Document:

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                                                                   Exhibit 10.12

                                    CONTRACT

                                     BETWEEN

                              FLAG ATLANTIC LIMITED

                            FLAG ATLANTIC USA LIMITED

                            FLAG ATLANTIC FRANCE SARL

                            FLAG ATLANTIC UK LIMITED

                                       AND

                           ALCATEL SUBMARINE NETWORKS

                         ALCATEL SUBMARINE NETWORKS INC.

                       ALCATEL SUBMARINE NETWORKS LIMITED

------------------------------

  Confidential Treatment has been requested with respect to the portions of
this agreement marked with three asterisks (***) and the redacted material
has been filed separately with the Securities and Exchange Commission.

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                         <C>
1      DEFINITIONS...........................................................4
2      PROVISION OF THE SYSTEM...............................................5
3      VESTING AND WARRANTY OF TITLE.........................................6
4      INSPECTION............................................................7
5      DELIVERY, PACKAGING, CUSTOMS CLEARANCE AND WASTE DISPOSAL.............8
6      ACCEPTANCE PROCEDURES.................................................8
7      LIQUIDATED DAMAGES FOR DELAY IN PERFORMANCE..........................10
8      INJURY TO PERSONS AND DAMAGE TO PROPERTY.............................11
9      DAMAGE TO THE SYSTEM AND THE EQUIPMENT...............................11
10     LOSS DUE TO ACTS OF PURCHASER........................................12
11     OVERALL RESPONSIBILITY...............................................12
12     WARRANTIES...........................................................13
13     SUPPLIER SUPPORT.....................................................16
14     FORCE MAJEURE........................................................16
15     SUSPENSION OF WORK...................................................17
16     CHANGES OR ADDITIONAL WORK...........................................18
17     TERMINATION FOR DEFAULT..............................................18
18     TERMINATION BY NOTICE................................................19
19     SAFEGUARDING INFORMATION AND TECHNOLOGY..............................22
20     INFRINGEMENT.........................................................22
21     SOFTWARE.............................................................23
22     PAYMENT..............................................................24
23     KEEPING OF BOOKS.....................................................26
24     INSURANCE............................................................27
25     AGENTS AND REPRESENTATIVES OF THE PURCHASER..........................31
26     REMOVAL OF PERSONS EMPLOYED ON CONTRACT..............................31
27     SEVERABILITY.........................................................31
28     SUCCESSORS BOUND.....................................................31
29     RELATIONSHIP OF THE PARTIES TO EACH OTHER............................31
30     RESPONSIBILITY FOR OBTAINING PERMITS AND LOCAL LAWS..................31
31     CONSENTS.............................................................32
32     LIMITATION OF LIABILITY..............................................33
33     ALLOCATION OF DUTIES.................................................33
34     NOTICES..............................................................33
35     CAPTIONS.............................................................34
36     LAW AND ARBITRATION..................................................34
37     PRECEDENCE...........................................................35
</TABLE>

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<TABLE>
<S>                                                                         <C>
38     WAIVER...............................................................35
39     RECOVERY OF SUMS DUE.................................................35
40     WATCHING, LIGHTING AND PROTECTION OF SITE............................35
41     PROVISION OF ANCILLARY APPARATUS.....................................35
42     DIARY AND REPORTING..................................................35
43     PROPERTY OF THE PURCHASER............................................36
44     SERVICES RENDERED BY THE PURCHASER...................................37
45     FACILITIES FOR OTHER WORKS...........................................37
46     PUBLICITY............................................................37
47     ENTIRE CONTRACT......................................................37
48     LETTER OF PERFORMANCE GUARANTEE, GUARANTORS..........................38
49     CONTRACT EFFECTIVENESS...............................................38
50     CORRUPT PRACTICES....................................................39
51     SAFETY...............................................................39
</TABLE>

                 Annexes:       1 - Price Schedule
                                2 - Schedule of Progress Payments
                                3 - Plan of Work
                                4 - Technical Specification
                                5 - Confidentiality Agreement
                                6 - Long Term Support
                                7 - Sea State 6 Definition

<PAGE>

THIS CONTRACT, MADE AND ENTERED INTO THIS 20TH DAY OF SEPTEMBER, 1999.

BETWEEN:

         FLAG Atlantic Limited, whose registered office is at The Emporium
         Building, 69 Front Street-4th Floor, Hamilton HM12, Bermuda.

         FLAG Atlantic USA Limited, whose registered office is at 9 East
         Loockerman Street Dover, Delaware USA.

         FLAG Atlantic France Sarl, whose registered office is at 72 rue du
         Faubourg Saint-Honore 75008 Paris France.

         FLAG Atlantic UK Limited, whose registered office is at 103 Mount
         Street, London W1Y 5HE UK, hereinafter called the "Purchaser"

AND:

         Alcatel Submarine Networks, whose registered office is at 72 avenue de
         la Liberte 92723 Nanterre, France.

         Alcatel Submarine Networks Inc., whose registered office is at 15540
         North Lombard Street, Portland Oregon USA.

         Alcatel Submarine Networks Limited, whose registered office is at
         Christchurch Way, Greenwich, London SE10 OAG UK.

hereinafter called the "Supplier" and, together with the Purchaser, each a
"Party" and collectively, the "Parties".

WHEREAS, the Purchaser proposes to provide an integrated optical fibre cable
system linking North America and Europe (hereinafter called the "FLAG Atlantic
Fibre Optic Cable System"); and

WHEREAS this Contract will supercede the contract for a FLAG Atlantic-1 Fibre
Optic Cable System signed on 12 January 1999, between FLAG Atlantic Limited and
Alcatel Submarine Networks; and

WHEREAS the FLAG Atlantic Fibre Optic Cable System is to be as described in the
Technical Specification, Annex 4, forming part of this Contract; and

WHEREAS, the Supplier has been selected to engineer, provide, install, test,
commission and warrant the System as defined in Article 1 hereof; and

WHEREAS, the Purchaser is authorised to enter into this Contract with the
Supplier; and

WHEREAS, the Parties to this Contract now desire to define the terms and
conditions upon which the System will be engineered, provided, installed,
tested, commissioned and warranted by the Supplier.

NOW, THEREFORE, the Parties hereto, in consideration of the mutual covenants
herein expressed, covenant and agree with each other as follows:

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1        DEFINITIONS

         The following definitions and those contained in the Annexes shall
         apply throughout this Contract:

         1.1      "Ancillary Apparatus" means all materials, tools, plant,
                  appliances and other things which are for the time being on
                  the Site for use or otherwise in connection with the Work but
                  which are not intended for incorporation in the System.

         1.2      "Commissioning Report" means the report provided by the
                  Supplier to the Purchaser following system commissioning which
                  is part of the acceptance handbook.

         1.3      "Contract Sum" means the price payable for the full and proper
                  performance of this Contract, including any and all Contract
                  Variations, in accordance with these Terms and Conditions. The
                  breakdown of the Contract Sum is included in Annex 1 hereof.
                  The Contract Sum is for DDU (Incoterms 1990) delivery
                  conditions.

         1.4      "Contract Variation(s)" means any modification to this
                  Contract, consisting of additions, deletions or changes hereto
                  which may affect either the Contract Sum, the Plan of Work,
                  the Technical Specification or any other provision of this
                  Contract and which shall be the object of a formal amendment
                  to this Contract executed by both Parties hereto.

         1.5      "Design Life" means that period of time extending for a period
                  of twenty-five (25) years from the date of RFPA hereunder for
                  the System.

         1.6      "Equipment" means all materials, equipment and things
                  including Software supplied or procured or to be supplied or
                  procured by the Supplier for incorporation in the System and
                  includes all spares.

         1.7      "Factory Release Certificate" or "Release Certificate" means a
                  certificate confirming the Purchaser's acceptance of an item
                  and indicating clearance for billing and/or dispatch to the
                  designated Site.

         1.8      "Laying Report" means a report by the Supplier to the
                  Purchaser following each marine operation.

         1.9      "Phase" means each of Phase 1 and Phase 2as described in
                  Annex 4.

         1.10     "Plan of Work" means the detailed programme of manufacturing,
                  delivery, installation, testing and commissioning of the
                  System contained in Annex 3 hereof which the Supplier has
                  agreed to implement. A more detailed project implementation
                  plan shall be provided to the Purchaser by the Supplier and
                  agreed between the Parties within 30 days from the date of
                  signature hereof.

         1.11     "Quality Assurance Procedures" means all procedures referred
                  in the Supplier's QA Manual including qualification,
                  certification and manufacturing test and acceptance procedures
                  reviewed and accepted by the Purchaser.

         1.12     "Ready for Provisional Acceptance (RFPA)" means the date on
                  which a Certificate of Provisional Acceptance is issued
                  pursuant to the Terms and Conditions of this Contract.

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         1.13     "Site(s)" means the buildings and/or land and/or other places
                  allocated to the Supplier by the Purchaser for the purposes of
                  this Contract.

         1.14     "Software" means all programs, data, source code, object code,
                  documentation and operating systems, whether in writing, in
                  firmware, or in any other form, which are necessary for the
                  purposes of the System; including documentation, any support
                  tools which are not commercially available, and data connected
                  with the development and support as well as any upgrade or
                  enhancement thereto that may be required under the warranty
                  provisions hereof.

         1.15     "Supplier's Premises" means any place or location including
                  any vessel where the Supplier or any of its sub-contractors
                  carries out or performs in whole or in part its obligations
                  under this Contract, other than Sites.

         1.16     "System" means the whole of the submerged plant and associated
                  terminal equipment of the FLAG Atlantic Fibre Optic Cable
                  System provided between and among, and including the System
                  Interfaces in, the cable stations at:

                  Lands End, Long Island north shore, Long Island south shore
                  and St Brieuc.

                  The System (including the Phases) is more specifically defined
                  in the Technical Specification, Annex 4 hereof.

         1.17     "System Interface" means the nominal STM-4 (1x1 protected)
                  digital Input/output ports on the digital distribution frame
                  where the System connects with other transmission facilities
                  or equipment.

         1.18     "Unusually Severe Weather Conditions" means weather that is
                  worse than Sea State 6. Sea State 6 is as defined by the chart
                  shown in Annex 7.

         1.19     "Warranty Period" has the meaning set forth in Article 12.

         1.20     "Work" means all work set out in the Plan of Work which is
                  necessary to be carried out in the performance of the
                  Supplier's obligations under this Contract, and includes the
                  supply of all Equipment necessary for the provision of the
                  System.

2        PROVISION OF THE SYSTEM

         2.1      The Supplier agrees to develop, engineer, provide, install,
                  test and commission, or cause to be developed, engineered,
                  provided, installed, tested and commissioned, and to warrant
                  the System as well as to carry out and complete the route
                  survey in accordance with this Contract which includes the
                  Price Schedule contained in Annex 1, the Schedule of Progress
                  Payments contained in Annex 2, the Plan of Work contained in
                  Annex 3, the Technical Specification contained in Annex 4, the
                  Confidentiality Agreement contained in Annex 5 and the Long
                  Term support contained in Annex 6.

         2.2      The Supplier shall not, without prior consent of the
                  Purchaser, such consent not to be unreasonably withheld,
                  assign this Contract or sub-contract any significant part of
                  the Work, or assign, mortgage, charge or encumber any benefit
                  whatsoever arising or which may arise under this Contract. In
                  any event, the Supplier shall not

                                                                          Page 5
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                  be relieved of the responsibility under this Contract for such
                  parts of the Work as are sub-contracted and the Supplier shall
                  be responsible and liable for the acts or defaults of any
                  sub-contractor or their employees, servants and agents, as
                  fully as if they were the acts or defaults of the Supplier or
                  the Supplier's employees, servants and agents. The Supplier
                  shall ensure that any sub-contracts entered into by the
                  Supplier shall contain such provisions of this Contract as
                  should be made applicable to such sub-contracts. Without
                  limiting the generality of the foregoing, the Purchaser shall
                  have the right to approve all vessels employed in the
                  performance of the Work.

         2.3      The Purchaser shall have the option to nominate the marine
                  subcontractor in accordance with the terms and conditions of
                  this contract to perform the marine installation, together
                  with defined scope of work and price . In the event of such
                  nomination ASN shall enter into negotiations, in good faith,
                  to agree terms, including but not limited to contract terms
                  and schedule. In the event that terms cannot be agreed, which
                  as a minimum shall be a flowdown of the head contract terms
                  and at prices agreed with the Purchaser, within a reasonable
                  time, then the Purchaser shall have the right to nominate
                  another subcontractor or give the Supplier the option to
                  appoint a subcontractor of their own choice. The Parties shall
                  co-operate with each other to ensure timely agreement of the
                  appointment of the marine installer.

         2.4      The Purchaser has the right, at its discretion, to attend or
                  participate in any activity of the Work. For this purpose, the
                  Supplier shall provide, or cause to be provided,
                  accommodation, food and communications facilities for two (2)
                  Purchaser representatives aboard any vessel and offices,
                  supplies and communication facilities on all other sites. Such
                  attendance or participation on the part of the Purchaser shall
                  not relieve the Supplier from its obligation to carry out and
                  complete the Work in accordance with the provisions of this
                  Contract.

3        VESTING AND WARRANTY OF TITLE

         3.1      Except for Software, which is subject to Article 21, title
                  (free and clear of all liens other than those deriving through
                  or from the Purchaser) to any Equipment provided by the
                  Supplier for incorporation in or attachment to the System
                  shall pass to and vest in the Purchaser upon completion of the
                  manufacture of said Equipment or part thereof and payment
                  therefor, as set out in Article 22.1.2. Title (free and clear
                  of all liens other than those deriving through or from the
                  Purchaser) to Equipment and to each part of the System shall
                  otherwise pass upon issuance of a Certificate of Provisional
                  Acceptance or a Certificate of Commercial Acceptance covering
                  such Equipment and such part of the System as provided in
                  Article 6, as the case may be. The Supplier shall keep records
                  to identify Equipment where title has passed to the Purchaser,
                  and shall afford the Purchaser the right to review such
                  records.

         3.2      Upon transfer of title to the Purchaser of any part of the
                  System, and of any Equipment furnished by the Supplier or its
                  sub-contractors, the Supplier warrants that such part of the
                  System, and such Equipment furnished by the Supplier or its
                  sub-contractors hereunder, are free from claims liens,
                  encumbrances and security interests arising by and through the
                  Supplier or such sub-contractors but not otherwise. For any
                  part of the System or Equipment, title to which has been
                  transferred to the Purchaser prior to the issuance of a
                  Certificate of Provisional Acceptance or a Certificate of
                  Commercial Acceptance covering such part of the

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                  System or such Equipment, as relevant, is issued, the Supplier
                  warrants that upon issuance of such certificate for part of
                  the System and/or such Equipment, as relevant, is free from
                  claims, liens, encumbrances and security interests arising by
                  and through the Supplier or such sub-contractors but not
                  otherwise.

4        INSPECTION

         4.1      The Purchaser shall at all times have full and free access to
                  the Supplier's Premises for the purposes of inspection; and
                  the Supplier shall afford all such reasonable accommodation
                  and facilities including equipment, materials and labour for
                  such purposes.

         4.2      To the extent required by the Purchaser, the Supplier shall
                  assist the Purchaser to carry out the following inspection
                  activities:

                  4.2.1    to audit the Supplier's quality assurance procedures
                           and their application to the work carried out under
                           this Contract, including without limitation,
                           manufacture, development, and raw materials and
                           components provision; and

                  4.2.2    to inspect all parts of the Equipment including the
                           process of manufacture in all its stages, the
                           examining and testing of every article and the
                           material used in the manufacture thereof and the
                           examining of the Supplier's testing procedures and
                           the Supplier's books and records relating to the
                           manufacture, inspection and testing of the Equipment
                           and to any other service to be rendered under this
                           Contract, to permit the Purchaser to gain assurance
                           that the quality is sufficient to meet the
                           requirements of the Technical Specification, Annex 4.

         4.3      At any time during manufacture and installation, if any part
                  of the Work or the Equipment does not, or will not, comply
                  with this Contract, the Purchaser may reject the same by
                  notice in writing. Upon rejection, the Supplier shall
                  forthwith at its own expense rectify the non-compliance in
                  accordance with any directions of the Purchaser and no charges
                  shall be made by the Supplier in respect thereof.

         4.4      The Supplier shall secure rights of access for the Purchaser
                  to the premises of all its sub-contractors.

         4.5      No part of the Equipment shall be shipped until a Release
                  Certificate has been issued for it in accordance with Annex 10
                  of Section 1 to Annex 4.

         4.6      The release of parts of the Equipment in accordance with
                  Article 4.5 above shall not in any way prejudice any right or
                  remedy which the Purchaser may have against the Supplier, or
                  relieve the Supplier of any of its responsibilities under this
                  Contract.

         4.7      Any expression of satisfaction made by or on behalf of the
                  Purchaser in respect of any aspect of the Work, carried out or
                  proposed by the Supplier, shall not relieve the Supplier of
                  any of its responsibilities under this Contract.

                                                                          Page 7
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5        DELIVERY, PACKAGING, CUSTOMS CLEARANCE AND WASTE DISPOSAL

         5.1      The Supplier shall at its own expense and its own
                  responsibility carry out all loading and unloading of the
                  Equipment, and its transportation to the Sites and to the
                  nominated storage premises for the spare cable and repeaters,
                  which will be indicated prior to shipment by the Purchaser.

         5.2      The Supplier shall be responsible for supplying packaging for
                  the Equipment. This packaging must be suitable for the safe
                  transportation of the Equipment by land, sea or air as
                  appropriate.

         5.3      The Supplier shall be responsible for performing all import
                  formalities for and on behalf of the Purchaser and for paying
                  VAT, customs duties or other levies and duties due to such
                  formalities, to the relevant authorities on behalf of and for
                  the Purchaser.

         5.4      The Supplier shall be responsible to dispose of all waste
                  materials in accordance with any local or national
                  environmental and/or other regulations. The Supplier shall
                  keep the Site(s) free from waste materials or rubbish caused
                  by the performance of the Work or its employees and upon
                  completion of the Work the Supplier shall leave the Site(s) in
                  a clean and orderly condition.

         5.5      Customs declarations shall be made for and on behalf of the
                  Purchaser who agrees to be or designate the Importer of
                  Record.

6        ACCEPTANCE PROCEDURES

         6.1      General

                  6.1.1    All references to test periods in this Article and
                           all references to tests shall be to the test periods
                           and tests defined in, Annex 10 of Section 1 to Annex
                           4 hereof, respectively.

         6.2      Acceptance Procedures

            The System will be accepted as described in the following articles.

                  6.2.1    PROVISIONAL ACCEPTANCE

                           6.2.1.1  The System, Phase 1 and Phase 2 shall be
                                    provisionally accepted and a certificate
                                    therefor promptly issued when:

                                    6.2.1.1.1 the commission results of Annex 10
                                              of Section 1 to Annex 4 hereof
                                              indicate conformance of the
                                              relevant Phase ; and

                                    6.2.1.1.2 in the case of the System, the
                                              Supplier has carried out the Work
                                              required by this Contract (other
                                              than minor deficiencies, which
                                              will not affect the operation and
                                              maintenance of the System in
                                              accordance with Annex 4).

                                                                          Page 8
<PAGE>

                                    6.2.1.1.3 The Certificate of Provisional
                                              Acceptance shall bear the actual
                                              date the System or relevant Phase,
                                              as appropriate, is Ready for
                                              Provisional Acceptance, which
                                              shall be the date when
                                              Articles 6.2.1.1.1 and 6.2.1.1.2
                                              have been satisfied and may
                                              contain a written list of any
                                              outstanding items required by
                                              this Contract which do not affect
                                              the operation and maintenance of
                                              the System or relevant Phase, as
                                              applicable, in accordance with
                                              Annex 4. The Supplier shall remedy
                                              such items in accordance with a
                                              program to be mutually agreed upon
                                              at that time.

                           6.2.1.2  In the event that a Certificate of
                                    Commercial Acceptance under Article 6.2.3
                                    hereof is issued, the relevant Phase, as
                                    applicable, must conform fully to Annex 4,
                                    as indicated by the satisfactory completion
                                    of tests in accordance with, Annex 10 of
                                    Section 1 to Annex 4 hereof before a
                                    Certificate of Provisional Acceptance is
                                    issued. If the test results indicate that
                                    the relevant Phase conforms to Annex 4, the
                                    relevant Phase shall be provisionally
                                    accepted. Promptly thereafter, the Purchaser
                                    may issue a Certificate of Provisional
                                    Acceptance.

                           6.2.1.3  Unless title has already passed to the
                                    Purchaser, title to the relevant Phase or
                                    the System, as applicable, shall pass to the
                                    Purchaser when the Certificate of
                                    Provisional Acceptance is issued.

                  6.2.2    FINAL ACCEPTANCE

                     The Purchaser shall issue a Certificate of Final Acceptance
                     after the expiration of the Supplier's Warranty Period
                     provided that, at the expiration of the Supplier's Warranty
                     Period, the System conforms fully to Annex 4 or such other
                     performance requirements which may have been agreed between
                     the Purchaser and the Supplier. Final Acceptance will be
                     based upon the results of the Final Acceptance Tests
                     conducted by the end of the Supplier's Warranty Period or,
                     if the Purchaser decides not to perform Final Acceptance
                     Tests, a Certificate of Final Acceptance shall be granted
                     promptly following the end of the Supplier's Warranty
                     Period. The issuance of the Certificate of Final Acceptance
                     will not be unreasonably withheld or delayed, but in the
                     event that a pattern of failure or pattern of degradation
                     develops that is likely to cause the System to fail to meet
                     the requirements of Annex 4 or such other performance
                     requirements which may have been agreed between the
                     Purchaser and the Supplier to cover the Design Life, Final
                     Acceptance may be withheld until it can be reasonably
                     demonstrated that such pattern of failures or pattern of
                     degradation will not continue and the Supplier shall
                     promptly take all reasonable steps to that effect.

                  6.2.3    COMMERCIAL ACCEPTANCE

                           6.2.3.1  In the event that the relevant Phase does
                                    not meet the requirements of Article 6.2.1
                                    for the issuance of a Certificate of

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                                    Provisional Acceptance, but the relevant
                                    Phase is nevertheless acceptable for use by
                                    the Purchaser, then the Purchaser may, with
                                    the agreement of the Supplier, issue a
                                    Certificate of Commercial Acceptance for the
                                    relevant Phase.

                           6.2.3.2  The Certificate of Commercial Acceptance
                                    will contain a list of outstanding work
                                    items on which corrective action will be
                                    expected to be undertaken in order to place
                                    the relevant Phase in conformity with Annex
                                    4.

                           6.2.3.3  When the Certificate of Commercial
                                    Acceptance is issued, title to the relevant
                                    Phase, as applicable, and responsibility for
                                    maintenance thereof shall pass to the
                                    Purchaser, if such responsibility has not
                                    already passed. The Supplier shall remain
                                    responsible for any damage or loss to the
                                    System occurring as a result of the
                                    negligent or intentional acts or omissions
                                    of the Supplier, its agents or
                                    sub-contractors.

                           6.2.3.4  The issuance of a Certificate of Commercial
                                    Acceptance shall not constitute a waiver of
                                    the Supplier's obligation to provide the
                                    relevant Phase in compliance with the
                                    requirements of Annex 4. In the event that
                                    prior to RFPA for the relevant Phase the
                                    performance of the part of the System that
                                    was acceptable deteriorates from the
                                    performance established at the time of
                                    Commercial Acceptance, the Supplier shall be
                                    responsible for re-establishing promptly
                                    performance of such part to at least the
                                    level of performance at the time of
                                    Commercial Acceptance and bearing all costs
                                    of those corrective actions.

                           6.2.3.5  Following the issuance of a Certificate of
                                    Commercial Acceptance, the Supplier shall as
                                    soon as practicable remedy all outstanding
                                    work items so as to allow tests to be
                                    conducted in accordance with, Annex 10 of
                                    Section 1 to Annex 4 hereof.

7        LIQUIDATED DAMAGES FOR DELAY IN PERFORMANCE

         7.1      If the RFPA for any Phase does not occur by the applicable
                  date defined below or any extension thereto allowed or agreed
                  to by the Purchaser hereunder, then and in such case the
                  Supplier shall pay to the Purchaser as liquidated damages for
                  delay in performance a sum calculated as follows per 24 hour
                  period or part thereof and subject to the maximum set out in
                  Article 7.2.

<TABLE>
<CAPTION>
--------------------- ------------------------ -------------------------------------------- -----------------
Delayed Work          RFPA Date                LD Base                                      LD rate
--------------------- ------------------------ -------------------------------------------- -----------------
<S>                   <C>                      <C>                                          <C>
Phase 1               31 March 2001            Contract Sum for Phase 1 ("CS1")             0.05%
                                                                                            *CS1/day
--------------------- ------------------------ -------------------------------------------- -----------------
Phase 2               30 June 2001             Contract Sum ("CS")                          0.05%
                                                                                            *CS/day
--------------------- ------------------------ -------------------------------------------- -----------------

--------------------- ------------------------ -------------------------------------------- -----------------
</TABLE>

                                                                         Page 10
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N.B.     Liquidated damages cannot be paid for delay of more than one Phase at
         the same time. In the event more than one Phase is delayed payment will
         be at the higher applicable base.

         7.2      Liquidated damages for delay in performance pursuant to this
                  Article 7 shall not in any circumstances exceed 10% of the
                  Contract Sum.

         7.3      The right of the Purchaser to recover liquidated damages for
                  delay in performance as provided in Articles 7.1 and 7.2 above
                  shall not be waived by any concession granted or certificate
                  given or payment made to the Supplier.

         7.4      Payment of liquidated damages shall be in full satisfaction of
                  the Supplier's liability for delay.

8        INJURY TO PERSONS AND DAMAGE TO PROPERTY

         8.1      The Supplier assumes responsibility for, and shall indemnify
                  and save the Purchaser harmless from, any and all claims,
                  losses, expenses and damages for injuries to or death of any
                  persons including the employees of the Supplier and those of
                  its sub-contractors or agents and the employees of the
                  Purchaser, and for damage to property except as provided in
                  Article 9 (but excluding consequential, special or indirect
                  damages such as those arising as a result of interruption of
                  telecommunications services provided by the Purchaser, its
                  representatives, agents, lessees, customers and
                  correspondents), where such injuries, deaths, damages, claims,
                  losses and/or expenses result from the negligent or
                  intentional acts or omissions of the Supplier, its
                  sub-contractors, or agents in the provision or construction by
                  the Supplier, its sub-contractors or agents, of the System.
                  The Supplier in any case assumes responsibility for, and shall
                  indemnify and save the Purchaser harmless from, any and all
                  claims for injuries to or death of any of the employees of the
                  Supplier and those of its sub-contractors or agents and for
                  damage to property of such employees or of the Supplier, its
                  sub-contractor or agents.

         8.2      In the event of any claim being made or action brought against
                  the Purchaser arising out of the matters referred to in this
                  Article the Supplier shall be promptly notified thereof, and
                  may at its own expense conduct all negotiations for the
                  settlement of the same and any litigation that may arise
                  therefrom. The Purchaser shall not, unless and until the
                  Supplier or its Insurers shall have failed, within a
                  reasonable period of time but in any event no more than 30
                  days after any such action, to take over or diligently carry
                  on the conduct of the negotiations or litigation, make any
                  admission which might be prejudicial thereto. The Purchaser
                  shall, at the request of the Supplier, afford all available
                  assistance for the purpose of contesting any such claim or
                  action and shall be repaid by the Supplier any expenses
                  incurred in so doing.

9        DAMAGE TO THE SYSTEM AND THE EQUIPMENT

         9.1      Notwithstanding the transfer of title to the Purchaser in
                  accordance with Article 3, the Supplier assumes responsibility
                  for all damage to or loss of the Equipment up to the date of
                  the Certificate of Provisional Acceptance or Certificate of
                  Commercial Acceptance, whichever is the earlier, for such
                  Equipment.

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<PAGE>

         9.2      The Supplier shall, with all possible speed, repair or replace
                  any such loss or damage and notwithstanding such loss or
                  damage the Supplier shall proceed with the performance of the
                  Work and completion thereof in accordance with this Contract.
                  The cost of such repair or replacement shall be at the expense
                  of the Supplier, save that the Purchaser shall be liable to
                  the extent that such loss or damage results from the
                  negligence or default of employees, agents, or contractors
                  (other than the Supplier and the Supplier's employees, agents
                  or sub-contractors) of the Purchaser acting in the course of
                  their employment as such.

         9.3

                  9.3.1    Where any such loss or damage is caused by a third
                           party to a part of any Equipment which, although
                           vested in the Purchaser, remains at the risk of the
                           Supplier, the Purchaser shall, on demand, assign to
                           the Supplier in writing the benefits of any right or
                           remedy which the Purchaser may have or allege to have
                           against such third party, whether in contract, tort
                           or otherwise, arising out of such loss or damage, in
                           order that the Supplier may initiate proceedings
                           against such third party in its own name.

                  9.3.2    The Supplier agrees to fully indemnify the Purchaser
                           against all actions, costs, claims, demands, charges,
                           expenses or losses which the Purchaser may incur or
                           for which it may become liable, arising from such
                           assignment or from any proceedings brought by the
                           Supplier arising therefrom.

10       LOSS DUE TO ACTS OF PURCHASER

         10.1     The Supplier shall not be responsible for any loss, damage,
                  delay or failure of performance resulting directly or
                  indirectly from the acts or failure to act of the Purchaser,
                  not requested by the Supplier.

         10.2     If any such loss, damage, delay or failure causes an increase
                  in the cost of performance or the time required for
                  performance of any of the Supplier's duties of obligations
                  under this Contract, the Supplier shall be entitled to an
                  equitable adjustment in the time for completion of the Work
                  hereunder and to an equitable adjustment in the Contract Sum
                  provided that the increased cost is not recoverable from
                  insurance proceeds. The Supplier shall use its reasonable best
                  efforts to provide all necessary documentation required to
                  fully substantiate and support any claim pursuant to the
                  foregoing and shall use its reasonable best efforts to
                  minimise the effect on the Contract Sum and the time for
                  completion of the Work.

         10.3     The Supplier shall inform the Purchaser promptly of any
                  occurrence covered under this Article 10.

11       OVERALL RESPONSIBILITY

         11.1     The Supplier shall be held by the acceptance of this Contract
                  to approve of the System in the whole and in detail and shall
                  accept responsibility for the satisfactory performance of the
                  System on completion of the whole process of manufacture,
                  supply and installation thereof and the Supplier shall remain
                  responsible for the execution of this Contract, for the
                  overall working of the System and for its guarantee.

                                                                         Page 12
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         11.2     If the Supplier is of the opinion that any part of the Work
                  undertaken by the Purchaser would adversely affect the
                  Supplier's ability to execute this Contract, whether as a
                  result of the negligence or default of the Purchaser or for
                  any other reason, the Supplier shall immediately notify the
                  Purchaser in writing. Such notice shall be supported by the
                  Supplier's reasons for so opining.

         11.3     The Supplier shall only be relieved for time and cost under
                  this Article if the Purchaser has not taken appropriate action
                  within a reasonable time in response to a notification from
                  the Supplier in accordance with Article 11.2.

         11.4     The Supplier shall be solely responsible for the design of the
                  System and for the adequacy thereof and shall not claim any
                  additional payment nor be relieved from any obligation imposed
                  on it by this Contract on grounds of misunderstanding or
                  incorrect or insufficient information received from and/or
                  supplied by the Purchaser on any matter whatsoever related to
                  this Contract.

         11.5     The Supplier's responsibility for the design of the System
                  shall not in any way be diminished nor shall its design
                  approach be restricted or limited by the Purchaser's
                  acceptance of the Supplier's guidance or recommendations as to
                  engineering standards and design specifications or by the
                  Purchaser's suggestions or recommendations on any aspect of
                  the said design.

         11.6     If in the opinion of either Party any part of the Work as
                  detailed in the Plan of Work is, or is likely to be, delayed
                  (including any development or qualification being undertaken)
                  then the Parties shall meet in order to agree a work around
                  plan in order to assure the timely completion of the Work. If
                  the delay is attributable to the Supplier then any agreed work
                  around plan shall be at the Suppliers cost.

12       WARRANTIES

         12.1     The Supplier warrants that the System shall be designed so
                  that (i) the performance of the System shall be in accordance
                  with the Technical Specification, Annex 4 for the Design Life
                  and (ii) during the Design Life, no pattern of failure or
                  pattern of degradation shall develop that is likely to cause
                  the System to fail to meet the requirements of Annex 4 (or
                  such other performance requirements which may have been agreed
                  between the Purchaser and the Supplier) over the Design Life
                  (such warranty hereinafter called the "Design Life Warranty").

                  For the purpose of this Contract the warranty period
                  ("Warranty Period") for each Phase shall commence at RFPA of
                  the relevant Phase and continue for a period of two (2) years
                  for terminal equipment and five (5) years for submerged plant
                  from the RFPA of Phase 2 .

                  The Supplier in addition warrants that during the Warranty
                  Period the System, including the spares set forth in Annex 1,
                  shall conform fully to the performance requirements set forth
                  in the Technical Specification, Annex 4, or such other
                  performance requirements mutually agreed upon as acceptable by
                  the Supplier and the Purchaser (hereinafter called the
                  "Defects Warranty"). However, the Warranty Period of any items
                  not provided or requiring repair or replacement at the date of
                  RFPA of Phase 2 shall start from the date(s) such items are
                  provisionally accepted by the Purchaser, if later than RFPA of
                  Phase 2.

                                                                         Page 13
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                  Ships costs associated with repairs to the submerged plant in
                  years 3 through 5 shall be to the Purchaser's account.

         12.2     During the Warranty Period for the relevant item, the
                  Purchaser may elect, at its sole option, to undertake the
                  following repairs which are covered by the Defects Warranty:

                  12.2.1   System repairs, involving the repair of cable or the
                           replacement of cable and/or repeaters and branching
                           units, whether at-sea or on-land provided that such
                           repairs are carried out in accordance with the
                           Supplier's declared procedures which will be detailed
                           and provided in the relevant Supplier's maintenance
                           handbook or, at the option of the Purchaser, in
                           accordance with other procedures which have been
                           approved by the Supplier; and

                  12.2.2   The substitution of spare cards in cable station
                           equipment, provided that such substitutions are
                           carried out in accordance with the Supplier's
                           declared procedures which will be detailed and
                           provided in the relevant Supplier's maintenance
                           handbook or, at the option of the Purchaser, in
                           accordance with other procedures which have been
                           approved by the Supplier.

                  12.2.3   Except as otherwise provided in the last sentence of
                           Article 12.1, the Supplier shall reimburse the
                           Purchaser for the cost of such repairs, subject only
                           to the limitation of liability specified in Article
                           32. For the purpose of this provision, the cost of
                           repair shall include, but not be limited to, the cost
                           of any additional equipment necessary to effect the
                           repair, the cost of making the repair, including all
                           costs of the cable repair ship(s) that may be
                           required to make the repair, the cost of re-burying
                           the portion of the System that was previously buried,
                           the cost of labour and engineering assistance
                           required to make the repair, and all associated
                           costs, such as, but not limited to, shipping,
                           permits, customs duties and taxes. To the extent that
                           the Purchaser uses its spare equipment in making the
                           repair, the Supplier shall replace, in kind, such
                           spare equipment used by the Purchaser to effect such
                           repair. The replacement of such spare equipment shall
                           be made at a time mutually agreed to by the Purchaser
                           and the Supplier, but in any event no later than the
                           end of the period indicated in Annex 6.

                  12.2.4   Any equipment that is discovered to be defective or
                           faulty and is recovered during a Defects Warranty
                           repair by the Purchaser shall be retrieved by the
                           Supplier.

                  12.2.5   The Supplier shall be entitled to have a
                           representative present on board ship to observe
                           at-sea repairs.

         12.3

                  12.3.1   The Supplier shall perform all warranty repairs other
                           than those that the Purchaser elects to perform
                           pursuant to Article 12.2. Except as otherwise
                           provided in the last sentence of Article 12.1, the
                           Supplier shall bear the costs of each such repair
                           required during the Warranty Period subject only to
                           the limitation of liability specified in Article 32.
                           For the purposes of this provision, the cost of
                           repair shall include, but not be

                                                                         Page 14
<PAGE>

                           limited to, the cost of any component, equipment or
                           materials requiring replacement, the cost of any
                           additional equipment necessary to effect the repair,
                           the cost of making the repair, and including all
                           costs of cable repair ships that may be required to
                           make the repair, the cost of re burying the portion
                           of the system that was previously buried, the cost of
                           labour and engineering assistance required to make
                           the repair, and all associated costs, such as, but
                           not limited to, shipping, permits, customs duties and
                           taxes.

                  12.3.2   The timing and method of repair shall be agreed
                           between the Parties and the Supplier shall effect all
                           such warranty repairs through the use of repair
                           materials supplied by it. However, the Supplier may
                           use, with the agreement of the Purchaser, the
                           materials needed to effect a repair from the
                           Purchaser's available spare materials. The Supplier
                           shall replace, in kind, such materials supplied from
                           the Purchaser's spare materials. The replacement of
                           such materials shall be made at a time mutually
                           agreed by the Purchasers and the Supplier, but in any
                           event not later than the end of the period indicated
                           in Annex 6.

                  12.3.3   The Supplier shall make every reasonable effort to
                           make all such warranty repairs to the System to
                           minimise the period of time that the FLAG Atlantic
                           Fibre Optic Cable System is out-of-service for
                           testing and repair. In the event that the Supplier
                           fails to make the repair promptly or to make every
                           reasonable effort to minimise the period of time that
                           the FLAG Atlantic Fibre Optic Cable System is
                           out-of-service for repair, the Purchaser may repair
                           the System and collect the full costs of such repair
                           from the Supplier. The Purchaser agrees to co-operate
                           with the Supplier to facilitate the Supplier's repair
                           activity.

         12.4

                  12.4.1   All materials used to repair the System, which are
                           not supplied from the Purchaser's spare stock, shall
                           be warranted:

                           12.4.1.1 for a period of two (2) years for terminal
                                    equipment and five (5) years for submerged
                                    plant from the date of repair or
                                    replacement; or

                           12.4.1.2 from the date of repair or replacement until
                                    a date four (4) years for terminal equipment
                                    and seven (7) years for submerged plant from
                                    the date of issuance of the Certificate of
                                    Provisional Acceptance for the System,

                           whichever period is completed first.

                           12.4.1.3 All materials supplied to replenish the
                                    Purchaser's spare stock, in accordance with
                                    Article 12.2.3 or 12.3.2, shall be
                                    warranted:

                           12.4.1.4 for a period of two (2) years for terminal
                                    equipment and five (5) years for submerged
                                    plant from the date of repair or
                                    replacement; or

                           12.4.1.5 from the date of repair or replacement until
                                    a date four (4) years for terminal equipment
                                    and seven (7) years for submerged plant

                                                                         Page 15
<PAGE>

                                    from the date of issuance of the Certificate
                                    of Provisional Acceptance for the System,

                                    whichever period is completed first.

         12.5     If during the Warranty Period defects are found on frequent
                  occasions in any part(s) of the Work, such part(s) shall not
                  be repaired but shall be replaced by new part(s) which are
                  fully compatible with the System and have characteristics
                  equal or equivalent to the part(s) originally provided.

         12.6     The warranty of the System shall not apply to failures to
                  conform to Annex 4 which result from damage caused by
                  negligent acts or omissions of the Purchaser, its agents or
                  representatives (including that resulting from the negligent
                  or improper use of the System or from repair of the System by
                  the Purchaser not in accordance with the Supplier's declared
                  procedures or other procedures approved by the Supplier), or
                  which result from the causes set forth in Articles 10 and 14
                  hereof.

13       SUPPLIER SUPPORT

         13.1     In addition to the Design Life Warranty and the Defects
                  Warranty provided in the preceding Article, the Supplier
                  further warrants that for the Design Life of the System, the
                  Supplier will supply such spare parts, replacement equipment
                  and repair service, and Software support for the System as may
                  be necessary for its operation, maintenance or repair. Where
                  identical parts cannot be supplied, the Supplier shall provide
                  fully compatible parts with characteristics equal or
                  equivalent to those originally provided. Unless provided for
                  in Annex 6 such parts, equipment and services shall be
                  supplied under reasonable conditions of price and delivery.

         13.2     Notwithstanding Article 13.1, if for any reason the Supplier
                  and /or any of its sub-contractors intends to cease
                  manufacturing identical spare parts and replacement equipment,
                  the Supplier shall give a minimum one (1) year's prior written
                  notice to the Purchaser to allow the Purchaser to order from
                  the Supplier any required spare parts and replacement
                  equipment, and shall forthwith provide full details of the
                  arrangements to provide equivalents.

         13.3     In the event that the Supplier fails to comply with the
                  provisions of Article 13.1 or 13.2 or this Contract is
                  terminated for default, the Purchaser may require the Supplier
                  to provide the Purchaser with any and all manufacturing
                  drawings and related specifications as well as bills of
                  materials giving the description, in-house numbers and/or code
                  numbers for all such parts or equipment or to give, in cases
                  where the parts or equipment were not manufactured by the
                  Supplier, the manufacturer's name, description of the parts or
                  equipment and code numbers, and to give tolerances for
                  matching of parts or equipment and finally, for matched parts
                  or equipment, to give lists of matched parameters and
                  tolerances and the Purchaser shall have the right to use the
                  same only for the purpose of continual maintenance, repair and
                  support of the System. In the case of Software the Supplier
                  will provide Source Code together with documentation to enable
                  the Purchaser to maintain the System.

14       FORCE MAJEURE

                                                                         Page 16
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         14.1     Neither Party shall be in default if any failure to perform
                  this Contract arises from any cause which is beyond its
                  reasonable control and without its fault or negligence and
                  could not have been avoided through reasonable efforts,
                  including, but not limited to, acts of God or of the public
                  enemy, acts or failure to act of any governmental authority,
                  war, warlike operations, insurrections or riots, epidemics,
                  quarantine restrictions, strikes, Unusually Severe Weather
                  Conditions but no other weather conditions, fires, floods,
                  trawler or anchor damage, damage caused by other marine
                  activity both natural and man-made, such as, but not limited
                  to, fishing, marine research and marine development, or
                  defaults by any of the Supplier's suppliers or sub-contractors
                  due to any such causes.

         14.2     If any such Force Majeure by itself causes an increase in the
                  time required to reach RFPA for any Phase and/or the System
                  the Supplier shall be entitled to an equitable adjustment to
                  the time to reach such RFPA.

         14.3     The Supplier shall inform the Purchaser promptly, but in any
                  event within 3 (three) working days, of any occurrence covered
                  under this Article 14.

         14.4     With regard to Unusually Severe Weather Conditions in Article
                  14.1 above, the following will apply:

                  14.4.1   A claim for an extension of time due to force majeure
                           may only be made in respect of Unusually Severe
                           Weather Conditions to the extent that the number of
                           days such conditions are experienced exceeds the
                           number of unused days of weather contingency included
                           in the Plan of Work for the relevant Phase.

                  14.4.2   The time period for making claims of force majeur in
                           respect of Unusually Severe Weather Conditions, shall
                           be 7 days after completion of marine operations for
                           each Phase.

                  14.4.3   Any such claim is subject to the provisions of 14.2
                           and the Supplier must demonstrate that the number of
                           days of Unusually Severe Weather Conditions not only
                           exceed the number of unused weather contingency days
                           but also that it has resulted or will result in an
                           increase in the time required to reach RFPA for the
                           relevant Phase.

15       SUSPENSION OF WORK

         15.1     The Purchaser may, at its convenience, order the Supplier to
                  suspend all or part of the Work for such period of time as the
                  Purchaser determines to be appropriate provided that such
                  suspension shall not continue for a cumulative period of
                  twelve (12) months or for any period of six (6) consecutive
                  months. Where as a result of such suspension the Supplier
                  incurs additional costs or where such a suspension causes loss
                  to the Supplier in the discharge of its responsibilities under
                  this Contract, and where such suspension or losses and costs
                  are not caused by the Supplier's negligence and could not have
                  been reasonably prevented by the Supplier, the Supplier shall
                  be allowed an equitable adjustment to the applicable prices
                  and an equitable extension in the time required for
                  performance.

         15.2     In the event that the Purchaser is unable to make Payment due
                  hereunder to the Supplier, then the Supplier shall be entitled
                  to give the Purchaser Notice to arrange such Payment within 30
                  days and thereafter, if Payment is not received, may

                                                                         Page 17
<PAGE>

                  Suspend all or part of the Work and such suspension shall be
                  deemed to be Suspension under Article 15.1

16       CHANGES OR ADDITIONAL WORK

         16.1     No change shall be made to this Contract except by Contract
                  Variation.

         16.2     The Purchaser may, with the Supplier's agreement, specify
                  modifications to the Work. The Supplier shall not unreasonably
                  refuse to agree to such modifications.

         16.3     The Purchaser shall have the right to make any variation to
                  the Work by not more than 10 %, in quantity, of any product
                  type and this shall have no impact on the Plan of Work. The
                  latest date for making such change shall be the RFPA date for
                  the relevant Phase or as such date may be extended pursuant
                  hereto, minus the lead time for any item as set forth in
                  Annex 6.

         16.4     The Purchaser shall have the right at any time by a written
                  order to demand variations within the scope of delivery of any
                  of the following:

                  16.4.1   drawings, designs or specifications, where supplies
                           to be furnished are to be specially manufactured for
                           the Purchaser;

                  16.4.2   method of shipment or packing, including methods of
                           preservation; and

                  16.4.3   place of delivery.

         16.5     The Supplier may propose modifications to the Work if it
                  considers that such modifications will result in improved
                  manufacturing processes or manufacturing time, reduction in
                  costs, technical improvements of the product(s) or imply
                  maintenance advantages or give better technical applicability.

         16.6     If any proposed change and/or order in accordance with
                  Articles 16.2, 16.3 and/or 16.4 above causes an increase or a
                  decrease in the price of the Work and/or in the time required
                  for the execution of the Supplier's obligations under this
                  Contract, it shall so inform the Purchaser no later than
                  fourteen (14) days after it has received the proposed change
                  and/or order.

         16.7     Information about any increase or decrease in the price of the
                  Work and/or in the time required for the execution of the
                  Supplier's obligations under this Contract shall be contained
                  in any proposed change in accordance with Article 16.5 above.

         16.8     Adjustments mentioned in this Article 16 which contain items
                  included in the Price Schedule (Annex 1) shall be costed using
                  the unit prices stated for these items in Annex 1. Where
                  adjustments mentioned in this Article contain items which are
                  not specified or sufficiently defined in Annex 1 then these
                  items shall be costed on an equitable basis.

         16.9     The Purchaser shall not unreasonably refuse to agree to a
                  Contract Variation to reflect the Supplier's recommendation of
                  route and cable types arising as a result of the Route Survey.

17       TERMINATION FOR DEFAULT

                                                                         Page 18
<PAGE>

         17.1     The Purchaser may, by written notice of termination for
                  default to the Supplier, terminate the whole or any part of
                  this Contract in any one of the following circumstances, such
                  termination to be effective immediately upon receipt of said
                  notice, or at such later date as it may specify in such
                  notice:

                  17.1.1   if the Supplier materially fails to comply with Annex
                           4 or any written amendment thereto, and does not
                           remedy such failure within a period of thirty (30)
                           days, or such longer period as the Purchaser may
                           authorise in writing, after receipt of notice from
                           the Purchaser specifying such failure; or

                  17.1.2   if the Supplier materially fails to perform an
                           essential requirement of this Contract, and does not
                           remedy such failure within a period of thirty (30)
                           days , or such longer period as the Purchaser may
                           authorise in writing, after receipt of notice from
                           the Purchaser specifying such failure; or

                  17.1.3   if the Supplier becomes insolvent, files for
                           bankruptcy, takes advantage of any legal scheme for
                           the relief of debtors, adopts a resolution for the
                           liquidation of its assets, or if a petition in
                           bankruptcy, for receivership or for winding-up is
                           taken against it and is not rejected or withdrawn
                           within thirty (30) days from its inception.

         17.2     The Supplier shall not be in default if any failure to perform
                  this Contract arises out of the causes stipulated in Articles
                  10.1 and 14.1.

         17.3     If this Contract is terminated as provided in Article 17.1 the
                  Supplier shall comply with Articles 18.2.1 - 18.2.7 and 18.2.9
                  and the Purchaser, in addition to any other rights provided in
                  this Article 17, may require the Supplier to transfer title
                  and deliver to the Purchaser in the manner and to the extent
                  directed by the Purchaser, any completed cable, equipment,
                  material or supplies and such partially completed cable,
                  equipment, materials or supplies, and any parts, tools, dies,
                  jigs, fixtures, plans, drawings, information and contract
                  rights (hereinafter in this Article 17 called "manufacturing
                  material") as the Supplier 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 Supplier shall, upon the direction of the
                  Purchaser, protect and preserve property in the Supplier's
                  possession in which the Purchaser has an interest. The
                  Supplier shall be paid the prices specified in Annex 1 for
                  completed cable, equipment, material and supplies delivered
                  and services performed, the amount to be agreed upon by the
                  Purchaser and the Supplier for manufacturing material
                  delivered to and approved by the Purchaser and the Supplier's
                  reasonable costs incurred for the protection and preservation
                  of property.

         17.4     In the event of any termination of this Contract as provided
                  in Article 17.1 the Supplier shall not be relieved from any
                  liability for damages or otherwise which may have been
                  incurred by reason of any breach of this Contract.

         17.5     The Supplier's liability hereunder shall be limited in
                  accordance with Article 32.

18       TERMINATION BY NOTICE

                                                                         Page 19
<PAGE>

         18.1     The performance of work under this Contract may be terminated
                  by the Purchaser in whole, or from time to time in part,
                  whenever it shall so determine. The Purchaser shall deliver to
                  the Supplier a written notice of termination specifying the
                  extent to which performance of work under this Contract is
                  terminated, and the date upon which such termination becomes
                  effective.

         18.2     After receipt of such notice of termination, and except as
                  otherwise directed by the Purchaser, the Supplier shall:

                  18.2.1   stop work under this Contract on the date and to the
                           extent specified in the notice of termination;

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

                  18.2.3   use its reasonable best efforts to terminate all
                           orders and contracts to the extent that they relate
                           to the performance of work terminated by the notice
                           of termination unless otherwise directed by the
                           Purchaser;

                  18.2.4   assign to the Purchaser, in the manner, at the time,
                           and to the extent directed by the Purchaser, all of
                           the Supplier's right, title and interest under the
                           orders and contracts so terminated;

                  18.2.5   use its reasonable best 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 it
                           may require, which approval or ratification shall be
                           final for all the purposes of this Article 18;

                  18.2.6   transfer title and deliver to the Purchaser in the
                           manner, at the time, and to the extent (if any)
                           directed by it ;

                           18.2.6.1 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, and

                           18.2.6.2 the completed or partially completed plans,
                                    drawings, information, and other property
                                    which, if this Contract had been completed,
                                    would have been required to be furnished to
                                    the Purchaser;

                  18.2.7   use its reasonable best efforts to sell, in the
                           manner, at the times, to the extent, and at the price
                           or prices directed or authorised by the Purchaser,
                           any property of the types referred to in Article
                           18.2.6 provided, however, that the Supplier:

                           18.2.7.1 shall not be required to extend credit to
                                    any buyer, and

                           18.2.7.2 may acquire any such property under the
                                    conditions prescribed by and at a price
                                    approved by the Purchaser; and provided
                                    further that the proceeds of any such
                                    transfer or disposition

                                                                         Page 20
<PAGE>

                                    shall be applied in reduction of any
                                    payments to be made by the Purchaser to the
                                    Supplier under this Contract or paid in such
                                    other manner as the Purchaser may direct;

                  18.2.8   complete performance of such part of the Work as
                           shall not have been terminated by the notice of
                           termination; and

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

         18.3     After receipt of a notice of termination, the Supplier shall
                  submit to the Purchaser a written termination claim. Such
                  claim shall be submitted promptly, but in no event later than
                  six (6) months from the effective date of termination, unless
                  one or more extensions in writing are granted by the Purchaser
                  upon request made in writing within such six (6) month period
                  or any authorised extension thereof.

         18.4     In the settlement of any such partial or total termination
                  claim, the Purchaser shall pay to the Supplier the total of:

                  18.4.1   that part of the Contract Sum relating to the
                           completed Work; and

                  18.4.2   a fair and reasonable proportion of the Contract Sum
                           relevant to partially completed Work, including work
                           in progress, produced or manufactured but not
                           delivered; and

                  18.4.3   the cost of materials and supplies purchased in
                           respect of this Contract but not yet incorporated
                           into the Work; and

                  18.4.4   the cost of settling and paying claims arising out of
                           the termination of work under the contracts and
                           orders, as provided in Article 18.2.5, which are
                           properly chargeable to the terminated portion of this
                           Contract; and

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

         18.5     In arriving at the amount due to the Supplier under this
                  Article 18, Purchaser shall deduct all payments made to the
                  Supplier under this Contract, any liabilities which the
                  Supplier may have to the Purchaser, and the agreed price for,
                  or the proceeds of sale of, any materials, supplies, or other
                  things produced or acquired by the Supplier and sold, pursuant
                  to the provisions of this Article 18, and not otherwise
                  recovered by or credited to the Purchaser.

         18.6     If the termination hereunder be partial, prior to the
                  settlement of the terminated portion of this Contract, the
                  Supplier may file with the Purchaser a request in writing for
                  an equitable adjustment of the price or prices specified in
                  this Contract

                                                                         Page 21
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                  relating to the portion of this Contract not terminated and
                  such equitable adjustments as may be agreed upon shall be made
                  in such price or prices.

         18.7     The Purchaser may, from time to time, under such terms and
                  conditions as it may prescribe, approve partial payments and
                  payments on account against costs incurred by the Supplier in
                  connection with the terminated portion of this Contract
                  whenever in the opinion of the Purchaser the aggregate of such
                  payments may be within the amount to which the Supplier will
                  be entitled hereunder. If the total of such payments is in
                  excess of the amount finally agreed or determined to be due
                  under this Article 18, such excess shall be payable by the
                  Supplier to the Purchaser upon demand.

         18.8     For a period of five (5) years after final settlement under
                  this Contract, the Supplier shall preserve and make available
                  to the Purchaser at all reasonable times at the Supplier's
                  office, but without direct charge to the Purchaser, all books,
                  records, and documents required to be kept by Article 23
                  bearing on its costs and expenses under this Contract and
                  relating to the work terminated hereunder, or to the extent
                  approved by the Purchaser, photographs, photocopies, or other
                  authentic reproductions thereof.

         18.9     Any payment made by the Purchaser to the Supplier pursuant to
                  this Article together with any amounts already paid under this
                  Contract shall in no circumstances exceed the Contract Sum.

19       SAFEGUARDING INFORMATION AND TECHNOLOGY

Any technical, manufacturing, commercial or other information furnished by the
Supplier to the Purchaser and any information provided by the Purchaser to the
Supplier hereunder or in contemplation hereof shall be subject to the FLAG
Atlantic Fibre Optic Cable System Confidentiality Agreement contained in Annex
5.

20       INFRINGEMENT

         20.1     The Supplier shall fully indemnify the Purchaser against all
                  actions, claims, demands, costs, charges, expenses, and losses
                  arising from or incurred by reason of any infringement or
                  alleged infringement of any patent, copyright or other form of
                  intellectual property right in any country in the world, for
                  any material or software (or the manufacture of any material
                  or the normal use thereof) provided by the Supplier or on its
                  behalf pursuant to this Contract except such infringement or
                  alleged infringement arising from:

                  20.1.1   the Supplier's adherence to the Purchaser's
                           directions to use materials or parts of the
                           Purchaser's selection; or

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

                  20.1.3   such material or parts furnished to the Supplier by
                           other FLAG Atlantic Fibre Optic Cable System
                           suppliers (other than the Supplier's subcontractors);
                           or

                                                                         Page 22
<PAGE>

                  20.1.4   use of the Equipment other than for the purposes
                           indicated in, or reasonably to be inferred from, this
                           Contract.

         20.2     The Purchaser will, at its own expense, defend all suits
                  against the Supplier for such excepted infringement or alleged
                  infringement, and save the Supplier harmless from all expense
                  of defending any such suit and from all payments by final
                  judgement therein assessed against the Supplier on account of
                  such excepted infringement.

         20.3     If the System or any part of the Equipment supplied by the
                  Supplier is held to constitute infringement and is subject to
                  an injunction restraining its use or any order providing for
                  its delivery up or destruction, the Supplier shall forthwith
                  at its own expense either:

                  20.3.1   procure for the Purchaser the right to retain and
                           continue to use the System; or

                  20.3.2   modify the System within sixty (60) days or within
                           that period imposed by the third party being
                           infringed, whichever shall be the shortest, so that
                           it becomes non-infringing while ensuring the
                           compliance with the requirements of Annex 4.

         20.4     In the event of any claim being made or action brought against
                  the Purchaser arising out of the matters referred to in this
                  Article, the Supplier shall be promptly notified, within a
                  reasonable period of time but in any event no more than 30
                  days after any such action, thereof, and may at its own
                  expense conduct all negotiations for the settlement of the
                  same, and any litigation that may arise therefrom. The
                  Purchaser shall not, unless and until the Supplier shall have
                  failed, within a reasonable time but in any event no more than
                  30 days after such notice, to take over the conduct of the
                  negotiations or litigation, make any admission which might be
                  prejudicial thereto.

21       SOFTWARE

         21.1     The Supplier hereby grants to the Purchaser an irrevocable
                  non-exclusive royalty free license to use, copy, modify and
                  use as copied or modified all Software and related
                  documentation provided under this Contract, provided that this
                  license shall be limited to use of the Software with the
                  Equipment or with such other equipment (including any
                  surveillance centre) that is employed to operate and maintain
                  the System. Individual licenses shall commence from the date
                  of delivery of each item of Software and related documentation
                  to the Purchaser. The Purchaser may permit each operator of a
                  cable station, surveillance centre or other facility connected
                  to the System to use the Software in order to so operate such
                  station and is hereby granted the right to sub-licence as
                  appropriate.

         21.2     The Supplier shall ensure that the documentation pertaining to
                  the Software provided hereunder shall always be complete and
                  up-to-date.

         21.3     Should the Purchaser decide to modify the Software object
                  code, it shall be free to do so, provided that the Purchaser
                  shall not be entitled to decompile the Software or alter the
                  source code, or attempt to do the same.

                                                                         Page 23
<PAGE>

         21.4     Where the Purchaser modifies the Software (either before or
                  after the expiry of the Warranty Period) then the Supplier
                  shall not be responsible for providing support insofar as the
                  Software is modified without the prior approval of the
                  Supplier and any warranty given in respect of the Software
                  shall not apply in respect of non approved modifications made.

         21.5     The Supplier shall take suitable precautions to protect the
                  documentation and relevant source code against loss of any
                  kind. Up-to-date copies of the latest documentation and
                  relevant source code shall be stored by the Supplier in a safe
                  and secure location remote from its normal work premises for
                  the period of the Design Life of the System.

         21.6     In addition to the above, if requested by the Purchaser the
                  Supplier shall enter into an escrow agreement with the
                  Purchaser and an escrow agent acceptable to the Purchaser and
                  the Supplier. The Supplier shall place in escrow thereunder
                  one copy of the source code and relevant high level design
                  documentation and keep updating each such copy each time when
                  a new version of the Software is issued both in human readable
                  format, if requested, and machine readable format, details of
                  host machines and sufficient documentation including tools to
                  enable modification of the Software and shall grant the
                  Purchaser an irrevocable, non-exclusive, non-transferable
                  (except that the Purchaser may assign such license in the
                  event its amalgamation or reconstruction), royalty free
                  license, to use the source code to modify, and use as modified
                  the Software (and permit the use of such Software by each
                  operator of a cable station, surveillance centre or other
                  facility connected to the System as set forth in Article
                  21.1), provided that such license is limited to the
                  circumstances defined in the Escrow Agreement.

22       PAYMENT

Payment to the Supplier of the Contract Sum of *** shall be made by the
Purchaser on the following basis:

         22.1     Terms of Payment

                  22.1.1   INITIAL PAYMENT

                  ***

                  22.1.2   PROGRESS PAYMENTS

                  *** of the Contract Sum shall be paid *** aggregating to a
                  cumulative amount not greater than that indicated in the
                  Schedule of Progress Payments in Annex 2 hereof in respect of
                  Equipment, works or services which have been supplied or
                  executed to the satisfaction of the Purchaser, and not
                  previously included in a request for payment, at the following
                  stages:

                       ***

                  22.1.3   FINAL PAYMENT

                           The remainder of the Contract Sum plus any amounts in
                           respect of Contract Variations will be billed ***.

                                                                         Page 24
<PAGE>

         22.2     General Terms of Payment

                  22.2.1   All payments to the Supplier shall be made in US
                           Dollars.

                  22.2.2   Full and properly itemised and issued requests for
                           progress payments, reimbursement of VAT, customs
                           duties and other taxes and duties shall be submitted
                           by the Supplier to the Purchaser not more than ***.

                  22.2.3   No payment shall be claimed earlier than that set out
                           in the Schedule of Progress Payments in Annex 2
                           hereof, unless otherwise specifically agreed to by
                           the Purchaser.

                  22.2.4   The monthly request for payment shall show the total
                           prices and charges for each item in accordance with
                           the Price Schedule contained in Annex 1 hereof. The
                           amounts due to the Supplier shall be computed in
                           accordance with Article 22.1.

                  22.2.5   Such requests for payment are to be accompanied by
                           all documentation necessary to demonstrate compliance
                           with the terms of this Contract including but not
                           limited to appropriate Release Certificates signed on
                           behalf of the Purchaser and relevant shipping papers.

                  22.2.6   On the basis of such requests for payment, the
                           Supplier shall be paid the full amount owed *** of
                           receipt of the request for payment by the Purchaser,
                           subject to applicable deduction or withholding
                           pursuant to this Contract.

                  22.2.7   In the event that one or more items, on any request
                           for payment, is questioned by the Purchaser or for
                           which the Purchaser requires additional information
                           prior to authorising its payment, the amount of such
                           item shall be deducted from the total amount of the
                           request for payment and payment of the balance of
                           such request for payment shall be made in accordance
                           with the terms of this Contract. Whenever such
                           questioning occurs, the Supplier shall be advised of
                           its nature and requested to furnish the information
                           required to permit the expeditious resolution of the
                           issue. The Purchaser shall act in a reasonable manner
                           in exercising this right.

                  22.2.8   No payment (final or otherwise) made under or in
                           connection with this Contract shall be conclusive
                           evidence of the performance of the Work, or of this
                           Contract, in whole or in part, and no such payment
                           shall be construed to constitute the acceptance of
                           defective, faulty of improper Work or Equipment, nor
                           shall it release the Supplier from any of its
                           obligations under this Contract.

         22.3     Following issue of the Certificate of Provisional Acceptance
                  of the System, invoices will be issued by the Supplier to the
                  Purchaser in respect of the actual supply of Equipment and
                  related services under this Contract and the respective
                  amounts payable therefor (whether payable or paid), by
                  reference to the Appendix to Annex 1 (Price Schedule).

                                                                         Page 25
<PAGE>

         22.4     Taxes

                  22.4.1   The Contract Sum is exclusive of VAT, sales taxes,
                           customs duties or other levies or duties applicable
                           in the FLAG Atlantic Fibre Optic Cable System landing
                           countries. For the avoidance of doubt, such taxes
                           shall be amounts relating to the importation of
                           Equipment into the landing countries and also
                           relating to the supply of the Equipment and related
                           services. The Purchaser shall pay to the Supplier
                           appropriate VAT, sales taxes, customs duties, or
                           other levies or duties applicable against submission
                           of the appropriate request for reimbursement within
                           30 days following the presentation of such
                           documentation (including appropriate tax invoices) to
                           the Purchaser, provided the requested amounts do not
                           exceed by more than *** the mounts the Parties will
                           agree within 30 days of signing this contract should
                           be levied by the relevant authorities, but excluding
                           any changes in legislation. The above amounts paid by
                           the Supplier shall be converted into US Dollars at
                           the rate in effect at the time of payment to the
                           relevant Tax Authorities.

                  22.4.2   The Supplier shall give the Purchaser all reasonable
                           assistance in the making of all appropriate
                           applications for revisions, exemptions, recoveries
                           and remission of taxes, duties and other levies in
                           accordance with the appropriate law. The Supplier
                           shall provide relevant documentary information in a
                           timely fashion to fully support the Purchaser in its
                           efforts to obtain any revision, exemption, recovery
                           or remission or to import the Equipment at the lowest
                           value possible and shall take such actions as the
                           Purchaser may reasonably request to obtain such
                           revisions, exemptions, recoveries and remissions and
                           to otherwise minimise the level of such taxes, duties
                           and other levies.

                  22.4.3   If withholding taxes are payable in the Purchaser's
                           country or in any country where any Site is located,
                           the Purchaser shall withhold the necessary amount
                           from the relevant payments hereunder and pay the
                           withheld amount to the relevant authorities in
                           accordance with the applicable laws, and provide
                           evidence of having done so to the Supplier. The
                           Purchaser shall not withhold any such amount without
                           having previously taken into consideration any
                           bilateral tax agreements concluded between the
                           Purchaser's country and the Supplier's country.

                           In any such case, the Purchaser shall promptly
                           provide to the Supplier, an original or copy of the
                           original tax receipt, certified by the tax
                           authorities, for any income tax which is retained
                           from any payment due to the Supplier. All such
                           receipts shall be in the name of the Supplier.

23       KEEPING OF BOOKS

         23.1     For those items specified in Annex 1 as cost incurred items,
                  the Supplier shall keep and maintain books, records, vouchers
                  and accounts of all cost pertaining to the System until five
                  (5) years from RFPA for the System.

         23.2     For those items specified in Annex 1 as fixed cost items, the
                  Supplier shall keep and maintain books, records, vouchers and
                  accounts with respect to its billing of those items to FLAG
                  Atlantic Fibre Optic Cable System until five (5) years from
                  RFPA for the System.

                                                                         Page 26
<PAGE>

         23.3     The Supplier shall obtain from its suppliers and
                  sub-contractors such supporting records, for other than the
                  cost of fixed cost items, as may be reasonably required and
                  shall maintain such records for a period of five (5) years
                  from RFPA for the System.

         23.4     The Supplier shall afford the Purchaser the right to review
                  and make copies, at no cost to the Purchaser, of the said
                  books, records, vouchers and accounts required to be kept,
                  maintained and obtained pursuant to this Article 23.

24       INSURANCE

The Insurance Coverage Requirements contained hereunder are not intended to
cover all of the Supplier's exposures to loss under this Contract. Any
additional risk management measures or additional insurance coverage the
Supplier may deem necessary to fulfil its obligations shall be at its own
discretion and expense.

The Supplier shall, at its own expense and at no cost to the Purchaser, procure
or cause to be procured and maintain in force from the Contract signature date
until the granting of Provisional Acceptance of the System the following
insurance coverage in a form and with Underwriters acceptable to the Purchaser:

         24.1     "ALL RISKS PHYSICAL DAMAGE INSURANCE" COVERING THE WORK AT
                  SUPPLIERS PREMISES

         This insurance is to be written on a replacement cost basis for the
         full value at risk with loss if any, payable to the Purchaser and the
         Supplier as their respective interests may appear, or as they may
         direct. This coverage may terminate when the last shipment of the
         completed Work is loaded on board any vehicle or carrier for the
         purpose of transportation from the Supplier's premises.

         24.2     "COMPREHENSIVE GENERAL LIABILITY INSURANCE"

         General Liability insurance shall cover losses and claims arising from
         injuries or death to any person (including any employee of the Supplier
         or any subcontractor) or damage to any property (including that of the
         Purchaser) under this Contract. This insurance shall cover liability
         arising from all operations of the Supplier and be effected for a
         Combined Single Limit of no less than three hundred million US Dollars
         (US$300,000,000) per occurrence and in the annual aggregrate or such
         greater amount as may be required by statute and is to include
         Completed Operations, Contractual and Product liability coverages.
         Coverage is also to include the Protective section with respect to
         subcontractors and the liability arising from the operation of motor
         vehicules owned and non-owned. The insurance policy(ies) is (are)
         deemed to be written on an occurrence basis. For purposes of showing
         evidence of insurance the Supplier shall be required to show evidence
         of a Combined Single Limit of no less than two hundred million US
         Dollars (US$200,000,000) per occurrence and in the annual aggregrate.

         24.3     "WORKER'S COMPENSATION INSURANCE" OR EQUIVALENT PROTECTION

         This insurance shall cover all employees and servants of the Supplier
         for all compensation and other benefits required by any applicable law
         or by governmental authority in respect of injury, death, sickness or
         disease. Territorial restriction to be amended so that employees
         working at sea or in the area of operation are not excluded.

                                                                         Page 27
<PAGE>

         24.4     "EMPLOYER'S LIABILITY INSURANCE"

         This insurance shall cover claims presented by or on behalf of
         employees or servants of the Supplier and related to employer's
         liability whether the claim arises under statute or maritime law or
         otherwise. The minimum limit of liability shall be no less than two
         million US Dollars (US$2,000,000) per occurrence or as required by
         applicable statute whichever is greater. This insurance shall be
         scheduled to any and all applicable umbrella/excess liability policies
         and is required by all contractors and subcontractors.

         24.5     "CARGO AND INSTALLATION ALL RISKS ON GOODS OF THE CONTRACT"

         The Supplier is required to procure and maintain in force an insurance
         contract written on the latest edition of the Institute Cargo Clauses
         "A", (All Risks Form), modified if required to pick-up the installation
         exposures. This insurance is to cover the cable and equipment from the
         point where the insurance required under Article 24.1 ceases, and to
         continue until the date of the acceptance of the System by the
         Purchaser. Such insurance is to include the perils of jettison, loss
         overboard, sue and labour, increased value by way of payment of duty,
         the risks of war, strike, riot and civil commotion. The limit of such
         insurance should be not less than the replacement value of any one
         shipment at any time.

         24.6     "INSURANCE COVERAGE TO BE MAINTAINED BY SHIP OWNER"

         The Supplier shall, or shall require the Ship owner to provide and
         maintain in force during the charter period the following coverage:

                           24.6.1.1

                                   P&I (Protection and Indemnity) coverage from
                                   one of the Mutual P&I Clubs subscribing to
                                   the International Group Association Agreement
                                   (IGA) as per Standard Rules with a US$2
                                   billion liability limit for all risks covered
                                   with the exception of Oil Pollution risks
                                   where recovery may be limited to
                                   US$500,000,000 for each separate accident or
                                   occurrence or for each vessel owned or
                                   chartered by the Supplier and used in the
                                   performance of this Contract.

                                   In the event of any vessel being used in the
                                   performance of this Contract that is less
                                   than 2,500 gross tons, the minimum limits of
                                   liability carried for the risks of Protection
                                   and Indemnity, including, but not limited to
                                   Crew and Passenger Liability, Liability to
                                   Cargo, Collision Liability, Pollution
                                   Liability, War Risks and Removal of Wreck,
                                   shall be US$25,000,000.

                                   Such Protection and Indemnity coverage shall
                                   be extended to include the Specialist
                                   Operations Extension, where such operations
                                   are to be performed and otherwise excluded by
                                   the policy/entry, to a limit of no less than
                                   US$25,000,000 for each separate accident or
                                   occurrence and for each vessel.

                  24.6.2   Hull and Machinery Insurance including War Risks
                           cover on full conditions for a limit of no less than
                           the actual value of each vessel owned or chartered by
                           the Supplier and their subcontractors and used in the
                           performance of this Contract. The territorial
                           warranties of the policy should include the planned
                           cable route.

                                                                         Page 28
<PAGE>

                  24.6.3   Seabed or equivalent coverage is to be provided as
                           required to protect against all risks of physical
                           loss or damage to the submersible plant and equipment
                           ending with the Certificate of Provisional
                           Acceptance.

                           Where referenced in these Articles 24.6.1 and 24.6.2,
                           the word vessel or vessels shall be deemed to include
                           all sub-sea equipment (Sea Plough, Scarab and/or any
                           similar equipment) which the Supplier or their
                           subcontractors may be using in the performance of
                           this Contract.

         24.7     GENERALITIES APPLICABLE TO INSURANCE COVERAGE

                  24.7.1   Coverage required under Articles 24.5 and 24.6 above
                           are to be arranged so that any general average and
                           salvage costs contribution from the part of the
                           Purchaser as well as subrogation rights be waived in
                           their favour by the Underwriters, except for
                           casualties arising from actions of Purchaser acting
                           in the capacity of Subcontractor to the Supplier.

                  24.7.2   On coverage required under Articles 24.1, 24.2, 24.5
                           and 24.6, the Purchaser is to be added as an
                           Additional Named Insured with the appropriate "Cross
                           Liability" and "Severability of Interests" clauses,
                           provided that the Purchaser shall not be liable for
                           any insurance premiums.

                  24.7.3   The Supplier will notify the Insurers promptly and
                           shall supply all necessary information concerning any
                           occurrence which may give rise to a claim under the
                           above insurance policies in order to expedite the
                           processing of the claims. With respect to coverage
                           under 24.1, 24.2, 24.5 and 24.6, it will keep the
                           Purchaser informed of the details of the occurrences
                           and of the progress of the claim treatment by the
                           Underwriters.

                  24.7.4   All deductibles or self-insured retentions in the
                           above insurance coverage are for the account of the
                           Supplier and/or the Ship owner as the case may be and
                           shall under no circumstance be the responsibilty of
                           the Purchaser.

                  24.7.5   If the Supplier is to charter, operate or use any
                           aircraft, helicopter or other flying craft in the
                           performance of this Contract, it engages itself to
                           procure or cause to be procured and maintain in force
                           all the necessary insurance covering the aviation
                           liability and hull exposures with a minimum of
                           US$100,000,000 of Liability Insurance and scheduled
                           to the excess liability policies. If the Supplier
                           charters, operates or uses any aircraft, helicopter
                           or other flying craft in the performance of this
                           Contract evidence of this required insurance shall be
                           furnished prior to use of any aircraft, helicopter or
                           other flying craft. It will also ensure that any such
                           craft is holder of a current airworthiness
                           certificate.

                  24.7.6   On coverage required under Articles 24.1 and 24.5,
                           provision should be made for loss, if any, to be
                           payable to the Purchaser and the Supplier as their
                           respective interests may appear.

                  24.7.7   The insolvency, liquidation, bankruptcy or failure of
                           any Insurer providing insurance for the Supplier or
                           its sub-contractors, or failure of

                                                                         Page 29
<PAGE>

                           any such Insurer to pay claims accruing, shall not be
                           considered a waiver of nor shall it excuse the
                           Supplier from complying with any of the provisions of
                           this Contract.

                  24.7.8   The Supplier shall furnish the Purchaser with
                           certified copies of insurance policies or
                           certificates of insurance which provide sufficient
                           information to verify that the Supplier has complied
                           with the insurance requirements.

                           If any of the insurance coverage required herein are
                           not procured or maintained pursuant to the
                           specifications, the Purchaser, at its option, may
                           notify the Supplier that the failure to provide the
                           insurance is a material omission whereupon it is
                           agreed that the Purchaser, at its sole option, shall
                           have the right either to purchase similar coverage,
                           the cost thereof to be reimbursed by the Supplier
                           forthwith to the Purchaser or, alternatively to be
                           deducted by the Purchaser from any sum due or
                           thereafter becoming due to the Supplier from the
                           Purchaser or to terminate this Contract in accordance
                           with the provisions of Article 17 hereof. In the
                           event of Purchaser supplied insurance, the Supplier
                           will notify Purchaser immediately by facsimile, telex
                           or telephone of any loss or damage covered by these
                           policies and shall co-operate fully in gathering,
                           assembling and presenting claim documentation to
                           Underwriters. All insurance proceeds will then be
                           paid solely to the Purchaser.

                  24.7.9   Following a loss or damage, the Supplier shall remedy
                           any such loss or damage with due diligence and
                           dispatch and shall not wait for any insurance
                           proceeds to effect the repairs.

                  24.7.10  All of the above insurance coverage should provide
                           that prior to any cancellation or material change
                           thereto initiated by the Underwriters, a 90 days
                           notice will be forwarded to:

                           FLAG Atlantic Limited
                           The Emporium Building
                           69 Front Street - 4th Floor
                           Hamilton HM12, Bermuda.

                           Attention: Co-Chairmen
                           Telephone: +1 441 296 0909
                           Facsimile: +1 441 296 0938

                           With a copy to:

                           FLAG Telecom Limited
                           1st Floor, Sovereign Court
                           635 Sipson Road, West Drayton
                           Middlesex UB7 OJE
                           UK.

                           Attention: Program Manager
                           Telephone: +44 181 282 1565
                           Facsimile:+44 181 282 1566

                                                                         Page 30
<PAGE>

                  24.7.11  Furthermore, any certificate or other similar
                           document the Supplier is required to submit to the
                           Purchaser under this Article 24 shall be forwarded to
                           FLAG Atlantic Limited at the address appearing in
                           Article 24.7.10 above.

                  24.7.12  The Supplier or the Purchaser, as the case may be,
                           shall promptly give to the other party notice in
                           writing of any claim made or proceedings commenced
                           for which the Supplier or the Purchaser claims to be
                           entitled to indemnification under this Contract and
                           shall confer with the other party concerning the
                           defence of any such claim or proceedings, shall
                           permit such other party to be represented by counsel
                           in defence thereof and shall not effect settlement of
                           or compromise any such claim or proceedings without
                           the other's prior written agreement.

25       AGENTS AND REPRESENTATIVES OF THE PURCHASER

The Purchaser may nominate such agents or representatives, as it may desire, to
carry out any of its responsibilities or to exercise any of its rights under
this Contract. The Purchaser shall notify the Supplier in writing of any such
nominations.

26       REMOVAL OF PERSONS EMPLOYED ON CONTRACT

If and whenever the Purchaser for any reason considers that the continued
employment by the Supplier of any person in connection with this Contract is
undesirable, it may so inform the Supplier who shall thereupon cease to employ
that person in that connection.

27       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 not
containing the particular invalid or unenforceable provision or provisions, and
the rights and obligations of the parties shall be construed and enforced
accordingly.

28       SUCCESSORS BOUND

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

29       RELATIONSHIP OF THE PARTIES TO EACH OTHER

The relationship of the Parties to this Contract shall not be that of partners
and nothing herein contained shall be deemed to constitute a partnership between
them.

30       RESPONSIBILITY FOR OBTAINING PERMITS AND LOCAL LAWS

         30.1     The Purchaser shall be responsible for obtaining, maintaining
                  and complying with all appropriate permits, licences,
                  consents, authorisations and approvals as well as for the
                  payment of all costs related thereto, in connection with its
                  ownership and operation of the FLAG Atlantic Fibre Optic Cable
                  System, its ownership and operation, its landing in each
                  territory as well as its transoceanic route, including,
                  without limitation, permits, licences, authorities and
                  approvals therefor and for the

                                                                         Page 31
<PAGE>

                  cable to cross other telecommunication cables, pipelines, and
                  the like, to rest or be buried in any inland waters,
                  territorial waters, continental shelf, contiguous zones,
                  Exclusive Economic Zones and permissions to cross any beach or
                  land at any shore end. The cost of any related fisherman's
                  compensation will also be to the Purchaser's account.

         30.2     The Supplier shall, at no additional cost to the Purchaser, be
                  responsible for obtaining, maintaining and complying with all
                  permits, licences, consents, authorisations and approvals
                  required for carrying out the installation activities
                  including, without limitation, obtaining harbour and port
                  clearances and approvals to operate the vessel(s) wherever
                  required to duly carry out the route survey and installation
                  activities as well as the route survey in the due performance
                  of its obligations under this Contract.

         30.3     The Supplier shall comply with all laws, by-laws and
                  regulations applicable to the Work in force in the localities
                  within which this Contract is to be performed. The Supplier
                  shall, before making any variations from the designs,
                  drawings, plans or procedures that may be necessitated by so
                  complying, give to the Purchaser written notice, specifying
                  the variation proposed to be made, and the reasons for making
                  it, and apply for instructions thereon. The Supplier shall be
                  responsible for the payment of any and all costs incurred as a
                  result of a need to vary design, drawings, plans or
                  procedures. The Supplier shall give all notices required by
                  the said laws, by-laws and regulations to be given to any
                  authority, perform or permit the performance by authorised
                  persons of any inspection required by the said legislation,
                  rules, regulations, by-laws, orders and proclamations and pay
                  all fees, charges, impositions, or any other amounts payable
                  to any such authority, or to any public officer in respect of
                  the Work.

         30.4     The Purchaser shall not be responsible for any acts or
                  omissions of the Supplier that violate, the laws, by-laws or
                  regulations of any locality in which the work is carried out.

         30.5     The Supplier shall indemnify the Purchaser against any such
                  act or omission or any claims, demands, actions, suits,
                  proceedings, prosecutions, fines, penalties, damages or
                  expenses arising out of the same or any of them, and against
                  the fees payable by the Supplier to any authority or public
                  officer pursuant to this Article 30.

         30.6     The Supplier and Purchaser shall give each other such
                  assistance as may be reasonably required to obtain the permits
                  hereinbefore mentioned

31       CONSENTS

         Whenever under this Contract either Party's consent or approval is
         required, such Party shall not unreasonably withhold such consent or
         approval and shall not unreasonably delay in granting or denying such
         consent or approval. If such Party has not denied such consent or
         approval within 30 days after such consent or approval is requested,
         such Party shall be deemed to have granted such consent or approval.

                                                                         Page 32
<PAGE>

32       LIMITATION OF LIABILITY

         32.1     The Supplier shall not be liable to the Purchaser in any event
                  howsoever arising, whether in contract, tort or otherwise, for
                  any consequential, incidental or special damages, nor for any
                  loss of profits, loss of revenue or the costs of, or
                  associated with the use of, restoration facilities resulting
                  from the failure of the Supplier to perform pursuant to the
                  terms of this Contract.

         32.2     The maximum amount payable as damages or by way of indemnity
                  by the Supplier to the Purchaser for whatever reason under
                  this Contract or arising upon its termination shall in no
                  circumstances exceed 100% of the Contract Sum.

33       ALLOCATION OF DUTIES

         33.1     Allocation of the principal duties and obligations of the
                  Parties shall be in accordance with the Appendix to the Price
                  Schedule.

         33.2     Notwithstanding the provisions of Article 33.1, Alcatel
                  Submarine Networks and FLAG Atlantic Limited respectively
                  shall be and remain principally liable for and in respect of
                  all duties and obligations of:

                  33.2.1   Alcatel Submarine Networks Inc. and Alcatel Submarine
                           Networks Limited, in the case of Alcatel Submarine
                           Networks; and

                  33.2.2   FLAG Atlantic USA Limited, Flag Atlantic France sarl
                           and FLAG Atlantic UK Limited, in the case of FLAG
                           Atlantic Limited.

34       NOTICES

         34.1     All notices pertaining to this Contract shall be in writing
                  and shall be sent to the respective parties at the following
                  postal addresses or facsimile numbers:

                  For Purchaser:

                  FLAG Atlantic Limited
                  The Emporium Building
                  69 Front Street - 4th Floor
                  Hamilton HM12, Bermuda

                  Attention: Co-Chairmen
                  Telephone: +1 441 296 0909
                  Facsimile: +1 441 296 0938

                  with a copy to:

                  FLAG Telecom Limited
                  103 Mount Street
                  London W1Y 5HE
                  UK

                  Attention: General Counsel
                  Facsimile: +44 171 317 0808

                                                                         Page 33
<PAGE>

                  with a copy to:

                  GTS Terhulpsesteenweg 6A
                  1560 Hoeilaart
                  Belgium

                  Attention: Legal Director
                  Facsimile: +322 658 5101

                  For Supplier:

                  Alcatel Submarine Networks
                  72 avenue de la Liberte
                  92723 Nanterre
                  France

              Attention: General Counsel

              Facsimile: +33 1 5551 6365

         34.2     Either Party may change its designated nominee or the address
                  for notices to be sent hereunder, at any time by giving the
                  other Party thirty (30) days prior written notice.

         34.3     Any notice to be given to the Supplier under the terms of this
                  Contract shall, without prejudice to any other way of serving
                  it, be sufficiently given if sent by recorded delivery to the
                  Supplier's last know place of business or registered office
                  and shall be deemed to be given at the time when it was
                  delivered in the ordinary course of post.

35       CAPTIONS

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

36       LAW AND ARBITRATION

         36.1     This Contract shall be considered as a contract made in
                  England and subject to English law.

         36.2     The Parties to this Contract shall try to solve by
                  negotiations any disagreement which may arise in connection
                  with this Contract. In case of a dispute arising after
                  negotiations have failed, the dispute shall be resolved by
                  arbitration under the Rules of Arbitration of the
                  International Chamber of Commerce in effect on the date that
                  the arbitration is initiated.

         36.3     Arbitration shall be by arbitrators appointed under the said
                  rules by three arbitrators, unless the Parties agree to use a
                  single Arbitrator.

         36.4     The place of arbitration shall be London.

                                                                         Page 34
<PAGE>

         36.5     Responsibility for paying the costs of the arbitration,
                  including the costs incurred by the Parties themselves in
                  preparing and presenting their cases, shall be apportioned by
                  the tribunal.

         36.6     The award shall state the reasons upon which it is based.

         36.7     The award shall be final and binding on the Parties as from
                  the date it is made.

         36.8     Judgement upon the award rendered may be entered in any court
                  having jurisdiction, or application may be made to such court
                  for a judicial acceptance of the award and an order of
                  enforcement, as the case may be.

         36.9     The fact that a dispute is brought to arbitration does not
                  relieve either Party from its obligation to fulfil its
                  commitments as provided in this Contract and the Parties shall
                  continue to perform this Contract notwithstanding a dispute or
                  arbitration thereof.

37       PRECEDENCE

In the event of any inconsistency between the Articles and Annexes of this
Contract, such inconsistency shall be resolved by giving precedence to the
Articles and the Annexes shall be in the order indicated in Article 47.

38       WAIVER

No failure to exercise and no delay in exercising, on the part of either Party,
any right, power or privilege hereunder will operate as a waiver thereof, nor
will any single or partial exercise of any right, power or privilege hereunder
preclude further exercise of any other right hereunder.

39       RECOVERY OF SUMS DUE

Whenever under this Contract any sum of money shall be recoverable from or
payable by the Supplier and the Supplier has not paid the sum due within a
reasonable time, the same may be deducted from any sum then due, or which at any
time thereafter may become due to the Supplier, under this Contract.

40       WATCHING, LIGHTING AND PROTECTION OF SITE

For the protection of the Site, the System, and all Equipment and Ancillary
Apparatus and for the prevention of danger to persons on or near the Site and to
shipping, the Supplier shall, unless the Purchaser otherwise agrees, take all
usual and reasonable steps to ensure that the System, the Equipment, the Site
and all things on Site are properly watched, secured, protected, marked and lit.

41       PROVISION OF ANCILLARY APPARATUS

Except where this Contract provides otherwise, the Supplier shall provide, at
its own expense, the Ancillary Apparatus necessary to carry out the Work
properly and efficiently.

42       DIARY AND REPORTING

         42.1     The Supplier shall keep written records or diaries of all
                  activities undertaken in the performance of the Work,
                  including details of any variations or additional work

                                                                         Page 35
<PAGE>

                  and the routine and non-routine events, alarms, faulty units
                  and equipment and other kind of problems as well as the
                  remedial actions taken. The Supplier shall make the records or
                  diaries available for inspection and confirmation by the
                  Purchaser, or any authorised representative of the Purchaser,
                  at any time during the progress of the Work and for a
                  reasonable period thereafter, and at all events, for a minimum
                  period of five (5) years from RFPA for the System.

         42.2     The Supplier shall conform to the Plan of Work.

         42.3     The Supplier shall attend at such times and places as may be
                  required by the Purchaser co-ordination meetings with the
                  Purchaser's representatives to discuss the general progress of
                  the Work.

         42.4     The Supplier shall render such reports of the progress of the
                  Work, in such form, as may be called for by the Purchaser. The
                  submission and acceptance of these reports shall not prejudice
                  the rights of the Purchaser under Article 6 or 7 or elsewhere
                  in this Contract.

         42.5     The Purchaser shall meet with the Supplier on a quarterly
                  basis to review and discuss the fiscal position of the
                  Purchaser with regard to its obligations under this Contract.

43       PROPERTY OF THE PURCHASER

         43.1     Any property of the Purchaser issued in connection with this
                  Contract, and anything supplied by the Purchaser whether for
                  incorporation in the System or not, shall remain the property
                  of the Purchaser and shall not be used other than in the
                  execution of this Contract without the prior written consent
                  of the Purchaser.

         43.2     No such property or things shall be removed from the place
                  where they are normally used or stored for the purposes of
                  this Contract without the Purchaser's consent.

         43.3     The Supplier shall keep readily available records of all such
                  property and things in order to enable the Purchaser to check
                  from time to time the quantities in use, used, and available
                  for use, against those delivered to the Supplier's charge.

         43.4     Neither the Supplier nor any other person shall have a lien on
                  any such property or things for any sum due. The Supplier
                  shall take all reasonable steps to ensure that the Purchaser's
                  title and the exclusion of liens are brought to the notice of
                  all persons dealing with such property and things.

         43.5     All such property and things shall be deemed to be in good
                  condition when received by or on behalf of the Supplier unless
                  the Supplier notifies the Purchaser to the contrary within
                  fourteen (14) days of receipt.

         43.6     All such property and things which are not for incorporation
                  in the System shall be duly returned by the Supplier. Between
                  the time of delivery to the Supplier and of return to the
                  Purchaser, the Supplier shall be responsible for all damage
                  thereto except for normal wear and tear resulting from proper
                  use in the execution of this Contract.

                                                                         Page 36
<PAGE>

         43.7     Any test equipment provided by the Purchaser shall be
                  re-calibrated immediately prior to its return.

44       SERVICES RENDERED BY THE PURCHASER

If the Purchaser shall accept delivery of any articles, materials, or stores, in
connection with this Contract on behalf of the Supplier and shall pay any
charges upon such articles, materials, or stores, either for demurrage,
handling, storage, cartage or carriage, or for the price of such materials or
stores, or if the Purchaser shall at the express or implied request of the
Supplier perform any other services for the Supplier any expense so incurred by
the Purchaser shall be recoverable from the Supplier upon demand by the
Purchaser.

45       FACILITIES FOR OTHER WORKS

         45.1     The Purchaser shall have power at any time to execute other
                  works (whether or not in connection with the Work) on the Site
                  (except for Cableships) concurrently with the execution of the
                  Work and the Supplier shall give reasonable facilities for
                  such purpose.

         45.2     Should interference arise between the work of the Supplier and
                  the work of other suppliers engaged by the Purchaser then the
                  co-ordination between such different work will be prepared and
                  agreed in meetings to be held with the Purchaser, the Supplier
                  and such other supplier(s). The minutes of those meetings
                  shall be binding on the respective parties and shall be
                  considered contractual documents providing such conclusions
                  are not at variance with the Supplier's obligations under this
                  Contract.

         45.3     The Supplier shall co-operate with the Purchaser and other
                  suppliers in their employ in the execution of their work. The
                  Supplier shall immediately bring to the attention of the
                  Purchaser any conflict between its work and that of any
                  supplier employed by the Purchaser.

46       PUBLICITY

No publicity relating to this Contract shall be published in any newspaper,
magazine, journal or any written or visual media without the prior written
consent of the Purchaser.

47       ENTIRE CONTRACT

         47.1     This Contract consists of Articles 1 through 51 and the
                  following documents which are attached hereto:

                   Annex 4    Technical Specification
                   Annex 1    Price Schedule
                   Annex 3    Plan of Work
                   Annex 2    Schedule of Progress Payments
                   Annex 6    Long Term Support
                   Annex 5    Confidentiality Agreement
                   Annex 7    Sea State 6 Definition

                                                                         Page 37
<PAGE>

         47.2     This Contract supersedes all prior oral or written
                  understandings between the Supplier and the Purchaser with
                  respect to the subject matter of this Contract, including (but
                  not limited to) the contract signed on 12 January 1999,
                  between FLAG Atlantic Limited and Alcatel Submarine Networks,
                  and constitutes the entire agreement between them with respect
                  to said subject matter.

48       LETTER OF PERFORMANCE GUARANTEE, GUARANTORS

         48.1     In order to guarantee the good and timely execution of all the
                  contractual obligations, the Supplier shall, at its own cost,
                  provide in time for the Purchaser to obtain financing for this
                  Contract, a Performance Guarantee for a value equal to ten
                  percent (10 %) of the Contract sum in favour of the Purchaser
                  in the form of an irrevocable and unconditional Bank Guarantee
                  in the format to be agreed with the Purchaser and if necessary
                  its lenders. The Performance Guarantee shall be issued by a
                  bank acceptable to the Purchaser. Upon the issuance of the
                  Certificate of Provisional Acceptance of the System, the value
                  of the Performance Guarantee shall be reduced to five
                  percent (5%).

         48.2     The Performance Guarantee shall remain in force until the
                  issuance of the Certificate of Final Acceptance.

         48.3     In the event of default by the Supplier in carrying out its
                  responsibilities under this Contract, the Purchaser, at its
                  discretion, shall have the right from time to time, to call in
                  all or part of the amount represented by the Performance
                  Guarantee.

         48.4     The Supplier agrees to cause its ultimate parent company to
                  execute and deliver a guaranty to the Purchaser, in time for
                  the Purchaser to obtain financing for this Contract, and in a
                  form to be mutually agreed with the Purchaser and if necessary
                  its lenders.

49       CONTRACT EFFECTIVENESS

         49.1     This Contract shall be effective as at the date of signature.

         49.2     It is the intention of the Purchaser to ensure that as soon as
                  possible thereafter financing is in place ("Financial
                  Closure"). In the event that such financing is not in place,
                  by 20 October 1999, then the Supplier shall have the option:

                  49.2.1   as long as the financing is not available, and up to
                           31 December 1999, to suspend this Contract and be
                           entitled to claim only an equitable extension of
                           time; and

                  49.2.2   as long as the financing continues not to be
                           available, and up to 30 June 2000, to continue to
                           suspend this Contract and be entitled to claim an
                           equitable extension of time as well as costs in
                           accordance with Article 15 of this Contract; and

                  49.2.3   in the event that financing is not available after 30
                           June 2000 then the Supplier shall be entitled to
                           terminate this Contract in which case the Purchaser's
                           total liability shall be limited to the Supplier's
                           out of pocket expenses to a maximum of the amount
                           payable under Article 22.1.1. In such circumstances
                           the title in the desk top study and the marine route
                           survey report shall transfer to the Purchaser.

                                                                         Page 38
<PAGE>

50       CORRUPT PRACTICES

         50.1     The Supplier shall at all times comply with all applicable
                  laws and regulations and shall conduct its business in
                  accordance with the US Foreign Corrupt Practices Act of 1977,
                  as amended.

         50.2     The Supplier shall not offer or give or agree to give to any
                  person associated with this Agreement, whether employed by
                  Purchaser or not, any gift, commission, rebate or
                  consideration of any kind as an inducement or reward for
                  doing, influencing or carrying out any act in relation to the
                  obtaining or execution of this Contract or for showing any
                  favour or disfavour to any person or persons in relation to
                  this Contract.

51       SAFETY

The Supplier shall at all times comply, and ensure that all of its employees,
contractors and agents comply, with all regulations (governmental or otherwise),
laws etc. relating to both the safety of personnel and the operations themselves
and all associated activities that are undertaken in the Supplier's performance
of its obligations under this Contract, and the Supplier hereby indemnifies and
holds the Purchaser harmless from and against any consequences that may result
from the Supplier having failed to do so.

                                                                         Page 39
<PAGE>

IN WITNESS THEREOF the parties to this Contract have signed:

FLAG Atlantic Limited

By: /s/ Name of Signatory                           By: /s/ Name of Signatory
   ----------------------                              -----------------------

Date: 20/9/99                                       Title: CO Chairman

                                                     Date: 20/9/99

FLAG Atlantic USA Limited

By: /s/ Name of Signatory                           By: /s/ Name of Signatory
   ----------------------                              -----------------------

Date: 22 Sept. 1999                                 Title: Co Secretary

                                                     Date: 20 Sept. 1999

                                                     By: /s/ Name of Signatory
                                                        -----------------------

                                                     Date: 20 Sept. 1999

FLAG Atlantic France Sarl

By: /s/ Name of Signatory                           By: /s/ Name of Signatory
   ----------------------                              -----------------------

Date: 20/09/99                                        Date: 22 Sept. 1999

FLAG Atlantic UK Limited

By: /s/ Name of Signatory                           By: /s/ Name of Signatory
   ----------------------                              -----------------------

Date: 20/9/99                                        Title: Title of Signatory

                                                     Date: 22 Sept. 1999

                                                                         Page 40
<PAGE>

                                                   By: /s/ Name of Signatory
                                                      -----------------------

                                                   Date: 20 Sept. 1999

Alcatel Submarine Networks

By: /s/ Name of Signatory
   ----------------------

Title: Chief Operating Officer

Date: 20/9/99

Alcatel Submarine Networks Inc.

By: /s/ Robert J. Kelly
   ----------------------

Title: President

Date: 20/9/99

Alcatel Submarine Networks Limited

By: /s/ Name of Signatory
   ----------------------

Date: 20/9/99

                                                                         Page 41<PAGE>

                                                                   Exhibit 10.17

                                                                 EXECUTION COPY

                         CAPACITY RIGHT OF USE AGREEMENT

THIS AGREEMENT, dated as of the 7th day of October 1999, is among FLAG ATLANTIC
LIMITED, a company organised under the laws of Bermuda and having its principal
office at The Emporium Building, 69 Front Street, 4th Floor, Hamilton, Bermuda,
FLAG ATLANTIC USA LIMITED, a company organised under the laws of Delaware, USA
and having its principal office at 570 Lexington Avenue, 38th Floor, New York,
NY 10022, USA, (together hereinafter referred to as "FA-1") and NYNEX LONG
DISTANCE COMPANY, D/B/A BELL ATLANTIC LONG DISTANCE, a Delaware corporation,
with principal offices at 1327 Broadway, 8th Floor West, New York, New York,
10018 USA ("BELL ATLANTIC").

                                   WITNESSETH:

WHEREAS, except as set out below, FLAG Atlantic Limited is constructing and will
directly and/or indirectly own, operate and maintain a fiberoptic cable system
to be known as FLAG Atlantic-1 as more fully described in Schedule 1 (the
"System"); and

WHEREAS, FLAG Atlantic USA Limited is constructing and will own all that part of
the System that is within the territory (including the territorial waters) of
the United States of America; and

WHEREAS, the System is currently scheduled to go into service in stages with the
initial stage, as more particularly described in Schedule 1, ("Initial Stage")
currently scheduled to go into service on or about 31 March 2001 ("Scheduled
Initial RFS Date"); and

WHEREAS, BELL ATLANTIC desires to acquire from FA-1, and FA-1 is willing to
provide to BELL ATLANTIC, an indefeasible right of use ("IRU") (except as
otherwise provided herein) in the capacity on the System as set out in Schedule
2A or 2B, as applicable (the "Capacity"); and

WHEREAS, FA-1 and BELL ATLANTIC (the "Parties") desire to define the terms and
conditions under which the Capacity will be acquired by BELL ATLANTIC.

NOW, THEREFORE, the Parties hereby agree as follows:

1.       PURCHASE OF CAPACITY

1.1      Individual units of Capacity as set out in Schedule 2A or 2B, as
         applicable, (each a "Unit") shall be available for activation in
         tranches (each a "Tranche") pursuant to the delivery schedule set out
         in Schedule 6A or 6B, as applicable. BELL ATLANTIC agrees to acquire
         the IRU (except as otherwise provided herein) in the Capacity in
         Tranche 1 and has the option to acquire the IRU (except as otherwise
         provided herein) in the Capacity in Tranches 2, 3, 4 and (if
         applicable) 5 for the purchase price set forth in Schedule 2A or 2B, as
         applicable (the "Purchase Price"), subject to the terms and conditions
         of this Agreement. BELL ATLANTIC may exercise its option to acquire the
         Capacity in Tranches 2, 3, 4 and (if applicable) 5 by notice to FA-1
         ***. BELL ATLANTIC shall by the earlier of *** notify FA-1 whether
         Schedule 2A or 2B shall apply to this Agreement (and if BELL ATLANTIC
         fails

---------------
 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE PORTIONS OF
THIS AGREEMENT MARKED WITH THREE ASTERISKS (***) AND THE REDACTED MATERIAL
HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

<PAGE>

         to give such notice by the required date Schedule 2A shall apply). If
         Schedule 2A applies then Schedule 6A shall apply and if Schedule 2B
         applies then Schedule 6B shall apply.

1.2      FA-1 shall notify BELL ATLANTIC of the actual date upon which the
         Initial Stage of the System is able to carry commercial traffic
         ("Initial RFS Date"). Subject to the foregoing, when BELL ATLANTIC
         wishes to activate one or more units of Capacity as set out in
         Schedule 2A or 2B, as applicable, (each a "Unit") it shall provide
         FA-1 with a notice ("Activation Notice") indicating the number of
         Units of Capacity that BELL ATLANTIC wishes to activate ("Requested
         Capacity") and a proposed activation date for each Unit of Capacity.
         An Activation Notice for Units of Capacity in a Tranche shall not be
         valid unless BELL ATLANTIC has activated all the Capacity within the
         previous Tranche.

1.3      ***

1.4      FA-1 shall:

         1.4.1    Provide to BELL ATLANTIC the circuit designations within one
                  day after receipt of an Activation Notice from BELL ATLANTIC;
                  and

         1.4.2    Provision the Requested Capacity within *** days (*** days in
                  the case of the initial Requested Capacity to be activated
                  following the Initial RFS Date) after receipt of an Activation
                  Notice for such Requested Capacity in accordance with the
                  standards described in Schedule 7.

1.5      Subject to BELL ATLANTIC paying the Purchase Price in accordance with
         the terms of this Agreement, BELL ATLANTIC shall have the right,
         subject to the terms of this Agreement, to use such Requested Capacity
         from the date provisioned under clause 1.4.2 until the System is
         decommissioned.

1.6      BELL ATLANTIC shall be entitled to collocation pursuant to a
         collocation agreement to be negotiated between the Parties within 90
         days of the execution of this Agreement, based on the principles set
         out in Schedule 4.

1.7      Nothing set forth in this Agreement shall require BELL ATLANTIC to use
         purchased Capacity for transport of communications until such time as
         (a) BELL ATLANTIC, in its sole discretion, determines to use such
         purchased Capacity, and (b) BELL ATLANTIC has obtained all necessary
         approvals to use such purchased Capacity.

1.8      BELL ATLANTIC shall have an ownership interest in the Capacity as
         provided herein but BELL ATLANTIC shall have no legal title or
         ownership in the physical assets of the System itself, including any
         proceeds from the disposition of the System.

1.9      In the event that (i) after using commercially reasonable efforts, FA-1
         does not have the underlying rights to grant an IRU in portions of the
         System located in France, England and between France and England and/or
         (ii) if any jurisdiction in which the System is located does not
         currently recognize or does not recognize in the future the conveyance
         of communications facilities on an IRU basis and/or (iii) FA-1 chooses
         not to obtain an IRU on the portion of the System located in England
         that FLAG Atlantic Limited or a subsidiary will not own outright, then
         as to the Capacity on such portions of the System or within such
         jurisdiction(s) only, this Agreement shall be considered an agreement
         for a lease of such Capacity ("Lease").

                                                                              2

<PAGE>

1.10     In the event that this Agreement is to be treated as a Lease for any
         portion of the Capacity, then as to such portion only, the terms
         "purchase" and any variations thereon shall mean "lease" or the
         appropriate variation thereof, and the terms "indefeasible right of
         use" and "IRU" shall mean "Lease." Any other terms and conditions of
         this Agreement also shall be deemed modified only to the extent
         necessary to be consistent with the grant of a lease to BELL ATLANTIC.
         All other terms and conditions of this Agreement shall remain unchanged
         and fully valid and enforceable.

2.       PAYMENTS

2.1      BELL ATLANTIC shall pay to FA-1 the Purchase Price for Capacity to be
         acquired pursuant hereto as follows (and all such payments shall be
         non-refundable except as otherwise provided in clause 4):

         2.1.1    BELL ATLANTIC shall pay to FA-1 the Purchase Price for
                  Capacity in Tranche 1 pursuant to the payment schedule set out
                  in Schedule 3.

         2.1.2    If BELL ATLANTIC exercises its option in clause 1.1 to acquire
                  Capacity in Tranche 2, 3, 4 or (if applicable) 5 it shall pay
                  *** of the Purchase Price specified for the Capacity in that
                  Tranche on notice to FA-1 of the exercise of its option, with
                  the remaining *** of the Purchase Price being payable when
                  such Capacity has passed the bringing-into-service tests
                  specified in Schedule 7.

2.2      BELL ATLANTIC shall pay to FA-1 such amounts for the operation and
         maintenance of the System as are set forth in, or determined pursuant
         to, Schedule 5 ("O&M Payments").

2.3      FA-1 shall render to BELL ATLANTIC invoices for amounts payable
         pursuant to this Agreement. Invoices for the Purchase Price shall be
         rendered in accordance with clause 2.1. Invoices for O&M Payments shall
         be rendered pursuant to Schedule 5. All invoices shall be due and
         payable within 30 days after receipt by BELL ATLANTIC.

2.4      If BELL ATLANTIC disputes any invoiced amount for O&M payments in good
         faith, BELL ATLANTIC must provide to FA-1, on or before the due date of
         the invoice, reasonable notice and a detailed explanation of the basis
         of the dispute, and pay any undisputed amount in accordance with this
         Agreement. *** The parties will make a good faith effort to resolve all
         billing disputes as expeditiously as possible.

2.5      FA-1 shall maintain complete and accurate records of all amounts
         billable to and payments made by BELL ATLANTIC under this Agreement
         and in accordance with generally accepted accounting principles.
         FA-1 shall retain and preserve such records in accordance with
         FA-1's standard record retention practices during the term of this
         Agreement and for a period of three years after expiration or
         termination of this Agreement. FA-1 will provide BELL ATLANTIC, at
         BELL ATLANTIC's request, reasonable supporting documentation
         concerning any invoice amount to BELL ATLANTIC ***.

2.6      Any amount payable pursuant to this Agreement which is not paid when
         due shall accrue interest at the annual rate of *** above the U.S.
         Dollar LIBOR for one month as quoted in THE WALL STREET JOURNAL on the
         first business day of the month in which the payment is due or the
         maximum rate permitted under the laws of the State of New York, USA,
         whichever is less. All such default interest shall accrue from the day
         following the date payment of the relevant amount was due until it is
         paid in full and shall accrue both before and after judgement. ***

                                                                              3

<PAGE>

2.7      All amounts payable by BELL ATLANTIC pursuant hereto shall be paid in
         full in U.S. dollars by wire transfer, free and clear of all bank or
         transfer charges to such account(s) as FA-1 may by notice to BELL
         ATLANTIC designate without reduction for any deduction or withholding
         for or on account of any tax, duty or other charge of whatever nature
         imposed by any taxing authority in lieu of a direct tax on FA-1 in
         connection with its income. If BELL ATLANTIC is required by law to make
         any deduction or withholding from any payment hereunder, BELL ATLANTIC
         shall pay such additional amount to FA-1 so that after such deduction
         or withholding the net amount received by FA-1 will be not less than
         the amount FA-1 would have received had such deduction or withholding
         not been required. BELL ATLANTIC shall make the required deduction or
         withholding, shall pay the amount so deducted or withheld to the
         relevant governmental authority and shall promptly provide FA-1 with
         evidence of such payment.

2.8      In the case of payments of the Purchase Price, until the Initial RFS
         Date there shall be such controls over the account(s) designated by
         FA-1 pursuant to clause 2.7 so as to ensure that payments of the
         Purchase Price may only be used to make timely payments required to be
         made by FA-1 in connection with the planning, design, construction and
         project management of the System. Any interest arising from amounts
         held in the account(s) shall accrue for the benefit of FA-1.

2.9      BELL ATLANTIC's obligation to pay the Purchase Price and other amounts
         shall not be subject to any rights of set-off, counterclaim, deduction,
         defence or other right which BELL ATLANTIC may have against FA-1 or any
         other party under this Agreement or otherwise.

3.       TAXES

         Save as the context requires or as otherwise stated herein all
         references to payments made in this Agreement are references to such
         payments exclusive of all applicable sales and use taxes, gross
         turnover taxes, value added taxes, or other similar turnover or sales
         based taxes, excise taxes, duties and levies chargeable under
         applicable law in respect of the supply for which the payment is or is
         deemed to be consideration. Where applicable, such taxes shall be added
         to the invoice and shall be paid to FA-1 at the same time as the
         relevant invoice is settled in accordance with clause 2. FA-1 shall be
         solely responsible for payment of taxes on its income and, except as
         provided in clause 2.7, for withholding taxes, including, but not
         limited to, social security and payroll taxes for its employees. BELL
         ATLANTIC shall be solely responsible for payment of taxes on its income
         and for withholding taxes, including, but not limited to, social
         security and payroll taxes for its employees. Neither Party shall have
         any liability for such taxes which are to be borne by the other Party.
         Each Party indemnifies the other Parties and their respective
         affiliates for all claims, losses, penalties, interest, attorney's
         fees, and costs and expenses, including litigation costs, arising from
         any failure to make timely payment of such taxes, duties, and fees such
         Party is required to pay under this Agreement. Each Party shall
         co-operate in any effort by any other Party to contest application or
         payment or to seek refunds of any such taxes, duties, and levies.

4        DEFAULT AND TERMINATION

4.1      In the event that BELL ATLANTIC shall have failed to pay any portion of
         the Purchase Price for Capacity in Tranche 1 for more than *** days
         after its due date, then FA-1 may

                                                                              4

<PAGE>

         deactivate all then activated Capacity (and refuse to activate any
         additional Capacity) until BELL ATLANTIC has paid in full all amounts
         overdue together with applicable default interest provided that prior
         to such deactivation, FA-1 shall notify BELL ATLANTIC in writing of its
         concern regarding the overdue payment and shall provide BELL ATLANTIC
         with an opportunity to discuss this matter with FA-1 in order to reach
         an amicable solution to the issue of non-payment and avoid
         deactivation. ***

4.2      If such default in payment of any portion of the Purchase Price for
         Capacity in Tranche 1 continues for a further period of *** days FA-1
         may in its discretion by notice to BELL ATLANTIC, either:

         4.2.1    require BELL ATLANTIC forthwith to pay the unpaid balance of
                  the Purchase Price for Capacity in Tranche 1; or

         4.2.2    terminate this Agreement and relieve BELL ATLANTIC of its
                  obligation to pay any portion of the Purchase Price which has
                  not yet become due and its right to acquire Capacity pursuant
                  hereto.

         Neither such termination of this Agreement nor the exercise by FA-1 of
         such remedy shall relieve BELL ATLANTIC of its obligation to pay
         amounts already due hereunder plus default interest thereon.

4.3      In the event that BELL ATLANTIC shall have failed to pay any amount
         (including O&M Payments) payable by BELL ATLANTIC pursuant hereto (and
         not being disputed in good faith) for more than *** days after its due
         date, then BELL ATLANTIC shall not be entitled to activate any
         additional Capacity or to exercise its option to acquire any additional
         Capacity in Tranche 2, 3, 4 or (if applicable) 5 pursuant to clause 1.1
         until BELL ATLANTIC has paid in full all amounts overdue together with
         applicable default interest. If such failure continues for a further
         *** days, FA-1 shall be entitled to refrain from performing any
         services for BELL ATLANTIC required by this Agreement and to deny BELL
         ATLANTIC the right of access to collocated spaces until BELL ATLANTIC
         has paid in full all amounts overdue together with applicable default
         interest.

4.4      FA-1 reserves the right to temporarily or permanently deactivate all
         then activated Capacity (and refuse to activate any additional
         Capacity) and/or to disconnect BELL ATLANTIC's equipment from the
         System in the event BELL ATLANTIC's use of the System may result in
         material damage or disruption to the System provided that where
         practicable FA-1 shall notify BELL ATLANTIC prior to such deactivation
         or disconnection and shall provide BELL ATLANTIC with an opportunity to
         discuss this matter with FA-1 in order to reach a solution to avoid
         deactivation or disconnection.

4.5      Except as provided herein, BELL ATLANTIC shall have no right to
         terminate or cancel this Agreement for any reason whatsoever. If the
         Initial RFS Date has not occurred within *** months after the Scheduled
         Initial RFS Date *** BELL ATLANTIC may by two months written notice
         terminate its purchase of the Capacity. BELL ATLANTIC shall have no
         obligation to make any further payments under this Agreement following
         such termination and FA-1 shall within 60 days of such termination
         refund to BELL ATLANTIC any portion of the Purchase Price already paid
         by BELL ATLANTIC to FA-1 which has not been used to

                                                                              5

<PAGE>

         make timely payments required to be made by FA-1 in connection with the
         planning, design, construction and project management of the System.
         Subject to clause 20.1, the foregoing shall be the limit of BELL
         ATLANTIC's rights for delays to the Initial RFS Date.

5.       OPERATION AND MAINTENANCE

5.1      FA-1 shall be responsible for the operation and maintenance of the
         System including arranging for the repair of the System in the event
         of any fault. FA-1 shall use reasonable commercial efforts to
         operate and maintain the System in accordance with acceptable
         industry standards and by reference to Schedule 7, provided that
         except in the case of FA-1's gross negligence or wilful misconduct
         FA-1 shall not be liable to BELL ATLANTIC for any loss or damage
         sustained by reason of any failure in or breakdown of the facilities
         constituting the System or any interruption of BELL ATLANTIC's use
         of the Capacity, regardless of the cause of such failure, breakdown
         or interruption, and regardless of how long it shall last. BELL
         ATLANTIC's sole responsibility with regard to operation and
         maintenance of the System shall be to make the O&M Payments as and
         when they become due pursuant to this Agreement.

5.2      FA-1 shall promulgate procedures for the maintenance, use and
         operation of the System according to standards generally accepted in
         the ocean cable industry meeting the standards of Schedule 7 and shall
         provide BELL ATLANTIC with a copy thereof. FA-1 may, from time to
         time, amend such procedures and shall provide BELL ATLANTIC with a
         copy of each amendment.

6.       RESTORATION

         FA-1 shall provide restoration on the System as set forth in Schedule
         1. If such restoration is not sufficient for BELL ATLANTIC, then BELL
         ATLANTIC shall be responsible for making its own restoration
         arrangements for Capacity which is then activated.

7.       SYSTEM ENHANCEMENTS, UPGRADES AND ADDITIONAL CAPACITY

7.1      FA-1 reserves the right to further upgrade the capacity of the System
         and to make any enhancements to the System from time to time. FA-1
         shall provide at least 45 days advance notice for System upgrades or
         enhancements. FA-1 shall use reasonable efforts to minimise the
         interruption, interference or impairment of the System caused by the
         implementation of any such enhancement or upgrade and will consult with
         BELL ATLANTIC in determining the date, time and expected duration of
         any such interruption, interference or impairment.

7.2      BELL ATLANTIC shall have the right to acquire the IRU in the Capacity
         in Tranches 2, 3, 4 and (if applicable) 5 pursuant to clause 1.1
         whether or not FA-1 upgrades the capacity of the System in accordance
         with clause 7.1.

                                                                              6
<PAGE>

8.       SYSTEM DECOMMISSIONING

         The System shall be decommissioned at such time, no earlier than 15
         years and no later than 25 years from the Initial RFS Date, as either
         FA-1 or the holders of three quarters of the then activated capacity on
         the System determine that the System is technically obsolete or has
         reached the end of its useful economic life. There shall be no
         compensation payable to BELL ATLANTIC whether BELL ATLANTIC voted for
         or against decommissioning. This provision is without prejudice to the
         rights of FA-1 to decommission the System without any liability to BELL
         ATLANTIC whatsoever, in the event of a Force Majeure Event which makes
         it impossible to maintain the business efficacy of the System. FA-1
         will notify BELL ATLANTIC of the possibility of any such
         decommissioning of the System by FA-1 and give due consideration to
         BELL ATLANTIC's position and concerns regarding such possible
         decommissioning when considering whether to decommission the System.

9.       REPRESENTATIONS, WARRANTIES AND COVENANTS

9.1      BELL ATLANTIC represents and warrants to FA-1 as follows:

         9.1.1    BELL ATLANTIC is duly established and in good standing under
                  the laws of Delaware and has full power and authority to enter
                  into this Agreement.

         9.1.2    This Agreement constitutes the legal, valid and binding
                  obligation of BELL ATLANTIC, enforceable against BELL ATLANTIC
                  in accordance with its terms.

         9.1.3    BELL ATLANTIC has obtained or will obtain all necessary
                  consents, licenses, permits and other approvals, both
                  governmental and private, as may be necessary to permit BELL
                  ATLANTIC to perform its obligations under this Agreement and
                  to acquire and use the Capacity.

         9.1.4    BELL ATLANTIC shall perform its obligations under this
                  Agreement and use the Capacity in a manner consistent with
                  applicable law, and shall not use, or permit the Capacity to
                  be used, for any illegal purpose or in any other unlawful
                  manner.

9.2      FA-1 represents and warrants to BELL ATLANTIC as follows:

         9.2.1    It is duly established and in good standing under the laws of
                  the country of its incorporation and has full power and
                  authority to enter into this Agreement.

         9.2.2    This Agreement constitutes its legal, valid and binding
                  obligation enforceable against it in accordance with its
                  terms.

         9.2.3    FA-1 shall perform its obligations under this Agreement and
                  construct, acquire, provide, sell, operate, and maintain the
                  System and Capacity in a manner consistent with applicable
                  law.

         9.2.4    No interruption or impairment of BELL ATLANTIC's use of the
                  Capacity will be as a result of the System failing to comply
                  with the "Year 2000 Criteria" provided below.

                                                                              7
<PAGE>

                   "Year 2000 Criteria" means the System and its components
                  accurately processes date/time data from, into, and between
                  the twentieth and twenty-first centuries and the years 1999
                  and 2000.

9.3      FA-1 will, to the extent applicable, comply with the Government
         Requirements set forth in Schedule 8 in the performance of this
         Agreement. Reference to "Seller" in Schedule 8 shall be deemed to be
         references to FA-1.

9.4       FA-1 will use commercially reasonable efforts to obtain all necessary
          consents, licenses and permits and other approvals, both governmental
          and private, as may be necessary to permit FA-1 to perform its
          obligations under this Agreement and to construct, acquire, operate,
          provide, sell, operate and maintain the System and Capacity.

9.5      Except as provided above, FA-1 disclaims, and BELL ATLANTIC waives, all
         representations and warranties regarding the Capacity, including any
         warranty of merchantability or fitness for a particular use, and in
         particular, without limiting the foregoing FA-1 does not warrant that
         the Capacity will be uninterrupted or error free or that the Capacity
         will meet BELL ATLANTIC's requirements for the equipment to be deployed
         by BELL ATLANTIC in connection with the Capacity or services to be
         offered by BELL ATLANTIC utilising this equipment.

10.      FORCE MAJEURE

         "Force Majeure Event" means fire, strike, embargo, any requirement
         imposed by government regulation, civil or military authorities, act of
         God or by the public enemy, or other cause beyond a Party's reasonable
         control. Default of any of FA-1's subcontractors or suppliers shall not
         constitute a Force Majeure Event unless such default arises out of
         causes beyond the reasonable control of both FA-1 and its
         subcontractors or suppliers and without the fault or negligence of
         either of them. No failure or omission by any Party to carry out or
         observe any of the terms and conditions of this Agreement (other than
         payment obligations) shall give rise to any claim against such Party or
         be deemed a breach of this Agreement if such failure or omission arises
         from a Force Majeure Event.

11.      CONFIDENTIALITY

         Other than in connection with an assignment permitted under clause 13,
         or if it is required by applicable law in connection with the
         enforcement of this Agreement, or as required under subpoena or rule of
         order of a court or other governmental body of competent jurisdiction,
         neither FA-1 nor BELL ATLANTIC shall disclose the terms of this
         Agreement to any third party without the prior written consent of the
         other Party. Notwithstanding the foregoing, BELL ATLANTIC may disclose
         this Agreement to persons with whom it or its affiliates propose to
         merge, including, but not limited to, GTE Corporation and its
         affiliates, and/or to any BELL ATLANTIC affiliate provided such
         affiliate is bound by these obligations of confidentiality. In the
         event of a demand to disclose the Agreement under such rule, order, or
         subpoena, the Party subject to such demand shall where possible give
         prompt notice to the other Parties in advance of disclosure to permit
         the other parties to seek reasonable protective arrangements. Without
         limiting the generality of the foregoing, neither FA-1 nor BELL

                                                                              8
<PAGE>

         ATLANTIC shall issue any press release or otherwise publicise the
         existence or the terms of this Agreement without the prior written
         consent of the other Party.

12.      NO LICENCE

         Nothing in this Agreement shall or shall be deemed to give rise to any
         right on the part of any Party to use any other Party's Intellectual
         Property. For the purposes of this clause "Intellectual Property" means
         any and all patents, trade marks, rights in designs, copyrights, and
         topography rights, (whether registered or not and any applications to
         register or rights to apply for registration of any of the foregoing),
         rights in inventions, know-how, trade secrets and other confidential
         information, rights in databases and all other intellectual property
         rights of a similar or corresponding character which may now or in the
         future subsist in any part of the world, and a Party's Intellectual
         Property means Intellectual Property owned by or licensed to that Party
         together with the goodwill relating thereto.

13.      ASSIGNMENT

13.1     This Agreement and all the provisions hereof shall be binding upon and
         inure to the benefit of the Parties hereto and their respective
         successors and permitted assigns; provided that, except for the
         assignment of FA-1's rights (but not FA-1's obligations) under this
         Agreement to one or more financial institutions, lenders, creditors and
         export credit agencies as collateral security for financing provided to
         FA-1 or in connection with a sale of receivables by FA-1, neither this
         Agreement nor any of the rights, interest or obligations hereunder
         shall be assigned or transferred by any of the Parties hereto without
         the prior written consent of the other Parties, and any attempted
         assignment or transfer in violation of this clause shall be void.
         Notwithstanding the foregoing, BELL ATLANTIC may assign its rights,
         duties and obligations under this Agreement upon notice to FA-1, but
         without FA-1's prior consent, to BELL ATLANTIC Affiliates or to any
         transferee of or successor to all or substantially all of the business
         assets of BELL ATLANTIC, provided:

         13.1.1   the Affiliate, transferee or successor agrees to be bound by
                  all terms and conditions of this Agreement; and

         13.1.2   the Affiliate, transferee or successor is authorised or
                  permitted under the laws and regulations of its country to
                  acquire and use the Capacity.

         For the purposes of this clause, an "Affiliate" shall mean any other
         entity that controls, is controlled by or is under common control with
         BELL ATLANTIC.

13.2     FLAG Atlantic Limited and FLAG Atlantic USA Limited may use
         subcontractors or agents to fulfil their obligations hereunder.

14.      ENTIRE AGREEMENT

         This Agreement constitutes the whole agreement between the Parties and
         supersedes any previous or contemporaneous agreements, arrangements or
         understandings between them, oral or written, relating to the subject
         matter hereof. Each of the Parties acknowledges that it is not relying
         on any statements, warranties or representations given or made by any
         of them,

                                                                              9

<PAGE>

         whether written or oral, relating to the subject matter hereof, save as
         expressly set out in this Agreement.

15.      VARIATION

         No variation or amendment to this Agreement shall be effective unless
         in writing signed by authorised representatives of each of the Parties.

16.      HEADINGS

         The Clause headings of this Agreement are for convenience of reference
         only and are not intended to restrict, affect or influence the
         interpretation or construction of provisions of such Clause.

17.      SEVERABILITY

         If any provision of this Agreement is found by an arbitral, judicial or
         regulatory authority having jurisdiction to be void or unenforceable,
         such provision shall be deemed to be deleted from this Agreement and
         the remaining provisions shall continue in full force and effect.

18.      WAIVER

18.1     Failure by a Party at any time to enforce any of the provisions of this
         Agreement shall neither be construed as a waiver of any rights or
         remedies hereunder nor in any way affect the validity of this Agreement
         or any part of it and no waiver of a breach of this Agreement shall
         constitute a waiver of any subsequent breach.

18.2     Termination of this Agreement shall not operate as a waiver of any
         breach by a Party of any of the provisions hereof and shall be without
         prejudice to any rights or remedies of a Party which may arise as a
         consequence of such breach or which may have accrued hereunder up to
         the date of such termination.

18.3     No waiver of a breach of this Agreement shall be effective unless given
         in writing.

19.      NOTICE

19.1     Any notice, request, demand or other communication required or
         permitted hereunder shall be sufficiently given if in writing in
         English and delivered by hand or sent by prepaid registered or
         certified mail (airmail if international), by facsimile or by prepaid
         international courier service of international reputation addressed to
         the appropriate Party at the following address or to such address as
         such Party may from time to time designate in writing by notice sent in
         accordance with this clause:

                                                                             10
<PAGE>

         If to BELL ATLANTIC:

         NYNEX Long Distance Company
         1372 Broadway, 8th Floor
         New York, NY  10018
         Attention: President

         With copies to:

         Bell Atlantic International
         1095 Avenue of the Americas
         Room: 444
         New York, NY 10036
         Attention:  John Pricken
         Fax:  1-212-597-2696

         Bell Atlantic Corporation
         Legal Department
         1095 Avenue of the Americas
         Room 3831
         New York, NY  10036
         Attention: International Counsel
         Fax: 212-764-2739

         Bell Atlantic Network Services, Inc.
         Legal Department
         1320 North Courthouse Road, 8th Floor
         Arlington, VA  22201
         Attention: Long Distance Counsel
         Fax: 703-974-0691

         If to FA-1:

         FLAG Atlantic Limited
         The Emporium Building
         69 Front Street
         4th Floor
         Hamilton HM 12
         Bermuda

         Attention: Co-chairmen
         Tel:  +1-441-296-0909
         Fax: +1-441-296-0938

         With a copy to:

         FLAG Telecom Limited

                                                                             11
<PAGE>

         103 Mount Street - 3rd Floor
         London  W1Y 5HE
         U.K.

         Attention:  General Counsel
         Tel:  +44-171-317-0800
         Fax: +44-171-317-0808

         With a copy to:

         GTS Carrier Services
         Terhulpsesteenweg 6A
         Hoeilaart 1560
         Belgium

         Attention:  General Counsel
         Tel:  +322-658-5200
         Fax: +322-658-5100

19.2     BELL ATLANTIC acknowledges that all communications in connection with
         this Agreement shall be between BELL ATLANTIC and FLAG Atlantic
         Limited. For this purpose, FLAG Atlantic USA Limited hereby appoints
         FLAG Atlantic Limited as its agent to receive and send all
         communications in connection with this Agreement.

19.3     Any notice, request, demand or other communication given or made
         pursuant to this clause shall be deemed to have been received (i) in
         the case of hand delivery or courier, on the date of receipt as
         evidenced by a receipt of delivery from the recipient, (ii) in the case
         of mail delivery, on the date which is seven days after the mailing
         thereof, and (iii) in the case of transmission by facsimile, on the
         date of transmission with confirmed answer back. Each such
         communication sent by facsimile shall be promptly confirmed by notice
         in writing hand-delivered or sent by courier, mail or air mail as
         provided herein, but failure to send such a confirmation shall not
         affect the validity of such communication.

20.      LIABILITY

20.1     ***

20.2     Notwithstanding any other provision in this Agreement to the contrary,
         no Party shall be liable to any other Party for any indirect, special,
         punitive or consequential damages (including, but not limited to, any
         loss of profit or business or claim from any customer for loss of
         services) arising out of this Agreement or from any breach of any of
         the terms and conditions of this Agreement.

20.3     ***

21.      COUNTERPARTS

                                                                             12
<PAGE>

         This Agreement may be executed in counterparts. Any single counterpart
         or set of counterparts signed, in either case, by all the Parties
         hereto shall constitute a full and original agreement for all purposes.

22.      WAIVER OF IMMUNITY

         The Parties acknowledge that this Agreement is commercial in nature,
         and the Parties expressly and irrevocably waive any claim or right
         which they may have to immunity (whether sovereign immunity or
         otherwise) for themselves or with respect to any of their assets in
         connection with an arbitration, arbitral award or other proceedings to
         enforce this Agreement, including, without limitation, immunity from
         service of process, immunity of any of their assets from pre- or
         post-judgement attachment or execution and immunity from the
         jurisdiction of any court or arbitral tribunal.

23.      FA-1 FINANCIAL CLOSURE

23.1     The obligation of BELL ATLANTIC to pay the Purchase Price (or any
         instalment thereof) and the obligation of FA-1 to provide the Capacity
         is conditional upon the occurrence of FA-1 Financial Closure.

23.2     If FA-1 Financial Closure has not occurred by 31 October 1999, then
         this Agreement shall terminate (with the exception of clauses 11, 20,
         22 and 24 which shall survive termination).

23.3     For the purposes of this Agreement, "FA-1 Financial Closure" shall be
         deemed to take place on the date when FA-1 and its shareholders have
         put in place arrangements satisfactory to them for the financing of the
         construction of the System.

24.      GOVERNING LAW AND DISPUTE RESOLUTION

24.1     This Agreement shall be governed by and construed in accordance with
         the laws of the state of New York, United States of America, without
         regard to the law of New York governing conflicts of law.

24.2     Except as otherwise provided herein, any dispute or controversy arising
         under or in connection with this Agreement shall be finally settled
         under the Rules of Arbitration of the International Chamber of Commerce
         by one arbitrator appointed in accordance with such Rules. The place of
         arbitration shall be London. The arbitration shall be conducted in
         English. The decision and award resulting from such arbitration shall
         be final and binding on the Parties. Judgement upon the arbitration
         award may be rendered by any court of competent jurisdiction, or
         application may be made to such court for a judicial acceptance of the
         award and an order of enforcement. Insofar as permissible under the
         applicable laws, the Parties hereby waive all rights to object to any
         action for judgement or execution which may be brought before a court
         of competent jurisdiction on an arbitration award or on a judgement
         rendered thereon.

25.      NON-EXCLUSIVE MARKET RIGHTS

                                                                              13

<PAGE>

         It is expressly understood and agreed that this Agreement does not
         grant to FA-1 an exclusive privilege to sell or otherwise provide to
         BELL ATLANTIC any or all products and services of the type described in
         this Agreement. It is, therefore, understood that BELL ATLANTIC may
         contract with other suppliers for the procurement of comparable
         products and services.

 26.      AFFILIATE PURCHASES

         Affiliates (which shall have the same meaning as that term is given in
         clause 13.1) designated by BELL ATLANTIC may acquire the Capacity in
         place of BELL ATLANTIC by issuing an order to FA-1 that incorporates
         this Agreement by reference. Such Affiliates that order Capacity shall
         be entitled to all the rights, and subject to all the obligations, of
         BELL ATLANTIC under this Agreement and as to orders by such Affiliates,
         references in this Agreement to BELL ATLANTIC shall be deemed to be
         references to such Affiliates.

27.      SURVIVAL

         Clauses 11, 20, 22 and 24 and any rights of a Party which have accrued
         prior to the cancellation, termination, or expiration of this Agreement
         shall survive such cancellation, termination, or expiration.

28.      ***

29.     CUSTOMER INPUT

         Following the Initial RFS Date, FA-1 shall solicit views from its
         customers on operation and maintenance (including assignment and
         routing of capacity) of the System through such means as FA-1 shall
         consider appropriate, including by way of periodic conference calls
         with a representative sampling of such customers.

IN WITNESS WHEREOF, FA-1 and BELL ATLANTIC have each caused this Agreement to be
signed and delivered by its duly authorised representatives, effective as of the
date first set forth above.

FLAG ATLANTIC LIMITED

BY  /s/ Name of Signatory
  ------------------------
Name:
Title:

FLAG ATLANTIC USA LIMITED

BY /s/ Larry F. Bautista                             BY /s/ James E. Shields
  -----------------------                              -----------------------
Name:                                                Name:   James E. Shields
Title:                                               Title:

                                                                             14
<PAGE>

NYNEX LONG DISTANCE COMPANY

By /s/ Veronica Gralha
  ----------------------
Name:  Veronica Gralha
Title:   President

                                                                              15

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