Document:

<PAGE>   1
                                                                    EXHIBIT 10.5
                                                                  EXECUTION COPY

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

                                      PC-1

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

                               PROJECT DEVELOPMENT

                                       AND

                              CONSTRUCTION CONTRACT

                                     BETWEEN

                           TYCO SUBMARINE SYSTEMS LTD.

                                       AND

                              PACIFIC CROSSING LTD.

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

                           DATED AS OF APRIL 21, 1998

                      -------------------------------------
<PAGE>   2
                         TABLE OF CONTENTS

                   GENERAL TERMS AND CONDITIONS

<TABLE>
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Article                                                          PAGE
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<S>                                                              <C>
1    Provision of System......................................     1

2    Documents Forming the Entire Contract....................     2

3    Definitions..............................................     2

4    Contract Price...........................................    12

5    Terms of Payment by Purchaser............................    16

6    Contract Variations......................................    18

6A.  Optional Upgrades........................................    19

7    Responsibilities for Permits.............................    22

8    Route Survey.............................................    23

9    Acceptance...............................................    24

10   Warranty.................................................    28

11   Contractor Support.......................................    32

12   Purchaser's Obligations..................................    32

13   Termination for Default..................................    33

14   Termination for Convenience..............................    35

15   Suspension...............................................    37

16   Title and Risk of Loss...................................    38

17   Force Majeure............................................    38

18   Intellectual Property....................................    39

19   Infringement.............................................    45

20   Safeguarding of Information and Technology...............    46
</TABLE>

                                        i
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<TABLE>
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Article                                                         PAGE
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21   Export Control...........................................    47

22   Liquidated Damages.......................................    47

23   Limitation of Liability/Indemnification..................    48

24   Counterparts.............................................    50

25   Design and Performance Responsibility....................    50

26   Product Changes..........................................    50

27   Risk and Insurance.......................................    50

28   Plant and Work Rules.....................................    54

29   Right of Access..........................................    54

30   Quality Assurance........................................    55

31   Documentation............................................    55

32   Training.................................................    55

33   Settlement of Disputes/Arbitration.......................    56

34   Applicable Law...........................................    58

35   Notices..................................................    58

36   Publicity and Confidentiality............................    59

37   Assignment; Subcontractors...............................    59

38   Relationship of the Parties..............................    61

39   Successors Bound.........................................    61

40   Article Captions.........................................    61

41   Severability.............................................    61

42   Guarantors...............................................    61

43   Survival of Obligations..................................    61

44   Non-Waiver...............................................    62
</TABLE>

                                       ii
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<TABLE>
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Article                                                         PAGE
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45   Language.................................................  62

46   Entire Agreement.........................................  62
</TABLE>

<TABLE>
<CAPTION>
EXHIBITS

<S>                                                            <C>
     Exhibit A..............................................                  Guaranty
     Exhibit B..............................................     Consent and Agreement
     Exhibit C..............................................        Opinion of Counsel
     Exhibit D..............................................          Escrow Agreement
     Exhibit E..............................................   Approved Subcontractors
     Exhibit F..............................................     Intellectual Property
</TABLE>

                                       iii
<PAGE>   5
                             PROJECT DEVELOPMENT AND
                              CONSTRUCTION CONTRACT
                                     BETWEEN
                         TYCO SUBMARINE SYSTEMS LTD. AND
                              PACIFIC CROSSING LTD.

          This Project Development and Construction Contract ("Contract") is
made as of this 21st day of April 1998 between Tyco Submarine Systems Ltd., a
corporation organized and existing under the laws of the State of Delaware,
United States, ("TSSL" or "Contractor") and Pacific Crossing Ltd., a company
organized and existing under the laws of Bermuda (hereinafter referred to as
"Purchaser").

          WHEREAS, Purchaser desires to establish a fiber optic submarine cable
system, to be known as the Pacific Crossing 1 Submarine Cable System
(hereinafter, and as more fully defined herein, the "System"), which will be
used to provide service between the United States mainland and Japan; and

          WHEREAS, the System will consist of the following Segments:

          Segment N:  From Norma Beach, Washington, United States to Ajigaura,
                      Japan;

          Segment W:  From Ajigaura, Japan to Shima, Japan;

          Segment S:  From Shima, Japan to Toro Creek, California, United
                      States; and

          Segment E:  From Toro Creek, California, United States to Norma Beach,
                      Washington, United States; and

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

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

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

          NOW THEREFORE, IT HAS BEEN AGREED AS FOLLOWS

ARTICLE 1 PROVISION OF SYSTEM
-----------------------------

          In consideration of the Contract Price and the Upgrade Prices, the
Contractor agrees to undertake the Work and the Upgrade Work and to provide the
Purchaser with the
<PAGE>   6
                                                                               2

System meeting the System Performance Requirements on or before the Scheduled
System RFS Date and the System Upgrades meeting the requirements of Article 6A,
all in accordance with the terms hereof.

ARTICLE 2 DOCUMENTS FORMING THE ENTIRE CONTRACT
-----------------------------------------------

          This Contract consists of these commercial Terms and Conditions,
Exhibits E and F hereto, and the following documents (in the form of
attachments, including appendices, attached hereto), which shall be read and
construed as part of the Contract:

     -    Technical Volume (includes Route Information), Appendix 6
     -    Plan of Work, Appendix 3, Upgrade Plan of Work, Appendix 3A
     -    Provisioning Schedule, Appendix 1, Upgrade Provisioning Schedule,
          Appendix 1A
     -    Billing Schedule, Appendix 2, Upgrade Billing Schedule, Appendix 2A
     -    Invoice Format, Appendix 4, Form of Contractor's Certificate, Appendix
          4A
     -    Progress Schedule, Appendix 5

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

ARTICLE 3 DEFINITIONS
---------------------

          Definitions are as described in the specific Articles. Except as
otherwise defined the following definitions shall apply throughout the Contract:

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

          ACCEPTANCE TESTING means (i) with respect to a Segment or the System,
     the tests described in the Commissioning and Acceptance section of the
     Technical Volume or developed pursuant to such section by mutual agreement
     of the Parties (with 15 days prior notice to the Independent Engineer) and
     reasonably designed to verify that such Segment or the System meets the
     applicable Performance Requirements and (ii) with respect to any System
     Upgrade, the tests described in the Commissioning and Acceptance section of
     the Technical Volume or developed pursuant to such section by mutual
     agreement of the Parties (with 15 days notice to the Independent Engineer)
     and reasonably designed to verify that the System Upgrade meets the
     applicable Performance Requirements.

          ACCESS RIGHTS means all ownership, easement and/or other property
     rights, from both private and governmental entities, both on land and below
     the surface of the water (including, without limitation, agreements to use
     conduits, install manholes and to lease space in cable stations) necessary
     to access, use and occupy cable stations and the sites for cable stations
     (including, without limitation, to land and install the
<PAGE>   7
                                                                               3

     submarine cable and related equipment and to bring such cable from the
     ocean to the cable stations) in order for the Purchaser to own, operate and
     maintain the System.

          ACTUAL KNOWLEDGE means the actual knowledge of any executives with
     management responsibility for the Contract.

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

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

          BILLING SCHEDULE means a billing schedule attached hereto as Appendix
     2.

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

          CERTIFICATE OF FINAL ACCEPTANCE means a certificate issued by
     Purchaser in accordance with Sub-Article 9(E) to Contractor certifying that
     the System or a System Upgrade is Ready for Final Acceptance.

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

          CIF means cost, insurance and freight as defined in the International
     Chamber of Commerce, Guide to Incoterms (1990).

          COMMISSIONING REPORT has the meaning set forth in the Commissioning
     and Acceptance section of the Technical Volume.

          CONFIDENTIAL INFORMATION has the meaning set forth in Sub-Article
     36(B).

          CONSENT means a Consent and Agreement to be entered into among
     Contractor, Purchaser and the financing parties described in Sub-Article
     37(C) and substantially in the form of Exhibit B hereto, with such changes
     therein as made pursuant to Sub-Article 37(C) hereto.

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

          CONTRACTOR means the entity that has executed this Contract as
     Contractor (TSSL) and that will be responsible for the performance of the
     Work (and if applicable, Upgrade Work) under this Contract and shall
     include its permitted successors and/or assigns.
<PAGE>   8
                                                                               4

     CONTRACT PRICE means the Initial Contract Price, plus any variations
     pursuant to Article 6 (Contract Variations), Taxes as set forth in
     SubArticle 4(B) and other adjustments to the Contract Price provided for in
     this Contract.

          CONTRACT TAXES has the meaning set forth in Sub-Article 4(B)(1).

          CONTRACT VARIATION has the meaning set forth in Sub-Article 6(A).

          DATE OF COMMERCIAL ACCEPTANCE, PROVISIONAL ACCEPTANCE OR FINAL
     ACCEPTANCE means the date that Purchaser receives a Commissioning Report or
     an Upgrade Commissioning Report, as the case may be, demonstrating that a
     Segment or the System or a System Upgrade, as the case may be, is Ready for
     Commercial Acceptance, Ready for Provisional Acceptance or Ready for Final
     Acceptance in accordance with Article 9 (Acceptance).

          DDP means delivered duty paid as defined in the International Chamber
     of Commerce, Guide to Incoterms (1990).

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

          DELIVERABLE SOFTWARE has the meaning set forth in Sub-Article 18(C).

          DELIVERABLE TECHNICAL MATERIAL has the meaning set forth in
     Sub-Article 18(B).

          DISPUTE ACCOUNT means the Dispute Account to be created under the
     Escrow Agreement.

          ESCROW AGENT means Citibank, N.A., in its capacity as escrow agent
     under the Escrow Agreement, and its successors in such capacity.

          ESCROW AGREEMENT means that Escrow Agreement to be entered into, in
     the event of a dispute as described in Sub-Article 5(C)(5), by and among
     the Contractor, the Purchaser and the Escrow Agent, substantially in the
     form of Exhibit D hereto, with such changes therein as are reasonably
     requested by the Escrow Agent, as amended modified or supplemented from
     time to time.

          EVENT OF DEFAULT has the meaning set forth in Sub-Article 13(A).

          EXCLUDED TAX means (i) any franchise, excess profits, net worth,
     capital or capital gains Tax, as well as any Tax on doing business or
     imposed on net or gross income or receipts (including minimum and
     alternative minimum Taxes measured by any items of Tax preference), but in
     each case excluding Taxes that are or are in the nature of sales, use,
     excise, license, stamp, rental, ad valorem, value added or property
<PAGE>   9
                                                                               5

     Taxes; (ii) any Taxes imposed by a jurisdiction other than one in which (a)
     the Contractor is or is treated as engaged in activities contemplated by or
     in fulfillment of the Contract or (b) the Purchaser or its affiliates has a
     nexus to such jurisdiction and the Tax imposed is attributable to that
     nexus, (iii) Taxes imposed on the Contractor as a result of Contractor's
     gross negligence or willful misconduct and (iv) any import duty, other
     import related charges, sales or use tax, VAT or property tax imposed by
     the United States or any political subdivision thereof or Taxing authority
     therein in respect of Supplies brought into the United States for testing,
     modification or other similar purposes prior to being installed or used
     outside the United States.

          EXPEDITED UPGRADE has the meaning set forth in Sub-Article 6A(L).

          FINAL COMMISSIONING REPORT has the meaning set forth in Section 7,
     Commissioning and Acceptance section of the Technical Volume.

          FINAL SURVEY REPORT means the final survey report described in Section
     5 of the Marine Installation section of the Technical Volume.

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

          FORCE MAJEURE has the meaning set forth in Sub-Article 17(A).

          GUARANTOR means Tyco International Ltd.

          GUARANTY means the guaranty to be entered into by Tyco International
     Ltd. in favor of the Purchaser, to be substantially in the form of Exhibit
     A hereto

          INDEPENDENT ENGINEER means Conexart Technologies, Inc. or a similarly
     qualified successor in the capacity as the engineer to the financing
     sources specified in Sub-Article 37(C) who has agreed to be bound by the
     confidentiality provisions of this Contract and who is not affiliated with
     a competitor of Contractor.

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

          INITIAL CONTRACT PRICE has the meaning set forth in Sub-Article
     4(A)(1).

          INITIAL UPGRADE PRICE has the meaning set forth in Sub-Article
     4(A)(2).

          INTELLECTUAL PROPERTY has the meaning set forth in Sub-Article 18(A).

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

          MANUFACTURING MATERIALS has the meaning set forth in Sub-Article
     13(B).

<PAGE>   10
                                                                               6

          MILESTONES means the milestones set forth in the Progress Schedule
     attached as Appendix 5 to this Contract.

          NEXUS TAX means any Tax imposed by way of withholding in respect of or
     in lieu of an Excluded Tax, but only to the extent such Tax would not have
     been imposed but for the nexus (other than as a consequence of the
     activities of the Contractor) of the Purchaser or its affiliate to the
     jurisdiction imposing the Tax.

          NON-SHIP COSTS has the meaning set forth in Sub-Article 10(A)(2).

          NOTICE OF TERMINATION has the meaning set forth in Sub-Article 14(A).

          OPTION PERIOD has the meaning set forth in Sub-Article 6A(B).

          PARTY(IES) means either of the Purchaser and/or the Contractor, as
     appropriate.

          PERFORMANCE REQUIREMENTS means (i) with respect to a Segment or the
     System, the applicable System Performance Requirements set forth or to be
     developed by mutual agreement pursuant to the System Performance and
     Availability section of the Technical Volume, (ii) with respect to any
     System Upgrade, the applicable System Performance Requirements set forth in
     or to be developed by mutual agreement pursuant to the Technical Volume or
     (iii) in each case, such other Segment, System or System Upgrade
     performance levels as mutually agreed by the Parties.

          PERMITS means all Access Rights, permits, pipeline and cable crossing
     agreements, approvals, "no objections", permissions-in-principle,
     authorizations, consents, customs clearances, registrations, certificates,
     rights-of-way, certificates of occupancy, licenses, including without
     limitation, landing licenses, orders, vessel and crew authorizations/visas,
     permission for the operation of navigational aids and radio systems and
     similar authorizations necessary to complete the Work and operate and
     maintain the System (other than any of the foregoing (i) relating to the
     ownership, operation and maintenance of the System and not necessary until
     after the System is Ready for Final Acceptance, (ii) which is or would be
     needed by Purchaser to engage in any business outside the business of
     developing, owning and operating a submarine cable system or (iii) which is
     or would be needed at any time by any purchaser or lessee of capacity on
     the System).

          PROVISIONING SCHEDULE means the price schedule attached hereto in
     Appendix 1.

          PURCHASER means Pacific Crossing Ltd. and shall include its permitted
     successors and assigns.

          READY FOR COMMERCIAL ACCEPTANCE means

               (i)  for any Segment, that
<PAGE>   11
                                                                               7

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

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

                    (c) Contractor has tested and provided for STM-1
               interconnectivity capability (or such other interconnectivity
               capability as may be mutually agreed) to the Segment terminal
               equipment according to ITU-T G.826,

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

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

               (ii)  for the System,

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

                    (b) Contractor has tested and provided for STM-1
               interconnectivity capability (or such other interconnectivity
               capability as may be mutually agreed) to the System terminal
               equipment according to ITU-T G.826,

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

                    (d) all Permits are obtained for the System and

               (iii) for any System Upgrade, the System is Ready for Commercial
          Acceptance at the capacity specified for such System Upgrade.
<PAGE>   12
                                                                               8

          READY FOR FINAL ACCEPTANCE means

               (i)  for the System, that

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

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

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

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

               (ii)  for any System Upgrade, that

                    (a) (I) the System Upgrade has successfully functioned in
               compliance with the System Performance Requirements during the
               period of ninety (90) days after the Date of Provisional
               Acceptance of the System Upgrade or (II) if the System Upgrade
               shall have failed to meet the System Performance Requirements
               during such period, the Contractor has corrected such failure and
               the System Upgrade has successfully functioned in compliance with
               the System Performance Requirements for such additional period of
               time not to exceed ninety (90) days as reasonably determined by
               the Independent Engineer as sufficient to confirm that such
               failure has been corrected and
<PAGE>   13
                                                                               9

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

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

          READY FOR PROVISIONAL ACCEPTANCE means

               (i)  with respect to any Segment,

                    (a) in the case of all Segments other than Segment S, if the
               System is not, at the same time, also Ready for Provisional
               Acceptance, the Purchaser has consented, in its sole discretion,
               to accept such segment as Ready for Provisional Acceptance,

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

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

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

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

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

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

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

          RETAINAGE means an amount equal to *% of the Initial Contract Price.

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

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   14
                                                                              10

     ROUTE SURVEY means the route survey described in the Marine section of the
     Technical Volume.

          SCHEDULED SEGMENT S RFS DATE has the meaning set forth in Sub-Article
     9(A).

          SCHEDULED SYSTEM RFS DATE has the meaning set forth in Sub-Article
     9(A).

          SCHEDULED UPGRADE DATE means for any System Upgrade, the date by which
     the Contractor agrees such System Upgrade will be Ready for Provisional
     Acceptance pursuant to Sub-Article 6A(K) hereof.

          SEGMENT means Segment N, Segment S, Segment E or Segment W, as the
     case may be.

          SEGMENT E means the Segment of the System from Toro Creek, California,
     United States to Norma Beach, Washington, United States and landing in
     locations capable of interconnecting with major telecommunications
     carriers.

          SEGMENT N means the Segment of the System from Norma Beach,
     Washington, United States to Ajigaura, Japan and landing in locations
     capable of interconnecting with major telecommunications carriers.

          SEGMENT S means the Segment of the System from Shima, Japan to Toro
     Creek, California, United States and landing in locations capable of
     interconnecting with major telecommunications carriers.

          SEGMENT W means the Segment of the System from Ajigaura, Japan to
     Shima, Japan and landing in locations capable of interconnecting with major
     telecommunications carriers.

          SHIP COSTS has the meaning set forth in Sub-Article 10(A)(2).

          SHIP PERIOD has the meaning set forth in Sub-Article 10(A).

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

          SUSPENSION means a suspension in pursuant to Sub-Article 15(A) or
     15(B).

          SYSTEM means the four fiber pair submarine cable system consisting of
     Segments N, S, E and W (at a per fiber pair capacity of * at the Date of
     Commercial Acceptance or the Date of Provisional Acceptance, as the case
     may be, of the System, with each Segment having the capability of being
     upgraded to * per fiber pair at the Date of Provisional Acceptance),
     including the cable stations, as more fully described in the System
     Description section of the Technical Volume.

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   15
                                                                              11

          SYSTEM PERFORMANCE REQUIREMENTS has the meaning set forth in the
     System Description section of the Technical Volume.

          SYSTEM UPGRADE has the meaning set forth in Sub-Article 6A(A).

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

          TECHNICAL VOLUME means the Technical Volume attached hereto as
     Appendix 6.

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

          UPGRADE BILLING SCHEDULE means the billing schedule attached hereto as
     Appendix 2A.

          UPGRADE COMMISSIONING REPORT has the meaning set forth in the
     Commissioning and Acceptance section of the Technical Volume.

          UPGRADE PERIOD has the meaning set forth in Sub-Article 6A(E).

          UPGRADE PLAN OF WORK means the plan of work attached hereto as
     Appendix 3A.

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

          UPGRADE PROVISIONING SCHEDULE means the provisioning schedule attached
     hereto as Appendix 1A.

          UPGRADE WARRANTY PERIOD has the meaning set forth in Sub-Article
     10(A).

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

          *

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   16
                                                                              12

     WARRANTY PERIOD has the meaning set forth in Sub-Article 10(A).

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

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

ARTICLE 4 CONTRACT PRICE
------------------------

     A.   Contract Price

          1.   The initial Contract Price for the Work, in United States Dollars
               (US$) is a fee of * (the "Initial Contract Price") which includes
               a fixed component of * (the "Fixed Component") and a variable
               component of * (which is subject to adjustment to correspond to
               the actual cost (including out-of-pocket fees and expenses)
               incurred by Contractor in obtaining land in Japan on which two
               cable stations, and any parking lots thereto, are built pursuant
               to Sub-Article 6(D) (the "Variable Component"). The Initial
               Contract Price does not include the cost of optional upgrades
               which are described in Article 6A (Optional Upgrades), any
               contract variations as provided for in Article 6 (Contract
               Variations), or any Taxes. The Fixed Component of the Initial
               Contract Price includes all costs and expenses incurred in
               obtaining all Permits (including Access Rights) including those
               incurred with respect to cable stations (excluding the cost of
               acquiring land in Japan on which the two cable stations, and any
               parking lots thereto, are built pursuant to Sub-Article 6(D)).
               The Fixed Component of the Initial Contract Price includes all
               the Work except for the Work described in the Variable Component.
               The Fixed Component includes all charges for CIF.

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

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   17
                                                                              13

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

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

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

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

     B.   Taxes, Levies and Duties

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

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

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   18
                                                                              14

          3.   The Contractor agrees to use reasonable efforts including,
               without limitation, by registering for VAT and any applicable
               sales Taxes in any country, state or other jurisdiction where
               legally required, to cooperate with and assist Purchaser in its
               efforts (i) to have Supplies which are the subject of this
               Contract made exempt from Contract Taxes, whether in the
               manufacture of the Supplies or related to the importation or
               location or installation of the Supplies, (ii) to request
               revisions, drawbacks, remissions, reclassifications or the like
               to the jurisdictions identified by the Purchaser; or (iii) to
               reduce or eliminate Contract Taxes (including the provision of
               applicable certifications and forms) and to obtain any available
               refunds of Contract Taxes, provided that the Contractor shall not
               be required to act other than in accordance with the relevant
               Laws then in force. The Purchaser shall reimburse the Contractor,
               in accordance with Article 5, for any reasonable costs (including
               the reasonable fees and expenses of legal counsel, accountants
               and other advisors) incurred by the Contractor under this Sub-
               Article 4(B)(3) provided that Purchaser was notified and has
               consented to the incurrence of such costs, fees and expenses.
               Contractor shall not be required to cooperate with and assist
               Purchaser in its efforts under this Sub-Article 4(B)(3) or to
               take any action hereunder which in the Contractor's good faith
               judgment would incur any costs or if in Contractor's good faith
               judgment it would be advisable to obtain the advice of counsel,
               accountants or other advisors prior to cooperating with or
               assisting purchaser or taking any action, unless in each case,
               Purchaser has agreed to reimburse Contractor under the foregoing
               proviso.

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

          5.   As part of Work or any Upgrade Work, the Contractor shall obtain
               at its expense, on Purchaser's behalf, any import license or
               other official authorization and carry out all customs
               formalities necessary for the importation or exportation of goods
               in connection with such Work or Upgrade Work. The Purchaser
               agrees to be the Importer or Exporter of Record or designate an
               Importer or Exporter of Record/Consignee on its behalf. Purchaser
               must provide a Letter of Authorization from any third party
               designate stating it agrees to be the Importer or Exporter of
               Record on Purchaser's behalf and identify the name and address of
               the designated  Importer or Exporter of Record.
<PAGE>   19
                                                                              15

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

     C.   Withholding Tax

          1.   If withholding for any Tax is required in respect of any payment
               to the Contractor, the Purchaser shall (i) withhold the
               appropriate amount from such payment, (ii) pay such amount to the
               relevant authorities in accordance with the applicable Laws and
               (iii) in the case of any such withholding in respect of a
               Contract Tax or a Nexus Tax and subject to the Contractor's
               satisfying the obligations set forth in the last sentence of this
               Sub-Article 4(C)(1), pay the Contractor an additional amount such
               that the net amount received by the Contractor is the amount the
               Contractor would have received in the absence of such
               withholding. In such a case, the Purchaser shall provide to the
               Contractor, as soon as reasonably practicable, a certified copy
               of an official tax receipt for any Tax which is retained from any
               payment due to the Contractor or for any Tax which is paid on
               behalf of the Contractor. All such receipts shall be in the name
               of the Contractor. The Contractor agrees to complete accurately
               and timely provide to the Purchaser or, if required, to the
               applicable Taxing authority, such forms, certifications or other
               documents as may be requested in timely manner by Purchaser, in
               order to allow it to make payments to the Contractor without any
               deduction or withholding on account of withholding Taxes (or at a
               reduced rate thereof) or to receive a refund of any amounts
               deducted or withheld on account of withholding Taxes.

          2.   If the Contractor shall become aware that it is entitled to
               receive a refund or credit from a relevant taxing or governmental
               authority in respect of a Contract Tax or Nexus Tax as to which
               the Purchaser has paid an additional amount pursuant to Sub-
               Article 4(C)(1) above, the Contractor shall promptly notify the
               Purchaser of the availability of such refund or credit and shall,
               within 30 days after receipt of a request by the Purchaser
               (whether as a result of notification that it has made to the
               Purchaser or otherwise), make a claim to such taxing or
               governmental authority for such refund or credit at the
               Purchaser's expense. If the Contractor receives a refund or
               credit in respect of a Contract or Nexus Tax as to which the
               Purchaser has paid an additional amount pursuant to Sub-Article
               4(C)(1) above, or if, as a result of the Purchaser's payment of
               such additional amounts, the Contractor or any other member of an
               affiliated group, as defined in section 1504(a) of the Code, of
               which the Contractor is a member, receives a credit against Taxes
               imposed on its income or franchise taxes imposed on it by the
               country under the laws of which it is organized or any political
               subdivision thereof, the Contractor shall promptly notify the
               Purchaser
<PAGE>   20
                                                                              16

               of such refund or credit and shall within 30 days from the date
               of receipt of such refund or benefit of such credit pay over the
               amount of such refund or benefit of such credit (including any
               interest paid or credited by the relevant taxing or governmental
               authority with respect to such refund or credit) to the Purchaser
               (but only to the extent of the additional payments made by the
               Purchaser under Sub-Article 4(C)(1) above with respect to the
               Contract or Nexus Tax giving rise to such refund or credit), net
               of all out-of-pocket expenses of the Contractor; provided,
               however, that the Purchaser, upon the request of the Contractor
               agrees to repay the amount paid over to the Purchaser (plus
               penalties, interest or other charges due to the appropriate
               authorities in connection therewith) to the Contractor in the
               event the Contractor is required to repay such refund or credit
               to such relevant authority.

ARTICLE 5 TERMS OF PAYMENT BY PURCHASER
---------------------------------------

     A.   General Conditions of Payment

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

     B.   Invoice Procedures

          1.   All invoices for Work shall be submitted according to the Billing
               Schedule, provided, that at the time of any such Invoice the
               relevant Milestones have been achieved. All invoices for Work
               shall have a certificate addressed to Purchaser in the form of
               Appendix 4A attached.

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

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

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

          5.   The Contractor shall render all invoices to the following address
               or facsimile number:
<PAGE>   21
                                                                              17

                    Pacific Crossing Ltd.
                    Wessex House
                    45 Reid Street
                    Hamilton HM12
                    Bermuda
                    Facsimile:  441-296-6749/8606
                    Attn:  Cameron Adderly

               with a copy to

                    Conexart Technologies, Inc.
                    124 de Charante
                    Saint Lambert
                    Quebec, Canada
                    J4S 1K3
                    Facsimile: 514-466-1093
                    Attn: Mr. Martin Fournier

     C.   Payment Procedures

          1.   The Purchaser shall pay the Contractor, and the Contractor shall
               accept payment, in accordance with this Article 5 (Terms of
               Payment by Purchaser).

          2.   Purchaser agrees to pay an initial payment to Contractor in the
               amount of *. Within three business days of the time this Contract
               is signed, the first portion of the initial payment, in the
               amount of *, shall be paid by Purchaser to Contractor. Failure to
               receive this payment shall entitle Contractor to immediately
               suspend Work hereunder. The second portion of the initial
               payment, in the amount of *, shall be paid by Purchaser to
               Contractor on June 30, 1998.

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

               provided that invoices given to Purchaser on or before April 30,
               1998 shall be due and payable no earlier than June 30, 1998.

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

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   22
                                                                              18

          5.   In the event that the Purchaser has an objection to any invoice
               or other payment obligation or any amount owing by Contractor to
               Purchaser shall not have been paid when due, the Purchaser shall
               promptly notify the Contractor of such objection and such amount,
               and the Purchaser and Contractor shall make every reasonable
               effort to settle promptly the dispute concerning the payment(s)
               in question.  In the event such dispute cannot be settled, the
               Purchaser will have the right to withhold payment of the disputed
               amount(s) (or withhold from the invoice amount a sum equal to the
               amount purportedly owing by Contractor) so long as it deposits,
               in full, such disputed amount(s) into the Dispute Account.

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

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

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

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

               The Contractor and the Purchaser will execute and deliver an
               Escrow Agreement substantially in the form of Exhibit D hereto,
               with such changes therein as the Escrow Agreement may reasonably
               request.

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

ARTICLE 6 CONTRACT VARIATIONS
-----------------------------

     A. Either Party may request, during construction of the System or any
System Upgrade, by written order, a contract variation requiring additions or
alterations to, deviations or deductions from the System or System Upgrade
("Contract Variation"). If the other Party consents, in its sole discretion,
this change will be formalized as an amendment to this Contract by a Contract
Variation; provided, that the Contractor will not unreasonably withhold

<PAGE>   23
                                                                              19

its consent to a Contract Variation requested by the Purchaser; and provided
further, that Purchaser will not unreasonably withhold its consent to a Contract
Variation requested by the Contractor so long as such Contract Variation does
not affect the Contract Price, any Upgrade Price, the Scheduled System RFS Date,
the Scheduled Segment S RFS Date, any Scheduled Upgrade Date, any warranties or
the Performance Standards.

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

     C. Contractor may seek a Contract Variation for any change, after the date
hereof, of any Law (except, and to the extent, affecting Taxes or wages) which
requires a change in the Work or the Upgrade Work or affects the costs (other
than wages) incurred or to be incurred by the Contractor or any combination of
the foregoing and Purchaser shall agree to any such change in Work or Upgrade
Work as may be required and to an equitable adjustment to the Contract Price or
the applicable Upgrade Price. As of the date hereof, neither Party has Actual
Knowledge of any proposed change in any Law that would require a change in the
Work or the Upgrade Work.

     D. The Parties will execute a Contract Variation to confirm the actual
amount of the Variable Component, after final adjustment, if any, pursuant to
Sub-Article 4(A)(1) hereof.

     E. The Initial Contract Price is based on the assumption that Contractor
will acquire ownership of land and build, on such land, two cable stations in
Japan and two cable stations in the United States. To the extent that such
assumption is incorrect (if, for example, the Contractor shall lease space in
one or more existing cable stations) both Parties will agree to an equitable
adjustment, up or down, to the Contract Price and the terms and schedule of
payments. The Contractor will consult with, and obtain the consent of the
Purchaser (not to be unreasonably withheld or delayed) regarding the location of
cable stations and whether to acquire, build, or lease such cable stations. Any
lease for space in a cable station shall be reasonably satisfactory in form and
substance to the Purchaser.

ARTICLE 6A.    OPTIONAL UPGRADES
--------------------------------

     A. This Article includes the terms and conditions governing an option for
future upgrades to the System (each a "System Upgrade") that may be exercised by
Purchaser during the Option Period.

     B.   In no event shall Purchaser elect a System Upgrade under this Article
6A after the end of the Option Period. The option period ("Option Period") is
defined as the period commencing on August 1, 1999 and ending on the date which
is * after the Date of Final Acceptance of the System.

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   24

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

          Each System Upgrade shall consist of an incremental increase in the
ring network capacity in integral multiples of * around the ring network), as
specified in Sub-Article D of this Article. Purchaser shall provide a separate
notice pursuant to Article 35 for each System Upgrade.

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

          Each System Upgrade shall increase the service capacity of all
Segments by equal increments for service and protection capacity. At the time
of the Initial installation of the System and upon the installation of each
System Upgrade, Contractor shall be permitted to install infrastructure
necessary to prepare for the next System Upgrade.

     E.   In implementing each System Upgrade, Contractor will not impair
service of existing System traffic. Contractor, upon receiving authorization
from Purchaser, may reroute traffic on a service path on the installed System
to a protection path on the installed System in order to implement the System
Upgrade so as not to incur traffic disruption other than the possibility of two
severely errored seconds, as defined in the Performance Specifications,
associated with each forced ring switchover and switchback.

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

     G.   The System Upgrades shall be provided by Contractor at the following
fixed prices, payable as set forth in the Upgrade Billing Schedule, Appendix 2A:

         *

     Amounts payable for System Upgrades in increments of more than * will be
increased in accordance with the foregoing schedule. For example, if the First
System Upgrade

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   25
                                                                              21

is for *, the Price would be *. An initial payment will be due and payable at
the time a System Upgrade is ordered in the amount of * of the total Fixed
Initial Upgrade Price, plus *.

     H.   The plan of work for any System Upgrade is included in the Upgrade
Plan of Work, Appendix 3A.

     I.   The provisioning schedule for any System Upgrade is included in the
Upgrade Provisioning Schedule, Appendix 1A.

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

     K.   Contractor agrees that the installation, testing and acceptance of
each System Upgrade will occur not later than the date (the "Scheduled Upgrade
Date") which is (i) * after notice in the case of a requested System Upgrade of
not more than 20 Gb/s per fiber pair for all four fiber pairs, (ii) * after
notice in the case of a requested System Upgrade of not more than * per fiber
pair for all four fiber pairs and (iii) 30 months after notice in the case of a
requested System Upgrade of not more than 80 Gb/s per fiber pair for all four
fiber pairs. Requested System Upgrades in excess of 80 Gb/s per fiber pair for
all four fiber pairs will be subject to the last sentence of this paragraph K.
In each case such period shall begin upon the giving of notice pursuant to
paragraph C of this Article 6A. Purchaser will use reasonable efforts to try to
forecast its System Upgrade capacity requirements so as to give earlier notice
of an estimated time of upgrade to Contractor. The Parties agree that where
overlapping occurs because the Purchaser exercises an option for a System
Upgrade prior to the completion of a previously elected System Upgrade, the
Parties will agree in good faith to a mutually acceptable delivery schedule and
price adjustment. Should a need for a special upgrade * arise, the Parties will
negotiate in good faith to meet Purchaser's needs.

     L.   In addition to, and apart from the other provisions of this Article
6A, Contractor agrees to maintain (at no cost or expense to Purchaser) at all
times from the date the System is Ready for Provisional Acceptance until the end
of the Option Period, a sufficient inventory of equipment so as to be able to
ship out for installation within * of Purchaser's request sufficient equipment
to provide Purchaser with a System Upgrade of * of fully protected capacity (*
of fully protected service capacity on each of two fiber pairs) (an "Expedited
Upgrade"). Upon such request, the Contractor will so ship such equipment and in
good faith develop with the Purchaser a plan to most expeditiously install and
test such equipment. The fixed price payable for each Expedited Upgrade (fully
installed, tested and accepted) will be *. Such price shall be payable on a
similar basis as the System Upgrade Billing Schedule (with a * initial payment).
Purchaser will accept the Factory acceptance test report on Expedited Upgrades
but such request must show that the equipment left the Factory working as a
unit. Whenever Purchaser orders an Expedited Upgrade, if Purchaser so requests,
Contractor shall replace the inventory used for such Upgrade so that it is ready
to ship the equipment for the next Expedited Upgrade within nine months of such
request. Expedited Upgrades may be ordered during the periods when Purchaser is
waiting for a System Upgrade pursuant to Sub-Article 6A(K) above. Expedited
Upgrades shall be in addition to System Upgrades and shall not affect the
schedule set forth in Sub-Article 6A(G) above, except that Contractor shall not
be obligated to install more than * of capacity in the System. The capacity of
all Expedited Upgrades installed will be subtracted from the last System Upgrade
ordered and the Price of such System Upgrade shall be adjusted accordingly.
Expedited Upgrades shall be considered "Upgrade Work" for all purposes of this
Agreement. The provisions of Sub-Articles 6A (B), (C) (first paragraph only),
(D), (E), (F) and (J) shall apply to Expedited Upgrades. If, at the end of the
Option Period, Contractor is maintaining any requested inventory for an
Expedited Upgrade, Purchaser will purchase such inventory from Contractor.

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   26
                                                                              22

ARTICLE 7  RESPONSIBILITIES FOR PERMITS; COMPLIANCE WITH LAWS
-------------------------------------------------------------

     A. The Purchaser shall reasonably cooperate with and assist the Contractor
to obtain all Permits (except those specified in paragraph C below), to the
extent that Purchaser's cooperation and assistance are necessary for Contractor
to expeditiously and cost-efficiently obtain such Permits. The Purchaser agrees
to respond promptly to any such request from Contractor. Further, the Purchaser
agrees that it will not impede or interfere with Contractor's activities or
Contractor's abilities to perform its obligations. Upon notice from Contractor
with respect to a Permit or receipt by Purchaser of a copy of a Permit,
Purchaser shall fulfill all conditions of such Permit and perform all
responsibilities thereunder, except to the extent that such conditions or
responsibilities are those of the Contractor under Work. Contractor will inform
Purchaser as to any such conditions or responsibilities that, in the
Contractor's reasonable judgment, are not ordinary and routine and obtain
Purchaser's consent, which consent shall not be unreasonably withheld, thereto
prior to arranging for any such Permit.

     B. Subject to paragraph C below, the Contractor shall have the
responsibility for obtaining, at Contractor's sole cost and expense, all Permits
on Purchaser's behalf. The Contractor will cause all Permits not issued in the
name of Purchaser to be assignable to Purchaser, and to be assigned to Purchaser
at the time title to the System is transferred to Purchaser pursuant to this
Contract. Subject to Sub-Article 4(A)(4), Purchaser shall be

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   27
                                                                              23

responsible for payment of all Permit fees and other costs and expenses due with
respect to any Permit after the Date of Provisional Acceptance of the System.

     C. The Purchaser shall be responsible for obtaining, at its expense,
landing licenses in the United States and Japan. The Contractor will cooperate
with the Purchaser in connection therewith. Purchaser shall reimburse reasonable
outside counsel fees, reasonable independent consultant fees and other
reasonable out-of-pocket expenses incurred by Contractor in connection with such
cooperation.

     D. Any delay in obtaining or failure to obtain any Permit shall constitute
a Force Majeure and be treated as described in Article 17 (Force Majeure),
except to the extent such delay is a result of Contractor's negligence or
willful misconduct.

     E. Except with respect to variations necessitated by complying with any
changes, enacted after the date hereof, in any Laws (the costs with respect to
which shall be borne by the Purchaser), the Contractor shall be responsible for
the payment of any and all costs incurred as a result of the need to vary
design, drawings, plans or procedures to comply with any of the circumstances
set forth in this Article. The Contractor shall, before making any variations
from the designs, drawings, plans or procedures that may be necessitated by so
complying with any Laws and that would represent a material change to the
overall design of the System, give to the Purchaser written notice, specifying
the variations proposed to be made, and the reasons for making them. As of the
date hereof, neither Party has Actual Knowledge of any proposed changes in the
Laws which would necessitate any such variation.

     F. The Contractor shall (i) give all notices required by any Laws to be
given to any authority and (ii) perform or permit the performance by authorized
persons of any inspection required by the said Laws, subject to Sub-Article
6(C).

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

ARTICLE 8  ROUTE SURVEY
-----------------------

     A. The Contractor shall conduct the Route Survey and select the cable route
for the System in accordance with the information in the Final Survey Report.
Contractor shall be permitted to make changes, at its discretion, to the route
selection, if necessary for operational reasons without additional cost to
Purchaser.
<PAGE>   28
                                                                              24

     B. Any changes to the route selection requested by Purchaser (such as a
change of location for, or an addition of, a cable station) shall be treated as
a Contract Variation in accordance with Article 6 (Contract Variations).

ARTICLE 9  ACCEPTANCE
---------------------

     A.   General

          1.   The Acceptance Testing shall be performed by the Contractor. The
               Purchaser and its designated representatives (including the
               Independent Engineer) may observe, at their own expense, the
               Contractor's tests and review the test results. Purchaser may
               request and conduct any additional tests, at its own expense, but
               any delay caused by such process shall be a Force Majeure event.

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

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

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

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

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

          7.   The Contractor agrees that the Date of Provisional Acceptance or
               Commercial Acceptance of Segment S will occur by March 31, 2000
               (as such date may be extended under Article 6 (Contract
               Variations) Article 17 (Force Majeure) or otherwise under this
               Contract or by agreement of the Parties, the "Scheduled Segment S
               RFS Date").

          8.   The Contractor agrees that the Date of Provisional Acceptance or
               Commercial Acceptance of the System will occur by July 31, 2000
               (as such date may be extended under Article 6 (Contract
               Variations),
<PAGE>   29
                                                                              25

               Article 17 (Force Majeure) or otherwise under this Contract or by
               agreement of the Parties, the "Scheduled System RFS Date").

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

     B.   Notice of Acceptance or Rejection

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

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

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

               (c)  rejection of the Segment, the System or System Upgrade in
                    its existing condition and issuance of neither a Certificate
                    of Provisional Acceptance nor a Certificate of Commercial
                    Acceptance, with in the case of the System or System Upgrade
                    a written explanation of reasons for rejection (it being
                    understood that acceptance of a Segment instead of the
                    System (other than Provisional Acceptance of Segment S) is
                    at the sole discretion of the Purchaser).

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

          2.   On receipt of a notice from the Purchaser pursuant to Sub-
               Articles 9(B)(1)(b) or (c) above, the Contractor shall be
               entitled to address any disputes and explain any discrepancies to
               the Purchaser regarding the results of the Acceptance Testing.
               Unless Purchaser, for good cause, rejects such explanation, it
               shall issue a new notice pursuant to Sub-Article 9(B)(1) above,
               which shall be deemed to have been issued on the date of the
               original notice.
<PAGE>   30
                                                                              26

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

     C.   Provisional Acceptance

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

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

     D.   Commercial Acceptance

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

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

          3.   The Contractor shall, as soon as reasonably practicable, remedy
               the outstanding items, provided that the Purchaser allows
               Contractor the necessary access to the Segment(s) as the
               Contractor needs to remedy such outstanding items. The Contractor
               shall give the Purchaser
<PAGE>   31
                                                                              27

               reasonable notice of its requirement for such access.
               Notwithstanding the above, provided that Contractor has been
               allowed access to the Segment(s) as required in Sub-Article
               9(A)(2), the Contractor shall continue to carry the risk of loss
               for any outstanding item until such item is no longer
               outstanding.

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

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

     E.   Final Acceptance

          1.   Within thirty (30) days of the date of receipt by Purchaser and
               Independent Engineer of the Final Commissioning Report, the
               Purchaser shall issue a Certificate of Final Acceptance or reject
               such Report. If the Purchaser neither issues a Certificate of
               Final Acceptance nor rejects such Report within such thirty (30)
               day period, then the Date of Final Acceptance of the System shall
               be deemed to be the date such Final Commissioning Report was
               received by the Purchaser.

     F.   Title and Risk of Loss

          1.   If the Purchaser, in its sole discretion, chooses to accept a
               Segment prior to accepting the System, then upon payment of all
               amounts listed in the Billing Schedule with respect to a Segment
               (other than the Retainage with respect thereto) and the issuance
               of a Certificate of Commercial Acceptance or a Certificate of
               Provisional Acceptance with respect to such Segment by the
               Purchaser in accordance with this Contract, title (free and clear
               of all liens other than those deriving through or from the
               Purchaser) to such Segment shall vest in the Purchaser.

          2.   Upon (i) payment of all amounts listed in the Billing Schedule
               with respect to the System (other than the Retainage) and (ii)
               the issuance of a Certificate of Commercial Acceptance or a
               Certificate of Provisional Acceptance with respect to the System
               by the Purchaser in accordance with this Contract, title (free
               and clear of all liens other than those
<PAGE>   32
                                                                              28

               deriving through or from the Purchaser) to the System shall vest
               in the Purchaser.

          3.   Upon payment of the Upgrade Price with respect to a System
               Upgrade and the issuance of a Certificate of Commercial
               Acceptance or a Certificate of Provisional Acceptance with
               respect to such System Upgrade by the Purchaser in accordance
               with this Contract, title to such System Upgrade shall vest in
               the Purchaser.

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

ARTICLE 10  WARRANTY
--------------------

     A. The Contractor warrants that the System and each System Upgrade,
including its spares, shall be free from defects in supplies, workmanship and
design for a period of five (5) years commencing from the Date of Provisional
Acceptance of the System or such System Upgrade, as the case may be,
(hereinafter "Warranty Period" and "Upgrade Warranty Period"), with Ship Costs
being covered for the first two (2) years of the Warranty Period (the "Ship
Period") and the Purchaser being responsible for all Ship Costs thereafter.

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

               (a)  If at any time within the Warranty Period or the Upgrade
                    Warranty Period for a System Upgrade any defect occurs which
                    causes the System or such System Upgrade, as the case may
                    be, to fail to meet its overall Performance Requirements,
                    the Contractor shall repair or replace such part or parts.
                    In making such repairs, Contractor may make changes to the
                    System or such System Upgrade, as the case may be, or
                    substitute equipment of later or comparable design, provided
                    the changes, modifications, or substitutions under normal
                    and proper use do

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   33
                                                                              29

                    not cause the System or such System Upgrade as the case may
                    be to fail to meet the Performance Requirements.

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

               (c)  It is understood that if there is a problem on the System,
                    the Purchaser may immediately dispatch the maintenance
                    authority to effect repairs.  If and to the extent that such
                    problem is determined to be caused by a defect in the System
                    covered by this warranty, the Contractor shall reimburse the
                    Purchaser for its actual Non-Ship Costs incurred and, with
                    respect to any such repair relating to a defect identified
                    in good faith by Purchaser in writing prior to the end of
                    the Ship Period, actual Ship Costs incurred.

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

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

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

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

                    (ii) Subject to the foregoing, any repair by the Purchaser
                         shall not in any way diminish the Contractor's
                         obligation
<PAGE>   34
                                                                              30

                         under the warranty. Any equipment discovered to be
                         defective or faulty and recovered during a warranty
                         repair shall be returned to the Contractor at its
                         request.

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

               As used herein, "Ship Cost" means the costs of operating a
               vessel, including but not limited to running and standing charges
               for the vessel (including but not limited to labor charges for
               the vessel's crew, at sea insurance, port charges, fuel and lube
               oils, consumables, cable loading, cable unloading, navigation and
               maritime communications) as well as the costs associated with the
               use and operation of a remotely operated vehicle and the tracked
               self-propelled burial tool, and "Non-Ship Costs" means the costs
               of making a repair, including the cost of components, equipment
               or materials requiring replacement, the cost of any additional
               equipment necessary to effect the repair, the cost of making the
               repair, including the cost of reburying any previously buried
               portion, the cost of labor and engineering assistance or
               development required to make the repair and all necessary
               associated costs, such as, but not limited to, shipping and
               customs and services that may be required to make the repair, but
               excluding any of the foregoing which are Ship Costs.

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

          4.   The Contractor warrants that services furnished hereunder will be
               performed in a workmanlike manner using materials free from
               defects except when such materials are provided by the Purchaser
               (it being understood that all materials arranged for directly by
               Contractor, whether or not purchased in the name of Purchaser,
               are not materials provided by the Purchaser). If such services
               prove to be not so performed and Purchaser notifies the
               Contractor within six (6) months from the completion of the
               service, the Contractor will promptly correct the defect.
<PAGE>   35
                                                                              31

          5. Any part which replaces a defective part during the applicable
Warranty Period or Upgrade Warranty Period, shall be subject to the remaining
Warranty Period and Ship Period, if any, or Upgrade Warranty Period, as the case
may be, of the part which was replaced. However, the Warranty Period shall never
exceed five (5) years from the Date of Provisional Acceptance of the System and
the Upgrade Warranty Period for any System Upgrade shall never exceed five (5)
years from the Date of Provisional Acceptance of such System Upgrade. Further,
Ship Costs shall be included only with respect to defects identified in good
faith by Purchaser in writing during the first two (2) years from the Date of
Provisional Acceptance of the System.

     B. The contractor represents and warrants that the Design Life of the
System is twenty-five (25) years. The Contractor warrants that (i) the System
shall be designed so that during the Design Life Period no pattern of failure
shall develop that causes the System (as upgraded from time to time by System
Upgrades) to fail to meet its reliability as set forth in the System
Performance Requirements (as upgraded from time to time by System Upgrades)
over the Design Life Period and (ii) the System shall be designed with
sufficient transmission margin to be upgradeable to a capacity of 160 Gb/s per
fiber pair. Contractor shall have no liability with respect to the design
warranty set forth in clause (ii) of this Sub-Article unless and until
Contractor shall have failed to perform a System Upgrade requested by
Purchaser. The Design Life Period shall run for twenty-five (25) years from the
Date of Provisional Acceptance of the System (whether or not any System
Upgrades are done). In the event the System is not designed as provided in the
first two sentences of this Sub-Article, Contractor shall effect such
reengineering and redesign and make such repairs or replace such parts as may
be necessary to correct such deficiency. The Contractor shall bear the costs of
all repairs and parts and of the reengineering and redesign necessary to effect
such repairs and replacements and the Ship Costs incurred in connection with
such repairs and replacements.

     C. The Contractor warrants that all Deliverable Software and Deliverable
Technical Materials are Year 2000 Compliant.

     D. The warranties provided above in Sub-Articles 10(A) and (B) by the
Contractor shall not apply to defects or failures of performance, which result
from damage caused by acts or omissions of the Purchaser or its agents,
employees or representatives or third parties (other than the Contractor), or
which result from modifications, misuse, neglect, accident or abuse, repair,
storage or maintenance by other than the Contractor or its agents or use in a
manner not in accordance with the System Description or other causes set forth
in Article 12 (Purchaser's Obligations) or Article 17 (Force Majeure).

     E. THE FOREGOING WARRANTY IS EXCLUSIVE AND IS IN LIEU OF ALL OTHER EXPRESS
AND IMPLIED WARRANTIES INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WHICH ARE SPECIFICALLY
DISCLAIMED. THE PURCHASER'S SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO DEFECTS
COVERED BY THE FOREGOING WARRANTY SHALL (EXCEPT AS SET FORTH IN SUB-ARTICLE B

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   36
                                                                              32

ABOVE) BE THE CONTRACTOR'S OBLIGATION TO MAKE REPAIRS OR REPLACEMENTS AS SET
FORTH IN THIS ARTICLE; PROVIDED, THAT CONTRACTOR'S FAILURE TO SO PERFORM SHALL
BE SUBJECT TO ARTICLE 13 HEREOF.

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

ARTICLE 11  CONTRACTOR SUPPORT
------------------------------

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

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

ARTICLE 12  PURCHASER'S OBLIGATIONS
-----------------------------------

     A. Purchaser agrees to pay all amounts payable by it when due under this
Contract and to perform all of its other obligations under this Contract.

     B. In the event the Purchaser establishes a branch office in any of the
relevant jurisdictions, the Purchaser shall be solely responsible to perform all
activities necessary to establish such branch office.

     C. If any loss, damage, delay or failure of performance of the System or a
System Upgrade results from the Purchaser's failure to perform its obligations
under this Contract and results in an increase in the costs of performance or
the time required for performance of any of the Contractor's duties or
obligations under this Contract, the Contractor shall be entitled, as
appropriate, to (i) an equitable adjustment in the Contract Price or applicable
Upgrade Price, (ii) an equitable extension of time for completion of its Work or
the Upgrade Work, (iii) reimbursement for all such additional costs incurred,
and (iv) to the extent necessary in light of Purchaser's failure and the
adjustments made in accordance with clauses (i), (ii) and (iii) above, an
equitable adjustment of the Work and/or Upgrade Work.
<PAGE>   37
                                                                              33

          1.   The Contractor shall inform the Purchaser promptly of any
               occurrence covered under this Sub-Article 12(C), and shall use
               reasonable efforts to minimize any such additional costs or
               delay.

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

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

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

ARTICLE 13  TERMINATION FOR DEFAULT
-----------------------------------

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

          1.   In the case of the Purchaser, (a) if Contractor materially fails
               to comply with the terms and conditions of this Contract and, if
               such failure occurs prior to the Date of Commercial Acceptance or
               the Date of Provisional Acceptance, it would not be reasonable to
               believe that the Contractor will be able to provide the System
               which is Ready for Provisional Acceptance, within 200 days after
               the Scheduled System RFS Date or (b) the Contractor fails to
               cause the System to be Ready for Commercial Acceptance or
               Provisional Acceptance within 200 days after the Schedule RFS
               Date;

          2.   If the other Party defaults on any of its payment obligations and
               does not cure such default within a period of thirty (30) days
               (or such longer period as the non-breaching Party may authorize
               in writing) after receipt of written notice demanding cure
               (subject to dispute provisions);
<PAGE>   38
                                                                              34

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

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

     B. If this Contract is terminated by the Purchaser as provided in
Sub-Article 13(A), the Purchaser, in addition to any other rights provided in
this Article and upon payment to Contractor of all monies due and owing as set
forth in clauses 1 and 2 of Sub-Article 13(C) below, may require the Contractor
to transfer title and deliver to the Purchaser in the manner and to the extent
directed by the Purchaser any completed equipment, material or supplies, and
such partially completed cable and materials, parts, tools, dies, jigs,
fixtures, plans, drawings, information, and contract rights (hereinafter
collectively "Manufacturing Materials") as the Contractor has had specifically
produced or specifically acquired for the performance of such part of this
Contract as has been terminated and which, if this Contract had been completed,
would have been required to be furnished to the Purchaser; and the Contractor
shall, upon the direction of the Purchaser, protect and preserve property in the
Contractor's possession in which the Purchaser has an interest.

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

          1.   the cost of settling and paying claims rising out of the
               termination of Work under the contracts in orders, as provided in
               Sub-Article 13(C)(2) below which are properly chargeable to the
               terminated portion of this Contract; and

          2.   the reasonable costs of settlement including accounting, legal,
               clerical and other expenses necessary for the preparation of
               settlement claims and supporting data with respect to the
               terminated portion of this
<PAGE>   39
                                                                              35

               Contract and for termination and settlement of contracts
               thereunder, together with reasonable storage, transportation and
               other costs incurred in connection with the protection,
               preservation and disposition of property proper to this Contract.

     D. Force Majeure events pursuant to Article 17 (Force Majeure) shall not
constitute a default or provide a basis for termination under this Article.

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

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

ARTICLE 14  TERMINATION FOR CONVENIENCE
---------------------------------------

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

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

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

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

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

          4.   Assign to the Purchaser, in the manner, at the time, and to the
               extent directed by the Purchaser, all of the Contractor's rights,
               title and interest under the orders and contracts so terminated;
<PAGE>   40
                                                                              36

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

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

          7.   Use reasonable efforts to sell, in the manner, at the time, to
               the extent and at the price or prices directed or authorized by
               the Purchaser, any property of the types referred to in
               Sub-Article 13(B)(6) above provided, however, that the
               Contractor:

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

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

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

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

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

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

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

          1.   (i) all amounts invoiced in accordance with the Contract plus,
               for Work or Supplies which have been done or provided but which
               have not been invoiced, an amount calculated by reference to the
               prices set forth in the Provisioning Schedule and to the amount
               of such Work or Supplies done or provided;
<PAGE>   41
                                                                              37

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

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

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

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

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

ARTICLE 15  SUSPENSION
----------------------

     A. The Purchaser may, at its convenience, order the Contractor to suspend
all or part of the Work for such period of time as the Purchaser determines to
be appropriate. If, as a result of such Suspension, the Contractor incurs
additional costs or losses in the discharge of its responsibilities under this
Contract, and where such suspension, losses or costs are not caused by the
Contractor's act or omission and could not have been reasonably prevented by the
Contractor, the Contractor shall be allowed an equitable adjustment to the
Contract Price or the Provisioning Schedule in Appendix 1 and an equitable
extension in the time required for performance.

     B. Upon the occurrence of:

          (i) an Event of Default by the Purchaser;
<PAGE>   42
                                                                              38

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

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

the Contractor, in addition to any other rights provided in Article 13, may
suspend performance of its obligations and all Work and (in the case of clause
(i)) Upgrade Work.

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

     D. Thereafter, if the Suspension continues for a total of one hundred and
eighty (180) days, the Contractor may terminate the Contract by notice to the
Purchaser and the Contract shall be deemed to have been terminated by Purchaser,
effective on the date of Contractor's notice, in accordance with Sub-Article
13(A) and the remaining provisions of Article 13 shall apply.

ARTICLE 16  TITLE AND RISK OF LOSS
----------------------------------

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

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

ARTICLE 17  FORCE MAJEURE
-------------------------

     A. The Contractor shall not be responsible for any loss, damage, delay or
failure of performance resulting directly or indirectly from any cause which is
beyond its reasonable control ("Force Majeure"), including but not limited to:
delay in obtaining or failure to obtain
<PAGE>   43
                                                                              39

any Permits (subject to the provisions of Sub-Article 7(D)); acts of God or of
the public enemy; acts or failure to act of any governmental authority; war or
warlike operations, civil war or commotion, mobilizations or military call-up,
and acts of similar nature; revolution, rebellions, sabotage, and insurrections
or riots; fires, floods, epidemics, quarantine restrictions; strikes, and other
labor actions; freight embargoes; unworkable weather; trawler or anchor damage;
damage caused by other marine activity such as fishing, marine research and
marine development; acts or omissions of transporters; or the acts or failure to
act of any of the Purchaser, of its representatives or agents, provided that (i)
a loss by Contractor of employees (other than by reasons of Force Majeure), (ii)
strikes and other labor actions involving the Contractor's own work force, (iii)
the first 5 days of unworkable weather (unless any such day occurs during the 30
days immediately preceding the then Scheduled System RFS Date or Scheduled
Segment S RFS Date), (iv) the failure (other than by reason of force majeure) of
any subcontractor, supplier or transporter to perform its obligations to
Contractor (including on account of insolvency) unless such supplies or
transportation or other services are generally unavailable in the marketplace,
(v) the unavailability of any raw materials or components, unless such raw
materials or components are generally unavailable in the marketplace or are
unavailable by reason of force majeure or (vi) any increase in Contractor's
costs, shall not in and of itself constitute Force Majeure.

     B. If any such Force Majeure causes an increase in the time required for
performance of any of its duties or obligations, the Contractor shall be
entitled to an equitable extension of time for completion of the Work or the
Upgrade Work, as the case may be.

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

     D. The Contractor shall inform the Purchaser promptly with written
notification, and in all cases within fourteen (14) days of discovery and
knowledge, of any occurrence covered under this Article and shall use its
reasonable efforts to minimize such additional delays. The Contractor shall
promptly provide an estimate of the anticipated time required to complete the
Work or the Upgrade Work. Contractor shall be entitled to an extension of time
equal to at least one day for each day of delay resulting from the Force Majeure
condition.

     E. Within thirty (30) days of receipt of such a notice from Contractor, the
Purchaser and the Independent Engineer may provide a written response. The
absence of a response shall be deemed as acceptance of Contractor's notice and
request for additional time.

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

ARTICLE 18  INTELLECTUAL PROPERTY
---------------------------------

     A.  Ownership
<PAGE>   44
                                                                              40

     All right, title, and interest in and to all Intellectual Property
(excluding Project Patent Rights) created or developed by Contractor in the
course of its performance under this Contract that is (a) specifically and
exclusively applicable to the System or a System Upgrade; and (b) either (i)
embodied in Deliverable Technical Material (as that term is defined in
SubArticle 18(B) below) or (ii) embodied in the System or a System Upgrade (the
"Project Intellectual Property"), is and shall remain the sole property of
Purchaser. All right, title and interest in and to all Intellectual Property
created or developed by Contractor before commencing its performance under this
Contract, or created or developed by Contractor exclusively in connection with
activities other than its performance under this Contract, or created or
developed by Contractor in the course of its performance under this Contract
that is not Project Intellectual Property, and all Project Patent Rights
(collectively, the "Contractor Intellectual Property"), is and shall remain the
sole property of Contractor. Unless otherwise expressed in this Contract, no
license is implied or granted herein to Purchaser to any Contractor Intellectual
Property by virtue of this Contract, nor by the transmittal or disclosure of any
such Contractor Intellectual Property to Purchaser. Any Contractor Intellectual
Property disclosed, furnished, or conveyed to Purchaser that is marked as
"Proprietary" or "Confidential" (or if transmitted orally is identified as being
proprietary or confidential in a subsequent writing) shall be treated in
accordance with the provisions of Article 20 (Safeguarding of Information and
Technology). As used herein, "Intellectual Property" means any information,
computer or other apparatus programs, software, specifications, drawings,
designs, sketches, tools, market research or operating data, prototypes,
records, documentation, works of authorship or other creative works, ideas,
concepts, methods, inventions, discoveries, improvements, or other business,
financial and/or technical information (whether or not protectable or
registrable under any applicable intellectual property law). As used herein,
"Project Patent Rights" means all inventions, discoveries, methods and
improvements of a patentable nature created or developed by Contractor in the
course of its performance under this Contract. Project Intellectual Property
will include the materials to be listed in a Schedule to be created mutually by
the Parties within thirty (30) days of execution of this Contract, as it may be
amended from time to time by mutual agreement of the Parties.

     B.  Licenses

     Contractor shall furnish to Purchaser, upon the transfer of title to any
portion of the System or a System Upgrade pursuant to Article 9, copies of all
technical information, specifications, drawings, designs, sketches, tools,
operating data, records, documentation and/or other types of engineering or
technical data or information reasonably relating to the operation, maintenance
or repair of each component of such portion of the System or System Upgrade as
delivered by Contractor (the "Deliverable Technical Material"). Contractor
grants to Purchaser a perpetual, royalty-free, non-transferable (except under
the circumstances specified in Sub-Article 18(F) below) license to use and
reproduce those Deliverable Technical Materials owned, controlled, or developed
by Contractor and all Contractor Intellectual Property included in or necessary
to use all the Deliverable Technical Materials for purposes of fulfilling
Purchaser's obligations under this Contract and using and operating the System
(as upgraded by any System Upgrades) supplied by Contractor with the right to
employ third parties (under appropriate written obligations respecting
confidentiality) to assist Purchaser in fulfilling its obligations under this
Contract and in using and operating the
<PAGE>   45
                                                                              41

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

     C.  Deliverable Software

     Contractor shall furnish to the Purchaser, upon transfer of title to any
portion of the System or System Upgrade pursuant to Article 9, copies of all
computer or other apparatus programs and software, in executable form, and
related documentation relating to the operation, maintenance, or repair of the
computer systems of such portion of the System or System Upgrade, as the case
may be, as delivered by Contractor (the "Deliverable Software"). In the case of
Contractor Intellectual Property, such copies of programs and software shall
consist solely of executable code provided in offline media (e.g., tapes, or
diskettes) for restoration purposes, sufficient to operate, maintain or repair
the computer systems of such portion of the System or System Upgrade, as the
case may be, as delivered by Contractor, and in the case of Project Intellectual
Property, such programs and software shall be delivered in both source and
object code forms. Contractor shall furnish to Purchaser, from time to time
during the Warranty Period or any Upgrade Warranty Period, copies of all
computer or other apparatus programs and software, in executable form (and in
the case of Project Intellectual Property, in source code form), and related
documentation that Contractor may develop to correct errors or to maintain
Deliverable Software previously furnished to Purchaser, which shall also be
treated as Deliverable Software for purposes of this Contract upon delivery
thereof to Purchaser. Contractor grants to Purchaser a perpetual, royalty-free,
non-transferable (except under the circumstances specified in Sub-Article 18(F)
below) license to use and reproduce the Deliverable Software Materials owned,
controlled, or
<PAGE>   46
                                                                              42

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

           1.  Confidentiality
               Purchaser shall keep the Deliverable Software that is not Project
               Intellectual Property confidential in accordance with Article 20
               (Safeguarding of Information and Technology) and Article 21
               (Export Control) to the extent that such Deliverable Software is
               designated as Confidential Information by its owner and agrees to
               use its best efforts to see that its employees, consultants, and
               agents, and other users of such software, comply with the
               provisions of this Contract. Purchaser also agrees to refrain
               from taking any steps, such as reverse assembly or decompilation,
               to derive a source code equivalent of any object code that is
               furnished by Contractor, provided that Contractor continues to
               maintain the Deliverable Software that is not Project
               Intellectual Property in accordance with the terms of a support
               and maintenance agreement to be entered into on such terms to be
               agreed upon by the Parties, which terms shall in all events
               contain assurances of support and maintenance at least as
               favorable to Purchaser as those contained in the Operating,
               Administration and Maintenance Agreement concerning AC-1 or is
               willing and able to enter into an agreement to maintain the
               Deliverable Software upon terms reasonably comparable to the
               pertinent terms of the initial agreement to be entered into by
               the Parties with regard to support and maintenance after the
               expiration or termination thereof or does not go insolvent or
               bankrupt to thereby *. In the case of insolvency or bankruptcy of
               Contractor, Purchaser shall limit any derivation of a source code
               equivalent to that portion of the Deliverable Software that is
               Contractor Intellectual Property. Purchaser shall not under any
               circumstances take any steps to derive a source code

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   47
                                                                              43

               equivalent from that portion of the Deliverable Software
               comprising commercial, off-the-shelf software developed or
               provided by third parties.

           2.  Backup Copies

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

           3.  Termination of Software Licenses

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

           4.  Indemnification

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

     D.  Trademarks, Tradenames, etc.

     No rights are granted herein to either Party to use any identification
(such as, but not limited to tradenames, trademarks, service marks or symbols,
and abbreviations, contractions, or simulations thereof) owned or used by the
other Party or its parent company or its affiliates to identify itself or its
affiliates or any of its products or services. Each Party agrees that it will
not, without the prior written permission of the other Party, use such
identification in advertising, publicity, packaging, labeling, or in any other
manner to identify itself or any of its products, services, or organizations, or
represent directly or indirectly that any product, service, or organization of
it is a product, service, or organization of the other Party or its affiliates,
or that any product or service of a Party is made in accordance with or utilizes
any intellectual property of the other Party or its affiliates.
<PAGE>   48
                                                                              44

     E.  DISCLAIMER, LIMITATION OF LIABILITY

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

     F.  Transferability

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

     G.   Deliverable Software Escrow

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

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

     The escrow service shall be authorized by Contractor to release the
escrowed software to Purchaser within five (5) business days after the receipt
of notice by Purchaser (which notice Purchaser shall not deliver unless a
Bankruptcy Event shall have occurred or the Contractor is no longer engaged in
the business of operating or maintaining, or providing support for other parties
in operating or maintaining, systems comparable to the System (as modified by
System Upgrades)) that a Bankruptcy Event has occurred or that the Contractor is
no longer engaged in the business of operating or maintaining, or providing
support for other parties in operating or maintaining, systems comparable to the
System (as modified by System Upgrades).

<PAGE>   49
                                                                           45

ARTICLE 19  INFRINGEMENT
------------------------

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

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

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

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

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

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   50
                                                                              46

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

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

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

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

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

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

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

ARTICLE 20  SAFEGUARDING OF INFORMATION AND TECHNOLOGY
------------------------------------------------------

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

     B. Unless such Information was previously known to the Party receiving such
Information free of any obligation to keep it confidential, or such Information
has been or is
<PAGE>   51
                                                                              47

subsequently made public through other than unauthorized disclosure by the
receiving Party or is independently developed by the receiving Party (as
documented by the records of the receiving Party), it shall be kept confidential
by the Party receiving such Information, shall be used only in the performance
of this Contract, and may not be used for any other purposes except upon such
terms as may be agreed upon in writing by the Party owning such Information. The
receiving Party may disclose such Information to other persons, upon the
furnishing Party's prior written authorization, but solely to perform acts which
this Article expressly authorizes the receiving Party to perform itself and
further provided such other person agrees in writing (a copy of which writing
will be provided to the furnishing Party at its request) to the same conditions
respecting disclosure and use of Information contained in this Article and to
any other reasonable conditions requested by the furnishing Party. Nothing
herein shall prevent a Party from disclosing Information (a) upon the order of
any court or administrative agency, (b) upon the request or demand of, or
pursuant to any regulation of, any regulatory agency or authority, (c) to the
extent reasonably required in connection with the exercise of any remedy
hereunder and (d) to a Party's legal counsel or independent auditors.

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

ARTICLE 21  EXPORT CONTROL
--------------------------

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

ARTICLE 22  LIQUIDATED DAMAGES
------------------------------

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

     1.  Article 6 (Contract Variations);

     2.  Article 17 (Force Majeure); or

     3. Other arrangements as agreed between the Purchaser and the Contractor;
<PAGE>   52
                                                                              48

then Contractor shall pay to Purchaser for each day of delay, for up to 200
days, by way of pre-estimated and liquidated damages for the delay and not as a
penalty, an amount equal to 0.05% of the Initial Contract Price for the System
less that portion of the Initial Contract Price allocable to Segment S, provided
that prior to the Scheduled System RFS Date, the Date of Provisional Acceptance
for Segment S has occurred.

     B. If Segment S is not Ready for Commercial Acceptance or Provisional
Acceptance within fifteen (15) days (the "Grace Period") following the Scheduled
Segment S RFS Date, as it may have been extended under:

     1.  Article 6 (Contract Variations)

     2.  Article 17 (Force Majeure); or

     3. Other Arrangements as agreed between the Purchaser and Contractor;

then Contractor shall pay to Purchaser for each day of delay following the
expiration of the Grace Period, for up to 200 days, by way of pre-estimated and
liquidated damages for the delay and not as penalty, an amount equal to 0.05% of
that portion of the Initial Contract Price of the System allocable to Segment S.

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

     1.  Article 6 (Contract Variations);

     2.  Article 17 (Force Majeure); or

     3. Other arrangements as agreed between the Purchaser and the Contractor;

then Contractor shall pay to Purchaser for each day of delay, for up to 90 days,
by way of pre-estimated and liquidated damages for the delay and not as a
penalty, an amount equal to 0.05% of the Initial Upgrade Price for such System
Upgrade.

ARTICLE 23  LIMITATION OF LIABILITY/INDEMNIFICATION
---------------------------------------------------

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

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   53
                                                                              49

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

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

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

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   54
                                                                              50

ARTICLE 24  COUNTERPARTS
------------------------

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

ARTICLE 25  DESIGN AND PERFORMANCE RESPONSIBILITY
-------------------------------------------------

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

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

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

ARTICLE 26  PRODUCT CHANGES
---------------------------

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

ARTICLE 27  RISK AND INSURANCE
------------------------------

     A. The Contractor shall at all times maintain, after the date which is 30
days from the date hereof, and upon request, the Contractor shall furnish the
Purchaser with certificates, or other reasonable evidence, that Contractor
maintains, the following insurance or has adequate self-insurance (other than as
required to comply with any statutory insurance requirements); provided, that
the following insurance coverages may be combined or in different form so long
as Contractor maintains insurance consistent with the following requirements:

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

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   55
                                                                              51

               which the Contractor and its operations under this Contract are
               subject in respect of injury of death of any such employee.

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

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

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

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

          6.   All vessels are to be entered in a Mutual Protection and
               Indemnity Association with a full and unlimited entry or to have
               Marine Protection and Indemnity Insurance with a limit of not
               less than * including coverage far illness, injury or death of
               crew members (unless covered under Workmen's Compensation
               Insurance), Contractual Liability Coverage, Collision and Tower's
               Liability, Removal of Wreck and Debris and Third Party Liability.

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

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

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   56
                                                                              52

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

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

          11.  Sea Bed or equivalent coverage (including an Old Mines and
               Torpedoes Clause, including other derelict weapons of War) is
               required to protect, for full cost, against all risks of physical
               loss or damage to the submersible plant and equipment described
               in Sub-Article 27(A)(10) above. See last paragraph.

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

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

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

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

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   57
                                                                              53

          2.   All the foregoing insurances shall name Purchaser as an
               additional insured as to operations hereunder, in which event the
               Contractor's insurance shall be primary to any insurance carried
               by Purchaser.

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

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

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

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

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

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

     C.  The Contractor may organize such levels of deductibles, excesses and
self-insurance as it considers appropriate and which are within prudent industry
standards.
<PAGE>   58
                                                                              54

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

ARTICLE 28  PLANT AND WORK RULES
--------------------------------

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

ARTICLE 29  RIGHT OF ACCESS
---------------------------

     A. The Contractor shall, upon reasonable notice of not less than ten (10)
working days, during normal business hours and in a manner to avoid any
disruption of the work on the premises including performance of other contracts,
permit access by the Purchaser or its Quality Assurance (QA) Representative
(other than a competitor of the Contractor or any affiliate of a competitor) to
the Contractor's premises where the work will be performed, and will use its
best endeavors to secure rights of access to premises of its subcontractors
where the work will be performed, having subcontracts or orders in the amount
of, or equivalent to * or more, in accordance with the Contractor's contractual
arrangements with its subcontractors, and allow the Purchaser or its QA
Representative to:

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

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

This right of access shall allow for the Purchaser and/or its QA representative
(up to a total of three (3) persons). The Purchaser shall provide the name(s),
nationality and title of each such visitor prior to the visit. The Contractor
shall not be responsible for any costs, including travel and accommodation
costs, of the Purchaser or its representatives.

     B.  The right of access shall also allow for the Purchaser and/or
representatives (up to a total of three (3) persons) to be aboard the vessel(s)
during installation and the route survey, provided accommodations are available.
The Contractor shall not be responsible for any costs of the Purchaser or its
representatives, except for living expenses on board the vessel which includes
one (1) daily telex or fax, all other travel and accommodation costs for the
Purchaser or its QA Representatives shall be for the account of the Purchaser.

     C. Any right of access shall not be construed as creating any obligation
requiring the Contractor or its subcontractors to disclose trade secrets or
proprietary information.

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   59
                                                                              55

Further, such right of access may be conditioned on the execution of a
confidentiality and non-disclosure agreement and/or subject to routine building
or security rules, regulations or procedures.

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

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

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

ARTICLE 30  QUALITY ASSURANCE
-----------------------------

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

ARTICLE 31  DOCUMENTATION
-------------------------

     The Contractor shall furnish to the Purchaser one copy of the standard
documentation in the English language for the System provided hereunder. Such
documentation shall be provided prior to the Acceptance testing. Additional
copies of the documentation are available at additional cost.

ARTICLE 32  TRAINING
--------------------

     The Contractor will provide, as part of the Initial Contract Price, until
the Date of Final Acceptance, any and all training, as more particularly
described in the training section of Appendix 6, necessary for the operation and
maintenance of the System.
<PAGE>   60
                                                                              56

ARTICLE 33  SETTLEMENT OF DISPUTES/ARBITRATION/LITIGATION
---------------------------------------------------------

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

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

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

          2.   Each Party hereby irrevocably and unconditionally submits to the
               non-exclusive jurisdiction of any New York State or Federal court
               sitting in The City of New York, and any appellate court from any
               thereof, in any action or proceeding arising out of or relating
               to this Contract, and each Party hereby irrevocably and
               unconditionally agrees that all claims in respect of such action
               or proceeding may be heard and determined in such New York State
               court or, to the extent permitted by law, in such Federal court.
               Each Party hereby irrevocably and unconditionally waives, to the
               fullest extent it may effectively do so, any defense of an
               inconvenient forum to the maintenance of such action or
               proceeding in any such court and any right of jurisdiction on
               account of the place of residence or domicile of either Party.
               The Contractor hereby irrevocably and unconditionally appoints CT
               Corporation System (the "New York Process Agent"), with an office
               on the date hereof at 1633 Broadway, New York, New York, as its
               agent to receive on behalf of the Contractor and its respective
               property service of copies of the summons and complaint and any
               other process which may be served in any such action or
               proceeding in any such New York State or Federal court and agrees
               promptly to appoint a successor New York Process Agent in The
               City of New York (which successor Process Agent shall accept such
<PAGE>   61
                                                                              57

               appointment in a writing prior to the termination for any reason
               of the appointment of the initial New York Process Agent). In any
               such action or proceeding in such New York State or Federal court
               sitting in The City of New York, such service may be made on the
               Contractor by delivering a copy of such process to the Contractor
               in care of the appropriate Process Agent at such Process Agent's
               above address and by depositing a copy of such process in the
               mails by certified or registered air mail, addressed to the
               Contractor at its address referred to in Article 35 of this
               Contract (such service to be effective upon such receipt by the
               appropriate Process Agent and the depositing of such process in
               the mails as aforesaid). The Contractor hereby irrevocably and
               unconditionally authorizes and directs such Process Agent to
               accept such service on its behalf. As an alternate method of
               service, the Contractor also irrevocably and unconditionally
               consents to the service of any and all process in any such action
               or proceeding in such New York State or Federal court sitting in
               The City of New York by mailing of copies of such process to the
               Contractor, as the case may be, by certified or registered air
               mail at its address referred to in Article 35 of this Contract.
               The Contractor agrees that, to the fullest extent permitted by
               applicable law, a final judgment in any such action or proceeding
               shall be conclusive and may be enforced in other jurisdictions by
               suit on the judgment or in any other manner provided by law.

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

     D.  THE OBLIGATIONS OF EACH PARTY IN RESPECT OF THIS CONTRACT DUE TO ANY
PARTY SHALL, NOTWITHSTANDING ANY JUDGMENT IN A CURRENCY (THE "JUDGMENT
CURRENCY") OTHER THAN DOLLARS, BE DISCHARGED ONLY TO THE EXTENT THAT ON THE
BUSINESS DAY FOLLOWING RECEIPT BY SUCH PARTY OF ANY SUM ADJUDGED TO BE SO DUE IN
THE JUDGMENT CURRENCY SUCH PARTY MAY IN ACCORDANCE WITH NORMAL
<PAGE>   62
                                                                              58

BANKING PROCEDURES PURCHASE DOLLARS WITH THE JUDGMENT CURRENCY; IF THE AMOUNT OF
DOLLARS SO PURCHASED IS LESS THAN THE SUM ORIGINALLY DUE TO SUCH PARTY IN
DOLLARS, EACH PARTY AGREES, AS A SEPARATE OBLIGATION AND NOTWITHSTANDING ANY
SUCH JUDGMENT, TO INDEMNIFY SUCH PARTY AGAINST SUCH LOSS, AND IF THE AMOUNT OF
DOLLARS SO PURCHASED EXCEEDS THE SUM ORIGINALLY DUE TO ANY PARTY TO THIS
CONTRACT, EACH PARTY AGREES TO REMIT TO SUCH PARTY, SUCH EXCESS.

ARTICLE 34  APPLICABLE LAW
--------------------------

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

ARTICLE 35  NOTICES
-------------------

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

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

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

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

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

Tyco Submarine Systems Ltd.
340 Mt. Kemble Avenue
Morristown, New Jersey 07960
Tel: 973-326-3500
Fax: 973-326-2711
<PAGE>   63
                                                                              59

Pacific Crossing Ltd.
Wessex House
45 Reid Street
Hamilton HM12
Bermuda
Fax:  441-296-6749/8606
Attn:  Cameron Adderly

     C. All provisions in this Contract regarding notices, consents, approvals
and other communications to and from, and other actions taken on behalf of, the
Contractor are subject to the provisions of Article 42 hereof.

ARTICLE 36  PUBLICITY AND CONFIDENTIALITY
-----------------------------------------

     A.  No information relating to this Contract shall be released by either
Party to any newspaper, magazine, journal or other written, oral or visual
medium without the prior written approval of an authorized representative of the
other Party; provided that, subject to Article 20 (Safeguarding of Information
and Technology) and the following Sub-Article, this Article shall not restrict
either Party from (i) responding to customary press inquiries or otherwise
making public or private statements in the normal course of business, so long as
consistent with a mutually agreed press-release and (ii) assisting in the
obtaining of financing in accordance with Sub-Article 37(C), including the
publication of a financial tombstone.

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

ARTICLE 37  ASSIGNMENT; SUBCONTRACTORS
--------------------------------------

     A. Except as provided in this Article, neither Party shall assign this
Contract or any right or interest under this Contract, nor delegate any work or
obligation to be performed under this Contract ("Assignment"), without the other
Party's prior written consent which shall not be unreasonably withheld (it being
understood that it shall be deemed to be reasonable to withhold consent to the
assignment of this Contract or any rights, interest or
<PAGE>   64
                                                                              60

obligations hereunder to a competitor of Contractor or an affiliate of a
competitor or uncreditworthy party). Nothing herein shall preclude a Party from
employing a subcontractor in carrying out its obligations under this Contract. A
Party's use of such subcontractor shall not release the Party from its
obligations or liability (including warranties) under this Contract. If a
proposed subcontractor of major equipment (i.e., equipment listed on Exhibit E)
is not listed on Exhibit E hereto, Contractor shall obtain approval thereof from
Purchaser, which approval shall not be unreasonably withheld. Purchaser and
Contractor shall agree on the form and substance of Exhibit E by May 1, 1998.

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

     C. The Parties acknowledge that Purchaser may finance construction of the
System on a "project finance" basis and that in connection therewith the
financing parties will require that such financing be secured by certain assets
of Purchaser (including but not limited to this Contract). The Purchaser may, in
connection with any such project financing grant a collateral assignment of the
System and/or its rights and obligations under this Contract to any such
financing parties, and in connection therewith, the Contractor will execute and
deliver a Consent, substantially in the form of Exhibit B hereto; provided that
Contractor agrees to make such changes or additions to such form as may be
reasonably requested by such financing parties, and Purchaser, and such
financing parties, may transfer in accordance with such Consent. Contractor will
also deliver an Opinion in the form of Exhibit C hereto, and a similar opinion
of Guarantor's counsel with respect to the Guaranty, to Purchaser and such
financing parties and such other documents as are reasonably requested by such
financing parties. Furthermore, Contractor agrees, for the benefit of any such
financing parties, that (i) prior to the closing of the financing and the
execution and delivery of the Consent the Contractor shall have no recourse to
such financing parties for any of Purchaser's obligations hereunder and (ii)
thereafter, the Contractor shall have recourse in accordance with the Consent.

     D. The Purchaser has the right to assign all of its rights and delegate all
of its duties under this Contract to any other entity to whom all of Purchaser's
rights and interests in the System have been transferred. Purchaser also has the
right (i) to assign all of its rights hereunder with respect to any particular
Landing Assets to any Transferee, (ii) to assign Permits with respect to such
Landing Assets, or have Permits with respect to such Landing Assets issued in
the name of, such Transferee and (iii) to transfer such Landing Assets or have
such Landing Assets transferred directly to, such Transferee; provided
that such Transferee shall execute a supplement to this Contract whereby it
becomes jointly and severally liable, together with Purchaser, for all of
Purchaser's obligations under this Contract. "Landing Assets" means, with
respect to each jurisdiction where a portion of the System is located, all or
part of such portion of the System located therein. It is understood that the
<PAGE>   65
                                                                              61

Purchaser, at its option, may assign and transfer rights with respect to Landing
Assets in different jurisdictions to different Transferees. Purchaser shall not
transfer any of its rights under this Contract or the System except in
accordance with the foregoing. Any assignment or transfer not expressly
permitted by Sub-Articles 37(D) shall be of no force and effect. Any assignment
or transfer which results in any increase in costs or any loss, damage, delay or
failure of performance shall constitute a Force Majeure, and, without limiting
the applicability of Article 17 (Force Majeure), Purchaser shall be responsible
for any increase in costs resulting therefrom.

ARTICLE 38  RELATIONSHIP OF THE PARTIES
---------------------------------------

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

ARTICLE 39  SUCCESSORS BOUND
----------------------------

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

ARTICLE 40  ARTICLE CAPTIONS
----------------------------

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

ARTICLE 41  SEVERABILITY
------------------------

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

ARTICLE 42   GUARANTORS
-----------------------

     TSSL agrees to cause its ultimate parent company to execute and deliver a
guaranty to Purchaser substantially in the form of Exhibit A hereto.

ARTICLE 43  SURVIVAL OF OBLIGATIONS
-----------------------------------

     The Parties' rights and obligations, which, by their nature would continue
beyond the termination, cancellation or expiration of this Contract, including,
but not limited

* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION
  FOR CONFIDENTIAL TREATMENT.
<PAGE>   66
                                                                              62

to, those contained in Sub-Article 4(B) (Taxes, Levies and Duties) and Sub-
Article 4(C) (Withholding Tax), Article 18 (Intellectual Property), Article 20
(Safeguarding of Information and Technology), Article 21 (Export Control) and
Article 23 (Limitation of Liability/Indemnification) shall survive termination,
cancellation or expiration hereof. Article 10 (Warranty) and Article 11
(Contractor Support), shall survive termination, cancellation or expiration
hereof, if and only if, this Contract is terminated by Purchaser pursuant to
Sub-Article 13(A).

ARTICLE 44  NON-WAIVER
----------------------

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

ARTICLE 45  LANGUAGE
--------------------

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

ARTICLE 46  ENTIRE AGREEMENT
----------------------------

     This Contract supersedes all prior oral or written understanding between
the Parties and constitutes the entire agreement with respect to the subject
matter herein. Any modification, amendment, waiver, approval or consent given
hereunder must be evidenced by a writing signed by authorized representatives of
all Parties.
<PAGE>   67
                                                                              63

     This Contract is executed in Bonn, Germany by a duly authorized
representative of the Purchaser and in Bonn, Germany by a duly authorized
representative of Contractor as set forth below.

                              TYCO SUBMARINE SYSTEMS LTD.

                             By: /s/ Martin T. Leone
                                 -------------------------
                              Name: Martin T. Leone
                             Title: Managing Director
                              Date: May 6, 1998

                              PACIFIC CROSSING LTD.

                              By: /s/ David Lee
                                 -------------------------
                               Name: David Lee
                              Title: Director
                               Date: May 6, 1998

<PAGE>   68

                                                                       EXHIBIT A
                                                                              TO
                                                           CONSTRUCTION CONTRACT

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

                                    GUARANTY

                                       by

                             TYCO INTERNATIONAL LTD.

                                   in favor of

                                   -----------

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

                         Dated as of _________ __, 1998

                         ------------------------------
<PAGE>   69
                  GUARANTY, dated as of __________ __, 1998, by Tyco
International Ltd., a corporation ("Tyco" or the "Guarantor"), in favor of     ,
a Bermuda corporation (the "Purchaser").

                                 R E C I T A L S

                  (A) Pursuant to the Project Development and Construction
Contract (as the same may from time to time be amended, modified or
supplemented, the "Contract") dated as of April 21, 1998 between Tyco Submarine
Systems Ltd., a Delaware corporation ("TSSL" and together with any successors or
assignees of TSSL under the Contract, the "Contractor") and the Purchaser, the
Contractor has agreed to design, build and install the System.

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

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

                  (D) Tyco is the owner either directly or indirectly of all of
the capital stock of TSSL.

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

                                    ARTICLE 1

                                   DEFINITIONS

                  SECTION 1.1. Definitions. Capitalized terms not otherwise
defined in this Guaranty shall have the meanings ascribed to them in the
Contract. As used in this Guaranty, the following terms have the following
meanings unless the context otherwise requires:

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

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

                                       1
<PAGE>   70
                                    ARTICLE 2

                                  THE GUARANTY

                  SECTION 2.1. The Guaranty. Except as expressly set forth
herein, the Guarantor hereby unconditionally guarantees to Purchaser the full
and punctual performance by Contractor (i) of the Work required under the
Contract for the System to be Ready for Final Acceptance and/or the payment of
damages (including, without limitation, liquidated damages) for Contractor's
failure to perform such Work, in each case subject to the limitations on
liability therefor expressly set forth in the Contract and (ii) of the covenants
and other obligations of the Contractor under the Contract (collectively, the
"Guarantied Obligations"). The Guarantor and the Purchaser expressly acknowledge
that, subject to Section 2.5 below, default by the Contractor or the failure of
the Contractor to perform any Guarantied Obligation in the time required in each
case under the Contract, is a condition of the exercise of this Guaranty. If the
Purchaser requests the Guarantor to perform any Guarantied Obligation (other
than the payment of money) the Guarantor may undertake to satisfy such
obligation by causing another qualified person to perform such Guarantied
Obligation or, in its sole discretion, by assigning such obligation to a
qualified party; provided, that such assignment shall not relieve the Guarantor
of any liability for the performance of such obligation unless and until such
obligation has been completely performed. The Guarantied Obligations shall
conclusively be deemed to have been created in reliance upon this Guaranty.

                  SECTION 2.2. Termination of Guaranty. This Guaranty shall
remain in full force and effect until the earliest date on which (i) all of the
Guarantied Obligations have been completely performed and paid in full or (ii)
the Date of Final Acceptance of the System shall be deemed to have occurred
under the Contract. The Guarantor's payment of a portion, but not all, of the
Guarantied Obligations shall in no way limit, affect, modify or abridge the
Guarantor's liability, as set forth herein, for any portion of the Guarantied
Obligations that has not been completely performed or indefeasibly paid in full.

                  SECTION 2.3. Guaranty Unconditional. Except as expressly set
forth herein, the Guarantor agrees that the obligations of the Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by any of the following, whether with or without notice to or assent by
the Guarantor:

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

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

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

                                       2
<PAGE>   71
                     (iv) any change in the corporate existence, structure or
         ownership of the Contractor, or any insolvency, bankruptcy,
         reorganization or other similar proceeding affecting the Contractor or
         its assets or any resulting release or discharge of any obligation of
         the Contractor contained in the Contract;

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

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

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

Notwithstanding any provision of this Guaranty to the contrary, the Guarantor
shall be entitled to assert as a defense to any claim for payment or performance
of the Guarantied Obligations, that (i) such Guarantied Obligations are not
currently due under the terms of the Contract or (ii) that such Guaranteed
Obligations have previously been paid or performed in full.

                  SECTION 2.4. Waivers of Notices and Defenses. The Guarantor
hereby waives acceptance hereof, presentment, demand, protest and any notice not
provided for herein, as well as any requirement that at any time any action be
taken by any corporation or person against the Contractor or any other
corporation or person.

                  SECTION 2.5. Stay. The Guarantor agrees that, notwithstanding
anything to the contrary herein, if the Purchaser is stayed upon the insolvency,
bankruptcy, or reorganization of the Contractor from exercising its rights to
enforce or exercise any right or remedy with respect to the Guarantied
Obligations, or is prevented from giving any notice or demand for payment or
performance or talking any action to realize on any security or collateral or is
prevented from collecting any of the Guarantied Obligations, in any such case,
by such proceeding or action, the Guarantor shall pay or render to the Purchaser
upon demand therefor the amount or performance that would otherwise have been
due had such rights and remedies been permitted to be exercised by the
Purchaser.

                  SECTION 2.6. No Enforcement of Subrogation. Upon making any
payment or performance with respect to any Guarantied Obligation hereunder, the
Guarantor shall be subrogated to the rights of the Purchaser against the
Contractor with respect to such payment or performance; provided that the
Guarantor shall not enforce any payment or performance right by way of
subrogation until all Guarantied Obligations been paid and performed in full.

                                        3
<PAGE>   72
                                    ARTICLE 3

                         REPRESENTATIONS AND WARRANTIES

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

                  SECTION 3.1. Binding Obligation. This Guaranty has been duly
and validly executed and delivered by the Guarantor and constitutes the legal,
valid and binding obligation of the Guarantor enforceable against the Guarantor
in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and by equitable principles relating
to the availability of equitable remedies.

                  SECTION 3.2. Relationship to the Contractor. As of the date
hereof, Tyco is the owner, directly or through one or more wholly-owned
subsidiaries, of all of the issued and outstanding capital stock of TSSL; the
agreement of the Purchaser to enter into the Contract with TSSL is of
substantial and material benefit to Tyco; and Tyco has reviewed and approved
copies of the Contract and all other related documents and is fully informed of
the remedies the Purchaser may pursue upon the occurrence of a default under the
Contract. This Guaranty will remain in full force and effect if TSSL ceases to
be a direct or indirect subsidiary of Tyco.

                                    ARTICLE 4

                                  MISCELLANEOUS

                  SECTION 4.1. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
facsimile transmission, telex or similar writing) and shall be given to such
party at its address, telecopy number or telex number set forth, in the case of
the Guarantor, on the signature pages hereof, or in the case of the Purchaser,
in the Contract, or such other address or telecopy number or telex number as
such party may hereafter specify for the purpose by notice to the other party.
Each such notice, request or other communication shall be effective (i) if given
by facsimile transmission, when such telecopy is transmitted to the telecopy
number specified in this Section and answerback has been received, (ii) if given
by telex, when such telex is transmitted to the telex number specified in this
Section and the appropriate answerback is received, (iii) if given by mail,
three business days after such communication is deposited in the mails with
first class (or, in the case of international mail, airmail) postage prepaid,
addressed as aforesaid, or (iv) if given by any other means, when delivered at
the address specified in this Section.

                  SECTION 4.2. No Waivers. No failure or delay by the Purchaser
in exercising any right, power or privilege hereunder or under the Contract
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.

                                       4
<PAGE>   73
                  SECTION 4.3. Amendments and Waivers. This Guaranty constitutes
the complete agreement of the Purchaser and the Guarantor with respect to the
subject matter hereof and supersedes all prior or contemporaneous negotiations,
promises, covenants, agreements or representations. No amendment, modification,
termination or waiver of any provision of this Guaranty, shall in any event be
effective without the written consent of the Purchaser and Guarantor.

                  SECTION 4.4. Successors and Assigns; Beneficiaries. This
Guaranty is a continuing Guaranty and shall be binding upon the Guarantor and
its successors and assigns, provided, however, that the Guarantor may not assign
this Guaranty or any of the rights or obligations of the Guarantor hereunder
without the prior written consent of the Purchaser and a majority of the lenders
referred to below. This Guaranty shall inure to the benefit of (i) the Purchaser
and its successors and assigns permitted under the Contract, (ii) any
"Transferee" under Sub-Articles 37(D) or 37(E) of the Contract and its
successors and assigns permitted under the Contract, (iii) any lenders
participating in the financing of the System to which the Purchaser assigns its
rights hereunder and (iv) any of the successors, assigns and transferees of such
lenders to whom the Contract has also been assigned in accordance with the terms
of any consent to the assignment of the Contact executed by Contractor. Nothing
contained in this Guaranty shall be deemed to confer upon anyone other than the
parties hereto and the other beneficiaries described in the preceding sentence
any right to insist upon or to enforce the performance or observance of any of
the obligations contained herein. If requested by the Purchaser, the Guarantor
will execute and deliver a consent, in a form reasonably requested by such
lenders, to such assignment in favor of such lenders.

                  SECTION 4.5. Limitation on Liability. Notwithstanding anything
to the contrary contained or implied herein, except as otherwise agreed by
Guarantor and Purchaser, the aggregate liability for payment by Guarantor
hereunder shall not in any event exceed the maximum aggregate liability set
forth in Sub-Article 23(B) of the Contract, as such amount may be increased or
decreased pursuant to such Article, less amounts previously paid as damages
under the Contract to the Purchaser and/or its successors and assigns by
Contractor.

                  SECTION 4.6. APPLICABLE LAW. THIS GUARANTY SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

                  SECTION 4.7.  JURISDICTION.

                  (a) ANY ACTION OR PROCEEDING AGAINST THE GUARANTOR RELATING IN
ANY WAY TO THIS GUARANTY MAY BE BROUGHT AND ENFORCED IN THE COURTS OF THE STATE
OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
THE GUARANTOR IRREVOCABLY CONSENTS TO THE JURISDICTION OF EACH SUCH COURT IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING. THE GUARANTOR IRREVOCABLY APPOINTS CT
CORPORATION, WHICH CURRENTLY MAINTAINS AN OFFICE IN NEW YORK, NEW YORK SITUATED
AT 1633 BROADWAY, AS ITS AGENT TO RECEIVE SERVICE OF

                                       5
<PAGE>   74
PROCESS OR OTHER LEGAL SUMMONS FOR PURPOSES OF ANY SUCH ACTION OR PROCEEDING.
THE GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO THE GUARANTOR AT ITS ADDRESS
AS PROVIDED FOR NOTICES HEREUNDER. THE FOREGOING SHALL NOT LIMIT THE RIGHT OF
THE PURCHASER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING
ANY ACTION OR PROCEEDING, OR TO OBTAIN EXECUTION OF ANY JUDGMENT, IN ANY OTHER
JURISDICTION.

                  (b) THE GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING
ARISING UNDER THIS GUARANTY IN ANY COURT LOCATED IN THE STATE OF NEW YORK, AND
HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY COURT LOCATED IN THE STATE
OF NEW YORK IS NOT A CONVENIENT FORUM FOR ANY SUCH ACTION OR PROCEEDING.

                  SECTION 4.8. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY
IRREVOCABLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED UPON, OR ARISING OUT OF, THIS GUARANTY OR ANY OTHER RELATED
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS OR ACTIONS OF
THE PURCHASER OR THE GUARANTOR RELATING THERETO.

                  SECTION 4.9. Judgment. The obligations of the Guarantor in
respect of this Guaranty due to any party hereto shall, notwithstanding any
judgment in a currency (the "judgment currency") other than Dollars, be
discharged only to the extent that on the Business Day following receipt by such
party of any sum adjudged to be so due in the judgment currency such party may
in accordance with normal banking procedures purchase Dollars with the judgment
currency; if the amount of Dollars so purchased is less than the sum originally
due to such party in Dollars, the Guarantor agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify such party against such loss,
and if the amount of Dollars so purchased exceeds the sum originally due to any
party to this Guaranty, such party agrees to remit to the Guarantor, such
excess.

                  SECTION 4.10. Severability. If any provision in or obligation
under this Guaranty shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.

                  SECTION 4.11. Interpretation. Section headings in this
Guaranty are included herein for convenience of reference only and shall not
constitute a part of this Guaranty for any other purpose or be given any
substantive effect.

                                       6
<PAGE>   75
                  SECTION 4.12. Further Assurances. At any time or from time to
time, upon the request of the Purchaser, the Guarantor shell execute and deliver
such further documents and do such other acts and things as the Purchaser may
reasonably request in order to effect fully the purposes of this Guaranty. The
Guarantor agrees to be liable for any reasonable expenses incurred by Purchaser
and/or its successors and assigns with respect to any action or proceeding to
enforce this Guaranty. The Guarantor agrees to deliver an opinion of counsel
satisfactory to the Purchaser, addressed to the Purchaser and the lenders
described in Section 4.4(ii) hereof substantially in the form of Exhibit C to
the Contract.

                  IN WITNESS WHEREOF, the Guarantor has executed this Guaranty
by its duly authorized officer as of the date first above written.

                                   GUARANTOR:

                                   TYCO INTERNATIONAL LTD.

                                   By
                                      --------------------------------------
                                      Name:
                                      Title:
                                      Tyco International Ltd.
                                      41 Cedar House
                                      Hamilton HM12 Bermuda

                                    has executed this Guaranty to confirm the
-----------------------------------
matters stated in this Guaranty to be acknowledged by                       .
                                                      ----------------------

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

                                   By:
                                      --------------------------------------
                                      Name:
                                      Title:

                                       7
<PAGE>   76
                                                                       EXHIBIT B
                                                                              TO
                                                           CONSTRUCTION CONTRACT

                          FORM OF CONSENT AND AGREEMENT

                  CONSENT AND AGREEMENT, dated as of _________ __, 1998 (this
"Consent"), among Tyco Submarine Systems Ltd. ("TSSL,") and together with its
successors and assigns, the "Contractor") a corporation, [ADMINISTRATIVE AGENT],
as administrative agent for the Lenders referred to below (in such capacity, the
"Administrative Agent") and Pacific Crossing Ltd., a corporation organized and
existing under the laws of Bermuda (the "Borrower"), [US Terminal Party], and
[Japan Terminal Party] (collectively with the Borrower, the "Purchasers").*/

                              W I T N E S S E T H:

                  WHEREAS, the Borrower proposes to develop, construct, own,
provide, operate and sell capacity on a four fiber pair, fiber optic cable
system connecting (a) Norma Beach, Washington, United States to Ajigaura, Japan,
(b) Ajigaura, Japan to Shima, Japan, (c) Shima, Japan to Toro Creek, California,
United States and (d) Toro Creek, California, United States to Norma Beach,
Washington, United States (the "System") and, in connection therewith, the
Borrower has requested the Contractor to design, construct and install all
components of the System in accordance with the terms and conditions contained
in the Project Development and Construction Contract, dated as of _____ __, 1998
(as amended, supplemented or otherwise modified from time to time, the "Supply
Contract"), between the Contractor and the Purchasers;

                  [Describe any other assigned agreements and define them,
together with the Supply Contract, as the "Assigned Agreements"]

                  WHEREAS, in order to finance the construction and installation
of the System, the Borrower is entering into a Credit Agreement, dated as of
____________ __, 1998 (as amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among the Borrower, the Administrative Agent,
and the banks and financial institutions from time to time parties thereto as
lenders (collectively, the "Lenders");

                  WHEREAS, as collateral security for all obligations of the
Borrower to the Lenders, the Borrower, and the other Purchasers, among other
things, have assigned or will assign all of their right, title and interest (the
"Assigned Interest") in, to and under the Assigned Agreements to the
Administrative Agent pursuant to the Borrower Security Agreement, dated as of
___________ __, 1998 (as amended, supplemented or otherwise modified from time
to time,

---------
*/       This assumes the local companies have been formed in the U.S. and
         Japan.

                                      B-1
<PAGE>   77
the "Security Agreement"), made by the Borrower in favor of the Administrative
Agent and the other Security Agreements (as defined in the Credit Agreement);
and

                  WHEREAS, it is a condition precedent to the effectiveness of
the Credit Agreement that the Contractor and the other parties hereto shall have
executed and delivered this Consent;

                  NOW, THEREFORE, in consideration of the foregoing premises and
for good and valuable consideration, the receipt of which is hereby
acknowledged, and intending to be legally bound, the parties hereto hereby
agree, notwithstanding anything to the contrary contained in the Assigned
Agreements, as follows:

                  1. Consent to Assignment. The Contractor (a) consents to the
assignment as collateral security to the Administrative Agent, for the benefit
of the Lenders, of the Assigned Interest and (b) acknowledges the right of the
Administrative Agent in the exercise of its rights and remedies under the
Security Agreements to make all demands, give all notices, take all actions and
exercise all rights of the Borrower under the Assigned Agreements; provided,
that insofar as the Administrative Agent exercises any of its rights under the
Assigned Agreements or makes any claims with respect to payments or other
obligations under the Assigned Agreements, the terms and conditions of the
Assigned Agreements applicable to such exercise of rights or claims shall apply
to the Administrative Agent to the same extent as to each Purchaser.

                  2. Borrower's Acknowledgment. Each Purchaser acknowledges and
agrees that the Contractor is authorized to act in accordance with the
Administrative Agent's exercise of the Borrower's rights in accordance with this
Consent, and that the Contractor shall bear no liability to any Purchaser in
connection therewith.

                  3. Subsequent Transferee. The Contractor agrees that, if the
Administrative Agent shall notify the Contractor in writing (a copy of which
notice the Administrative Agent agrees to deliver simultaneously to the
Purchasers) that an Event of Default under the Credit Agreement has occurred and
is continuing and that the Administrative Agent has elected to exercise its
rights and remedies pursuant to the Security Agreements with respect to the
foreclosure or sale of the Assigned Interest, then the Administrative Agent or
any purchaser of the Assigned Interest, if the Administrative Agent or such
purchaser, as the case may be, has elected to assume all of the rights and
obligations of the Purchasers under the Assigned Agreements (a "Subsequent
Transferee"), shall (whether or not the Administrative Agent shall have
delivered a copy of the above-mentioned notice to the Purchasers and without
relieving the Administrative Agent of its obligation to do so) be substituted
for the Purchasers under such Assigned Agreements; provided that in the case of
a purchaser of the Assigned Interest, such purchaser (i) if such Event of
Default shall have occurred prior to the Date of Final Acceptance of the System,
is not and is not an affiliate of any entity engaged in the business of
designing or constructing undersea cable systems for telecommunications;
provided that such purchaser shall not request any System Upgrades, and (ii) if
such Event of Default shall have occurred prior to the Date of Final Acceptance
of the System, is sufficiently creditworthy to fulfill the obligations under the
Assigned Agreements. Upon any transfer by the Administrative Agent of the
Assigned Interest to a Subsequent Transferee, the Administrative Agent and the
Lenders shall have no

                                      B-2
<PAGE>   78
obligations under the Assigned Agreements, except to the extent any such entity
is a Subsequent Transferee.

                  4. Right to Cure. In the event of a default by the Purchasers
in the performance of any of their obligations under any Assigned Agreement, or
upon the occurrence or nonoccurrence of any event or condition under such
Assigned Agreement which would immediately or with the passage of any applicable
grace period or the giving of notice, or both, enable the Contractor to
terminate such Assigned Agreement (hereinafter, a "default"), the Contractor
will not terminate such Assigned Agreement until it first gives written notice
of such default to the Administrative Agent and affords the Administrative Agent
a period of at least 45 days from receipt of such notice to cure such default.

                  5. Replacement Agreement. In the event any Assigned Agreement
is terminated as a result of any bankruptcy or insolvency proceeding affecting
the Purchasers, the Contractor will, at the option of the Administrative Agent
exercised within 45 days after such termination, provided that all defaults
under the Assigned Agreements (other than such insolvency event) shall have been
cured, enter into a new agreement with the Administrative Agent or its
transferee or nominee having identical terms other than as necessitated by the
substitution of parties and other changes as the parties may agree; provided
that in the case of a transferee or nominee, such transferee or nominee (i) if
such termination shall have occurred prior to the Date of Final Acceptance of
the System, is not and is not an affiliate of any entity engaged in the business
of designing or constructing undersea cable systems for telecommunications;
provided that such transferee or nominee shall not request any System Upgrades
and (ii) if such termination shall have occurred prior to the Date of Final
Acceptance of the System, is sufficiently creditworthy to fulfill the
obligations under the Assigned Agreements.

                  6. No Liability. The Contractor acknowledges and agrees that
neither the Administrative Agent nor any Lender (nor any other representative of
any Lender) shall have any liability or obligation under the Assigned Agreements
as a result of this Consent, the Security Agreements or the Credit Agreement,
nor shall the Administrative Agent, any Lender or any other representative of
any Lender (except during any period in which such person has elected to become
a Subsequent Transferee pursuant to Sections 3 and 5) be obligated or required
to perform any of the Purchasers' obligations under the Assigned Agreements or
to take any action to collect or enforce any claim for payment assigned under
the Security Agreements.

                  7. Representations and Warranties. The Contractor hereby
represents and warrants, for the benefit of the Administrative Agent and the
Lenders, that:

                  (a) this Consent and each Assigned Agreement is in full force
         and effect, has been duly executed and delivered on behalf of the
         Contractor, and constitutes a valid and binding obligation of the
         Contractor enforceable against the Contractor in accordance with its
         terms except as enforceability may be limited by general principles of
         equity and by applicable bankruptcy, insolvency, reorganization,
         moratorium or similar laws affecting the rights of creditors generally;

                                      B-3
<PAGE>   79

                  (b) no consent, license, approval or authorization of, or
         filing, registration or declaration with, or exemption by, any
         governmental body, bureau or agency or any other person is required in
         connection with the execution, delivery and performance by the
         Contractor of this Consent or any of the Assigned Agreements, except as
         provided in the express terms of the Assigned Agreements and other than
         those which have been duly obtained and are in full force and effect;

                  (c) except pursuant to this Consent and as expressly set forth
         in the Assigned Agreements, the Contractor has not consented to any
         pledge, assignment or other transfer of any interest in the Assigned
         Agreements; and

                  (d) the Contractor has the corporate power and is duly
         authorized to enter into this Consent and the Assigned Agreements and
         the execution, delivery and performance of this Consent and each of the
         Assigned Agreements does not violate the charter or bylaws of the
         Contractor or any law applicable to the Contractor or any contract
         material to the Contractor or the Assigned Agreements.

                  8. GOVERNING LAW. THIS CONSENT SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
UNITED STATES OF AMERICA.

                  9. Submission to Jurisdiction. The parties hereto submit to
the nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in New
York City for purposes of all legal proceedings arising out of or relating to
this Consent or the transactions contemplated hereby. The parties hereto
irrevocably waive, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.

                  10. Counterparts. This Consent may be executed in any number
of counterparts, all of which together shall constitute a single instrument, and
it shall not be necessary that any counterpart be signed by all the parties
hereto.

                  11. Severability. Any provision of this Consent that may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

                  12. Amendment, Waiver. Neither this Consent nor any of the
terms hereof may be terminated, amended, supplemented, waived or modified except
by an instrument in writing signed by the Contractor, the Purchasers and the
Administrative Agent.

                  13. Notices. All notices and other communications required or
permitted by the terms hereof shall be in writing and shall be given in person
or by means of telecopy (promptly

                                      B-4
<PAGE>   80
followed by delivery in person, by mail or by courier in the case of a notice of
default) or other wire transmission, or mailed by registered or certified mail,
or sent by courier, in each case addressed as follows or to such other address
as any party may designate by written notice to the other parties:

                           The Borrower and the Purchasers:

                                            Pacific Crossing Ltd.
                                            Wessex House
                                            45 Reid Street
                                            Hamilton HM1Z
                                            Bermuda
                                            Fax:  441-296-6749/8606
                                            Attn:  Cameron Adderly

                           The Contractor:

                                            Tyco Submarine Systems Ltd.
                                            340 Mt. Kemble Avenue
                                            Morristown, NJ 07960
                                            Fax: 973-326-2711

                           The Administrative Agent:

                                            [ADMINISTRATIVE AGENT],
                                            as Administrative Agent
                                            [Address]
                                            Attn:
                                            Fax:

Any such communication shall become effective when delivered by hand, or three
days after being deposited in the mail, first class postage prepaid, or, in the
case of an internationally recognized overnight courier service, one Business
Day after delivery to such courier service, or, in the case of transmission by
telecopier, when confirmation of receipt is obtained.

                  14. Third Party Beneficiaries. This Consent and the
representations, covenants and agreements contained herein are and shall be held
to be for the sole benefit of the parties hereto and the Lenders, and the
respective successors and assigns of the Lenders.

                                      B-5
<PAGE>   81
                  IN WITNESS WHEREOF, the parties have caused this Consent to be
duly executed and delivered by their officers thereunto duly authorized as of
the date first above written.

                                     TYCO SUBMARINE SYSTEMS LTD.

                                     By:
                                        --------------------------------------
                                        Name:
                                        Title:

                                     [ADMINISTRATIVE AGENT], as Administrative
                                     Agent

                                     By:
                                        --------------------------------------
                                        Name:
                                        Title:

                                     By:
                                        --------------------------------------
                                        Name:
                                        Title:

                                     PACIFIC CROSSING LTD.

                                     By:
                                        --------------------------------------
                                        Name:
                                        Title:

                                     [US TERMINAL PARTY]

                                     By:
                                        --------------------------------------
                                        Name:
                                        Title:

                                      B-6
<PAGE>   82
                                     [JAPAN TERMINAL PARTY]

                                     By:
                                        --------------------------------------
                                        Name:
                                        Title:

                                      B-7
<PAGE>   83
                                                                       EXHIBIT C
                                                                              TO
                                                           CONSTRUCTION CONTRACT

                          FORM OF CONTRACTOR OPINION*/

                                                     DATE

Re:      PACIFIC CROSSING CABLE SYSTEM

[Administrative Agent],
as Administrative Agent, and the banks
listed on Schedule A hereto

Dear Sirs:

                  We have participated in the preparation of the Project
Development and Construction Contract dated _________ __, 1998 between Tyco
Submarine System Ltd. (the "Contractor") and Pacific Crossing Ltd. ("PCL"), and
the Consent and Agreement dated as of ________ __, 1998 among Tyco Submarine
System Ltd., [Administrative Agent], as Administrative Agent, and PCL
(collectively, the "Agreements"), and have acted as counsel for Contractor for
the purpose of rendering this opinion.

                  Upon the basis of the foregoing and subject to the
qualifications set forth below, we are of the opinion that:

                  1. Contractor has been duly incorporated and is validly
         existing as a corporation in good standing under the laws of the State
         of Delaware.

                  2. The Agreements have been duly authorized, executed and
         delivered by Contractor.

                  3. Each of the Agreements constitutes a valid and binding
         agreement of Contractor, enforceable against Contractor in accordance
         with its terms, subject to the effect of applicable bankruptcy,
         insolvency or similar laws affecting creditors' rights generally and
         equitable principles of general applicability.

                  4. The execution, delivery and performance by Contractor of
         each of the Agreements and the consummation of the transactions
         contemplated thereby by

---------
*/       Counsel may include usual, standard qualifications.
<PAGE>   84
[Administrative Agent], et al.          2                      DATE

         Contractor will not violate or conflict with any laws, rules or
         regulations applicable to Contractor or any provision of the
         Certificate of Incorporation or the Bylaws of Contractor or, to my
         knowledge without independent investigation, any agreement binding on
         Contractor.

                  5. The execution and delivery of the Agreements by Contractor,
         the consummation by Contractor of the transactions provided for in the
         Agreements and the performance of or compliance with the obligations
         specified in the Agreements do not result in or constitute a violation
         of or default pursuant to any orders, judgments or decrees of which we
         have knowledge to which Contractor is a party or by which Contractor or
         its assets are bound.

         [The foregoing opinion is subject to the following qualifications:

                  1. We express no opinion as to any indemnification or
         exculpation provisions in any of the Agreements that purport to
         indemnify any person or entity for or relieve any person or entity of
         responsibility for its own gross negligence or willful misconduct or
         insofar as any of said provisions contravene public policy.

                  2. We express no opinion as to any provision in any of the
         Agreements providing for liquidated damages or extended payment charges
         to the extent any such provision is determined to be a penalty
         provision.

                  3. In rendering the foregoing opinion, we have, with your
         consent and without independent investigation, assumed that the
         Agreements have been duly authorized, executed and delivered by the
         each of the parties thereto and constitute valid and binding agreements
         of each of the parties thereto (other than Contractor).

                  4. We are members of the bar of the State of New York and the
         foregoing opinion is limited to the laws of the State of New York and
         the federal laws of the United States of America.]
<PAGE>   85
[Administrative Agent], et al.          3                      DATE

                  This opinion is being rendered to [Administrative Agent], as
Administrative Agent, and the banks listed on Schedule A hereto and may not,
except as may be required by law or regulatory authority, be distributed to any
other person or entity and may not be relied upon by any other person or entity
without our prior written consent.

                                         Very truly yours,

                                         [CONTRACTOR'S COUNSEL]
<PAGE>   86
                                   Schedule A

         [To be provided.]

<PAGE>   87
                                   Schedule A

[To be provided.]
<PAGE>   88
                                                                       EXHIBIT D
                                                                              TO
                                                           CONSTRUCTION CONTRACT

                            FORM OF ESCROW AGREEMENT

                                      PC-1

                  ESCROW AGREEMENT dated as of ______ __, 1998 by and among
Pacific Crossing Ltd., a corporation organized and existing under the laws of
Bermuda (hereinafter called the "Purchaser"), Tyco Submarine Systems Ltd., a
corporation organized and existing under the laws of the State of Delaware,
United States, and having an office at 340 Mt. Kemble Avenue, Morristown, New
Jersey, United States ("Contractor") and Citibank, N.A.
(hereinafter called the "Escrow Agent").

                              W I T N E S S E T H :

                  WHEREAS, pursuant to the Project Development and Construction
Contract, dated as of ______ __, 1998 (said agreement, as the same may be
amended, modified or supplemented from time to time, the "Supply Contract"),
among the Purchaser, and Contractor, there is required to be deposited by
Purchaser in escrow certain payments to be held by the Escrow Agent subject to
the terms and conditions set forth herein.

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

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

1. Establishment of Dispute Account. The Purchaser and the Contractor hereby
establish and, at all times until this Escrow Agreement is terminated, shall
maintain, with the Escrow Agent an escrow account (the "Dispute Account"), in
the name of and under the control of Citibank, N.A., as Escrow Agent, in which
the Purchaser shall deposit payments (if and when) made pursuant to Sub-Articles
5(C)(5) and 12(C)(2) of the Supply Contract (the "Disputed Payments"). Such
funds shall be delivered to, and held by the Escrow Agent in, the Escrow Agent's
account set forth in Exhibit C hereto. The Escrow Agent shall hold, subject to
the terms and conditions hereof, such cash and such investments and
reinvestments as may be permitted pursuant to Section 2 hereof (which, together
with the income from such investments, are hereinafter, referred to as the
"Dispute Fund"). If any withholding tax is required to be paid from amounts in
the Dispute Fund, the Contractor and the Purchaser shall deliver to the Escrow
Agent
<PAGE>   89
                                                                               2

any necessary and appropriate forms instructing the Escrow Agent as to the
amount and timing of such payments.

                  2. Investment of Dispute Fund. During the term of this Escrow
Agreement, the Dispute Fund shall be invested and reinvested by the Escrow Agent
in interest-bearing or money market bank accounts of the Escrow Agent and such
other investments as the Contractor and the Purchaser may mutually agree upon
from among the Permitted Investments described on Exhibit D. In the absence of
any instruction, the Escrow Agent shall invest and reinvest the Dispute Fund in
its sole discretion in interest-bearing or money market bank accounts of the
Escrow Agent.

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

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

                  4. The Escrow Agent may rely and shall be protected in acting
or refraining from acting upon any written notice, order, determination,
instruction or request furnished to it
<PAGE>   90
                                                                               3

hereunder and believed by it to be genuine and to have been signed or presented
by the proper party or parties. The Escrow Agent shall have no duty to solicit
any payments which may be due it hereunder.

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

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

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

                  8. The Purchaser and the Contractor hereby agree to jointly
and severally indemnify the Escrow Agent for, and to hold it harmless against
any loss, liability or expense incurred without gross negligence or bad faith on
the part of the Escrow Agent, arising out of or in connection with its entering
into this Agreement and carrying out its duties hereunder, including the costs
and expenses of defending itself against any claim of liability and with respect
to any investigation. The Escrow Agent may charge against all property in the
Dispute Account any amounts owed to it under the foregoing indemnity if not paid
when due or may withhold payment of such property as security for any
unliquidated claims.

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

                  10. The Escrow Agent hereby expressly acknowledges and agrees
that it shall have neither a lien nor any other right or claim on any amounts
deposited in the Dispute Account
<PAGE>   91
                                                                               4

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

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

                           If to Escrow Agent:
                           Citibank, N.A.

                           _________________________________

                           _________________________________

                           Attn: ___________________________

                           Telecopy No. ____________________

                           If to Purchaser:
                           Pacific Crossing Ltd.
                           Wessex House
                           45 Reid Street
                           Hamilton HM1Z
                           Bermuda
                           Attn:  Cameron Adderly
                           Fax:  441-296-6749/8606

                           If to Contractor:
                           Tyco Submarine Systems Ltd.
                           340 Mt. Kemble Avenue
                           Morristown, New Jersey, 07960
                           Tel: 973-326-3500
                           Fax: 973-326-2711

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

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

                  13. It is understood and agreed that the Escrow Agent makes no
representations or warranties hereunder.
<PAGE>   92
                                                                               5

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

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

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

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

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

                  19. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK AND ANY ACTION BROUGHT
HEREUNDER SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, LOCATED IN
THE COUNTY OF NEW YORK. EACH PARTY HERETO IRREVOCABLY WAIVES ANY OBJECTION ON
THE GROUND OF VENUE, FORUM NON-CONVENIENS OR ANY SIMILAR GROUNDS AND IRREVOCABLY
CONSENTS TO SERVICE OF PROCESS BY MAIL OR IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW AND CONSENTS TO THE JURISDICTION OF SAID COURTS.
<PAGE>   93
                                                                               6

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

                                       PACIFIC CROSSING LTD.

                                       By:
                                          ------------------------------------
                                             Name:
                                             Title:

                                       TYCO SUBMARINE SYSTEMS LTD.

                                       By:
                                          ------------------------------------
                                             Name:
                                             Title:

                                       CITIBANK, N.A.

                                       By:
                                          ------------------------------------
                                             Name:
                                             Title:
<PAGE>   94
                          EXHIBIT A TO ESCROW AGREEMENT

                           Account Name:    ____________________________________
                           Account Number:  __________________
                           Bank Name:       _________________________________
                           ABA No.:         __________________
                           Reference:       __________________  Attn: __________
<PAGE>   95
                          EXHIBIT B TO ESCROW AGREEMENT

                           Account Name:    ____________________________________
                           Account Number:  __________________
                           Bank Name:       _________________________________
                           ABA No.:         __________________
                           Reference:       __________________  Attn: __________
<PAGE>   96
                          EXHIBIT C TO ESCROW AGREEMENT

                Account Name:    _______________________________
                ABA Number:      _______________________________
                Account Name:    _______________________________
                Account Number:  _______________________________
                Attention:       ____________________ (tel: ________________
<PAGE>   97
                          EXHIBIT D TO ESCROW AGREEMENT

                              Permitted Investments

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

                  (b) Investments in certificates of deposit, banker's
acceptances and time deposits maturing within 180 days from the date of
acquisition thereof issued or guaranteed by or placed with, and overnight sweep
accounts, money market deposit accounts issued or offered by, (i) the Escrow
Agent or any of its affiliates or (ii) any of Purchaser's senior lenders and/or
any other bank which, in each case, has a combined capital and surplus and
undivided profits of not less than $250,000,000.
<PAGE>   98
                                                                       EXHIBIT E
                                                                              TO
                                                           CONSTRUCTION CONTRACT

                          LIST OF MAJOR SUBCONTRACTORS

CABLE:  KDD-SCS, OCC, Hitachi Cable Company, Alcatel Submarine Networks (ASN)

-        REPEATERS: KDD-SCS, NEC, Fujitsu, ASN

-        TERMINAL EQUIPMENT: KDD-SCS, Lucent Technologies, Toshiba, Alcatel,
         ASN, Northern Telcom, Mitsubishi, General Dynamics, TYCO International
         Ltd (& Subsidiaries), DSC, NEC, Fujitsu

-        MARINE INSTALLATION SERVICES: KDD, KDD-SCS, C&W Marine, France Telcom,
         Temasa, TeleDenmark Marine, SBSS, General Offshore Corp., NTTI,
         Harmsdorf, VanOordtz ACZ, SAIC, C&C Technologies, Sea Floor Surveys
         International, Korea Cable Ship Company
<PAGE>   99
                                                                       EXHIBIT F
                                                                              TO
                                                           CONSTRUCTION CONTRACT

                              INTELLECTUAL PROPERTY

                         TO BE PROVIDED WITHIN 30 DAYS.<PAGE>   1
                                                                   EXHIBIT 10.14

                              ASIA GLOBAL CROSSING
                            2000 STOCK INCENTIVE PLAN

1.       PURPOSE OF THE PLAN

         The purpose of the Plan is to aid the Company, its Parent, Subsidiaries
and Affiliates in recruiting and retaining key individuals of outstanding
ability and to motivate such individuals to exert their best efforts on behalf
of the Company, its Parent, Subsidiaries and Affiliates by providing incentives
through the granting of Awards. The Company expects that it will benefit from
the added interest which such key individuals will have in the welfare of the
Company as a result of their proprietary interest in the Company's success.

2.       DEFINITIONS

         The following capitalized terms used in the Plan have the respective
meanings set forth in this Section:

         (a)      Act: The Securities Exchange Act of 1934, as amended, or any
                  successor thereto.

         (b)      Affiliate: With respect to the Company, any company directly
                  or indirectly controlling, controlled by, or under common
                  control with, the Company or any other entity designated by
                  the Board of Directors of the Company in which the Company has
                  an interest.

         (c)      Award: An Option, Stock Appreciation Right or Other
                  Stock-Based Award granted pursuant to the Plan.

         (d)      Beneficial Owner: A "beneficial owner", as such term is
                  defined in Rule 13d-3 under the Act (or any successor rule
                  thereto).

         (e)      Board: The Board of Directors of the Company.

         (f)      Board Change: Within the twenty-four consecutive month period
                  following the occurrence of any of the events set forth in
                  Section 2(u)(i), individuals who immediately prior to the
                  occurrence of any of such events constitute the Board cease
                  for any reason to constitute at least a majority thereof
                  (other than in the event of a director's death or Disability).

         (g)      Cause: In the event that a Participant is a party to an
                  employment agreement with the Company, the Parent, a
                  Subsidiary or an Affiliate at the date an Award is granted,
                  "Cause" shall have the same meaning ascribed to such term in
                  such employment agreement. In the event that a Participant is
                  not party to any such employment agreement or there is no such
                  definition, "Cause" shall be defined as follows:
<PAGE>   2
                  (i)      a Participant's continued failure substantially to
                           perform the Participant's duties (other than as a
                           result of total or partial incapacity due to physical
                           or mental illness) for a period of 10 days following
                           written notice by the Company to the Participant of
                           such failure; or

                  (ii)     dishonesty in the performance of, or willful
                           malfeasance or willful misconduct in connection with,
                           a Participant's duties; or

                  (iii)    an act or acts on a Participant's part constituting
                           (x) a felony under the laws of the United States or
                           any state thereof or (y) a misdemeanor involving
                           moral turpitude; or

                  (iv)     any act or omission of a Participant which is
                           materially injurious to the financial condition or
                           business reputation of Parent, the Company or any of
                           its Subsidiaries or Affiliates; or

                  (v)      a Participant's breach of any restrictive covenants
                           contained in any agreement with the Company or any of
                           its Subsidiaries or Affiliates to which Participant
                           is a party.

         (h)      Change in Control: The occurrence of any of the following
                  events:

                  (i)      any Person, other than the Company, any trustee or
                           other fiduciary holding securities under an employee
                           benefit plan of the Company, or any company owned,
                           directly or indirectly, by the shareholders of the
                           Company in substantially the same proportions as
                           their ownership of Stock of the Company, becomes the
                           Beneficial Owner, directly or indirectly, of
                           securities of the Company, (a) representing a greater
                           percentage of the combined voting power of the
                           Company's then-outstanding securities than the
                           percentage of the combined voting power of the
                           Company's then-outstanding securities held by Parent
                           and its Affiliates and (b) representing 30% or more
                           of the combined voting power of the Company's
                           then-outstanding securities; or

                  (ii)     during any period of twenty-four months (not
                           including any period prior to the Effective Date),
                           individuals who at the beginning of such period
                           constitute the Board, and any new director (other
                           than (A) a director nominated by a Person who has
                           entered into an agreement with the Company to effect
                           a transaction described in Sections 2(h)(i), (iii) or
                           (iv) of the Plan, (B) a director nominated by any
                           Person (including the Company) who publicly announces
                           an intention to take or to consider taking actions
                           (including, but not limited to, an actual or
                           threatened proxy contest) which if consummated would
                           constitute a Change in Control or (C) a director
                           nominated by any Person, other than Parent and its
                           Affiliates, who is the Beneficial Owner, directly or
                           indirectly, of securities
<PAGE>   3
                           of the Company representing 10% or more of the
                           combined voting power of the Company's securities)
                           whose election by the Board or nomination for
                           election by the Company's shareholders was approved
                           in advance by a vote of at least two-thirds (2/3) of
                           the directors then still in office who either were
                           directors at the beginning of the period or whose
                           election or nomination for election was previously so
                           approved, cease for any reason to constitute at least
                           a majority thereof; or

                  (iii)    the Company is merged or consolidated with any other
                           company, other than a merger or consolidation which
                           would result in the shareholders of the Company
                           immediately prior thereto continuing to own (either
                           by remaining outstanding or by being converted into
                           voting securities of the surviving entity) more than
                           50% of the combined voting power of the voting
                           securities of the Company or such surviving entity
                           outstanding immediately after such merger or
                           consolidation; or

                  (iv)     the complete liquidation of the Company or the sale
                           or disposition by the Company of all or substantially
                           all of the Company's assets, other than a liquidation
                           of the Company or sale of its assets to an Affiliate
                           into a wholly-owned subsidiary.

         (i)      Code: The Internal Revenue Code of 1986, as amended, or any
                  successor thereto.

         (j)      Committee: The Compensation Committee of the Board, or, if
                  applicable, the subcommittee to which such Committee delegates
                  its duties and powers.

         (k)      Company: Asia Global Crossing.

         (l)      Disability: Inability to engage in any substantial gainful
                  activity by reason of a medically determinable physical or
                  mental impairment which constitutes a permanent and total
                  disability, as defined in Section 22(f)(3) of the Code (or any
                  successor section thereto). The determination whether a
                  Participant has suffered a Disability shall be made by the
                  Committee based upon such evidence as it deems necessary and
                  appropriate. A Participant shall not be considered disabled
                  unless he or she furnishes such medical or other evidence of
                  the existence of the Disability as the Committee, in its sole
                  discretion, may require.

         (m)      Effective Date: The date on which the registration statement
                  for the Company's initial Public Offering is declared
                  effective by the Securities and Exchange Commission.

         (n)      Employer: The Company, the Parent, a Subsidiary or an
                  Affiliate, as applicable, which employs any given Participant.

         (o)      Fair Market Value: on a given date, the closing price of the
                  Shares as reported on such date on the Composite Tape of the
                  principal national securities exchange on
<PAGE>   4
                  which such Shares are listed or admitted to trading, or, if no
                  Composite Tape exists for such national securities exchange on
                  such date, then on the principal national securities exchange
                  on which such Shares are listed or admitted to trading, or, if
                  the Shares are not listed or admitted on a national securities
                  exchange, the per Share closing bid price on such date as
                  quoted on the National Association of Securities Dealers
                  Automated Quotation System (or such market in which such
                  prices are regularly quoted), or, if there is no market on
                  which the Shares are regularly quoted, the Fair Market Value
                  shall be the value established by the Committee in good faith;
                  provided, however, that for Awards granted to become effective
                  on the date of the Company's initial Public Offering, Fair
                  Market Value shall be equal to the initial Public Offering
                  price. If no sale of Shares shall have been reported on such
                  Composite Tape or such national securities exchange on such
                  date or quoted on the National Association of Securities
                  Dealer Automated Quotation System on such date, then the
                  immediately preceding date on which sales of the Shares have
                  been so reported or quoted shall be used.

         (p)      ISO: An Option that is also an incentive stock option granted
                  pursuant to Section 6(d) of the Plan.

         (q)      LSAR: A limited stock appreciation right granted pursuant to
                  Section 7(d) of the Plan.

         (r)      Other Stock-Based Awards: Awards granted pursuant to Section 8
                  of the Plan.

         (s)      Option: A stock option granted pursuant to Section 6 of the
                  Plan.

         (t)      Option Price: The purchase price per Share of an Option, as
                  determined pursuant to Section 6(a) of the Plan.

         (u)      Parent: Global Crossing Ltd.

         (v)      Parent Triggering Event: With respect to all Participants, the
                  occurrence of the events described in Sections 2(u)(i) and
                  2(u)(ii)(x), and with respect to any individual Participant,
                  the occurrence of the events described in Sections 2(u)(i) and
                  2(u)(ii)(y):

                  (i)      The occurrence of any of the following events:

                           (A) any Person (other than a Person holding
                  securities representing 10% or more of the combined voting
                  power of Parent's outstanding securities as of the Effective
                  Date, Parent, any trustee or other fiduciary holding
                  securities under an employee benefit plan of Parent, or any
                  company owned, directly or indirectly, by the shareholders of
                  Parent in substantially the same proportions as their
                  ownership of stock of Parent), becomes the Beneficial Owner,
                  directly or
<PAGE>   5
                  indirectly, of securities of Parent representing 30% or more
                  of the combined voting power of Parent's then-outstanding
                  securities; or

                           (B) during any period of twenty-four months (not
                  including any period prior to the Effective Date), individuals
                  who at the beginning of such period constitute the Board of
                  Directors of Parent, and any new director (other than (I) a
                  director nominated by a Person who has entered into an
                  agreement with Parent to effect a transaction described in
                  Section 2(u)(i)(A), (C) or (D) of the Plan, (II) a director
                  nominated by any Person (including Parent) who publicly
                  announces an intention to take or to consider taking actions
                  (including, but not limited to, an actual or threatened proxy
                  contest) which if consummated would constitute a Parent
                  Triggering Event or (III) a director nominated by any Person
                  who is the Beneficial Owner, directly or indirectly, of
                  securities of Parent representing 10% or more of the combined
                  voting power of Parent's securities) whose election by the
                  Board of Directors of Parent or nomination for election by
                  Parent's shareholders was approved in advance by a vote of at
                  least two-thirds (2/3) of the directors then still in office
                  who either were directors at the beginning of the period or
                  whose election or nomination for election was previously so
                  approved, cease for any reason to constitute at least a
                  majority thereof; or

                           (C) the shareholders of Parent approve any
                  transaction or series of transactions under which Parent is
                  merged or consolidated with any other company, other than a
                  merger or consolidation which would result in the shareholders
                  of Parent immediately prior thereto continuing to own (either
                  by remaining outstanding or by being converted into voting
                  securities of the surviving entity) more than 65% of the
                  combined voting power of the voting securities of Parent or
                  such surviving entity outstanding immediately after such
                  merger or consolidation; or

                           (D) the shareholders of Parent approve a plan of
                  complete liquidation of Parent or an agreement for the sale or
                  disposition by Parent of all or substantially all of Parent's
                  assets, other than a liquidation of Parent or sale of its
                  assets to an Affiliate into a wholly-owned subsidiary
                  (including the Company); and

                  (ii)     The earlier to occur of (x) a Board Change or (y)
                           within the 24-month period immediately following the
                           occurrence of any event described in Section 2(u)(i),
                           the Participant's employment is terminated without
                           Cause by such Participant's Employer.

         (w)      Participant: An employee or director of the Company, its
                  Parent, Subsidiary or Affiliate, or an individual who is not
                  such an employee or director but who otherwise performs
                  services for the Company, its Parent, Subsidiary or Affiliate,
                  and in any case, who is selected by the Committee to
                  participate in the Plan.
<PAGE>   6
         (x)      Performance-Based Awards: Certain Other Stock-Based Awards
                  granted pursuant to Section 8(b) of the Plan.

         (y)      Person: A "person", as such term is used for purposes of
                  Section 13(d) or 14(d) of the Act (or any successor section
                  thereto).

         (z)      Plan: The Asia Global Crossing 2000 Stock Incentive Plan.

         (aa)     Public Offering: A sale of shares of the Company's common
                  stock to the public pursuant to a registration statement under
                  the Securities Act of 1933, as amended, that has been declared
                  effective by the Securities and Exchange Commission (other
                  than a registration statement on Form S-4 or Form S-8, or any
                  other successor or other forms promulgated for similar
                  purposes, or a registration statement in connection with an
                  offering to employees of the Company and its Subsidiaries)
                  that results in an active trading market in the Company's
                  common stock; provided, that there shall be deemed to be an
                  "active trading market" if the Company's common stock is
                  listed or quoted on a national stock exchange or the NASDAQ
                  National Market.

         (bb)     Shares: Common Shares of the Company, par value $[0.01] per
                  Share.

         (cc)     Stock Appreciation Right: A stock appreciation right granted
                  pursuant to Section 7 of the Plan.

         (dd)     Subsidiary: A subsidiary corporation, as defined in Section
                  424(f) of the Code (or any successor section thereto).

3.       SHARES SUBJECT TO THE PLAN

         The total number of Shares which may be issued under the Plan is 15% of
the total Shares outstanding as of the initial Public Offering of the Shares,
which shall not exceed [NUMBER] Shares. The maximum number of Shares for which
Options and Stock Appreciation Rights may be granted during a calendar year to
any Participant shall be 5,000,000. The maximum number of Shares for which Other
Stock-Based Awards may be granted over the life of the Plan shall be [NUMBER].
The Shares may consist, in whole or in part, of unissued Shares or treasury
Shares. The issuance of Shares or the payment of cash upon the exercise of an
Award shall reduce the total number of Shares available under the Plan, as
applicable. Shares which are subject to Awards which terminate or lapse may be
granted again under the Plan.

4.       ADMINISTRATION

         The Plan shall be administered by the Committee, which may delegate its
duties and powers in whole or in part to any subcommittee thereof consisting
solely of at least two individuals who are intended to qualify as "non-employee
directors" within the meaning of Rule 16b-3 under the Act (or any successor rule
thereto) and "outside directors" within the meaning of Section 162(m) of the
Code (or any successor section thereto). At its discretion, for so long as
<PAGE>   7
the Company remains a subsidiary of Parent, a subcommittee consisting solely of
at least two individuals who are intended to qualify as "non-employee directors"
and "outside directors" of Parent may discharge the duties and exercise the
powers reserved for the Committee hereunder. Awards may, in the discretion of
the Committee, be made under the Plan in assumption of, or in substitution for,
outstanding awards previously granted by the Company or its affiliates or a
company acquired by the Company or with which the Company combines. The number
of Shares underlying such substitute awards shall be counted against the
aggregate number of Shares available for Awards under the Plan. The Committee is
authorized to interpret the Plan, to establish, amend and rescind any rules and
regulations relating to the Plan, and to make any other determinations that it
deems necessary or desirable for the administration of the Plan. The Committee
may correct any defect or supply any omission or reconcile any inconsistency in
the Plan in the manner and to the extent the Committee deems necessary or
desirable. Any decision of the Committee in the interpretation and
administration of the Plan, as described herein, shall lie within its sole and
absolute discretion and shall be final, conclusive and binding on all parties
concerned (including, but not limited to, Participants and their beneficiaries
or successors). The Committee shall have the full power and authority to
establish the terms and conditions of any Award consistent with the provisions
of the Plan and to waive any such terms and conditions at any time (including,
without limitation, accelerating or waiving any vesting conditions). The
Committee shall require payment of any amount it may determine to be necessary
to withhold for federal, state, local or other taxes as a result of the exercise
of an Award. Unless the Committee specifies otherwise, the Participant may elect
to pay a portion or all of such withholding taxes by (a) delivery in Shares or
(b) having Shares withheld by the Company from any Shares that would have
otherwise been received by the Participant.

5.       LIMITATIONS

         No Award may be granted under the Plan after the tenth anniversary of
the Effective Date, but Awards theretofore granted may extend beyond that date.

6.       TERMS AND CONDITIONS OF OPTIONS

         Options granted under the Plan shall be, as determined by the
Committee, nonqualified or incentive stock options for federal income tax
purposes, as evidenced by the related Award agreements, and shall be subject to
the foregoing and the following terms and conditions and to such other terms and
conditions, not inconsistent therewith, as the Committee shall determine:

         (a)      Option Price. The Option Price per Share shall be determined
                  by the Committee.

         (b)      Exercisability. Options granted under the Plan shall be
                  exercisable at such time and upon such terms and conditions as
                  may be determined by the Committee, but in no event shall an
                  Option be exercisable more than ten years after the date it is
                  granted.

         (c)      Exercise of Options. Except as otherwise provided in the Plan
                  or in an Award agreement, an Option may be exercised for all,
                  or from time to time any part, of
<PAGE>   8
                  the Shares for which it is then exercisable. For purposes of
                  Section 6 of the Plan, the exercise date of an Option shall be
                  the later of the date a notice of exercise is received by the
                  Company and, if applicable, the date payment is received by
                  the Company pursuant to clauses (i), (ii) or (iii) in the
                  following sentence. The purchase price for the Shares as to
                  which an Option is exercised shall be paid to the Company in
                  full at the time of exercise at the election of the
                  Participant (i) in cash or its equivalent (e.g., by check);
                  (ii) in Shares having a Fair Market Value equal to the
                  aggregate Option Price for the Shares being purchased and
                  satisfying such other requirements as may be imposed by the
                  Committee; provided, that such Shares have been held by the
                  Participant for no less than six months (or such other period
                  as established from time to time by the Committee or generally
                  accepted accounting principles); (iii) partly in cash and
                  partly in such Shares; or (iv) through the delivery of
                  irrevocable instruments to a broker to deliver promptly to the
                  Company an amount equal to the aggregate Option price for the
                  shares being purchased. No Participant shall have any rights
                  to dividends or other rights of a stockholder with respect to
                  Shares subject to an Option until the Participant has given
                  written notice of exercise of the Option, paid in full for
                  such Shares and, if applicable, has satisfied any other
                  conditions imposed by the Committee pursuant to the Plan.

         (d)      ISOs. The Committee may grant to employees Options under the
                  Plan that are intended to be ISOs. Such ISOs shall comply with
                  the requirements of Section 422 of the Code (or any successor
                  section thereto), including, without limitation the
                  requirement that the Option Price per Share subject to an ISO
                  shall not be less than 100% of the Fair Market Value of the
                  Shares on the date an ISO is granted.. No ISO may be granted
                  to any Participant who at the time of such grant, owns more
                  than ten percent of the total combined voting power of all
                  classes of stock of the Company or of any Subsidiary, unless
                  (i) the Option Price for such ISO is at least 110% of the Fair
                  Market Value of a Share on the date the ISO is granted and
                  (ii) the date on which such ISO terminates is a date not later
                  than the day preceding the fifth anniversary of the date on
                  which the ISO is granted. Any Participant who disposes of
                  Shares acquired upon the exercise of an ISO either (i) within
                  two years after the date of grant of such ISO or (ii) within
                  one year after the transfer of such Shares to the Participant,
                  shall notify the Company of such disposition and of the amount
                  realized upon such disposition.

         (e)      Attestation. Wherever in this Plan or any agreement evidencing
                  an Award a Participant is permitted to pay the exercise price
                  of an Option or taxes relating to the exercise of an Option by
                  delivering Shares, the Participant may, subject to procedures
                  satisfactory to the Committee, satisfy such delivery
                  requirement by presenting proof of beneficial ownership of
                  such Shares, in which case the Company shall treat the Option
                  as exercised without further payment and shall withhold such
                  number of Shares from the Shares acquired by the exercise of
                  the Option.
<PAGE>   9
7.       TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

         (a)      Grants. The Committee also may grant (i) a Stock Appreciation
                  Right independent of an Option or (ii) a Stock Appreciation
                  Right in connection with an Option, or a portion thereof A
                  Stock Appreciation Right granted pursuant to clause (ii) of
                  the preceding sentence (A) may be granted at the time the
                  related Option is granted or at any time prior to the exercise
                  or cancellation of the related Option, (B) shall cover the
                  same Shares covered by an Option (or such lesser number of
                  Shares as the Committee may determine) and (C) shall be
                  subject to the same terms and conditions as such Option except
                  for such additional limitations as are contemplated by this
                  Section 7 (or such additional limitations as may be included
                  in an Award agreement).

         (b)      Terms. The exercise price per Share of a Stock Appreciation
                  Right shall be an amount determined by the Committee but in no
                  event shall such amount be less than the greater of (i) the
                  Fair Market Value of a Share on the date the Stock
                  Appreciation Right is granted or, in the case of a Stock
                  Appreciation Right granted in conjunction with an Option, or a
                  portion thereof, the Option Price of the related Option and
                  (ii) an amount permitted by applicable laws, rules, by-laws or
                  policies of regulatory authorities or stock exchanges. Each
                  Stock Appreciation Right granted independent of an Option
                  shall entitle a Participant upon exercise to an amount equal
                  to (i) the excess of (A) the Fair Market Value on the exercise
                  date of one Share over (B) the exercise price per Share, times
                  (ii) the number of Shares covered by the Stock Appreciation
                  Right. Each Stock Appreciation Right granted in conjunction
                  with an Option, or a portion thereof, shall entitle a
                  Participant to surrender to the Company the unexercised
                  Option, or any portion thereof, and to receive from the
                  Company in exchange therefor an amount equal to (i) the excess
                  of (A) the Fair Market Value on the exercise date of one Share
                  over (B) the Option Price per Share, times (ii) the number of
                  Shares covered by the Option, or portion thereof, which is
                  surrendered. The date a notice of exercise is received by the
                  Company shall be the exercise date. Payment shall be made in
                  Shares or in cash, or partly in Shares and partly in cash (any
                  such Shares valued at such Fair Market Value), all as shall be
                  determined by the Committee. Stock Appreciation Rights may be
                  exercised from time to time upon actual receipt by the Company
                  of written notice of exercise stating the number of Shares
                  with respect to which the Stock Appreciation Right is being
                  exercised. No fractional Shares will be issued in payment for
                  Stock Appreciation Rights, but instead cash will be paid for a
                  fraction or, if the Committee should so determine, the number
                  of Shares will be rounded downward to the next whole Share.

         (c)      Limitations. The Committee may impose, in its discretion, such
                  conditions upon the exercisability or transferability of Stock
                  Appreciation Rights as it may deem fit.
<PAGE>   10
         (d)      Limited Stock Appreciation Rights. The Committee may grant
                  LSARs that are exercisable upon the occurrence of specified
                  contingent events. Such LSARs may provide for a different
                  method of determining appreciation, may specify that payment
                  will be made only in cash and may provide that any related
                  Awards are not exercisable while such LSARs are exercisable.
                  Unless the context otherwise requires, whenever the term
                  "Stock Appreciation Right" is used in the Plan, such term
                  shall include LSARs.

8.       OTHER STOCK-BASED AWARDS

         (a)      Generally. The Committee, in its sole discretion, may grant
                  Awards of Shares, Awards of restricted Shares and Awards that
                  are valued in whole or in part by reference to, or are
                  otherwise based on the Fair Market Value of, Shares ("Other
                  Stock-Based Awards"). Such Other Stock-Based Awards shall be
                  in such form, and dependent on such conditions, as the
                  Committee shall determine, including, without limitation, the
                  right to receive one or more Shares (or the equivalent cash
                  value of such Shares) upon the completion of a specified
                  period of service, the occurrence of an event and/or the
                  attainment of performance objectives. Other Stock-Based Awards
                  may be granted alone or in addition to any other Awards
                  granted under the Plan. Subject to the provisions of the Plan,
                  the Committee shall determine to whom and when other
                  Stock-Based Awards will be made, the number of Shares to be
                  awarded under (or otherwise related to) such Other Stock-Based
                  Awards; whether such Other Stock-Based Awards shall be settled
                  in cash, Shares or a combination of cash and Shares; and all
                  other terms and conditions of such Awards (including, without
                  limitation, the vesting provisions thereof and provisions
                  ensuring that all Shares so awarded and issued shall be fully
                  paid and non-assessable).

         (b)      Performance-Based Awards. Notwithstanding anything to the
                  contrary herein, certain Other Stock-Based Awards granted
                  under this Section 8 may be granted in a manner which is
                  deductible by the Company under Section 162(m) of the Code (or
                  any successor section thereto) ("Performance-Based Awards"). A
                  Participant's Performance-Based Award shall be determined
                  based on the attainment of written performance goals approved
                  by the Committee for a performance period established by the
                  Committee (i) while the outcome for that performance period is
                  substantially uncertain and (ii) no more than 90 days after
                  the commencement of the performance period to which the
                  performance goal relates or, if less, the number of days which
                  is equal to 25 percent of the relevant performance period. The
                  performance goals, which must be objective, shall be based
                  upon one or more of the following criteria: (i) consolidated
                  earnings before or after taxes (including earnings before
                  interest, taxes, depreciation and amortization); (ii) net
                  income; (iii) operating income; (iv) earnings per Share; (v)
                  book value per Share; (vi) return on shareholders' equity;
                  (vii) expense management; (viii) return on investment; (ix)
                  improvements in capital structure; (x) profitability of an
                  identifiable business unit or product; (xi) maintenance or
<PAGE>   11
                  improvement of profit margins; (xii) stock price; (xiii)
                  market share; (xiv) revenues or sales; (xv) costs; (xvi) cash
                  flow; (xvii) working capital and (xviii) return on assets. The
                  foregoing criteria may relate to the Company, one or more of
                  its Subsidiaries or one or more of its divisions or units, or
                  any combination of the foregoing, and may be applied on an
                  absolute basis and/or be relative to one or more peer group
                  companies or indices, or any combination thereof, all as the
                  Committee shall determine. In addition, to the degree
                  consistent with Section 162(m) of the Code (or any successor
                  section thereto), the performance goals may be calculated
                  without regard to extraordinary items. The maximum amount of a
                  Performance-Based Award during a calendar year to any
                  Participant shall be (x) with respect to Performance-Based
                  Awards that are granted in shares, 500,000 shares and (y) with
                  respect to Performance-Based Awards that are not granted in
                  shares, $20,000,000. The Committee shall determine whether,
                  with respect to a performance period, the applicable
                  performance goals have been met with respect to a given
                  Participant and, if they have, to so certify and ascertain the
                  amount of the applicable Performance Based Award. No
                  Performance-Based Awards will be paid for such performance
                  period until such certification is made by the Committee. The
                  amount of the Performance-Based Award actually paid to a given
                  Participant may be less than the amount determined by the
                  applicable performance goal formula, at the discretion of the
                  Committee. The amount of the Performance-Based Award
                  determined by the Committee for a performance period shall be
                  paid to the Participant at such time as determined by the
                  Committee in its sole discretion after the end of such
                  performance period; provided, however, that a Participant may,
                  if and to the extent permitted by the Committee and consistent
                  with the provisions of Section 162(m) of the Code, elect to
                  defer payment of a Performance-Based Award.

9.       ADJUSTMENTS UPON CERTAIN EVENTS

         Notwithstanding any other provisions in the Plan to the contrary, the
following provisions shall apply to all Awards granted under the Plan:

         (a)      Generally. In the event of any change in the outstanding
                  Shares after the Effective Date by reason of any Share
                  dividend or split, reorganization, recapitalization, merger,
                  consolidation, spin-off, combination or exchange of Shares or
                  other corporate exchange, or any distribution to shareholders
                  of Shares other than regular cash dividends or any
                  transactions similar to the foregoing, the Committee in its
                  sole discretion and without liability to any person may make
                  such substitution or adjustment, if any, as it deems to be
                  equitable, as to (i) the number or kind of Shares or other
                  securities issued or reserved for issuance pursuant to the
                  Plan or pursuant to outstanding Awards, (ii) the Option Price
                  and/or (iii) any other affected terms of such Awards.

         (b)      Change in Control. Except as otherwise provided in an Award
                  agreement or an employment, severance or change in control
                  agreement, in the event of a Change
<PAGE>   12
                  in Control or a Parent Triggering Event, the Committee in its
                  sole discretion and without liability to any person may take
                  such actions, if any, as it deems necessary or desirable with
                  respect to any Award (including, without limitation, (i) the
                  acceleration of an Award, (ii) the payment of a cash amount in
                  exchange for the cancellation of an Award and/or (iii) the
                  requiring of the issuance of substitute Awards that will
                  substantially preserve the value, rights and benefits of any
                  affected Awards previously granted hereunder) as of the date
                  of the consummation of the Change in Control.

10.      NO RIGHT TO EMPLOYMENT OR AWARDS

         The granting of an Award under the Plan shall impose no obligation on
the Company or any Subsidiary to continue the employment or service or
consulting relationship of a Participant and shall not lessen or affect the
Company's or Subsidiary's right to terminate the employment or service or
consulting relationship of such Participant. No Participant or other Person
shall have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Participants, or holders or beneficiaries of Awards.
The terms and conditions of Awards and the Committee's determinations and
interpretations with respect thereto need not be the same with respect to each
Participant (whether or not such Participants are similarly situated).

11.      SUCCESSORS AND ASSIGNS

         The Plan shall be binding on all successors and assigns of the Company
and a Participant, including without limitation, the estate of such Participant
and the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant's creditors.

12.      NONTRANSFERABILITY AWARDS

         Unless otherwise determined by the Committee or as hereinafter
provided, an Award shall not be transferable or assignable by the Participant
otherwise than by will or by the laws of descent and distribution. An Award
exercisable after the death of a Participant may be exercised by the legatees,
personal representatives or distributees of the Participant. However, unless the
Award agreement provides otherwise, a Participant may transfer his or her rights
under a nonqualified Option agreement or a Stock Appreciation Right agreement,
by assignment, satisfactory in form and substance to the Committee, to a trust
or similar entity established solely for the benefit of the Participant's lineal
descendants; provided, that such assignee must first agree to be bound by the
same terms and conditions as the Participant with respect to such Option or
Stock Appreciation Right; and provided, further, that the rights of such
assignee shall not themselves be transferable.

13.      AMENDMENTS OR TERMINATION

         The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which, (a) without the approval of
the shareholders of the
<PAGE>   13
Company, would (except as is provided in Section 9 of the Plan), increase the
total number of Shares reserved for the purposes of the Plan or change the
maximum number of Shares for which Awards may be granted to any Participant or
(b) without the consent of a Participant, would impair any of the rights or
obligations under any Award theretofore granted to such Participant under the
Plan; provided, however, that the Committee may amend the Plan in such manner as
it deems necessary to permit the granting of Awards meeting the requirements of
the Code or other applicable laws. Notwithstanding anything to the contrary
herein, the Board may not amend, alter or discontinue the provisions relating to
Section 9(b) of the Plan after the occurrence of a Change in Control.

14.      INTERNATIONAL PARTICIPANTS

         With respect to Participants who reside or work outside the United
States of America and who are not (and who are not expected to be) "covered
employees" within the meaning of Section 162(m) of the Code, the Committee may,
in its sole discretion, amend the terms of the Plan or Awards with respect to
such Participants in order to conform such terms with the requirements of local
law.

15.      CHOICE OF LAW

         The Plan shall be governed by and construed in accordance with the laws
of the State of New York without regard to conflicts of laws.

16.      EFFECTIVENESS OF THE PLAN

         The Plan shall be effective as of the Effective Date.

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