Document:

<PAGE>

                                                                    EXHIBIT 10.5

Note: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

                                   AGREEMENT

                                    BETWEEN

                   CABLE & WIRELESS GLOBAL NETWORKS LIMITED

                                      AND

                                 TELLIUM, INC.

                                FOR THE SUPPLY

                                      OF

                                NETWORK SYSTEMS
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                                      <C>
CLAUSE 1  DEFINITIONS AND INTERPRETATIONS............................................................     4

CLAUSE 2  TERM AND SCOPE OF WORK.....................................................................    11

CLAUSE 3  PURCHASING.................................................................................    12

CLAUSE 4  DOCUMENTATION AND SPECIFICATIONS...........................................................    15

CLAUSE 5  INTENTIONALLY LEFT BLANK...................................................................    16

CLAUSE 6  QUALITY....................................................................................    16

CLAUSE 7  TYPE APPROVALS.............................................................................    17

CLAUSE 8  PRE-SHIPMENT TESTS.........................................................................    17

CLAUSE 9  DELIVERY, INSURANCE, RISK AND TITLE........................................................    18

CLAUSE 10 SYSTEM INTERWORKING........................................................................    19

CLAUSE 11 INTENTIONALLY DELETED......................................................................    20

CLAUSE 12 PRICE AND PAYMENT..........................................................................    20

CLAUSE 13 LIABILITY AND INDEMNITY....................................................................    21

CLAUSE 14 CONTRACTOR'S LIABILITY FOR DELAY...........................................................    23

CLAUSE 15 CONTRACTOR'S REPRESENTATIONS AND WARRANTIES................................................    23

CLAUSE 16 PERFORMANCE WARRANTY.......................................................................    25

CLAUSE 17 PRODUCT SUPPORT............................................................................    27

CLAUSE 19 HARDWARE, SOFTWARE AND HARDWARE/SOFTWARE DEVELOPMENT.......................................    28

CLAUSE 20 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............................................    29

CLAUSE 21 ESCROW.....................................................................................    30

CLAUSE 22 LICENSE....................................................................................    30
</TABLE>

                                      -i-
<PAGE>

<TABLE>
<S>                                                                                           <C>
CLAUSE 23 INTELLECTUAL PROPERTY...........................................................    31

CLAUSE 24 INTELLECTUAL PROPERTY RIGHTS INDEMNITY..........................................    32

CLAUSE 25 TERMINATION.....................................................................    33

CLAUSE 26 AMENDMENTS......................................................................    35

CLAUSE 27 OTHER CONTRACTORS AND SUB-CONTRACTORS...........................................    36

CLAUSE 28 CONFIDENTIAL INFORMATION........................................................    36

CLAUSE 29 PUBLICITY.......................................................................    38

CLAUSE 30 FORCE MAJEURE...................................................................    38

CLAUSE 31 RESOLUTION OF DISPUTES..........................................................    39

CLAUSE 32 ETHICS..........................................................................    42

CLAUSE 33 NOTICES.........................................................................    42

CLAUSE 34 ENTIRE AGREEMENT................................................................    44

CLAUSE 35 WAIVER..........................................................................    44

CLAUSE 36 SEVERABILITY....................................................................    44

CLAUSE 37 ASSIGNMENT AND SUB-CONTRACTING..................................................    44

CLAUSE 38 COMPLIANCE WITH LAW AND REGULATIONS.............................................    45

CLAUSE 39 GOVERNING LAW AND JURISDICTION..................................................    46
</TABLE>

                                     -ii-
<PAGE>

                                   EXHIBITS

A.   LIST PRICES

B.   [INTENTIONALLY OMITTED]

C.   SPECIFICATIONS

D.   [INTENTIONALLY OMITTED]

E.   TURNKEY AGREEMENT

F.   [INTENTIONALLY OMITTED]

G.   DOCUMENTATION

H-1. CONTRACTOR'S STANDARD FORM OF CONFIDENTIALITY AGREEMENT

H-2. CABLE & WIRELESS GLOBAL CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT

I.   CUSTOMER SERVICE

J.   SOFTWARE MAINTENANCE AGREEMENT

K.   ESCROW

                                     -iii-
<PAGE>

                               PURCHASE AGREEMENT

     This Purchase Agreement (this "Agreement") is made effective as of August
7, 2000 by and between CABLE & WIRELESS GLOBAL NETWORKS, LIMITED, an Ireland
corporation, ("C&W") and TELLIUM, INC., a Delaware corporation ("Tellium").
Entry into this Agreement by C&W is conditioned upon approval by the Board of
Directors of Cable & Wireless plc of the transaction contemplated by and terms
set forth in this Agreement no later than September 5, 2000 or for such
extension of time as the parties may agree, provided, for purposes of clarity,
if the condition is not so satisfied, C&W shall not be deemed to have entered
into or ratified this Agreement. In consideration of the mutual covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

     CLAUSE 1  DEFINITIONS AND INTERPRETATIONS

     A.   In the Contract, unless inconsistent with the context or otherwise
specified, the following terms shall have the following meanings:

          Agent means (***), or other agent designated by C&W or Cable &
          Wireless plc, in its capacity as agent for a Group Company under this
          Contract.

          Baseline Software means the most current release of Software, as of
          the applicable Date of Delivery, with the most current feature
          functionalities which have been paid for by the Purchaser.  Baseline
          Software requirements are in addition to the requirements set forth in
          Clause 19(C) of this Agreement.

          Clause means a clause of this Agreement.

          Claim means any loss, damages, action, claim, cost or expense
          (including, without limitation, reasonable costs of counsel and court
          or arbitration tribunal costs).

          Commitment means the purchase obligation under the Agreement to be
          satisfied by aggregating purchases by Purchasers, as more particularly
          described in this Agreement..

          Concession means the written waiver by C&W of a requirement of the
          Specifications.

          Confidential Information means any and all written, oral or other
          tangible or intangible form of:

                                      -4-
<PAGE>

          (a)  Commercial or financial information, including but not limited to
               information concerning the Disclosing Party's current and future
               products and services, its clients and customers and its
               marketing plans and techniques; and

          (b)  Technical information including, but not limited to, discoveries,
               ideas, concepts, know-how (whether patentable or capable of being
               protected by copyright or not) research, development, designs,
               specifications, drawings, blueprints, tracings, diagrams, models,
               samples, flow charts, data, computer programs, disks, diskettes,
               algorithms, software programs and trade secrets,

          in each case whether or not labeled as "Confidential" and whether or
          not that information could give any potential or actual competitor of
          the Disclosing Party any form of commercial or other advantage; and

          (c)  The terms and conditions of this Contract.

          Contract means this Agreement and includes any Schedules, Exhibits and
          any associated Purchase Orders, all as may be amended from time to
          time in accordance with this Agreement.

          Contractor means Tellium, Inc., a Delaware corporation, and includes
          its successors and permitted assignees.

          Contract Prices mean the prices to be paid to the Contractor by the
          Purchasers or its Agent under the Contract, which shall not exceed:

               (1)  for each element of Hardware and Software, the lower of (a)
               at least (***) off each list price set out in Exhibit A (***)
               under (***) or (b) any (***),(***) or (***) effected under (***)
               of this Agreement; and

               (2) for services, actual direct costs based on the lower of the
               governing labor rate set forth in Exhibit A or any (***), (***)
               or (***) effected by (***) or (***) of this Agreement..

          Date of Delivery means the date when the deliverable under the
          Contract is delivered to the Purchaser or Agent in accordance with the
          Contract and the applicable Purchase Order.

                                      -5-
<PAGE>

          Disclosing Party means the Party or the Purchaser that owns
          Confidential Information and which discloses such information.

          Disclosure Requirement means any requirement that information be
          disclosed by any (i) law, regulation or legal process, (ii) the rules
          and regulations of any securities exchange on which either party's
          securities are traded and any regulatory body over such securities
          exchange or (iii) any order of a court or other tribunal of competent
          jurisdiction.

          Documentation means the operating manuals, user instructions,
          technical literature, including drawings, diagrams, specifications,
          and other relevant materials written in English related to the use,
          operation, maintenance and control of all or any portion of the
          System.

          Effective Date of Contract means the date set forth above in this
          Agreement.

          Exhibits mean the designated exhibits to this Agreement but
          specifically exclude and do not mean Purchase Orders.

          Existing Network means the Purchaser's relevant computer equipment,
          network and telecommunications facilities (including but not limited
          to its billing systems) and all software, firmware and hardware used
          in relation thereto.

          Force Majeure means events which are beyond the reasonable control of
          the entity claiming Force Majeure which occur after the Effective Date
          of Contract and which is outside the control of the entity claiming
          Force Majeure and whose effects are not capable of being overcome.
          Events of Force Majeure include but are not limited to governmental
          act, war, the threat of imminent war, riots, civil commotion, fires,
          explosions, storms, floods, lightning, earthquakes and other natural
          calamities.  Any failure on the part of the Contractor's sub-
          contractors and suppliers to perform their obligations to the
          Contractor shall not be considered an event of Force Majeure under the
          Contract, unless such failure was the result of a Force Majeure event.
          A strike, work stoppage or other industrial action by the employees of
          the Contractor or its sub-contractors shall not be considered an event
          of Force Majeure unless such strike, work stoppage or industrial
          action is part of an industry-wide campaign that does not arise out of
          a dispute between the Contractor and any of its employees or
          subcontractors between a sub-contractor and any  of its employees.

          Group Company means all and any of:

          (a)  Cable and Wireless plc,

                                      -6-
<PAGE>

          (b)  any direct and indirect subsidiaries of Cable and Wireless plc,
               and

          (c)  any companies in or over which Cable and Wireless plc is able,
               through a direct or indirect shareholding, to exercise control;
               and

          (d)  any company in or over which Cable & Wireless plc is able,
               through direct or indirect shareholding, to exercise significant
               influence.

          Hardware means the hardware including, without limitation, hardware
          and modules identified on Exhibit A and any associated firmware which
          the Contractor is required to supply as part of the Contract.

          Insolvency Event means each and any of the following:

          (a)  the issue of a petition for winding up which is not dismissed
               within thirty (***) of its issue; or

          (b)  the making of an order or an effective resolution being passed
               for winding up except for the purposes of a solvent
               reconstruction or amalgamation and where the resulting entity
               assumes in writing all of the obligations of the relevant party
               under the Contract; or

          (c)  the making of an order for the appointment of an administrative
               receiver, administrator, trustee, liquidator, manager or similar
               officer; or

          (d)  an encumbrancer, receiver (including an administrative receiver)
               or other similar officer taking possession of the whole or any
               part (which is material in the context of the performance of the
               affected party's obligations under the Contract) of such party's
               undertaking, property or assets; or

          (e)  the making or proposing of making of a composition with creditors
               generally; or

          (f)  generally being unable to pay debts as they fall due; or

          (g)  an assignment for the benefit of creditors.

          Intellectual Property Rights mean all rights in inventions, patents,
          copyrights, design rights, semiconductor topography and chip design
          rights, trade marks and

                                      -7-
<PAGE>

          trade names, domain names, service marks, trade secrets, know-how and
          other intellectual property rights (whether registered or
          unregistered) and all applications and registrations for and
          extensions and renewals of such rights or any of them, anywhere in the
          world.

          IPR Claim means an action or claim by any person that the use or
          possession of the Works, any New Technology or the Source Technology
          or any part of them or of any other goods or services provided under
          the Contract infringes the Intellectual Property Rights of that person
          or any other person.

          License means the license granted in the Clause of this Contract
          headed `License'.

          Licensed Software means the Software provided by the Contractor as
          part of the System or otherwise for the purposes of the Contract.

          Media means the media on which the Software and the Documentation for
          the Software are recorded or printed as provided to the Purchaser by
          the Contractor.

          New Technology means inventions, drawings, designs, developments,
          software and technical information including, but not limited to,
          know-how, data, formulae, specifications, procedures and techniques
          discovered derivatively in the course of the engagement of the parties
          and exclusive of the System.

          Party means the Contractor or C&W.

          Pre-Shipment Tests means the series of tests carried out by the
          Contractor prior to delivery to demonstrate that the Hardware and/or
          Software meet the requirements of the Specifications.

          Pre-Shipment Test Completion Certificate means the document issued by
          the Contractor certifying successful completion of the Pre-Shipment
          Tests upon their completion.

          Purchase Order means a purchase order issued by a  Purchaser or Agent
          for all or any portion of the System.

          Purchaser means any Group Company purchasing all or any portion of the
          System under this Contract.

          Receiving Party means the Party or Purchaser that receives
          Confidential Information from the Disclosing Party.

                                      -8-
<PAGE>

          Site means the land, buildings and environment where a System is to be
          installed.

          Software means the set of computer programs in machine-readable code,
          which the Contractor is required to supply as part of the Contract.

          Source Code means the original base code of the Software together with
          associated libraries, command files, any other proprietary
          intermediate software, modifications, enhancements, revisions, updates
          and all relevant listings, flow charts and associated documentation,
          in human readable form which can be used to create executable code,
          supplied on a Media in a format which can be read and printed by the
          Hardware and which is readily accessible for modification and
          adaptation.

          Source Technology means inventions, drawings, designs, developments,
          software and technical information including but not limited to know-
          how, data, formulae, specifications, procedures and techniques
          provided by the Contractor for the purposes of the Contract and which
          is in existence at the Effective Date.

          Specifications means the specifications agreed between C&W and the
          Contractor which define the requirements of the Systems, including
          plans, drawings and data, and related addenda and clarifications, as
          identified in the jointly agreed upon Exhibit C.

          System means the Hardware or Software or any combination thereof (and
          any associated cabling or other items) as defined in the
          Specifications or otherwise set out or referenced in the Contract and
          shall include repaired and replacement parts supplied under the
          Contract.

          System Interworking means the ability of the various components of the
          System to be compatible with and to work in combination with the
          Existing Network and with the systems of other interfacing networks
          and equipment, and "Integrate", "Integrating", 'Integrated' and
          'Integration' shall be construed as referring to this ability.

          Warranty Period means a period from (***), indicated for each
          applicable category as follows: (i) System Software: (***); (ii)
          software media: (***); (iii) all products other than System Software
          and software media: (***).

          Year 2000 Compliant means that neither performance nor functionality
          is affected by dates prior to, during and after the year 2000.  In
          particular:

                                      -9-
<PAGE>

          (a)  no value for a current date will cause any interruption in the
               operation of the System or Existing Network;

          (b)  all manipulations of date-related data will produce the desired
               results for all valid date values;

          (c)  date elements in the interfaces and data storage will permit
               specifying the century to eliminate date ambiguity without human
               intervention;

          (d)  where any date element is represented without a century, the
               correct century shall be unambiguous for all manipulations
               involving that element; and

          (e)  Year 2000 must be recognized as a leap year.

     B.  The headings and marginal notes in the Contract are for ease of
reference only and shall not affect its interpretation or construction.

     C.  The Exhibits to this Agreement are integrated into and form part of
this Agreement.

     D.  Words indicating the singular include the plural and vice versa where
the context requires.

     E.  Words denoting persons include bodies corporate and unincorporated
associations and vice versa where the context requires.

     F.  Reference to any enactment, order, regulation or other similar
instrument shall be construed as a reference to the enactment, order, regulation
or instrument as may be amended by any subsequent enactment, order, regulation
or instrument.

     G.  Reference in the Contract to "days" shall be construed as calendar days
and to weeks as calendar weeks.

     H.  In writing or written includes facsimile transmission expressly and
personally confirmed as received by the designated recipient, electronic mail,
letter, written documents or other comparable means of written communication.

     I.  The Contractor shall be as responsible for the acts and omissions of
its employees, officers, directors and for those of its agents and
subcontractors.

                                     -10-
<PAGE>

     CLAUSE 2  TERM AND SCOPE OF WORK

     A.  The Contract shall become effective on the Effective Date of Contract
and shall continue in force for a period of five (5) years from the Effective
Date (the "Initial Term"), unless terminated earlier in accordance with the
provisions of Clause 25 headed "Termination".  The term of the Contract shall
automatically renew thereafter on the anniversary date of the Effective Date for
one-year periods, subject to termination rights under this Agreement, unless
either Party to this Agreement provides sixty (60) days' advance written notice
to the other Party that the Contract shall expire and not be renewed.
Notwithstanding  anything to the contrary in the Contract, the Contract shall
not expire until the outstanding Purchase Orders placed and accepted prior to
the anticipated date of expiration (based on the notice of expiration) have been
fulfilled, and the date of expiration of this Agreement shall be the last date
of delivery of such ordered Systems.

     B.  The terms and conditions set out in this Agreement shall be the only
terms and conditions which shall apply to this Agreement, except the provisions
of any law and or regulation affecting the provision of the Systems at the
Effective Date of this Agreement or which comes into force during the period of
performance of this Agreement and which, pursuant to the requirement of law,
takes precedence over or varies a provision of this Agreement.  Where any
standard or pre-printed conditions contained on a form of quotation, a purchase
order, acknowledgment of a purchase order, invoice or similar document conflict
with the terms of this Agreement, the terms of this Agreement shall control.

     C.  In the Contract, the Works includes:

          (a)  the System, including

               (i)    the design of the System;

               (ii)   the build of the System in accordance with the
                      Specifications; and

               (iii)  packing and delivery of the System;

all of which are more specifically described in this Agreement.

          (b)  the supply of Documentation;

          (c)  the grant of the License to the Purchaser;

          (d)  the provision of training; and

                                     -11-
<PAGE>

          (e)  the provision of all services expressly set forth in the
               Contract.

     D.  The Contractor shall provide the Works in accordance with the Contract.

     CLAUSE 3  PURCHASING

     A.  The Contractor will develop the Systems in accordance with the Exhibit
C entitled "Specifications".  The Parties acknowledge that a portion of the
Specifications have not been fully developed and further agree to work
diligently and in good faith toward the completion of those Specifications,
which, when completed, will be made a part of Exhibit C.The Parties additionally
acknowledge that the Specifications may be refined from time to time so as to
meet intended functions.

     B.  During the Term of this Contract, C&W, directly or through a designated
Group Company, shall provide the Contractor with quarterly forecasts, each of
which will set forth the quantities of and delivery dates for Systems to be
ordered by Purchasers or Agent during the twelve-month period following the date
of the forecast.  As C&W may deem appropriate, C&W shall work toward the
objective of providing monthly forecasts.

     C.  To order the Works, the Purchasers or Agent shall provide Contractor
with Purchase Orders in writing delivered to Contractor's designated
representative, which, among other things, shall clearly reference the Contract.
The Contractor shall be required to accept and fulfill Purchase Orders up to
(***) of a forecast. Delivery shall be made in accordance with the following
schedule:

          (a)  for orders placed during the first year of the Contract, delivery
               shall be made within (***) after receipt of the Purchase Order;

          (b)  for orders placed after the first year of the Contract, delivery
               shall be made within (***) after receipt of the Purchase Order;
               however, the Contractor agrees that, after the second year of the
               Contract, it shall use all diligent, good faith, commercially
               reasonable efforts to achieve the goal of fulfilling Purchase
               Orders within (***) after receipt of the Purchase Order.

Notwithstanding the intervals stated above, the Contractor shall use diligent,
good faith commercially reasonable efforts to fulfill as quickly as possible
those Purchase Orders placed by a Purchaser on shorter delivery timeframes as
mutually agreed by the parties.

     D.  Unless otherwise specified in the Contract, time is of the essence in
the performance of the Contractor's obligations under the Contract.  The
Contractor shall use its best efforts to prevent delays and to minimize any
delays which may arise and shall take all reasonable steps to expedite the
performance of the Contract.

                                     -12-
<PAGE>

     E.  If the Contractor has reason to believe that the Date of Completion (as
defined in Exhibit E as applicable) or a Date of Delivery may be delayed, it
shall promptly notify the Purchaser of:

          (a)  the cause of the delay;

          (b)  the expected period of delay; and

          (c)  the steps proposed to be taken to minimize the delay.

     F.  Except in circumstances of Force Majeure, no amendment to the Date of
Completion (as applicable) or a Date of Delivery shall be accepted by the
Purchaser except as mutually agreed and confirmed in writing by the Purchaser in
accordance with the procedures set out in the Clause headed `Amendments'.

     G.  The Purchasers shall be entitled to purchase Systems from the
Contractor through the Agent, as well as on a turnkey basis. The Parties' and
the Purchaser's obligations for turnkey purchases shall be the same as provided
under this Agreement; plus the reasonable additional payment and performance
obligations set forth in Exhibit E to this Agreement, which exhibit shall be
negotiated in good faith and diligently by the Parties after the Effective Date
and then incorporated into this Agreement.

     H.  If any Purchaser receives a bona fide offer from a third party (the
"Bona Fide Offer") to purchase the Systems in connection with a liquidation of
such Purchaser, such Purchaser shall (i) provide the Contractor with written
notice of such Bona Fide Offer (the "Offer Notice"), which shall include, among
other things, a copy of such Bona Fide Offer and (ii) shall offer the Contractor
the right to purchase the Systems at the same price and on the same terms and
conditions as the Bona Fide Offer. The Contractor shall have ten (10) days from
receipt of the Offer Notice (the "Notice Date") to accept the offer from the
Purchaser. If the Contractor has rejected or failed to accept such offer within
such ten (10) day period, Purchaser may sell such Systems to the party making
the Bona Fide Offer, pursuant to the terms of the Bona Fide Offer and shall have
no further obligations to the Contractor as to that liquidation.

     I.  During the initial five (5) year term of the Contract, C&W -through the
     Group Companies shall be obligated to purchase in the aggregate U.S. Three
     Hundred Fifty Million Dollars ($350,000,000) of Systems at the Contract
     Prices and may, during the term of the Contract, purchase additional
     Systems at the Contract Prices, subject to (a)  rights of termination for
     default and (b) the purchase obligation reduction set forth in this Clause
     3(I).  The Parties acknowledge that it is the business objective of the
     Contractor to be at the forefront of development of leading edge optical
     cross-connect and related

                                     -13-
<PAGE>

     technology and that the Contractor's competitive technology position is a
     key reason for C&W's selection of the Contractor as a vendor. If though,
     during the term of the Contract, the Contractor does not maintain a
     technological edge so that there exists in the market superior technology
     unmatched by the Contractor, then C&W may reduce the purchase obligation
     under the Contract to U.S. Two Hundred Million Dollars ($200,000,000) and
     the discount specified in (1)(a) of the definition of Contract Price and
     amount due to the Contractor shall be adjusted at the end of the initial
     term of the Contract. At the end of the intial term of the Contract, the
     aggregate purchases under the Contract shall be determined, and the
     applicable purchase discount under 1(a) of the definition of Contract Price
     shall be adjusted as follows. If the aggregate purchases under the Contract
     equal or exceed $350,000,000, then 1(a) of the definition of the Contract
     Price shall not change and no additional sums shall be due to the
     Contractor. If the aggregate purchases total between (***) and (***) then
     the discount to be applied under 1(a) of the definition of Contract Price
     shall be (***), and C&W shall refund promptly to the Contractor the
     difference between amounts paid to date based on (***) discount and those
     same amounts based on a (***) discount. If the aggregate purchases total
     between (***) and (***), then the discount to be applied under 1(a) of the
     definition of Contract Price shall be (***), and C&W shall refund promptly
     to the Contractor the difference between those amounts paid to date based
     on a (***) discount and those same amounts based on a (***) discount. If
     the aggregate purchases total between (***) and up to (but not including)
     $350,000,000, then the discount to be applied under 1(a) of the definition
     of Contract Price shall be (***), and C&W shall refund promptly to the
     Contractor the difference between those amounts paid to date based on a
     (***) discount and those same amounts based on a (***).

     J.  The Contractor acknowledges and agrees that the Contract is not an
     exclusive contract and that the ordering and/or purchasing of optical
     cross-connect technology from any other vendor(s) does not constitute a
     breach of the Contract.  The Group Companies shall also have the option, in
     satisfaction of the foregoing purchase obligation and any additional
     purchases, to purchase, in lieu of Systems, newer equipment of the
     Contractor that constitutes a suitable replacement for Systems.

     K.  The acceptance of the initial Purchase Order placed by the Agent may be
     conditioned upon (i) the parties reaching, after diligent and good faith
     negotiations, commercially reasonable terms for the protection of the
     Contractor's Confidential Information and Intellectual Property Rights; and
     (ii) the Agent agreeing in writing to be bound by relevant obligations of a
     Purchaser under this Agreement.  The Contractor acknowledges and agrees
     that the purpose of this Clause is to protect the Contractor's proprietary
     information; and that this Clause shall not and is not intended to confer a
     right on Contractor to renegotiate the terms of the Contract.

                                     -14-
<PAGE>

     L.  Each Purchaser, by placing a Purchase Order, agrees to and shall be
bound by all obligations of a Purchaser hereunder; however, such obligations
shall not extend to the obligations of C&W or any other Purchaser
hereunder.CLAUSE 4  DOCUMENTATION AND SPECIFICATIONS

     A.  The Contractor shall supply Documentation to the Purchaser with each
delivery of the related deliverable (System, upgrade or other deliverable) under
the Contract or as may be reasonably requested by the Purchaser, in hard or soft
copies or both if reasonably available, including a CD ROM version, as a part of
the Contract Price and not at an additional charge, in the English language in
the number of copies and format agreed between the parties not to exceed two (2)
sets of documentation per System when ordered as a separate line item.  The
Documentation is more specifically identified in the Exhibit G entitled
`Documentation'.

     B.  Any drawings or documents held by the Contractor shall be retained
during the lifetime of the Systems to enable the Contractor to supply any
replacement parts and/or extensions to the Systems.

     C.  The Contractor shall furnish to the Purchaser Documentation completed
in sufficient detail to enable the Purchaser to operate the System properly.

     D.  All System Documentation supplied shall be referenced against a
specific Software or Hardware release.

     E.  Any omission, inconsistency or ambiguity in detail and/or description
in any Documentation provided under the Contract shall be corrected by the
Contractor without delay without cost to the Purchaser, and replacement
Documentation shall be provided promptly by the Contractor at no cost to the
Purchaser.

     F.      The Contractor shall be responsible for any significant
         discrepancies, errors or omissions in the Documentation, whether the
         Documentation has been approved by the Purchaser or not, provided that
         such discrepancies, errors or omissions are not due to inaccurate
         drawings or information and decisions supplied in writing to the
         Contractor by C&W.

     G.      The Contractor shall provide to C&W and the Purchasers
         documentation that identifies for Hardware and Software and services
         (i) part numbers to enable cataloguing, (ii) descriptions, (iii) list
         prices (in accordance with Exhibit A or Clause 12(H), as applicable),
         (iv) discounted prices and (v) System configurations as available. So
         that such information is current, the Contractor shall update this
         documentation regularly or as often as the Purchaser or C&W requests.

                                     -15-
<PAGE>

     CLAUSE 5  INTENTIONALLY LEFT BLANK

     CLAUSE 6  QUALITY

     A.  No later than December 31, 2000, the Contractor shall implement and
shall maintain throughout the term of this Contract a quality system conforming
to the requirements of ISO 9001 (or an equivalent standard approved by C&W, such
approval not to be unreasonably withheld).  In the event the Contractor receives
any notice of nonconformance to ISO 9001 from the ISO registrars, Contractor
shall immediately advise C&W and promptly provide  C&W with (i) the list of
details of nonconformance and (ii) the detailed plan submitted to the ISO
registrars including timelines and goals to achieve compliance with ISO 9001.

     B.  At no cost to C&W (or a Group Company designated by C&W), the
Contractor shall give C&W, or a designated Group Company, reasonable access, to
the extent reasonably possible, to the Contractor's manufacturing locations,
inspection records and test records to audit the effective operation of the
quality system throughout the Contractor's performance of its obligations under
the Contract.

     C.  If C&W (or a Group Company designated by C&W), so requests, the
Contractor shall promptly submit to C&W as part of the Works a quality plan
setting out the specific quality practices, resources and activities relevant to
the Contractor's performance of its obligations under the Contract.

     D.  C&W, itself or through a designated Group Company, may, but is not
obligated to, perform a quality inspection and carry out quality tests on all or
any part of the Systems at any stage during the Contract.  The Contractor shall,
to the extent reasonably possible, give C&W free and safe access to parts of its
premises or those of its subcontractors concerned with the implementation of the
Systems and, at C&W's reasonable cost, shall provide C&W with such inspection
facilities, testing apparatus and services as C&W may reasonably require.

     E.  In addition to the foregoing rights, C&W, or a Group Company designated
by C&W, shall also have the right, but not the obligation, at C&W's cost, to
conduct such laboratory tests of the Systems as it deems appropriate in C&W's
designated laboratory facilities, which shall be reasonably acceptable to the
Contractor.

     F.  If an inspection or test conducted by C&W, or a Group Company
designated by C&W, reveals that all or any part of the Systems will not fulfill
the requirements of the Specifications or that a Specification is deficient,
C&W, or a Group Company designated by C&W, shall notify the Contractor of such
deficiencies. For the avoidance of doubt, such notice shall not relieve the
Contractor from any liability or obligation under the Contract. If a
Specification is revealed to be deficient, then the Parties will diligently and
in good faith work toward a reasonable resolution of the Specification problem.

                                     -16-
<PAGE>

     G.  As to any release of the Works, prior to issuance by C&W, or a Group
Company designated by C&W, of a Fit For Use Certificate (as defined in Clause
8(C)), C&W, or a Group Company designated by C&W, shall be entitled to reject
any Systems, in whole or in part, which do not conform to the Specifications or
otherwise fail laboratory acceptance tests  of C&W, or a Group Company
designated by C&W.

     CLAUSE 7  TYPE APPROVALS

     A.  The Contractor shall, (***), obtain any type approvals or equivalent
approvals required for the Systems or any part of the Systems (***) of the Site.

     B.  The Contractor shall promptly provide C&W, or a Group Company
designated by C&W, with all relevant documentation relating to type approval for
the Systems and such shall be deemed to be Documentation under this Contract.
C&W shall have the right but not the obligation to approve such documentation
and, if not reasonably satisfied, to require the Contractor to carry out
additional type approval tests to satisfy type approval requirements.

     C.  Upon satisfaction of type approval requirements, C&W, or a Group
Company designated by C&W, shall issue to the Contractor a certificate stating
that the Systems at issue are fit for use (the "Fit For Use Certificate").

     CLAUSE 8  PRE-SHIPMENT TESTS

     A.  Before each portion of the Systems is shipped, the Contractor shall
carry out the Pre-Shipment Tests, a listing of which shall be supplied to C&W,
or a Group Company designated by C&W, in advance.  If C&W, or a Group Company
designated by C&W, reasonably considers that the proposed Pre-Shipment Tests are
not sufficient, then the Contractor shall make appropriate amendments to such
schedule to satisfy C&W at no additional cost to C&W.

     B.  C&W reserves the right for itself, or a Group Company designated by
C&W, to be present at and to participate in the Pre-Shipment Tests and the
Contractor shall give adequate notice of the commencement of the Pre-Shipment
Tests.

     C.  Upon successful completion of the Pre-Shipment Tests, the Contractor
shall issue a Pre-Shipment Test Completion Certificate to the Purchaser for such
tested portions of the System.

     D.  In the event that the Contractor manufactures a part of the Systems or
utilizes an item of equipment which does not fully comply with the
Specifications, the Contractor may apply to C&W for a Concession in accordance
with the Clause headed `Amendments'.

                                     -17-
<PAGE>

     CLAUSE 9  DELIVERY, INSURANCE, RISK AND TITLE

     A.  The Systems shall be properly and suitably packed by the Contractor to
ensure that they reach the destination designated by the Purchaser or the Agent
in good condition having due regard to the nature of the Works and the climatic
and other conditions prevailing both during delivery and at the designated
destination.

     B.  NO (***) SHALL BE MADE WITHOUT THE PURCHASER'S EXPRESS, PRIOR WRITTEN
CONSENT.

     C.  The Contractor shall be responsible for delivering the Systems DDP, VAT
unpaid to the designated destination in accordance with INCOTERMS 2000 and shall
insure the same accordingly.  The Purchaser or the Agent shall reimburse the
Contractor for those direct costs and expenses incurred for shipping the Systems
from the Contractor's facility to the designated destination, including all
delivery, carrier insurance, worldwide transit coverage, export, import, tariff
and similar expenses but excluding costs of due diligence, corrective actions,
fines, penalties and the like due to the acts or omissions of the Contractor or
any person or entity for which it has responsibility.  If delivery of a System
VAT unpaid is not permitted under applicable law, then the VAT shall be paid by
the Contractor and the VAT, without mark-up, shall be reimbursed by the
Purchaser or Agent under this Clause 9(C).

     D.  If the designated destination is the Site and the Purchaser's Site
manager has been identified to the Contractor, then the Contractor shall notify
such Site manager in writing, with a copy to the Purchaser at the notice address
set forth in this Agreement or such other address as the Purchaser shall
specify, before the delivery of the Systems of the shipment with reference to
the controlling Purchase Order.  Where relevant the notification shall include
the carrying vessel or flight number, the air waybill, the number and size of
cartons and a brief description of the items being delivered.

     E.  Following the delivery of the Systems to the designated destination,
the Contractor shall submit to the Purchaser, with a complete copy to the
invoicee and the Agent and notice to C&W (for purposes of tracking aggregate
purchases), a shipping document (with an original signature upon request)
detailing the Systems shipped and stating, among other things: (a) the
Contractor's name and, where appropriate, sub-supplier's name; (b) the country
of origin; (c) the port of loading; (d) the country of final destination; (e)
the company vessel or flight number; (f) the metric net and gross weights of
each case, carton or package; (g)  the quantity and description of the Systems;
and (h) the address of the designated destination.  Each case, carton or package
shall show the Purchaser's name, the address of the designated destination, the
Contract reference, the Contract number and/or the Purchase Order number.

     F.  If the Contractor delivers any Systems more than (***) prior to the
time period set forth in the applicable Purchase Order, the Purchaser or the
Agent, as the case may be, may

                                     -18-
<PAGE>

charge the Contractor the reasonable and actual costs of storage, handling and
insurance incurred by the Purchaser or the Agent. All charges made pursuant to
this Clause 9(F) shall be invoiced to the Contractor with express reference to
the controlling Purchase Order.

     G.  If the delivery of the Systems is delayed for reasons other than Force
Majeure, the Purchaser reserves the right to stipulate in writing that all or
part of the Systems so delayed be air freighted to the designated destination,
with any excess cost borne by the Contractor without pass-through or
reimbursement, if any such delay is likely to materially prejudice the scheduled
date of completion of the project of which such Systems are a part.

     H.  Subject to the Purchaser's or Agent's reimbursement obligations under
Clause 9(C) above and except where such obligations have expressly been assumed
by the Purchaser or the Agent, the Contractor shall be solely responsible for
all importation activities associated with the Systems or any part of the
Systems into the country of the designated destination.  Subject to the prior
express agreement of the Contractor and Purchaser, such agreement not to be
unreasonably withheld, a local Group Company may be used and cited as the
importer of record.  The Contractor shall inform the Purchaser or the Agent, as
appropriate, of known applicable import and export laws, rules and regulations
in order to facilitate the delivery of the Systems to the designated
destinations.  The Purchaser recognizes the value of sharing information it may
have to facilitate deliveries and, where it deems prudent, shall do so but
without in any way assuming, waiving or limiting the due diligence and other
obligations of the Contractor or the Agent.  The sharing of information by a
disclosing party shall in no case be deemed to be the rendering of legal advice
nor absolve the receiving party of its independent duty to verify such
information.  Unless applicable export regulations and other law state to the
contrary or unless such duty is assumed by the Agent, the Contractor is
responsible for obtaining all export licenses and permits.

     I.  The Contractor shall insure the Systems with a reputable insurance
company on an "all risk" basis against all loss or damage, and shall lodge and
pursue to conclusion all claims arising prior to title passing in such Systems.

     J.  Title and risk of loss in the Systems shall pass from the Contractor to
the Purchaser (or the Agent if applicable) upon (***) of the Systems to (***) of
the (***) as set forth in Clause 9(C).

     CLAUSE 10  SYSTEM INTERWORKING

     A.  In addition to the Contractor's obligations with regard to System
Interworking under the Specifications or other terms of the Contract, the
Contractor shall, when requested by the Purchaser in writing, provide the
Purchaser with external interface specifications (including protocols, data
formats and connectivity architecture) relevant to the request and shall
promptly

                                     -19-
<PAGE>

discuss with the Purchaser any changes which need to be made to the System to
ensure such System Integration is satisfactorily effected.

     B.  The Purchaser may provide such external interface specifications to
third parties involved in the integration and/or maintenance of the Systems and
Existing Network, as agreed to in writing by the Contractor, and such approval
rights shall be conditioned on their not being unreasonably withheld,
conditioned or delayed, and shall be available only so long as withholding or
conditioning does not materially and adversely affect the Purchaser's ability to
have integration and maintenance services timely performed or cause the
Purchaser to breach an existing contract for such services.  Such disclosure
shall further be subject to the provisions of the Clause headed `Confidential
Information' and provided further that such third party enter a Confidentiality
Agreement in the form attached hereto as Exhibit H-1.

     C.  At the reasonable request of the Purchaser, the Contractor agrees to
co-operate with the Purchaser's other suppliers and/or customers from time to
time to assist the Purchaser in resolving any integration problems specific to
the Purchaser, at the cost of the Purchaser (unless such response is warranty-
related).

     CLAUSE 11  INTENTIONALLY DELETED

     CLAUSE 12  PRICE AND PAYMENT

     A.  The Purchaser or the Agent shall pay amounts due and payable under the
Contract pursuant to an agreed form of detailed invoice, accompanied by agreed
substantiation, import documentation (where applicable) and such other
documentation as is mutually agreed by Purchaser and Contractor. Invoices shall
be submitted to the address shown on the applicable Purchase Order.

     B.  (1) Each Contract Price and each list price on Exhibit A is a firm
maximum price and shall not be exceeded except as a result of amendment to the
Contract made in accordance with the Clause headed `Amendments'.

         (2) If the (***) any (***) or (***) a (***) that is (***) a (***) on
(***), then, (***) and without the (***), such (***) the (***) the (***) is
(***).

         (3) If a (***) from the (***) a (***) or (***) (other than (***)) for
(***) and/or (***) that is (***), then, (***) and without the (***), the (***)
shall be (***) such (***) and (***) at the (***),(***) or (***).

         (4) (***) shall have (***) to (***) the (***) to (***) with a (***)
with the foregoing (***) the (***) and (***) per (***), at its (***), to (***) a
(***) to (***) to (***) the (***) and (***) of the (***).  Any (***) pursuant to
this Clause 12(B) (***) to (***) the (***) as (***) pursuant to the (***) of
(***), attached hereto as (***), and may (***) to (***) the

                                     -20-
<PAGE>

(***) that the (***) has (***) or (***) with this Clause, the applicable dates
upon which any such (***) occurred and the (***) in (***) and (***) up to and
including the (***) but shall not (***) the (***) of the (***) or any other
(***) not directly related to this Clause. If the (***) a (***), then the (***)
shall (***) to the (***), the (***) of the (***) at the (***) of (***) from the
(***) to the (***).

     C.  All amounts payable under the Contract shall be exclusive of value
added or other applicable sales taxes (if any) and import duties, which shall be
paid at the rate and in the manner for the time being prescribed by law and, if
paid by the Contractor on behalf of the Purchaser, shall be passed on to the
Purchaser at cost with no mark-up.  If required to do so by relevant law, the
Purchaser shall deduct any taxes (including, without limitation, withholding
taxes), duties or charges from any payments to be made to the Contractor under
the Contract.

     D.  Where prices specified in the Exhibits or Purchase Orders are stated as
estimates, the prices paid post delivery shall not exceed the amount of such
estimate, as confirmed on the Purchase Order unless otherwise expressly agreed
by the parties in writing.

     E.  All payment, purchase order and invoice amounts shall be in U.S.
Dollars.  Payments shall be made to the address set forth in the invoice, either
by check or electronic transfer at the Purchaser's sole option.

     F.  Invoices together with supporting documentation shall be submitted in
accordance with Clause 12(A) above.  Payment for Systems properly delivered and
invoiced shall be due forty-five (45) days from date of receipt of invoice.

     G.  Past due payments under the Contract will begin accruing interest at
the rate of (***) from the date due until paid.

     CLAUSE 13  LIABILITY AND INDEMNITY

     A.  Except for Claims resulting from any suit, claim or proceeding as set
forth in Clause 24 (Intellectual Property Rights Indemnity), C&W, Purchasers and
Contractor agree that C&W and Purchasers shall not be liable to Contractor and
Contractor shall not be liable to either Purchasers or C&W for any lost profits,
incidental, punitive, consequential, indirect or special loss or damage arising
from or in any way connected with the Contract; provided, however, that if the
law of any jurisdiction applicable to this Contract does not permit such damages
to be completely disclaimed, this Clause shall be interpreted as necessary to
give the affected entity the full benefit of any disclaimer or limitation of
said damages as permitted under such law.

                                     -21-
<PAGE>

     B.  Except for Claims resulting solely from the gross negligence or willful
misconduct of a Group Company, its employees, officers, directors and agents
(other than Agent), the Contractor agrees to indemnify the Group Companies from
and against any and all Claims awarded against, incurred by or paid or payable
by a Group Company as a result of:

          (a)  any injury to or death of any person;

          (b)  any loss of or damage to any property;

          (c)  any claim for infringement of health and safety legislation and
               regulations; and/or

          (d)  any other loss or damage (other than lost profits, incidental,
               punitive, consequential, indirect or special loss or damage which
               is expressly excluded in sub-clause A of this Clause);

Arising out of the negligent, willful or unlawful act or omission or default of
the Contractor, its employees, officers, directors, agents and contractors.

     C.  Each of C&W, Purchasers and the Contractor shall either (1) take out
and maintain for the term of the Contract insurance coverages, with a reputable
insurance company against the liabilities referred to in the Contract and
against all actions in respect thereof or (2) maintain adequate self insurance
for the liabilities referred to in the Preceding Clause.  Any insurance policy
shall, among other things, (i) be written on an occurrence basis (unless
precluded by law, in which event coverages shall be maintained without
interruption for a period of five (5) years after the termination of the
Contract), (ii) if it is Purchaser's or C&W's, note the interests of Contractor,
or if it is Contractor's, note the interests of C&W or Purchaser, as applicable,
and (iii) as to C&W's, Purchaser's and Contractor's respective obligations, be
primary as to any coverages carried by the additional insureds. Where requested
in writing, Purchaser, C&W or Contractor shall provide the other with written
evidence of the insurance coverages obtained.  Insurance coverages shall not
limit or negate the indemnities provided under this Contract.

     D.  C&W agrees to indemnify the Contractor against those direct losses or
damages (other than consequential, indirect or special loss or damage, which are
expressly excluded under sub-Clause A of this Clause) by reason of third party
claims made against the Contractor only because of the presence of a System of
the premises of a Purchaser and where there exists no fault of the Contractor,
its employees, officers, directors, agents or contractors.

                                     -22-
<PAGE>

     E.  The limitations of liability and indemnities contained in this Clause
and in Clauses 24 and 25 shall survive and remain in full force and effect
notwithstanding any termination or expiration of the Contract.

     CLAUSE 14  CONTRACTOR'S LIABILITY FOR DELAY

     A.  If a delivery of Systems or portion of a Purchaser-approved partial
delivery is delayed beyond (***) from the scheduled Date of Delivery in
accordance with Clause 3(C), as adjusted for Force Majeure, the Contractor shall
pay to the Purchaser (***) of the applicable Purchase Order (or, for a
Purchaser-approved partial delivery, (***) of the unusable portion set forth on
the applicable Purchase Order) per day for each day beyond such (***) until
delivery is made, as liquidated damages and not as a penalty; provided, however,
that such liquidated damages shall not exceed the cost of (***) of the Purchase
Order (or, for a Purchaser-approved partial delivery, the unusable portion of
the Purchase Order). If the Contractor fails to deliver such System within (***)
of the designated Date of Delivery, as adjusted for Force Majeure, then the
Purchaser may, without liability, terminate such Purchase Order, and the
Contractor shall pay the liquidated damages accrued to the date of termination
within (***) after the date of such termination.

     B.  No payment of liquidated damages shall be due pursuant to Clause 14(A)
if (i) the delivery is delayed through no fault of Contractor or its
subcontractors or (ii) the delay is a result of the System not being approved by
C&W, or a Group Company designated by C&W following successful lab testing.

     C.  The payment of liquidated damages shall not relieve the Contractor of
its obligation to complete and deliver the Systems or from any other liability
or obligation under the Contract, other than for the specific delay, nor shall
payment of liquidated damages limit the Purchaser's other rights under this
Contract including, without limitation, the rights under Clause 25.

     CLAUSE 15  CONTRACTOR'S REPRESENTATIONS AND WARRANTIES

     A.  The Contractor represents and warrants to C&W that:

          (a)  each of the Systems shall provide the intended facilities and
               functions and perform in accordance with the Specifications;

          (b)  the possession and use of the Systems and any Source Technology
               by the Purchaser shall not infringe any Intellectual Property
               Rights of any third party;

                                     -23-
<PAGE>

          (c)  it shall act in good faith and in a commercially reasonable
               manner in performance of its obligations under this Contract;

          (d)  the Systems shall not cause any degradation in the operation of
               the Existing Network or cause the Existing Network to cease to
               comply with any type approvals or standards applicable at the
               time the Systems are provided;

          (e)  it is a company duly incorporated under the laws of Delaware and
               has the corporate power and authority to accept the terms of the
               Contract and to perform its obligations thereunder;

          (f)  any Software supplied contains no viruses or other contaminants
               or devices including, without limitation, bugs, worms, logic
               bombs, Trojan horses or self-propagating or other programs that
               may cause malfunctions or damage to or erase the Software or data
               contained therein or any other software or data;

          (g)  the Intellectual Property Rights in the Source Technology and the
               Licensed Software are vested in the Contractor or its licensors
               and the Contractor is authorized to grant the licenses to use the
               Source Technology and the Licensed Software under the Contract;

          (h)  except as provided for in sub-clause (g) above, the Systems are
               the Contractor's original work and are not copied from any other
               work or materials, that no rights have been granted to others in
               respect thereof and that no third party has any right, title or
               interest in the Systems or any part thereof; (i) it has the full
               capacity to grant the License;

          (j)  any Software supplied is capable of operating without degradation
               or failure in performance, functionality, output or otherwise in
               relation to any decimal based currencies or any combination of
               decimal based currencies including the euro and the euro symbol;

          (k)  the System shall be free from defects in materials and
               workmanship under normal use;

          (l)  upon its initial delivery, each System shall be new and unused
               (other than factory testing);

                                     -24-
<PAGE>

          (m)  the System and each item of Hardware and Software is Year 2000
               Compliant;

          (n)  where the Existing Network is Year 2000 Compliant, the use of the
               Systems shall not adversely affect the Year 2000 Compliant status
               of the Existing Network; and

          (o)  all individuals providing repair or maintenance services on
               behalf of the Contractor shall have received the appropriate
               Railroad Safety Training.

          B.   The representations and warranties of sub-clauses (a), (b), (d),
(j), (k), (m), (n) and (f) do not apply to any System that (a) has been altered,
modified, or improperly repaired by someone other than the Contractor or its
subcontractors; (b) has been the subject of misuse, negligence, accident, or
improper storage or installation by someone other than the Contractor or its
subcontractors; or (c) has been used or maintained in any manner other than in
accordance with the Documentation.  THE WARRANTIES CONTAINED IN THIS CONTRACT
ARE IN LIEU OF ANY OTHER PRODUCT WARRANTY BY THE CONTRACTOR, WHETHER EXPRESS,
IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION, WARRANTIES OF CORRESPONDENCE
OF DESCRIPTION OF SAMPLES, SATISFACTORY QUALITY AND FITNESS FOR AN IDENTIFIED
PURPOSE AND SHALL SURVIVE THE TERMINATION OR EXPIRATION OF THE CONTRACT.
CONTRACTOR NEITHER ASSUMES NOR AUTHORIZES ANY PERSON TO ASSUME FOR IT ANY OTHER
LIABILITY THAN THOSE SET FORTH IN THE CONTRACT.  THE WARRANTIES EXPRESSED HEREIN
SHALL NOT BE ASSIGNABLE TO ANY OTHER PARTY EXCEPT AS SPECIFICALLY PERMITTED
UNDER THIS AGREEMENT.

     CLAUSE 16  PERFORMANCE WARRANTY A.  The Contractor warrants to C&W and the
Agent the performance of the Systems in accordance with the Specifications for
the applicable Warranty Period.  During the Warranty Period:

          (a)  the Contractor shall promptly investigate the cause of any System
               that fails to meet the Specifications (or within 24 hours with no
               cure period if such non-compliance presents a material, adverse
               threat to the Purchaser's operations),  including, without
               limitation, attendance at the Site and such other of the
               Purchaser's premises as may be necessary, and promptly repair
               such System according to the Specifications and the Purchaser's
               reasonable satisfaction or replace, without charge to the
               Purchaser, such System (or any component thereof) found not to be
               in accordance with the Specifications.

                                     -25-
<PAGE>

          (b)  the Purchaser shall bear the cost of delivering to the Contractor
               any parts of the System which must be repaired or replaced.  The
               Contractor shall bear the cost of delivering to the destination
               specified by the Purchaser the repaired or replaced parts or
               Systems in the most efficient manner.

          (c)  if a System fails to operate in accordance with the
               Specifications and such failure cannot be rectified using the
               standard operational and maintenance procedures, upon notice the
               Contractor shall promptly send a specialist to the Site at the
               Contractor's expense and maintain him/her there at no cost to the
               Purchaser for so long as may be necessary to restore the System,
               provided that if such failure is likely to have a material
               adverse impact on the Purchaser, the specialist shall be sent
               within twenty-four (24) hours notice with no cure period or
               sooner if possible; and

          (d)  if a new hardware or software feature is needed to conform the
               Systems to the Specifications, such new feature shall be
               implemented at no cost to the Purchaser. The absence of a charge
               shall not apply when the Purchaser has requested new
               functionality features.

     B.  If the Contractor fails to remedy the faults within a reasonable time,
taking into account the impact of any such fault on C&W's and the Purchaser's
operations, the Purchaser may proceed to do the work at the Contractor's cost
and expense.  The costs reasonably incurred by the Purchaser shall be deducted
from the Contract Price or be paid by the Contractor to the Purchaser within
(***) of invoice.

     C.  Default repair or emergency repair of Systems by or on behalf of the
Purchaser pursuant to Clause 16(B) above in accordance with the Documentation
and other relevant information supplied shall not invalidate or limit the
Contractor's warranty provided that reasonable care is taken during such repair.
The Purchaser shall immediately notify the Contractor of any emergency repairs
to be undertaken.

     D.  The period of warranty to apply on items repaired or replaced during
the Warranty Period shall be (***) from the date of shipment of the repaired or
replaced item or the balance of the applicable warranty period, whichever is
longer.

     E.  The Contractor shall reimburse the Purchaser's direct costs incurred as
a direct result of errors or omissions in the Documentation.

     F.  If:

                                     -26-
<PAGE>

          (a)  all or any portion of the Systems fails to be Year 2000 Compliant
               in any material respect; or

          (b)  as a result of any act or omission of the Contractor or its
               subcontractors the Year 2000 compliance of the Existing Network
               is adversely affected in any material respect; or

          (c)  where applicable, the combined Systems and Existing Network fails
               to be Year 2000 Compliant;

then the Contractor shall, upon notice, promptly (or within 24 hours with no
cure period if such non-compliance presents a material, adverse threat to the
Purchaser's operations), at no cost to the Purchaser, undertake and diligently
pursue such action as is reasonably necessary to make the Systems Year 2000
Compliant, or to restore the Existing Network to its status prior to the
relevant act or omission of the Contractor or its subcontractors, or to enable
the combined Systems and Existing Network to be Year 2000 Compliant, as the case
may be.

     G. Contractor shall provide support and repair and return service for the
        Systems as set forth in Exhibit I.

     H. If the Contractor fails to respond within the designated response
        periods under this Clause 16, then C&W or the Purchaser shall have the
        right to offset and/or recover all direct costs incurred by C&W or the
        Purchaser as a result of the Contractor's failure timely to respond.

     I. If Systems installation shall become the Contractor's responsibility
        through a turnkey amendment, then such turnkey amendment shall
        incorporate installation and performance warranties acceptable to the
        Parties.

     CLAUSE 17  PRODUCT SUPPORT

     A.  For a period of ten (10) years from the first Date of Delivery under
the Contract, the Contractor shall support the Systems including, without
limitation:

         (a)   timely supply of all spare and replacement parts to the systems
               integrator and/or the Purchaser or Agent at the then-current
               prices less any appropriate discounts;

         (b)   the retention of the Documentation to enable any modifications or
               extensions to the Systems or its integration that may
               subsequently be required; and
<PAGE>

          (c)  Contractor shall offer maintenance and support to C&W and the
               Agent for Software pursuant to the Software Maintenance Agreement
               attached hereto as Exhibit J.

The Contractor shall notify the Purchaser and Agent at least six (6) months in
advance of any termination of production and/or support to enable the Purchaser
and Agent to review their positions, their future spares holding and to exercise
any last buy opportunities.

     A.   Upon cessation of support for the Systems, the Contractor shall supply
          to the Purchaser, without limitation, such drawings, designs and
          technical information as the Purchaser may reasonably require to
          enable it to continue to use, operate and control the Systems.

     B.   The Contractor shall provide and deliver specialist higher level
          technical support to key Cable &Wireless markets in the U.S., U.K.,
          Europe and Japan upon request by C&W or its designee. Dedicated
          Contractor optical network expertise includes optical switching
          network designers, network management software developers, restoration
          and efficiency planners, interoperability (including DWDM, ATM and IP
          networking) engineers. Dedicated support, at no charge to the
          Purchaser or C&W, shall be a minimum of three (3) qualified personnel,
          of which two shall be a project manager and technical sales engineer),
          per region. Support requested by C&W in excess of the dedicated
          personnel shall be at the rates stated in Exhibit A.

     CLAUSE 18  TRAINING SERVICES

     A.  The Contractor shall provide the training courses at the prices
detailed in the Exhibit A.

     B.  Additionally, the Contractor shall provide training on a regular basis
to meet the Purchaser's and the Agent's needs, including customized courses
where required.  Training, including hands-on facilities, shall, wherever
possible, be delivered in, or as near as possible to the Purchaser's or  Agent's
preferred location.

     C.  The Purchaser shall be responsible for any travel, lodging, and other
fees incident to the attendance of its or the Agent's personnel at the
Contractor's training courses.

     CLAUSE 19  HARDWARE, SOFTWARE AND HARDWARE/SOFTWARE DEVELOPMENT

     A. The Contractor shall keep the Purchaser and Agent reasonably informed of
all relevant aspects of the Contractor's software development. The Purchaser
shall forward to the Contractor requests for product development such that the
Contractor may in its sole discretion incorporate reasonable requests in its
software development plan.

                                     -28-
<PAGE>

     B.  The Contractor shall report on a quarterly basis to the Purchaser and
Agent the status of known software upgrades and of any future upgrades that have
been planned since the last report.

     C.  The Contractor shall in all events provide the Purchaser and the Agent
with all maintenance upgrades to the Software during the Warranty Period and any
period of purchased support at no charge to Purchaser or C&W.  For the avoidance
of doubt, the term "maintenance upgrades" shall mean any and all software
(whether or not described as an upgrade, update or release) necessary to correct
bugs, replace temporary maintenance fixes with permanent ones, or provide minor
enhancements, but does not include software which provides substantial new
functionality to the Software.  The Contractor shall inform the Purchaser and
Agent of any Hardware implications when upgrading Software at the earliest
possible date.  If any Hardware supplied and/or installed by the Contractor
needs to be replaced to facilitate the Software maintenance upgrades identified
above, then the new Hardware requirements shall be provided at the Contractor's
sole cost.

     D.  The Contractor shall ensure that all Software supplied will interwork,
         itself or by upgrade, with the (***) immediately preceding versions of
         the Systems. For purposes of the Contract, all releases issued though
         and including (***) of the Contract shall be deemed to constitute the
         Baseline Software

     E.  and a single "version", and the Contractor guarantees continuing
         backward compatibility and interoperability of all future Software
         releases and support, at no additional charge, for the longer of the
         term of the Contract or the Software warranty period. To this end, the
         Contractor shall provide promptly on a routine basis, at no charge to
         the Purchaser or C&W, Baseline Software and all Hardware upgrades so
         that all of the System delivered to the Purchaser to date may be run at
         the same version. The Contractor shall invoice and the Purchaser shall
         pay for all additional functionality Software features beyond Baseline
         Software and for that Hardware necessary for such additional feature
         functionalities. For every release of Software and/or Hardware, the
         Contractor shall provide to C&W and the Purchaser a detailed itemized
         invoice identifying the Software maintenance upgrades, the feature
         upgrades, the Hardware related to Software maintenance upgrades, the
         Hardware related to additional feature functions and the prices
         invoiced for each.

     CLAUSE 20  REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     A. C&W will act in good faith and in a commercially reasonable manner in
performance of its obligations under the Contract. Each Purchaser represents and
warrants at the time of its purchases that it will act in good faith in
performance of its obligations under the Contract.

                                     -29-
<PAGE>

     B.   C&W is duly organized and has the power and authority to accept the
terms of the Contract and to perform its obligations hereunder. Each Purchaser,
through its initial Purchase Order, will represent that at the time of purchase
it is duly organized and has the power and authority to accept the terms of the
Contract and to perform its obligations hereunder.

     C.  Except pursuant to Clause 22(E), the Purchaser and C&W shall not, and
shall not authorize any third party to, reverse compile, reengineer or
disassemble or analyze the physical construction of the Systems (or any
component thereof) for any purpose nor will a Purchaser or C&W reproduce the
Software for the purpose of furnishing it to others except as authorized in
writing by the Contractor. Purchaser and C&W shall not remove or destroy any
copyright, logo, trademark, trade name, proprietary markings or confidentiality
legends placed on or contained within the Systems, its containers or any related
materials or Documentation. Purchaser and C&W shall comply with all legends that
appears on or in the Systems, materials or Documentation to the extent
consistent with the Contract and the intended use and purpose of the Systems.

     D.   No copies of the Documentation shall be made except for internal
operational use, and if the Documentation is installed on any intranet, access
to the Documentation shall be limited in accordance with the Clause entitled
"Confidential Information."

     CLAUSE 21 ESCROW

     A.   At the request of C&W, the Contractor shall enter into an Escrow
Agreement with the National Computing Centre (`NCC') in accordance with NCC's
then prevailing terms and conditions, a current copy of which is attached for
reference as Exhibit K entitled `Escrow'.

     B.   C&W shall pay any fees charged by the Escrow Agent.

     CLAUSE 22 LICENSE

     A.   The Contractor hereby grants to the Purchaser a perpetual, irrevocable
(except under the conditions of Clause 22(I) below), royalty-free, non-
transferable and non-exclusive license to use and install the Licensed Software
on and in conjunction with the Systems and/or the Existing Network.

     B.   The Purchaser may make only so many copies of the Licensed Software as
are reasonably necessary for operational security and use.

     C.   The Purchaser may, with fourteen (14) days notice to the Contractor
(or in the event of an emergency such notice in form and time as may be
practicable), allow a permitted third party to use and install the Licensed
Software for the purposes of providing services to the Purchaser.

                                     -30-
<PAGE>

     D.   If any part of the Systems or the Existing Network becomes temporarily
inoperable, then the License is deemed to apply to the use of the Licensed
Software on other equipment which is under the Purchaser's control, without any
additional payment to the Contractor but at the Purchaser's risk and expense
(except where the Systems are defective), until the Systems and/or Existing
Network becomes operable.

     E.   Except as permitted under this Clause or under Clause 16(B), the
Purchaser shall not alter or modify the whole or any part of the Licensed
Software nor, other than in connection with the creation of any necessary
interfaces or to ensure interoperability with software already installed in the
Purchaser's network management systems and with other vendor's platforms in
order to meet operational objectives, decompile, disassemble or reverse engineer
the object code of the Licensed Software.

     F.   If any part of the Licensed Software delivered to the Purchaser is not
owned by the Contractor:

          (a)  the Contractor shall notify the Purchaser and  Agent of that
               fact; and

          (b)  the Contractor grants to the Purchaser a sub-license to such
               third party software with the same rights and subject to the same
               restrictions as the Contractor, such restrictions having been
               notified to the Purchaser prior to the Effective Date.

     G.   The Parties may from time to time by mutual agreement extend the scope
of the licenses granted hereunder.

     H.   Subject to Clause 22(I) below, any termination or expiration of the
Contract shall not operate so as to terminate the License.

     I.   Notwithstanding Clause 22(H) above, the license granted under Clause
22(A) above may be terminated immediately by the Contractor in the event of the
Purchaser's breach of Clause 22(E) or 20(C) above.

     CLAUSE 23  INTELLECTUAL PROPERTY

     A.   The Contract Price includes all amounts which may be payable
(including, without limitation, royalties) in respect of the Intellectual
Property Rights on or in respect of the Systems.

     B.   The Purchasers and C&W acknowledge that all Intellectual Property
Rights in the Source Technology and the Licensed Software are vested, and shall
remain vested, in the Contractor or its licensors.

                                     -31-
<PAGE>

     C.   C&W, Purchasers and Contractor recognize that New Technology may arise
during the course of their association under the Contract. If any New Technology
is deemed by the entity that created it to be deserving of intellectual property
protection, then that entity is responsible for taking steps to protect any
interests it may have in such New Technology and may refuse to disclose such
during its pursuit of Intellectual Property Rights in the same.

     CLAUSE 24  INTELLECTUAL PROPERTY RIGHTS INDEMNITY

     A.  The Contractor agrees to indemnify, hold harmless and defend (with
counsel acceptable to C&W) the Group Companies and their officers, directors,
employees and agents without limitation from and against any and all liability,
loss, damage, costs and expenses (including legal expenses on a solicitor and
own client basis) awarded against, incurred by or paid or payable by the
Purchaser resulting at any time from any IPR Claim.

     B.  This indemnity shall not apply to any infringement resulting directly
and solely from any amendments, modifications or enhancements of the Systems or
the Source Technology undertaken by the Purchaser without license or right to
use.

     C.  C&W or the Purchaser, as applicable, agrees that:

         (a)   C&W or the Purchaser shall promptly notify the Contractor in
               writing of any IPR Claim;

         (b)   C&W or the Purchaser shall not knowingly make any admission as to
               liability or agree to any settlement of or compromise any IPR
               Claim without the prior written consent of the Contractor; and

         (c)   the Contractor shall, at the Contractor's request and expense, be
               entitled to conduct all negotiations and litigation arising from
               any IPR Claim subject to reasonable consultation with the
               Purchaser. The Purchaser and C&W shall, at their election and at
               the Contractor's request and expense, reasonably cooperate with
               the Contractor in connection with such negotiations and
               litigation. If the Contractor fails to mount a defense on a
               timely basis such that C&W and/or the Purchaser may be at risk of
               liability under any IPR Claim, C&W may conduct the litigation at
               the expense of the Contractor, including, without limitation,
               reasonable attorneys fees.

     D.   Without prejudice to any other provision of the Contract, if any IPR
Claim is made, or in C&W's or the Purchaser's reasonable opinion is likely to be
made, against C&W and/or the Purchaser, the Contractor shall act promptly and
diligently pursue at its own expense to:

                                     -32-
<PAGE>

          (a)  modify the affected Systems or replace portions thereof (without
               detracting from its overall performance and while still complying
               with the Specifications) including rewriting, modifying or
               replacing the Documentation (without detracting from its clarity
               and effectiveness) in order to remove the infringement of
               Intellectual Property Rights; or

          (b)  procure for the Purchaser the right to continue to use the
               relevant Systems  and/or Source Technology in accordance with the
               Contract; or

          (c)  in the event that neither (a) nor (b) above can be achieved
               within a timeframe acceptable to the Purchaser, purchase from a
               third party and provide to the Purchaser alternative Systems
               and/or Source Technology that shall perform the functions of the
               affected Systems to a standard acceptable to the Purchaser.

     E.   If the Contractor does not perform any of the actions listed above,
C&W may, without prejudice to its other rights and remedies, terminate the
Contract immediately by reason of the Contractor's material breach and the
provisions of the Clause headed `Termination' shall apply.

     CLAUSE 25  TERMINATION

     A.  C&W has the right, without prejudice to its other rights or remedies,
to terminate the Contract immediately, by written notice to the Contractor, if
the Contractor is in breach of any of its obligations under the Contract and
either fails to remedy that breach within thirty (30) days after receipt of
written notice of such breach from the Purchaser, C&W or its designee, unless a
shorter cure period is specifically prescribed in the Contract for such breach
(e.g., emergency response), in which case such shorter cure period shall
control. If such breach is unable to be remedied despite prompt and diligent
efforts of the Contractor to remedy such breach within the governing cure
period, then C&W may agree to extend the cure period for a reasonable period of
time. . Persistent breaches of the Contract by the Contractor, whether or not
individual breaches have been cured, may be deemed by C&W to constitute material
breach, entitling C&W to terminate on seven days' notice without any right to
cure. C&W or a Purchaser may determine that a breach does not merit termination;
however, such a decision by C&W or a Purchaser shall not constitute a waiver of
any other breach or limit in any way C&W's or a Purchaser's other rights or
remedies.

     B.   The Contractor has the right, without prejudice to its other rights or
remedies, to terminate the Contract immediately, by written notice to C&W if C&W
is in material breach of its obligations under the Contract and fails to remedy
that breach within thirty (30) days after receipt of written notice of such
breach from the Contractor. In addition, the Contractor has the

                                     -33-
<PAGE>

right to terminate the applicable Purchase Order immediately and seek recourse
against the Purchaser if the Purchaser is in material breach of its obligations
under the Contract and the Purchaser or C&W fails to remedy such breach within
thirty (30) days after receipt by the Purchaser and C&W of written notice from
                                                ---
the Contractor of such breach. If any breach under this Clause 25(B) is
unable to be remedied within the governing cure period despite prompt and
diligent efforts of the Purchaser or C&W to remedy such breach within the
governing cure period, then the Contractor may agree to extend the cure period
for a reasonable period of time.

     C.   If C&W, any Purchaser or the Contractor is prevented by Force Majeure
from performing its obligations for a period longer than (***), or such other
time as may be agreed by C&W or Purchaser, as the case may be, and Contractor,
the other Party shall be entitled to terminate the Contract by giving (***)
notice in writing to the party claiming Force Majeure delay.

     D.   Each Party has the right to terminate the Contract immediately by
written notice to the other Party if an Insolvency Event occurs to the other
Party.

     E.   If C&W terminates the Contract for breach or insolvency,,

          (1)  the Contractor shall cease work with respect to the Contract
               forthwith and shall be entitled to receive from the Purchaser the
               unpaid portion of the Contract Price for those Systems (in
               accordance with the Specifications) that have been delivered to
               the Purchaser (but not to the Agent) to the date of termination
               and that portion of a Contract Price that cannot be recouped by
               the Contractor for those accepted Purchase Orders in production
               for more than thirty (30) days at the time of termination , less
               all amounts which C&W or any Purchaser may withhold or offset
               pursuant to the Contract,  and

          (2)  C&W shall be entitled, in addition to any other rights or
               remedies available to it, to recover all damages incurred by it
               or the Purchaser as a result of the breach (subject to the
               provisions of Clause 13 (A)).

     F.  If the Contractor terminates the Contract pursuant to Clause 25, after
taking into account amounts previously paid by the Purchasers and C&W under the
Contract and, in an Insolvency Event, subject to the priorities established by
applicable insolvency law, C&W or the Purchaser, as applicable, shall pay to the
Contractor the Contract Price for those Systems which have been completed in
accordance with the Specifications at the date of termination less all amounts
which C&W or a Purchaser may withhold or offset pursuant to the Contract.

     G.  If the Contract is breached by a Party or a Purchaser for reasons of
Force Majeure and consequently terminated as provided in Clause 25(C), then
neither Party nor any Purchaser,

                                     -34-
<PAGE>

as applicable, shall be liable to any entity under this Agreement for loss or
damage to the extent resulting directly and solely from the event of Force
Majeure.

     H.  Notwithstanding anything to the contrary contained in the Contract, the
liability of C&W and the Purchasers, jointly and severally, shall be limited to
the unpaid portion of the Contract Prices for those Systems that have been
accepted and delivered to the Purchaser (but not the agent) in accordance with
the Contract plus that portion of a Contract Price that cannot be recouped by
the Contractor for those accepted Purchase Orders in production for more than
thirty (30) days, less all amounts that C&W or a Purchaser may withhold or
offset under the Contract.

I.  Any termination or expiration of the Contract shall not affect any accrued
rights or liabilities of either Party or Purchaser, nor shall it affect the
coming into force or the continuance in force of any provision of the Contract
which is expressly or by implication intended to come into or continue in force
on or after such termination.

     CLAUSE 26 AMENDMENTS

     A.  Any amendment to the Contract, including without limitation a
Concession, shall not be binding on the Parties unless it is set out in writing
in accordance with this Clause and executed by the Parties.

     B.  Either Party may request an amendment at any time. If one Party
requests an amendment:

          (a)  the Parties shall discuss the proposed amendment on an informal
               basis, and such discussions shall be without prejudice to the
               rights of either Party;

          (b)  if C&W is the Party requesting the amendment and proposes to
               materially amend the Specifications or the Works, the C&W shall
               request a written quotation for the work and the Contractor
               shall, within fourteen (14) days of receipt of the quotation,
               provide a written statement describing the impact, if any, of the
               proposed amendment together with a written quotation for the
               work;

          (c)  if the Contractor is the Party requesting the amendment and
               proposes to materially amend the Specifications or the Works, the
               Contractor shall request a written acceptance for the work and
               C&W shall respond as soon as may be practicable after receipt of
               the request; however, in no event

                                     -35-
<PAGE>

               shall acceptance be deemed to have occurred by reason of C&W's
               failure to respond;

          (d)  if the Parties agree to proceed further with a proposed
               amendment, C&W shall prepare a written contract amendment and
               submit it to the Contractor for countersignature.

     C.   An amendment shall become effective when signed by both Parties.
Unless otherwise agreed in writing, the Parties shall continue to perform their
obligations under the Contract pending negotiation and, where applicable,
signature of the amendment.

     D.   The grant of a Concession shall not relieve the Contractor from any
other liability or obligation under the Contract.

     E.   Any Party's decision with respect to amendments (including without
limitation the granting of a Concession) is at its sole discretion.

     CLAUSE 27 OTHER CONTRACTORS AND SUB-CONTRACTORS

     A.   In performing its obligations under the Contract, the Contractor
shall:

          (a)   co-operate with any other contractors and sub-contractors
                appointed by the Purchaser and not jeopardize or compromise
                their work; and

          (b)   comply with reasonable directions given by C&W and/or a
                Purchaser from time to time.

     B.   The Contractor shall not be liable for any failure to perform by C&W
and/or a Purchaser or any of its contractors, except to the extent resulting
from the acts or omissions of the Contractor, its employees, officers, agents or
contractors.

     CLAUSE 28  CONFIDENTIAL INFORMATION

     A.   The Receiving Party undertakes to the Disclosing Party that:

          (a)  it shall use Confidential Information of the Disclosing Party
               solely for the purposes of the Contract;

          (b)  it shall reveal Confidential Information of the Disclosing Party
               only to those of its (i) employees or (ii) approved sub-
               contractors, in each case to whom disclosure is necessary for
               them to perform their duties under the Contract; and

                                     -36-
<PAGE>

          (c)  it shall not disclose Confidential Information of the Disclosing
               Party to any third party without the prior written consent of the
               Disclosing Party, except to its professional advisors (such as
               auditors and attorneys) on a "need to know" basis.

     B.   The foregoing obligations shall not apply to any Confidential
Information which:

          (a)  was known to the Receiving Party prior to receipt thereof from
               the Disclosing Party; or

          (b)  is or becomes public knowledge other than by a breach of this
               clause; or

          (c)  is received from a third party without breach of any other legal
               or contractual confidentiality arrangements; or

          (d)  is required to be disclosed by any applicable regulation, law or
               government authority or by a court of competent jurisdiction (a
               "Disclosure Requirement") provided the Receiving Party shall use
               all reasonable endeavors to (i) give the Disclosing Party two (2)
               days notice in writing of such disclosure and (ii) disclose only
               such portion of the Confidential Information as is required to be
               disclosed; or

          (e)  as provided under Clause 10.

     C.   Each Receiving Party shall ensure that its employees and sub-
contractors comply with the confidentiality obligations contained in this Clause
and are bound by terms and conditions of use and non-disclosure and use at least
as onerous as those contained herein. Each Receiving Party shall be responsible
for any breach of such agreement.

     D.   A party may share any Confidential Information with an Affiliate (as
defined in the Confidentiality and Non-Disclosure Agreement between C&W and
Tellium dated as of June __, 2000 (the "Global NDA"), a copy of which is
attached hereto as Exhibit H-2) of such party pursuant to the terms and
conditions of the Global NDA.

     E.  The confidentiality obligations contained in this clause shall remain
in full force and effect for a period of (***) from any termination or
expiration of the Contract.

     F.  If the Contract is terminated or expires, the Receiving Party shall
return or destroy at the Disclosing Party's request all Confidential Information
of the Disclosing Party.

                                     -37-
<PAGE>

     G.   Subject to the Non-Disclosure Agreement, dated as of May 18, 2000, by
and between the Contractor and the Agent, the Contractor will provide the Agent
with all information of Contractor's that is necessary for Agent to integrate
and guaranty end-to-end performance of the Systems, maintenance and support
roles.

     CLAUSE 29  PUBLICITY

     A.   The Contractor, the Purchasers and C&W shall not (and shall ensure
that their employees, agents and sub-contractors shall not) advertise or make
any public announcement in respect of the Contract without the express written
consent of, in the case of C&W and Purchaser, Contractor or in the case of
Contractor, C&W. Such consent shall not be unreasonably withheld, except (i)
pursuant to a Disclosure Requirement or (ii) if a request for consent has been
submitted to the other party and the other party has not responded within
fourteen (14) days.

     B.   If C&W or a Purchaser desires to publicize under this Clause 29, it
shall, prior to publication, submit in draft form to Contractor or its designee,
for its approval, all copy or materials relating to the Contract which is
intended for publication and a list of all countries in which the requesting
party wishes to publicize the Contract.  If Contractor wishes to publicize under
this Clause 29, it shall, prior to publication, submit in draft form to C&W or
its designee, for its approval, all copy or materials relating to the Contract
which is intended for publication and a list of all countries in which the
requesting party wishes to publicize the Contract.

     CLAUSE 30  FORCE MAJEURE

     A.   If either Party or a Purchaser is affected by an event of Force
Majeure, it shall:

          (a)  promptly notify  all affected entities under this Contract in
               writing of the nature and extent of the Force Majeure and the
               estimated duration of any delay; and

          (b)  use its commercially reasonable efforts to commence as soon as
               possible and diligently pursue the mitigation of the effect of
               such Force Majeure event upon the Contract.

     B.   Subject to compliance with the notice requirement in this Clause, the
entity affected by Force Majeure shall be excused from, and shall not be liable
for, any delay or non-performance of its obligations under the Contract to the
extent that its performance is interrupted or prevented by Force Majeure.

                                     -38-
<PAGE>

      CLAUSE 31  RESOLUTION OF DISPUTES

     A.   In the event of any dispute between C&W or Purchaser, on the one hand
and Contractor on the other hand (individually a "Disputing Party" and
collectively, the "Disputing Parties") arising out of or relating to the
Contract, representatives of the Disputing Parties from a level of management
who have authority to settle the dispute shall, within (***) of receipt of a
written notice (the "Original Notice"), meet in a good faith effort to resolve
the dispute.  Unless concluded with a written legally binding agreement, all
negotiations connected with any dispute shall be conducted in confidence and
without prejudice to the rights of the Disputing Parties in any future
proceedings.

     B.   If any dispute cannot be resolved at such meeting, within (***) or
within (***) of the Original Notice if no meeting has taken place, the Disputing
Parties shall use one or more of the following dispute resolution processes:

          (a)  if the dispute is of a technical nature concerning Specifications
               and/or performance of Systems, expert determination, as set out
               below; or

          (b)  mediation or arbitration as set forth below.

     C.   Expert determination of disputes concerning Specifications and
performance shall be carried out in accordance with the following procedure:

          (a)  there shall be one expert, who shall be knowledgeable and
               experienced in the technology at issue;

          (b)  if the Disputing Parties are unable to agree on an expert or if
               the expert agreed upon is unable or unwilling to act and the
               parties are unable to agree upon another qualified and
               experienced expert, the Academy of Experts shall appoint the
               qualified and experienced expert;

          (c)  at least (***) prior to the expert determination, the Disputing
               Parties shall exchange copies of a written summary of their case
               and relevant documentation and shall submit copies of the same to
               the expert;

          (d)  all other details of procedure and the timetable for the expert
               determination shall be determined by the expert, in consultation
               with the Disputing Parties;

                                     -39-
<PAGE>

          (e)  the expert shall  determine the dispute, acting in the capacity
               of an expert, not an arbitrator;

          (f)  the expert shall deliver a written, reasoned determination to the
               Disputing Parties within (***) of full submission of documents
               and any supplementary materials required by the expert;

          (g)  the expert determination shall be legally and finally binding
               upon the Disputing Parties and not subject to appeal.  Any action
               required by the expert determination shall be implemented within
               (***) following the expert determination or as specified within
               the expert determination;

          (h)  the expert determination and all matters connected with it shall
               be kept confidential except as necessary for a Disputing Party to
               implement or enforce the expert determination;

          (i)  unless the Disputing Parties agree otherwise, the fees and
               expenses of the expert as well as any other administrative
               expenses of the expert determination shall be borne by the
               parties in equal shares.  Each Disputing Party shall also its own
               costs of representation except where costs are a matter for the
               expert.

     D.   Before any arbitration proceeding is initiated, the Disputing Parties
shall attempt to resolve the dispute through mediation.  Mediation shall be
carried out in accordance with the Centre for Dispute Resolution (`CEDR')
Mediation Procedure, which is hereby deemed incorporated, and modified as
follows:

          (a)  there shall be one mediator, qualified and experienced in the
               subject matter of the mediation;

          (b)  if the Disputing Parties are unable to agree on a mediator or if
               the mediator agreed upon is unable or unwilling to act and the
               parties are unable to decide upon another qualified and
               experienced mediator, CEDR shall appoint the mediator, who shall
               be so qualified and experienced;

          (c)  the place of mediation shall be London, England;

          (d)  the language to be used in the mediation shall be English;

                                     -40-
<PAGE>

          (e)  if the Disputing Parties reach agreement on the resolution of the
               dispute or difference during the mediation, such agreement shall
               be in writing and, once it is signed by the duly authorized
               representatives of the parties, shall be binding on the parties;

          (f)  unless concluded with a written legally binding agreement, the
               mediation shall be conducted in confidence and without prejudice
               to the rights of the Disputing Parties in any future proceedings.

     E.   In the event that a mediation under Clause 31(D) above is not resolved
within 30 days of its commencement or if the Disputing Parties agree to not
submit the dispute to mediation but to directly submit the dispute to
arbitration, the dispute will be referred to binding arbitration.  Arbitration
shall be carried out in accordance with the UNCITRAL Arbitration Rules as at
present in force, which are hereby deemed incorporated, and modified as follows:

          (a)  for individual disputes less than one million dollars
               ($1,000,000), there shall be one arbitrator, who shall be
               qualified, experienced in arbitration and knowledgeable in the
               subject area of the dispute.  If the Disputing Parties are unable
               to agree on an arbitrator or if an arbitrator agreed upon is
               unwilling or unable to act and the parties are unable to agree
               upon another qualified and experienced arbitrator, the London
               Court of International Arbitration shall appoint the arbitrator,
               who shall be so qualified and experienced;

          (b)  for individual disputes equal to or in excess of one million
               dollars ($1,000,000) there shall be three (3) arbitrators who
               shall be qualified and experienced in arbitration and
               knowledgeable in the subject area of the dispute.  Such
               arbitrators shall be selected as follows:

               (1)  each Disputing Party shall select one (1) arbitrator;

               (2)  the arbitrators selected by the Disputing Parties shall
                    agree on a third arbitrator;

               (3)  if the two (2) arbitrators are unable to agree on an
                    arbitrator or if an arbitrator agreed upon is unwilling or
                    unable to act and the Disputing Parties are unable to agree
                    upon another qualified and experienced arbitrator, the
                    London Court of International Arbitration shall appoint the
                    arbitrator, who shall be so knowledgeable, qualified and
                    experienced;

                                     -41-
<PAGE>

          (c)  the place of arbitration shall be London, England;

          (d)  the language to be used in the arbitration proceedings shall be
               English;

          (e)  the Disputing Parties shall be entitled to take limited discovery
               including the rights to request a reasonable number of documents,
               to serve no more than twenty (20) interrogatories and take no
               more than three (3) depositions.  This limited discovery shall be
               conducted in accordance with governing rules of civil procedure
               in the United Kingdom, which shall be interpreted and enforced by
               the arbitrator.

          (f)  the arbitrator shall conduct an arbitration hearing and
               proceeding and make its decision based on the merits of the case
               before it and shall deliver a written reasoned determination,
               citing the bases for the decision including findings of fact and
               conclusions of law;

          (g)  the Disputing Parties are free to seek interim or urgent
               injunctive relief in aid of the arbitration in any court of
               competent jurisdiction.

     F.   The Parties and each Purchaser agree that any breach of (i) the clause
titled "Confidential Information" or (ii) the provisions of this Contract
protecting the Intellectual Property Rights of any party, will cause actual and
material damage, and that such damages are difficult to calculate.  Each Party
and each Purchaser shall have the unequivocal right to obtain timely injunctive
relief as a result of such breach in any court of competent jurisdiction.

     CLAUSE 32 ETHICS

     C&W, each Purchaser and Contractor shall, in the performance of the
Contract, act in accordance with:

          (a)  sound business ethical principles;

          (b)  the provisions of the United States Foreign Corrupt Practices Act
               and any other applicable anti-corruption laws of England or other
               territories relevant to the Contract.

     CLAUSE 33  NOTICES

     A.   Any notice or other document to be served under the Contract may
(except as expressly provided herein) be delivered by hand or reputable courier,
or sent by post or sent by

                                     -42-
<PAGE>

facsimile or electronically and followed by copy of the notice by mail or
                            ---
courier, in accordance with the provisions of this Clause to the following
address:

          For the Contractor:  Tellium, Inc.
                               2 Crescent Place
                               Oceanport, NJ USA 07757
                               Facsimile: (732) 923-9805
                               Marked for the attention of: Chief Financial
          Officer or such other address as the Contractor may subsequently
          notify to the Purchaser.

          For C&W:             Cable & Wireless Global Networks Limited

                               2 Brookvale Plaza, East Park

                               Shannon

                               County Clare

                               Ireland

                               Attention:  __________________

          WITH  SIMULTANIOUS COPIES TO THE PURCHASER AND TO:

                               Cable & Wireless Global Operations Law Department

                               8219 Leesburg Pike

                               Vienna, Virginia 28219

                               Attention:  General Counsel

          or such other address(es) as C&W may subsequently notify to the
          Contractor.

     B.   Any notice or document shall be deemed to be duly served:

          (a)  if delivered or posted, at the time of delivery to the
               recipient's address notified under the Contract; or

          (b)  if sent by facsimile or electronically, at the time of
               transmission if within the normal business hours of the recipient
               and, if not, noon local time of the recipient on the next
               following business day, and a confirming copy is

                                     -43-
<PAGE>

               delivered by courier to the recipient within forty eight (48)
               hours after transmission.

     CLAUSE 34 ENTIRE AGREEMENT

     A.   This Agreement and the documents incorporated herein supersede all
prior understandings and agreements between the Parties and the Purchasers
relating to the subject matter hereof and contains the entire agreement between
the parties with respect to the subject matter hereof.

     B.   Each Party acknowledges that in agreeing to enter the Contract, it has
not relied on any representation, warranty or other assurance except those set
out in the Contract.

     C.   Notwithstanding anything contained herein to the contrary, the
provisions of the clauses headed `Escrow', `License', `Year 2000', `Performance
Warranty', `Product Support', `Liability and Indemnity', `Confidential
Information', `Intellectual Property', `Intellectual Property Rights Indemnity',
`Resolution of Disputes', `Ethics', `Governing Law and Jurisdiction' and
`Publicity' and any other clauses which are intended to survive termination
shall survive termination of the Contract and shall continue in full force and
effect thereafter.

     CLAUSE 35 WAIVER

     The failure of either Party or a Purchaser to enforce any of its rights or
to require the performance of any obligation, responsibility or liability of the
other under the Contract shall not of itself be taken as a waiver of such
Party's or Purchaser's rights, obligations, responsibilities or liabilities
under the Contract.

     CLAUSE 36 SEVERABILITY

     The invalidity, illegality or unenforceability of any of the provisions of
the Contract shall not affect the validity, legality and enforceability of the
remaining provisions of the Contract, and the Contract shall be construed as if
such invalid, illegal or unenforceable provision was not a part of the Contract.

     CLAUSE 37  ASSIGNMENT AND SUB-CONTRACTING

     A.   Except as expressly provided herein, neither C&W nor any Purchaser may
assign, sub-license, transfer, or otherwise dispose of (each a "Transfer") any
of its rights or any of its obligations under the Contract or any part thereof
or the benefit or advantage of the Contract or any part thereof without the
prior written consent of Contractor, such consent not to be unreasonably
withheld.  Similarly, except as expressly provided herein, the Contractor may
not make a Transfer of any of its rights or any of its obligations under the
Contract or any part

                                     -44-
<PAGE>

thereof or the benefit or advantage of the Contract or any part thereof without
the prior written consent of C&W, such consent not to be unreasonably withheld.
Notwithstanding the foregoing, a Group Company may assign, sublicense, transfer
or otherwise dispose of all or any of its rights or obligations under the
Contract to another Group Company without the Contractor's consent, provided
such other Group Company agrees in writing to be bound as if it was Purchaser
under Clause 3(K). If any Group Company (other than C&W or Cable & Wireless,
plc) agrees to a Transfer such that immediately after the consummation of such
Transfer, the Group Company would no longer qualify as a Group Company, such
Group Company shall cease to be eligible to place orders under the Contract
following the Transfer absent the consent of the Contractor hereunder. For
purposes of this Clause 37(A), a merger, reorganization or similar corporate
transaction in which the Contractor or Cable & Wireless, plc is not the
surviving company, or a sale by Contractor or Cable & Wireless, plc of all or
substantially all of its assets to another entity shall be deemed not to
constitute a Transfer. The Contract shall survive a change in control of the
Contractor; however, C&W shall have the right to immediately terminate the
Contract, without liability and without any cure period, if the transferee fails
to satisfy the contractual obligations of the Contractor under the Contract.

     B.   C&W reserves the right, but does not have the obligation, to approve
all sub-contractors in advance of their appointment by the Contractor.  The
Contractor shall not change sub-contractors without the prior written consent of
C&W, such consent not to be unreasonably withheld.  For the avoidance of doubt,
such consent shall not relieve the Contractor from any liability or obligation
under the Contract.

     CLAUSE 38  COMPLIANCE WITH LAW AND REGULATIONS

     A.   Each Party and each Purchaser shall obtain any permit, license or
other authorizations required by any governmental or other regulatory body to
enable it to perform its obligations under the Contract.

     B.   The Contractor shall comply, and shall ensure that each of the Systems
complies, with all applicable laws, orders, regulations, by-laws or requirements
of any government, local, regulatory, competent authority or agency.

     C.   The Purchaser shall, on request, provide all reasonable assistance to
the Contractor in obtaining information regarding local laws, orders,
regulations, by-laws and requirements, including, without limitation, export
controls.

     D.   In performing its obligations under the Contract, the Contractor shall
not endanger the safety of the public or unlawfully interfere with the
convenience of the public in any way.

     E.   The cost to the Contractor of complying with the provisions of this
Clause is included in the Contract Price.

                                     -45-
<PAGE>

     F.   The Contractor shall procure that its sub-contractors comply with the
obligations set out in this Clause.

     CLAUSE 39 GOVERNING LAW AND JURISDICTION

     A.   The Contract is governed by and shall be construed in accordance with
the laws of England.

     B.   Subject to the clause headed `Resolution of Disputes', each Party and
each Purchaser agrees that the courts of England have exclusive jurisdiction to
settle any disputes in connection with the Contract and accordingly submits to
the exclusive jurisdiction of the English courts.

     C.   Each Party and each Purchaser:

          (a)  waives objection to the English courts on grounds of
               inconvenience forum or otherwise as regards proceedings in
               connection with the Contract; and

          (b)  agrees that a judicial order, other than an interim judicial
               order, of an English court in connection with the Contract is
               conclusive and binding on it (subject to any right of appeal to a
               superior English court) and may be enforced against it in the
               courts of any other jurisdiction in accordance with the laws and
               procedures of that jurisdiction.

     IN WITNESS WHEREOF, C&W and the Contractor have entered into this Agreement
as of the date first above written.

                                              CABLE & WIRELESS
                                             GLOBALNETWORKS,LTD
                                           an Ireland corporation
                                  By:
                                     ------------------------------------------
                                Name:                            Conor O'Leary
                                     ------------------------------------------
                               Title:                                 Director
                                     ------------------------------------------

                                                 TELLIUM, INC.
                                            a Delaware corporation
                                  By:
                                     ------------------------------------------
                                Name:
                                     ------------------------------------------
                               Title:
                                     ------------------------------------------

                                     -46-
<PAGE>

                                   EXHIBIT A
                                   ---------

                                  LIST PRICES
                                  -----------
                         (submitted by Tellium, Inc.)

Aurora Optical Switch Configuration and Pricing

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                                                            Price
----------------------------------------------------------------------------------------------------------------
Module                                                                                      Per Module
----------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>
OC48 Transceiver                                                                                            (***)
----------------------------------------------------------------------------------------------------------------
OC-192 SR Transceiver                                                                                       (***)
----------------------------------------------------------------------------------------------------------------
OC-192 LR Transceiver                                                                                       (***)
----------------------------------------------------------------------------------------------------------------
Shelf Controller                                                                                            (***)
----------------------------------------------------------------------------------------------------------------
First Switch                                                                                                (***)
----------------------------------------------------------------------------------------------------------------
Middle Switch                                                                                               (***)
----------------------------------------------------------------------------------------------------------------
Main Control Shelf                                                                                          (***)
----------------------------------------------------------------------------------------------------------------
Synchronization Shelf                                                                                       (***)
----------------------------------------------------------------------------------------------------------------
High Speed Fan                                                                                              (***)
----------------------------------------------------------------------------------------------------------------
Cable Kit TR                                                                                                (***)
----------------------------------------------------------------------------------------------------------------
TR Shelf Assembly                                                                                           (***)
----------------------------------------------------------------------------------------------------------------
SW Shelf Assembly                                                                                           (***)
----------------------------------------------------------------------------------------------------------------
Fuse/Alarm                                                                                                  (***)
----------------------------------------------------------------------------------------------------------------
Blank                                                                                                       (***)
----------------------------------------------------------------------------------------------------------------
Rack                                                                                                        (***)
----------------------------------------------------------------------------------------------------------------
Engineering - Pre Assembly                                                                                  (***)
----------------------------------------------------------------------------------------------------------------
Software per System
----------------------------------------------------------------------------------------------------------------
AOS Software Base R1.0                                                                                      (***)
----------------------------------------------------------------------------------------------------------------
AOS Software A-Z Prov. OC-192 Groom (R1.1) (Upgrade from R1.0)                                              (***)
----------------------------------------------------------------------------------------------------------------
AOS Software Mesh R2.0 (Mesh, Prov, SDH) (Upgrade from R1.1)                                                (***)
----------------------------------------------------------------------------------------------------------------
AOS Software Mesh R3.0 (Domains) (Upgrade from R2.0)                                                        (***)
----------------------------------------------------------------------------------------------------------------
AOS Software Mesh R4.0 (FEC, Mesh) (Upgrade from R3.0)                                                      (***)
----------------------------------------------------------------------------------------------------------------
AOS Software R5.0                                                                                           (***)
----------------------------------------------------------------------------------------------------------------
================================================================================================================
                          Hardware Configs (Eng and Furnish)                              Hardware Prices
----------------------------------------------------------------------------------------------------------------
128 OC-48 TCVRs                                                                                             (***)
----------------------------------------------------------------------------------------------------------------
256 OC-48 TCVRs                                                                                             (***)
----------------------------------------------------------------------------------------------------------------
512 OC-48 TCVRs                                                                                             (***)
----------------------------------------------------------------------------------------------------------------
128 OC-48 and 96 OC-192 TCVRs                                                                               (***)
================================================================================================================
================================================================================================================
                          HW + SW Configs (Eng and Furnish)                               System Prices
----------------------------------------------------------------------------------------------------------------
128 OC-48 TCVRs                                                                                             (***)
----------------------------------------------------------------------------------------------------------------
256 OC-48 TCVRs                                                                                             (***)
----------------------------------------------------------------------------------------------------------------
512 OC-48 TCVRs                                                                                             (***)
----------------------------------------------------------------------------------------------------------------
128 OC-48 and 96 OC-192 TCVRs                                                                               (***)
================================================================================================================
----------------------------------------------------------------------------------------------------------------
CIT Software                                                                                                (***)
----------------------------------------------------------------------------------------------------------------
WMS Software                                                                                                (***)
----------------------------------------------------------------------------------------------------------------
</TABLE>

                                     -47-
<PAGE>

          Note 1:  Installation cost is determined after completion of Site
          Survey, and is dependent on whether the pre-wire option is chose or
          equipment is assembled on site.  See attached Labor Rates Tables for
          typical hourly costs {to be discussed during turnkey negotiations.].
          Note 2:  Future software feature functionalities will be reviewed with
          C&W; feature functionality prices to be negotiated in accordance with
          the Contract .  Exhibit A (Continued) - List Prices

                                     -48-
<PAGE>

                      Exhibit A (Continued) - List Prices

Tellium Customer Services

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                  <C>         <C>                    <C>
Customer Services
-----------------------------------------------------------------------------------------------------------------------------------
Repair and Return under Warranty                                                 NC                                 NC
-----------------------------------------------------------------------------------------------------------------------------------
Technical support                                                                            See Note 1 below.
-----------------------------------------------------------------------------------------------------------------------------------
Software Maintenance                                                                         See Note 2 below.
-----------------------------------------------------------------------------------------------------------------------------------
Documentation Manuals                                       (***)               (***)                              (***)
-----------------------------------------------------------------------------------------------------------------------------------
TRAINING
-----------------------------------------------------------------------------------------------------------------------------------
                                                                        Tellium Course Pricing:
-----------------------------------------------------------------------------------------------------------------------------------

                                                                        - Courses are offered at Tellium training facility  (***) -
Training (See course list in separate attachment):                      including (***)
Prices are valid for classes of a minimum of (***)                      - (***) are offered at Customer facility
students and a maximum of (***) students                                (***) - including (***).
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Note 1:  (***) at (***) during the (***).  Should an occasion occur where  the
problem is resolved through on-site visit to the customer location and it is
determined not to be a fault of the Tellium equipment or associated software,
Tellium may bill the customer for Tellium's time and expenses at the applicable
labor rate indicated in the attached Labor Rates Table.  The initial on-line
telephone assistance is free of charge.

Note 2: At C&W's option, C&W may enter intoa Software Maintenance agreement
(detailed Software License Agreement is a separate attachment to this
agreement).  The cost of the maintenance contract will be calculated based on a
percentage of the total software fees associated with the software resident
Aurora Optical Switch Network Elements (including software options purchased).

Note 3:  Tellium offers (***) of documentation for each optical switch unit
purchased.  The documentation is sent in the same shipment as the equipment.
Pricing for documentation shown above is for additional documentation sets if
needed.

Note 4:  Tellium offers (***) seats (one seat is equivalent to (***) trainee
attending (***) course) (***) for each (***) purchased (based on purchase order
value), up to a maximum total of (***) seats.

Note 5:  Tellium agrees to supply the Customer (***) complete (***) of training
modules and/or manuals for the Tellium Products described herein.  At the option
of the Customer, Tellium may provide any necessary assistance to allow the
Customer to conduct a training program of its own should the Customer enter into
an agreement to purchase said Products.

                                     -49-
<PAGE>

                      Exhibit A (Continued) - List Prices

Tellium Wavelength Management System Pricing

Note 1: Tellium assumes that C&W may buy hardware for the WMS directly from
equipment providers; should C&W choose to purchase hardware for the
WMS from Tellium, Tellium will first provide C&W with a price proposal for
hardware and, if C&W elects so to engage Tellium, Tellium will pass the hardware
cost through to C&W.

Tellium Craft Interface Terminal (CIT) Pricing

-------------------------------------------------------------------------------
                           Price                   Comment
-------------------------------------------------------------------------------
Software License           (***)                   Supports up to (***) users
-------------------------------------------------------------------------------

Note 1:  It is Tellium's assumption that C&W may already possess or buy hardware
for the CIT (laptop, PC, Workstation) directly from equipment providers.

Note 2:  The CIT Software License enables the Customer to support up to (***)
users on (***) computers (laptop, PC, Workstation), (***).  Memory and
processing capabilities of computer platform must at least meet the minimum
requirements to support the CIT software.

                                     -50-
<PAGE>

                     Exhibit A (Continued) -  List Prices

         Labor Rate Tables [to be determined in turnkey negotitations]

                 HOURLY ON TELLIUM PREMISE LABOR RATE SCHEDULE

<TABLE>
<CAPTION>
====================================================================================================
Local Labor Category                 Hourly Rate 40 Hours Includes      Hourly Rate Beyond 40
                                                Per Diem                         Hours
====================================================================================================
<S>                                  <C>                                <C>
CAD Operator                                     (***)                             (***)
----------------------------------------------------------------------------------------------------
Engineering services                             (***)                             (***)
====================================================================================================
</TABLE>

                             FIELD (Customer Site)
                          HOURLY LABOR RATE SCHEDULE
                    (Travel and Living Expenses additional)

<TABLE>
<CAPTION>
====================================================================================================
Local Labor Category                      Hourly Rate 40 Hours          Hourly Rate Beyond 40 Hours
====================================================================================================
<S>                                       <C>                           <C>
Installer I                                      (***)                            (***)
----------------------------------------------------------------------------------------------------
Installer II                                     (***)                            (***)
----------------------------------------------------------------------------------------------------
CAD Operator                                     (***)                            (***)
----------------------------------------------------------------------------------------------------
Customer Service Engineer                        (***)                            (***)
----------------------------------------------------------------------------------------------------
Test Technician                                  (***)                            (***)
----------------------------------------------------------------------------------------------------
Field Engineer                                   (***)                            (***)
----------------------------------------------------------------------------------------------------
Detail Engineer                                  (***)                            (***)
----------------------------------------------------------------------------------------------------
Project Manager                                  (***)                            (***)
----------------------------------------------------------------------------------------------------
Senior Consultant                                (***)                            (***)
====================================================================================================
</TABLE>

Note 1:  In the event the federal Cost of Living Index exceeds (***) in any
calendar year within the term of the contract, both parties agree to negotiate
in good faith a Cost of Living rate adjustment.
Note 2:  The Per Diem rate of (***) per day will be charged where applicable,
except for in higher cost of living major metropolitan areas, as defined to be
High Rate per the General Services Administration 1998 Federal Per Diem Rates.
The Per Diem includes meals, lodging and local transportation (rental auto,
taxi, bus, train, metro, etc.). Per Diem could be higher in higher-cost major
metropolitan areas (***). Per Diem does not include travel to and from customer
site.
Note 3:  Per Diem shall apply in the event a Local employee is required to stay
overnight in a work location which exceeds (***) miles from home of residence.
Mileage is to be determined using Rand McNally maps.
Note 4:  Personal mileage when working over (***) miles from the base location
shall be billed at (***).  Mileage to be determined using Rand McNally maps.
Note 5:  Travel expenses to and from the client site for the purpose of general
business meetings is not reimbursed by the client.
Note 6:  For products not covered under the Warranty a minimum of (***) hours
will be billed for work done in the field (customer site). C&W (***) be billed
for travel time to customer site.

                                     -51-
<PAGE>

                                   EXHIBIT B
                                  ----------

                            [INTENTIONALLY OMITTED]
                             ---------------------

                                      -52-
<PAGE>

                                   EXHIBIT D
                                   ---------

                            [INTENTIONALLY OMITTED]
                             ---------------------

                                      -53-
<PAGE>

                                   EXHIBIT F
                                   ---------

[INTENTIONALLY DELETED]

                                      -54-

<PAGE>

                                   EXHIBIT G
                                   ---------

                           DOCUMENTATION AND TRAINING
                           --------------------------

Documentation Plan
------------------
Tellium understands that comprehensive documentation is essential to the
customer's internal operation and support functions. Tellium will supply
complete documentation sets for all of its products as said product is shipped.

The Tellium documentation format is designed to be user friendly. Whether
utilizing the manual for engineering and network design, installation, testing,
operation procedures or troubleshooting, the Tellium product manual is precise
and easy to follow. Tellium welcomes all customer input to insure that the
documentation provided meets the customer needs.

Tellium will update equipment manuals with each new release of the
documentation. To make sure that our customers receive these updates as soon as
possible, each manual shipped will be registered in a customer data base to
ensure that updates and revisions are sent out as soon as possible. Registration
cards will be provided with each shipped manual to insure that the end "owner"
of the manual in question receives the current updates. This will ensure that
the end recipient of a manual will always have up to date documentation when
bulk shipments occur. This registration database will be maintained for the life
of the product.

Current Documentation that is available for the Tellium Products includes:
Aurora Engineering and Applications Manual
Aurora Operations Manual
Aurora Installation and Turn Up Manual
Aurora TL-1 Reference Manual
Wavelength Management System Users Guide
Craft Interface Terminal Users Guide

Training
--------
Tellium provides training to customers covering all of the necessary topics, as
agreed upon, for the installation, operation and maintenance of our equipment
including both hardware and software systems.

Currently, centralized training is offered at our Oceanport, New Jersey
location. Tellium will provide instructors and the necessary instructional
material in our standard format to train Customer personnel, (including
personnel of Customer affiliated companies) in the installation, planning and
practices, operation, maintenance, and trouble shooting / repair of Tellium
products purchased or evaluated by the Customer. These classes will be conducted
at reasonable intervals and at locations as agreed upon by Tellium and the
Customer. At the option of the Customer, Tellium agrees to supply the Customer
with training modules and/or manuals and any necessary assistance to allow the
Customer to conduct a training program of it's own should the Customer enter
into an agreement to purchase said products.

                                      -55-
<PAGE>

Custom "suit cased" courses will be offered as customer requirements are known.
Suit case classes can only be provided at locations where equipment is available
for "hands on" training.

The following is a list of training courses that are offered:

<TABLE>
<CAPTION>
     Course   #Title                                         Duration
<S>           <C>                                            <C>
     OXPF                 Optical Switch Product Family Overview                   1 Day

               The course provides an overview of the evolution of the Aurora
               Optical Switch product line.  This course covers the basic
               engineering principles that are to be considered when deploying
               all OXCs and specific network design parameters that should be
               evaluated.  The current schedule for availability of product
               hardware and software features will be discussed in detail. This
               course is incorporated into OXC 32-1 and OXC 32-2.

OXC 512-1     Aurora Optical Switch
               Product Engineering & Applications Course                       2 days

               This course will provide details on the engineering guidelines of
               the Aurora Optical Switch.  Bay layout and engineering details
               for all interface connections will be covered.  The functionality
               of all modules will be reviewed. Discussions of various
               applications for the cross-connect are to be addressed and
               comparisons made to other possible technology implementations.
               In addition we will provide an

               overview of network architectures that provide protection and
               restoration using the Optical Switch.

OXC 512-2     Aurora Optical Switch
               Installation, Operation, Software Provisioning and
               Maintenance Course                                              3 days

               This course will detail all of the installation activities and
               engineering considerations that are to be addressed for
               deployment of an Aurora Optical Switch.  The course will detail
               the installation and test procedures for turning up the equipment
               and all circuit-packs.  An overview of system administration and
               operations support for different configurations will be provided.
               Details of cabling, power requirements, HVAC and space demands
               will be covered.   All software features and functions will be
               reviewed.  There will be a special focus given to the
               provisioning of and removal of
</TABLE>

                                     -56-
<PAGE>

               actual cross-connects, both on a point-to-point and point-to-
               multi-point basis.

Course Notes:

1. In order to facilitate the required 50% "hands-on" time required for each
   class, courses are typically offered to a class with a minimum of 5 and a
   maximum of 10 students.
2. Currently, course material is provided in a text format on paper or soft
   copy. Other media such as audio or video may be developed as required.

                                     -57-
<PAGE>

                                  EXHIBIT H-1
                                  -----------

                     [UNDER REVIEW](Exchanging Information)
                    ---------------

                                 TELLIUM, INC.

                                2 Crescent Place
                                 P. O. Box 901
                           Oceanport, NJ  07757-0901

                                                             __________ __, 2000

_________________________
_________________________
_________________________
Attn:  ____________________

          Re:  Confidentiality Agreement
               -------------------------

          In connection with your interest in potentially establishing a
relationship with Tellium, Inc. ("Tellium"), we are both furnishing each other
with Disclosed Material (as hereinafter defined) all of which is non-public,
confidential and proprietary in nature.  In consideration of the other party
furnishing Disclosed Material, each of us agrees as follows:

          (a)  Each party will use the Disclosed Material provided by the other
               party solely for the purpose of evaluating a potential business
               relationship with the other party, and each party will keep the
               Disclosed Material strictly confidential for a period as long as
               the Disclosed Material remains a trade secret or competitively
               sensitive data or information or for (***) after the date of this
               agreement, whichever is earlier protecting the Disclosed Material
               with at least the same degree of care (but not less than a
               reasonable degree of care) as such party uses for its own
               confidential material; provided, however, each party may disclose
               any Disclosed Material to its directors, officers, employees,
               representatives, or agents (collectively, "Representatives") who
               need to know such information for the purpose of evaluating the
               potential business relationship (it being understood that the
               receiving party will inform them of the confidential nature of
               such information and that by receiving such information they are
               agreeing to be bound by this agreement, and the applicable party
               will be responsible for any breach of this agreement by its
               Representatives).

                                      -58-
<PAGE>

          The term "Disclosed Material" shall mean any information furnished by
one party to the other or any of its Representatives in whatever form or medium
provided, whether prior to or after the date hereof, and any notes, memoranda,
summaries, analyses, and other materials relating thereto or based thereon
prepared by the receiving party or its Representatives but shall not include
information which (i) is already in the receiving party's possession, (ii) is or
becomes generally available to the public (other than as a result of disclosure
by the receiving party or its Representatives), or (iii) is or becomes available
to the receiving party on a nonconfidential basis from a source other than the
other party or its Representatives, provided that such source is not under an
obligation (whether contractual, legal or fiduciary) to the disclosing party to
keep such information confidential.  Other than materials prepared by the
receiving party or its Representatives and relating to or based on Disclosed
Material received by it, all Disclosed Material shall be disclosed to the
receiving party in writing identifying it as confidential, or if first orally or
visually disclosed, shall be identified as confidential in a writing delivered
to the receiving party within (***) of such disclosure.

          (b)  Without the other party's prior written consent, neither party
               will disclose to any person (and both parties will direct their
               Representatives not to disclose to any person) the fact that any
               discussions nor negotiations are taking place concerning a
               possible business relationship with the other party or that
               either party has requested or received Disclosed Material or any
               of the potential terms, conditions, or other facts with respect
               to any such potential business relationship, including the status
               thereof.

          (c)  Upon the disclosing party's request, the receiving party will
               promptly redeliver to the disclosing party all copies of the
               Disclosed Material furnished to the receiving party and will
               destroy all memoranda, notes, and other writings prepared by the
               receiving party or its Representatives based on the Disclosed
               Material it received.  At the disclosing party's request, the
               receiving party will certify to the disclosing party its
               compliance with the provisions of this paragraph.

          (d)  Neither party nor their Representatives will initiate or maintain
               contact with any employee of the other party regarding the
               Disclosed Material provided by such other party, except with the
               express written permission of such disclosing party or its
               authorized agents.

          (e)  Except as may otherwise be agreed in writing, neither party nor
               any of its Representatives makes any representation or warranty
               express or implied with

                                      -59-
<PAGE>

               respect to the Disclosed Material including but not limited to
               its accuracy or completeness, and neither party nor any of its
               Representatives shall at any time be liable to the other party
               for any reliance placed upon such Disclosed Material.

          (f)  In the event that either party is requested in any judicial or
               administrative proceeding or by any governmental or regulatory
               authority to disclose any Disclosed Material provided by the
               other party, the party receiving the request will give the other
               party prompt written notice of such request so that the
               disclosing party may seek an appropriate protective order and
               agrees to cooperate with the disclosing party in this effort.  In
               the event that such protective order is not obtained, the
               receiving party agrees to furnish only the portion of the
               Disclosed Material which the receiving party is legally required
               to furnish and to use reasonable efforts to obtain assurances
               that confidential treatment will be accorded such information.

          (g)  Both parties acknowledge that money damages may not be a
               sufficient remedy for any breach of this agreement and that in
               addition to all other remedies, the non-breaching party shall be
               entitled to specific performance and injunctive or other
               equitable relief as a remedy for such breach and both parties
               hereby waive any requirement for the securing or posting of any
               bonds in connection therewith.  No failure or delay by either
               party in exercising any right, power, or privilege hereunder
               shall operate as a waiver hereof, nor will any single or partial
               exercise thereof preclude any other or further exercise thereof
               or the exercise of any other right, power, or privilege
               hereunder.

          (h)  Nothing herein shall obligate or otherwise commit either party or
               any other company in any way, directly or indirectly, to
               initiate, produce, or complete any observation, study, analysis
               or report of any product or service, or any aspect thereof, or to
               take any other action with respect to such product or service and
               nothing herein shall obligate or otherwise commit either party or
               any other company to license or purchase any product or service
               from anyone.

                                      -60-
<PAGE>

          (i)  This Agreement shall become effective upon full execution and
               shall continue for a period of (***).  The restrictions in
               paragraph (a) above shall survive and continue after the
               termination or expiration of this Agreement.

          (j)  This agreement shall be governed by and construed in accordance
               with the laws of the (***) without giving effect to the conflicts
               of laws or principles thereof.  Both parties hereby consent to
               the jurisdiction of the federal and state courts in the (***) to
               adjudicate any dispute that may arise in connection with this
               agreement or any of the duties or obligations hereunder.

          (k)  This agreement contains the sole and entire agreement between you
               and us with respect to the subject matter hereof.  This agreement
               may be amended, modified or waived only by a separate written
               instrument duly executed by or on behalf of you and us.  This
               agreement is being entered into by you for the benefit of
               Tellium, its affiliates, and their respective successors and
               assigns (including without limitation any purchaser of or
               investor in Tellium) and they shall be third party beneficiaries
               hereof having all rights to enforce this agreement.  Neither
               Tellium nor you will have any rights or obligations of any kind
               whatsoever with respect to any transaction by virtue of this
               agreement or any other written or oral expression by our
               respective Representatives unless and until a definitive
               transaction agreement between Tellium and you is executed and
               delivered, other than for the matters specifically agreed to
               herein.

          (l)  This Agreement shall survive any termination of negotiations with
               respect to the potential business relationship between the
               parties hereto or any other agreement or transaction between the
               parties.

                                      -61-
<PAGE>

          If the foregoing is agreeable to you, please sign the enclosed copy of
this letter on the line below and return it to the undersigned.

                                             Very truly yours,

                                             TELLIUM, INC.

                                             By:______________________________
                                             Name:  Michael J. Losch
                                             Title: CFO & Secretary

Date:__________________

AGREED TO AND ACCEPTED BY:
--------------------------

__________________________

By:_______________________
Name:
Title:

Date:____________________

                                      -62-
<PAGE>

[LOGO of CABLE & WIRELESS]

                                  EXHIBIT H-2
                                  -----------

                  CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT
                  --------------------------------------------

                               (TWO-WAY) ("NDA")
                               -----------------

                    CABLE & WIRELESS GLOBAL NETWORKS LIMITED
                    ----------------------------------------

                                      AND
                                      ---

                                 TELLIUM, INC.
                                 -------------

                              DATED JUNE __, 2000
                              -------------------

                                      -63-
<PAGE>

                  CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT
                  --------------------------------------------

DATE    June __, 2000
PARTIES
(1)  CABLE & WIRELESS GLOBAL NETWORKS LIMITED, a company incorporated under the
     laws of Ireland with registered number 282637, with its registered office
     at 2 Brookvale Plaza, East Park, Shannon, Co Clare, Ireland ("C&W"); and
(2)  Tellium, Inc. ("Tellium"), a company incorporated under the laws of
     Delaware.

RECITALS
(A)  The parties are discussing certain matters relating to the Supply Agreement
     (as defined below) which requires each party to disclose certain
     information to the other party.
(B)  The party disclosing such information shall be referred to in this
     Agreement as the "Disclosing Party" and the party receiving such
     information shall be referred to in this Agreement as the "Receiving
     Party".

OPERATIVE PROVISIONS
1.   The Confidential Information
     ----------------------------
     "Affiliates" means the ultimate holding company of the Party in question,
     and any direct or indirect subsidiary of such ultimate holding company, or
     in the case of C&W, any "Group Company" as defined in the Supply Agreement.

     "Confidential Information" shall have the meaning set forth in the Supply
     Agreement.

     "Supply Agreement" means the Agreement, dated as of June __, 2000, between
     C&W and Tellium for the Supply of Network Systems for purposes of this
     Agreement.

2.   Disclosure of Confidential Information
     --------------------------------------

2.1  The parties may disclose and provide to each other Confidential Information
     as is necessary under the Supply Agreement.  The parties acknowledge that
     the Confidential Information is a valuable, special and unique asset
     belonging to the Disclosing Party.  The parties agree that they will not
     disclose the Confidential Information to any person, firm, corporation,
     association or any other entity for any reason or purpose whatsoever except
     as provided in Clause 28 of the Supply Agreement, which governs the
     treatment of Confidential Information between the parties.  C&W agrees, for
     itself and for its Affiliates, that the obligations of this Non-Disclosure
     Agreement shall extend to its Affiliates and C&W shall cause such
     Affiliates to be so bound.

2.2  The parties shall be permitted to disclose the Confidential Information on
     a (***) to their Affiliates (and such Affiliates' employees and officers)
     provided always that where confidential information is disclosed to
     Affiliates such Affiliates sign an undertaking (the "Undertaking"), of
     which the Disclosing Party shall be a third party beneficiary, to treat the
     Confidential Information as confidential on the same terms and conditions
     as contained in this Agreement and the Receiving Party shall ensure that
     such Affiliates abide by the terms of such undertaking.

2.3  The Undertaking shall provide that such Affiliates shall not utilise,
     employ, exploit or in any other manner whatsoever use the Confidential
     Information disclosed other than as provided in Clause 28 of the Supply
     Agreement.

2.4  Clause 28 of the Supply Agreement is hereby incorporated by reference and
     shall constitute a part of this Agreement.

                                      -64-
<PAGE>

3.   Representations and Warranties
     ------------------------------
     Each party represents and warrants to the other that it is a corporation
     duly organised and validly existing in the jurisdiction of its
     incorporation. Each party represents that it has full corporate power and
     authority to enter into this Agreement and to do all things necessary for
     the performance of this Agreement.  The Disclosing Party warrants that the
     Confidential Information has not been provided in breach of any other
     agreements with third parties.
4.   Governing Law
     -------------

     This Agreement and the relationships of the parties in connection with the
     subject matter of this Agreement shall be governed by and determined in
     accordance with the laws of England and the parties submit to the non-
     exclusive jurisdiction of the courts of England in relation to any legal
     actions or proceedings arising out of or in connection with this Agreement.

5.   Notices
     -------

     All notices, demands or other communications under this Agreement shall be
     given in accordance with Clause 33 of the Supply Agreement.

6.   Duration
     --------
     This Agreement shall expire (***) after the termination of the Supply
     Agreement.

7.   Additional Provisions
     ---------------------

7.1  Each party to this Agreement shall execute and deliver such other documents
     and do such other acts and things as may be necessary or desirable to carry
     out the terms, provisions and purposes of this Agreement.

7.2  In the event of a breach or threatened breach by the Receiving Party or its
     agents of the terms of this Nondisclosure Agreement, Disclosing Party shall
     be entitled to an injunction prohibiting such breach in addition to other
     legal and equitable remedies available to it in connection with such
     breach. Receiving Party acknowledges that the Confidential Information is
     valuable and unique to Disclosing Party and that disclosure by Receiving
     Party or its agents in breach of this Nondisclosure Agreement will result
     in irreparable injury to Disclosing Party.

7.3  No amendment, interpretation or waiver of any of the provisions of this
     Agreement shall be effective unless made in writing and signed by the
     parties to this Agreement.

7.4  The failure to enforce or to require the performance at any time of any one
     of the provisions of this Agreement shall not be construed to be a waiver
     of such provision, and shall not affect either the validity of this
     Agreement or any part hereof or the right of any party thereafter to
     enforce each and every provision in accordance with the terms of this
     Agreement.

7.5  In the event any one or more of the provisions contained in this Agreement
     shall for any reason be held to be invalid, illegal or unenforceable in any
     respect, such invalidity, illegality or unenforceability shall not affect
     any other provision of this Agreement, but this Agreement shall be
     construed as if such invalid, illegal or unenforceable provision had never
     been included in this Agreement and this Agreement shall be carried out as
     nearly as possible according to its original terms and intent.

7.6  The headings of paragraphs are used for convenience only and shall not
     affect the meaning or construction of the contents of this Agreement.

7.7  This Agreement may be executed in counterparts, all of which shall
     constitute one agreement, and each such counterpart shall be deemed to have
     been made, executed and delivered on the date set out at the head of this

                                     -65-

<PAGE>

    Agreement, without regard to the dates or times when such counterparts may
    actually have been made, executed or delivered.

                                     -66-
<PAGE>

IN WITNESS whereof, the parties have caused their duly authorised
representatives to execute this Agreement as of the date set out at the head of
this Agreement.

CABLE & WIRELESS GLOBAL          TELLIUM INC.
NETWORKS LIMITED

By:___________________           By:____________________
Name:_________________           Name:__________________
Title:________________           Title:_________________

                                     -67-
<PAGE>

                                   EXHIBIT I
                                   ---------

                                CUSTOMER SERVICE
                                ----------------

Technical Support Services
--------------------------

Ongoing technical support and emergency problem resolution will be available on
a (***) basis. Tellium supplies technical assistance support services from its
Oceanport, NJ facility.

With regards to response times, Tellium recognizes that each customer has their
own goals and objectives as well as methods of operation.  Due to this, Tellium
has adopted the policy that specific response times for technical on-site
assistance will be defined to meet each individual customer's needs.  Tellium's
(***) technical support telephone service provides customers communications with
Tellium technical support personnel (***) of the initial call from the customer
to the help line at 1-888-TELLIUM (1-888-835-5486).

<TABLE>
<CAPTION>
Level of Outage                                                  Technical Support
----------------------------------------------------------------------------------------------------------------
<S>                                                   <C>
Out-of-Service                                        Tellium provides (***) technical support
(Failure causes service outage)                       within 24 hours; Tellium will attempt to
                                                      provide assistance (***).

----------------------------------------------------------------------------------------------------------------
Service Impaired                                      (***) technical support provided within
(System is operational, but Quality of service is     (***). compromised; e.g. performance monitoring software
is malfunctioning)

----------------------------------------------------------------------------------------------------------------
Non-service affecting                                 (***) technical support is Scheduled

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

     Tellium Repair and Return Policy
     --------------------------------

     The Aurora Optical Switches are equipped with field replaceable modules.
     Tellium's routine or non-emergency repair & returns policy is to repair or
     replace a defective module within (***) from receipt. If products returned
     to Tellium are determined to be beyond repair, Tellium shall so notify
     customer of the need to replace such product.

          Tellium provides a standard emergency repair and return service within
          (***), or, whenever possible, ships replacement parts within (***).
          Tellium can maintain a (***)

                                     -68-
<PAGE>

          for (***) (see Spares plan) to enable (***) ((***) if distance
          permits), once negotiated with the customer.

     The Tellium routine Repair and Return service is managed via a return
     authorization process.  This process is as follows:

     .    When a module is suspected as being defective (hardware or software),
          the customer calls Tellium's Customer Service number.

     .    If it is determined that the module is indeed defective, the customer
          is issued a Return Authorization Number for tracking and shipping to
          Tellium. Customer is responsible for shipping expenses to Tellium.

     .    The defective module will then be repaired or replaced and returned to
          the customer. Tellium is responsible for shipping expenses back to the
          customer.

     .    Repair of module(s) still under warranty is (***) unless it is
          determined that the defect was caused by (***).

     .    Repair of module(s) not covered under warranty will be charged at the
          rate of (***) ((***)) (***). If repaired cost is greater than (***) of
          individual module cost, module will be replaced rather than repaired.
          Tellium to notify C&W prior to replacement of modules. Customer will
          be invoiced at the then agreed upon charge.

                                     -69-
<PAGE>

                         EXHIBIT J
                         ---------

                         SOFTWARE MAINTENANCE AGREEMENT
                         ------------------------------
                                 (under review)

MAINTENANCE AND SUPPORT.

     A.  Contractor shall provide maintenance and support through the (***)
after the date of delivery of the Software (***) in accordance with Clause 19 of
the Agreement. Thereafter, Purchaser shall pay an annual fee of (***) ((***)) as
a Maintenance Fee.

     B.  Contractor shall provide (***), (***) support for answering questions
regarding operation of the Software and for reporting problems with the
Software.

     C.  Contractor shall provide (***) for any (***) or comparable (***) or
(***) in the Software and regular preventive maintenance. Response time for
service affecting problems will be within (***).

     D.  Contractor shall provide (***), (***), (***), (***), (***) of the same
type and quality that Contractor provides to its customers who are covered by a
fixed effort/budgeted maintenance agreement.  Additional new features or
customer specific features shall be subject to charges negotiated between C&W
and Contractor from time to time.

     E.  Contractor shall provide (***) technical support (***).  Except as
provided in Clause 17(C) of the Purchase Agreement, C&W agrees to pay for such
(***) support at the rates indicated in Schedule A, Labor Rate Tables of the
Purchase Agreement.

     F.  Maintenance and support shall not include the following: (a) (***); (b)
                                       ---
(***); (c) repair of damage resulting from (***), or (***) other than (***),
unless any such acts are the result of (***) or (***); (d) (***) or (***), or
(***) connected with (***) or (***) or (***), or (***);  (e) such service that
is (***) to render because of (***) in the (***) or (***) to (***), unless such
(***) or (***) were made by an (***) of (***); (f) (***),(***) (unless (***) a
(***)) or (***); (g) (***) required to (***) to (***) or (***) provided by
someone other than an (***) of (***); (h) (***) and (***); (i) (***) or (***)
necessitated by use of (***) or (***) not provided by (***).

     G.  Contractor assumes no responsibility if anyone other than an authorized
Contractor representative modifies or otherwise tampers with the hardware,
Software, or operating system except in the manner set forth in the
Documentation, except as provided in Clause 16 of the Purchase Agreement.

     H.  Charges for any maintenance services or other work performed by
Contractor stemming from any of the above exclusions will be separately invoiced
to Purchaser at Contractor's time and expense rates in effect at the time such
services are rendered. Prior written notice must be provided to and approved by
Purchaser, if charges for maintenance services or other work are to be incurred
by Purchaser.

                                      -70-
<PAGE>

                                   EXHIBIT K
                                   ---------

                                ESCROW SCHEDULE
                                ---------------

(***)

                             SINGLE LICENSEE (***)

ESCROW AGREEMENT:                       DATED:

Between:

(1)         whose registered office is at    (CRN:    ) ("the Owner");

(2)         whose registered office is at    (CRN:    ) ("the Licensee"); and

(3)  (***) whose registered office is at (***),(***),(***),(***) ("(***)").

Preliminary:

(A)  The Licensee has been granted a license to use a software package
     comprising computer programs.

(B)  Certain technical information and documentation describing the software
     package are the confidential property of the Owner and are required for
     understanding, maintaining and correcting the software package.

(C)  The Owner acknowledges that in certain circumstances the Licensee may
     require possession of the technical information and documentation held
     under this Agreement.

(D)  Each of the parties to this Agreement acknowledges that the considerations
     for their respective undertakings given under it are the undertakings given
     under it by each of the other parties.

It is agreed that:

1.   Definitions

     In this Agreement the following terms shall have the following meanings:

     1.1. "Full Verification Service" means those bespoke tests agreed between
          the Licensee and (***) for the verification of the Material;

                                      -71-
<PAGE>

     1.2  "Intellectual Property Rights" means copyright, trade secret, patent,
          and all other rights of a similar nature;

     1.3  "License Agreement" means the license granted to the Licensee for the
          Package;

     1.4  "Material" means the source code of the Package comprising the latest
          technical information and documentation described in Schedules 1 and
          2;

     1.5  "Package" means the software package licensed to the Licensee under
          the License Agreement; and

     1.6  "Standard Verification Service" means those tests detailed in the
          Standard Verification Service published by (***) from time to time.

2.   Owner's Duties and Warranties

     2.1  The Owner shall:

          2.1.1  deliver a copy of the Material to (***) within (***) of the
                 date of this Agreement;

          2.1.2  at all times ensure that the Material as delivered to (***) is
                 capable of being used to generate the latest version of the
                 Package issued to the Licensee and shall deliver further copies
                 of the Material as and when necessary;

          2.1.3  deliver a replacement copy of the Material within (***) of
                 receipt of a notice served upon it by (***) under the
                 provisions of Clause 4.1.5; and

          2.1.4  deliver with each deposit of the Material the information
                 detailed in Schedule 2.

     2.2  The Owner warrants that:

          2.2.1  it owns the Intellectual Property Rights in the Material and
                 has authority to enter into this Agreement; and

          2.2.2  the Material lodged under Clause 2.1 shall contain all
                 information in human-readable form and on suitable media to
                 enable a reasonably skilled programmer or analyst to
                 understand, maintain and correct the Package without the
                 assistance of any other person.

                                      -72-
<PAGE>

3.   Licensee's Responsibilities

     It shall be the responsibility of the Licensee to notify (***) of any
     change to the Package that necessitates a replacement deposit of the
     Material.

4.   (***)'s Duties

             4.1    (***) shall:

             4.1.1  hold the Material in a safe and secure environment;

             4.4.2  inform the Owner and the Licensee of the receipt of any copy
                    of the Material;

             4.1.3  in accordance with the terms of Clause 9 perform those tests
                    that form part of its Standard Verification Service from
                    time to time;

             4.1.4  at all times retain a copy of the latest verified deposit of
                    the Material; and

             4.1.5  notify the Owner if it becomes aware at any time during the
                    term of this Agreement that the copy of the Material held by
                    it has been lost, damaged or destroyed.

     4.2     (***) shall not be responsible for procuring the delivery of the
             Material in the event of failure by the Owner to do so.

5.   Payment

     (***)'s fees are payable in accordance with Schedule 4.

6.   Release Events

     6.1     Subject to the provisions of Clauses 6.2 and 6.3, (***) will
             release the Material to a duly authorized officer of the Licensee
             if any of the following events occur:

     6.1.1  the Owner enters into any composition or arrangement with its
            creditors or (being a company) enters into liquidation whether
            compulsory or voluntary (other than for the purposes of solvent
            reconstruction or amalgamation) or has a receiver or administrative
            receiver appointed over all or any part of its assets or undertaking
            or a petition is presented for an Administration Order or (being an
            individual or partnership) becomes bankrupt, or an event

                                      -73-
<PAGE>

            occurs within the jurisdiction of the country in which the Owner is
            situated which has a similar effect to any of the above events in
            the (***); or

     6.1.2  the Owner ceases to trade; or

     6.1.3  the Owner assigns copyright in the Material and the assignee fails
            within (***) of such assignment to offer the Licensee substantially
            similar protection to that provided by this Agreement without
            significantly increasing the cost to the Licensee; or

     6.1.4  the Owner without legal justification, has defaulted to a material
            degree in any obligation to provide maintenance or modification of
            the Package under the License Agreement or any maintenance agreement
            entered into in connection with the Package and has failed to remedy
            such default notified by the Licensee to the Owner.

            6.2     The Licensee must notify (***) of the event(s) specified in
                    Clause 6.1 by delivering to (***) a statutory or notarized
                    declaration ("the Declaration") made by an officer of the
                    Licensee attesting that such event has occurred and that the
                    License Agreement was still valid and effective up to the
                    occurrence of such event and exhibiting:

            6.2.1   such documentation in support of the Declaration as (***)
                    shall reasonably require;

            6.2.2   a copy of the License Agreement; and

            6.2.3   a signed confidentiality undertaking as detailed in
                    Schedule 3

            then (***) will release the Material to the Licensee upon receipt of
                    the release fee stated in Schedule 4.

            6.3     Upon receipt of a Declaration from the Licensee claiming a
                    release event under Clause 6.1.4:

            6.3.1   (***) shall send a copy of the Declaration to the Owner by
                    registered post; and

            6.3.2   unless within (***) after the date of delivery the Owner
                    delivers to (***) a counter-notice signed by a duly
                    authorized officer of the Owner stating that no such failure
                    has occurred or that any such failure has been rectified

                                      -74-
<PAGE>

          then (***) will release the Material to the Licensee upon receipt of
               the release fee stated in Schedule 4.

          6.4  Where there is any dispute as to the occurrence of any of the
               events set out in Clause 6 or the fulfillment of any obligations
               detailed therein, such dispute will be referred at the request of
               either the Owner or the Licensee to the Managing Director for the
               time being of (***) for the appointment of an expert who shall
               give a decision on the matter within (***) of the date of
               referral or as soon as practicable thereafter.  The expert's
               decision shall be final and binding as between the Owner and the
               Licensee except in the case of manifest error.

7.   Confidentiality

     7.1  The Material shall remain the confidential property of the Owner and
          in the event that (***) provides a copy of the Material to the
          Licensee, the Licensee shall be permitted to use the Material only in
          accordance with a confidentiality undertaking in the form contained in
          Schedule 3.

     7.2  (***) agrees to maintain all information and/or documentation coming
          into its possession or to its knowledge under this Agreement in
          strictest confidence and secrecy.  (***) further agrees not to make
          use of such information and/or documentation other than for the
          purposes of this Agreement and will not disclose or release it other
          than in accordance with the terms of this Agreement.

     7.3  Termination of this Agreement will not relieve (***) or its employees,
          or the Licensee or its employees, from the obligations of
          confidentiality contained in this Clause 7.

8.   Intellectual Property Rights

     The release of the Material to the Licensee will not act as an assignment
     of any Intellectual Property Rights that the Owner possesses in the
     Material.

9.   Verification

     9.1  Subject to the provisions of Clauses 9.2 and 9.3, (***) shall bear no
          obligation or responsibility to any person, firm, company or entity
          whatsoever to determine the existence, relevance, completeness,
          accuracy, effectiveness or any other aspect of the Material.

                                      -75-
<PAGE>

     9.2   Upon the Material being lodged with (***), (***) shall perform those
           tests in accordance with its Standard Verification Service and shall
           provide a copy of the test report to the parties to this Agreement.

     9.3   The Licensee shall be entitled to require that (***) carry out a Full
           Verification. Any reasonable charges and expenses incurred by (***)
           in carrying out a Full Verification will be paid by the Licensee save
           that if in the opinion of the expert appointed by the Managing
           Director of (***) the Material is substantially defective in content
           any such reasonable charges and expenses will be paid by the Owner.

10.  (***) Liability

     10.1  (***) shall not be liable for any loss caused to the Owner or the
           Licensee either jointly or severally except for loss of or damage to
           the Material to the extent that such loss or damage is caused by the
           negligent acts or omissions of (***), its employees, agents or sub-
           contractors and in such event (***) total liability in respect of all
           claims arising under or by virtue of this Agreement shall not (except
           in the case of claims for personal injury or death) exceed the sum of
           (***).

     10.2  (***) shall in no circumstances be liable to the Owner or the
           Licensee for indirect or consequential loss of any nature whatsoever
           whether for loss of profit, loss of business or otherwise.

     10.3  (***) shall be protected in acting upon any written request, waiver,
           consent, receipt or other document furnished to it pursuant to this
           Agreement, not only in assuming its due execution and the validity
           and effectiveness of its provisions but also as to the truth and
           acceptability of any information contained in it, which (***) in good
           faith believes to be genuine and what it purports to be.

11.  Termination

     11.1  (***) may terminate this Agreement after failure by the Owner or the
           Licensee to comply with a (***) written notice from (***) to pay any
           outstanding fee. If the failure to pay is on the part of the Owner
           the Licensee shall be given the option of paying such fee itself.
           Such amount will be recoverable by the Licensee direct from the
           Owner.

     11.2  (***) may terminate this Agreement by giving (***) written notice to
           the Owner and the Licensee.  In that event the Owner and the Licensee
           shall

                                     -76-
<PAGE>

            appoint a mutually acceptable new custodian on terms similar to
            those contained in this Agreement.

     11.3   If a new custodian is not appointed within (***) of delivery of any
            notice issued by (***) in accordance with the provisions of Clause
            11.2, the Owner or the Licensee shall be entitled to request the
            President for the time being of the (***) to appoint a suitable new
            custodian upon such terms and conditions as he shall require. Such
            appointment shall be final and binding on all parties.

     11.4   If the License Agreement has expired or has been lawfully terminated
            this Agreement will automatically terminate on the same date.

     11.5   The Licensee may terminate this Agreement at any time by giving
            written notice to the Owner and (***).

     11.6   The Owner may only terminate this Agreement with the written consent
            of the Licensee.

     11.7   This Agreement shall terminate upon release of the Material to the
            Licensee in accordance with Clause 6.

     11.8   Upon termination under the provisions of Clauses 11.2, 11.4, 11.5 or
            11.6 (***) will deliver the Material to the Owner. If (***) is
            unable to trace the Owner (***) will destroy the Material.

     11.9   Upon termination under the provisions of Clause 11.1 the Material
            will be available for collection by the Owner from (***) for (***)
            from the date of termination.  After such (***) period (***) will
            destroy the Material.

     11.10  (***) may forthwith terminate this Agreement and destroy the
            Material if it is unable to trace the Owner having used all
            reasonable endeavors to do so.

12.  General

     12.1   This Agreement shall be governed by and construed in accordance with
            the laws of (***).

     12.2   This Agreement represents the whole agreement relating to the escrow
            arrangements between the parties for the Package and supersedes all
            prior arrangements, negotiations and undertakings.

     12.3   All notices to be given to the parties under this Agreement shall be
            deemed to have been duly given or made when delivered personally or
            (***) after

                                      -77-
<PAGE>

          posting or if sent by facsimile, (***) after dispatch to the party to
          which such notice is required to be given or made under this Agreement
          addressed to the principal place of business, or for companies based
          in the (***), the registered office.

SCHEDULE 1

The Material

The source code of the Package known as

SCHEDULE 2

Material: Technical Information

The Material shall be supplied with details of the following:

     1.   Details of the deposit; full name and version details, number of media
          items, media type and density, file or archive format, list or
          retrieval commands, archive hardware and operating system details.

     2.   Name and functionality of each module/application of the Material.

     3.   Names and versions of development tools etc.

     4.   Documentation describing the procedures for building / compiling /
          executing / using the software (technical notes, user guides).

     5.   Hardcopy directory listings of the contents of the media.

     6.   Name and contact details of employee(s) with knowledge of how to
          maintain and support the Material.

SCHEDULE 3

Confidentiality Undertaking

This undertaking is given on release of the Material pursuant to an Escrow
     Agreement dated [date] between:

(1)         ("the Owner");

                                      -78-
<PAGE>

(2)  ("the Licensee"); and

(3)  (***) ESCROW INTERNATIONAL LIMITED ("(***)");

     1.   Definitions contained in the Escrow Agreement will apply to this
          undertaking.

     2.   In consideration of (***) delivering the Material to the Licensee, the
          Licensee undertakes with the Owner and (***):

          2.1  to use the Material only for the purpose of understanding,
               maintaining and correcting the Package exclusively on behalf of
               the Licensee;

          2.2  not to use the Material for any other purpose nor disclose it to
               any person save such of its employees or contractors who need to
               know the same in order to understand, maintain and correct the
               Package exclusively on behalf of the Licensee. In that event such
               contractors shall enter into a Confidentiality Undertaking direct
               with (***) in similar terms to this Undertaking;

          2.3  to hold all media containing the Material in a safe and secure
               environment when not in use; and

          2.4  forthwith to destroy the same should the Licensee cease to be
               entitled to use the Package.

SCHEDULE 4

(***) Fees (***)

   DESCRIPTION                                            FEE    OWNER  LICENSEE
1  Initial Fee
   (payable on completion of this Agreement)              (***)

2  Annual Fee
   (payable on completion of this Agreement and on each   (***)
   anniversary thereafter)

3  Update Fee
   (per update after the first 4 updates per annum)       (***)

4  Storage Fee
   (per annum, per cubic foot payable if the source code     (***)
   exceeds 1 cubic foot)

5  Release Fee
   (plus (***) reasonable expenses)                          (***)

1.   All fees are subject to (***) where applicable*

                                      -79-
<PAGE>

2.   All fees are reviewed by (***) from time to time

*    only applicable to (***).

                                      -80-
<PAGE>

Signed on behalf of

Name:_____________________________
     (Authorised Signatory)

Position:_________________________

Signed on behalf of

Name:_____________________________
     (Authorised Signatory)

Position:_________________________

Signed on behalf of (***)

Name:_____________________________
     (Authorised Signatory)

Position:_________________________

                                      -81-<PAGE>

                                                                    EXHIBIT 10.8

                  ==========================================

                             AMENDED AND RESTATED
                      1997 EMPLOYEE STOCK INCENTIVE PLAN

                                      OF

                                 TELLIUM, INC.
                             (formerly MWD, Inc.)

                  ==========================================
<PAGE>

                               TABLE OF CONTENTS
<TABLE>
<S>                                                                                                <C>
ARTICLE I.
         Definitions............................................................................   -1-

ARTICLE II.
         SHARES SUBJECT TO PLAN.................................................................   -5-
         2.1.     Shares Subject to Plan........................................................   -5-
                  ----------------------
         2.2.     Add-back of Awards............................................................   -5-
                  ------------------

ARTICLE III.
         GRANTING OF OPTIONS....................................................................   -6-
         3.1.     Eligibility...................................................................   -6-
                  -----------
         3.2.     Disqualification for Stock Ownership..........................................   -6-
                  ------------------------------------
         3.3      Qualification of Incentive Stock Options......................................   -6-
                  ----------------------------------------
         3.4      Granting of Options...........................................................   -6-
                  -------------------

ARTICLE IV.
         TERMS OF OPTIONS.......................................................................   -7-
         4.1.     Option Agreement..............................................................   -7-
                  ----------------
         4.2.     Option Price..................................................................   -7-
                  ------------
         4.3.     Option Term...................................................................   -8-
                  -----------
         4.4.     Option Vesting................................................................   -8-
                  --------------
         4.5.     Consideration.................................................................   -8-
                  -------------

ARTICLE V.
         EXERCISE OF OPTIONS....................................................................   -9-
         5.1.     Partial Exercise..............................................................   -9-
                  ----------------
         5.2.     Manner of Exercise............................................................   -9-
                  ------------------
         5.3.     Conditions to Issuance of Stock Certificates..................................  -10-
                  --------------------------------------------
         5.4.     Rights as Stockholders........................................................  -10-
                  ----------------------
         5.5.     Ownership and Transfer Restrictions...........................................  -11-
                  -----------------------------------

ARTICLE VI.
         RESTRICTED STOCK.......................................................................  -11-
         6.1.     Restricted Stock..............................................................  -11-
                  ----------------
         6.2.     Terms and Conditions..........................................................  -12-
                  --------------------
         6.3.     Agreements....................................................................  -13-
                  ----------

ARTICLE VII.
         ADMINISTRATION.........................................................................  -13-
         7.1      Compensation Committee........................................................  -13-
                  ----------------------
         7.2.     Duties and Powers of Committee................................................  -13-
                  ------------------------------
         7.3.     Majority Rule; Unanimous Written Consent......................................  -13-
                  ----------------------------------------
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                               <C>
         7.4.     Compensation; Professional Assistance; Good Faith Actions....................   -14-
                  ---------------------------------------------------------

ARTICLE VIII.
         MISCELLANEOUS PROVISIONS..............................................................   -14-
         8.1.     Not Transferable.............................................................   -14-
                  ----------------
         8.2.     Amendment, Suspension or Termination of this Plan............................   -14-
                  -------------------------------------------------
         8.3.     Changes in Common Stock or Assets of the Company, Acquisition
                  -------------------------------------------------------------
                  or Liquidation of the Company and Other Corporate Events.....................   -15-
                  --------------------------------------------------------
         8.4.     Approval of Plan by Stockholders.............................................   -17-
                  --------------------------------
         8.5.     Tax Withholding..............................................................   -18-
                  ---------------
         8.6.     Loans........................................................................   -18-
                  -----
         8.7.     Forfeiture Provisions........................................................   -18-
                  ---------------------
         8.8.     Limitations Applicable to Performance-Based Compensation.....................   -18-
                  --------------------------------------------------------
         8.9.     Effect of Plan Upon Options and Compensation Plans...........................   -18-
                  --------------------------------------------------
         8.10.    Compliance with Laws.........................................................   -18-
                  --------------------
         8.11.    Titles.......................................................................   -19-
                  ------
         8.12.    Governing Law................................................................   -19-
                  -------------
</TABLE>

                                      ii
<PAGE>

          THE AMENDED AND RESTATED 1997 EMPLOYEE STOCK INCENTIVE PLAN
                                      OF
                                 TELLIUM, INC.

     TELLIUM, INC. (formerly MWD, Inc.), a Delaware corporation (the "Company"),
has adopted the following amendment and restatement of its 1997 Employee Stock
Option Plan of MWD, Inc. (the "Plan"), effective November 16, 2000, for the
benefit of its eligible employees and consultants.

     The purposes of this Plan are as follows:

     (1)  To provide an additional incentive for key Employees and consultants
to further the growth, development and financial success of the Company by
personally benefiting through the ownership of Options (as defined below) to
purchase Common Stock of the Company and/or Restricted Stock (as defined below).

     (2)  To enable the Company to obtain and retain the services of key
Employees considered essential to the long range success of the Company by
offering them an opportunity to own Options to purchase Common Stock of the
Company and/or Restricted Stock.

     This amended and restated plan (a) increases the number of shares issuable
upon exercise of options granted under the Plan to 91,250,000 shares, (b)
provides for the issuance of the Restricted Stock, and (c) makes certain other
changes.

                                   ARTICLE I
                                  Definitions

     1.1. General. Wherever the following terms are used in this Plan they shall
          -------
have the meanings specified below, unless the context clearly indicates
otherwise. The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.

     1.2. Award. "Award" shall mean an Option or Restricted Stock.
          -----

     1.3. Award Limit. "Award Limit" shall mean 1,500,000 shares of Common
          -----------
Stock.

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

     1.5. Change in Control. "Change in Control" shall mean a change in
          -----------------
ownership or control of the Company effected through either of the following
transactions:

          (a) any person or related group of persons (other than the Company or
a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
securities possessing more than fifty percent (50%) of the total
<PAGE>

combined voting power of the Company's outstanding securities pursuant to a
tender or exchange offer made directly to the Company's stockholders which the
Board does not recommend such stockholders to accept; or

           (b) there is a change in the composition of the Board over a period
of thirty-six (36) consecutive months (or less) such that a majority of the
Board members ceases, by reason of one or more proxy contests for the election
of Board members, to be comprised of individuals who either (i) have been Board
members continuously since the beginning of such period or (ii) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board or by
persons who were nominated by such Board members.

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

     1.7.  Committee. "Committee" shall mean the Compensation Committee of the
           ---------
Board, or another committee of the Board, appointed as provided in Section 7.1.

     1.8.  Common Stock. "Common Stock" shall mean the common stock of the
           ------------
Company, par value $0.001 per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any preferred
stock and any warrants, options or other rights to purchase Common Stock.

     1.9.  Company. "Company" shall mean Tellium, Inc., a Delaware corporation.
           -------

     1.10. Corporate Transaction.  "Corporate Transaction" shall mean any of
           ---------------------
the following stockholder-approved transactions to which the Company is a party:

           (a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated, form a holding company or
effect a similar reorganization as to form whereupon this Plan and all Options
are assumed by the successor entity;

           (b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions to
clause (a) above; or

           (c) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are transferred or
issued to a person or persons different from those who held such securities
immediately prior to such merger.

     1.11. Director. "Director" shall mean a member of the Board.
           --------

                                       2
<PAGE>

     1.12. Employee. "Employee" shall mean any officer or other employee (as
           --------
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.

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

     1.14. Fair Market Value. "Fair Market Value" of a share of Common Stock as
           -----------------
of a given date shall be (i) the closing price of a share of Common Stock on the
principal exchange on which shares of Common Stock are then trading, if any (or
as reported on any composite index which includes such principal exchange), on
the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (ii) if Common Stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by NASDAQ or such successor quotation system,
or if shares were not traded on the trading day previous to such date, then on
the next preceding date on which a trade occurred; or (iii) if Common Stock is
not publicly traded on an exchange and not quoted on NASDAQ or a successor
quotation system, the fair market value of a share of Common Stock as
established by the Committee acting in good faith.

     1.15. Grantee. "Grantee" shall mean an Employee to whom an Award has been
           -------
granted under the Plan.

     1.16. Incentive Stock Option. "Incentive Stock Option" shall mean an
           ----------------------
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Committee.

     1.17. Non-Qualified Stock Option. "Non-Qualified Stock Option" shall mean
           --------------------------
an Option which is not designated as an Incentive Stock Option by the Committee.

     1.18. Option. "Option" shall mean a stock option granted under Article
           ------
III of this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option.

     1.19. Optionee. "Optionee" shall mean an Employee granted an Option under
           --------
this Plan.

     1.20. Performance Goals. "Performance Goals" shall mean the performance
           -----------------
goals established by the Committee in connection with the grant of Restricted
Stock. In the case of Qualified Performance-Based Awards, (i) such goals shall
be based on the attainment of specified levels of one or more of the following
measures: return on equity, return on assets, operating income, earnings per
share, net income, total shareholder return, share price, shareholder value
added, cash value added and/or achievement of pre-determined, objectively
defined strategic performance goals and (ii) such Performance Goals shall be set
by the

                                       3
<PAGE>

Committee within the time period prescribed by Section 162(m) of the Code and
related regulations. Performance Goals may be stated in the alternative or in
combination.

     1.21. Plan. "Plan" shall mean The 1997 Amended and Restated Employee Stock
           ----
Incentive Plan of Tellium, Inc.

     1.22. QDRO. "QDRO" shall mean a qualified domestic relations order as
           ----
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.

     1.23. Qualified Performance Based Award. "Qualified Performance Based
           ----------------------------------
Award" shall mean an Award of Restricted Stock designated as such by the
Committee at the time of grant based upon a determination that the Committee
wishes such Award to qualify for the exemption from deductibility imposed by
Section 162(m) of the Code.

     1.24. Restricted Stock. "Restricted Stock" shall mean any share of Common
           ----------------
Stock granted under Article VI of this Plan.

     1.25. Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under the
           ----------
Exchange Act, as such Rule may be amended from time to time.

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

     1.27. Termination of Employment. "Termination of Employment" shall mean the
           -------------------------
time when the employee-employer relationship between a Grantee and the Company
or any Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of an Optionee by
the Company or any Subsidiary, (ii) at the discretion of the Committee,
terminations which result in a temporary severance of the employee-employer
relationship, and (iii) at the discretion of the Committee, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company or a Subsidiary with the former employee. The Committee, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment; provided, however, that, with respect to
                                       --------  -------
Incentive Stock Options, a leave of absence, change in status from an employee
to an independent contractor or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the extent
that, such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section. Notwithstanding
any other provision of this Plan, the Company or any Subsidiary has an

                                       4
<PAGE>

absolute and unrestricted right to terminate an Employee's employment at any
time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.

                                  ARTICLE II
                            SHARES SUBJECT TO PLAN

     2.1.  Shares Subject to Plan.
           ----------------------

           (a) The shares of stock subject to Awards shall be Common Stock,
initially shares of the Company's Common Stock, par value $0.001 per share. The
aggregate number of such shares which may be available for grant under the Plan
shall not exceed ninety-one million two hundred fifty thousand (91,250,000). The
shares of Common Stock issuable upon exercise of Options or as Restricted Stock
may be either previously authorized but unissued shares or treasury shares.

           (b) The maximum number of shares which may be subject to Options
granted under the Plan to any individual in any calendar year shall not exceed
the Award Limit. To the extent required by Section 162(m) of the Code, shares
subject to Options which are canceled continue to be counted against the Option
Limit and if, after grant of an Option, the price of shares subject to such
Option is reduced, the transaction is treated as a cancellation of the Option
and a grant of a new Option and both the Option deemed to be canceled and the
Option deemed to be granted are counted against the Award Limit.

     2.2.  Add-back of Awards. If any Option expires or is canceled without
           ------------------
having been fully exercised, or is exercised in whole or in part for cash as
permitted by this Plan, or if any share of Restricted Stock is forfeited,
expires or is canceled, the number of shares subject to such Award but as to
which such Option was not exercised prior to its expiration or cancellation, or
with respect to which such Restricted Stock expired, was canceled or forfeited,
may again be optioned, granted or awarded hereunder, subject to the limitations
of Section 2.1. Furthermore, any shares subject to Awards which are adjusted
pursuant to Section 8.3 and become exercisable with respect to shares of stock
of another corporation shall be considered canceled and may again be subject to
Awards, subject to the limitations of Section 2.1. Shares of Common Stock which
are delivered by the Optionee or withheld by the Company upon the exercise of
any Option under this Plan, in payment of the exercise price thereof, may again
be subject to Awards hereunder, subject to the limitations of Section 2.1.
Notwithstanding the provisions of this Section 2.2, no shares of Common Stock
may again be optioned if such action would cause an Incentive Stock Option to
fail to qualify as an incentive stock option under Section 422 of the Code.

                                  ARTICLE III
                              GRANTING OF OPTIONS

     3.1.  Eligibility. Any Employee or consultant selected by the Committee
           -----------
pursuant to Section 3.4(a)(i) shall be eligible to be granted an Option.

                                       5
<PAGE>

     3.2.  Disqualification for Stock Ownership. No person may be granted an
           ------------------------------------
Incentive Stock Option under this Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary or parent corporation (within the meaning of Section
422 of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code as they relate to Incentive Stock Options
held by stockholders owning stock possessing more than 10% of the total combined
voting power of the capital stock of the Company.

     3.3   Qualification of Incentive Stock Options. No Incentive Stock Option
           ----------------------------------------
shall be granted to any person who is not an Employee of the Company.

     3.4   Granting of Options.
           -------------------

           (a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of this Plan:

               (i)   Determine which Employees are key Employees and select from
           among the key Employees and consultants (including Employees who have
           previously received Options or other awards under this Plan) such of
           them as in its opinion should be granted Options;

               (ii)  Subject to the Award Limit, determine the number of shares
           to be subject to such Options granted to the selected key Employees;

               (iii) Subject to Section 3.3, determine whether such Options are
           to be Incentive Stock Options or Non-Qualified Stock Options and
           whether such Options are to qualify as performance-based compensation
           as described in Section 162(m)(4)(C) of the Code; and

               (iv)  Determine the terms and conditions of such Options,
           consistent with this Plan; provided, however, that the terms and
                                      --------  -------
           conditions of Options intended to qualify as performance-based
           compensation as described in Section 162(m)(4)(C) of the Code shall
           include, but not be limited to, such terms and conditions as may be
           necessary to meet the applicable provisions of Section 162(m) of the
           Code.

           (b) Upon the selection of a key Employee or consultant to be granted
an Option, the Committee shall instruct the Secretary of the Company to issue
the Option and may impose such conditions on the grant of the Option as it deems
appropriate. Without limiting the generality of the preceding sentence, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option to an Employee or consultant
that the Employee or consultant surrender for cancellation some or all of the
unexercised Options which have been previously granted to him under this Plan or
otherwise. An Option, the grant of

                                       6
<PAGE>

which is conditioned upon such surrender, may have an option price lower (or
higher) than the exercise price of such surrendered Option, may cover the same
(or a lesser or greater) number of shares as such surrendered Option, may
contain such other terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, exercise period or any other term or condition of such
surrendered Option.

           (c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from treatment as an
"incentive stock option" under Section 422 of the Code.

                                  ARTICLE IV
                               TERMS OF OPTIONS

     4.1.  Option Agreement. Each Option shall be evidenced by a written Stock
           ----------------
Option Agreement, which shall be executed by the Optionee and an authorized
officer of the Company and which shall contain such terms and conditions as the
Committee shall determine, consistent with this Plan. Stock Option Agreements
evidencing Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Stock Option Agreements evidencing Incentive Stock Options
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.

     4.2.  Option Price. The price per share of the shares subject to each
           ------------
Option shall be set by the Committee; provided, however, that such price shall
                                      --------  -------
be no less than the par value of a share of Common Stock, unless otherwise
permitted by applicable state law, and (i) in the case of Incentive Stock
Options and Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code, such price shall not be less than
100% of the Fair Market Value of a share of Common Stock on the date the Option
is granted; and (ii) in the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code) such price shall not be less than 110% of the Fair
Market Value of a share of Common Stock on the date the Option is granted.

     4.3.  Option Term. The term of an Option shall be set by the Committee in
           -----------
its discretion; provided, however, that in the case of Incentive Stock Options,
                --------  -------
the term shall not be more than ten (10) years from the date the Incentive Stock
Option is granted, or five (5) years from such date if the Incentive Stock
Option is granted to an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or parent corporation thereof
(within the meaning of Section 422 of the Code). Except as it may cause a
disqualifying disposition under Section 421 of the Code and regulations and
rulings thereunder applicable to Incentive Stock Options, the Committee may
extend the term of any outstanding Option in connection with any

                                       7
<PAGE>

Termination of Employment of the Optionee, or amend any other term or condition
of such Option relating to such a termination.

     4.4.  Option Vesting.
           --------------

           (a) Unless otherwise determined by the Committee in its sole
discretion, options granted under the Plan shall become exercisable in
cumulative installments, 1/4th on the first anniversary of the date of Option
grant, and the remainder in 36 equal monthly installments, commencing on the
first day of the thirteenth month following the date of Option grant. At any
time after grant of an Option, the Committee may, in its sole and absolute
discretion and subject to whatever terms and conditions it selects, accelerate
the period during which an Option vests.

           (b) No portion of an Option which is unexercisable at Termination of
Employment, shall thereafter become exercisable, except as may be otherwise
provided by the Committee either in the Stock Option Agreement or by action of
the Committee following the grant of the Option.

           (c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any Subsidiary) exceeds
$100,000, such Options shall be treated as Non-Qualified Options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4(c), the Fair Market Value of
stock shall be determined as of the time the Option with respect to such stock
is granted.

     4.5.  Consideration. Unless the Committee determines otherwise in its sole
           -------------
discretion, in consideration of the granting of an Option, the Optionee shall
agree, in the written Stock Option Agreement, to remain in the employ of the
Company or any Subsidiary for a period of at least one year (or such shorter
period as may be fixed in the Stock Option Agreement or by action of the
Committee following grant of the Option) after the Option is granted. Nothing in
this Plan or in any Stock Option Agreement hereunder shall confer upon any
Optionee any right to continue in the employ of, or as a consultant for, the
Company or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Optionee at any time for any reason whatsoever, with or without
good cause.

                                   ARTICLE V
                              EXERCISE OF OPTIONS

     5.1.  Partial Exercise. An exercisable Option may be exercised in whole or
           ----------------
in part. However, an Option shall not be exercisable with respect to fractional
shares and the Committee may require that, by the terms of the Option, a partial
exercise be with respect to a minimum number of shares.

                                       8
<PAGE>

     5.2. Manner of Exercise.  All or a portion of an exercisable Option shall
          ------------------
be deemed exercised upon delivery of all of the following to the Secretary of
the Company or his office:

          (a) A written notice complying with the applicable rules established
by the Committee (or the Board, in the case of Options granted to Independent
Directors) stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to exercise
the Option or such portion;

          (b) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations.  The Committee may, in its
absolute discretion, also take whatever additional actions it deems appropriate
to effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer notices to agents and registrars;

          (c) In the event that the Option shall be exercised pursuant to
Section 5.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option; and

          (d) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised.  However,
the Committee may in its discretion (i) allow a delay in payment up to thirty
(30) days from the date the Option, or portion thereof, is exercised; (ii) allow
payment, in whole or in part, through the delivery of shares of Common Stock
owned by the Optionee, duly endorsed for transfer to the Company with a Fair
Market Value on the date of delivery equal to the aggregate exercise price of
the Option or exercised portion thereof; (iii) allow payment, in whole or in
part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee; (vi) allow payment, in whole or in part,
through the delivery of a notice that the Optionee has placed a market sell
order with a broker with respect to shares of Common Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; or (vii) allow payment through any
combination of the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv), (v) and (vi).  In the case of a promissory note, the Committee may
also prescribe the form of such note and the security to be given for such note.
The Option may not be exercised, however, by delivery of a promissory note or by
a loan from the Company when or where such loan or other extension of credit is
prohibited by law.

                                       9
<PAGE>

     5.3. Conditions to Issuance of Stock Certificates.  The Company shall not
          --------------------------------------------
be required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:

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

          (b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory body
which the Committee, in its absolute discretion, deems necessary or advisable;

          (c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;

          (d) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may establish from time to time for reasons of
administrative convenience; and

          (e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.

     5.4. Rights as Stockholders.  The holders of Options shall not be, nor have
          ----------------------
any of the rights or privileges of, stockholders of the Company in respect of
any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.

     5.5. Ownership and Transfer Restrictions.  The Committee, in its absolute
          -----------------------------------
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Stock Option Agreement
and may be referred to on the certificates evidencing such shares.  The
Committee may require the Employee to give the Company prompt notice of any
disposition of shares of Common Stock acquired by exercise of an Incentive Stock
Option within (i) two years from the date of granting such Option to such
Employee or (ii) one year after the transfer of such shares to such Employee.
The Committee may direct that the certificates evidencing shares acquired by
exercise of an Option refer to such requirement to give prompt notice of
disposition.

                                  ARTICLE VI
                               RESTRICTED STOCK

     6.1. Restricted Stock.  The Committee may from time to time cause the
          ----------------
Company to grant pursuant to the Plan Awards of Restricted Stock to Employees
and consultants for such

                                       10
<PAGE>

consideration, if any, as the Committee shall determine, subject to such
restrictions, conditions and other terms as the Committee may determine.

          (a) Certificates.  The Company shall issue, in the name of each
              ------------
Grantee to whom shares of Restricted Stock have been granted, certificates
representing the total number of shares of Restricted Stock granted to the
Grantee, as soon as reasonably practicable after the grant.  The Company, at the
direction of the Committee, shall hold such certificates, properly endorsed for
transfer, for the recipient's benefit until such time as the shares of
Restricted Stock are forfeited to the Company or the restrictions lapse.  Each
such certificate shall bear the following legend, in addition to such other
legends as counsel to the Corporation may require:

          THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
          TO TRANSFER AND OTHER RESTRICTIONS UNDER THE AMENDED
          AND RESTATED 1997 EMPLOYEE STOCK INCENTIVE PLAN OF
          TELLIUM, INC. AND UNDER A RESTRICTED STOCK AGREEMENT
          WITH THE CORPORATION. NO INTEREST IN THE SHARES
          REPRESENTED HEREBY MAY BE TRANSFERRED EXCEPT IN
          COMPLIANCE WITH THE PROVISIONS OF SUCH PLAN AND
          AGREEMENT.

          (b) Rights of Grantee.  Except as provided in this Article VI or as
              -----------------
otherwise determined by the Committee, holders of Restricted Stock shall have
the rights of a stockholder of the Company holding the class or series of Common
Stock that is the subject of the Restricted Stock, including, if applicable, the
right to vote such Restricted Stock and the right to receive any distributions
of regular cash dividends with respect to such shares. If so determined by the
Committee in the applicable Restricted Stock Agreement and subject to Article
II, (A) cash dividends or distributions of property other than Common Stock with
respect to the class or series of Common Stock that is the subject of the
Restricted Stock Award shall be automatically deferred and reinvested in
additional Restricted Stock, held subject to the vesting of the underlying
Restricted Stock, or held subject to meeting Performance Goals applicable only
to dividends, and (B) dividends payable in Common Stock shall be paid in the
form of Restricted Stock of the same class as the Common Stock with which such
dividend was paid, held subject to the vesting of the underlying Restricted
Stock, or held subject to meeting Performance Goals applicable only to
dividends.

          (c) Delivery of Restricted Stock.  Upon the expiration or termination
              ----------------------------
of the Restricted Period and the satisfaction of any Performance Goals and any
other conditions prescribed by the Committee, the restrictions applicable to the
Restricted Stock shall lapse and a certificate for the number of Shares with
respect to which the restrictions have lapsed shall be delivered, free of all
such restrictions, to the Grantee.

     6.2. Terms and Conditions.  Shares of Restricted Stock shall be subject to
          --------------------
the following terms and conditions:

                                       11
<PAGE>

          (a)  The Committee may, prior to or at the time of grant, designate an
Award of Restricted Stock as a Qualified Performance-Based Award, in which event
it shall condition the grant or vesting, as applicable, of such Restricted Stock
upon the attainment of Performance Goals. If the Committee does not designate an
Award of Restricted Stock as a Qualified Performance-Based Award, it may also
condition the grant or vesting thereof upon the attainment of Performance Goals.
Regardless of whether an Award of Restricted Stock is a Qualified Performance-
Based Award, the Committee may also condition the grant of vesting thereof upon
the continued service of the Grantee.  The conditions for grant or vesting and
the other provisions of Restricted Stock Awards (including without limitation
any applicable Performance Goals) need not be the same with respect to each
recipient.  The Committee may at any time, in its sole discretion, accelerate or
waive, in whole of in part, any of the foregoing restrictions; provided,
                                                               --------
however, that (except as otherwise provided in Section 6.2(c) or 8.3 in the case
-------
of Restricted Stock that is a Qualified Performance-Based Award) the applicable
Performance Goals have been satisfied;

          (b)  Subject to the provisions of the Plan and the Restricted Stock
Agreement, during the period, if any, set by the Committee, commencing with the
date of such Award for which such continued service is required (the
"Restriction Period"), and until either, as determined by the Committee, the
later of (i) the expiration of the Restriction Period and (ii) the date the
applicable Performance Goals (if any) are satisfied, the Grantee shall not be
permitted to sell, assign, transfer, pledge or otherwise encumber shares of
Restricted Stock;

          (c)  except to the extent otherwise provided in the applicable
Restricted Stock Agreement or this Article VI, upon a Termination of Employment
for any reason during the Restriction Period or before the applicable
Performance Goals are satisfied, all shares still subject to restriction shall
be forfeited by the Grantee; provided, however, that the Committee shall have
the discretion to waive, in whole of in part, any of all remaining restrictions
(other than, in the case of Restricted Stock which is a Qualified Performance-
Based Award, satisfaction of the applicable Performance Goals unless the
employment is terminated by reason of death or Disability) with respect to any
or all of such shares of Restricted Stock;

     6.3. Agreements.  Restricted Stock Awards granted under the Plan shall be
          ----------
evidenced by written documents ("Restricted Stock Agreements") in such form as
the Committee shall, from time to time, approve, which Restricted Stock
Agreements shall contain such provisions, not inconsistent with the provisions
of the Plan.  Each Grantee shall enter into, and be bound by, the terms of the
Restricted Stock Agreement.

                                 ARTICLE VII.
                                ADMINISTRATION

     7.1  Compensation Committee.  Prior to the Company's initial registration
          ----------------------
of Common Stock under Section 12 of the Exchange Act, the Compensation Committee
shall be appointed by the Board and may consist of one or members of the Board
or the entire Board .  Following such registration, the Compensation Committee
(or another committee or a subcommittee of the Board assuming the functions of
the Committee under this Plan) shall

                                       12
<PAGE>

consist solely of two or more persons appointed by and holding office at the
pleasure of the Board, each of whom is both a "non-employee director" as defined
by Rule 16b-3 and an "outside director" for purposes of Section 162(m) of the
Code. Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.

     7.2.  Duties and Powers of Committee.  It shall be the duty of the
           ------------------------------
Committee to conduct the general administration of this Plan in accordance with
its provisions.  The Committee shall have the power to interpret this Plan and
the agreements pursuant to which Awards are granted, and to adopt such rules for
the administration, interpretation, and application of this Plan as are
consistent therewith and to interpret, amend or revoke any such rules.  Any such
grant under this Plan need not be the same with respect to each Grantee.  Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code.  In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the sole discretion
of the Committee.

     7.3.  Majority Rule; Unanimous Written Consent.  The Committee shall act by
           ----------------------------------------
a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Committee.

     7.4.  Compensation; Professional Assistance; Good Faith Actions.  Members
           ---------------------------------------------------------
of the Committee shall receive such compensation for their services as members
as may be determined by the Board.  All expenses and liabilities which members
of the Committee incur in connection with the administration of this Plan shall
be borne by the Company.  The Committee may, with the approval of the Board,
employ attorneys, consultants, accountants, appraisers, brokers, or other
persons.  The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons.  All actions taken and all interpretations and determinations made by
the Committee or the Board in good faith shall be final and binding upon all
Grantees, the Company and all other interested persons.  No members of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan or Awards, and all
members of the Committee and the Board shall be fully protected by the Company
in respect of any such action, determination or interpretation.

                                 ARTICLE VIII.
                           MISCELLANEOUS PROVISIONS

     8.1.  Not Transferable.  Awards under this Plan may not be sold, pledged,
           ----------------
assigned, or transferred in any manner other than by will or the laws of descent
and distribution or, in the case of Restricted Stock or Non-Qualified Stock
Options, pursuant to a QDRO, unless and until, in the case of Options, shares
underlying such Options have been issued, and in the case of

                                       13
<PAGE>

Restricted Stock, such shares have vested. No Award or interest or right therein
shall be liable for the debts, contracts or engagements of the Grantee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.

     During the lifetime of the Optionee, only he may exercise an Option (or any
portion thereof) granted to him under the Plan, unless it has been disposed of
pursuant to a QDRO.  After the death of the Optionee, any exercisable portion of
an Option may, prior to the time when such portion becomes unexercisable under
the Plan or the applicable Stock Option Agreement, be exercised by his personal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.

     8.2. Amendment, Suspension or Termination of this Plan.  Except as
          -------------------------------------------------
otherwise provided in this Section 8.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee.  However, without approval of the
Company's stockholders given within twelve months before or after the action by
the Board or the Committee, no action of the Board or the Committee may, except
as provided in Section 8.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan or modify the Award
Limit, and no action of the Board or the Committee may be taken that would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule.  No amendment, suspension or termination of this Plan shall, without
the consent of the holder of Awards, alter or impair any rights or obligations
under any Awards theretofore granted, unless the award itself otherwise
expressly so provides.  No Awards may be granted during any period of suspension
or after termination of this Plan, and in no event may any Incentive Stock
Option be granted under this Plan after the first to occur of the following
events:

          (a) The expiration of ten years from the date the Plan is adopted by
the Board; or

          (b) The expiration of ten years from the date the Plan is approved by
the Company's stockholders under Section 8.4.

     8.3. Changes in Common Stock or Assets of the Company, Acquisition or
          ----------------------------------------------------------------
Liquidation of the Company and Other Corporate Events.
-----------------------------------------------------

          (a) Subject to Section 8.3(d), in the event that the Committee
determines that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company (including, but not limited to, a
Corporate Transaction), or exchange of

                                       14
<PAGE>

Common Stock or other securities of the Company, issuance of warrants or other
rights to purchase Common Stock or other securities of the Company, or other
similar corporate transaction or event, in the Committee's sole discretion,
affects the Common Stock such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to an Award, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of

               (i)   the number and kind of shares of Common Stock (or other
          securities or property) with respect to which Awards may be granted
          under the Plan (including, but not limited to, adjustments of the
          limitations in Section 2.1 on the maximum number and kind of shares
          which may be issued and adjustments of the Award Limit),

               (ii)  the number and kind of shares of Common Stock (or other
          securities or property) subject to outstanding Awards, and

               (iii) the grant or exercise price with respect to any Award.

          (b)  Subject to Section 8.3(d), in the event of any Corporate
Transaction or other transaction or event described in Section 8.3(a) or any
unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee in its discretion is hereby authorized to take any one
or more of the following actions whenever the Committee determines that such
action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any Award under this Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or principles:

               (i)   In its sole and absolute discretion, and on such terms and
          conditions as it deems appropriate, the Committee may provide, either
          by the terms of the agreement or by action taken prior to the
          occurrence of such transaction or event and either automatically or
          upon the Optionee's request, for either the purchase of any such
          Option for an amount of cash equal to the amount that could have been
          attained upon the exercise of such Option or realization of the
          Optionee's rights had such Option been currently exercisable (less the
          exercise price) or the replacement of such Option with other rights or
          property selected by the Committee in its sole discretion;

               (ii)  In its sole and absolute discretion, the Committee may
          provide, either by the terms of such Option or by action taken prior
          to the occurrence of such transaction or event that it cannot be
          exercised after such event;

               (iii) In its sole and absolute discretion, and on such terms and
          conditions as it deems appropriate, the Committee may provide, either
          by the

                                       15
<PAGE>

          terms of such Option or by action taken prior to the occurrence of
          such transaction or event, that for a specified period of time prior
          to such transaction or event, such Option shall be exercisable as to
          all shares covered thereby, notwithstanding anything to the contrary
          in Section 4.4 hereof or the provisions of such Option;

               (iv) In its sole and absolute discretion, and on such terms and
          conditions as it deems appropriate, the Committee may provide, either
          by the terms of such Award or by action taken prior to the occurrence
          of such transaction or event, that upon such event, such Award be
          assumed by the successor or survivor corporation, or a parent or
          subsidiary thereof, or shall be substituted for by similar options,
          rights or awards covering the stock of the successor or survivor
          corporation, or a parent or subsidiary thereof, with appropriate
          adjustments as to the number and kind of shares and prices;

               (v)  In its sole and absolute discretion, and on such terms and
          conditions as it deems appropriate, the Committee may provide, either
          by the terms of such Restricted Stock or by action taken prior to the
          occurrence of such transaction or event, that upon such event, the
          restrictions and deferral limitations applicable to any outstanding
          Restricted Stock shall lapse, and such Restricted Stock shall become
          free of all restrictions and become fully vested and transferable to
          the  full extent of the original grant; and

               (vi) In its sole and absolute discretion, and on such terms and
          conditions as it deems appropriate, the Committee may make adjustments
          in the number and type of shares of Common Stock (or other securities
          or property) subject to outstanding Awards and/or in the terms and
          conditions of (including the exercise price with respect to Options)
          and the criteria included in, outstanding Awards and Awards which may
          be granted in the future.

          (c)  Subject to Sections 8.3(d) and 8.8, the Committee may, in its
discretion, include such further provisions and limitations in any Award
agreement or certificate, as it may deem equitable and in the best interests of
the Company.

          (d)  With respect to Incentive Stock Options intended to qualify as
performance-based compensation under Section 162(m), no adjustment or action
described in this Section 8.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause the Plan to
violate Section 422(b)(1) of the Code or would cause such Option to fail to so
qualify under Section 162(m), as the case may be, or any successor provisions
thereto.  Furthermore, no such adjustment or action shall be authorized to the
extent such adjustment or action would result in short-swing profits liability
under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the
Committee determines that the Award is not to comply with such exemptive
conditions.  The number of shares of Common Stock subject to any Award shall
always be rounded to the next whole number.

                                       16
<PAGE>

     8.4. Approval of Plan by Stockholders.  The Plan became effective on
          --------------------------------
November 16, 2000.  This amendment and restatement of the Plan is effective as
of November 16, 2000; provided, however, that no Award granted in excess of the
                      --------  -------
shares previously reserved for issuance upon exercise of Awards granted
hereunder shall be exercisable by a Grantee unless and until the amendments
hereto increasing the number of shares subject to the Plan to 91,250,000 shall
have been approved by the stockholders of the Company in accordance with the
provisions of its Certificate of Incorporation and By-laws, which approval shall
be obtained within twelve (12) months after the adoption of such amendment by
the Board.  This Plan will be submitted for the approval of the Company's
stockholders within twelve months after the date of the Board's initial adoption
of this Plan.  Awards may be awarded prior to such stockholder approval,
provided that Options shall not be exercisable prior to the time when this Plan
is approved by the stockholders, and provided further that if such approval has
not been obtained at the end of said twelve-month period, all Awards previously
granted under this Plan shall thereupon be canceled and become null and void.

     8.5. Tax Withholding.  The Company shall be entitled to require payment in
          ---------------
cash or deduction from other compensation payable to each Optionee of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting or exercise of any Option.  The Committee may in its
discretion and in satisfaction of the foregoing requirement allow such Optionee
to elect to have the Company withhold shares of Common Stock otherwise issuable
under such Option (or allow the return of shares of Common Stock) having a Fair
Market Value equal to the sums required to be withheld.

     8.6. Loans.  The Committee may, in its discretion, extend one or more loans
          -----
to key Employees in connection with the exercise or receipt of an Award granted
under this Plan.  The terms and conditions of any such loan shall be set by the
Committee.

     8.7. Forfeiture Provisions.  Pursuant to its general authority to determine
          ---------------------
the terms and conditions applicable to Options under the Plan, the Committee
shall have the right to provide in the terms of Options, or to require the
recipient to agree by separate written instrument, that the Option shall
terminate and any unexercised portion of such Option (whether or not vested)
shall be forfeited, if (a) a Termination of Employment occurs prior to a
specified date, or within a specified time period following exercise of the
Option, or (b) the recipient at any time, or during a specified time period,
engages in any activity in competition with the Company, or which is inimical,
contrary or harmful to the interests of the Company, as further defined by the
Committee.

     8.8. Limitations Applicable to Performance-Based Compensation.  Except as
          --------------------------------------------------------
set forth in Sections 6.2 and 8.3(b), any Award intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall be subject to any additional limitations set forth in Section 162(m) of
the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to conform
to such requirements.

                                       17
<PAGE>

     8.9.  Effect of Plan Upon Options and Compensation Plans.  The adoption of
           --------------------------------------------------
this Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary.  Nothing in this Plan shall be construed to
limit the right of the Company (i) to establish any other forms of incentives or
compensation for Employees, Directors or consultants of the Company or any
Subsidiary or (ii) to grant or assume options or other rights otherwise than
under this Plan in connection with any proper corporate purpose including, but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, limited liability
company, firm or association.

     8.10. Compliance with Laws.  This Plan, the granting and vesting of Awards
           --------------------
and the issuance and delivery of shares of Common Stock and the payment of money
under this Plan or under Awards granted hereunder are subject to compliance with
all applicable federal and state laws, rules and regulations (including but not
limited to state and federal securities law and federal margin requirements) and
to such approvals by any listing, regulatory or governmental authority as may,
in the opinion of counsel for the Company, be necessary or advisable in
connection therewith.  Any securities delivered under this Plan shall be subject
to such restrictions, and the person acquiring such securities shall, if
requested by the Company, provide such assurances and representations to the
Company as the Company may deem necessary or desirable to assure compliance with
all applicable legal requirements.  To the extent permitted by applicable law,
the Plan and Awards granted hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.

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

     8.12. Governing Law.  This Plan and any agreements hereunder shall be
           -------------
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflict of laws principles thereof.

                                    * * * *

     I hereby certify that the foregoing Amended and Restated Plan was duly
adopted by the Board of Directors of Tellium, Inc. on November 16, 2000.

     Executed on this 18th day of November, 2000.

                                        /s/
                                    --------------------------------------------
                                    Michael J. Losch
                                    Secretary

                                       18

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00018-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00018-of-00352.parquet"}]]