               shall provide to the Contractor, as soon as reasonably
               practicable, a certified copy of an official tax receipt for any
               Tax which is retained from any payment due to the Contractor or
               for any Tax which is paid on behalf of the Contractor. All such
               receipts shall be in the name of the Contractor. The Contractor
               agrees to complete accurately and timely provide to the Purchaser
               or, if required, to the applicable Taxing authority, such forms,
               certifications or other documents as may be requested in timely
               manner by Purchaser, in order to allow it to make payments to the
               Contractor without any deduction or withholding on account of
               withholding Taxes (or at a reduced rate thereof) or to receive a
               refund of any amounts deducted or withheld on account of
               withholding Taxes.

           2.  If the Contractor shall become aware that it is entitled to
               receive a refund or credit from a relevant taxing or governmental
               authority in respect of a Contract Tax as to which the Purchaser
               has paid an additional amount pursuant to Sub-Article 4(C)(1)
               above, the Contractor shall promptly notify the Purchaser of the
               availability of such refund or credit and shall, within 30 days
               after receipt of a request by the Purchaser (whether as a result
               of notification that it has made to the Purchaser or otherwise),
               make a claim to such taxing or governmental authority for such
               refund or credit at the Purchaser's expense. If the Contractor
               receives a refund or credit in respect of a Contract Tax as to
               which the Purchaser has paid an additional amount pursuant to
               Sub-Article 4(C)(1) above, or if, as a result of the Purchaser's
               payment of such additional amounts, the Contractor or any other
               member of an affiliated group, as defined in section 1504(a) of
               the Code, of which the Contractor is a member, receives a credit
               against Taxes imposed on its income or franchise taxes imposed on
               it by the country under the laws of which it is organized or any
               political subdivision thereof, the Contractor shall promptly
               notify the Purchaser of such refund or credit and shall within 30
               days from the date of receipt of such refund or benefit of such
               credit pay over the amount of such refund or benefit of such
               credit (including any interest paid or credited by the relevant
               taxing or governmental authority with respect to such refund or
               credit) to the Purchaser (but only to the extent of the
               additional payments made by the Purchaser under Sub-Article
               4(C)(1) above with respect to the Contract Tax giving rise to
               such refund or credit), net of all out-of-pocket expenses of the
               Contractor which it would not have incurred but for the
               application of this paragraph; provided, however, that the
                                              --------  -------
               Purchaser, upon the request of the Contractor agrees to repay the
               amount paid over to the Purchaser (plus penalties, interest or
               other charges due to the appropriate authorities in connection
               therewith) to the Contractor in the event the Contractor is
               required to repay such refund or credit to such relevant
               authority.

Article 5  Terms of Payment by Purchaser
----------------------------------------

<PAGE>

                                                                              22

     A.    General Conditions of Payment

           1.  All payments shall be made and all invoices shall be rendered in
               US Dollars (US$). The Purchaser shall be responsible for and
               shall pay all costs and fees for payment, as well as the banking
               and wiring costs. All banking documents and correspondence must
               be in English.

     B.    Invoice Procedures

           1.  All invoices for Work shall be submitted according to the Billing
               Schedule, provided, that the appropriate Billing Milestones have
                         --------
               been achieved. All invoices for Work shall have a certificate in
               the form of Section 9 of the Commercial Volume attached.

           2.  Any Contract Variations shall be invoiced and paid in accordance
               with the terms of the Contract Variation as specified in Article
               6 (Contract Variations).

           3.  Invoices for Upgrade Work shall be submitted according to the
               Upgrade Billing Schedule and shall be paid in accordance with
               this Article 5.

           4.  Invoices for amounts not described in Sub-Sections 1 through 3
               above, which may become payable hereunder, shall be submitted
               after applicable costs have been incurred or such other time as
               may be specified in this Contract, and shall be accompanied by a
               certificate of the Contractor explaining such amount and
               certifying that it is payable.

           5.  The Contractor shall render all invoices to the following address
               or facsimile number:

                    South American Crossing Ltd.
                    Wessex House
                    45 Reid Street
                    Hamilton HM12, Bermuda
                    Facsimile: 441-296-6749/8606
                    Attn: Robert Klug

     C.    Payment Procedures

           1.  The Purchaser shall pay the Contractor, and the Contractor shall
               accept payment, in accordance with this Article 5 (Terms of
               Payment by Purchaser). Purchaser agrees to pay an initial payment
               to Contractor in the amount of *. Within three business days of
               the time the conditions set forth in Article 42 hereof are
               fulfilled by all Parties, the first portion of the initial
               payment, in the amount of *, shall be paid by Purchaser to
               Contractor. Failure to receive this payment shall entitle

  * Material omitted and separately filed with the Commission under an
    application for confidential treatment.
<PAGE>

                                                                              23

               Contractor, upon 5 business days' notice to Purchaser of intent
               to suspend, to immediately suspend Work hereunder. The second
               portion of the initial payment, in the amount of *,
               shall be paid by Purchaser within 30 days. The third portion of
               the initial payment in the amount of *, shall be paid
               by Purchaser within 56 days.

           2.  Invoices given to the Purchaser on or before the last day of any
               month shall, subject to Sub-Article 5(C)(5) below, be due and
               payable on the last day of the next month or such other time as
               may be specified in this Contract.

           3.  Invoices not paid when due shall accrue late payment charges from
               the day, following the day, on which payment was due until the
               day on which it is paid. Invoices for such extended payment
               charges shall not be issued for an amount less than U.S. $1,000.
               Extended payment charges shall be computed at the rate of one
               percent (1%) per month.

           4.  In the event that the Purchaser has an objection to any invoice
               or other payment obligation or any amount owing by Contractor to
               Purchaser shall not have been paid when due, the Purchaser shall
               promptly notify the Contractor of such objection and such amount,
               and the Purchaser and Contractor shall make every reasonable
               effort to settle promptly the dispute concerning the payment(s)
               in question. In the event such dispute cannot be settled within
               60 days, the Contractor and the Purchaser will promptly execute
               and deliver a Payment Escrow Agreement substantially in the form
               of Exhibit E hereto, with such changes therein as the Bank Escrow
               Agent may reasonably request, and the Purchaser will have the
               right to withhold payment of the disputed amount(s) (or withhold
               from the invoice amount a sum equal to the amount purportedly
               owing by Contractor) so long as it deposits, in full, such
               disputed amount(s) into the Dispute Account.

               (a)  Provided such disputed amount is placed into the Dispute
                    Account in a timely manner, the Purchaser shall not be
                    deemed to be in breach of or in default for failing to pay
                    Contractor and the Contractor shall continue to perform all
                    of its obligations hereunder.

               (b)  The Bank Escrow Agent will distribute the disputed amount in
                    accordance with the terms of the Payment Escrow Agreement.

               (c)  In addition, the prevailing Party shall be entitled to
                    receive from the Dispute Account an amount equal to the
                    interest earned by the Bank Escrow Agent on the distributed,
                    disputed amount, which shall be distributed by the Bank
                    Escrow Agent under clause (b) above.

  * Material omitted and separately filed with the Commission under an
    application for confidential treatment.
<PAGE>

                                                                              24

               The Contractor and the Purchaser will share equally the costs and
               expenses of the Bank Escrow Agent.

           5.  The Purchaser shall make timely payments for that portion of the
               invoice not in dispute in accordance with Sub-Article 5(C) or
               such payments will be assessed extended payment charges as set
               forth in Sub-Article 5(C)(4). Pending resolution of the dispute,
               the Purchaser may not withhold payment (unless also subject to
               dispute) on any other invoice concerning different goods and/or
               services submitted by Contractor.

           6.  The Retainage for the System, or any System Upgrade shall be
               invoiced on the Date of Final Acceptance of the System, or such
               System Upgrade, as the case may be and shall be payable as set
               forth in Sub-Article 5(C)(2).

Article 6  Contract Variations
------------------------------

     A.    Either Party may request, during construction of the System or any
System Upgrade, by written order, a contract variation ("Contract Variation")
requiring additions or alterations to, deviations or deductions from the System
or System Upgrade. If the other Party consents, in its sole discretion, this
change will be formalized as an amendment to this Contract by a Contract
Variation; provided, that the Contractor will not unreasonably withhold its
           --------
consent to a Contract Variation requested by the Purchaser; and provided
                                                                --------
further, that Purchaser will not unreasonably withhold its consent to a Contract
-------
Variation requested by the Contractor so long as such Contract Variation does
not affect the Contract Price, any Upgrade Price, the Scheduled System RFS Date,
the Scheduled Phase 1 RFS Date, the Scheduled Phase 2 RFS Date, any Scheduled
Upgrade Date, any warranties or the Performance Standards.

     B.    A Contract Variation shall not become effective unless and until the
price adjustment, the terms and schedule of payment and the extension of time
and all other terms have been mutually agreed upon by the Parties (and the
Parties shall act reasonably and in good faith in connection with all such
terms) and such Contract Variation is signed by an authorized representative of
each Party. Each Contract Variation shall be incorporated as an amendment to the
Contract.

     C.    Contractor may seek a Contract Variation for any change, after the
date hereof, of any Law (except those, and to the extent, affecting only Taxes
or wages) which requires a change in the Work or the Upgrade Work or affects the
costs (other than wages) incurred or to be incurred by the Contractor or any
combination of the foregoing and Purchaser shall agree to any such change in
Work or Upgrade Work as may be required and to an equitable adjustment to the
Contract Price or the applicable Upgrade Price; provided, that the Contractor
                                                --------
shall not be entitled to any increase in the Contract Price for any change of
Law resulting from any act or omission of Contractor. As of the date hereof,
neither Party has Actual Knowledge of any proposed change in any Law that would
require a change in the Work or the Upgrade Work.

     D.    The Initial Contract Price is based on the assumption that the SDH
low speed interconnect configuration shall be as set forth in the System
Description section of the Technical
<PAGE>

                                                                              25

Volume. Purchaser may elect to change such configuration by eliminating,
replacing or adding optical interfaces and SDH equipment each with respect to
one or more Segments, where all such elections (i.e. eliminations, replacements
or additions of optical interfaces) to such interconnect configuration shall be
implemented using equipment as listed in the Provisioning Schedule or as
otherwise mutually agreed by the Parties. If Purchaser makes any such election,
both Parties shall agree to an equitable adjustment, up or down, based on the
prices set forth in the Provisioning Schedule, to the Contract Price and/or one
or more of the Scheduled RFS Dates, as necessary for each such election. The
equitable adjustment shall take into account the actual costs incurred by
Contractor, including but not limited to, costs associated with canceling firm
commitments.

Article 6A  Optional Upgrades
-----------------------------

     A.    This Article includes the terms and conditions governing options for
future upgrades to the System (each a "System Upgrade") that may be exercised by
Purchaser during the Upgrade Option Period. Purchaser shall have the option to
cause Contractor to perform System Upgrades *. Contractor will have the
obligation, as part of each System Upgrade, to fully integrate as a working
Segment of the System, additional supplies furnished by another contractor for
Cook's Crossing so the entire System is upgraded by *, as more fully
described in the Technical Volume.

     B.    The option period ("Upgrade Option Period") during which Purchaser
may place orders to upgrade the System shall end * after the Date of Final
Acceptance of the System (and shall commence with respect to System Upgrades on
the Scheduled System RFS Date).

          C.  Purchaser may from time to time exercise an option, during the
Upgrade Option Period, to upgrade the System, in accordance with the terms and
conditions contained in this Article, by providing notice pursuant to Article
35.

          Each System Upgrade shall consist of an incremental increase in the
System capacity in integral multiples of *
* around the ring network.  Each System Upgrade shall increase the
capacity of all Segments by equal increments for service and protection capacity
and shall include all necessary spares, documentation and training attendant to
such System Upgrade. For each System Upgrade, the System capacity shall be *
*. Purchaser shall provide a separate notice pursuant to Article 35 for each
System Upgrade.

          D.  While Contractor only anticipates the need for dry plant
modifications to achieve each System Upgrade, Contractor reserves the right to
replace or supplement wet plant equipment, including repeaters and cable, if
Contractor determines that such replacement or supplement is reasonably
necessary to provide a particular System Upgrade that meets the Performance
Requirements. *.

*   Material omitted and separately filed with the Commission under an
    application for confidential treatment.

<PAGE>

                                                                              26

          E.  In implementing each System Upgrade, Contractor will not impair
service of existing System traffic. Contractor, upon receiving authorization
from Purchaser, may reroute traffic on a service path on the installed System to
a protection path on the installed System in order to implement the System
Upgrade so as not to incur traffic disruption.

          F.  The performance of the System, at the end of each Upgrade Period,
shall be consistent *.

          G.  The System Upgrades shall be provided by Contractor at the
following fixed prices payable as set forth in the Upgrade Billing Schedule:

<TABLE>
<CAPTION>
                                                      A                                 B
                                      ---------------------------------  -------------------------------------------
                                        Fixed Initial Upgrade Price(s)     Fixed Initial Upgrade Price for
Each Upgrade of System Capacity Of       for  *
           *                                                                              *
----------------------------------    ---------------------------------  -------------------------------------------
<S>        *                        <C>              *                 <C>                *

</TABLE>

*   Material omitted and separately filed with the Commission under an
    application for confidential treatment.
<PAGE>

                                                                              27

<TABLE>
<CAPTION>
                                                      A                                 B
                                      ---------------------------------  -------------------------------------------
                                        Fixed Initial Upgrade Price(s)     Fixed Initial Upgrade Price for *
Each Upgrade of System Capacity Of       for  *
           *
----------------------------------    ---------------------------------  -------------------------------------------
<S>                                   <C>                               <C>
                   *                                  *                                      *
Total of Upgrades  * :                           1,543,779,041                          1,933,788,475

</TABLE>

          If and when the aggregate prices of System Upgrades ordered by
Purchaser pursuant to column A above equals *, then Purchaser will be entitled
to a * discount on the portion of any System Upgrade price which exceeds *
provided, that if and when such aggregate price equals * such discount shall be
--------
increased to *. If and when the aggregate prices of System Upgrades ordered by
Purchaser pursuant to column B above equals *, then Purchaser will be entitled
to a * discount on the portion of any System Upgrade price which exceeds *;
provided, that such discount shall not be applied to the portion of such price
--------
which relates to the Supplies which are furnished by *; provided, further, that
                                                        --------
if and when such aggregate price equals *, such discount shall be increased to
*. In addition, if *, at any time after the aggregate prices of System Upgrades
ordered by Purchaser pursuant to column B above equals or exceeds *, offers the
Contractor a discount on the price of * to be provided in connection with any
                                              --------
future such System Upgrades, the Contractor agrees to pass the full amount of
such discount through to the Purchaser. Amounts payable for System Upgrades in
increments of more than * will be increased in accordance with the foregoing
schedule. For example, if the first System Upgrade chosen from column B is for
*, the Price would be *. An initial payment may be invoiced at the time a
System Upgrade is ordered in the amount of * of the fixed Initial Upgrade Price
for such Upgrade plus, if applicable, the additional amounts set forth below. *
such initial payment (or * of the fixed Initial Upgrade Price for such Upgrade),
plus, so long as the Contractor is maintaining inventory for Expedited Upgrades
pursuant to Sub-Article 6A(L), an additional payment of *, will be payable
within * business days of Purchaser's receipt of such invoice. The remaining
half of such initial payment will be payable within * of Purchaser's receipt of
such invoice. Such initial payment, including any additional payment described
above shall be part of the Initial

<PAGE>

                                                                              28

 Upgrade Price stated above for such System Upgrade and shall not
be an increase to such System Upgrade's Initial Upgrade Price.

          H.  The plan of work for any System Upgrade is included in the
Commercial Volume.

          I.  The provisioning schedule for any System Upgrade is included in
the Commercial Volume.

          J.  Contractor shall have no obligation to perform a System Upgrade
(and no liability for failure to perform a System Upgrade) if Purchaser, its
representatives, employees or agents (other than Contractor) shall have modified
the System in such a way as to make it more difficult (unless there is an
equitable adjustment to the Upgrade Work) or more costly (unless such cost is
provided for by Purchaser) for Contractor to perform such System Upgrade,
provided that Contractor shall be relieved of its obligation to perform such
System Upgrade (and shall have no liability for failure to perform such System
Upgrade) if such modification makes it impossible for Contractor to perform such
System Upgrade.

          K.  Contractor agrees that the installation, testing and acceptance of
each System Upgrade will occur not later than the date (the "Scheduled Upgrade
Date") which is (i) * after notice in the case of a requested System Upgrade of
not more than * per fiber pair on two fiber pairs and (ii) * after notice in the
case of a requested System Upgrade of not more than * per fiber pair on two
fiber pair. In each case, such period shall begin upon the giving of notice
pursuant to paragraph C of this Article 6A. Purchaser will use reasonable
efforts to try to forecast its System Upgrade capacity requirements so as to
give earlier notice of an estimated time of upgrade to Contractor. The Parties
agree that where overlapping occurs because the Purchaser exercises an option
for a System Upgrade prior to the completion of a previously elected System
Upgrade, the Parties will agree in good faith to a mutually acceptable delivery
schedule and price adjustment. Should a need for a special upgrade (in addition
to the foregoing) arise, the Parties will negotiate in good faith to meet
Purchaser's needs.

          L.  1.   In addition to, and apart from the other provisions of this
Article 6A, Contractor agrees that unless and until instructed otherwise by
Purchaser, Contractor will (at no cost or expense to Purchaser, except as set
forth in this Sub-Article) at all times from the date the System is Ready for
Provisional Acceptance until the end of the Upgrade Option Period, cause to be
substantially installed at each cable station and telehouse, sufficient
equipment so as to be able to cause testing and acceptance of the Expedited
Upgrade within * of Purchaser's upgrade election, sufficient equipment to
provide Purchaser with a System Upgrade of * of fully protected capacity (* of
service on one fiber pair and * of protection on the second fiber pair) (an
"Expedited Upgrade"). Upon such request, the Contractor will in good faith
develop with the Purchaser a plan to most expeditiously finish installation and
test such equipment. Purchaser agrees that it will not place such substantially
installed Expedited Upgrade Equipment into service without prior written consent
of the Contractor. The fixed price payable for each Expedited Upgrade (fully
installed, tested and accepted) will be * of the price of the next scheduled
System Upgrade which may be ordered. Notwithstanding any other provision to the
contrary contained herein, title (free and clear of all liens other than those
deriving through or from the Purchaser) and risk of loss to such Expedited
Upgrade equipment

* Material omitted and separately filed with the Commission under an
  application for confidential treatment.
<PAGE>

                                                                              29

shall vest in the Purchaser when it is substantially installed. All relevant
Taxes with respect to the installation and transfer of title to such Expedited
Upgrade shall be invoiced by Contractor and paid by Purchaser in accordance with
this Contract. Such price shall be payable on a similar basis as the System
Upgrade Billing Schedule. Purchaser will accept the Factory acceptance test
report on Expedited Upgrades, but such report must show that the equipment left
the Factory working as a unit. Whenever Purchaser orders an Expedited Upgrade,
if Purchaser so requests, Contractor shall replace the equipment used for such
Upgrade so that it substantially installs the equipment for the next Expedited
Upgrade at the time of the completion of the next System Upgrade, or within
* of such request, whichever is earlier. Expedited Upgrades may be ordered
during the periods when Purchaser is waiting for a System Upgrade pursuant to
Sub-Article 6A(K) above. Expedited Upgrades shall be in addition to System
Upgrades and shall not affect the schedule set forth in Sub-Article 6A(G) above,
except that Contractor shall not be obligated to install more than * of
capacity in the System. The capacity of all Expedited Upgrades installed will be
subtracted from the last System Upgrade ordered and the Price of such System
Upgrade shall be adjusted accordingly. Expedited Upgrades shall be considered
"Upgrade Work" for all purposes of this Contract. The provisions of Sub-Articles
6A (B), (C) (first paragraph only), (D), (E), (F) and (J) shall apply to
Expedited Upgrades. If requested by Purchaser, at any time during the six (6)
month period immediately preceding the expiration of the Upgrade Option Period,
Contractor shall use reasonable efforts to sell (at Purchaser's cost) any
equipment for an Expedited Upgrade which has been substantially installed but
not activated, to other customers. Notwithstanding the foregoing sentence, if,
at the end of the Upgrade Option Period, equipment for an Expedited Upgrade has
been installed in accordance with this Sub-Article, but not activated, Purchaser
shall pay Contractor for such equipment in accordance with the Payment terms of

this Contract, provided that if Contractor has sold such equipment in accordance
               --------
with the foregoing sentence, the proceeds of such sale (less Contractor's costs
in connection with its efforts to sell) shall be deducted from the price owed by
Purchaser to Contractor.

              2.  The Expedited Upgrade Price and supporting equipment
availability are based on * being provided for interconnectivity. With respect
to any Expedited Upgrade, Purchaser may elect (i) to exclude from such Expedited
Upgrade some or all * and/or (ii) to include other *. If Purchaser elects (i)
and/or (ii), both Parties shall agree to an equitable adjustment, up or down,
based on the prices set forth in the Provisioning Schedule, to the Expedited
Upgrade Price and the supporting equipment availability and an equitable
adjustment in the schedule for the Expedited Upgrade, as needed in the event
Purchaser elects (ii) above.

Article 6B  Construction Options for the Trans-Andes Crossing
-------------------------------------------------------------

          A.  The Purchaser, at any time on or prior to *, shall have the option
to interconnect the Las Toninas Cable Station with the Buenos Aires Telehouse
during Phase 1 (the "Phase 1 Option"). If the Purchaser elects such option, (i)
the Phase 1 Option shall become part of Phase 1, (ii) * and (iii) the Scheduled
Phase 1 RFS Date shall remain unchanged. Under the Phase 1 Option, the System
will be *

* Material omitted and separately filed with the Commission under an
  application for confidential treatment.
<PAGE>

                                                                              30

*. Purchaser hereby elects the Phase 1 Option.

          B. The Purchaser, at any time on or prior to *, shall have the option
to elect to interconnect the Santiago Telehouse with the Buenos Aires Telehouse
during Phase 2 (the "Phase 2 Option"). If the Purchaser elects such option, (i)
the Phase 2 Option shall become part of Phase 2, (ii) * and (iii) the Scheduled
System RFS Date shall remain unchanged. Under the Phase 2 Option, the Purchaser
shall *. If Purchaser does not elect such option, Contractor may invoice
Purchaser for engineering and design work performed up to * for Segment E-2. If
such option is exercised, and * is not available, Contractor will install the *,
and when * is available, Contractor will retrofit * with * at no additional cost
to the Purchaser.

          C.  The Purchaser shall have the option to supply * on all or
any portion of the Trans-Andes Crossing, in which case, *, provided
                                                           --------
that Purchaser notifies Contractor of its intention to supply the * on or prior
to * (which notice must set forth the characteristics of * to be provided). In
the event that Purchaser elects to supply * in accordance with the prior
sentence with respect to the Phase 2 Option, the deadline for ordering such
Option shall be *.

Article 6C  Optional Branching Unit
-----------------------------------

              The Purchaser shall have the option to elect to change the
configuration of the System by adding the Optional Branching Unit as more fully
described in the Technical Volume. If the Purchaser shall elect such option on
or prior to *, the Contract Price shall be increased by the amount of * (the
"Optional Branching Unit Price"), and the Scheduled System RFS Date shall remain
unchanged. If the Purchaser shall elect such option after *, the Contractor
shall be entitled to * and the Scheduled System RFS Date.

Article 7   Responsibilities for Permits; Compliance with Laws; Purchaser
-------------------------------------------------------------------------
Access Rights
-------------

          A.  Upon written request of the Contractor, the Purchaser shall
reasonably cooperate with and assist the Contractor to obtain all Permits
(except those specified in paragraph C below), to the extent that Purchaser's
cooperation and assistance are necessary for Contractor to expeditiously and
cost-efficiently obtain such Permits. The Purchaser agrees to respond reasonably
promptly to any such request from Contractor; provided, that, the failure of
                                              --------
Purchaser to comply with such request shall not give rise to a Purchaser
Hindrance unless (i) the requested

* Material omitted and separately filed with the Commission under an
  application for confidential treatment.
<PAGE>

                                                                              31

cooperation was required by Law and (ii) Purchaser failure is due to gross
negligence or willful misconduct. Contractor shall reimburse reasonable outside
counsel fees, reasonable independent consultant fees and other reasonable
out-of-pocket expenses incurred by Purchaser in connection with such
cooperation. Further, the Purchaser agrees that it will not impede or interfere
with Contractor's abilities to perform its obligations under paragraph B of this
Article 7. Upon notice from Contractor with respect to a Permit or receipt by
Purchaser of a copy of a Permit, Purchaser shall fulfill all conditions of such
Permit and perform all responsibilities thereunder, except to the extent that
such conditions or responsibilities are those of the Contractor under the Work.
Contractor will inform Purchaser as to any such conditions or responsibilities
that are not ordinary and routine (based on industry standards) and obtain
Purchaser's consent thereto prior to arranging for any such Permit. Purchaser
(and its representatives and lawyers, whose services shall be paid by Purchaser)
may, at its sole option and cost, participate with Contractor in the process of
obtaining any Permits to the extent it deems reasonably necessary; provided,
                                                                   --------
that any such participation shall not relieve or alter any of Contractor's
obligations under this Contract with respect to obtaining all Permits and shall
not, by itself, be deemed to impede or interfere with Contractor.

          B.  Subject to paragraph C below, the Contractor shall have the
responsibility for obtaining, at the Contractor's sole cost and expense, all
Permits on Purchaser's behalf. The Contractor will cause all Permits ultimately
required to be held by Purchaser but not initially issued in the name of
Purchaser to be assignable to Purchaser, and to be assigned to Purchaser at
the time title to the System (or a Phase or any Segment) is transferred to
Purchaser pursuant to this Contract. Contractor shall be responsible to pay any
transfer fees in connection with any such assignment. Subject to Sub-Article
4(A)(4), Purchaser shall be responsible for payment of all Permit fees and other
costs and expenses due with respect to any Permit after the Date of Provisional
Acceptance of the System.

          C.  The Contractor shall not be responsible for obtaining Purchaser
Permits or Purchaser Access Rights, but the Contractor will cooperate with the
Purchaser in connection therewith. Purchaser shall reimburse reasonable outside
counsel fees, reasonable independent consultant fees and other reasonable
out-of-pocket expenses incurred by Contractor in connection with such
cooperation.

          D.  Any delay in obtaining or failure to obtain any Owner Permit shall
constitute a Force Majeure and be treated as described in Article 17 (Force
Majeure), except to the extent such delay is a result of Contractor's negligence
or willful misconduct. No Force Majeure shall be granted with respect to
Contractor Permits, except for Force Majeure events which are unrelated to the
process by which such Contractor Permits are obtained. For example, a delay in
issuance of a Contractor Permit because of a change in administration or rules
is not a Force Majeure, but such a delay caused by a war or an earthquake may be
a Force Majeure.

          E.  Except with respect to variations necessitated by complying with
any changes, enacted after the date hereof, in any Laws (the costs with respect
to which shall be borne by the Purchaser unless such change is a result of any
act or omission by Contractor), the Contractor shall be responsible for the
payment of any and all costs incurred as a result of the need to vary design,
drawings, plans or procedures to comply with any of the circumstances set forth
in this
<PAGE>

                                                                              32

Article. The Contractor shall, before making any variations from the designs,
drawings, plans or procedures that may be necessitated by so complying with any
Laws and that would represent a material change to the overall design of the
System, give to the Purchaser written notice, specifying the variations proposed
to be made, and the reasons for making them. As of the date hereof, neither
Party has Actual Knowledge of any proposed changes in the Laws which would
necessitate any such variation.

          F.  The Contractor shall (i) comply with all applicable Laws in
performing the Work, (ii) give all notices required by any Laws to be given to
any authority and (iii) perform or permit the performance by authorized persons
of any inspection required by the said Laws. All Work and the Project, upon
completion, will comply with all applicable Laws.

          G.  As part of the Initial Contract Price, the Contractor shall
obtain, at its own risk and expense, any export and import license and other
official authorization and carry out all customs formalities for the exportation
and importation of goods and, where necessary, for their transit through another
country.

          H.  Within 30 days after the date of execution of this Contract, the
Contractor will prepare and deliver to the Purchaser a detailed list of Permits
that to its knowledge are required to be obtained under current law in order to
complete the Work and shall update such list from time to time if it becomes
aware of changes in Permit requirements. Such list, as updated from time to
time, shall set forth the projected dates of filing for such Permits and an
estimate of when such Permits are expected to be obtained. Without limiting
Contractor's liabilities in respect of Sub-Articles 7(B), Contractor shall have
no liability in respect of the accuracy of the information furnished under this
Sub-Article, except in the case of gross negligence or willful misconduct.

Article 8  Route Survey
-----------------------

          A.  The Contractor shall conduct a Desk Top Study, the Route Survey
and, where prudent, a Burial Assessment Survey, and select the cable route for
the System in accordance with the information in the Final Route Survey Report
and such Burial Assessment Survey. Contractor shall be permitted to make
changes, at its discretion, to the route selection, if necessary for operational
reasons, without additional cost to Purchaser. The Contractor shall review with
the Purchaser the route for the System, and the results of the Burial Assessment
Survey, within 20 business days of the presentation of the Final Route Survey
Report, which Report must include the results of such Burial Assessment Survey.

          B.  Any changes to the route selection requested by Purchaser shall be
treated as a Contract Variation in accordance with Article 6 (Contract
Variations).

          C.  Any changes to any aspect of the Work due to any Desk Top Study,
Route Survey, Burial Assessment Survey or Final Route Survey Report will not
result in any change to the Initial Contract Price.

          D.  The Contractor will perform the Desktop Study, Route Survey and
Burial Assessment Survey, and engineer and design the cable route, using
generally accepted practices
<PAGE>

                                                                              33

in the industry. In the engineering and design of the cable route the Contractor
will give due consideration to the interests of the Purchaser and shall in good
faith try to satisfy such interests, particularly (but without limitation)
regarding survivability, maintainability and tax consequences, in each case
arising from the location of the cable.

Article 9  Acceptance
---------------------

          A.  General

              1.   The Acceptance Testing shall be performed by the Contractor.
                   The Purchaser and its designated representatives may observe,
                   at their own expense, the Contractor's tests and review the
                   test results. Purchaser may request the Contractor to conduct
                   and/or may itself conduct any additional tests to demonstrate
                   compliance with the provisions of this Agreement and the
                   specifications in the Technical Volume. If such additional
                   tests do demonstrate that the provisions of this Agreement
                   and the specifications in the Technical Volume have been
                   complied with, then the Purchaser shall be responsible for
                   paying the costs of such additional tests, and any delay
                   beyond the Contractor's schedule for completion of its tests
                   caused by such process shall be a Purchaser Hindrance. If,
                   however, such additional tests demonstrate that the
                   provisions of this Agreement or the specifications in the
                   Technical Volume have not been complied with, then it shall
                   be the Contractor's responsibility to pay the costs of such
                   additional tests, and any delay caused by such process shall
                   not be a Force Majeure.

              2.   Until the Date of Final Acceptance of the System or if a
                   System Upgrade is requested by Purchaser, the Date of Final
                   Acceptance of such System Upgrade, the Purchaser agrees to
                   allow Contractor access to all Segments of the System.

              3.   The Purchaser shall issue a Certificate of Commercial
                   Acceptance in accordance with the provisions of Sub-Article
                   9(D)(1).

              4.   Once a Segment of the System, a Phase of the System, or a
                   System Upgrade is Ready for Provisional Acceptance, the
                   Purchaser shall issue a Certificate of Provisional
                   Acceptance, provided, that it is within the Purchaser's sole
                   discretion as to whether to accept a Segment instead of a
                   Phase of the System.

              5.   Once a Phase of the System or a System Upgrade is Ready for
                   Final Acceptance, the Purchaser shall issue a Certificate of
                   Final Acceptance.

              6.   The Purchaser shall not unreasonably withhold or delay
                   issuance of a Certificate of Commercial Acceptance, a
                   Certificate of Provisional Acceptance or a Certificate of
                   Final Acceptance.
<PAGE>

                                                                              34

              7.   The Contractor agrees that the Date of Provisional Acceptance
                   or Commercial Acceptance of Phase 1 of the System will occur
                   by August 15, 2000 (as such date may be extended under
                   Article 6 (Contract Variations), Article 17 (Force Majeure)
                   or otherwise under this Contract or by agreement of the
                   Parties, the "Scheduled Phase 1 RFS Date").

              8.   The Contractor agrees that the Date of Provisional Acceptance
                   or Commercial Acceptance of Phase 2 of the System will occur
                   by September 30, 2000 (as such date may be extended under
                   Article 6 (Contract Variations), Article 17 (Force Majeure)
                   or otherwise under this Contract or by agreement of the
                   Parties, the "Scheduled Phase 2 RFS Date").

              9.   The Contractor agrees that the Date of Provisional Acceptance
                   or Commercial Acceptance of Phase 3 of the System and of the
                   System will occur by March 31, 2001 (as such date may be
                   extended under Article 6 (Contract Variations), Article 17
                   (Force Majeure) or otherwise under this Contract or by
                   agreement of the Parties, the "Scheduled Phase 3 RFS Date"
                   and the "Scheduled System RFS Date").

              10.  The Date of Commercial Acceptance, Provisional Acceptance and
                   Final Acceptance, as the case may be, shall be deemed to have
                   occurred with respect to a Segment, the System or a System
                   Upgrade if a Certificate of Commercial Acceptance, a
                   Certificate of Provisional Acceptance or a Certificate of
                   Final Acceptance, as the case may be, is issued with respect
                   thereto.

          B.  Notice of Acceptance or Rejection

              1.   Within thirty (30) days of receipt by Purchaser of a complete
                   Commissioning Report or Upgrade Commissioning Report, as the
                   case may be, the Purchaser must issue notification to the
                   Contractor of the following:

                   (a)  issuance of a Certificate of Provisional Acceptance in
                        accordance with Sub-Article 9(C); or

                   (b)  rejection of a Certificate of Provisional Acceptance,
                        but instead issuance of a Certificate of Commercial
                        Acceptance in accordance with Sub-Article 9(D) below; or

                   (c)  rejection of the Segment, the Phase; the System or the
                        System Upgrade in its existing condition and issuance of
                        neither a Certificate of Provisional Acceptance nor a
                        Certificate of Commercial Acceptance, and in the case of
                        the Phase; the System or the System Upgrade, a written
                        explanation of reasons for
<PAGE>

                                                                              35

                        rejection (it being understood that acceptance of a
                        Segment instead of a Phase or the System is at the sole
                        discretion of the Purchaser).

                   If the Purchaser fails to respond with such notification
                   within thirty (30) days, then the Date of Provisional
                   Acceptance of the Segment (subject to Purchaser's consent),
                   the Phase; the System or System Upgrade shall be deemed to be
                   the date occurring thirty (30) days after such Commissioning
                   Report or Upgrade Commissioning Report, as the case may be,
                   was received by the Purchaser.

              2.   On receipt of a notice from the Purchaser pursuant to Sub-
                   Articles 9(B)(1)(b) or (c) above, the Contractor shall be
                   entitled to address any disputes and explain any
                   discrepancies to the Purchaser. Unless Purchaser, for good
                   cause, rejects such explanation, it shall issue a new notice
                   pursuant to Sub-Article 9(B)(1) above, which shall be deemed
                   to have been issued on the date of the original notice.

              3.   In case of rejection, and if the explanation by the
                   Contractor as in Sub-Article 9(B)(2) above is not accepted,
                   for good cause, by the Purchaser, the Contractor shall carry
                   out the necessary corrective actions and will effect a new
                   series of Acceptance Testing ("Retesting"). After receipt by
                   Purchaser of the new Commissioning Report or Upgrade
                   Commissioning Report, as the case may be, describing the
                   corrective action and the results of Retesting, the Purchaser
                   will be granted a new period of thirty (30) days to analyze
                   the new Report according to the provisions of Sub-Article
                   9(B)(1) and any new notice of the Purchaser shall apply from
                   the date the Purchaser receives such new Commissioning Report
                   or Upgrade Commissioning Report, as the case may be.

          C.  Provisional Acceptance

              1.   The Certificate of Provisional Acceptance may have annexed to
                   it a list of any outstanding deficiencies to be corrected by
                   the Contractor.

              2.   The Contractor shall, as soon as reasonably practicable,
                   correct, at its sole cost and expense, such deficiencies and
                   complete the Work or Upgrade Work indicated on all such
                   listed items so as to comply in all material respects with
                   the requirements of this Contract, provided that the
                   Purchaser allows Contractor the necessary access to the
                   Segment(s) as the Contractor needs to correct such
                   deficiencies and complete the Work or Upgrade Work. The
                   Contractor shall give the Purchaser reasonable notice of its
                   requirement for such access.
<PAGE>

                                                                              36

          D.  Commercial Acceptance

              1.   A Certificate of Commercial Acceptance shall be issued by
                   Purchaser with respect to a Segment, a Phase, the System or a
                   System Upgrade if the results of the Acceptance Testing
                   demonstrate that such Segment, such Phase, the System or such
                   System Upgrade does not justify the issuance of a Certificate
                   of Provisional Acceptance, but nevertheless, such Segment,
                   such Phase, the System or such System Upgrade is Ready for
                   Commercial Acceptance; provided, that acceptance of a Segment
                                          --------
                   instead of a Phase or the System shall be in the sole
                   discretion of the Purchaser.

              2.   Each Certificate of Commercial Acceptance shall have annexed
                   to it a list of all outstanding items to be completed by the
                   Contractor.

              3.   The Contractor shall, as soon as reasonably practicable,
                   remedy, at its sole cost and expense, the outstanding items,
                   provided that the Purchaser allows Contractor the necessary
                   access to the Segment(s) as the Contractor needs to remedy
                   such outstanding items. The Contractor shall give the
                   Purchaser reasonable notice of its requirement for such
                   access. Notwithstanding the above, provided that Contractor
                   has been allowed access to the Segment(s) as required in Sub-
                   Article 9(A)(2), the Contractor shall continue to carry the
                   risk of loss for any outstanding item until such item is no
                   longer outstanding.

              4.   When the outstanding items referenced in Sub-Article 9(D)(3)
                   above have been remedied, and the Segment(s), the Phase, the
                   System or the System Upgrade is otherwise Ready for
                   Provisional Acceptance, the Purchaser will promptly issue a
                   Certificate of Provisional Acceptance; provided, that
                                                          --------
                   acceptance of a Segment instead of the System shall be in the
                   sole discretion of the Purchaser.

              5.   The issuance of a Certificate of Commercial Acceptance with
                   respect to a Segment, a Phase, the System or a System Upgrade
                   shall in no way relieve the Contractor from its obligation to
                   provide a Segment, a Phase, the System or System Upgrade
                   conforming with the Performance Requirements at the time of
                   the issuance of a Certificate of Commercial Acceptance.

          E.  Final Acceptance

              1.   Within thirty (30) days of the date of receipt by Purchaser
                   of the Final Commissioning Report, the Purchaser shall issue
                   a Certificate of Final Acceptance or reject such Report. If
                   the Purchaser neither issues a Certificate of Final
                   Acceptance nor rejects such Report within such thirty (30)
                   day period, then the Date of Final Acceptance of the System
                   shall be
<PAGE>

                                                                              37

                   deemed to be the date occurring thirty (30) days after such
                   Final Commissioning Report was received by the Purchaser.

          F.  Title and Risk of Loss

              1.   If the Purchaser, in its sole discretion, chooses to accept a
                   Segment prior to accepting the System, then upon the issuance
                   of a Certificate of Commercial Acceptance or a Certificate of
                   Provisional Acceptance with respect to such Segment by the
                   Purchaser in accordance with this Contract, title (free and
                   clear of all liens other than those deriving through or from
                   the Purchaser) to such Segment shall vest in the Purchaser. A
                   statement of the time of passage of title in such Certificate
                   shall be final and conclusive.

              2.   Upon the issuance of a Certificate of Commercial Acceptance
                   or a Certificate of Provisional Acceptance with respect to a
                   Phase or the System by the Purchaser in accordance with this
                   Contract, title (free and clear of all liens other than those
                   deriving through or from the Purchaser) to such Phase or the
                   System shall vest in the Purchaser. A statement of the time
                   of passage of title in such Certificate shall be final and
                   conclusive.

              3.   Upon the issuance of a Certificate of Commercial Acceptance
                   or a Certificate of Provisional Acceptance with respect to a
                   System Upgrade by the Purchaser in accordance with this
                   Contract, title to such System Upgrade shall vest in the
                   Purchaser. A statement of the time of passage of title in
                   such Certificate shall be final and conclusive.

              4.   As from the date of vesting of title in a Segment, a Phase,
                   the System or a System Upgrade, the Purchaser shall, except
                   as set forth in the following sentence, assume the risk of
                   loss in respect of all parts of such Segment, such Phase, the
                   System or System Upgrade and responsibility for its
                   maintenance. As stated in Sub-Article 9(A)(2), the Contractor
                   will be allowed access to such Segment, and, so long as the
                   Contractor has been allowed access to such Segment as may be
                   required, the Contractor shall continue to carry the risk of
                   loss with respect of each item outstanding under Sub-Article
                   9(C)(1) and 9(D)(2) until such item is no longer outstanding.

Article 10  Warranty
--------------------

          A.  The Contractor warrants that the System and each System Upgrade,
including its spares, shall be free from defects in supplies, workmanship and
design for a period of * years commencing from the Date of Provisional
Acceptance of the System or such System Upgrade, as the case may be,
(hereinafter "Warranty Period" and ""Upgrade Warranty Period"), with Ship Costs
being covered for the first * years of the Warranty Period (the "Ship
Period") and the Purchaser being responsible for all Ship Costs thereafter.

* Material omitted and separately filed with the Commission under an
  application for confidential treatment.
<PAGE>

                                                                              38

              1.   During the Warranty Period for the System or the Upgrade
                   Warranty Period for a System Upgrade, the Contractor shall
                   make good, by repair or replacement, at its sole option, any
                   defects in the System or such System Upgrade, as the case may
                   be, including any spares, which may become apparent or be
                   discovered due to imperfect workmanship, faulty design or
                   faulty material supplied by the Contractor, or any act,
                   neglect or omission on the Contractor's part.

                   (a)   If at any time within the Warranty Period or the
                         Upgrade Warranty Period for a System Upgrade any defect
                         occurs which causes the System or such System Upgrade,
                         as the case may be, to fail to meet its overall
                         Performance Requirements, the Contractor shall repair
                         or replace such part or parts. In making such repairs,
                         Contractor may make changes to the System or such
                         System Upgrade, as the case may be, or substitute
                         equipment of later or comparable design, provided the
                         changes, modifications, or substitutions under normal
                         and proper use do not cause the System or such System
                         Upgrade as the case may be to fail to meet the
                         Performance Requirements.

                   (b)   The Contractor shall use reasonable efforts to minimize
                         the period of time that any Segment or the System is
                         out of service for testing and repair. The Purchaser
                         agrees to cooperate with the Contractor to facilitate
                         the Contractor's repair activity.

                   (c)   It is understood that if there is a problem on the
                         System, the Purchaser may immediately dispatch the
                         maintenance authority to effect repairs. If and to the
                         extent that such problem is determined to be caused by
                         a defect in the System covered by this warranty, the
                         Contractor shall reimburse the Purchaser for its actual
                         Non-Ship Costs incurred and, with respect to any such
                         repair relating to a defect identified in good faith by
                         Purchaser in writing prior to the end of the Ship
                         Period, actual Ship Costs incurred. If the Purchaser
                         has entered into arrangements whereby maintenance is
                         all or partially covered by a "lump sum" payment
                         covering a specific period (e.g., an annual fixed fee
                         operations and maintenance contract), then Contractor
                         understands that Purchaser may not actually incur costs
                         with respect to any particular warranty repair. In such
                         a case, Contractor agrees that the Purchaser is still
                         entitled to a payment from Contractor in connection
                         with such warranty repair. The Contractor and Purchaser
                         will agree in good faith to an equitable method of
                         determining the industry standard typical costs for
                         such a repair based upon what the repair would have
                         actually cost had it been paid under a specific
                         maintenance agreement and such typical costs shall be
                         reimbursed to Purchaser. The Purchaser will provide the
                         Contractor with all reasonably requested information,
                         data or invoices available with respect to
<PAGE>

                                                                              39

                         such warranty repair to enable the Contractor to
                         recover its costs from its insurers. The unavailability
                         or denial of any such insurance shall in no way relieve
                         the Contractor of its obligations under this clause
                         (c).

                         (i)  The Contractor shall be given advance notice and
                              be entitled to have a representative on board ship
                              to observe at sea repairs and shall be given the
                              earliest possible notice of any such repair.

                         (ii) Subject to the foregoing and to Sub-Article 10(D),
                              any repair by the Purchaser shall not in any way
                              diminish the Contractor's obligation under the
                              warranty. Any equipment discovered to be defective
                              or faulty and recovered during a warranty repair
                              shall be returned to the Contractor at its
                              request.

                   (d)   In the event that the Contractor fails to make the
                         repair or to make reasonable efforts to minimize the
                         period of time that the System is out of service for
                         repair, the Purchaser may repair the System or the
                         System Upgrade and the Contractor shall reimburse the
                         Purchaser for Non-Ship Costs and, with respect to any
                         such repair relating to a defect identified in good
                         faith by Purchaser in writing prior to the end of the
                         Ship Period, Ship Costs.

                         (i)  The Contractor shall be given advance notice and
                              be entitled to have a representative on board ship
                              to observe at sea repairs and shall be given the
                              earliest possible notice of any such repair.

                         (ii) Subject to the foregoing, any repair by the
                              Purchaser shall not in any way diminish the
                              Contractor's obligation under the warranty. Any
                              equipment discovered to be defective or faulty and
                              recovered during a warranty repair shall be
                              returned to the Contractor at its request.

              2.   Contractor shall bear the Ship Costs of only those repairs of
                   the defects identified in good faith by Purchaser in writing
                   prior to the end of the Ship Period. However, the Contractor
                   shall bear the Non-Ship Costs of each repair, replacement or
                   improvement required during the Warranty Period.

                   As used herein, "Ship Cost" means the costs of operating a
                   vessel, including but not limited to running and standing
                   charges for the vessel (including but not limited to labor
                   charges for the vessel's crew, at sea insurance, port
                   charges, fuel and lube oils, consumables, cable loading,
                   cable unloading, navigation and maritime communications) as
                   well as the
<PAGE>

                                                                              40

                   costs associated with the use and operation of a remotely
                   operated vehicle and the tracked self propelled burial tool
                   and ANon-Ship Costs" means the costs of making a repair,
                   including the cost of components, equipment or materials
                   requiring replacement, the cost of any additional equipment
                   necessary to effect the repair, the cost of making the
                   repair, including the cost of reburying any previously buried
                   portion, the cost of labor and engineering assistance or
                   development required to make the repair and all necessary
                   associated costs, such as, but not limited to, shipping and
                   customs and services that may be required to make the repair,
                   but excluding any of the foregoing which are Ship Costs.

              3.   The Contractor shall effect all warranty repairs of the
                   System and shall supply all necessary repair materials.
                   However, the Contractor may use, with the consent of the
                   Purchaser, which shall not be unreasonably withheld, the
                   materials needed to effect a repair from the Purchaser's
                   available spare materials. The Contractor shall promptly
                   replace in kind such materials supplied from the Purchaser's
                   spare materials or at the option of the Purchaser, reimburse
                   the Purchaser for such materials at its original purchase
                   price. The replacement of or reimbursement for such materials
                   shall be made at a time mutually agreed to by the Purchaser
                   and the Contractor.

              4.   The Contractor warrants that services furnished hereunder
                   will be performed in a workmanlike manner using materials
                   free from defects except when such materials are provided by
                   the Purchaser (it being understood that all materials
                   arranged for directly by Contractor, whether or not purchased
                   in the name of Purchaser, are not materials provided by the
                   Purchaser). If such services prove to be not so performed and
                   Purchaser notifies the Contractor within six (6) months from
                   the completion of the service or before the end of the
                   Warranty Period, whichever is later, the Contractor will
                   promptly correct the defect.

              5.   Any part which replaces a defective part during the
                   applicable Warranty Period or Upgrade Warranty Period, shall
                   be covered by these warranties for the remaining Warranty
                   Period and Ship Period, if any, or Upgrade Warranty Period,
                   as the case may be, of the part which was replaced or, if
                   longer, six months from the date of replacement. The
                   foregoing is not meant to limit any separate warranty that
                   may apply to the replacement part. However, the Warranty
                   Period shall never exceed * years from the Date of
                   Provisional Acceptance of the System and the Upgrade Warranty
                   Period for any System Upgrade shall never exceed * years
                   from the Date of Provisional Acceptance of such System
                   Upgrade. Further, Ship Costs shall be included only with
                   respect to defects identified by Purchaser in writing during
                   the first * years from the Date of Provisional Acceptance
                   of the System, and shall be included with respect to such
                   defect until it is repaired.

* Material omitted and separately filed with the Commission under an
  application for confidential treatment.
<PAGE>

                                                                              41

          B.  The Contractor represents and warrants that the System has been
designed to last for * years. The Contractor warrants that (i) the System
shall be designed so that during the Warranty Period no pattern of failure shall
develop that causes the System (as upgraded from time to time by System
Upgrades) to fail to meet its reliability as set forth in the System Performance
Requirements (as upgraded from time to time by System Upgrades) over the Design
Life Period and (ii) the System shall be designed with sufficient transmission
margin to be upgradable to a capacity of * per fiber pair. Contractor shall
have no liability with respect to the design warranty set forth in clause (ii)
of this Sub-Article unless and until Contractor shall have failed to perform a
System Upgrade requested by Purchaser. The Design Life Period shall run for
* years from the Date of Provisional Acceptance of the System (whether or
not any System Upgrades are done). In the event the System is not so designed as
provided in the first two sentences of this Sub-Article, Contractor shall effect
such reengineering and redesign and make such repairs or replace such parts as
may be necessary to correct such deficiency. The Contractor shall bear the costs
of all repairs and parts and of the reengineering and redesign necessary to
effect such repairs and replacements and the Ship Costs incurred in connection
with such repairs and replacements. The Contractor warrants that all Supplies,
Deliverable Software and Deliverable Technical Materials are Year 2000
Compliant.

          C.  The warranties provided above in Sub-Articles 10(A) and (B) by the
Contractor shall not apply to defects or failures of performance, which result
from damage caused by acts or omissions of the Purchaser or its agents,
employees or representatives or third parties (other than the Contractor or its
Subcontractors), or which result from modifications, misuse, neglect, accident
or abuse, repair, storage or maintenance by other than the Contractor or its
Subcontractors or, use in a manner not in accordance with the System Description
or other causes set forth in Article 17 (Force Majeure).

          D.  THE FOREGOING WARRANTY IS EXCLUSIVE AND IS IN LIEU OF ALL OTHER
EXPRESS AND IMPLIED WARRANTIES INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WHICH ARE SPECIFICALLY
DISCLAIMED.

          E.  The Contractor shall, in accordance with its normal operating
practices, investigate any defective part or parts repaired or replaced pursuant
to this Article 10 to determine the type of defect and the cause of failure of
the part or parts. The Contractor shall provide a written report to the
Purchaser on the results of the investigation, if any.

          F.  Contractor warrants that the System and the Optional Branching
Unit, as applicable, shall be designed in a manner (i) adequate to support,
without modification to the System, any extension constructed by Contractor from
such branching unit and (ii) such that any extension will have performance equal
to or better than the System, provided that (i) and (ii) are contingent upon
each such extension falling within the applicable distance parameters set forth
in the Technical Volume.

          G.  The Contractor agrees that the foregoing provisions of this
Article 10 may be enforced, on behalf of Purchaser, by the entity or entities
performing operation, administration or maintenance services for the System.

* Material omitted and separately filed with the Commission under an
  application for confidential treatment.
<PAGE>

                                                                              42

Article 11  Contractor Support; Use of Segment for Restoration Protection
-------------------------------------------------------------------------

          A.  For a period of ten (10) years from the applicable Date of
Provisional Acceptance or Date of Commercial Acceptance of the System whichever
is earlier, the Contractor will make available to the Purchaser replacement
parts and repair service for the System as may be reasonably necessary for its
operation, maintenance or repair. Where identical parts cannot be supplied, the
Contractor shall provide fully compatible parts with characteristics equal or
superior to those originally provided by the Contractor. Such parts and services
shall be provided under commercially reasonable conditions of price and
delivery.

          B.  Notwithstanding Sub-Article 11(A), if for any reason the
Contractor or Contractor's suppliers intend to cease or ceases manufacturing or
having manufactured identical or fully compatible replacement parts, the
Contractor shall use reasonable efforts to give one year's prior written notice
to the Purchaser to allow the Purchaser to order from the Contractor any
required replacement parts and shall provide full details of the arrangements to
provide equivalents.

          C.  Once the Purchaser has accepted a Segment of the System, the
Purchaser shall be entitled to use, without charge, any other unaccepted Segment
or Segments of the System solely for purposes of instituting restoration
protection in the System (a "Restoration Segment"); provided that:
                                                    --------

              1.   Contractor shall be relieved from its obligations pursuant to
                   Article 22, to pay liquidated damages with respect to any
                   Restoration Segment for any delays in the Contractor's Work
                   directly resulting from, and only to the extent of,
                   Purchaser's usage of such Restoration Segment or Segments for
                   restoration protection purposes;

              2.   Contractor shall be compensated for any payment milestones
                   delayed or made unachievable arising out of or as a result of
                   Purchaser's use of such Restoration Segment or Segments for
                   restoration protection purposes; and

              3.   Purchaser shall be responsible for all maintenance costs that
                   would not have been incurred but for Purchaser's use of such
                   Restoration Segment or Segments for restoration protection
                   purposes.

              4.   At the time Purchaser makes a request for a Restoration
                   Segment, the Contractor shall notify the Purchaser whether
                   Purchaser's use of such Restoration Segment will cause a
                   delay in the RFS Date for such Restoration Segment and, as a
                   result, cause the Contractor to incur additional insurance
                   premium costs, which notice shall set forth the amount of
                   such premiums. Upon receipt of such notice, Purchaser shall
                   determine, in its sole discretion, whether it will utilize
                   the Restoration Segment and therefore compensate Contractor
                   for such additional insurance premium costs.
<PAGE>

                                                                              43

          The Purchaser's use of any unaccepted Segment or Segments for
restoration protection purposes shall in no way obligate the Purchaser to accept
such other Segment or Segments, nor shall it be deemed to constitute an
acceptance by the Purchaser of any such other Segment or Segments, and the title
and any risk of loss associated with the any such other Segment or Segments
shall remain with the Contractor.

Article 12  Purchaser's Obligations
-----------------------------------

          A.  If the Purchaser's failure to perform any of its express
obligations under this Contract directly results in an increase in the costs of
performance or the time required for performance of any of the Contractor's
duties or obligations under this Contract, such failure shall be deemed a
"Purchaser Hindrance." In the event of a Purchaser Hindrance, the Contractor
shall be entitled, as appropriate, to (i) an equitable extension of time for
completion of its Work or the Upgrade Work if the Purchaser Hindrance meets the
requirements for a Force Majeure delay, (ii) reimbursement for all such
additional costs incurred, and (iii) to the extent necessary in light of
Purchaser's failure and the adjustments made in accordance with clauses (i) and
(ii) above, an equitable adjustment of the Work and/or Upgrade Work. The
Contractor shall not be entitled to any other right or remedy with respect to a
Purchaser Hindrance.

              1.   The Contractor's remedies described in clauses (i), (ii) and
                   (iii) above are conditioned upon the Contractor informing the
                   Purchaser promptly of any potential Purchaser Hindrance, and
                   using reasonable efforts to minimize any such additional
                   costs or delay.

              2.   The Contractor shall promptly provide to the Purchaser an
                   estimate of the anticipated additional costs and time
                   required to complete the Work or Upgrade Work and request
                   relief from contractual obligations or duties, as
                   appropriate. Purchaser shall, upon notification, make advance
                   payment to Contractor for the estimated amount of anticipated
                   additional costs; provided that Purchaser may deposit such
                                     --------
                   amount into the Dispute Account and Sub-Article 5(C)(4) shall
                   apply. Contractor shall without limiting Purchaser's
                   obligations in the foregoing sentence, discuss such costs
                   with Purchaser upon Purchaser's request.

              3.   As soon as reasonably practicable after the actual costs
                   become known to the Contractor, the Contractor shall provide
                   a statement of such actual costs to the Purchaser.

              4.   If the estimated amount is greater than the amount of actual
                   costs, then the Contractor shall reimburse the Purchaser. If
                   the amount of actual costs incurred is greater than the
                   estimated amount, then the Purchaser shall reimburse the
                   Contractor for any shortfall in accordance with Article 5
                   (Terms of Payment of Purchaser).
<PAGE>

                                                                              44

Article 13  Termination for Default
-----------------------------------

          A.  Either Party may, by written Notice of Termination for Default,
effective fifteen (15) days after receipt or such later date as specified in the
notice, terminate the whole or any part of this Contract if any one of the
following circumstances continues after such notice (each an "Event of
Default"):

              1.   In the case of the Purchaser, (a) if Contractor fails to
                   comply in any material respect with any of the terms and
                   conditions of this Contract and such failure shall continue
                   for thirty (30) days after written notice from Purchaser to
                   Contractor specifying the failure and demanding that the same
                   be remedied; provided that, if such default cannot be
                                --------
                   reasonably corrected within such thirty (30) day period, an
                   Event of Default with respect to Contractor shall not be
                   deemed to occur until the expiration of such further period,
                   not to exceed ninety (90) days, as reasonably required to
                   correct such failure, if the Contractor commences, within
                   such thirty (30) day period, and continues diligently at all
                   times thereafter, to take reasonable steps to correct the
                   failure as soon as possible, or (b) any representation or
                   warranty made by Contractor herein or in any certificate,
                   statement or document given pursuant to the terms hereof
                   shall prove to be false, incorrect or misleading in any
                   material respect as of the date on which it was made and any
                   material adverse consequences to Purchaser caused thereby
                   shall not have been remedied within thirty (30) days after
                   written notice thereof shall have been given to Contractor by
                   Purchaser; or (c) the Contractor fails to cause the System to
                   be Ready for Provisional Acceptance within 200 days after the
                   Scheduled System RFS Date;

              2.   If the other Party defaults on any of its payment obligations
                   and does not cure such default within a period of thirty (30)
                   days (or such longer period as the non-breaching Party may
                   authorize in writing) after receipt of written notice
                   demanding cure (subject to dispute provisions);

              3.   If the other Party shall commence a voluntary case or other
                   proceeding seeking liquidation, reorganization or other
                   relief with respect to itself or its debts under any
                   bankruptcy, insolvency or other similar law now or hereafter
                   in effect or seeking the appointment of a trustee, receiver,
                   liquidator, custodian or other similar official of it or any
                   substantial part of its property, or shall consent to any
                   such relief or to the appointment of or taking possession by
                   any such official in an involuntary case or other proceeding
                   commenced against it, or shall make a general assignment for
                   the benefit of creditors, or shall fail generally to pay its
                   debts as they become due, or shall take any corporate action
                   to authorize any of the foregoing;

              4.   If an involuntary case or other proceeding shall be commenced
                   against the other Party seeking liquidation, reorganization
                   or other relief with respect to
<PAGE>

                                                                              45

                   it or its debts under any bankruptcy, insolvency or other
                   similar law now or hereafter in effect or seeking the
                   appointment of a trustee, receiver, liquidator, custodian or
                   other similar official of it or any substantial part of its
                   property, and such involuntary case or other proceeding shall
                   remain undismissed and unstayed for a period of 60 days; or
                   an order for relief shall be entered against the other Party;

              5.   The Guaranty shall for any reason cease to be in full force
                   and effect or the Guarantor shall repudiate any of its
                   obligations thereunder.

          B.  If this Contract is terminated by the Purchaser as provided in
Sub-Article 13(A), the Purchaser, in addition to any other rights provided in
this Article, and upon payment to Contractor of all monies due and owing as set
forth in Sub-Article 13(C) below, may require the Contractor to transfer title
and deliver to the Purchaser in the manner and to the extent directed by the
Purchaser any completed equipment, material or supplies, and such partially
completed cable and materials, parts, tools, dies, jigs, fixtures, plans,
drawings, information, and contract rights (hereinafter collectively
"Manufacturing Materials") as the Contractor has had specifically produced or
specifically acquired for the performance of such part of this Contract as has
been terminated and which, if this Contract had been completed, would have been
required to be furnished to the Purchaser; and the Contractor shall, upon the
direction of the Purchaser, protect and preserve property in the Contractor's
possession in which the Purchaser has an interest.

          C.  If the Contract is terminated by Contractor as provided in Sub-
Article 13(A), the Purchaser shall pay, in addition to any other damages payable
pursuant to Sub-Article 13(E) below, the total of:

              1.   the cost of settling and paying claims arising out of the
                   termination of Work under the contracts and orders, as
                   provided in Sub-Article 14(B)(3) below which are properly
                   chargeable to the terminated portion of this Contract; and

              2.   the reasonable costs of settlement including accounting,
                   legal, clerical and other expenses necessary for the
                   preparation of settlement claims and supporting data with
                   respect to the terminated portion of this Contract and for
                   termination and settlement of contracts thereunder, together
                   with reasonable storage, transportation and other costs
                   incurred in connection with the protection, preservation and
                   disposition of property proper to this Contract.

          D.  Force Majeure or Purchaser Hindrance events shall not constitute a
default or provide a basis for termination under this Article.

          E.  Regardless of any termination of this Contract as provided in Sub-
Article 13(A), neither Party shall be relieved from any liability for damages or
otherwise which may have been incurred by reason of any breach of this Contract.
<PAGE>

                                                                              46

          F.  Without limitation to the foregoing, in the event that Purchaser
terminates this Contract pursuant to Sub-Article 13(A), the Contractor shall be
liable to Purchaser (without duplication) for the total of all costs and
expenses reasonably incurred by Purchaser in completing the Work or in
correcting deficiencies in the Work to the extent that the payments made to
Contractor pursuant to this Contract, together with such costs and expenses,
exceed the Contract Price.

Article 14  Termination for Convenience
---------------------------------------

          A.  The performance of Work under this Contract may be terminated by
the Purchaser in whole, or in part, at its discretion. The Purchaser shall
deliver to the Contractor a written notice specifying the extent to which
performance of Work under this Contract is terminated, and the date upon which
such termination becomes effective (a "Notice of Termination"). Upon
termination, the Purchaser will make payment to Contractor of all monies due and
owing as set forth in Sub-Article 14(D) below.

          B.  After receipt of such Notice of Termination, and except as
otherwise directed by the Purchaser, the Contractor shall:

              1.   Stop Work under this Contract on the date and to the extent
                   specified in the Notice of Termination;

              2.   Place no further orders or contracts for materials, services
                   or facilities except as may be necessary for completion of
                   such portion of Work under this Contract as is not
                   terminated;

              3.   Use reasonable efforts to terminate all orders and contracts
                   to the extent that they relate to the performance of Work
                   terminated by the Notice of Termination;

              4.   Assign to the Purchaser, in the manner, at the time, and to
                   the extent directed by the Purchaser, all of the Contractor's
                   rights, title and interest under the orders and contracts so
                   terminated;

              5.   Use reasonable efforts to settle all outstanding liabilities
                   and all claims arising out of such termination of orders and
                   contracts, with the Purchaser's approval or ratification to
                   the extent required;

              6.   Transfer title and deliver to the Purchaser in the manner, at
                   the time and to the extent (if any) directed for the
                   fabricated or unfabricated parts, work in process, completed
                   work, supplies and other material produced as a part of, or
                   acquired in connection with, the performance of the Work
                   terminated by the Notice of Termination;

              7.   Use reasonable efforts to sell, in the manner, at the time,
                   to the extent and at the price or prices directed or
                   authorized by the Purchaser, any property
<PAGE>

                                                                              47

                   of the types referred to in Sub-Article 14(B)(6) above
                   provided, however, that the Contractor:
                   --------  -------

                   (a)  shall not be required to extend credit to any buyer; and

                   (b)  may acquire any such property under the conditions
                        prescribed by and at a price approved by the Purchaser;

                   and provided further that the net proceeds of any such
                       -------- -------
                   transfer or disposition shall be applied in reduction of any
                   payments to be made by the Purchaser to the Contractor under
                   this Contract or, if no such payments are due, paid in such
                   other manner as the Purchaser may direct;

              8.   Complete performance of such part of the Work which was not
                   terminated by the Notice of Termination; and

              9.   Take such action as may be necessary, or as the Purchaser may
                   reasonably direct, for the protection and preservation of the
                   property related to this Contract which is in the
                   Contractor's possession and in which the Purchaser has
                   acquired or may acquire an interest.

          C.  After such Notice of Termination, the Contractor shall submit to
the Purchaser a written termination claim. Such claim shall be submitted
promptly, but, unless otherwise extended, in no event later than six months from
the effective date of termination.

          D.  In the settlement of any such partial or total termination claim,
the Purchaser shall pay to the Contractor the total of:

              1.   all amounts invoiced in accordance with the Contract plus,
                   for Work or Supplies which have been done or is in progress
                   or provided but which have not been invoiced, an amount
                   calculated by reference to the prices set forth in the
                   Provisioning Schedule and to the amount of such Work or
                   Supplies done or provided;

              2.   the cost of settling and paying claims arising out of the
                   termination of Work under the contracts in orders, as
                   provided in Sub-Article 14(D)(4) below which are properly
                   chargeable to the terminated portion of this Contract; and

              3.   the reasonable costs of settlement including accounting,
                   legal, clerical and other expenses necessary for the
                   preparation of settlement claims and supporting data with
                   respect to the terminated portion of this Contract and for
                   termination and settlement of contracts thereunder, together
                   with reasonable storage, transportation and other costs
                   incurred in connection with the protection and disposition of
                   property proper to this Contract.
<PAGE>

                                                                              48

          E.  In arriving at the amount due to the Contractor under this Article
14, all unliquidated payments made to the Contractor, any liability which the
Contractor may have to the Purchaser, and the agreed price for, or the proceeds
of sale of any materials, supplies or other things acquired by the Contractor or
sold, pursuant to the provisions of this Article 14, and not otherwise recovered
by or credited to the Purchaser shall be deducted.

          F.  The Purchaser may, from time to time, under such terms and
conditions as they prescribe approve partial payments and payments on account
against costs incurred by the Contractor in connection with the terminated
portion of this Contract. If such payments total in excess of the amount finally
agreed or determined to be due under this Article 14, such excess shall be
refunded, upon demand, by the Contractor to the Purchaser.

          G.  For a period of one year after final settlement under this
Contract, the Contractor shall preserve and make available to the Purchaser at
reasonable times at the Contractor's office, but without direct charge to the
Purchaser, all supporting books, records and documents required to be kept
relating to the terminated Work.

Article 15  Suspension
----------------------

          A.  The Purchaser may, at its convenience, order the Contractor to
suspend all or part of the Work for such period of time as the Purchaser
determines to be appropriate. If, as a result of such Suspension, the Contractor
incurs additional costs or losses in the discharge of its responsibilities under
this Contract, and where such suspension, losses or costs are not caused by the
Contractor's act or omission and could not have been reasonably prevented by the
Contractor, the Contractor shall be allowed an equitable adjustment to the
Contract Price or the Provisioning Schedule and an equitable extension in the
time required for performance.

          B.  Upon the occurrence of:

              (i)   an Event of Default by the Purchaser;

              (ii)  any transfer prior to the Date of Final Acceptance of any
     portion of the System except in accordance with Article 37; or

              (iii) any supplement executed by a Transferee shall not be in full
     force and effect;

the Contractor, in addition to any other rights provided in Article 14, may
suspend performance of its obligations and all Work and (in the case of clause
(i)) Upgrade Work.

          C.  Every forty-five (45) days, during the period of Suspension, the
Parties shall meet formally and review the circumstances surrounding the
Suspension including without limitation, the anticipated date of re-commencing
Work.

          D.  Thereafter, if the Suspension continues for a total of one hundred
and eighty (180) days, the Contractor may terminate the Contract by notice to
the Purchaser and the Contract shall
<PAGE>

                                                                              49

be deemed to have been terminated by Purchaser, effective on the date of
Contractor's notice, in accordance with Sub-Article 14(A) and the remaining
provisions of Article 14 shall apply.

Article 16  Title and Risk of Loss
----------------------------------

          A.  Except as provided in Article 18 (Intellectual Property), Article
20 (Safeguarding of Information and Technology) and Article 21 (Export Control),
title to all Supplies provided by the Contractor hereunder for incorporation in
or attachment to a Segment shall pass to and vest in the Purchaser in accordance
with Article 9 (Acceptance). Risk of loss or damage to all Supplies provided by
the Contractor for incorporation in or attachment to such Segment shall pass to
and vest in the Purchaser in accordance with Article 9. Upon termination of this
Contract pursuant to Article 13 (Termination for Default) or 14 (Termination for
Convenience), the Purchaser may require, upon full payment of all amounts due
thereunder (provided that, without limiting Purchaser's obligation to make any
            --------
such payment, if this Contract is terminated by Purchaser because of a
Bankruptcy Event full payment shall not be required prior to the transfer of
title), that title to the equipment, materials and supplies, which has not
previously passed to the Purchaser, pass to the Purchaser, free and clear of all
liens, claims, charges and other encumbrances other than those deriving through
Purchaser.

          B.  Upon the passage of title in accordance with the terms of Article
13 (except a transfer described in the proviso of the last sentence of Sub-
Article 16(A)), the Contractor warrants that all parts, materials, and equipment
to which title has passed will be free and clear of all liens, claims, charges
and other encumbrances other than those deriving through the Purchaser.

Article 17  Force Majeure
-------------------------

          A.  The Contractor shall not be responsible for any loss, damage,
delay or failure of performance resulting directly or indirectly from any cause
which is beyond its reasonable control ("Force Majeure"), including but not
limited to: delay in obtaining or failure to obtain any Owner Permits (subject
to the provisions of Sub-Article 7(D)); acts of God or of the public enemy; acts
or failures to act (other than with respect to Permits) of any governmental
authority unless resulting from any act or omission of Contractor; war or
warlike operations, civil war or commotion, mobilizations or military call-up,
and acts of similar nature; revolution, rebellions, sabotage, and insurrections
or riots; fires, floods, epidemics quarantine restrictions; strikes, and other
labor actions; freight embargoes; unworkable weather (so long as Contractor
shall have taken reasonably foreseeable unworkable weather into account when
planning its Work schedule; trawler or anchor damage caused by other marine
activity such as fishing, marine research and marine development; acts or
omissions of transporters; or a Purchaser Hindrance, but only to the extent that
the obligation underlying such Hindrance is not performed at the time
contemplated by the Plan of Work, provided that the following shall not
                                  --------
constitute Force Majeures: (i) a loss by Contractor of employees (other than by
reason of Force Majeure), (ii) strikes and other labor actions involving the
Contractor's own work force, (iii) the first 5 days of unworkable weather
(unless any such day occurs during the 30 days immediately preceding the then
Scheduled RFS Date), (iv) the failure (other than by reason of Force Majeure) of
any subcontractor, supplier or transporter to perform its obligations to
Contractor (including on account of insolvency), (v) the
<PAGE>

                                                                              50
unavailability of any raw materials or components, unless such raw materials or
components are generally unavailable in the marketplace at the time Contractor
would customarily have placed orders therefore or are unavailable by reason of
force majeure or (vi) any increase in Contractor's costs.

          B.  If any such Force Majeure causes an increase in the time or costs
required for performance of any of its duties or obligations, the Contractor
shall be entitled to an equitable extension of time for completion of the Work
or the Upgrade Work, as the case may be, but not any adjustment in the Contract
Price nor any reimbursement for any such additional costs incurred.

          C.  Increase in cost due to Purchaser Hindrance will be as provided
for in Article 12 (Purchaser's Obligations).

          D.  The Contractor shall inform the Purchaser promptly with written
notification, and in all cases within fourteen (14) days of discovery and
knowledge, of any occurrence covered under this Article and shall use its
reasonable efforts to minimize such additional delays. The Contractor shall
promptly provide an estimate of the anticipated time required to complete the
Work or the Upgrade Work. Contractor shall be entitled to an equitable extension
of time resulting from the Force Majeure condition, but only to the extent that
such Force Majeure actually causes a delay in the timely completion of the Work
or Upgrade Work after all reasonable efforts to minimize such a delay have been
made.

          E.  Within thirty (30) days of receipt of such a notice from
Contractor, the Purchaser may provide a written response. The absence of a
response shall not be deemed as acceptance of Contractor's notice and request
for additional time.

          F.  If a Force Majeure continues for a total of two hundred (200)
days, either Party may terminate the Contract by notice to the other and the
Contract shall be deemed to have been terminated by Purchaser, effective on the
date of the terminating Party's notice, in accordance with Sub-Article 14(A) and
the remaining provisions of Article 14 shall apply to such termination.

          G.  Majeure, the Parties shall meet and review the circumstances
surrounding the Force Majeure, including, without limitation, the anticipated
date of recommencing work.

Article 18  Intellectual Property
---------------------------------

          A.  Ownership

              Subject to the provisions of the next two sentences, all right,
title, and interest in and to all Intellectual Property (excluding Project
Patent Rights) created or developed by Contractor in the course of its
performance under this Contract that is (a) specifically and exclusively
applicable to the System or a System Upgrade; and (b) either (i) embodied in
Deliverable Technical Material (as that term is defined in Sub-Article 18(B)
below) or (ii)
<PAGE>

                                                                              51

embodied in the System or a System Upgrade (the "Project Intellectual
Property"), is and shall remain the sole property of Purchaser. Contractor
represents that as of the date of this Contract, no software is planned to be
developed that would be included as Project Intellectual Property.
*  All right, title and interest in and to all Intellectual Property created
or developed by Contractor before commencing its performance under this
Contract, or created or developed by Contractor exclusively in connection with
activities other than its performance under this Contract, or created or
developed by Contractor in the course of its performance under this Contract
that is not Project Intellectual Property, and all Project Patent Rights
(collectively, the "Contractor Intellectual Property"), is and shall remain the
sole property of Contractor. Unless otherwise expressed in this Contract, no
license is implied or granted herein to Purchaser to any Contractor Intellectual
Property by virtue of this Contract, nor by the transmittal or disclosure of any
such Contractor Intellectual Property to Purchaser. Any Contractor Intellectual
Property disclosed, furnished, or conveyed to Purchaser that is marked as
"Proprietary" or "Confidential" (or if transmitted orally is identified as being
proprietary or confidential in a subsequent writing) shall be treated in
accordance with the provisions of Article 20 (Safeguarding of Information and
Technology). As used herein, "Intellectual Property" means any information,
computer or other apparatus programs, software, specifications, drawings,
designs, sketches, tools, market research or operating data, prototypes,
records, documentation, works of authorship or other creative works, ideas,
concepts, methods, inventions, discoveries, improvements, or other business,
financial and/or technical information (whether or not protectable or
registrable under any applicable intellectual property law). As used herein,
"Project Patent Rights" means all inventions, discoveries, methods and
improvements of a patentable nature created or developed by Contractor in the
course of its performance under this Contract. Project Intellectual Property
will include the materials to be listed in a Schedule (to be attached as Exhibit
H hereto) to be created mutually by the Parties within thirty (30) days of
execution of this Contract, as it may be amended from time to time by mutual
agreement of the Parties.

          B.  Licenses

              Contractor shall furnish to Purchaser, upon the transfer of title
to any portion of the System or a System Upgrade pursuant to Article 9, copies
of all technical information, specifications, drawings, designs, sketches,
tools, operating data, records, documentation and/or other types of engineering
or technical data or information reasonably relating to the operation,
maintenance or repair of each component of such portion of the System or System
Upgrade as delivered by Contractor (the "Deliverable Technical Material").
Contractor grants to Purchaser a perpetual, royalty-free, non-transferable
(except under the circumstances specified in Sub-Article 18(F) below) license to
use and reproduce those Deliverable Technical Materials owned, controlled, or
developed by Contractor and all Contractor Intellectual Property included in or
necessary to use all the Deliverable Technical Materials for purposes of
fulfilling Purchaser's obligations under this Contract and using and operating
the System (as upgraded by any System

  * Material omitted and separately filed with the Commission under an
    application for confidential treatment.
<PAGE>

                                                                              52

Upgrades) supplied by Contractor with the right to employ third parties (under
appropriate written obligations respecting confidentiality) to assist Purchaser
in fulfilling its obligations under this Contract and in using and operating the
System (as upgraded by any System Upgrades), but with no right to sublicense.
Contractor grants to Purchaser a perpetual, royalty-free, non-transferable
(except under the circumstances specified in Sub-Article 18(F) below) license to
use and reproduce those portions of Deliverable Technical Materials owned or
controlled by third parties (but only to the extent of any rights which may have
been granted to Contractor by such third parties) for the purpose of fulfilling
Purchaser's obligations under this Contract and using and operating the System
supplied by Contractor with the right to employ third parties (under appropriate
written obligations respecting confidentiality) to assist Purchaser in
fulfilling its obligations under this Contract and in using and operating the
System (as upgraded by any System Upgrades), but with no right to sublicense.
Except as set forth in this provision, no license under Contractor's patents,
copyrights, trade or service marks, trade secrets or other intellectual property
rights protectable under law in the United States or any foreign country is
granted to Purchaser. It is expressly understood that it shall not be a
violation of this license for Purchaser, on its own behalf or through third
parties (under appropriate written obligations respecting confidentiality)
specifically employed for the purpose, to use and reproduce Deliverable
Technical Material that is not Project Intellectual Property to modify the
System (as upgraded by any System Upgrades) or connect the System (as upgraded
by any System Upgrades) to other systems, provided that Purchaser may not use
the Deliverable Technical Materials that is not Project Intellectual Property in
achieving such modification or interconnection for any purpose other than
determining the technical configuration, systems interface and/or
interoperability requirements of the System (as upgraded by any System Upgrades)
as delivered by Contractor (subject to the rights of third parties therein and
thereto), and subject to the limitations on Contractor's obligations as set
forth in Articles 10(D) and 19(A) concerning any such modification or
interconnection.

          C.  Deliverable Software

              Contractor shall furnish to the Purchaser, upon transfer of title
to any portion of the System or System Upgrade pursuant to Article 9, copies of
all computer or other apparatus programs and software, in executable form, and
related documentation relating to the operation, maintenance, or repair of the
computer systems of such portion of the System or System Upgrade, as the case
may be, as delivered by Contractor (the "Deliverable Software"). In the
case of Contractor Intellectual Property, such copies of programs and software
shall consist solely of executable code provided in offline media (e.g., tapes,
or diskettes) for restoration purposes, sufficient to operate, maintain or
repair the computer systems of such portion of the System or System Upgrade, as
the case may be, as delivered by Contractor, and in the case of Project
Intellectual Property, such programs and software shall be delivered in both
source and object code forms. Contractor shall furnish to Purchaser, from time
to time during the Warranty Period or any Upgrade Warranty Period, copies of all
computer or other apparatus programs and software, in executable form (and in
the case of Project Intellectual Property, in source code form), and related
documentation that Contractor may develop to correct errors or to maintain
Deliverable Software previously furnished to Purchaser, which shall also be
treated as Deliverable Software for purposes of this Contract upon delivery
thereof to Purchaser. Contractor grants to Purchaser a perpetual, royalty-free,
non-transferable (except under the circumstances
<PAGE>

                                                                              53

specified in Sub-Article 18(F) below) license to use and reproduce the
Deliverable Software owned, controlled, or developed by Contractor for the
purpose of fulfilling Purchaser's obligations under this Contract and using and
operating the System (as upgraded by any System Upgrades) supplied by Contractor
with the right to employ third parties (under appropriate written obligations
respecting confidentiality) to assist Purchaser in fulfilling its obligations
under this Contract and in using and operating the System (as upgraded by any
System Upgrades), but with no right to sublicense. Contractor grants to
Purchaser a perpetual, royalty-free, non-transferable (except under the
circumstances specified in Sub-Article 18(F) below) license to use and reproduce
those portions of Deliverable Software owned or controlled by third parties (but
only to the extent of any rights which may have been granted to Contractor by
such third parties) for the purpose of fulfilling Purchaser's obligations under
this Contract and using and operating the System (as upgraded by any System
Upgrades) supplied by Contractor with the right to employ third parties (under
appropriate written obligations respecting confidentiality) to assist Purchaser
in fulfilling its obligations under this Contract and in using and operating the
System (as upgraded by any System Upgrades), but with no right to sublicense.
These licenses shall be limited to the right to use Deliverable Software that is
not Project Intellectual Property only with the particular type of computer
equipment or substantially similar replacement equipment for which such
Deliverable Software was provided in the System (as upgraded by any System
Upgrades) as supplied by Contractor.

              1.   Confidentiality

                   Purchaser shall keep the Deliverable Software that is not
                   Project Intellectual Property confidential in accordance with
                   Article 20 (Safeguarding of Information and Technology) and
                   Article 21 (Export Control) to the extent that such
                   Deliverable Software is designated as Confidential
                   Information by its owner and agrees to use its best efforts
                   to see that its employees, consultants, and agents, and other
                   users of such software, comply with the provisions of this
                   Contract. Purchaser also agrees to refrain from taking any
                   steps, such as reverse assembly or decompilation, to derive a
                   source code equivalent of any object code that is furnished
                   by Contractor, provided that Contractor continues to maintain
                   the Deliverable Software that is not Project Intellectual
                   Property in accordance with the terms of a support and
                   maintenance agreement to be entered into on such terms to be
                   agreed upon by the Parties, which terms shall in all events
                   contain assurances of support and maintenance similar to
                   those otherwise available to Purchaser at such time through
                   any other third party operations and maintenance service
                   provider or is willing and able to enter into an agreement to
                   maintain the Deliverable Software upon terms reasonably
                   comparable to the pertinent terms of the initial agreement to
                   be entered into by the Parties with regard to support and
                   maintenance after the expiration or termination thereof or
                   does not go insolvent or bankrupt to thereby trigger a
                   software escrow event in accordance with Article 18(G)
                   (Escrow). In the case of insolvency or bankruptcy of
                   Contractor, Purchaser shall limit any derivation of a source
                   code equivalent to that portion of the Deliverable Software
                   that is Contractor Intellectual Property. Purchaser shall not
                   under any circumstances take any
<PAGE>

                                                                              54

                   steps to derive a source code equivalent from that portion of
                   the Deliverable Software comprising commercial, off-the-shelf
                   software developed or provided by third parties.

              2.   Backup Copies

                   Purchaser may make and retain two archive copies in
                   executable form of the Deliverable Software that is not
                   Project Intellectual Property. Any copy will contain the same
                   copyright notice and proprietary markings as are on the
                   original software and shall be subject to the same
                   restrictions as the originals.

              3.   Termination of Software Licenses

                   In the event of (i) use by the Purchaser of Deliverable
                   Software that is not Project Intellectual Property in a
                   manner other than that permitted in Sub-Article 18(C) or (ii)
                   any other material breach of this Article 18 by Purchaser
                   that in either event is not cured within sixty (60) days from
                   receipt by Purchaser of written notice of such impermissible
                   use or breach, Contractor, at its option, may terminate the
                   rights granted to Purchaser pursuant to this Article, upon
                   written notice to Purchaser, which termination shall take
                   effect no sooner than sixty (60) days following receipt by
                   Purchaser of a subsequent written notice of termination. Upon
                   termination, Purchaser shall either return or destroy, at
                   Contractor's option, all copies of Deliverable Software that
                   is not Project Intellectual Property furnished under this
                   Contract.

              4.   Indemnification

                   In the event of (i) use by Purchaser of Deliverable Software
                   that is not Project Intellectual Property furnished hereunder
                   other than that permitted in Sub-Article 18(C) or (ii) any
                   other material breach of this Article 18 by Purchaser, the
                   Purchaser shall indemnify and hold Contractor harmless from
                   any and all third party claims resulting therefrom whether
                   arising from a defect in the software or otherwise.

          D.  Trademarks, Tradenames, etc.

              No rights are granted herein to either Party to use any
identification (such as, but not limited to tradenames, trademarks, service
marks or symbols, and abbreviations, contractions, or simulations thereof) owned
or used by the other Party or its parent company or its affiliates to identify
itself or its affiliates or any of its products or services. Each Party agrees
that it will not, without the prior written permission of the other Party, use
such identification in advertising, publicity, packaging, labeling, or in any
other manner to identify itself or any of its products, services, or
organizations, or represent directly or indirectly that any product, service, or
organization of it is a product, service, or organization of the other Party or
its affiliates, or that any product or service of a Party is made in accordance
with or utilizes any intellectual property of the other Party or its affiliates.
<PAGE>

                                                                              55

          E.  DISCLAIMER, LIMITATION OF LIABILITY

              CONTRACTOR REPRESENTS THAT ANY INFORMATION OR INTELLECTUAL
PROPERTY FURNISHED IN CONNECTION WITH THIS CONTRACT SHALL BE TRUE AND ACCURATE
TO THE BEST OF ITS KNOWLEDGE AND BELIEF, BUT CONTRACTOR SHALL NOT BE HELD TO ANY
LIABILITY FOR UNINTENTIONAL ERRORS OR OMISSIONS THEREIN. EXCEPT AS EXPRESSLY
PROVIDED, CONTRACTOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESSLY OR
IMPLIEDLY. BY WAY OF EXAMPLE, BUT NOT OF LIMITATION, CONTRACTOR AND ITS PARENT
COMPANY AND AFFILIATES MAKES NO REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OF INFORMATION OR
INTELLECTUAL PROPERTY DISCLOSED OR PROVIDED HEREUNDER WILL NOT INFRINGE ANY
PATENT OR OTHER INTELLECTUAL PROPERTY RIGHT OF A THIRD PARTY. EXCEPT AS
OTHERWISE PROVIDED IN THIS CONTRACT, CONTRACTOR AND ITS PARENT AND AFFILIATES
SHALL NOT BE HELD TO ANY LIABILITY WITH RESPECT TO ANY CLAIM BY PURCHASER OR ANY
THIRD PARTY CLAIM AGAINST PURCHASER ON ACCOUNT OF, OR ARISING FROM, PURCHASER'S
USE OF INFORMATION OR INTELLECTUAL PROPERTY DISCLOSED OR PROVIDED BY CONTRACTOR.

          F.  Transferability

              The licenses granted to Purchaser by Contractor in the Deliverable
Technical Materials and Deliverable Software are personal and non-transferable,
except that Purchaser may assign or transfer such licenses to an affiliated
entity under common control with the Purchaser or to any entity succeeding to
Purchaser's entire interest in the System (as upgraded by any System Upgrades)
as a result of reorganization or restructuring of the Purchaser or in the event
of a change of control of the Purchaser.

          G.  Deliverable Software Escrow

              Within sixty (60) days of the Date of Provisional Acceptance or
Commercial Acceptance of any portion of the System or any System Upgrade,
Contractor shall deliver copies of source code and related documentation for
that portion of Deliverable Software that is Contractor Intellectual Property
(but not that portion of Deliverable Software comprising commercial, off-the-
shelf software, or software developed or provided by third parties) to a third
party commercial software escrow service, and from time to time as it becomes
available, copies of source code for updates, maintenance releases, or other new
versions of the Deliverable Software that is Contractor Intellectual Property
that is reasonably relating to the operation, maintenance or repair of the
computer systems of any portion of the System or any System Upgrade as delivered
by Contractor during the System's twenty-five (25) year Design Life Period.

              A detailed listing of commercial, off-the-shelf software, or
software developed or provided by third parties to be included in the
Deliverable Software shall be delivered by Contractor to Purchaser within sixty
(60) days of the Date of Provisional Acceptance of any portion of the System or
any System Upgrade, as the case may be.
<PAGE>

                                                                              56
              The escrow service shall be authorized by Contractor to release
the escrowed software to Purchaser within five (5) business days after the
receipt of notice by Purchaser that (i) a Bankruptcy Event has occurred, (ii)
that the Contractor is no longer engaged in the business of operating or
maintaining, or providing support for other parties in operating or maintaining,
systems comparable to the System (as modified by System Upgrades) or (iii) that
Purchaser has terminated the Contract pursuant to Article 12 (Termination for
Default) due to Contractor's default, unless Contractor agrees to continue to
support Purchaser with respect to Deliverable Software.

Article 19  Infringement
------------------------

          A.  The Contractor agrees to defend or settle at its own expense all
suits for infringement of any patent, copyright, trademark or other form of
intellectual property right in any country of the world, for the use and
operation of the System (as upgraded by any System Upgrades) as supplied by
Contractor and for any component part thereof or material or equipment used
therein (or the manufacture of any material or the normal use thereof) provided
by the Contractor or on its behalf pursuant to this Contract and will hold the
Purchaser harmless from all expense of defending any such suit and all payments
for final judgment assessed on account of such infringement, except such
infringement or claim arising from:

              1.   The Contractor's adherence to the Purchaser's directions in
                   the design and configuration of the System (as upgraded by
                   any System Upgrades) or to use materials, parts or equipment
                   of the Purchaser's selection; or

              2.   Such material, parts or equipment furnished to the Contractor
                   by the Purchaser, other than in each case, items of the
                   Contractor's design or selection or the same as any of the
                   Contractor's commercial merchandise or in processes or
                   machines of the Contractor's design or selection used in the
                   manufacture of such standard products or parts; or

              3.   Use of the System (as upgraded by any System Upgrades) or the
                   materials, parts or equipment furnished by Contractor other
                   than for the purposes indicated in, or reasonably to be
                   inferred from, this Contract or in conjunction with other
                   products; or

              4.   Modification of the System (as upgraded by any System
                   Upgrades) or the materials, parts or equipment furnished by
                   the Contractor, or connection of the System to another system
                   by any person or entity other than Contractor, without prior
                   expressed written approval by Contractor.

          B.  The Purchaser will, at its own expense, defend all suits against
the Contractor for such excepted infringement and hold the Contractor harmless
from all expense of defending any such suit and from all payments by final
judgment assessed against the Contractor on account of such excepted
infringement.
<PAGE>

                                                                              57

          C.  The Contractor and the Purchaser agree to give each other prompt
written notice of claims and suits for infringement, full opportunity and
authority to assume the sole defense, including appeals and, upon request and at
its own expense, the other agrees to furnish all information and assistance
available to it for such defense.

          D.  If all or any portion of the System (as upgraded by any System
Upgrades) or any material, part or equipment provided by the Contractor or on
its behalf is held to constitute an infringement (excluding such excepted
infringements specified in Sub-Article 19(A)) and is subject to an injunction
restraining its use or any order providing for its delivery up to or
destruction, or if in respect of any such claim of infringement the Contractor
deems it advisable to do so, the Contractor shall at its own expense either:

              1.   Procure for the Purchaser the right to retain and continue to
                   use the System, the affected portion thereof, or any such
                   material, part or equipment without interruption for the
                   Purchaser;

              2.   Replace or modify the System, the affected portion thereof,
                   or any material, part or equipment so that it becomes
                   noninfringing while continuing to meet the Performance
                   Requirements or

              3.   If the remedies specified in Sub-Articles 19(D)(1) an
                   19(D)(2) are not feasible, refund to the Purchaser the full
                   purchase price paid for the System, the affected portion
                   thereof, or any material, part or equipment found to be
                   infringing.

          E.  In no event shall the Purchaser make any admission or settle any
claim in relation with any claim for infringement without Contractor's consent.

Article 20  Safeguarding of Information and Technology
------------------------------------------------------

          A.  In performance of this Contract, it may be mutually advantageous
to the Parties hereto to share certain specifications, designs, plans, drawings,
software, market research or operating data, prototypes, or other business,
financial, and or/technical information related to products, services, or
systems which are proprietary to the disclosing Party or its affiliates (and in
the case of Contractor, Contractor's parent company) (together with this
Contract and related documents, "Information"). The Parties recognize and agree
that Information includes information that was supplied in contemplation hereof
prior to execution of this Contract, and further agree that Information includes
information in both tangible and intangible form.

          B.  Unless such Information was previously known to the Party
receiving such Information free of any obligation to keep it confidential, or
such Information has been or is subsequently made public through other than
unauthorized disclosure by the receiving Party or is independently developed by
the receiving Party (as documented by the records of the receiving Party), it
shall be kept confidential by the Party receiving such Information, shall be
used only in the performance of this Contract, and may not be used for any other
purposes except upon such terms as may be agreed upon in writing by the Party
owning such Information. The receiving
<PAGE>

                                                                              58

Party may disclose such Information to other persons, upon the furnishing
Party's prior written authorization, but solely to perform acts which this
Article expressly authorizes the receiving Party to perform itself and further
provided such other person agrees in writing (a copy of which writing will be
provided to the furnishing Party at its request) to the same conditions
respecting disclosure and use of Information contained in this Article and to
any other reasonable conditions requested by the furnishing Party. Nothing
herein shall prevent a Party from disclosing Information (a) upon the order of
any court or administrative agency, (b) upon the request or demand of, or
pursuant to any regulation of, any regulatory agency or authority, (c) to the
extent reasonably required in connection with the exercise of any remedy
hereunder and (d) to a Party's legal counsel or independent auditors.

          C.  The Purchaser may disclose Information to its lenders and their
representatives in connection with obtaining financing for the System, provided
that each such lender or their representative enters into a confidentiality
agreement containing terms and conditions similar to those in this Contract. Any
such disclosure of Information shall be subject to the restrictions in Sub-
Article 20(B).

Article 21  Export Control
--------------------------

              The Parties acknowledge that any products, software, and technical
information (including, but not limited to, services and training) provided by
either Party under this Contract are or may be subject to export laws and
regulations of the United States and the destination country(ies) and any use or
transfer of such products, software and technical information must be authorized
under those Laws. The Parties agree that they will not use, distribute, transfer
or transmit the products, software or technical information (even if
incorporated into other products) except in compliance with export Laws. If
requested by either Party, the other Party agrees to sign all necessary export-
related documents as may be required to comply with export Laws.

Article 22  Liquidated Damages
------------------------------

          A.  If Phase 1 of the System is not Ready for Commercial Acceptance or
Provisional Acceptance within * of the Scheduled Phase 1 System RFS Date, as it
may have been extended under:

              1.   Article 6 (Contract Variations);

              2.   Article 17 (Force Majeure);

              3.   Article 15 (Suspension); or

              4.   Other arrangements as agreed between the Purchaser and the
Contractor; then Contractor shall pay to Purchaser for each day of delay
following the * for up to 200 days or, if earlier, to the day Contractor
begins making payments under paragraph C of this Article 22, by way of pre-
estimated and liquidated damages for the

  * Material omitted and separately filed with the Commission under an
    application for confidential treatment.
<PAGE>

                                                                              59

delay and not as a penalty, an amount equal to * of the Phase 1 portion of
the Initial Contract Price for the System, subject to the maximum aggregate
amount set forth in Paragraph E of this Article 22.

          B.  If Phase 2 of the System is not Ready for Commercial Acceptance or
Provisional Acceptance within * of the Scheduled Phase 2 RFS Date, as it may
have been extended under:

              1.   Article 6 (Contract Variations);

              2.   Article 17 (Force Majeure);

              3.   Article 15 (Suspension); or

              4.   Other arrangements as agreed between the Purchaser and the
Contractor; then Contractor shall pay to Purchaser for each day of delay
following the expiration of the * for up to 200 days or, if earlier, to the
day Contractor begins making payments under paragraph C of this Article 22, by
way of pre-estimated and liquidated damages for the delay and not as a penalty,
an amount equal to * of the Phase 2 portion of the Initial Contract Price
for the System, subject to the maximum aggregate amount set forth in Paragraph E
of this Article 22.

          C.  If the System is not Ready for Commercial Acceptance or
Provisional Acceptance by the Scheduled RFS Date, as it may have been extended
under:

              1.   Article 6 (Contract Variations);

              2.   Article 17 (Force Majeure); or

              3.   Article 15 (Suspension); or

              4.   Other arrangements as agreed between the Purchaser and the
Contractor; then Contractor shall pay to Purchaser for each day of delay, for up
to 200 days, by way of pre-estimated and liquidated damages for the delay and
not as a penalty, an amount equal to * of the Initial Contract Price for the
System, * subject to the maximum aggregate amount set forth in Paragraph E of
this Article 22.

          D.  If a System Upgrade is not Ready for Commercial Acceptance or
Provisional Acceptance by the Scheduled Upgrade Date, as it may have been
extended under:

              1.   Article 6 (Contract Variations);

  * Material omitted and separately filed with the Commission under an
    application for confidential treatment.
<PAGE>

                                                                              60

              2.   Article 17 (Force Majeure); or

              3.   Article 15 (Suspension); or

              4.   Other arrangements as agreed between the Purchaser and the
Contractor; then Contractor shall pay to Purchaser for each day of delay, for up
to 90 days, by way of pre-estimated and liquidated damages for the delay and not
as a penalty, an amount equal to * of the Initial Upgrade Contract Price.

          E.  In no event shall the aggregate amount payable with respect to
Phases and/or the System pursuant to Paragraphs A, B and/or C above exceed *
of the Initial Contract Price.

Article 23  Limitation of Liability/Indemnification
---------------------------------------------------

          A.  NOTWITHSTANDING ANY OTHER PROVISION IN THIS CONTRACT, AND
IRRESPECTIVE OF ANY FAULT, NEGLIGENCE OR GROSS NEGLIGENCE OF ANY KIND, IN NO
EVENT SHALL EITHER PARTY OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS
BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, RELIANCE OR SPECIAL
(INCLUDING PUNITIVE) DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOSS OF REVENUE,
LOSS OF BUSINESS OPPORTUNITY OR THE COSTS ASSOCIATED WITH THE USE OF RESTORATION
FACILITIES RESULTING FROM ITS FAILURE TO PERFORM PURSUANT TO THE TERMS AND
CONDITIONS OF THIS CONTRACT.

          B.  EXCEPT AS SET FORTH BELOW IN THE LAST TWO SENTENCES OF THIS SUB-
ARTICLE 23(B), THE CONTRACTOR'S MAXIMUM AGGREGATE LIABILITY, WHETHER IN TORT,
CONTRACT OR OTHERWISE, EXCEPT FOR CLAIMS RELATING TO SYSTEM UPGRADES, SHALL NOT
EXCEED ONE HUNDRED PERCENT (100%) OF THE CONTRACT PRICE. THE CONTRACTOR'S
MAXIMUM AGGREGATE LIABILITY FOR CLAIMS RELATING TO SYSTEM UPGRADES (IF
CONTRACTOR CAN PROVE THAT THE SYSTEM WAS DESIGNED WITH SUFFICIENT TRANSMISSION
MARGIN AND THUS SUCH CLAIMS DO NOT ARISE UNDER CLAUSE (ii) OF SUB-ARTICLE 10(B))
SHALL NOT EXCEED ONE HUNDRED PERCENT (100%) OF THE APPLICABLE UPGRADE PRICE. THE
FOREGOING LIMITATION SHALL NOT APPLY TO CLAIMS UNDER SUB-ARTICLES 19(A) AND
23(C). IF CONTRACTOR CANNOT PROVE THAT THE SYSTEM WAS DESIGNED WITH SUFFICIENT
TRANSMISSION MARGIN FOR A SYSTEM UPGRADE, THE CONTRACTOR'S MAXIMUM AGGREGATE
LIABILITY FOR CLAIMS ARISING UNDER CLAUSE (ii) OF SUB-ARTICLE 10(B) SHALL NOT
EXCEED ONE HUNDRED PERCENT (100%) OF THE UPGRADEABILITY LIABILITY LIMIT.

          C.  Contractor, at its expense, shall defend, indemnify and hold
harmless Purchaser, its affiliates, agents, subcontractors and employees
(collectively, the "Indemnitees") against any and all claims, proceedings,
demands, costs, expenses, liabilities (including without limitation, reasonable
legal fees), and judgements for losses (collectively, "Liabilities") asserted
against or

  * Material omitted and separately filed with the Commission under an
    application for confidential treatment.
<PAGE>

                                                                              61

incurred by any Indemnitee, arising out of, or in connection with (a) this
Contract, and/or the performance thereof by Contractor or any of its
subcontractors, or (b) the operation and maintenance of the System prior to the
risk of loss passing to Purchaser, resulting from acts or omissions of
Contractor or any Subcontractor, regardless of whether involving errors,
negligence or willful misconduct or resulting from, strict liability or
statutory liability, except to the extent that such Liabilities were caused by
the negligent acts or willful misconduct of Purchaser. The defense,
indemnification and save harmless obligation is specifically conditioned on the
following: (i) Purchaser providing prompt notification in writing of any such
Liability when it obtains Actual Knowledge thereof, unless such failure shall
not have materially impaired Contractor's ability to defend against such claim;
(ii) Contractor having control of the defense of any such action, claim or
demand and of all negotiations for its settlement or compromise; and (iii)
Purchaser cooperating, at Contractor's expense, in a reasonable way to
facilitate the defense of such claim or demand or the negotiations for its
settlement. The Purchaser, at its option, shall be entitled to participate, at
its own expense, in any proceeding, claim or demand involving an Indemnitee.

          D.  Purchaser, at its expense, shall defend, indemnify and hold
harmless Contractor, its agents, subcontractors and employees against any and
all claims, demands, and judgments for losses due to any act or omission,
arising out of, or in connection with this Contract or, after risk of loss
passes to Purchaser, the operation or maintenance of the System, to the extent
such losses were caused by the negligence or willful misconduct of the
Purchaser, its subcontractors, employees or agents (other than Contractor). The
defense, indemnification and save harmless obligation is specifically
conditioned on the following (i) Contractor providing prompt notification in
writing of any such claim or demand when it obtains Actual Knowledge thereof,
unless such failure shall not have materially impaired Purchaser's ability to
defend against such claim; (ii) Purchaser having control of the defense of any
such action, claim or demand and of all negotiations for its settlement or
compromise; and (iii) Contractor cooperating, at Purchaser's expense, in a
reasonable way to facilitate the defense of such claim or demand or the
negotiations for its settlement.

Article 24  Counterparts
------------------------

              This Contract may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.

Article 25  Design and Performance Responsibility; Subcontractors
-----------------------------------------------------------------

          A.  The Contractor shall be solely responsible for the engineering and
design of and for all details of the System and the System Upgrades and for the
adequacy thereof.

          B.  The Contractor's responsibility for engineering and designing of
the System and the System Upgrades shall not in any way be diminished, nor shall
the Contractor's design approach be restricted or limited by, the Purchaser's
acceptance of the Contractor's guidance or recommendations as to engineering
standards and design specifications, or by the Purchaser's approval, suggestions
or recommendations on any aspect of the engineering or design.
<PAGE>

                                                                              62

          C.  Purchaser shall use reasonable efforts in assisting the
Contractor, at Contractor's expense, to obtain in a timely manner accurate
information required for the Contractor to perform the Work and the Upgrade
Work, which Contractor cannot expeditiously and cost-effectively obtain from any
source other than the Purchaser.

          D.  The Contractor will select Subcontractors in connection with the
performance of the Work such that all Work provided by any such Subcontractors
meet the System specifications set out in the Technical Volume hereto and the
reliability and performance requirements set forth in this Contract. Regardless
of whether or not the Contractor obtains approval from the Purchaser of a
Subcontractor or whether the Contractor uses a Subcontractor recommended or
designated by the Purchaser, use by the Contractor of a Subcontractor will not,
under any circumstances: (i) give rise to any claim by the Contractor against
the Purchaser if such Subcontractor breaches its subcontract or contract with
the Contractor; (ii) give rise to any claim by such Subcontractor against the
Purchaser; (iii) create any contractual obligation by the Purchaser to the
Subcontractor; (iv) give rise to a waiver by the Purchaser of its rights to
reject any defects or deficiencies or defective Work; or (v) in any way release
the Contractor from being solely responsible to the Purchaser for the Work to be
performed under this Contract.

          E.  The Contractor is the general contractor for the Work and remains
responsible for all of its obligations under this Contract, including the Work,
regardless of whether a subcontract or supply agreement is made or whether the
Contractor relies upon any Subcontractor to any extent. The Contractor's use of
Subcontractors for any of the Work will in no way increase the Contractor's
rights or diminish the Contractor's liabilities to the Purchaser with respect to
this Contract, and in all events the Contractor's rights and liabilities
hereunder with respect to the Purchaser will be as though the Contractor had
itself performed such Work. The Contractor will be liable for any delays caused
by any Subcontractor as if such delays were caused by the Contractor.

          F.  The terms of this Contract will in all events be binding upon the
Contractor regardless of and without regard to the existence of any inconsistent
terms in any agreement between the Contractor and any Subcontractor whether or
not and without regard to the fact that the Purchaser may have directly and/or
indirectly had notice of any such inconsistent term.

          G.  The Contractor must make all payments to all Subcontractors
(except in the case of legitimate disputes between the Contractor and any such
Subcontractor arising out of the agreement between the Contractor and such
Subcontractor) in accordance with the respective agreements between the
Contractor and its Subcontractors such that Subcontractors will not be in a
position to enforce liens and/or other rights against the Purchaser, the System
or any part thereof.

          H.  If a proposed Subcontractor of major Supplies is not listed on
Exhibit G hereto, Contractor shall obtain approval thereof from Purchaser, which
approval will not be unreasonably withheld. Contractor will not terminate any
such listed or approved Subcontractor except for good cause (taking into account
the interests of Purchaser) and after consultation with Purchaser, *

  * Material omitted and separately filed with the Commission under an
    application for confidential treatment.

<PAGE>

                                                                              63

*

Article 26  Product Changes
---------------------------

              The Contractor may at any time make changes to the System or
System Upgrades furnished pursuant to this Contract, or modify the drawings and
published specifications relating thereto, or substitute equipment of later
design, provided the changes, modifications, or substitutions under normal and
proper use do not impact upon the form, fit, expected life or function of the
System as provided in the System Performance Requirements.

Article 27  Risk and Insurance
------------------------------

          A.  The Contractor shall at all times maintain, and upon request, the
Contractor shall furnish the Purchaser with certificates, or other reasonable
evidence, that Contractor maintains, the following insurance or has adequate
self-insurance (other than as required to comply with any statutory insurance
requirements); provided, that the following insurance coverages may be combined
               --------
or in different form so long as Contractor maintains insurance consistent with
the following requirements:

              1.   Workmen's Compensation and Employers Liability Insurance
                   (with a limit of not less than * for any one incident
                   or series of incidents arising from one event or such higher
                   limit as may be required by the laws of any jurisdiction)
                   covering the officers and employees of the Contractor for all
                   compensation or other benefits required of the Contractor by
                   the laws of any nation or political sub-division thereof to
                   which the Contractor and its operations under this Contract
                   are subject in respect of injury of death of any such
                   employee.

              2.   Comprehensive General Public Liability Insurance, covering
                   personal injury and/or property damage, with combined single
                   limits of not less than * for claims of injury or
                   death of any persons or loss of or damage to property
                   resulting from any one accident. This insurance to be
                   extended to provide Marine Comprehensive General Liability
                   including liabilities arising out of the operation of subsea
                   equipment.

              3.   Comprehensive Automobile Liability insurance covering all
                   vehicles and automotive equipment owned, hired, or in the
                   custody and control of Contractor and complying with all
                   applicable legislation with limits not less than *
                   combined single limit for the death or injury of any person
                   per accident and not less than * for the loss or
                   damage to property resulting from any one accident.

              4.   Excess Liability Coverage over that required in Sub-Articles
                   27(A)(1), (2) and (3) with minimum limits of * for
                   any one accident or occurrence.

  * Material omitted and separately filed with the Commission under an
    application for confidential treatment.
<PAGE>

                                                                              64

              5.   All Risk Insurance in respect of all property of Contractor,
                   its respective officers, agents and employees connected with
                   the performance of the Work against all loss or damage from
                   whatever cause.

              6.   Conventional Marine Hull and Machinery Insurance including
                   War Risks or any vessel(s) owned, operated or chartered by
                   the Contractor, in an amount equal to the full value thereof.
                   In the event of damage to or loss of such vessel(s), the
                   Contractor agrees to look to its insurance carrier for
                   payment of such loss or damage and hereby releases the
                   Purchaser and waives any claims against the Purchaser for the
                   loss of such vessel(s) unless due to the negligence of
                   Purchaser, its agent or representatives (other than
                   Contractor).

              7.   All vessels are to be entered in a Mutual Protection and
                   Indemnity Association with a full and unlimited entry or to
                   have Marine Protection and Indemnity Insurance with a limit
                   of not less than * including coverage for illness,
                   injury or death of crew members (unless covered under
                   Workmen's Compensation Insurance), Contractual Liability
                   Coverage, Collision and Tower's Liability, Removal of Wreck
                   and Debris and Third Party Liability, except that the
                   foregoing shall not apply to small craft which are not
                   customarily so insured; provided, that such small craft will
                                           --------
                   be insured to the limits customary for such commercial small
                   craft vessels.

              8.   Specialist Operations Insurance with a limit of not less than
                   * as per London Wording 1993 or equivalent.

              9.   Transit Insurance including inland, air, and Marine Cargo
                   coverage including War (other than on land) in an amount
                   sufficient to cover the expected highest value of any one
                   shipment. Coverage to include Institute Cargo Clauses, all
                   risks 1.1.63, Institute War Clauses, London Malicious Damage
                   Clause, and Institute Strikes Riots and Civil Commotion
                   Clauses or their equivalent.

             10.   Marine Cargo or equivalent is required to protect, for full
                   cost, against all risks of physical loss or damage to the
                   plant, equipment and supplies to be included in the System
                   (other than War Risks) beginning with when each such item is
                   ready for shipping and ending when the submersible plant and
                   equipment are placed overside the cable laying vessel and
                   when the equipment and supplies are delivered to the cable
                   stations, central offices, or network operation center. The
                   coverage continues to cover cable lying on the seabed.

              11.  Sea Bed or equivalent coverage (including an Old Mines and
                   Torpedoes Clause, including other derelict weapons of War) is
                   required to protect, for full cost, against all risks of
                   physical loss or damage to the submersible

  * Material omitted and separately filed with the Commission under an
    application for confidential treatment.
<PAGE>

                                                                              65

                   plant and equipment described in Sub-Article 27(A)(10) above.
                   See last paragraph.

              12.  War Risks or equivalent coverage is required to protect
                   against damage to, seizure by and/or destruction of the
                   System by means of war, piracy, takings at sea and other
                   warlike operations until discharge of the submersible plant
                   and equipment. For the purposes of this Article "discharge of
                   the submersible plant and equipment" shall be deemed to take
                   place when the plant and equipment reaches the sea bottom, as
                   far as the submersible plant and equipment is concerned, and
                   when the plant is off-loaded in the respective terminal
                   country, as far as non-submersible plant is concerned.

              13.  Pollution Liability (EIL) insurance for installation
                   operations and as arising from the use of vessels in an
                   amount not less than * or such higher sum as may
                   be required to meet any legal requirement in area of
                   operations.

              The Comprehensive General Liability Insurance required pursuant to
Sub-Article 27(A)(2) above, shall include Contractual Liability Coverage which
shall specifically apply to the obligations assumed by the Contractor under the
Terms and Conditions of this Contract.

          B.  1.   All the foregoing insurances shall be effected with a
                   creditworthy insurer and shall be endorsed to provide
                   Purchaser with at least thirty (30) days prior written notice
                   of cancellation or material change.

              2.   The foregoing insurances, where relevant, shall name
                   Purchaser and its lenders as an additional insured as to
                   operations hereunder, in which event the Contractor's
                   insurance shall be primary and non-contributory to any
                   insurance carried by Purchaser.

              3.   The limits specified herein are minimum requirements and
                   shall not be construed in any way as limits of liability or
                   as constituting acceptance by Purchaser of such
                   responsibility for financial liabilities in excess of such
                   limits. The Contractor shall bear all deductibles applicable
                   to any insurance.

              4.   If it is judicially determined that the monetary limits of
                   insurance required hereunder or of any indemnity voluntarily
                   assumed under the Terms and Conditions of this Contract which
                   the Contractor agrees will be supported either by available
                   liability insurance or voluntarily self-insured, in part or
                   whole, exceeds the maximum limits permitted under applicable
                   law, it is agreed that said insurance requirements or
                   indemnity shall automatically be amended to conform to the
                   maximum monetary limits permitted under such law.

  * Material omitted and separately filed with the Commission under an
    application for confidential treatment.

<PAGE>

                                                                              66

              5.   Contractor shall take reasonable steps to provide that any
                   sub-contractor engaged by it has in effect or will effect
                   Employer's Liability, Workmen's Compensation, Hull and
                   Machinery and Protection and Indemnity insurances and any
                   other insurances required by law, together with such other
                   insurances as the Contractor may consider necessary.

              6.   If the Contractor fails to effect or keep in force any of the
                   insurances required under this Contract, Purchaser may effect
                   and keep in force any such insurances and pay such premiums
                   as may be necessary for that purpose and from time to time
                   deduct the amount so paid by Purchaser from any money due or
                   which may become due to the Contractor hereunder or recover
                   the same as a debt due from the Contractor, provided that
                   Purchaser is not in Default.

              7.   Each Party shall give the other prompt notification of any
                   claim with respect to any of the insurances to be provided
                   hereunder, accompanied by full details giving rise to such
                   claim. Each Party shall afford the other all such assistance
                   as may be required for the preparation and negotiation of
                   insurance claims.

              8.   Contractor shall report to Purchaser as soon as practicable
                   all accidents or occurrences resulting in injuries to
                   Contractor's employees or third parties, or damage to
                   property of third parties, arising out of our during the
                   course of services for Purchaser by Contractor.

          C.  The Contractor may organize such reasonable levels of deductibles,
excesses and self-insurance as it considers appropriate and which are within
prudent industry standards.

          D.  The insurance requirements of this Article 27 will remain in place
with respect to each Segment, the System or System Upgrade, as the case may be,
and will not in any way be diminished or reduced until the transfer of title and
risk of loss shall have passed to Purchaser of such Segment, System or System
Upgrade, as the case may be, even in the event of the sale of substantially all
the assets of the Contractor by way of a merger, consolidation or sale of
assets.

Article 28  Plant and Work Rules
--------------------------------

              Employees and agents of each Party shall, while on the premises of
the other or its subcontractors, comply with all plant rules and governmental
regulations.

Article 29  Right of Access and Review
--------------------------------------

          A.  The Contractor shall, upon reasonable notice during normal
business hours and in a manner to avoid any disruption of the work on the
premises including performance of other contracts, permit access by the
Purchaser or its Quality Assurance (QA) Representatives (other than a competitor
of the Contractor or any affiliate of a competitor) to the Contractor's premises
where the work will be performed, and will use its best endeavors to secure
rights of access to
<PAGE>

                                                                              67

premises of its subcontractors where the work will be performed, having
subcontracts or orders in the amount of, or equivalent to U.S. $125,000 or more,
in accordance with the Contractor's contractual arrangements with its
Subcontractors, and allow the Purchaser or its QA Representative to:

              1.   audit the Contractor's quality assurance system and its
                   application to the Work and Upgrade Work, including
                   manufacture, development and raw materials and components
                   provision;

              2.   inspect all parts of the Work and Upgrade Work to the extent
                   reasonably practicable to ensure that their quality meets the
                   Specification.

This right of access shall allow for the Purchaser and/or its QA
representatives. The Purchaser shall provide the name(s) of each such visitor
prior to the visit. The Contractor shall not be responsible for any costs,
including travel and accommodation costs, of the Purchaser or its
representatives.

          B.  The right of access shall also allow for the Purchaser and/or
representatives to be aboard the vessel(s) during installation and the route
survey, provided accommodations are available. The Contractor shall not be
responsible for any costs of the Purchaser or its representatives, except for
living expenses on board the vessel which includes one (1) daily telex or fax,
all other travel and accommodation costs for the Purchaser or its QA
Representatives shall be for the account of the Purchaser.

          C.  Any right of access shall not be construed as creating any
obligation requiring the Contractor or its subcontractors to disclose trade
secrets or proprietary information. Further, such right of access may be
conditioned on the execution of a confidentiality and non-disclosure agreement
and/or subject to routine building or security rules, regulations or procedures.

          D.  Any exercise of any right of the Purchaser under this Contract to
inspect, audit, visit or to observe or to review or approve any part of the Work
or System Upgrades shall not be construed as limiting any obligation of
Contractor hereunder, including without limitation, under Articles 1 and 10
hereof.

          E.  Contractor will have access to the System as necessary to
accomplish its responsibilities under this Contract and in order to make repairs
and to make System Upgrades. Contractor will provide reasonable notice of its
need for access and will take reasonable steps to minimize disruptions to the
operation of the System.

          F.  Contractor shall give the Purchaser reasonable prior written
notice of each monthly project management review meeting with respect to the
status of the construction and/or installation of the System, and Purchaser's
representatives shall at their cost be permitted to attend and participate in
such meetings.

Article 30  Quality Assurance; First Application
------------------------------------------------
<PAGE>

                                                                              68

          A.  All equipment, material and supplies provided under this Contract
shall be inspected and tested by representatives designated by the Contractor to
the extent reasonably practical to assure that the quality of the equipment,
materials and supplies being incorporated is sufficient to realize the System
Performance Requirements. The inspection and test program established for such
equipment, materials and supplies shall be consistent with commercial practices
normally employed by the Contractor in the construction of submarine cable
systems. The foregoing shall not be construed as limiting any of the
Contractor's obligations under this Contract.

          B.  The Contractor represents that the list in Exhibit F identifies
(i) all major System elements and subsystems and (ii) all Deliverable Software,
which have not been used, as of the date hereof, in any other currently
operating submarine cable system, the qualification plans for which are more
fully described in the First Office Application section of the Quality Plan
section of the Technical Volume.

Article 31  Documentation
-------------------------

              The Contractor shall furnish to the Purchaser one copy of the
standard documentation in the English language for the System provided
hereunder. Such documentation shall be provided prior to the Acceptance testing.
Additional copies of the documentation are available at additional cost. The
Contractor agrees to reformat the Commercial Volume and the Technical Volume in
a manner that is consistent with Purchaser's guidelines within four weeks of the
execution of this Contract.

Article 32  Training
--------------------

              The Contractor will provide, as part of the Initial Contract
Price, any and all training, as more particularly described in the training
section of the Technical Volume, necessary for the operation and maintenance of
the System.

Article 33  Settlement of Disputes/Arbitration/Litigation
---------------------------------------------------------

          A.  The Parties shall endeavor to settle amicably by mutual
discussions any disputes, differences, or claims whatsoever related to this
Contract.

          B.  Failing such amicable settlement, any controversy, claim or
dispute arising under or relating to this Contract, including the existence,
validity, interpretation, performance, termination or breach thereof, shall, if
both Parties agree in writing thereto, finally be settled by arbitration in
accordance with the International Arbitration Rules of the American Arbitration
Association ("AAA"). Unless the Parties agree to a sole arbitrator, there shall
be three (3) arbitrators, with each Party appointing one arbitrator, who
collectively will select a third. The language of the arbitration shall be
English. The Arbitrator will not have authority to award punitive damages to
either Party. Each Party shall bear its own expenses, but the Parties shall
share equally the fees and expenses of the Arbitration Tribunal and the AAA.
This Contract shall be enforceable, and any arbitration award shall be final,
and judgment thereon may be entered in any court of competent jurisdiction. In
any such arbitration, the decision in any prior arbitration
<PAGE>

                                                                              69

under this Contract shall not be deemed conclusive of the rights as among
themselves of the Parties hereunder. The arbitration shall be held in New York,
New York, U.S.A.

          C.  1.   If both Parties do not agree to arbitration pursuant to
                   paragraph (B) above, then either Party may institute suit in
                   the Supreme Court of the State of New York sitting in New
                   York County or the United States District Court of the
                   Southern District of New York, or any appellate court from
                   any thereof.

              2.   Each Party hereby irrevocably and unconditionally submits to
                   the non-exclusive jurisdiction of any New York State or
                   Federal court sitting in The City of New York, and any
                   appellate court from any thereof, in any action or proceeding
                   arising out of or relating to this Contract, and each Party
                   hereby irrevocably and unconditionally agrees that all claims
                   in respect of such action or proceeding may be heard and
                   determined in such New York State court or, to the extent
                   permitted by law, in such Federal court. Each Party hereby
                   irrevocably and unconditionally waives, to the fullest extent
                   it may effectively do so, any defense of an inconvenient
                   forum to the maintenance of such action or proceeding in any
                   such court and any right of jurisdiction on account of the
                   place of residence or domicile of either Party. The
                   Contractor hereby irrevocably and unconditionally appoints CT
                   Corporation System with an office on the date hereof at 1633
                   Broadway, New York, New York, as its agent and Purchaser
                   hereby irrevocably appoints Global Crossing Ltd., with an
                   office at 712 Fifth Avenue, New York, New York, as its agent
                   (collectively, the "New York Process Agents"), in the case of
                   each, to receive on behalf of each such Party and its
                   respective property service of copies of the summons and
                   complaint and any other process which may be served in any
                   such action or proceeding in any such New York State or
                   Federal court and agrees promptly to appoint a successor New
                   York Process Agent in The City of New York (which successor
                   Process Agent shall accept such appointment in a writing
                   prior to the termination for any reason of the appointment of
                   the initial New York Process Agent). In any such action or
                   proceeding in such New York State or Federal court sitting in
                   The City of New York, such service may be made on a Party by
                   delivering a copy of such process to such Party in care of
                   the appropriate Process Agent at such Process Agent's above
                   address and by depositing a copy of such process in the mails
                   by certified or registered air mail, addressed to such Party
                   at its address referred to in Article 35 of this Contract
                   (such service to be effective upon such receipt by the
                   appropriate Process Agent and the depositing of such process
                   in the mails as aforesaid). Each Party hereby irrevocably and
                   unconditionally authorizes and directs such Process Agent to
                   accept such service on its behalf. As an alternate method of
                   service, each Party also irrevocably and unconditionally
                   consents to the service of any and all process in any such
                   action or proceeding in such New York State or Federal court
                   sitting in The City of New York by mailing of
<PAGE>

                   copies of such process to such Party, as the case may be, by
                   certified or registered air mail at its address referred to
                   in Article 35 of this Contract. Each Party agrees that, to
                   the fullest extent permitted by applicable law, a final
                   judgment in any such action or proceeding shall be conclusive
                   and may be enforced in other jurisdictions by suit on the
                   judgment or in any other manner provided by law.

              3.   WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
                   --------------------
                   THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
                   MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY
                   OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
                   THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
                   CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A)
                   CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
                   OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
                   SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
                   TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
                   AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO
                   THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
                   CERTIFICATIONS IN THIS PARAGRAPH.

          D.  THE OBLIGATIONS OF EACH PARTY IN RESPECT OF THIS CONTRACT DUE TO
ANY PARTY SHALL, NOTWITHSTANDING ANY JUDGMENT IN A CURRENCY (THE "JUDGMENT
CURRENCY") OTHER THAN DOLLARS, BE DISCHARGED ONLY TO THE EXTENT THAT ON THE
BUSINESS DAY FOLLOWING RECEIPT BY SUCH PARTY OF ANY SUM ADJUDGED TO BE SO DUE IN
THE JUDGMENT CURRENCY SUCH PARTY MAY IN ACCORDANCE WITH NORMAL BANKING
PROCEDURES PURCHASE DOLLARS WITH THE JUDGMENT CURRENCY; IF THE AMOUNT OF DOLLARS
SO PURCHASED IS LESS THAN THE SUM ORIGINALLY DUE TO SUCH PARTY IN DOLLARS, EACH
PARTY AGREES, AS A SEPARATE OBLIGATION AND NOTWITHSTANDING ANY SUCH JUDGMENT, TO
INDEMNIFY SUCH PARTY AGAINST SUCH LOSS, AND IF THE AMOUNT OF DOLLARS SO
PURCHASED EXCEEDS THE SUM ORIGINALLY DUE TO ANY PARTY TO THIS CONTRACT, EACH
PARTY AGREES TO REMIT TO SUCH PARTY, SUCH EXCESS.

Article 34  Applicable Law
--------------------------

              THIS CONTRACT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, UNITED STATES, EXCLUDING ITS CONFLICTS OF LAW
PROVISIONS AND EXCLUDING THE CONVENTION FOR THE INTERNATIONAL SALE OF GOODS.
<PAGE>

                                                                              71

Article 35  Notices
-------------------

          A.  Any notices, consent, approval, or other communication pursuant to
this Contract shall be in writing, in the English language, and shall be deemed
to be duly given or served on a Party if sent to the Party at the address
stipulated in Sub-Article 35(B) and if sent by any one of the following means
only:

              1.   Sent by hand: Such communication shall be deemed to have been
                   received on the day of delivery provided receipt of delivery
                   is obtained.

              2.   Sent by facsimile: Such communication shall be deemed to have
                   been received, under normal service conditions, twenty-four
                   (24) hours following the time of dispatch or on confirmation
                   by the receiving Party, whichever is earlier.

              3.   Sent by registered or certified mail: Such communication
                   shall be deemed to have been received, under normal service
                   conditions, on the day it was received or on the tenth day
                   after it was dispatched, whichever is earlier.

          B.  For purposes of this Article, the names, addresses and fax numbers
of the Parties are as detailed below. Any change to the name, address, and
facsimile numbers may be made at any time by giving thirty (30) days prior
written notice.

Alcatel Submarine Networks
30, rue Pierre Beregovoy
92111 Clichy Cedex
France
Facsimile:  33-(0)-1-4756-6920
Attn: Charles H. Matthews

South American Crossing Ltd.
Wessex House
45 Reid Street
Hamilton HM12, Bermuda
Facsimile:  441-296-6749/8606
Attn:  Robert Klug

Article 36  Publicity and Confidentiality
-----------------------------------------

          A.  No information relating to this Contract shall be released by
either Party to any newspaper, magazine, journal or other written, oral or
visual medium without the prior written approval of an authorized representative
of the other Party; provided that, subject to Article 20 (Safeguarding of
                    --------
Information and Technology) and the following Sub-Article, this Article shall
not restrict either Party from responding to customary press inquiries or
otherwise making public or private statements in the normal course of business,
so long as consistent with a mutually agreed press-release.
<PAGE>

                                                                              72

          B.  This Contract and any non-public information, written or oral,
with respect to this Contract, "Confidential Information", will be kept
confidential and shall not be disclosed, in whole or in part, to any person
other than affiliates, officers, directors, employees, agents or representatives
of a Party (collectively, "Representatives") who need to know such Confidential
Information for the purpose of negotiating and executing this Contract. Each
Party agrees to inform each of its Representatives of the non-public nature of
the Confidential Information and to direct such persons to treat such
Confidential Information in accordance with the terms of this Article. Nothing
herein shall prevent a Party from disclosing Confidential Information (a) upon
the order of any court or administrative agency, (b) upon the request or demand
of, or pursuant to any regulation of, any regulatory agency or authority, (c) to
the extent reasonably required in connection with the exercise of any remedy
hereunder, (d) to a Party's legal counsel or independent auditors, (e)
prospective lenders to the Purchaser or Purchaser's parent or affiliate
companies, (f) to the extent required, to any actual or proposed person or
entity which will provide any operation, administrative or maintenance services
with respect to the System or any part thereof and (g) to any actual or proposed
assignee of all or part of its rights hereunder provided that such actual or
proposed assignee agrees in writing to be bound by the provisions of this
Article.

Article 37  Assignment
----------------------

          A.  Except as provided in this Article, neither Party shall assign
this Contract or any right or interest under this Contract, nor delegate any
work or obligation to be performed under this Contract ("Assignment"), without
the other Party's prior written consent which shall not be unreasonably withheld
(it being understood that it shall be deemed to be reasonable to withhold
consent to the assignment of this Contract or any rights, interest or
obligations hereunder to a competitor of Contractor or an affiliate of a
competitor or uncreditworthy party).

          B.  The Contractor has the right to assign all or any part of its
rights under this Contract, or to delegate all or any part of its duties
hereunder at any time without the Purchaser's consent to a successor to
substantially all the assets of the Contractor by way of a merger, consolidation
or sale of assets; provided that in the case of any assignment or delegation
                   --------
pursuant to this Sub-Article 37(B), such assignee or delegee shall assume in
writing all liabilities, warranties, representations and obligations of
Contractor under this Contract. The Contractor shall give the Purchaser written
notice 30 days prior to any assignment or delegation. Contractor shall remain
jointly and severally liable with any assignee or delegee described in clause
(i) of this paragraph.

          C.  The Purchaser has the right to assign all of its rights and
delegate all of its duties under this Contract to any other entity to whom all
of Purchaser's rights and interests in the System have been transferred.
Purchaser also has the right (i) to assign all of its rights hereunder with
respect to any particular Landing Assets to any Transferee, (ii) to assign
Permits with respect to such Landing Assets, or have Permits with respect to
such Landing Assets issued in the name of, such Transferee and (iii) to transfer
such Landing Assets or have such Landing Assets transferred directly to, such
Transferee; provided that such Transferee shall execute a supplement to this
            --------
Contract whereby it becomes jointly and severally liable, together with
Purchaser, for all of Purchaser's obligations under this Contract. "Landing
Assets" means, with respect to each
<PAGE>

                                                                              73

jurisdiction where a portion of the System is located, all or part of such
portion of the System located therein. It is understood that the Purchaser, at
its option, may assign and transfer rights with respect to Landing Assets in
different jurisdictions to different Transferees.

Purchaser contemplates effecting the foregoing assignment pursuant to a
Supplement hereto and the Contractor agrees to execute and deliver such
Supplement. Purchaser shall not transfer any of its rights under this Contract
or the System except in accordance with the foregoing. Any assignment or
transfer by Purchaser not expressly permitted by Sub-Article 37(C) shall be of
no force and effect. Any assignment or transfer by Purchaser which results in
any increase in costs or any loss, damage, delay or failure of performance shall
constitute a Force Majeure, and, without limiting the applicability of Article
17 (Force Majeure), Purchaser shall be responsible for any increase in costs
resulting therefrom.

Article 38  Relationship of the Parties
---------------------------------------

              All work performed by a Party under this Contract shall be
performed as an independent contractor and not as an agent of the other and no
persons furnished by a Party shall be considered the employees or agents of the
other. Each Party shall be responsible for its employees' compliance with all
Laws while performing under this Contract. This Contract shall not form a joint
venture or partnership between the Parties.

Article 39  Successors Bound
----------------------------

              This Contract shall be binding on the Contractor and the Purchaser
and their respective successors and permitted assigns.

Article 40  Article Captions; Joint Drafting
--------------------------------------------

          A.  The captions of the Articles do not form part of this Contract and
shall not have any effect on the interpretation thereof.

          B.  This Contract has been fully negotiated between, and jointly
drafted by, the Parties hereto.

Article 41  Severability
------------------------

              If any of the provisions of this Contract shall be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate or
render unenforceable the entire Contract, but rather the entire Contract shall
be construed as if not containing the particular invalid or unenforceable
provision or provisions and the rights and obligations of the Contractor and the
Purchaser shall be construed and enforced accordingly. In the event such invalid
or unenforceable provision is an essential and material element of this
Contract, the Parties shall promptly negotiate a replacement provision.
<PAGE>

                                                                              74

Article 42 *
----------

              The Contractor agrees to cause the Guarantor to execute and
deliver the Guaranty to Purchaser within five days of the execution of this
Agreement. *

Article 43  Survival of Obligations
-----------------------------------

              The Parties' rights and obligations, which, by their nature would
continue beyond the termination, cancellation or expiration of this Contract,
including, but not limited to, those contained in Sub-Article 4(B) (Taxes,
Levies and Duties) and Sub-Article 4(C) (Withholding Tax), Article 18
(Intellectual Property), Article 20 (Safeguarding of Information and
Technology), Article 21 (Export Control) and Article 23 (Limitation of
Liability/Indemnification) shall survive termination, cancellation or expiration
hereof. Article 10 (Warranty) and Article 11 (Contractor Support), shall survive
termination, cancellation or expiration hereof, if and only if, this Contract is
terminated by Purchaser pursuant to Sub-Article 13(A).

Article 44  Non-Waiver
----------------------

              A waiver of any of the terms and conditions of this Contract, or
the failure of either Party strictly to enforce any such term or condition, on
one or more occasions shall not be construed as a waiver of the same or of any
other term or condition of this Contract on any other occasion.

Article 45  Language
--------------------

              This Contract has been executed in the English language and
English will be the controlling language for interpretation of this Contract.

Article 46  Entire Agreement
----------------------------

              This Contract supersedes all prior oral or written understanding
between the Parties and constitutes the entire agreement with respect to the
subject matter herein. Such terms and conditions shall not be modified or
amended except by a writing signed by authorized representatives of all Parties.

* Material omitted and separately filed with the Commission under an
  application for confidential treatment.
<PAGE>

                                                                              75

              This Contract is executed as of the date first set forth above in
the location set forth below the signature of the duly authorized representative
of each Party, as set forth below.

                                   ALCATEL SUBMARINE NETWORKS

                                   By:  /s/ P.A. Scully
                                      ----------------------------------
                                   Name:  P.A. Scully
                                   Title: Contracting Director
                                   Signed In:

                                   SOUTH AMERICAN CROSSING LTD.

                                   By:  /s/ S. Wallace Dawson Jr.
                                      ----------------------------------
                                   Name:  S. Wallace Dawson Jr.
                                   Title:
                                   Signed In: The Netherlands
<PAGE>

                                                                    EXHIBIT A TO
                                                           CONSTRUCTION CONTRACT

                                       *

* Material omitted and separately filed with the Commission under an
  application for confidential treatment.

<PAGE>

                                                                       EXHIBIT B
                                                                              TO
                                                           CONSTRUCTION CONTRACT

________________________________________________________________________________

________________________________________________________________________________

                         _______________________________

                                    GUARANTY

                                       by

                                    ALCATEL

                                  in favor of

                          SOUTH AMERICAN CROSSING LTD.

                         ______________________________

                           Dated as of August 6, 1999

                         _______________________________

________________________________________________________________________________
<PAGE>

          This GUARANTY, executed as of August 6, 1999, by ALCATEL, a
societe anonyme established in France (the "Guarantor"), in favor of SOUTH
AMERICAN CROSSING  LTD., a Bermuda corporation (the "Purchaser").

                                R E C I T A L S
                                - - - - - - - -

          (A)  Pursuant to the Project Development and Construction Contract (as
the same may from time to time be amended, modified or supplemented, the
"Contract") dated as of July 30, 1999 between Alcatel Submarine Networks, a
societe anonyme established in France [and Alcatel Submarine Networks, Inc., a
Delaware corporation, jointly and severally] (together with any successor or
assignee under the Contract, collectively, the "Contractor"), and the Purchaser,
the Contractor has agreed to design, build and install the System.

          (B)  The Purchaser has required, as a condition precedent to entering
into the Contract, that the Guarantor execute and deliver this Guaranty.  The
Purchaser would not enter into the Contract with the Contractor but for the
execution and delivery of this Guaranty by the Guarantor.

          (C)  In furtherance of the business purposes of the Guarantor, the
Guarantor desires to guaranty all of the obligations of the Contractor under the
Contract as provided herein.

          (D)  The Guarantor is the owner either directly or indirectly of all
of the capital stock of the Contractor.

          NOW, THEREFORE, based upon the foregoing, and in order to induce the
Purchaser to enter into the Contract, the Guarantor hereby agrees as follows:

                                  ARTICLE A.

                                  Definitions

     Section 1.  Definitions.  Capitalized terms not otherwise defined in this
Guaranty shall have the meanings ascribed to them in the Contract.  As used in
this Guaranty, the following terms have the following meanings unless the
context otherwise requires:

     "Guarantied Obligations" has the meaning ascribed to such term in Section
2.1.

     "Guaranty" means this Guaranty, as it may be amended, supplemented or
otherwise modified from time to time in writing signed by the Guarantor and the
Purchaser.

<PAGE>

                                  ARTICLE B.

                                 The Guaranty

          Section 1.  The Guaranty.  Except as expressly set forth herein, the
Guarantor hereby unconditionally guarantees to Purchaser the full and punctual
performance by Contractor (i) of the Work required under the Contract (including
Upgrade Work, when and if an upgrade is ordered) and/or the payment of damages
which become due, owing or incurred under or in connection with the Contract
(including, without limitation, liquidated damages), for Contractor's failure to
perform such Work (or Upgrade Work, as the case may be), in each case subject to
the limitations on liability therefor expressly set forth in the Contract and
(ii) of the covenants and other obligations of the Contractor under the Contract
(including all warranties) (collectively, the "Guarantied Obligations").  The
Guarantor and the Purchaser expressly acknowledge that, (i) subject to Section
2.5 below, default by the Contractor or the failure of the Contractor to perform
any Guarantied Obligation in the time required in each case under the Contract,
is a condition of the exercise of this Guaranty, and (ii) in no event shall the
Guarantied Obligations exceed the Contractor's obligations and liabilities under
the Contract. The Guarantor agrees unconditionally to pay to the Purchaser,
forthwith on demand by the Purchaser, in the manner and currency prescribed
under the Contract for payments by the Contractor thereunder, any and every sum
or sums of money which the Contractor shall at any time be liable to pay under
the Contract and which the Contractor shall have failed to pay at the time that
such demand is made.  If the Purchaser requests the Guarantor to perform any
Guarantied Obligation (other than the payment of money) the Guarantor may
undertake to satisfy such obligation by causing another qualified person to
perform such Guarantied Obligation or, in its sole discretion, by assigning such
obligation to a qualified party; provided, that such assignment shall not
relieve the Guarantor of any liability for the performance of such obligation
unless and until such obligation has been completely performed.  The Guarantied
Obligations shall conclusively be deemed to have been created in reliance upon
this Guaranty.

          Section 2.  Termination of Guaranty. Except as expressly set forth
herein,  (a) this Guaranty shall remain in full force and effect with respect to
the Guarantied Obligations, including, without limitation, all obligations such
as covenants and warranties which survive completion of the Work and all
obligations under any supplements, extensions, amendments, Upgrades or Contract
Variations, until terminated in accordance with paragraph (b) below.

          (b)  This Guaranty shall terminate with respect to each of the
Guarantied Obligations described below on the respective dates described below
(each a "Termination Date") subject to the survival of certain obligations and
         ----------------
liabilities as expressly described in the last paragraph (c) below:

          (i)  with respect to all Guarantied Obligations (except for any longer
     periods for those Guarantied Obligations described in clauses (b)(ii) and
     (b)(iii) below) on the date occurring ten (10) years after the Date of
     Provisional Acceptance of the System;

                                       2
<PAGE>

               (ii)   with respect to all Guaranteed Obligations relating to or
     in connection with Contractor's obligation to implement System Upgrades
     (including, without limitation, Contractor's warranties as to
     Upgradeability contained in Article 10(B)(ii) of the Contract), on the
     earlier of (A) the last date of the Upgrade Option Period or (B) the Date
     of Final Acceptance of the last possible System Upgrade provided for in the
     Contract; provided, that such Termination Date shall not limit any longer
               --------
     period with respect to any elected System Upgrade in accordance with clause
     (b)(iii) below; and

               (iii)  with respect to all Guarantied Obligations relating to or
     in connection with each System Upgrade elected during the Upgrade Option
     Period, on the date occurring ten (10) years after the Date of Provisional
     Acceptance of such System Upgrade.

          (c)  If a Guarantied Obligation has become due, owing or performable
prior to the Termination Date relating to such Guarantied Obligation, then this
Guaranty shall continue only with respect to such Guarantied Obligation until
fully performed. For example:

               (i)    pursuant to Article 10(A) of the Contract, if a defect
     covered by the Warranty Period is identified in good faith just prior to
     the Termination Date set forth in clause (b)(i) above, the Guarantor's
     obligations under this Guaranty shall continue with respect to such
     Guarantied Obligation, not withstanding such Termination Date, until
     Contractor performs all of its obligations under the Contract with respect
     to such defect, or

               (ii)   if Purchaser elects a System Upgrade just prior to the
     Termination Date set forth in clause (b)(ii) above, Guarantor's obligation
     under this Guaranty shall continue with respect to such Guarantied
     Obligation, not withstanding such Termination Date, until Contractor
     performs all its obligations under the Contract with respect to such System
     Upgrade.

          (d)  The Guarantor's performance or payment of a portion, but not all,
of the Guarantied Obligations shall in no way limit, affect, modify or abridge
the Guarantor's liability, as set forth herein, for any portion of the
Guarantied Obligations that has not been completely performed or paid in full.

          Section 3.  Guaranty Unconditional.  Except as expressly set forth
herein, the Guarantor agrees that the obligations of the Guarantor hereunder
shall be unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by any of the
following, whether with or without notice to or assent by the Guarantor:

               (a)  any extension, renewal, settlement, compromise, waiver or
     release in respect of any obligation of the Contractor under the Contract,
     by operation of law or otherwise;

                                       3
<PAGE>

               (b)  any modification or amendment of or supplement to the
     Contract;

               (c)  any release, impairment, non-perfection or invalidity of any
     direct or indirect security for any obligation of the Contractor under the
     Contract;

               (d)  any change in the corporate existence, structure or
     ownership of the Contractor, or any insolvency, bankruptcy, reorganization
     or other similar proceeding affecting the Contractor or its assets or any
     resulting release or discharge of any obligation of the Contractor
     contained in the Contract;

               (e)  the existence of any claim, set-off or other rights which
     the Guarantor may have at any time against the Contractor, the Purchaser,
     or any other corporation or person, whether in connection herewith or any
     unrelated transactions, provided that nothing herein shall prevent the
     assertion of any such claim by separate suit or compulsory counterclaim;

               (f)  any invalidity or unenforceability relating to or against
     the Contractor for any reason of the Contract, or any provision of
     applicable law or regulation purporting to prohibit the payment by the
     Contractor of any other amount payable by the Contractor under the
     Contract; or

               (g)  any other act or omission to act or delay of any kind by the
     Contractor, the Purchaser, or any other corporation or person or any other
     circumstance whatsoever which might, but for the provisions of this
     paragraph, constitute a legal or equitable discharge of or defense to the
     Guarantor's obligations hereunder.

Notwithstanding any provision of this Guaranty to the contrary, the Guarantor
shall be entitled to assert as a defense to any claim for payment or performance
of the Guarantied Obligations, that (i) such Guarantied Obligations are not
currently due under the terms of the Contract or (ii) such Guarantied
Obligations have previously been paid or performed in full.  In addition,
notwithstanding any provision of this Guaranty to the contrary, any defense or
counterclaim available to the Contractor under the Contract based on a breach of
contract by Purchaser or failure of Purchaser to satisfy conditions to perform
shall be available as a defense to performance or counterclaim by Guarantor
hereunder to the same extent it would be a defense to performance or
counterclaim by Contractor under the Contract.

          Section 4.  Waivers of Notices and Defenses.  The Guarantor hereby
waives acceptance hereof, presentment, demand, protest and any notice not
provided for herein, as well as any requirement that at any time any action be
taken by any corporation or person against the Contractor or any other
corporation or person.

          Section  5. Stay; Indemnity.  (a) The Guarantor, unconditionally and
irrevocably, agrees that, notwithstanding anything to the contrary herein, if
the Purchaser is stayed upon the insolvency, bankruptcy, or reorganization of
the Contractor from exercising its rights to enforce

                                       4
<PAGE>

or exercise any right or remedy with respect to the Guarantied Obligations, or
is prevented from giving any notice or demand for payment or performance or
taking any action to realize on any security or collateral or is prevented from
collecting any of the Guarantied Obligations, in any such case, by such
proceeding or action, the Guarantor shall pay or render to the Purchaser upon
demand therefor the amount or performance that would otherwise have been due had
such rights and remedies been permitted to be exercised by the Purchaser. The
foregoing is not meant to imply that the Purchaser may terminate the Contract in
contravention of law in the event of a Contractor bankruptcy.

          (b)  The Guarantor irrevocably and unconditionally agrees as a primary
obligation to indemnify the Purchaser from time to time on demand from and
against any loss incurred by the Purchaser as a result of any of the obligations
of the Contractor under or pursuant to the Contract being or becoming void,
voidable, unenforceable or ineffective as against the Contractor for any reason
whatsoever, whether or not known to the Purchaser or any other person, the
amount of such loss being the amount which the person or persons suffering it
would otherwise have been entitled to recover from the Contractor.

          Section 6.  No Enforcement of Subrogation.  Upon making any payment or
performance with respect to any Guarantied Obligation hereunder, the Guarantor
shall be subrogated to the rights of the Purchaser against the Contractor with
respect to such payment or performance; provided that the Guarantor shall not
enforce any payment or performance right by way of subrogation until all
Guarantied Obligations been paid and performed in full.

                                  ARTICLE C.

                        Representations and Warranties

          The Guarantor hereby represents and warrants to the Purchaser that the
following statements are true and correct:

          Section 1.  Binding Obligation.  This Guaranty has been duly and
validly executed and delivered by the Guarantor and constitutes the legal, valid
and binding obligations of the Guarantor enforceable against the Guarantor in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by equitable principles relating to the
availability of equitable remedies.

          Section 2.  Relationship to the Contractor.  As of the date hereof,
the Guarantor is the owner, directly or through one or more wholly-owned
subsidiaries, of all of the issued and outstanding capital stock of the
Contractor; the agreement of the Purchaser to enter into the Contract with the
Contractor is of substantial and material benefit to the Guarantor; and the
Guarantor has reviewed and approved copies of the Contract and all other related
documents and is fully informed of the remedies the Purchaser may pursue upon
the occurrence of a default

                                       5
<PAGE>

under the Contract. This Guaranty will remain in full force and effect if
Contractor ceases to be a direct or indirect subsidiary of Guarantor.

          Section 3.  Status.  Guarantor is a corporation duly organized and
existing under the laws of France.

          Section 4.  Governing Law and Judgments.  In any proceedings taken in
France in relation to this Guaranty, the choice of English law as the governing
law of this Guaranty and any judgment obtained in England will be recognized and
enforced, without it affecting the representation made in Section 3.1 in case of
insolvency.

          Section 5.  Claims Pari Passu.  Under the laws of France in force at
the date hereof, the claims of the Purchaser against Guarantor under this
Guaranty will rank at least pari passu with the claims of all its other
unsecured and unsubordinated creditors save those whose claims are preferred
solely by any bankruptcy, insolvency, liquidation or other similar laws of
general application.

          Section 6.  No Filing or Stamp Taxes.  Under the laws of France in
force at the date hereof, it is not necessary that this Guaranty be filed,
recorded or enrolled with any court or other authority in such jurisdiction or
that any stamp, registration or similar tax be paid on or in relation to this
Guaranty.

          Section 7.  No Deduction or Withholding.  Under the laws of France in
force at the date hereof, it will not be required to make any deduction or
withholding from any payment Guarantor may make hereunder.

                                  ARTICLE D.

                                 Miscellaneous

          Section 1.  Notices.  All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, facsimile
transmission, telex or similar writing) and shall be given to such party at its
address, telecopy number or telex number set forth, in the case of the
Guarantor, on the signature pages hereof, or in the case of the Purchaser, in
the Contract, or such other address or telecopy number or telex number as such
party may hereafter specify for the purpose by notice to the other party. Each
such notice, request or other communication shall be effective (i) if given by
facsimile transmission, 24 hours after such telecopy is transmitted to the
telecopy number specified in this Section and answerback has been received, (ii)
if given by telex, when such telex is transmitted to the telex number specified
in this Section and the appropriate answerback is received, (iii) if given by
mail, ten business days after such communication is deposited in the mails with
first class (or, in the case of international mail, airmail) postage prepaid,
addressed as aforesaid, or (iv) if given by any other means, when delivered at
the address specified in this Section.

                                       6
<PAGE>

          Section 2.  No Waivers.  No failure or delay by the Purchaser in
exercising any right, power or privilege hereunder or under the Contract shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.  The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.

          Section 3.  Amendments and Waivers.  This Guaranty constitutes the
complete agreement of the Purchaser and the Guarantor with respect to the
subject matter hereof and supersedes all prior or contemporaneous negotiations,
promises, covenants, agreements or representations.  No amendment, modification,
termination or waiver of any provision of this Guaranty, shall in any event be
effective without the written consent of the Purchaser and Guarantor.

          Section 4.  Successors and Assigns; Beneficiaries.  This Guaranty is a
continuing Guaranty and shall be binding upon the Guarantor and its successors
and assigns, provided, however, that the Guarantor may not assign this Guaranty
or transfer any of the rights or obligations of the Guarantor hereunder without
the prior written consent of the Purchaser and a majority of the lenders
referred to below.  This Guaranty shall inure to the benefit of (i) the
Purchaser and its successors and assigns permitted under the Contract, (ii) any
"Transferee" under Article [    ] of the Contract and its successors and assigns
permitted under the Contract, (iii) any lenders participating in the financing
of the System to which the Purchaser assigns its rights hereunder and (iv) any
of the successors, assigns and transferees of such lenders to whom the Contract
has also been assigned in accordance with the terms of any consent to the
assignment of the Contact executed by Contractor.  Nothing contained in this
Guaranty shall be deemed to confer upon anyone other than the parties hereto and
the other beneficiaries described in the preceding sentence any right to insist
upon or to enforce the performance or observance of any of the obligations
contained herein.  If requested by the Purchaser, the Guarantor will execute and
deliver a consent, in a form reasonably requested by such lenders, to such
assignment in favor of such lenders.

          Section 5.  Limitation on Liability.  Notwithstanding anything to the
contrary contained or implied herein, except as otherwise agreed by Guarantor
and Purchaser, the aggregate liability for payment by Guarantor hereunder shall
not in any event exceed the maximum aggregate liability set forth in Sub-Article
23(B) of the Contract, as such amount may be increased or decreased pursuant to
such Article, less amounts previously paid as damages under the Contract to the
Purchaser and/or its successors and assigns by Contractor.

          Section 6.  APPLICABLE LAW.  THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH ENGLISH LAW.

          Section 7.  Jurisdiction.

          (i)    English Courts.  The courts of England shall have exclusive
                 --------------
                 jurisdiction to hear and determine any suit, action or
                 proceeding and to settle any dispute

                                       7
<PAGE>

                 (a "Dispute") arising out of or in connection with this
                 Guaranty (including a dispute regarding the existence, validity
                 or termination of this Guaranty or the consequences of its
                 nullity).

          (ii)   Convenient Forum.  The parties agree that the courts of England
                 ----------------
                 are the most appropriate and convenient forum to settle a
                 Dispute between them and, accordingly, that they will not argue
                 to the contrary.

          (iii)  Non-Exclusive Jurisdiction.  This Section is only for the
                 --------------------------
                 benefit of the Purchaser. As a result and notwithstanding
                 Section (a) (English Courts), it does not prevent the Purchaser
                 from taking proceedings relating to a Dispute ("Proceedings")
                 in any other courts of competent jurisdiction. To the extent
                 allowed by law, the Purchaser may take concurrent Proceedings
                 in any number of jurisdictions.

          Section 8.  Service of Process.  The Guarantor agrees that the
documents which start any Proceedings and any other documents required to be
served in relation to those Proceedings may be served by it on the Guarantor at
Alcatel Submarine Networks, Christchurch Way, Greenwich, London SE10 0"G,
England or at any address in Great Britain at which process may be served on it
in accordance with Part XXIII of the Companies Act 1985.

          If Alcatel Submarine Networks ceases to have a place of business in
Great Britain or, as the case may be, the appointment of the person mentioned in
this Section 4.8 ceases to be effective, the Guarantor shall immediately appoint
another person in England to accept service of process on its behalf in England.
If the Guarantor fails to do so (and such failure continues for a period of not
less than fourteen days), the Purchaser shall be entitled to appoint such a
person by notice to the Guarantor.  Nothing contained herein shall restrict the
right to serve process in any other manner allowed by law.  This section 4.8
applies to Proceedings in England and to Proceedings elsewhere.

          Section 9.  Judgment.  The obligations of the Guarantor in respect of
this Guaranty due to any party hereto shall, notwithstanding any judgment in a
currency (the "judgment currency") other than Dollars, be discharged only to the
               -----------------
extent that on the Business Day following receipt by such party of any sum
adjudged to be so due in the judgment currency such party may in accordance with
normal banking procedures purchase Dollars with the judgment currency; if the
amount of Dollars so purchased is less than the sum originally due to such party
in Dollars, the Guarantor agrees, as a separate obligation and notwithstanding
any such judgment, to indemnify such party against such loss, and if the amount
of Dollars so purchased exceeds the sum originally due to any party to this
Guaranty, such party agrees to remit to the Guarantor, such excess.

          Section 10.  Severability.  If any provision in or obligation under
this Guaranty shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and

                                       8
<PAGE>

enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.

          Section 11.  Interpretation.  Section headings in this Guaranty are
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive effect.

          Section 12.  Further Assurances.  At any time or from time to time,
upon the request of the Purchaser, the Guarantor shell execute and deliver such
further documents and do such other acts and things as the Purchaser may
reasonably request in order to effect fully the purposes of this Guaranty.  The
Guarantor agrees to be liable for any reasonable expenses incurred by Purchaser
and/or its successors and assigns with respect to any action or proceeding to
enforce this Guaranty.  The Guarantor agrees to deliver an opinion of counsel
satisfactory to the Purchaser, addressed to the Purchaser and the lenders
described in Section 4.4(iii) hereof substantially in the form of Exhibit D
to the Contract.

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

                                    EXECUTED AS A DEED BY:
                                    ALCATEL

                                        /s/ S. Tchuruk
                                    By  _____________________________________
                                        Name: S. Tchuruk
                                        Title:Chairman and CEO

                                    Address:  Alcatel
                                              54 rue la Boetie
                                              75411 Paris Cedex 08
                                              France
                                              Fax: 011-33-1-4076-1400

                                       9
<PAGE>

                                                                       EXHIBIT C
                                                                              TO
                                                           CONSTRUCTION CONTRACT

*

* Two pages of material omitted and separately filed with the Commission under
  an application for confidential treatment.

<PAGE>

                                                                       EXHIBIT D
                                                                              TO
                                                           CONSTRUCTION CONTRACT

                           FORM OF CONTRACTOR OPINION

DATE

Re:    South American Crossing Cable System

South American Crossing Ltd.
Wessex House
45 Reid Street
Hamilton HM-12
Bermuda

Gentlemen,

I am the General Counsel of Alcatel Submarine Networks, a societe anonyme
established in France ("ASN").  This opinion is furnished to you in connection
with the Project Development and Construction Contract and its appendices dated
July __, 1999 for the supply and installation of the SAC submarine cable system
made between ASN and South American Crossing Ltd. (the "Supply Contract").

I have not investigated the laws of any jurisdiction but France and do not
express an opinion on the laws of any jurisdiction but France.

I or attorneys under my supervision have examined the Supply Contract, as well
as such documents, records and matters of law as I have deemed necessary for
purposes of this opinion.  Based on the foregoing and subject to the assumptions
and qualifications set forth herein, I am of the opinion that:

1.     ASN has been duly established and is validly existing under the laws of
       France as a legal entity in the form of a societe anonyme.

2.     ASN has the corporate power and corporate authority and has taken all
       necessary corporate action to execute and deliver the Supply Contract and
       to perform its obligations thereunder and has duly executed and delivered
       the Supply Contract.
<PAGE>

                                                                          [DATE]

3.     The Supply Contract constitutes the legal, valid and binding obligations
       of ASN, enforceable in accordance with its terms.

4.     The execution and delivery by ASN of the Supply Contract and the
       performance by ASN of its obligations thereunder will not conflict with
       or result in a breach of any provision of French law or of the Articles
       of Association (status) of ASN or any other agreements to which it is a
       party.

5.     No license, authorization, permission or consent from any French public
       authority or governmental agency or any other party is required for the
       valid execution and delivery by ASN of the Supply Contract or for the
       valid performance by ASN of its obligations thereunder.

6.     In order to ensure the legality, validity, enforceability or
       admissibility in evidence of the Supply Contract, it is not necessary
       that the Supply Contract be filed or recorded with any public office in
       France.

7.     The choice of law and submission to jurisdiction provisions included in
       the Supply Contract (that is, the choice of New York law and submission
       to jurisdiction of New York Courts) are valid and binding under the laws
       of France and would be given effect by the courts of France and any
       political subdivision thereof.

8.     A judgment rendered against ASN in a court in New York in respect of the
       Supply Contract would be recognized and enforced by the courts of the
       Republic of France, provided the application of such laws does not
       violate French ordre public international. I have no reason to believe
       that the application of New York Law in connection with the enforcement
       of the Supply Contract would be judged contrary to French ordre public
       international.

The opinions expressed above are subject to the following assumptions and
qualifications:

       (i)   I have assumed that the Supply Contract will constitute the legal,
       valid and binding obligations of ASN under the laws of New York, to which
       it is expressed to be subject, enforceable in accordance with its terms.

       (ii)  This opinion is subject to any French laws applicable to reglement
       amiable, redressement judiciaire, liquidation judiciaire, insolvency and
       reorganization of companies, to moratoriums and similar laws affecting
       creditors' rights generally.

       (iii) I do not express any view on any particular remedies that may be
       available in the French courts, which may be discretionary or otherwise
       affected by the application of rules of French ordre public (public
       policy).

       (iv)  Claims may become barred under statutes of limitations, imposing
       limited periods within which suits, actions, or proceedings can be
       brought.

                                       2
<PAGE>

                                                                          [DATE]

       (v)  Enforcement proceedings in France are subject to the general
       jurisdiction of the French courts with regard to the award of costs, even
       as against a successful party.

                                       3
<PAGE>

                                                                          [DATE]

This opinion letter is addressed to you and may not be relied upon by any person
but yourselves and your legal advisers.

Yours faithfully,

Charles Matthews

                                       4
<PAGE>

                           FORM OF GUARANTOR OPINION

DATE

Re:    South American Crossing Cable System

South American Crossing Ltd.
Wessex House
45 Reid Street
Hamilton HM-12
Bermuda

Ladies and Gentlemen,

I am the General Counsel of Alcatel, a societe anonyme established in France
("Alcatel").  This opinion is furnished to you in connection with the Guaranty
dated ______, 1999 from Alcatel to South American Crossing Ltd., a copy of which
is enclosed (the "Guaranty").

I have not investigated the laws of any jurisdiction but France and do not
express an opinion on the laws of any jurisdiction but France.

I or attorneys under my supervision have examined the Guaranty, as well as such
documents, records and matters of law as I have deemed necessary for purposes of
this opinion.  Based on the foregoing and subject to the assumptions and
qualifications set forth herein, I am of the opinion that:

1.     Alcatel has been duly established and is validly existing under the laws
       of France as a legal entity in the form of a societe anonyme.

2.     Alcatel has the corporate power and corporate authority and has taken all
       necessary corporate action to execute and deliver the Guaranty and to
       perform its obligations thereunder and has duly executed and delivered
       the Guaranty.

3.     The Guaranty constitutes the legal, valid and binding obligations of
       Alcatel, enforceable in accordance with its terms.

4.     The execution and delivery by Alcatel of the Guaranty and the performance
       by Alcatel of its obligations thereunder will not conflict with or result
       in a breach of any provision of French law or of the Articles of
       Association (statut) of Alcatel or any other agreements to which it is a
       party.
<PAGE>

5.     No license, authorization, permission or consent from any French public
       authority or governmental agency or any other person is required for the
       valid execution and delivery by Alcatel of the Guaranty or for the valid
       performance by Alcatel of its obligations thereunder.

6.     In order to ensure the legality, validity, enforceability or
       admissibility in evidence of the Guaranty, it is not necessary that the
       Guaranty be filed or recorded with any public office in France.

7.     The choice of law and submission to jurisdiction provisions included in
       the Guaranty (that is, the choice of English law and submission to
       jurisdiction of English Courts) are valid and binding under the laws of
       France and would be given effect by the courts of France and any
       political subdivision thereof.

8.     A judgment rendered against Alcatel in a court in England pursuant to the
       submission of jurisdiction provision of the Guaranty would be recognized
       and enforced by the courts of the Republic of France, provided the
       application of such laws does not violate French "ordre public
       international." I have no reason to believe that the application of
       English law in connection with the enforcement of the Guaranty would
       violate French ordre public international.

The opinions expressed above are subject to the following assumptions and
qualifications:

       (i)   I have assumed that the Guaranty will constitute the legal,
       valid and binding obligations of Alcatel under the laws of
       England, to which it is expressed to be subject, enforceable in
       accordance with its terms.

       (ii)  This opinion is subject to any French laws applicable to
       "reglement amiable," "redressement judiciaire," "liquidation
       judiciaire," insolvency and reorganization of companies, to
       moratoriums and similar laws affecting creditors' rights
       generally.

       (iii) I do not express any view on any particular remedies that
       may be available in the French courts, which may be discretionary
       or otherwise affected by the application of rules of French
       "ordre public" (public policy); in particular, the remedy of
       specific performance or the issue of an injunction or other
       similar remedy may not be available in a French court in respect
       of any obligations under the Guaranty.

               (iv)  Claims may become barred under statutes of limitations,
               imposing limited periods within which suits, actions, or
               proceedings can be brought.

               (v)   Enforcement proceedings in France are subject to the
               general jurisdiction of the French courts with regard to the
               award of costs, even as against a successful party.

This opinion letter is addressed to you and may not be relied upon by any person
but yourselves and your legal advisers.

Yours faithfully,

Pascal Durand-Barthez

                                       2
<PAGE>

                                                                       EXHIBIT E
                                                                              TO
                                                           CONSTRUCTION CONTRACT

                           FORM OF ESCROW AGREEMENT

                          [________________] CROSSING

          ESCROW AGREEMENT dated as of ______ __, 1999 by and among
[________________ Crossing Ltd.], a [corporation] organized and existing under
the laws of Bermuda (the "Purchaser"), [________________], a [corporation]
organized and existing under the laws of [________________], and having an
office in [________________] (the "Contractor") and [________________] (the
"Escrow Agent").

                             W I T N E S S E T H :

          WHEREAS, pursuant to the Project Development and Construction
Contract, dated as of ________ ___, 1999 (said agreement, as the same may be
amended, modified or supplemented from time to time, the "Supply Contract"),
between the Purchaser and the Contractor, there is required to be deposited by
Purchaser in escrow certain payments to be held by the Escrow Agent subject to
the terms and conditions set forth herein.

          NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, the parties hereto agree as follows:

          The Purchaser and the Contractor do hereby appoint and designate the
Escrow Agent as escrow agent for the purposes set forth herein, and the Escrow
Agent does hereby accept such appointment under the terms and conditions set
forth herein.

          1.   Establishment of Dispute Account.  The Purchaser and the
               --------------------------------
Contractor hereby establish and, at all times until this Escrow Agreement is
terminated, shall maintain, with the Escrow Agent an escrow account (the
"Dispute Account"), in the name of and under the control of [________________]
as Escrow Agent, in which the Purchaser shall deposit payments (if and when)
made pursuant to Sub-Articles 5(C)(4) of the Supply Contract (the "Disputed
Payments"). Such funds shall be delivered to, and held by the Escrow Agent in,
the Escrow Agent's account set forth in Exhibit C hereto. The Escrow Agent shall
hold, subject to the terms and conditions hereof, such cash and such investments
and reinvestments as may be permitted pursuant to Section 2 hereof (which,
together with the income from such investments, are hereinafter, referred to as
the "Dispute Fund"). If any withholding tax is required to be paid from amounts
in the Dispute Fund, the Contractor and the Purchaser shall deliver to the
Escrow Agent any necessary and appropriate forms instructing the Escrow Agent as
to the amount and timing of such payments.
<PAGE>

          2.  Investment of Dispute Fund.  During the term of this Escrow
              --------------------------
Agreement, the Dispute Fund shall be invested and reinvested by the Escrow Agent
in interest-bearing or money market bank accounts of the Escrow Agent and such
other investments as the Contractor and the Purchaser may mutually agree upon
from among the Permitted Investments described on Exhibit D. In the absence of
any instruction, the Escrow Agent shall invest and reinvest the Dispute Fund in
its sole discretion in interest-bearing or money market bank accounts of the
Escrow Agent. All interest or other income earned under the Escrow Agreement
shall be allocated and paid as provided herein and reported by the recipient to
the Internal Revenue Service as having been so allocated and paid.

          In addition, the Escrow Agent shall have the right to liquidate any
investments held in order to provide funds necessary to make required payments
under this Escrow Agreement. The Escrow Agent in its capacity as escrow agent
hereunder shall not have any liability for any loss sustained as a result of any
investment made pursuant to the instructions of the parties hereto or as a
result of any liquidation of any investment prior to its maturity or for the
failure of the parties to give the Escrow Agent instructions to invest or
reinvest the Dispute Fund or any earnings thereon. Costs incurred by the Escrow
Agent in connection with the making or liquidation of any investment of the
Dispute Fund may be charged by the Escrow Agent against amounts in the Dispute
Fund if such costs are not paid when due.

          3.  Dispositions.  All or a portion of the Dispute Fund shall be paid
              ------------
to (i) the Contractor account as set forth in Exhibit A upon the receipt by the
Escrow Agent of a written instruction from the Contractor to do so and
countersigned by the Purchaser, (ii) the Purchaser's account as set forth in
Exhibit B upon the receipt by the Escrow Agent of a written instruction from the
Purchaser to do so and countersigned by the Contractor, (iii) the account of the
prevailing party, if the dispute underlying the Disputed Payments is submitted
to arbitration in accordance with the Supply Contract, and upon receipt by the
Escrow Agent of a written instruction of the arbitrators directing the Escrow
Agent to do so or (iv) the account of the prevailing party, if the dispute
underlying the Disputed Payments is submitted to a court of competent
jurisdiction in accordance with the Supply Contract, and upon receipt by the
Escrow Agent of a final order or determination (no longer capable of being
appealed) from such court (or appellate court) setting forth the resolution of
such dispute and directing the Escrow Agent to do so. The Escrow Agent shall pay
amounts to the Contractor or the Purchaser, as the case may be, in accordance
with such written instruction, order or determination on (A) the business day
that such instruction, order or determination is received in the case of an
instruction, order or determination received by the Escrow Agent by no later
than 12:00 noon, New York City time or (B) the next business day in the case of
an instruction, order or determination received by the Escrow Agent after 12:00
noon, New York City time. All written instructions, orders or determinations may
be delivered by facsimile transmission to the Escrow Agent.

          4.  The Escrow Agent may rely and shall be protected in acting or
refraining from acting upon any written notice, order, determination,
instruction or request furnished to it hereunder and believed by it to be
genuine and to have been signed or presented by the proper party or parties. The
Escrow Agent shall be under no duty to inquire into or investigate the validity,
accuracy or content of any such document. The Escrow Agent shall have no duty to
solicit any payments which may be due it hereunder.
<PAGE>

          5.  The Escrow Agent shall not be liable for any action taken by it in
good faith and believed by it to be authorized or within the rights or powers
conferred upon it by this Agreement, and may consult with counsel of its own
choice and shall have full and complete authorization and protection for any
action taken or suffered by it hereunder in good faith and in accordance with
the opinion of such counsel unless a court of competent jurisdiction determines
that the Escrow Agent's gross negligence or willful misconduct was the cause of
any loss to the Contractor or the Purchaser. In the administration of the
Dispute Account hereunder, the Escrow Agent may execute any of its powers and
perform its duties hereunder directly or through agents or attorneys and may
consult with counsel, accountants and other skilled persons to be selected and
retained by it.

          6.  The Escrow Agent may resign and be discharged from its duties or
obligations hereunder by giving notice to the Contractor and the Purchaser in
writing of such resignation specifying a date when such resignation shall take
effect except that the Escrow Agent shall hold the Dispute Fund until it is paid
in accordance with the joint written instructions of Contractor and Purchaser.
If no such instructions are received within 30 days, the resigning Escrow Agent
may, upon notice to Contractor and Purchaser, arrange for a successor escrow
agent which shall be a national banking institution or trust company located in
New York City, New York. The Escrow Agent shall have the right to withhold an
amount equal to the amount due and owing to the Escrow Agent, plus any costs and
expenses the Escrow Agent shall reasonably believe may be incurred by the Escrow
Agent in connection with the termination of the Escrow Agreement.

          7.  The Purchaser and Contractor hereby agree to pay to the Escrow
Agent upon execution of this agreement compensation for the services to be
rendered hereunder as described in Exhibit E hereto, in advance, and will pay or
reimburse the Escrow Agent upon request for all expenses, disbursements and
advances, including reasonable attorneys' fees, incurred or made by it in
connection with carrying out its duties hereunder (including, without
limitation, in connection with the making or liquidation of any investments
under Section 2).

          8.  The Purchaser and the Contractor hereby agree to jointly and
severally indemnify the Escrow Agent for, and to hold it harmless against any
loss, liability or expense incurred without gross negligence or bad faith on the
part of the Escrow Agent, arising out of or in connection with its entering into
this Agreement and carrying out its duties hereunder, including the costs and
expenses of defending itself against any claim of liability and with respect to
any investigation. The Escrow Agent may charge against all property in the
Dispute Account any amounts owed to it under the foregoing indemnity if not paid
when due or may withhold payment of such property as security for any
unliquidated claims. Notwithstanding anything in this Escrow Agreement to the
contrary, in no event shall the Escrow Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Escrow Agent has been advised of the likelihood of
such loss or damage and regardless of the form of action.

          9.  The duties and responsibilities of the Escrow Agent hereunder
shall be determined solely by the express provisions of this Escrow Agreement,
and no other or further duties or responsibilities shall be implied.

          10. The Escrow Agent hereby expressly acknowledges and agrees that it
shall have neither a lien nor any other right or claim on any amounts deposited
in the Dispute Account on its

                                       3
<PAGE>

own account (excepting its fees and expenses under this Agreement to the extent
not paid after demand upon Purchaser).

          11. All notices and communications hereunder shall be in writing and
shall be deemed to be duly given when received if sent by registered mail,
return receipt requested, or when delivered if sent by personal hand or by
facsimile transmission, as follows:

If to Escrow Agent:
------------------
[________________]
Attn:
Fax:

If to Purchaser:
---------------
[________________ Crossing Ltd.]
Wessex House
45 Reid Street
Hamilton HM12
Bermuda
Attn: Robert Klug
Tel: 441-296-8600
Fax: 441-296-8606
Tax Identification Number:

If to Contractor:
----------------
[_______________]
Tel:
Fax:
Tax Identification Number:

or at such other address as any of the above may have furnished to the other
parties in writing as set forth above and any such notice or communication given
in the manner specified in this Paragraph 11. A copy of any notice or
communication under this Escrow Agreement which is given by any party shall be
given by such party to each of the parties hereto.

          12. (a) In the event funds transfer instructions are given (other than
in writing at the time of execution of the Escrow Agreement), whether in
writing, by telecopier or otherwise, the Escrow Agent is authorized to seek
confirmation of such instructions by telephone call-back to the person or
persons designated in Exhibit F hereto, and the Escrow Agent may rely upon the
confirmations of anyone purporting to be the person or persons so designated.
The persons and telephone numbers for call-backs may be changed only in a
writing actually received and acknowledged by the Escrow Agent. The parties to
this Escrow Agreement acknowledge that such security procedure is commercially
reasonable.

              (b) It is understood that the Escrow Agent and the beneficiary's
bank in any funds transfer may rely solely upon any account numbers or similar
identifying number provided by either of the parties hereto to identify (i) the
beneficiary, (ii) the beneficiary's bank, or (iii) an

                                       4
<PAGE>

intermediary bank. The Escrow Agent may apply any of the escrowed funds for any
payment order it executes using any such identifying number, even where its use
may result in a person other than the beneficiary being paid, or the transfer of
funds to a bank other than the beneficiary's bank, or an intermediary bank
designated.

          13. The provisions of this Escrow Agreement may be waived, altered,
amended or supplemented, in whole or in part, only by a writing signed by all of
the parties hereto.

          14. It is understood and agreed that the Escrow Agent makes no
representations or warranties hereunder.

          15. Neither this Escrow Agreement nor any right or interest hereunder
may be assigned in whole or in part by any party without the prior consent of
the other parties[; provided that Purchaser may grant a security interest in its
                    --------
rights hereunder to the senior lenders participating in the financing of its
cable system].

          16. This Escrow Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.

          17. The Escrow Agent shall not incur any liability for following the
instructions herein contained or expressly provided for, or written instructions
given by the parties hereto.

          18. In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions, claims or demands from
any party hereto which, in its opinion, conflict with any provision of this
Agreement, it shall be entitled to refrain from taking any action and its sole
obligation shall be to keep safely all property held in escrow until it shall be
directed otherwise in writing by all of the other parties hereto or by final
order or judgment of a court of competent jurisdiction.

          19. Any corporation into which the Escrow Agent in its individual
capacity may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Escrow Agent in its individual capacity shall be a party, or any corporation to
which substantially all the corporate trust business of the Escrow Agent in its
individual capacity may be transferred, shall be the Escrow Agent under this
Escrow Agreement without further act.

          20. The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby. Nothing contained in this Agreement shall be deemed to confer
upon anyone other than the parties hereto (and their permitted successors and
assigns) any legal right or equitable right, remedy or claim under or by reason
of this Agreement.

          21. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK AND ANY ACTION BROUGHT HEREUNDER SHALL BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, LOCATED IN THE COUNTY OF NEW
YORK. EACH PARTY HERETO IRREVOCABLY WAIVES ANY OBJECTION ON THE GROUND OF VENUE,
FORUM

                                       5
<PAGE>

NON-CONVENIENS OR ANY SIMILAR GROUNDS AND IRREVOCABLY CONSENTS TO SERVICE
OF PROCESS BY MAIL OR IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW AND
CONSENTS TO THE JURISDICTION OF SAID COURTS.

                                       6
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement on the day and year first above written.

                              [PURCHASER]

                              By: ______________________________________
                                  Name:
                                  Title:

                              [CONTRACTOR]

                              By: ______________________________________
                                  Name:
                                  Title:

                              [ESCROW AGENT]

                              By: ______________________________________
                                  Name:
                                  Title:

                                       7
<PAGE>

                        EXHIBIT A TO ESCROW AGREEMENT
                        ------------------------------

                             Contractor's Account
                             --------------------

               Account Name:
               Account Number:
               Bank Name:

               ABA No.:
               Reference:
               Attn:
<PAGE>

                         EXHIBIT B TO ESCROW AGREEMENT
                         -----------------------------

                              Purchaser's Account
                              -------------------

               Account Name:    [_________ Crossing Ltd.]
               Account Number:
               Bank Name:

               ABA No.:
               [Reference:      __________________]
               [Attn:           __________________]
<PAGE>

                         EXHIBIT C TO ESCROW AGREEMENT
                         -----------------------------

                            Escrow Agent's Account
                            ----------------------

               Account Name:
               Account Number:

               Bank Name:
               ABA Number:
               Attention:
<PAGE>

                         EXHIBIT D TO ESCROW AGREEMENT
                         -----------------------------

                             Permitted Investments

          (a)  Direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof; and

          (b)  Investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and overnight sweep accounts, money
market deposit accounts issued or offered by, (i) the Escrow Agent or any of its
affiliates or (ii) any of Purchaser's senior lenders and/or any other bank
which, in each case, has a combined capital and surplus and undivided profits of
not less than $250,000,000.
<PAGE>

                         EXHIBIT E TO ESCROW AGREEMENT
                         -----------------------------

                    Compensation To Be Paid To Escrow Agent
                    ---------------------------------------
<PAGE>

                         EXHIBIT F TO ESCROW AGREEMENT
                         -----------------------------

              Persons Authorized To Confirm Transfer Instructions
              ---------------------------------------------------

Purchaser:  S. Wallace Dawson, Tel: 441-296-8600
---------
            Robert Klug, Tel: 441-296-8600
            Ian McLean, Tel:  441-296-8600

Contractor: Christian Reinaudo
----------
            Jean Godeluck
            Michel Gonazalvez
<PAGE>

                                                                       EXHIBIT F
                                                                              TO
                                                           CONSTRUCTION CONTRACT

                           First Office Applications
                           -------------------------

1)   Submarine Line Terminal Equipment (SLTE) OALW64

2)   CORBA/IDL over TCP/IP

3)   BWM and OLS4006 Retail Schedules and features sets are as shown in the
     Technical Volume
<PAGE>

                                                                       EXHIBIT G
                                                                              TO
                                                           CONSTRUCTION CONTRACT

                          List of Major Subcontractors
                          ----------------------------

Terminal Transmission    Alcatel Submarine Networks
Equipment                Avenue Charles de Gaulle
                         Ormes
                         45915 Orleans Cedex 9
                         FRANCE

                    And/or

                         Alcatel Submarine Networks
                         Christchurch Way
                         Greenwich
                         London SE10 OAG
                         ENGLAND

                    And/or

                         Lucent Technologies
                         475 South Street
                         Morristown
                         New Jersey 07692
                         USA

Repeaters and            Alcatel Submarine Networks
Branching Units          Christchurch Way
                         Greenwich
                         London SE10 OAG
                         ENGLAND

Power Feeding            Alcatel Submarine Networks
Equipment                Christchurch Way
                         Greenwich
                         London SE10 OAG
                         ENGLAND

SDH Equipment            Lucent Technologies
Network Management       600 Mountain Avenue
                         Murray Hill
                         New Jersey
                         USA
<PAGE>

Cable                    Lucent Technologies
(For TAC Segment)        600 Mountain Avenue
                         Murray Hill
                         New Jersey
                         USA

Cable                    Alcatel Cable
                         536 Quai de la Loire
                         62225 Calais Cedex
                         FRANCE

                    And/or

                         Alcatel TCC Pty Ltd
                         2 Bomband/orah Point Road
                         Port Botnay
                         Sydney N.S.W
                         AUSTRALIA

                    And/or

                         Alcatel Submarine Networks Inc.
                         15540 North Lombard Street
                         Portland - Oregon 97203
                         USA

Optical Fibre            Lucent Technologies
                         Atlanta Works
                         2000 Northeast Expressway
                         Norcross, GA 30071
                         USA

                    And/or

                         Sumitomo
                         1-3-12, Motoakasaka
                         Minato-Ku
                         Tokyo 107
                         JAPAN

<PAGE>

                    And/or

                         Corning
                         MP-RO-04-2
                         Corning
                         New York 14831
                         USA

                    And/or

                         Alcatel Alsthom Recherche
                         Route de Nozay
                         91460, Macoussis

Terminal Installations   Atcatel Submarine Networks
                         Centre de Villarceaux
                         91625 Nozay
                         FRANCE

                         Lucent Technologies
                         475 South Street
                         Morristown
                         New Jersey 07692
                         USA

Marine Installations     Global Marine
                         East Saxon House
                         27 Duke Street
                         Chelmsford, Essex CM1 1HT
                         ENGLAND

                    And/or

                         France Cable et Radio (FCR)
                         Dept. sous-marine
                         124 rue Reaumur
                         75002 Paris
                         FRANCE

                    And/or

                         TeleDanmark International Marine
                         Talegade 2
                         Tasstrup
                         Danmark

                                       3
<PAGE>

                                                                       EXHIBIT H
                                                                              TO
                                                           CONSTRUCTION CONTRACT

                             Intellectual Property
                             ---------------------

     [To be completed pursuant to the last sentence of Sub-Article 18(A)]
<PAGE>

                                                                       EXHIBIT I
                                                                              TO
                                                           CONSTRUCTION CONTRACT

                                Landing Licenses
                                ----------------

Country        Landing Licenses Required
-------        -------------------------

Argentina      None;

Brazil         None;

Chile          Intermediate Telecommunications Service Concession (to be granted
               by SUBTEL);

Colombia       Concession to install the network and Carrier Service Provider
               Concession (both to be granted by the Ministry of
               Communications);

Peru           International Carrier Concession (to be granted by the Ministry
               of Transportation, Communications, Construction and Housing); and

Panama         None.

*              *

* Material omitted and separately filed with the Commission under an
  application for confidential treatment.

<PAGE>

                                                                       EXHIBIT J
                                                                              TO
                                                           CONSTRUCTION CONTRACT

               EXAMPLES OF CONSTRUCTION PERMITS
               --------------------------------

               Permission of Entry to EEZ

               Permission of Entry to Harbor

               Notifications of Operations

               Visas

               Work Permits

               Import Licenses

               Customs Clearances

               Export Licenses
<PAGE>

                                                                       EXHIBIT K
                                                                              TO
                                                           CONSTRUCTION CONTRACT

                           EXAMPLES OF OWNER PERMITS
                           -------------------------

               Building Permits for Cable Stations

               Permits to land cables

               Permits to lay cables on land and in the water

               Environmental or Conservation Permits<PAGE>
                                                                     EXHIBIT 4.3

              Long-Term Stock Incentive
              Compensation Program

              Edwards Lifesciences Corporation

              March 2000
<PAGE>

<TABLE>
<CAPTION>

Contents
<S>                                                            <C>
=================================================================
Article 1. Establishment, Objectives, and Duration              1

Article 2. Definitions                                          1

Article 3. Administration                                       4

Article 4. Eligibility and Participation                        5

Article 5. Shares Subject to the Program and Maximum Awards     5

Article 6. Stock Options                                        7

Article 7. Restricted Stock                                     9

Article 8. Performance Units and Performance Shares            10

Article 9. Performance Measures                                12

Article 10. Beneficiary Designation                            13

Article 11. Deferrals                                          13

Article 12. Rights of Employees and Contractors                13

Article 13. Change in Control                                  13

Article 14. Amendment, Modification, and Termination           14

Article 15. Compliance with Applicable Law and Withholding     15

Article 16. Indemnification                                    17

Article 17. Successors                                         17

Article 18. Legal Construction                                 17
</TABLE>
<PAGE>

Edwards Lifesciences Corporation
Long-Term Stock Incentive Compensation Program

Article 1. Establishment, Objectives, and Duration

   1.1  Establishment of the Program. Edwards Lifesciences Corporation, a
Delaware corporation (hereinafter referred to as the "Company"), hereby
establishes an incentive compensation plan to be known as the "Edwards
Lifesciences Corporation Long-Term Stock Incentive Compensation Program"
(hereinafter referred to as the "Program"), as set forth in this document. The
Program permits the grant of Nonqualified Stock Options, Incentive Stock
Options, Restricted Stock, Performance Shares, and Performance Units.

   The Program shall become effective as of April 1, 2000 (the "Effective Date")
and shall remain in effect as provided in Section 1.3 hereof.

   1.2  Objectives of the Program. The objectives of the Program are to optimize
the profitability and growth of the Company through long-term incentives which
are consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's stockholders; to provide Participants
with an incentive for excellence in individual performance; and to promote
teamwork among Participants. Awards generally are made in conjunction with
services performed by the Participant within the previous twelve (12) months.

   The Program is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants who make
significant contributions to the Company's success and to allow Participants to
share in the success of the Company.

   1.3  Duration of the Program. The Program shall commence on the Effective
Date, as described in Section 1.1 hereof, and shall remain in effect, subject to
the right of the Board to amend or terminate the Program at any time pursuant to
Article 14 hereof, until all Shares subject to it shall have been purchased or
acquired according to the Program's provisions. However, in no event may an
Award be granted under the Program on or after April 1, 2010.

Article 2. Definitions

   Whenever used in the Program, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:

   2.1  "Award" means, individually or collectively, a grant under this Program
of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock,
Performance Shares, or Performance Units.

   2.2  "Award Agreement" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under this Program.

   2.3  "Board" or "Board of Directors" means the Board of Directors of the
Company.

                                       1
<PAGE>

   2.4  "Change in Control" of the Company shall mean the occurrence of any one
of the following events:

       (a)  Any "Person", as such term is used in Sections 13(d) and 14(d) of
            the Exchange Act (other than the Company, any corporation owned,
            directly or indirectly, by the stockholders of the Company in
            substantially the same proportions as their ownership of stock of
            the Company, and any trustee or other fiduciary holding securities
            under an employee benefit plan of the Company or such
            proportionately owned corporation), is or becomes the "beneficial
            owner" (as defined in Rule 13d-3 under the Exchange Act), directly
            or indirectly, of securities of the Company representing thirty
            percent (30%) or more of the combined voting power of the Company's
            then outstanding securities; or

       (b)  During any period of not more than twenty-four (24) months,
            individuals who at the beginning of such period constitute the Board
            of Directors of the Company, and any new director (other than a
            director designated by a Person who has entered into an agreement
            with the Company to effect a transaction described in Sections
            2.4(a), 2.4(c), or 2.4(d) of this Section 2.4) whose election by the
            Board or nomination for election by the Company's stockholders was
            approved by a vote of at least two-thirds (2/3) of the directors
            then still in office who either were directors at the beginning of
            the period or whose election or nomination for election was
            previously so approved, cease for any reason to constitute at least
            a majority thereof; or

       (c)  The consummation of a merger or consolidation of the Company with
            any other entity, other than: (i) a merger or consolidation which
            would result in the voting securities of the Company outstanding
            immediately prior thereto continuing to represent (either by
            remaining outstanding or by being converted into voting securities
            of the surviving entity) more than sixty percent (60%) of the
            combined voting power of the voting securities of the Company or
            such surviving entity outstanding immediately after such merger or
            consolidation; or (ii) a merger or consolidation effected to
            implement a recapitalization of the Company (or similar transaction)
            in which no Person acquires more than thirty percent (30%) of the
            combined voting power of the Company's then outstanding securities;
            or

       (d)  The Company's stockholders approve a plan of complete liquidation or
            dissolution of the Company, or an agreement for the sale or
            disposition by the Company of all or substantially all of the
            Company's assets (or any transaction having a similar effect).

   2.5  "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

   2.6  "Committee" means the Compensation Committee or any other committee
appointed by the Board to administer Awards to Participants, as specified in
Article 3 herein.

                                       2
<PAGE>

   2.7  "Company" means Edwards Lifesciences Corporation, a Delaware
corporation, and any successor thereto as provided in Article 17 herein.

   2.8  "Contractor" means an individual providing services to the Company who
is not an Employee or member of the Board, and who does not participate in the
Edwards Lifesciences Corporation Nonemployee Directors and Consultants Stock
Incentive Program.

   2.9  "Covered Employee" means a Participant who, as of the date of vesting
and/or payout of an Award, as applicable, is one of the group of "covered
employees," as defined in the regulations promulgated under Code Section 162(m),
or any successor statute.

   2.10  "Disability" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan, or if no such plan exists, at
the discretion of the Board.

   2.11  "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.

   2.12  "Employee" means any employee of the Company or of a Subsidiary of the
Company. Directors who are employed by the Company shall be considered Employees
under this Program. For the purposes of this definition, "Subsidiary" means any
business, whether or not incorporated, in which the Company has a direct or
indirect ownership interest.

   2.13  "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.

   2.14  "Fair Market Value" means, at any date, the closing sale price on the
principal securities exchange on which the Shares are traded on the last
previous day on which a sale was reported.

   2.15  "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.

   2.16  "Insider" shall mean an individual who is, on the relevant date, an
officer, director, or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.

   2.17  "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.

   2.18  "Option" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.

   2.19  "Option Price" means the price at which a Share may be purchased by a
Participant pursuant to an Option.

                                       3
<PAGE>

   2.20  "Participant" means an Employee or Contractor who has been selected to
receive an Award or who has outstanding an Award granted under the Program.

   2.21  "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).

   2.22  "Performance Share" means an Award granted to a Participant, as
described in Article 8 herein.

   2.23  "Performance Unit" means an Award granted to a Participant, as
described in Article 8 herein.

   2.24  "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of time,
the achievement of performance goals, or upon the occurrence of other events as
determined by the Committee, in its discretion), and the Shares are subject to a
substantial risk of forfeiture, as provided in Article 7 herein.

   2.25  "Restricted Stock" means an Award granted to a Participant pursuant to
Article 7 herein.

   2.26  "Retirement" means, unless otherwise defined in the applicable Award
Agreement, any termination of an Employee's employment or a Contractor's service
after age fifty-five (55) other than due to death or Disability, provided that
such Employee or Contractor has at least a combined ten (10) years of service
with the Company and Baxter International Inc. A Participant's number of years
of service with the Company and Baxter International, Inc. shall be determined
by calculating the number of complete twelve-month (12) periods of employment
from the Participant's original date of hire as an Employee or Contractor with
the Company or Baxter International, Inc. to the Participant's date of
employment or service termination.

   2.27  "Shares" means the shares of common stock of the Company.

Article 3. Administration

   3.1  General. The Program shall be administered by the Compensation Committee
of the Board, or by any other Committee appointed by the Board, which shall
consist of two (2) or more nonemployee directors within the meaning of the rules
promulgated by the Securities and Exchange Commission under Section 16 of the
Exchange Act who also qualify as outside directors within the meaning of Code
Section 162(m) and the related regulations under the Code, except as otherwise
determined by the Board. Any Committee administering the Program shall be
comprised entirely of directors. The members of the Committee shall be appointed
from time to time by, and shall serve at the sole discretion of, the Board. The
Committee shall have the authority to delegate administrative duties to
officers, Employees, or directors of the Company; provided, however, that the
Committee shall not be able to delegate its authority with respect to: (i)
granting Awards to Insiders; (ii) granting Awards to Covered Employees that are
intended to qualify for the Performance-Based Exception; and (iii) certifying
that any performance goals and other material terms attributable to

                                       4
<PAGE>

Awards to Covered Employees that are intended to qualify for the Performance-
Based Exception have been satisfied.

   3.2  Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions of the Program, the Committee shall have the authority to: (a)
interpret the provisions of the Program, and prescribe, amend, and rescind rules
and procedures relating to the Program; (b) grant Awards under the Program, in
such forms and amounts and subject to such terms and conditions as it deems
appropriate, including, without limitation, Awards which are made in combination
with or in tandem with other Awards (whether or not contemporaneously granted)
or compensation or in lieu of current or deferred compensation; (c) subject to
Article 14, modify the terms of, cancel and reissue, or repurchase outstanding
Awards; (d) prescribe the form of agreement, certificate, or other instrument
evidencing any Award under the Program; (e) correct any defect or omission and
reconcile any inconsistency in the Program or in any Award hereunder; (f) to
design Awards to satisfy requirements to make such Awards tax-advantaged to
Participants in any jurisdiction or for any other reason that the Company
desires; and (g) make all other determinations and take all other actions as it
deems necessary or desirable for the administration of the Program; provided,
however, that it is the Company's intent that no outstanding Option will be
canceled for the purpose of reissuing such Option to a Participant at a lower
exercise price. The determination of the Committee on matters within its
authority shall be conclusive and binding on the Company and all other persons.
The Committee shall comply with all applicable law in administering the Plan. As
permitted by law (and subject to Section 3.1 herein), the Committee may delegate
its authority as identified herein.

   3.3  Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Program and all related orders and
resolutions of the Board shall be final, conclusive, and binding on all persons,
including the Company, its stockholders, directors, Employees, Contractors,
Participants, and their estates and beneficiaries.

Article 4. Eligibility and Participation

   4.1  Eligibility. Persons eligible to participate in this Program shall
include all Employees and Contractors. Directors who are not Employees of the
Company shall not be eligible to participate in the Program.

   4.2  Actual Participation. Subject to the provisions of the Program, the
Committee may, from time to time, select from all eligible Employees and
Contractors those to whom Awards shall be granted and shall determine the nature
and amount of each Award.

Article 5. Shares Subject to the Program and Maximum Awards

   5.1  Number of Shares Available for Grants. Subject to adjustment as provided
in Section 5.4 herein, the number of Shares hereby reserved for delivery to
Participants under the Program shall be twelve million five hundred thousand
(12,500,000) Shares. No more than five hundred thousand (500,000) Shares
reserved for issuance under the Program may be granted in the form of Shares of
Restricted Stock. The Committee shall determine the appropriate methodology for
calculating the number of Shares issued pursuant to the Program. Unless and
until the Committee determines that an Award to a Covered Employee shall not be
designed to comply with the

                                       5
<PAGE>

Performance-Based Exception, the following rules shall apply to grants of such
Awards under the Program:

       (a)  Options: The maximum aggregate number of Shares that may be granted
            in the form of Options in any one (1) fiscal year to any one (1)
            Participant shall be one million (1,000,000).

       (b)  Restricted Stock: The maximum aggregate number of Shares that may be
            granted in the form of Restricted Stock in any one (1) fiscal year
            to any one (1) Participant shall be fifty thousand (50,000).

       (c)  Performance Shares: The maximum aggregate payout (determined as of
            the end of the applicable performance period) with respect to Awards
            of Performance Shares granted in any one (1) fiscal year to any one
            (1) Participant shall be equal to the value of one hundred thousand
            (100,000) Shares.

       (d)  Performance Units: The maximum aggregate payout (determined as of
            the end of the applicable performance period) with respect to Awards
            of Performance Units granted in any one (1) fiscal year to any one
            (1) Participant shall be equal to two million dollars ($2,000,000).

   5.2  Type of Shares. Shares issued under the Program in connection with Stock
Options and Performance Shares may be authorized and unissued Shares or issued
Shares held as treasury Shares. Shares issued under the Program in connection
with Restricted Stock shall be issued Shares held as treasury Shares; provided,
however, that authorized and unissued Shares may be issued in connection with
Restricted Stock to the extent that the Committee determines that past services
of the Participant constitute adequate consideration for at least the par value
thereof.

   5.3  Reusage of Shares.

       (a)  General. In the event of the exercise or termination (by reason of
            forfeiture, expiration, cancellation, surrender, or otherwise) of
            any Award under the Program, that number of Shares that was subject
            to the Award but not delivered shall again be available as Awards
            under the Program.

       (b)  Restricted Stock. In the event that Shares are delivered under the
            Program as Restricted Stock and are thereafter forfeited or
            reacquired by the Company pursuant to rights reserved upon the grant
            thereof, such forfeited or reacquired Shares shall again be
            available as Awards under the Program.

       (c)  Limitation. Notwithstanding the provisions of Sections 5.3(a) or
            5.3(b) above, the following Shares shall not be available for
            reissuance under the Program: (i) Shares which are withheld from any
            Award or payment under the Program to satisfy tax withholding
            obligations (as described in Section 15.3; (ii) Shares which are
            surrendered to fulfill tax obligations (as described in Section
            15.4; and

                                       6
<PAGE>

            (iii) Shares which are surrendered in payment of the Option Price
            upon the exercise of an Option.

   5.4  Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368) or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of Shares which may be delivered under
Section 5.1, in the number and class of and/or price of Shares subject to
outstanding Awards granted under the Program, and in the Award limits set forth
in Section 5.1, as may be determined to be appropriate and equitable by the
Committee, in its sole discretion, to prevent dilution or enlargement of rights;
provided, however, that the number of Shares subject to any Award shall always
be a whole number. In a stock-for-stock acquisition of the Company, the
Committee may, in its sole discretion, substitute securities of another issuer
for any Shares subject to outstanding Awards.

Article 6. Stock Options

   6.1  Grant of Options. Subject to the terms and provisions of the Program,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee. If
all or any portion of the exercise price or taxes incurred in connection with
the exercise are paid by delivery (or, in the case of payment of taxes, by
withholding of Shares) of other Shares of the Company, the Options may provide
for the grant of replacement Options.

   6.2  Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO or an NQSO.

   6.3  Option Price. The Option Price for each grant of an Option under this
Program shall be at least equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted. The only exception to the
foregoing shall be for Options issued to Participants upon the conversion of
their Baxter International, Inc. stock options at the time of the Company's
spin-off from Baxter International, Inc.

   6.4  Duration of Options. Each Option granted to a Participant shall expire
at such time as the Committee shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.

   6.5  Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.

                                       7
<PAGE>

   6.6  Payment. Options granted under this Article 6 shall be exercised by the
delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.

                                       8
<PAGE>

   The Option Price upon exercise of any Option shall be payable to the Company
in full either: (a) in cash or its equivalent; or (b) by tendering previously
acquired Shares (by either actual delivery or attestation) having an aggregate
Fair Market Value at the time of exercise equal to the total Option Price
(provided that the Shares which are tendered must have been held by the
Participant for at least six (6) months prior to their tender to satisfy the
Option Price); or (c) by a combination of (a) and (b).

   The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Board determines to be consistent with the
Program's purpose and applicable law.

   Subject to any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment, the Company
shall deliver to the Participant, in the Participant's name (or, at the
direction of the Participant, jointly in the names of the Participant and the
Participant's spouse), Share certificates in an appropriate amount based upon
the number of Shares purchased under the Option(s).

   6.7  Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.

   6.8  Termination of Employment or Service. Each Participant's Option Award
Agreement shall set forth the extent to which the Participant shall have the
right to exercise the Option following termination of the Participant's
employment with the Company or service to the Company as a Contractor. Such
provisions shall be determined in the sole discretion of the Committee, shall be
included in the Award Agreement entered into with each Participant, need not be
uniform among all Options issued pursuant to this Article 6, and may reflect
distinctions based on the reasons for termination.

   6.9  Nontransferability of Options.

       (a)  Incentive Stock Options. No ISO granted under the Program may be
            sold, transferred, pledged, assigned, or otherwise alienated or
            hypothecated, other than by will or by the laws of descent and
            distribution. Further, all ISOs granted to a Participant under the
            Program shall be exercisable during his or her lifetime only by such
            Participant.

       (b)  Nonqualified Stock Options. Except as otherwise provided in a
            Participant's Award Agreement, no NQSO granted under this Article 6
            may be sold, transferred, pledged, assigned, or otherwise alienated
            or hypothecated, other than by will or by the laws of descent and
            distribution. Further, except as otherwise provided in a
            Participant's Award Agreement, all NQSOs granted to a Participant
            under this Article 6 shall be exercisable during his or her lifetime
            only by such Participant.

                                       9
<PAGE>

   6.10  Substitution of Cash. Unless otherwise provided in a Participant's
Award Agreement, and notwithstanding any provision in the Program to the
contrary (including but not limited to Section 14.3), in the event of a Change
in Control in which the Company's stockholders holding Shares receive
consideration other than shares of common stock that are registered under
Section 12 of the Exchange Act, the Committee shall have the authority to
require that any outstanding Option be surrendered to the Company by a
Participant for cancellation by the Company, with the Participant receiving in
exchange a cash payment from the Company within ten (10) days of the Change in
Control. Such cash payment shall be equal to the number of Shares under Option,
multiplied by the excess, if any, of the greater of (i) the highest per Share
price offered to stockholders in any transaction whereby the Change in Control
takes place, or (ii) the Fair Market Value of a Share on the date the Change in
Control occurs, over the Option Price.

Article 7. Restricted Stock

   7.1  Grant of Restricted Stock. Subject to the terms and provisions of the
Program, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine.

   7.2  Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Committee shall determine.

   7.3  Restriction on Transferability. Except as provided in this Article 7,
the Shares of Restricted Stock granted herein may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated until the end of the
applicable Period of Restriction established by the Committee and specified in
the Restricted Stock Award Agreement, or upon earlier satisfaction of any other
conditions, as specified by the Committee in its sole discretion and set forth
in the Restricted Stock Award Agreement. All rights with respect to the
Restricted Stock granted to a Participant under the Program shall be available
during his or her lifetime only to such Participant.

   7.4  Other Restrictions. Subject to Article 9 herein, the Committee shall
impose such other conditions and/or restrictions on any Shares of Restricted
Stock granted pursuant to the Program as it may deem advisable including,
without limitation, any or all of the following:

       (a)  A required period of employment or service as a Contractor with the
            Company, as determined by the Committee, prior to the vesting of
            Shares of Restricted Stock.

       (b)  A requirement that Participants forfeit (or in the case of Shares
            sold to a Participant, resell to the Company at his or her cost) all
            or a part of Shares of Restricted Stock in the event of termination
            of his or her employment or service as a Contractor during the
            Period of Restriction.

       (c)  A prohibition against employment of Participants holding Shares of
            Restricted Stock by any competitor of the Company, against such
            Participants' dissemination of any secret or confidential
            information belonging to the Company, or the solicitation by
            Participants of the Company's employees for employment by another
            entity.

                                       10
<PAGE>

   Shares of Restricted Stock awarded pursuant to the Program shall be
registered in the name of the Participant and, if such Shares are certificated,
in the sole discretion of the Committee, may be deposited in a bank designated
by the Committee or with the Company. The Committee may require a stock power
endorsed in blank with respect to Shares of Restricted Stock whether or not
certificated.

   Except as otherwise provided in this Article 7, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Program shall become
freely transferable (subject to any restrictions under any applicable securities
law) by the Participant after the last day of the applicable Period of
Restriction.

   7.5  Voting Rights. At the Committee's sole discretion, Participants holding
Shares of Restricted Stock granted hereunder may be granted the right to
exercise full voting rights with respect to those Shares during the Period of
Restriction.

   7.6  Dividends and Other Distributions. At the Committee's sole discretion,
during the Period of Restriction, Participants holding Shares of Restricted
Stock granted hereunder may be credited with regular cash dividends paid with
respect to the underlying Shares while they are so held. The Committee may apply
any restrictions to the dividends that the Committee deems appropriate. Without
limiting the generality of the preceding sentence, if the grant or vesting of
Shares of Restricted Stock granted to a Covered Employee is designed to comply
with the requirements of the Performance-Based Exception, the Committee may
apply any restrictions it deems appropriate to the payment of dividends declared
with respect to such Shares of Restricted Stock, such that the dividends and/or
the Shares of Restricted Stock maintain eligibility for the Performance-Based
Exception.

   7.7  Termination of Employment or Service. Each Restricted Stock Award
Agreement shall set forth the extent to which the Participant shall have the
right to receive unvested Shares of Restricted Stock following termination of
the Participant's employment with the Company or service to the Company as a
Contractor. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Participant, need not be uniform among all Shares of Restricted Stock issued
pursuant to the Program, and may reflect distinctions based on the reasons for
termination; provided, however that, except in the cases of terminations
connected with a Change in Control and terminations by reason of death or
Disability, the vesting of Shares of Restricted Stock which qualify for the
Performance-Based Exception and which are held by Covered Employees shall occur
at the time they otherwise would have, but for the termination.

Article 8. Performance Units and Performance Shares

   8.1  Grant of Performance Units/Shares. Subject to the terms of the Program,
Performance Units and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee.

                                       11
<PAGE>

   8.2  Value of Performance Units/Shares. Each Performance Unit shall have an
initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant. The Committee shall set performance goals in its
sole discretion which, depending on the extent to which they are met, will
determine the number and/or value of Performance Units/Shares that will be paid
out to the Participant. For purposes of this Article 8, the time period during
which the performance goals must be met shall be called a "Performance Period."

   8.3  Earning of Performance Units/Shares. Subject to the terms of this
Program, after the applicable Performance Period has ended, the holder of
Performance Units/Shares shall be entitled to receive payout on the number and
value of Performance Units/Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance goals have been achieved.

   8.4  Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units/Shares shall be made in a single lump sum following the
close of the applicable Performance Period. Subject to the terms of this
Program, the Committee, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash or in Shares (or in a combination thereof)
which have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance Period. Such
Shares may be granted subject to any restrictions deemed appropriate by the
Committee. The determination of the Committee with respect to the form of payout
of such Awards shall be set forth in the Award Agreement pertaining to the grant
of the Award.

   At the discretion of the Committee, Participants may be entitled to receive
any dividends declared with respect to Shares which have been earned in
connection with grants of Performance Units and/or Performance Shares which have
been earned, but not yet distributed to Participants (such dividends shall be
subject to the same accrual, forfeiture, and payout restrictions as apply to
dividends earned with respect to Shares of Restricted Stock, as set forth in
Section 7.6 herein). In addition, Participants may, at the discretion of the
Committee, be entitled to exercise their voting rights with respect to such
Shares.

   8.5  Termination of Employment or Service Due to Death, Disability, or
Retirement. Unless determined otherwise by the Committee and set forth in the
Participant's Award Agreement, following termination of the Participant's
employment with the Company or service to the Company as a Contractor, by reason
of death, Disability, or Retirement during a Performance Period, the Participant
or his legal representative shall receive a payout of the Performance
Units/Shares which is prorated, as specified by the Committee in its discretion.

   Payment of earned Performance Units/Shares shall be made at a time specified
by the Committee in its sole discretion and set forth in the Participant's Award
Agreement. Notwithstanding the foregoing, with respect to Covered Employees who
retire during a Performance Period, payments shall be made at the same time as
payments are made to Participants who did not terminate employment during the
applicable Performance Period.

                                       12
<PAGE>

   8.6  Termination of Employment or Service for Other Reasons. In the event
that a Participant's employment or service to the Company as a Contractor
terminates for any reason other than those reasons set forth in Section 8.5
herein, all Performance Units/Shares shall be forfeited by the Participant to
the Company unless determined otherwise by the Committee, as set forth in the
Participant's Award Agreement.

   8.7  Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participant's Award Agreement, a Participant's rights under the Program shall be
exercisable during the Participant's lifetime only by the Participant or the
Participant's legal representative.

Article 9. Performance Measures

   Unless and until the Board proposes for stockholder vote and stockholders
approve a change in the general performance measures set forth in this Article
9, the attainment of which may determine the degree of payout and/or vesting
with respect to Awards to Covered Employees which are designed to qualify for
the Performance-Based Exception, the performance measure(s) to be used for
purposes of such grants shall be chosen from among:

   (a) Earnings per share;

   (b) Net income (before or after taxes);

   (c) Return measures (including, but not limited to, return on assets,
       capital, equity, or sales);

   (d) Cash flow return on investments which equals net cash flows divided by
       owners' equity;

   (e) Gross revenues;

   (f) Market-to-book value ratio;

   (g) Share price (including, but not limited to, growth measures and total
       shareholder return);

   (h) Working capital measures;

   (i) Economic value added; and

   (j) The percentage of sales generated by new products.

   Subject to the terms of the Program, each of these measures shall be defined
by the Committee on a corporation or subsidiary basis or in comparison with peer
group performance, and may include or exclude specified extraordinary items, as
determined by the corporation's auditors.

                                       13
<PAGE>

   The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the preestablished performance goals or the size of
Awards; provided, however, that Awards which are designed to qualify for the
Performance-Based Exception, and which are held by Covered Employee, may not be
adjusted upward in terms of either the degree of goal attainment or size (the
Committee shall retain the discretion to adjust the degree of goal attainment or
the size of the Awards downward).

   In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining stockholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining stockholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards that shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).

Article 10. Beneficiary Designation

   Each Participant under the Program may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Program is to be paid in case of his or her death
before he or she receives any or all of such benefit. Each such designation
shall revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.

Article 11. Deferrals

   The Committee may permit or require a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such Participant by virtue of the exercise of an Option, lapse or waiver
of restrictions with respect to Restricted Stock, or the satisfaction of any
performance goals with respect to Performance Units/Shares. If any such deferral
election is required or permitted, the Committee shall, in its sole discretion,
establish rules and procedures for such payment deferrals.

Article 12. Rights of Employees and Contractors

   12.1  Employment. Nothing in the Program or any Award Agreement shall
interfere with or limit in any way the right of the Company to terminate at any
time any Participant's employment or service to the Company as a Contractor, nor
confer upon any Participant any right to continue in the employ of the Company
or to provide services to the Company as a Contractor.

   12.2  Participation. No Employee or Contractor shall have the right to be
selected to receive an Award under this Program, or, having been so selected, to
be selected to receive a future Award.

Article 13. Change in Control

   13.1  Treatment of Outstanding Awards. Except as may otherwise be provided in
a Participant's Award Agreement, and subject to Section 13.3, upon the
occurrence of a Change in Control, unless otherwise specifically prohibited
under applicable laws, or by the rules and regulations of any governing
governmental agencies or national securities exchanges:

                                       14
<PAGE>

       (a)  Any and all Options granted hereunder shall become immediately
            exercisable, and shall remain exercisable throughout their entire
            term;

       (b)  Any restriction periods and restrictions imposed on Share of
            Restricted Stock that are not performance-based shall lapse;

       (c)  The vesting of all performance-based Awards denominated in Shares
            such as performance-based Restricted Stock and Performance Shares
            shall be accelerated as of the effective date of the Change in
            Control, and there shall be paid out to Participants within thirty
            (30) days following the effective date of the Change in Control a
            pro rata number of Shares based upon an assumed achievement of all
            relevant targeted performance goals and upon the length of time
            within the Performance Period(s) which has elapsed prior to the
            Change in Control. The vesting of Awards denominated in cash, such
            as Performance Units, shall also be accelerated as of effective date
            of the Change in Control and there shall be paid out to Participants
            within thirty (30) days following the effective date of the Change
            in Control a pro rata cash payment with the proration determined as
            a function of the length of time within the Performance Period(s)
            which has elapsed prior to the Change in Control, and based on an
            assumed achievement of all relevant targeted performance goals.

   13.2  Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of this Program (but subject to
the limitations of Section 13.3 hereof) or any Award Agreement provision, the
provisions of this Article 13 may not be terminated, amended, or modified on or
after the date of a Change in Control to affect adversely any Award theretofore
granted under the Program without the prior written consent of the Participant
with respect to said Participant's outstanding Awards; provided, however, the
Board may terminate, amend, or modify this Article 13 at any time and from time
to time prior to the date of a Change in Control.

   13.3  Pooling of Interests Accounting. Notwithstanding any provision of the
Program or of any Award Agreement to the contrary, in the event that the
consummation of a Change in Control is contingent on using pooling of interests
accounting methodology, the Board may, in its sole discretion, take any action
necessary to preserve the use of pooling of interests accounting.

Article 14. Amendment, Modification, and Termination

   14.1  Amendment, Modification, and Termination. Subject to the terms of the
Program, the Board may at any time and from time to time, alter, amend, suspend
or terminate the Program in whole or in part.

                                       15
<PAGE>

   14.2  Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 5.4 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Program; provided that, unless the
Committee determines otherwise at the time such adjustment is considered, no
such adjustment shall be authorized to the extent that such authority would be
inconsistent with the Program's meeting the requirements of Section 162(m) of
the Code, as from time to time amended.

   14.3  Awards Previously Granted. Notwithstanding any provision of the Program
or of any Award Agreement to the contrary (but subject to Sections 6.10 and 13.3
hereof), no termination, amendment, or modification of the Program shall
adversely affect in any material way any Award previously granted under the
Program, without the written consent of the Participant holding such Award.

   14.4  Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Program to a Covered
Employee shall comply with the requirements of Code Section 162(m); provided,
however, that in the event the Committee determines that such compliance is not
desired with respect to any Award or Awards available for grant under the
Program, then compliance with Code Section 162(m) will not be required. In
addition, in the event that changes are made to Code Section 162(m) to permit
greater flexibility with respect to any Award or Awards available under the
Program, the Committee may, subject to this Article 14, make any adjustments it
deems appropriate.

Article 15. Compliance with Applicable Law and Withholding

   15.1  General. The granting of Awards and the issuance of Shares under the
Program shall be subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental agencies or national securities exchanges as
may be required. Notwithstanding anything to the contrary in the Program or any
Award Agreement, the following shall apply:

       (a)  The Company shall have no obligation to issue any Shares under the
            Program if such issuance would violate any applicable law or any
            applicable regulation or requirement of any securities exchange or
            similar entity.

       (b)  Prior to the issuance of any Shares under the Program, the Company
            may require a written statement that the recipient is acquiring the
            Shares for investment and not for the purpose or with the intention
            of distributing the Shares and that the recipient will not dispose
            of them in violation of the registration requirements of the
            Securities Act of 1933.

                                       16
<PAGE>

       (c)  With respect to any person who is subject to Section 16(a) of the
            Exchange Act, the Committee may, at any time, add such conditions
            and limitations to any incentive or payment under the Program or
            implement procedures for the administration of the Program which it
            deems necessary or desirable to comply with the requirements of Rule
            16b-3 of the Exchange Act.

       (d)  If, at any time, the Company, determines that the listing,
            registration, or qualification (or any updating of any such
            document) of any Award, or the Shares issuable pursuant thereto, is
            necessary on any securities exchange or under any federal or state
            securities or blue sky law, or that the consent or approval of any
            governmental regulatory body is necessary or desirable as a
            condition of, or in connection with, any Award, the issuance of
            Shares pursuant to any Award, or the removal of any restrictions
            imposed on Shares subject to an Award, such Award shall not be
            granted and the Shares shall not be issued or such restrictions
            shall not be removed, as the case may be, in whole or in part,
            unless such listing, registration, qualification, consent, or
            approval shall have been effected or obtained free of any conditions
            not acceptable to the Company.

   15.2  Securities Law Compliance. With respect to Insiders, transactions under
this Program are intended to comply with all applicable conditions of Rule 16b-3
or its successors under the 1934 Act. To the extent any provision of the Program
or action by the Committee or the Board fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the Board.

   15.3  Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Program.

   15.4  Share Withholding. With respect to withholding required upon any
taxable event arising as a result of Awards payable in Shares granted hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares to satisfy their tax obligations. With respect to withholding required
upon the exercise of Options, or upon the lapse of restrictions on Shares of
Restricted Stock, Participants may only elect to have Shares withheld having a
Fair Market Value on the date the tax is to be determined equal to the minimum
statutory withholding tax which could be imposed on the transaction. All
elections shall be irrevocable, made in writing, signed by the Participant, and
shall be subject to any restrictions or limitations that the Committee, in its
sole discretion, deems appropriate.

                                       17
<PAGE>

Article 16. Indemnification

   Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Program
and against and from any and all amounts paid by him or her in settlement
thereof, with the Company's approval, or paid by him or her in satisfaction of
any judgement in any such action, suit, or proceeding against him or her,
provided he or she shall give the Company an opportunity, at its own expense, to
handle and defend the same before he or she undertakes to handle and defend it
on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.

Article 17. Successors

   All obligations of the Company under the Program with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

Article 18. Legal Construction

   18.1  Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

   18.2  Severability. In the event any provision of the Program shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Program, and the Program shall be construed and
enforced as if the illegal or invalid provision had not been included.

   18.3  Governing Law. To the extent not preempted by federal law, the Program,
and all Award or other agreements hereunder, shall be construed in accordance
with and governed by the laws of the state of Delaware without giving effect to
principles of conflicts of laws.

                                       18

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