Document:

EXHIBIT 10.33

                        VIATEL, INC. 401(K) SAVINGS PLAN

     Effective  January 1, 2000,  Viatel,  Inc. (the  ) has amended and
restated  the  Viatel,  Inc.  401(k)  Savings  Plan  (the  "Plan"),   originally
established in 1996 for its eligible employees, in accordance with the following
terms and conditions:
                                  SECTION ONE

                                 PURPOSE OF PLAN

     A.  DESIGNATION.  The Plan is designated the "Viatel, Inc.  401(k) Savings
Plan."

     B.  PURPOSE.  The purpose of the Plan is to provide retirement, disability,
death and  employment  termination  benefits for the  eligible  employees of the
Company and their beneficiaries.

     C.  AUTOMATIC PARTICIPATION.   Participation in the Plan by employees shall
be  automatic upon   completing   the  eligibility  requirements  set  forth  in
Section Three of the Plan.

                                   SECTION TWO

                                   DEFINITIONS

     A.  DEFINITIONS.  As used in the Plan,  the following  terms shall have the
following meanings:

     "ACCOUNTS"  shall  mean  a  Participant's  Salary  Reduction   Contribution
Account,  his or her Company Matching  Contribution  Account, his or her Company
Discretionary  Contribution  Account  and, if  applicable,  his or her  Rollover
Account and, if applicable,  his or her Transfer  Account.  The term  "Accounts"
shall also  include  any  additional  accounts  established  by the  Pension and
Benefits Committee, in its sole discretion.

     "AFFILIATED COMPANY" or "AFFILIATED COMPANIES" shall mean (i) a member of a
controlled group of corporations of which the Company is a member, as determined
in  accordance  with  Section  414(b)  of the  Internal  Revenue  Code  and  the

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regulations  issued  thereunder,  (ii) a trade or business which is under common
control with the Company, as determined in accordance with Section 414(c) of the
Internal Revenue Code and the regulations issued  thereunder,  or (iii) a member
of an affiliated  service group of which the Company is a member,  as determined
in  accordance  with  Section  414(m) of the  Internal  Revenue  Code.  For this
purpose,  a "controlled group of corporations"  shall mean a controlled group of
corporations  as defined  in  Section  1563(a)  of the  Internal  Revenue  Code,
determined  without regard to subsections  1563(a)(4) and  1563(e)(3)(C)  of the
Internal Revenue Code, except that, with respect to the limitations set forth in
Section Six of the Plan, the phrase "more than 50%" shall be substituted for the
phrase "at least 80%" whenever such percentage  appears in Section 1563(a)(l) of
the Internal Revenue Code.

     "ANNUITY  STARTING  DATE" of a Participant  shall mean the first day of the
first period for which a benefit is payable to the Participant as an annuity or,
in the case of a benefit not  payable as an  annuity,  the first day as of which
all events have occurred which entitle the Participant to such benefit.

     "AVERAGE  CONTRIBUTION  PERCENTAGE"  shall mean the  average of the ratios,
calculated  separately for each applicable Employee,  by which the amount of the
Company Matching  Contributions  allocated to such Employee with respect to such
Plan Year bears to the amount of such Employee's  Testing  Compensation for such
Plan Year or, at the  election  of the  Pension  and  Benefits  Committee,  that
portion of the Plan Year during which the  Employee was eligible to  participate
in the cash or deferred arrangement under the Plan.

     "AVERAGE  DEFERRAL  PERCENTAGE"  shall  mean  the  average  of the  ratios,
calculated  separately for each applicable Employee,  by which the amount of the
Salary  Reduction  Contributions  contributed  to the  Trust on  behalf  of such
Employee  for a given Plan Year bears to the amount of such  Employee's  Testing
Compensation for such Plan Year, or, at the election of the Pension and Benefits

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Committee,  for the  portion  of the Plan Year  during  which the  Employee  was
eligible to participate in the cash or deferred arrangement under the Plan.

     "BENEFICIARY"  shall mean any person entitled to receive benefits which are
payable upon or after a  Participant's  death  pursuant to Section Twelve of the
Plan.

     "BOARD OF  DIRECTORS"  shall mean the Board of  Directors of the Company or
any  individual  or  committee  to which the Board of  Directors  has  delegated
authority to act with respect to a specific activity.

     "CHANGE IN CONTROL" shall mean such time as (i) a person or "group" (within
the meaning of Sections  13(d) and  l4(d)(2) of the  Securities  Exchange Act of
1934,  as amended (the  "Exchange  Act")) (i) becomes the  ultimate  "beneficial
owner" (as defined in Rule l3d-3 under the Exchange Act) of more than 50% of the
total  voting  power of the then  outstanding  Voting  Stock of the Company on a
fully  diluted basis or (ii)  individuals  who at the beginning of any period of
two consecutive calendar years constituted the Board of Directors (together with
any new directors  whose election by the Board of Directors or whose  nomination
for election by the  Company's  stockholders  was approved by a vote of at least
two-thirds  (2/3) of the members of the Board of Directors  then still in office
who either  were  members of the Board of  Directors  at the  beginning  of such
period or whose  election or nomination for election was previously so approved)
cease for any reason to  constitute  a majority  of the  members of the Board of
Directors  then in office.  For these  purposes,  "Voting  Stock" of the Company
shall mean its common stock, $01 par value per share.

     "COMPANY" shall mean Viatel,  Inc. In addition,  for purposes of describing
entities  eligible  to  make  contributions  to the  Plan  on  behalf  of  their
employees, the term Company shall, when so appropriate, include any entity which
is an  Affiliated  Company and which is permitted to adopt the Plan by the Board
of Directors  of Viatel,  Inc. (A list of such  entities  which have adopted the
Plan is set forth on Appendix A attached hereto.) All references in this Plan to

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the term  "Company" in any other  context,  such as the authority to administer,
interpret,  amend or  terminate  the Plan,  and the term  "Company  Stock" shall
constitute a reference solely to Viatel, Inc.

     "COMPANY  DISCRETIONARY  CONTRIBUTION  ACCOUNT"  shall  mean  the  separate
account   maintained  for  a  Participant   reflecting   Company   Discretionary
Contributions,  if any, allocated to such Participant pursuant to Paragraph D of
Section  Six of the  Plan,  as  adjusted  for  earnings  or  losses  thereon  in
accordance with the provisions of Section Eight of the Plan. The Company, in its
sole discretion, may elect to make such contribution in cash or Company Stock.

     "COMPANY DISCRETIONARY CONTRIBUTIONS" shall mean the contributions, if any,
made by or on behalf of the Company to each Participant's  Company Discretionary
Contribution Account pursuant to Paragraph F of Section Five of the Plan.

     "COMPANY  MATCHING  CONTRIBUTION  ACCOUNT" shall mean the separate  account
maintained for a Participant reflecting Company Matching Contributions,  if any,
allocated  to such  Participant  pursuant  to  Paragraph C of Section Six of the
Plan,  as  adjusted  for  earnings  or losses  thereon  in  accordance  with the
provisions  of  Section  Eight  of the  Plan.  The  Company  may,  in  its  sole
discretion, elect to make such contributions in cash or Company Stock.

     "COMPANY MATCHING CONTRIBUTIONS" shall mean the contributions, if any, made
by  or  on  behalf  of  the  Company  to  each  Participant's  Company  Matching
Contribution  Account  pursuant to Paragraph B of Section Five of the Plan.  The
Company may, in its sole discretion, elect to make such contributions in cash or
Company Stock.

     "COMPANY  STOCK" shall mean the Company's  common stock,  $01 par value per
share.

     "COMPENSATION"  shall mean base  salary  paid by the Company to an Employee
during the Plan Year for the period  while such  Employee  has been  eligible to
make  salary  reduction  contributions  to the Plan,  plus any amounts of salary
which the Employee has voluntarily elected to defer in respect of such Plan Year
under this Plan or any other program subject to the provisions of Section 125 or

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132(f) of the Internal Revenue Code. An Employee's  "Compensation"  for any Plan
Year shall not include bonuses,  commissions,  incentive pay, severance payments
or  cost  of  living   adjustments   for  Employees  on  overseas   assignments.
Additionally,  an Employee's  "Compensation" for any Plan Year shall not include
any amounts in excess of One Hundred and Seventy  Thousand  Dollars ($ 170,000),
as adjusted for  increases in the cost of living  pursuant to  40l(a)(l7) of the
Internal Revenue Code.

     "ELIGIBILITY  COMPUTATION  PERIOD"  for each  Employee  shall  mean a three
(3)-consecutive  calendar  month period  beginning on the first day of the month
coinciding  with or following the date such Employee  first  performs an Hour of
Service with the Company.  If the Employee has a One-Year Break in Service prior
to  becoming  eligible  to  participate  in the Plan,  and is then  subsequently
rehired, the Eligibility Computation Period shall be determined pursuant to this
paragraph  beginning on the first day of the month  coinciding with or following
the date the  Employee  first  completes  an Hour of  Service  with the  Company
immediately following his or her rehire.

     "EMPLOYEE" shall mean any person who is employed by the Company,  provided,
however,  that the term  "Employee"  shall not include  non-resident  aliens who
receive  no earned  income  (within  the  meaning of  Section  911(d)(2)  of the
Internal  Revenue Code) from the Company which  constitutes  income from sources
within the United  States  (within  the  meaning  of  Section  861(a)(3)  of the
Internal Revenue Code).  Leased Employees and other  individuals  whose services
are  provided  pursuant  to an  agreement  between  the  Company  and a  leasing
organization  shall be considered  Employees  for purposes of the  provisions of
this Plan, but shall not be eligible to  participate  in the Plan,  even if such
individuals  are  subsequently  reclassified  as  common  law  employees  by the
Internal Revenue Service or any other entity for employment tax purposes.

     "ENTRY DATE" shall mean January 1, April 1, July 1, and October 1.

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     "ERISA" shall mean the Employee  Retirement Income Security Act of 1974, as
amended from time to time.  References in the Plan to any Section of ERISA shall
include any successor provisions thereto.

     "FISCAL YEAR" shall mean the customary fiscal year of the Company.

     "FIVE-PERCENT  OWNER"  shall  mean  an  individual  who  (i)  owns  (or  is
considered as owning  within the meaning of Section 318 of the Internal  Revenue
Code) more than five percent (5%) of the outstanding  stock of the Company or an
Affiliated  Company or stock possessing more than five percent (5%) of the total
combined  voting  power of all stock of the  Company  or an  Affiliated  Company
provided such entity is a  corporation  or (ii) owns more than five percent (5%)
of the capital or profits  interest in the Company or an  Affiliated  Company if
such entity is not a corporation.

     "HIGHLY COMPENSATED EMPLOYEE" shall mean an Employee who at any time during
the  immediately  preceding  Plan Year:

          (a) was a Five-Percent Owner, or

          (b)  received  more than Eighty Five  Thousand  Dollars  ($85,000)  in
               compensation from the Company or any Affiliated Company,  and, if
               elected by the Company pursuant to Section 414(q) of the Internal
               Revenue  Code,  was in the top paid  group of  Employees  for the
               preceding Plan Year.

     For  purposes  of this  definition,  the  "top  paid  group"  is the  group
consisting of the top twenty percent (20%) of Employees when ranked on the basis
of compensation paid by the Company and any Affiliated Companies during the Plan
Year.

     For purposes of determining  the number of Employees in the top paid group,
Employees who have not  completed six (6) months of service,  normally work less
than  seventeen  and one-half (17 1/2) hours per week,  normally work during six
(6) or less months per year,  have not attained the age of twenty-one  (21), are

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non-resident  aliens with no earned income from sources within the United States
(within the meaning of Section  86l(a)(3) of the Internal  Revenue Code), or are
included in a unit of  employees  covered by a collective  bargaining  agreement
(except to the extent provided in regulations), shall not be included.

     The Eighty Five Thousand Dollar  ($85,000) figure specified herein shall be
subject to annual  adjustment  as  provided  in Section  414(q) of the  Internal
Revenue Code.

     As used herein, the term "compensation"  shall mean compensation as defined
in Section 414(q)(4) of the Internal Revenue Code.

     "HOUR OF  SERVICE"  shall be  determined  from  records  maintained  by the
Company and shall include the following:

          (i) PERFORMANCE OF DUTIES. Each hour for which an Employee is directly
or indirectly  paid, or entitled to payment by, the Company for the  performance
of duties (including services performed prior to the effective date on which the
Company  adopted the Plan).  Each such Hour of Service  shall be credited to the
Eligibility  Computation  Period or the Plan Year,  as the case may be, in which
the duties were performed.

          (ii)  BACK  PAY.  Each  hour  for  which  back  pay  (irrespective  of
mitigation of damages) has been either awarded or agreed to by the Company. Each
such Hour of Service shall be credited to the Eligibility  Computation Period or
the Plan Year,  as the case may be, to which the agreement or award for back pay
pertains rather than to the Eligibility  Computation Period or Plan Year, as the
case may be, in which the award, agreement or payment is made.

          (iii)  NON-WORKING  TIME  PAY.  Each  hour for  which an  Employee  is
directly or indirectly paid, or entitled to payment,  by the Company for reasons
other than for the  performance  of duties  during a period of service  with the
Company (such as vacation,  holiday,  sickness,  disability,  layoff, jury duty,
military duty or compensated  leave of absence and similar paid  periods).  Each
such  Hour of  Service  shall  be  computed  and  credited  in  accordance  with
Department of Labor Regulation Section 2530.200b.

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     An  Employee  shall not be  credited  with an Hour of  Service  under  both
Subparagraph (i) or (iii) above (as the case may be) and Subparagraph (ii) above
with respect to the same item.

     "INTERNAL  REVENUE  CODE" shall mean the Internal  Revenue Code of 1986, as
amended from time to time. References in the Plan to any Section of the Internal
Revenue Code shall include any successor provisions thereto.

     "INVESTMENT  ELECTION"  shall  mean the form,  filed with the  Pension  and
Benefits Committee or its delegate,  or such other procedure as may be specified
by the  Pension  and  Benefits  Committee  at any  time,  and from time to time,
through  which a  Participant  may  designate  the  manner  in which  his or her
Accounts shall be allocated among the Investment Funds.

     "INVESTMENT ELECTION DATE" shall mean any business day of the Plan Year.

     "INVESTMENT  FUND"  shall mean each fund,  contract,  or other  arrangement
designated by the Pension and Benefits  Committee as an Investment Fund in which
Participants may direct their Accounts to be invested.

     "INVESTMENT MANAGER" shall mean any party that (i) is either (a) registered
as an investment  adviser under the Investment  Advisers Act of 1940, (b) a bank
(as defined in the Investment  Advisers Act of 1940) or (c) an insurance company
qualified  to manage,  acquire and dispose of Plan assets under the laws of more
than one State, (ii) acknowledges in writing that it is a fiduciary with respect
to the Plan and (iii) is granted the power to manage,  acquire or dispose of any
asset of the Plan pursuant to Paragraph G of Section Fifteen hereof.

     "LEASED  EMPLOYEE" shall mean any individual who performs  services for the
Company  or an  Affiliated  Company in a  capacity  other  than as a  common-law
employee if (i) the  services are  provided  pursuant to one or more  agreements
between  the  Company  or  the  Affiliated  Company  and  one  or  more  leasing
organizations, (ii) the individual has performed services for the Company or the
Affiliated  Company on a substantially  full-time basis for a period of at least

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one year, and (iii) such services are performed  under the primary  direction or
control of the  Company  or the  Affiliated  Company.  This  paragraph  shall be
interpreted in accordance  with the provisions of Section 414(n) of the Internal
Revenue Code and the regulations thereunder.

     "MAXIMUM  DEFERRAL  AMOUNT"  shall mean Ten Thousand  Five Hundred  Dollars
($10,500)  per calendar  year,  as adjusted for  increases in the cost of living
pursuant to Section 402(g)(5) of the Internal Revenue Code.

     "NONHIGHLY  COMPENSATED EMPLOYEE" shall mean an Employee of the Company who
is not a Highly Compensated Employee.

     "ONE-YEAR  BREAK  IN  SERVICE"  shall  mean  a Plan  Year  during  which  a
Participant has not completed more than five hundred (500) Hours of Service.

         Solely  for the  purpose  of  determining  whether  a  Participant  has
incurred a One-Year Break in Service, such Participant shall be credited with up
to five  hundred  and one (501) Hours of Service  with  respect to any period of
absence attributable to a maternity or paternity leave, based upon the number of
Hours of Service  which  otherwise  normally  would have been  credited  to such
Participant  but for such absence or, in any case in which the Plan is unable to
determine  the  number of Hours of  Service  which  normally  would have been so
credited, such Participant shall be credited with eight (8) Hours of Service per
day of absence.  Any Hours of Service  attributable  to a maternity or paternity
leave of absence  shall be credited in the Plan Year in which the  maternity  or
paternity  leave of absence begins if such crediting is necessary to prevent the
Participant  from  incurring  a  One-Year  Break in  Service  in such Plan Year.
Otherwise,  such Hours of Service  shall be credited in the Plan Year  following
the Plan Year in which the maternity or paternity leave of absence  begins.  For
these purposes, a maternity or paternity leave of absence shall include any time
during which a  Participant  is absent from work for any period (a) by reason of
the pregnancy of the  Participant,  (b) by reason of the birth of a child of the
Participant,  (c) by reason of the placement of a child with the  Participant in

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connection  with  the  adoption  of such  child by such  Individual,  or (d) for
purposes of caring for such child for a period beginning  immediately  following
such birth or placement.

     "PARTICIPANT"  shall mean an eligible Employee who becomes a Participant in
the Plan as provided in Section Four of the Plan.

     "PENSION AND BENEFITS COMMITTEE" shall mean the person or persons or entity
appointed to administer  the Plan in accordance  with the  provisions of Section
Fifteen of the Plan.  The Pension  and  Benefits  Committee  shall be the "named
fiduciary,"  as  referred  to in Section  402(a) of ERISA,  with  respect to the
management, operation and administration of the Plan.

     "PLAN"  shall  mean the  Viatel,  Inc.  401(k)  Plan,  as set forth in this
document, and as hereafter amended.

     "PLAN ADMINISTRATOR" shall mean the Pension and Benefits Committee.

     "PLAN YEAR" shall mean the twelve  (12)-consecutive  month period beginning
on each January 1 and ending on the following December 31.

     "QUALIFIED  JOINT AND SURVIVOR  ANNUITY" shall mean an annuity for the life
of a  Participant  with an  annuity  for the  life of the  spouse  to whom  such
Participant  was  married on his or her Annuity  Starting  Date,  provided  such
spouse  survives the  Participant,  which is equal to fifty percent (50%) of the
amount of the annuity payable during the joint lives of the Participant and such
spouse.

     "RETIREMENT DATE" of a Participant shall mean the Participant's sixty-fifth
(65th) birthday.

     "ROLLOVER  ACCOUNT"  shall  mean  the  separate  account  maintained  for a
Participant  reflecting  any  rollover  made by  such  participant  pursuant  to
Paragraph B of Section Four, as adjusted by earnings or losses thereon  pursuant
to the provisions of Section Eight of the Plan.

     "ROLLOVER  AMOUNT" shall mean any rollover amount or rollover  contribution
defined in (i) Section  402(c)(5) of the  Internal  Revenue  Code,  (ii) Section
408(d)(3) of the Internal Revenue Code (relating to certain  distributions  from

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an individual  retirement account or an individual retirement annuity), or (iii)
former Section  409(b)(3)(C)  of the Internal  Revenue Code (relating to certain
distributions from a retirement bond).

     "SALARY  REDUCTION  CONTRIBUTION"  shall  mean the  cumulative  amount  the
Company  contributes  to the Trust  equal to the  amount by which a  Participant
elected to reduce his or her Compensation for such Plan Year pursuant to Section
Five.

     "SALARY REDUCTION  CONTRIBUTION  ACCOUNT" shall mean the account maintained
for a Participant reflecting the Salary Reduction Contributions (if any) made on
behalf of such  Participant  pursuant to the "cash or deferred  arrangement" set
forth in Paragraph A of Section Five, as adjusted by earnings or losses  thereon
in accordance  with the  provisions of Section Eight of the Plan.  Except as set
forth in Paragraph G of Section  Fourteen,  all amounts held in a  Participant's
Salary  Reduction  Contribution  Account  shall  not be  distributable  to  such
Participant (or to his or her Beneficiary) before the earliest of:

                (a) His or her  Termination of Employment,  his or her death, or
his or her retirement  after  attaining  Retirement  Date or after  sustaining a
Total and Permanent Disability;

                (b) The  termination  of the Plan without the  establishment  or
maintenance of another defined  contribution  plan (other than an employee stock
ownership plan as defined in Section 4975(e)(7) of the Internal Revenue Code);

                (c)  The  sale  or  other   disposition   by  the   Company   of
substantially  all of the assets (within the meaning of Section 409(d)(2) of the
Internal Revenue Code) used by the Company in a trade or business, but only with
respect to a Participant who continues employment with the corporation acquiring
such assets; or

                (d)  The  sale  or  other  disposition  by  the  Company  of its
interests  in a  subsidiary  (within  the  meaning of Section  409(d)(3)  of the
Internal  Revenue  Code),  but only with respect to a Participant  who continues
employment with such subsidiary.

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     "TERMINATION  OF  EMPLOYMENT"  shall mean a  Participant's  termination  of
employment with the Company and all Affiliated Companies, whether voluntarily or
involuntarily,  other  than  by  reason  of  a  Participant's  retirement  after
attaining his or her  Retirement  Date or after  sustaining  Total and Permanent
Disability, or death.

     "TESTING  COMPENSATION"  shall mean an  Employee's  "compensation"  (as
defined in Section  414(s) of the internal  Revenue  Code) from the Company.  An
Employee's Testing  Compensation for any Plan Year shall not include any amounts
in excess of One Hundred and Seventy  Thousand Dollars  ($170,000),  as adjusted
for  increases  in the cost of living  pursuant  to  Section  401(a)(17)  of the
Internal Revenue Code.

     "TOTAL  AND  PERMANENT   DISABILITY"  shall  mean  physical  and/or  mental
incapacity  of  such  a  nature  that  a  Participant  qualifies  for  long-term
disability under the Company's long-term disability plan.

     The  Company's  long-term  disability  carrier  shall  determine  whether a
Participant has suffered Total and Permanent Disability and its determination in
that respect is binding upon the Participant. The Company's long-term disability
carrier may require the Participant to submit to medical examinations by doctors
it has  selected.  The  provisions  of this  paragraph  shall be  uniformly  and
consistently applied to all Participants.

     "TRANSFER  ACCOUNT"  shall  mean  the  separate  account  maintained  for a
Participant  reflecting  the amount  transferred  to the Plan from  another  tax
qualified  plan  under  Section  401(a) of  Internal  Revenue  Code or a conduit
individual retirement account.

     "TRUST"  shall mean the legal  entity  resulting  from the Trust  Agreement
between the Company and the Trustee,  which entity  receives the  Company's  and
Participants'  contributions,  and holds, invests, and disburses funds to or for
the benefit of Participants and their Beneficiaries.

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     "TRUSTEE" shall mean the party or parties,  individual or corporate,  named
in the Trust Agreement and any duly appointed additional or successor Trustee or
Trustees  acting  thereunder.  The  Trustee  shall  be the  "named  fiduciaries"
referred to in Section  402(a) of ERISA with respect to the control,  management
and disposition of the assets of the Trust.

     "TRUST  AGREEMENT"  shall mean the  Viatel,  Inc.  401(k)  Trust  Agreement
executed by the Company and the Trustee, as amended from time to time.

     "TRUST FUND" shall mean the total of contributions  made by the Company and
the Participants to the Trust pursuant to the Plan, increased by profits, gains,
income and recoveries received, and decreased by losses, depreciation,  benefits
paid and  expenses  incurred in the  administration  of the Plan and Trust.  The
Trust Fund shall  include all assets  acquired by  investment  and  reinvestment
which are held in the Trust by the Trustee.

     "VALUATION  DATE" shall mean each  business day during the Plan Year or any
other date the Pension and Benefits  Committee,  in its sole  discretion,  shall
select as a Valuation Date.

     "YEAR OF SERVICE" shall mean a Plan Year during which an Employee completes
one thousand (1,000) or more Hours of Service with the Company. In addition, the
Board of Directors, in its sole discretion,  may elect to grant Years of Service
in connection with a stock or asset  acquisition to reflect  employment  periods
prior to the date of such stock or asset acquisition. A list of the entities for
which Employees shall receive past credit in the form of Years of Service is set
forth on Appendix B attached hereto.

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      B. USAGE OF TERMS.  Whenever  appropriate  words  used in the Plan in the
singular  may mean the  plural,  the  plural  may  mean  the  singular,  and the
masculine may mean the feminine.

                                  SECTION THREE

                          REQUIREMENTS FOR ELIGIBILITY

      A.  SALARY  REDUCTION  CONTRIBUTIONS.  Any  Employee  (other than a Leased
Employee)  shall  become a  Participant  and shall be  eligible to elect to have
Salary  Reduction  Contributions  made on his or her behalf under the Plan as of
the Entry Date  coinciding  with or following  the date upon which such Employee
has  completed  three (3) full  calendar  months of  service  with the  Company,
provided  such  Employee  is  employed  by the  Company on such  date.  For this
purpose,  a month of service will be considered a "full calendar  month" as long
as the  Employee is employed  by the  Company on the first  business  day of the
month and  continuously  provides service to the Company until the last business
day of the  month.  Any  Employee  who does not elect to have  Salary  Reduction
Contributions  made on his or her behalf  under the Plan when he or she is first
eligible,  shall  be  allowed  to make a  subsequent  election  to  have  Salary
Reduction Contributions made on his or her behalf as of any Entry Date, pursuant
to such  notification  procedures  as the Pension  and  Benefits  Committee  may
establish, from time to time.

      Any  Participant  who  otherwise  meets the  requirements  of this Section
Three, who suffers a Termination of Employment,  and who is subsequently rehired
by the  Company,  shall  again  become a  Participant  in this Plan and shall be
eligible  to elect to have  Salary  Reduction  Contributions  made on his or her
behalf under the Plan effective as of the date of his or her rehire provided the
individual meets the criteria of a Participant for such Plan Year.

      B.  COMPANY  MATCHING  CONTRIBUTIONS.  Any  Employee  (other than a Leased
Employee)  shall be  eligible  to share in the  allocation  of Company  Matching
Contributions  under the Plan as of the Entry Date  coinciding with or following

                                       14
<PAGE>

the date upon which such Employee has completed  three (3) full calendar  months
of service with the Company,  provided  such Employee is employed by the Company
on such date. "Full calendar months" shall have the same definition as set forth
in Paragraph A of this Section Three.

      C. COMPANY DISCRETIONARY CONTRIBUTIONS.  Any Employee (other than a Leased
Employee) shall be eligible to share in the allocation of Company  Discretionary
Contributions  under the Plan for any Plan Year  provided that (i) such Employee
completed at least one thousand  (1,000) Hours of Service  during such Plan Year
for  which  such  Company  Discretionary  Contribution  is made,  and (ii)  such
Employee  is  employed by the Company on the last day of the Plan Year for which
such Company  Discretionary  Contribution  is made,  subject to the exception in
Paragraph D of Section Six for  Participants who have not completed at least one
thousand  (1,000) Hours of Service during the Plan Year and who are not employed
by the  Company  on the  last day of the  Plan  Year  due to death or Total  and
Permanent Disability.

                                  SECTION FOUR

                            PARTICIPATION IN THE PLAN

      A. PARTICIPATION IN PLAN. Any Employee eligible to participate in the Plan
in  accordance   with  the  provisions  of  Section  Three  of  the  Plan  shall
automatically become a Participant in the Plan on the date he or she is eligible
pursuant to Section  Three.  Each Employee shall be notified that he or she is a
Participant and shall be provided with such  information as is required by ERISA
within the time  prescribed for providing such  information.  In addition,  each
Participant shall be provided with a Beneficiary  designation form with which he
or she may designate one or more  Beneficiaries  to receive any benefits payable
under the Plan in the event of the Participant's death.

      B. ROLLOVER AMOUNT. Any Employee (other than a Leased Employee) may file a
written  petition  with the Pension and Benefits  Committee  requesting  that it

                                       15
<PAGE>

direct the Trustee to accept a Rollover Amount from such Employee,  even if such
Employee  is not yet  eligible  to  participate  in the Plan.  The  Pension  and
Benefits Committee, in its sole discretion,  shall determine whether or not such
Employee  shall be permitted to contribute a Rollover  Amount to the Trust.  Any
written  petition  filed pursuant to this Paragraph B shall set forth the amount
of such  Rollover  Amount  and a  statement,  satisfactory  to the  Pension  and
Benefits Committee, that such contribution constitutes a Rollover Amount.

      Any Rollover  Amount  contributed  to the Trust shall be  maintained  in a
separate,  fully-vested Rollover Account on behalf of the Employee. The Employee
may direct the  investment  of such  Rollover  Account  in  accordance  with the
provisions  of  Section  Eight  of the  Plan.  The  Rollover  Account  shall  be
distributed to the Employee or, where applicable,  his or her Beneficiary at the
same time and in the same manner as provided in the Plan for the distribution of
his or her Salary Reduction Contributions in the Plan.

                                  SECTION FIVE

                                  CONTRIBUTIONS

      A. SALARY REDUCTION  CONTRIBUTIONS.  On behalf of each Participant who has
elected to reduce his or her  Compensation  pursuant to Subparagraph (i) of this
Paragraph  A, the Company  shall  contribute  to the Trust the Salary  Reduction
Contributions as elected by such Participant.

           (i) SALARY REDUCTION ELECTION.  The amount by which a Participant may
elect to  reduce  his or her  compensation  under  this  Plan  shall be in whole
percentages   and  shall  not  exceed  fifteen  percent  (15%)  of  his  or  her
compensation  for any Plan  Year.  In no event may the  total  amount by which a
Participant  elects  to  reduce  his or her  compensation  under  this Plan with
respect  to  a  Plan  Year  exceed  the  Maximum  Deferral   Amount.   The  Plan
Administrator  may  adjust  the  Salary  Reduction  Contributions  of any Highly
Compensated  Employee  as  necessary  to meet any  applicable  nondiscrimination
requirements.

                                       16
<PAGE>

           (ii) MAXIMUM DEFERRAL  AMOUNT.  The amount by which a Participant may
elect to reduce  his or her  Compensation  for  Salary  Reduction  Contributions
during any calendar year may not exceed the Maximum Deferral Amount and shall be
subject to the limits set forth in Paragraph C of this Section Five.

          If the total amount of the Salary Reduction  Contributions made to the
Plan on behalf of a  Participant  for a calendar  year,  when  combined with any
other salary reduction  contributions  made on behalf of the Participant  during
the calendar year to any other plans which contain  qualified  "cash or deferred
arrangements"  as described  in Section  401(k) of the  Internal  Revenue  Code,
exceeds the Maximum Deferral Amount, the full amount of such excess (the "Excess
Deferrals")  shall be returned to the  Participant  (together  with any earnings
attributable  thereto  for the  calendar  year)  by no later  than the  April 15
following the end of such calendar year; provided,  however,  that the amount of
Excess Deferrals that shall be distributed to such Participant for such calendar
year shall be reduced by the amount of any Excess  Contributions  (as defined in
Paragraph C of this Section Five)  previously  distributed  to such  Participant
during such calendar year.

           (iii)  SUSPENSION OF REDUCTIONS.  A Participant  may elect to suspend
his or her Salary Reduction  Contributions,  in a manner  prescribed by the Plan
Administrator.   Such  voluntary  suspension  shall  be  effective  as  soon  as
administratively  possible pursuant to the procedures established by the Pension
and Benefits Committee. Any such suspension shall remain in effect until revoked
by the Participant. A Participant may recommence Salary Reduction Contributions,
if any,  to the Plan as of the next  Entry  Date  following  the  suspension.  A
Participant may not make up suspended Salary Reduction Contributions. The Salary
Reduction  Contributions  made on behalf  of a  Participant  shall be  suspended
automatically  for any payroll period in which such Participant does not receive
any Compensation.

                                       17
<PAGE>

           (iv) Remittance of Salary Reduction  Contributions.  Amounts deducted
from a  Participant's  Compensation  under this Paragraph A shall be remitted to
the Trust as soon as practicable after the end of each payroll period, but in no
event shall they be remitted later than the fifteenth (15th) business day of the
month following the month which contains the relevant payroll period.

      B. COMPANY MATCHING CONTRIBUTIONS.

           (i) AMOUNT OF  CONTRIBUTIONS.  On behalf of each  Participant who has
met the  requirements set forth in Paragraph B of Section Three, the Company may
contribute  to the  Trust  each  Plan  Year an  amount  (the  "Company  Matching
Contribution")  equal  to  a  percentage  of  the  amount  of  Salary  Reduction
Contributions made on behalf of each Participant during the Plan Year,  provided
that the aggregate  amount of Company Matching  Contributions  made on behalf of
any  Participant  shall  not  exceed  ten  percent  (10%) of such  Participant's
Compensation.

           (ii) REMITTANCE OF COMPANY MATCHING CONTRIBUTIONS.  The Company shall
make its  Company  Matching  Contributions  to the  Trust  for a Plan Year on or
before the last date,  including any extensions thereof,  for filing its federal
income tax return for its Fiscal  Year ending with or after the last day of such
Plan Year.

      C. NONDISCRIMINATION  RULES APPLICABLE TO SALARY REDUCTION  CONTRIBUTIONS.
Notwithstanding any other provision of the Plan, the Average Deferral Percentage
(as defined below) of the Highly Compensated Employees for a Plan Year shall not
exceed the  GREATER of (i) one  hundred and  twenty-five  percent  (125%) of the
Average  Deferral   Percentage  of  all  the  other  Employees  (the  "Remaining
Employees") for the prior Plan Year, or (ii) a percentage  amount which is equal
to the lesser of (a) the Average Deferral  Percentage of the Remaining Employees
for the  prior  Plan  Year plus two (2)  percentage  points  or (b) two  hundred
percent (200%) of the Average Deferral Percentage of the Remaining Employees for

                                       18
<PAGE>

the prior  Plan  Year.  For  purposes  of this test  (hereinafter  the  "Average
Deferral  Percentage  Test"),  only Employees who are eligible to participate in
the Plan shall be counted.

      In calculating  each Employee's  Average  Deferral  Percentage  ratio, the
Salary  Reduction  Contributions  made on behalf of such Employee shall be taken
into account only if they relate to  Compensation  that would have been received
by the Employee in the Plan Year but for the deferral election,  In addition, in
calculating  each  Employee's  Average  Deferral  Percentage  ratio,  the Salary
Reduction  Contributions  made on behalf of such  Employee  shall be taken  into
account  for a Plan  Year  only  if such  contributions  were  allocated  to the
Employee  under the Plan as of a date within that Plan Year,  which  requirement
shall  be  deemed  satisfied  if the  allocations  are not  contingent  upon the
Employee's  participation in the Plan or the performance of services on any date
subsequent to the end of the Plan Year and the  contributions  are actually paid
to the Trust no later than the end of the twelve (12) month  period  immediately
following the Plan Year to which the contributions  relate.  Notwithstanding the
foregoing,  the  Pension and  Benefits  Committee  may, in its sole  discretion,
adjust the  percentage by which a  Participant  has elected to reduce his or her
Compensation in order to enable the Plan to satisfy the nondiscrimination test.

      If two  (2) or more  plans  maintained  by the  Company  or an  Affiliated
Company which contain  qualified `cash or deferred  arrangements'  under Section
401(k) of the  Internal  Revenue  Code are  aggregated  for  purposes of Section
401(a)(4)  or Section  410(b) of the  Internal  Revenue  Code,  all such cash or
deferred  arrangements shall be treated as one cash or deferred  arrangement for
purposes of this  Average  Deferral  Percentage  Test.  If a Highly  Compensated
Employee  participates  in two or more plans  described in Section 401(a) of the
Internal  Revenue  Code which are  maintained  by the  Company or an  Affiliated
Company and to which  contributions  subject to Section  401(k) of the  Internal
Revenue Code are made, all such  contributions  shall be aggregated for purposes
of this Average Deferral Percentage Test.

                                       19
<PAGE>

      The amount of any Excess  Contributions (as defined below) for a Plan Year
(together with any earnings or losses allocable thereto for the Plan Year) shall
be distributed using the procedures set forth below.

     (1) First, a determination shall be made of the extent to which the Average
Deferral  Percentage ratio of the Highly  Compensated  Employee with the highest
Average Deferral Percentage ratio would have to be reduced to either satisfy the
Average  Deferral  Percentage  test described above or cause such ratio to equal
the Average Deferral  Percentage ratio of the Highly  Compensated  Employee with
the next highest Average Deferral  Percentage ratio.  Second, this process shall
be repeated until the Average Deferral Percentage Test is satisfied.  The amount
of Excess Contributions to be distributed in accordance with (2) below, shall be
equal to the sum of these hypothetical  percentage  reductions,  multiplied,  in
each case, by the Highly Compensated Employee's Compensation.

     (2) In the event  Excess  Contributions  must be  distributed,  the  Highly
Compensated  Employee  having  the  highest  dollar  amount of Salary  Reduction
Contribution shall have Excess Contributions distributed to him or her until the
amount  of  Excess   Contributions   determined   under  (1),  above,  has  been
distributed.   This  process  shall  continue  until  the  Excess  Contributions
described in (1), above, have been distributed in full.

      The  income  allocable  to  Excess  Contributions  shall  be  equal to the
allocable  gain or loss on such  contributions  for the Plan  Year and shall not
include any allocable  gain or loss for the period between the close of the Plan
Year and the date of  distribution.  The Plan  shall  allocate  income to Excess
Contributions  by  multiplying  the  income  for the  Plan  Year  on the  Salary
Reduction  Contribution  Account  of a  Highly  Compensated  Employee  who is to
receive a distribution of Excess Contributions for such Plan Year by a fraction.
The  numerator  of this  fraction  shall be equal to the  amount  of the  Excess
Contributions to be distributed to the Highly Compensated  Employee for the Plan

                                       20
<PAGE>

Year.  The  denominator  of this  fraction  shall be equal to the sum of (i) the
balance in the  Highly  Compensated  Employee's  Salary  Reduction  Contribution
Account  as of the  beginning  of the Plan  Year and (ii) the  Salary  Reduction
Contributions  made on behalf of the Highly  Compensated  Employee  for the Plan
Year.

      Any corrective  distribution of Excess  Contributions  shall be made after
the close of the Plan Year for which such Excess Contributions were made and, if
possible,  within two and one-half  (2-1/2)  months after the close of such Plan
Year (to avoid tax  penalties),  but in any event not later than the last day of
the Plan Year following the Plan Year for which such Excess  Contributions  were
made.  The  amount of any Excess  Contributions  to be  distributed  to a Highly
Compensated  Employee  for a Plan Year  shall be  reduced  by the  amount of any
Excess Deferrals (as defined in Subparagraph (ii) of Paragraph A of Section Five
of the Plan)  which  were  previously  distributed  to such  Highly  Compensated
Employee for his or her taxable year ending with or within such Plan Year.

      As used herein, the term "Excess  Contributions"  shall mean, with respect
to any Plan Year, the excess of (i) the Salary Reduction  Contributions actually
paid over to the Trust on behalf of all the  Highly  Compensated  Employees  for
such Plan Year,  over (ii) the maximum  amount of such  contributions  permitted
under the Average Deferral Percentage Test for such Plan Year.

      D. NONDISCRIMINATION  RULES APPLICABLE TO COMPANY MATCHING  CONTRIBUTIONS.
Notwithstanding  any other  provisions  of the Plan,  the  Average  Contribution
Percentage  of the  Highly  Compensated  Employees  for any Plan Year  shall not
exceed the  greater of (i) one  hundred and  twenty-five  percent  (125%) of the
Average  Contribution  Percentage  applicable to all Remaining Employees for the
prior Plan Year or (ii) a percentage  amount which is equal to the lesser of (a)
the Average  Contribution  Percentage of the  Remaining  Employees for the prior
Plan Year plus two (2)  percentage  points or (b) two hundred  percent (200%) of
the Average  Contribution  Percentage of the  Remaining  Employees for the prior

                                       21
<PAGE>

Plan Year.  For purposes of this test  (hereinafter  the  "Average  Contribution
Percentage Test"), only Employees who are eligible to participate in the cash or
deferred arrangement under the Plan shall be counted.

      If a Highly  Compensated  Employee  participates  in two (2) or more plans
described in Section 401(a) of the Internal Revenue Code which are maintained by
the  Company or an  Affiliated  Company  and to which  contributions  subject to
Section  401(m) of the Internal  Revenue Code are made,  all such  contributions
shall be aggregated for purposes of this Average  Contribution  Percentage Test.
In addition, if two (2) or more plans maintained by the Company or an Affiliated
Company to which contributions subject to Section 401(m) of the Internal Revenue
Code are made are  aggregated  for  purposes of Internal  Revenue  Code  Section
401(a)(4)  or  410(b)  (other  than the  average  benefits  test  under  Section
410(b)(2)(A)(ii)),  all such plans shall be treated as one plan for  purposes of
this Average Contribution Percentage Test.

      The amount of any Excess Aggregate Contributions for a Plan Year (together
with  earnings or losses  allocable  to such  contributions  for such Plan Year)
shall be  distributed  using  the  procedures  set forth  below.

     (1) First, a determination shall be made of the extent to which the Average
Contribution  Percentage  ratio  of the  Highly  Compensated  Employee  with the
highest Average Contribution Percentage ratio would have to be reduced to either
satisfy the Average  Contribution  Percentage Test described above or cause such
ratio  to  equal  the  Average  Contribution  Percentage  ratio  of  the  Highly
Compensated  Employee  with the next  highest  Average  Contribution  Percentage
ratio.  Second,  this process shall be repeated  until the Average  Contribution
Percentage Test is satisfied. The amount of Excess Aggregate Contributions to be
distributed  in  accordance  with (2) below,  shall be equal to the sum of these
hypothetical  percentage  reductions,  multiplied,  in each case,  by the Highly
Compensated Employee's Compensation.

                                       22
<PAGE>

     (2) In the event Excess Aggregate  Contributions  must be distributed,  the
Highly Compensated Employee having the highest dollar amount of Company Matching
Contribution shall have Excess Aggregate Contributions distributed to him or her
until the amount of Excess Aggregate Contributions  determined under (1), above,
has been  distributed.  This process shall continue  until the Excess  Aggregate
Contributions described in (1), above, have been distributed in full.

      The income allocable to Excess Aggregate  Contributions  shall be equal to
the allocable gain or loss on such contributions for the Plan Year and shall not
include any allocable gain or loss for the period between the close of the  Plan
Year and the date of  distribution.  The Plan  shall  allocate  income to Excess
Aggregate  Contributions  by  multiplying  the  income  for the Plan Year on the
Company Matching Contribution Account of a Highly Compensated Employee who is to
receive a distribution of Excess Aggregate Contributions for such Plan Year by a
fraction.  The  numerator of this  fraction  shall be equal to the amount of the
Excess  Aggregate  Contributions  to be  distributed  to the Highly  Compensated
Employee for the Plan Year.  The  denominator of this fraction shall be equal to
the sum of (i) the balance in the Highly Compensated Employee's Company Matching
Contribution  Account as of the  beginning of the Plan Year and (ii) the Company
Matching Contributions made on behalf of the Highly Compensated Employee for the
Plan Year.

      Any Excess  Aggregate  Contributions  (together  with  earnings  or losses
thereon) which are forfeited under this Paragraph D shall be treated in the same
manner as  forfeitures  of  Non-Vested  Amounts  under  Paragraph  B of  Section
Thirteen of the Plan.

      E. ADDITIONAL  ADJUSTMENTS.  In accordance with regulations  issued by the
Internal Revenue Service under Internal Revenue Code Sections 401(k) and 401(m),
the Pension and Benefits  Committee may, in its sole  discretion,  treat some or
all of the  Company  Matching  Contributions  as being  subject  to the  Average

                                       23
<PAGE>

Deferral  Percentage  Test  described in  Paragraph C, above,  and may make such
other adjustments to the amounts contributed and allocated under the Plan as may
be necessary to comply with the multiple  use test  established  under  Treasury
Regulation Section 1.401 (m)-2.

      F. COMPANY DISCRETIONARY  CONTRIBUTIONS.  Each Plan Year, the Company may,
in its sole  discretion,  make  such  contribution  (if any) on  behalf  of each
Participant who has met the eligibility requirements set forth in Paragraph C of
Section  Three  to the Trust Fund in such amount (hereinafter referred to as the
"Company  Discretionary  Contribution")  as may be  determined  by the  Board of
Directors.  The Company shall have sole and complete discretion as to the amount
of its Company  Discretionary  Contribution.  The  determination  of its Company
Discretionary  Contribution  for each  Plan  Year  shall be made by the Board of
Directors no later than the due date (including  extensions  thereof) for filing
its federal income tax return for the Fiscal Year of the Company coinciding with
or ending after such Plan Year. The Company's Discretionary  Contribution to the
Trust Fund may be made in cash or Company Stock.

      G. DATE OF PAYMENT OF COMPANY  DISCRETIONARY  CONTRIBUTIONS.  The  Company
shall make its  contribution  to the Trust for a Plan Year on or before the last
date, including any extensions thereof, for filing its federal income tax return
for its Fiscal Year ending with or after the last day of such Plan Year.

      H. QUALIFIED NONELECTIVE CONTRIBUTIONS. With respect to any Plan Year, the
Company may make Qualified  Nonelective  Contributions to Nonhighly  Compensated
Employees who have completed at least one thousand  (1,000) Hours of Service for
the  Plan  Year  and are  Employees  on the  last  day of the  Plan  Year (i) in
proportion  to the  Nonhighly  Compensated  Employees  Compensation,  (ii)  in a
specific  dollar amount  allocable to each Nonhighly  Compensated  Employee,  or
(iii) in a less than all  Nonhighly  Compensated  Employees,  with the  specific
dollar amount being  allocated  first to those Employees with the lowest Average
Deferral Percentages.

                                       24
<PAGE>

      I. ADDITIONAL DEFERRAL OPPORTUNITIES.  The Pension and Benefits Committee,
in its  sole  discretion,  may  from  time to  time  provide  Participants  with
additional pre-tax deferral opportunities.  Such opportunities shall be provided
on a uniform and nondiscriminatory manner.

                                   SECTION SIX

                      ALLOCATION TO PARTICIPANTS' ACCOUNTS

      A.  MAINTENANCE  OF ACCOUNTS.  There shall be maintained on behalf of each
Participant a Company Matching  Contribution  Account,  a Company  Discretionary
Contribution   Account,  a  Salary  Reduction   Contribution  Account,  and,  if
applicable,  a  Rollover  Account  and a  Transfer  Account.  The  Participant's
interest  in his or her Company  Matching  Contribution  Account,  in his or her
Company  Discretionary  Contribution  Account,  and, if  applicable,  his or her
Transfer Account shall be subject to the vesting schedule set forth in Paragraph
A of Section Thirteen. The Participant's interest in his or her Salary Reduction
Contribution Account, and, if applicable,  his or her Rollover Account, shall be
one hundred percent (100%) vested at all times.

      B. METHOD OF ALLOCATING  SALARY  REDUCTION  CONTRIBUTIONS.  Subject to the
limitations   of  Paragraph  E  of  this  Section  Six,  the  Salary   Reduction
Contributions  for each Plan Year shall be allocated among the Salary  Reduction
Contribution   Accounts  of  all   Participants  who  elected  to  reduce  their
Compensation  for such Plan Year  pursuant to the  provisions  of Paragraph A of
Section  Five.  The amount to be  allocated  to each such  Participant's  Salary
Reduction  Contribution  Account for such Plan Year shall be equal to the amount
by which such  Participant  elected to reduce his or her  Compensation  for such
Plan Year pursuant to the provisions of Paragraph A of Section Five.

      C. METHOD OF ALLOCATING  COMPANY  MATCHING  CONTRIBUTIONS.  Subject to the
limitations   of  Paragraph  E  of  this  Section  Six,  the  Company   Matching
Contribution shall be allocated among the Company Matching Contribution Accounts

                                       25
<PAGE>

of all Participants who met the eligibility  requirements set forth in Paragraph
B of Section Three and who elected,  pursuant to Paragraph A of Section Five, to
reduce  their  compensation  in a  proportional  manner  based  upon the  Salary
Reduction  Contributions  made by each  such  Participant  during  the Plan Year
disregarding for these purposes any Salary Reduction  Contributions made by such
Participant in excess of ten percent (10%) of such Participant's Compensation.

      D. METHOD OF ALLOCATING COMPANY  DISCRETIONARY  CONTRIBUTIONS.  Subject to
the  limitations  of Paragraph E of this Section Six, the Company  Discretionary
Contributions   for  each  Plan  Year  shall  be  allocated  among  the  Company
Discretionary Contribution Accounts of all Participants who meet the eligibility
requirements in Paragraph C of Section Three,  including  Participants  who have
not made Salary  Reduction  Contributions,  in a proportional  manner based upon
Compensation earned by each such Participant during the Plan Year.  Participants
who have not  completed at least one thousand  (1,000)  Hours of Service  during
such Plan Year and who are not  employed on the last day of the Plan Year due to
death or Total  and  Permanent  Disability  during  the Plan  Year for which the
Company  Discretionary  Contribution is made shall receive Company Discretionary
Contribution  based on  Compensation  such  Participant  earned  while he or she
participated in the Plan during the applicable Plan Year.

      E. LIMITATION ON ANNUAL ADDITIONS.

           (i)  Notwithstanding any other provisions of the Plan, the sum of the
Annual Additions to a Participant's Accounts for any Limitation Year, as defined
below,  shall not exceed the lesser of(i) Thirty Thousand  Dollars  ($30,000) or
such  higher  amount to which such amount may be  adjusted  in  accordance  with
regulations  prescribed  by the  Secretary  of Treasury  or his or her  delegate
pursuant to Section 415(d) of the Internal Revenue Code to reflect  increases in
the cost of living,  or (ii)  twenty-five  percent  (25%) of such  Participant's
Limitation Year Compensation, as defined below. The term "Annual Additions" to a
Participant's Accounts for any Limitation Year shall mean the sum of:

                                       26
<PAGE>

                (a) All Company  Discretionary  Contributions  allocated  to the
Participant's Accounts for the Plan Year ending with such Limitation Year; and

                (b)  All  Salary  Reduction   Contributions   allocated  to  the
Participant's  Accounts for the Plan Year ending with such  Limitation  Year and
excluding any Rollover Amount; and

                (c)  All  Company  Matching   Contributions   allocated  to  the
Participant's Accounts for the Plan Year ending with such Limitation Year.

           (ii) In the event that it is determined that, but for the limitations
contained in  Subparagraph  (i) of this  Paragraph E, the Annual  Additions to a
Participant's  Accounts  for any  Limitation  Year  would  be in  excess  of the
limitations contained herein, such Participant's Salary Reduction  Contributions
which did not result in the  allocation  to the  Participant's  Accounts  of any
Company Matching  Contribution shall be reduced to the extent necessary to bring
the Annual  Additions  within the limitations  contained in Subparagraph  (i) of
this Paragraph E.

           (iii) If and to the  extent  that  the  amount  of any  Participant's
Salary  Reduction  Contributions  which do not result in the  allocation  to the
Participant's  Accounts of any  Company  Matching  Contributions  are reduced in
accordance with the provisions of Subparagraph (ii) of this Paragraph E, but the
amount of the Annual Additions to the Participant's Accounts continues to exceed
the limitations  contained herein, such Participant's  Accounts shall be further
reduced by Salary Reduction Contributions made by the Participant which resulted
in  a  Company  Matching   Contribution   together  with  the  Company  Matching
Contributions  which were  attributable to such Salary Reduction  Contributions.
For these  purposes,  each  dollar of Salary  Reduction  Contributions  which is
removed from the  Participant's  Accounts  shall cause a corresponding amount of
Company  Matching  Contributions to be removed from the  Participant's  Accounts
based upon the amount of Company Matching Contributions which resulted from such
Salary Reduction Contribution.

                                       27
<PAGE>

           (iv)  If and to the  extent  the  amount  of a  Participant's  Salary
Reduction  Contributions  are  reduced  in  accordance  with the  provisions  of
Subparagraph (ii) or Subparagraph  (iii) of this Paragraph E, the amount of such
reductions shall be paid out directly to the Participant  together with earnings
attributable  thereto.  If and to the  extent  that the  amount  of any  Company
Matching  Contributions  are  reduced  in  accordance  with  the  provisions  of
Subparagraph  (iii) of this Paragraph E, the amount of such reductions  shall be
maintained in a suspense account under the Trust (hereinafter referred to as the
"Suspense  Account") to be allocated  among  Participants in the next succeeding
Plan Year, in accordance with the provisions of Paragraph C of this Section Six,
as if such  amount were part of the Company  Matching  Contribution  made by the
Company  for such next  succeeding  Plan Year (and  succeeding  Plan  Years,  as
necessary). In addition, the following rules shall apply to any Suspense Account
established in accordance with this Subparagraph (iv):

                (a)  No  portion  of  the  net  income,  loss,  appreciation  or
depreciation  in the value of the Trust Fund may be allocated  to such  Suspense
Account.

                (b) The maximum Company Matching  Contribution for any Plan Year
in which a Suspense Account exists may not exceed the difference between:

                    (I) The maximum Company Matching Contribution which could be
allocated  among all  Participants  who  elected  to reduce  their  Compensation
pursuant to  Paragraph A of Section Five for such Plan Year in  accordance  with
the provisions of this Section Six,

                    LESS

                    (II) The full amount of the Suspense Account.

                (c) In the event  that the Plan is  terminated  at a time when a
Suspense  Account  exists and in the further  event that the full amount of such
Suspense  Account cannot be allocated  among the  Participants in the Plan as of

                                       28
<PAGE>

the date of the  termination  of the Plan due to the  restrictions  set forth in
this Section Six, then,  notwithstanding any other provision of this Plan or the
Trust Agreement to the contrary, the amount of such Suspense Account that cannot
be allocated among the Participants shall revert to the Company.

      F.  LIMITATIONS ON ANNUAL  ADDITIONS DUE TO PARTICIPATION IN OTHER DEFINED
CONTRIBUTION  PLANS.  In the  event  that  any  Participant  in  this  Plan is a
participant in any other Defined  Contribution  Plan (whether or not terminated)
maintained by the Company or an Affiliated  Company,  the total amount of Annual
Additions to such Participant's  accounts in all such Defined Contribution Plans
shall not exceed the  limitations  set forth in Paragraph E of this Section Six.
If it is  determined  that as a  result  of the  limitations  set  forth in this
Paragraph F the Annual  Additions to a Participant's  Accounts in this Plan must
be  reduced,  such  reduction  shall  be  accomplished  in  accordance  with the
provisions of Paragraph E of this Section Six.

      G. DEFINITIONS RELATING TO ANNUAL ADDITIONS  LIMITATIONS.  For purposes of
Paragraphs E, F, and this Paragraph G of Section Six, the following  definitions
shall apply:

           (i) "Retirement Plan" shall mean (a) any  profit-sharing,  pension or
stock bonus plan described in Sections 401(a) and 501(a) of the Internal Revenue
Code, (b) any annuity plan or annuity  contract  described in Sections 403(a) or
403(b) of the Internal  Revenue  Code,  (c) any  qualified  bond  purchase  plan
described in former  Section  405(a) of the Internal  Revenue Code,  and (d) any
individual retirement account,  individual retirement annuity or retirement bond
described  in Sections  408(a),  408(b) or former  Section  409 of the  Internal
Revenue Code.

           (ii) "Defined  Contribution  Plan" shall mean a Retirement Plan which
provides for an individual  account for each  participant and for benefits based
solely on the amount contributed to the participant's  accounts, and any income,
expenses,   gains  and  losses,   and  any  forfeitures  of  accounts  of  other
participants  which  may be  allocated  to  such  participant's  account,

           (iii) "Defined  Contribution Plan Fraction," for any Limitation Year,
shall  mean a  fraction  (a) the  numerator  of which  is the sum of the  Annual

                                       29
<PAGE>

Additions to the  Participant's  accounts under all Defined  Contribution  Plans
maintained by the Company and any Affiliated  Company in such  Limitation  Year,
and (b) the  denominator  of which  is the sum of the  lesser  of the  following
amounts for such Limitation Year and for all prior Limitation Years during which
he or she performed service  recognized under such plans: (I) the product of the
dollar  limitation in effect under Section  415(c)(l)(A) of the Internal Revenue
Code for each such  Limitation  Year  times one and  twenty-five  one-hundredths
(1.25) or (II) the product of  twenty-five  percent (25%) of such  Participant's
Limitation Year  Compensation for such Limitation Year times one and four tenths
(1.4).

           (iv) "Limitation  Year" shall mean the twelve (12) consecutive  month
period beginning on each January 1 and ending on the following  December 31.

           (v) "Limitation  Year  Compensation"  shall mean the aggregate of all
wages, salaries, and other amounts paid for personal services rendered which are
received by an Employee  from the Company and any  Affiliated  Company  within a
Limitation Year, to the extent that such amounts are includible in gross income.
In  general,   Limitation   Year   Compensation   shall  not  include   deferred
compensation, stock  options  and  other distributions which receive special tax
benefit.  However, with respect to Plan Years commencing on and after January 1,
1998, Limitation Year Compensation shall include amounts contributed pursuant to
a salary reduction  agreement and which are not includible in gross income under
Sections 125, 132(f) and 402(g)(3) of the Internal Revenue Code. Limitation Year
Compensation  shall be calculated in accordance  with the  provisions of Section
415(c)(3) of the Internal Revenue Code and the regulations issued thereunder.

                                       30
<PAGE>

                                  SECTION SEVEN

                             VALUATION OF TRUST FUND

      The Trustee shall evaluate the portion of the Trust Fund  attributable  to
this Plan at fair market  value as of the close of  business  on each  Valuation
Date. In making such valuation,  the Trustee shall deduct all charges,  expenses
and other liabilities,  if any, contingent or otherwise, then chargeable against
the Trust Fund, in order to give effect to income  realized and expenses paid or
incurred,   losses  sustained  and  unrealized  gains  or  losses   constituting
appreciation or depreciation  in the value of Trust  investments  since the last
prior valuation. As soon as practicable after such valuation,  the Trustee shall
deliver in writing to the Pension  and  Benefits  Committee  and to the Board of
Directors a valuation of the Trust Fund  together with a statement of the amount
of net income or loss  (including  appreciation  or depreciation in the value of
Trust investments) since the last prior valuation.

                                  SECTION EIGHT

                             PARTICIPANT'S ACCOUNTS

      A. SEPARATE ACCOUNTS.  A Salary Reduction  Contribution  Account,  Company
Matching Contribution Account, Company Discretionary  Contribution Account, and,
if  applicable,  Rollover  Account and  Transfer  Account and any other  account
deemed  necessary by the Pension and Benefits  Committee shall be maintained for
each Participant.  The amount  contributed by a Participant or allocated to such
Participant  shall be credited to his or her Accounts in the manner set forth in
Section  Five  and Six  hereof.  All  payments  to a  Participant  or his or her
Beneficiaries   shall  be  charged  against  the  respective  Accounts  of  such
Participant.

      B. ACCOUNTS OF  PARTICIPANTS  TRANSFERRED TO AN AFFILIATED  COMPANY.  If a
Participant is  transferred  to an Affiliated  Company which has not adopted the

                                       31
<PAGE>

Plan,  the amount in the Trust which is credited  to his or her  Accounts  shall
continue to be governed by the provisions of the Plan and Trust.

      C. ANNUAL ADJUSTMENT OF PARTICIPANT'S ACCOUNTS. Promptly after preparation
of the Trustee's evaluation, as provided in Section Seven above, the Accounts of
each  Participant  shall be  adjusted  so that the amount of net  income,  loss,
appreciation  or  depreciation  in the value of assets invested in an Investment
Fund shall be allocated equitably and exclusively to the Participants'  Accounts
invested in such Investment Fund.

      D. INVESTMENT OF CONTRIBUTIONS AND VOTING OF COMPANY STOCK.

           (i) PARTICIPANT-DIRECTED  INVESTMENTS.  In accordance with procedures
established  by the Pension and  Benefits  Committee  and Section  404(c) of the
Internal  Revenue Code, each  Participant  shall have the  opportunity,  on each
Investment  Election Date, to make an Investment Election for all amounts in his
or her Accounts  with the Pension and Benefits  Committee or its  delegate.  For
future contributions, this election shall be effective as prescribed by the Plan
Administrator.  Fund  transfers of existing  accounts and any  modifications  or
revocations of Investment  Elections shall be made in a manner prescribed by the
Plan  Administrator  and shall be effective at the time  prescribed  by the Plan
Administrator.

     The following restrictions shall apply to such investment elections:

                (a) No  election  may be made  in  violation  of any  applicable
investment contract or other agreement establishing an Investment Fund; and

                (b) Transfers among the available  Investment  Funds may be made
only in whole percentage multiples of one percent (1%) of the balances therein.

                (c)  Shares of Company  Stock  which  have been  allocated  to a
Participant's  Company  Discretionary  Contribution  Account or Company Matching

                                       32
<PAGE>

Contribution  Account may be liquidated or otherwise converted into another form
of  investment.  Any shares of Company Stock which must be acquired by the Trust
to  effectuate  an  investment  election  may be  issued by the  Company  out of
treasury shares or may be purchased on the open market (or otherwise acquired in
any  other  manner as may be  specified  from  time to time by the  Pension  and
Benefits  Committee) as soon as practicable after the next applicable  Valuation
Date. Any dividends paid with respect to Company Stock shall be used to purchase
additional whole or partial shares of Company Stock as soon as practicable after
the next Valuation Date.

           (ii)   PENSION   AND   BENEFITS   COMMITTEE   DIRECTED   INVESTMENTS.
Participants  who  fail to file an  Investment  Election  with the  Pension  and
Benefits  Committee pursuant to Subparagraph (i) above shall have their Accounts
invested in the Guaranteed Interest Fund or other short-term investment or other
cash equivalent selected by the Pension and Benefits Committee.

           (iii) VOTING OF COMPANY STOCK.

                (a)  Company  Stock  held  by the  Trustee  on  behalf  of  each
Participant  shall be voted by the  Trustee at each  annual  meeting and at each
special  meeting  of  the  stockholders  of  the  Company  as  directed  by  the
Participant to whose  Accounts  such stock is credited. Fractional shares may be
combined  and  voted by the  Trustee  to the  extent  possible  to  reflect  the
instructions of the Participant credited with such shares.

                (b) In order to  implement  the above,  the Trustee  shall cause
each Participant to be provided with a copy of a notice of each such stockholder
meeting and the proxy  statement of the Company,  together  with an  appropriate
form for the Participant to indicate his or her voting  instructions.  Such form
shall indicate that if instructions are not received by the Trustee with respect

                                       33
<PAGE>

to any shares of Company Stock allocated to the Participant's  Account three (3)
business  days prior to such  stockholder  meeting,  the Trustee  shall vote the
uninstructed  shares of Company Stock in the same proportions as the Trustee was
instructed  to vote with  respect to all  shares of  Company  Stock for which it
received  instructions from all other Participants.  Each Participant shall also
be given  similar  rights to direct  the  Trustee  as to the sale of  securities
pursuant  to a tender  offer  and the  exercise  of any  conversion  privileges,
subscription  rights or other  similar  rights  arising  with respect to Company
Stock credited to his or her Accounts.  The Trustee shall hold  confidential any
and all voting or other instructions  received from  Participants.

                                  SECTION NINE

                               COMMON TRUST FUND

      The fact that for  administrative  purposes the Trustee maintains separate
Accounts  for  each  Participant  shall  not be  deemed  to  segregate  for such
Participant,  or to give such  Participant  any direct interest in, any specific
assets in the Trust Fund held by the  Trustee.  All such  assets may be held and
administered by the Trustee as a commingled fund.

                                   SECTION TEN

                               DISABILITY BENEFITS

      Upon the  Termination of Employment of a Participant  because of Total and
Permanent  Disability while in the employ of the Company or Affiliated  Company,
his  or  her  Company  Discretionary   Contribution  Account,  Company  Matching
Contribution  Account,  and Transfer Account,  if applicable,  shall fully vest.
Such benefits shall be paid at the time and manner specified in Section Fourteen
of the Plan.

                                       34
<PAGE>

                                 SECTION ELEVEN

                               RETIREMENT BENEFITS

      If a Participant  is employed by the Company or an  Affiliated  Company on
his or her  Retirement  Date,  his or  her  Company  Discretionary  Contribution
Account,   Company  Matching  Contribution  Account  and  Transfer  Account,  if
applicable,  shall fully vest at that time. If the Participant  continues in the
Company's  employ after his or her Retirement  Date, he or she shall continue to
be eligible to elect to have Salary Reduction  Contributions  made on his or her
behalf  under  the  Plan and to share in the  allocations  of  Company  Matching
Contributions and Company  Discretionary  Contributions under the Plan until his
or her actual  retirement.  Upon  retirement  on or after  attaining  his or her
Retirement  Date, a Participant  shall be entitled to receive  benefits equal to
the total amount in his or her Accounts in the Plan as  determined in accordance
with the  provisions of Paragraph A of Section  Fourteen  hereof.  Such benefits
shall be paid at the time and in the manner specified in Section Fourteen of the
Plan.

                                 SECTION TWELVE

                                 DEATH BENEFITS

      A. DEATH BENEFITS.  Upon the death of a Participant who is employed by the
Company  or  an  Affiliated   Company  at  the  time  of  death,  such  deceased
Participant's  Company  Discretionary  Contribution  Account,  Company  Matching
Contribution  Account, and Transfer Account, if applicable,  shall fully vest at
that time,  and his or her  Beneficiary  shall be entitled  to receive  benefits
equal to the total amount in the deceased  Participant's Accounts in the Plan as
determined in accordance with the provisions of Paragraph A of Section  Fourteen
hereof. Upon the death of a Participant who is not employed by the Company or an
Affiliated Company at the time of death, such deceased Participant's Beneficiary
shall be entitled to receive benefits equal to the vested amount in the deceased

                                       35
<PAGE>

Participant's  Accounts  in the  Plan  as  determined  in  accordance  with  the
provisions of Paragraph A of Section  Thirteen.  In either event,  such benefits
shall be paid at the time and in the manner specified in Section Fourteen of the
Plan.

      B.  DESIGNATION  OF  BENEFICIARIES.  Subject  to  rules  contained  in the
following  paragraph,  each Participant may designate one or more  Beneficiaries
and contingent  Beneficiaries by delivering a written  designation  thereof over
his or her signature to the Pension and Benefits Committee. Again subject to the
rules  contained  in  the  following  paragraph,  a  Participant  may  designate
different Beneficiaries at any time by delivering a new written designation over
his or her signature to the Pension and Benefits Committee. Any such designation
shall  become  effective  only upon its  receipt  by the  Pension  and  Benefits
Committee.  The last effective  designation received by the Pension and Benefits
Committee shall supersede all prior designations. A designation of a Beneficiary
shall be effective only if the designated Beneficiary survives the Participant.

      Notwithstanding  the above, if a Participant is married at the time of his
or  her  death,  such  Participant's  surviving  spouse  shall  be  his  or  her
Beneficiary,  unless  such  spouse has waived  this right and  consented  to the
Participant's  designation of a different Beneficiary.  Any such spousal consent
must be in  writing,  must  acknowledge  the effect of the  waiver,  and must be
witnessed by a notary public or plan representative.  Any subsequent designation
of a Beneficiary by the Participant shall require a new spousal consent,  unless
the  spouse's   original  consent   expressly  permits  future  changes  without
additional spousal consent.

      C.  FAILURE  OF  PARTICIPANT  TO  DESIGNATE.  If a  Participant  fails  to
designate  a  Beneficiary,   or  if  no  designated   Beneficiary  survives  the
Participant,  the  Participant  shall be deemed to have designated the following
Beneficiaries  (if then living) in the following  order of priority:  (1) his or
her  spouse,   (2)  his  or  her  children,   including   adopted  children  and
stepchildren,  in equal shares, (3) his or her parents, in equal shares, and (4)
his or her estate.

                                       36
<PAGE>

      D. BENEFICIARIES' RIGHTS.  Whenever the rights of a Participant are stated
or limited in the Plan, his or her Beneficiaries shall be bound thereby.

                                SECTION THIRTEEN

                         EMPLOYMENT TERMINATION BENEFITS

      A. VESTING UPON TERMINATION OF EMPLOYMENT. In the event of the Termination
of Employment of a Participant,  such  Participant  shall be entitled to receive
(i) one  hundred  percent  (100%) of the  amounts  (if any) in his or her Salary
Reduction  Contribution  Account, and Rollover Account, if applicable,  and (ii)
the  following  percentage  of the  amount in his or her  Company  Discretionary
Contribution  Account and Company Matching  Contribution  Account based upon the
number  of the  Participant's  Years of  Service  prior to such  Termination  of
Employment, as follows:

               YEARS OF SERVICE                             PERCENTAGE
               Less than 1 year                             None
               1 year                                       33%
               2 years                                      66%
               3 years or more years                        100%

Notwithstanding  the foregoing,  upon a Change in Control, as defined in Section
Two,  all  Accounts  under the Plan shall  immediately  become 100%  vested.  In
addition, such Participant shall be entitled to receive the vested percentage of
his or her Transfer  Account  pursuant to the rules under Section  411(d) of the
Internal Revenue Code. Such benefits shall be paid at the time and in the manner
set forth in Section Fourteen of the Plan.

      B.  FORFEITURE OF NON-VESTED  AMOUNT.  The excess of (i) the amount in the
Company Discretionary  Contribution Account and/or Company Matching Contribution
Account  and/or  Transfer  Account,  as the case may be, of a Participant  whose
Termination  of  Employment  has  occurred,  over (ii) the vested amount in such

                                       37
<PAGE>

Company Discretionary  Contribution Account and/or Company Matching Contribution
Account and/or Transfer Account, as the case may be, as determined in accordance
with the vesting  schedule  set forth in  Paragraph A of this  Section  Thirteen
(such difference  being referred to herein as the "Non-Vested  Amount") shall be
forfeited upon the earlier of (i) the Participant's receipt of a distribution of
his or her total vested Accounts under the Plan, or (ii)  immediately  following
his or her incurring his or her fifth (5th) One-Year Break in Service  following
such Termination of Employment.

      If a  Participant  who has  received  a  distribution  of his or her total
vested  Accounts under the Plan is rehired by the Company and performs more than
five hundred (500) Hours of Service in any Plan Year before  incurring  five (5)
consecutive  One-Year  Breaks in Service,  any previously  forfeited  Non-Vested
Amount  shall  be  restored  to his or her  Company  Discretionary  Contribution
Account or Company Matching  Contribution  Account or Transfer  Account,  as the
case may be, and he or she shall  continue to earn  future  Years of Service for
purposes of determining the vested amount in such Accounts without regard to his
or her cessation of employment. The funds needed to restore such a Participant's
Non-Vested Amount shall be drawn first from any Account balances forfeited under
the  provisions  of this  Paragraph B or under the  provisions of Paragraph K of
Section Fourteen during the Plan Year in which such restoration is required.  If
such  sources  are not  sufficient  to fully  restore the  previously  forfeited
Non-Vested  Amount  to  the  Participant's  Company  Discretionary  Contribution
Account or Company Matching  Contribution  Account or Transfer  Account,  as the
case may be, the Company shall make a special contribution earmarked to fund the
remainder of the amount needed.

      Subject to the  immediately  preceding  paragraph and to the provisions of
Paragraph K of Section  Fourteen,  all  Non-Vested  Amounts  which are forfeited
during a Plan Year  under  this  Paragraph  B shall be used to reduce the future
cost of benefits of the Company by applying such forfeited Non-Vested Amounts to

                                       38
<PAGE>

the current or the following  year's Company  Matching  Contribution  or Company
Discretionary  Contribution,  as the case may be, required under the Plan by the
Company.

                                SECTION FOURTEEN

                               PAYMENT OF BENEFITS

      A.  RETIREMENT,  DISABILITY AND DEATH  BENEFITS.  The Pension and Benefits
Committee  shall commence  benefit  payment,  make  distribution of the benefits
payable to a Participant (or, if applicable,  his or her Beneficiary)  upon such
Participant's  retirement on or after  attaining his or her  Retirement  Date or
upon  sustaining a Total and  Permanent  Disability  or upon such  Participant's
death while employed by the Company or an Affiliated Company.  Such commencement
or distribution shall be made as soon as administratively feasible following the
date the distribution is requested or otherwise payable, and shall be based upon
the balance in such  Participant's  Accounts as of the Valuation Date coincident
with or immediately preceding such distribution.

      At  the  request  of  the  Participant  (or,  if  applicable,  his  or her
Beneficiary),  the Pension and Benefits Committee shall commence benefit payment
or make such  distribution  prior to the  close of the Plan  Year in which  such
retirement,  Total and Permanent Disability, or death occurs. In such event, the
benefit payable to the Participant  (or, if applicable,  his or her Beneficiary)
shall be based  upon  the  balances  in such  Participant's  Accounts  as of the
Valuation  Date  immediately  preceding the  distribution,  supplemented,  where
applicable,  by an  amount  representing  any  Salary  Reduction  Contributions,
Company  Matching  Contributions,  and any Company  Discretionary  Contributions
contributed  to the  Plan on  behalf  of  such  Participant  subsequent  to such
Valuation Date and any Rollover or Transfer  Amounts  contributed to the Plan by
such Participant subsequent to such Valuation Date.

      Notwithstanding  the  foregoing,  if  the  total  benefits  payable  to  a
Participant  under this Paragraph A exceed Five Thousand Dollars ($5,000) on the

                                       39
<PAGE>

date of  distribution,  such benefits may not be distributed to such Participant
before he or she reaches his or her Retirement Date unless he or she consents to
an earlier distribution.

      B. EMPLOYMENT  TERMINATION  BENEFITS.  The Pension and Benefits  Committee
shall  commence  benefit  payment  or make  an  employment  termination  benefit
distribution  to a Participant  (or, if applicable,  his or her  Beneficiary) as
soon as administratively  feasible following the close of the Plan Year in which
the Participant's  Termination of Employment  occurs.  The benefits payable to a
Participant (or, if applicable,  his or her Beneficiary) upon such Participant's
Termination of Employment shall be based upon (i) the vested amount (as provided
in  Paragraph A of Section  Thirteen)  in (a) his or her  Company  Discretionary
Contribution  Account, (b) his or her Company Matching Contribution Account, (c)
his or her  Transfer  Account  and (ii) the  total  amount  in his or her  other
Accounts as of the Valuation Date coincident  with or immediately  preceding the
date on which the distribution is made. Such commencement or distribution  shall
be made as soon as administratively feasible following the date the commencement
or distribution is requested or otherwise  payable,  and shall be based upon the
balance in such Participant's  Accounts as of the Valuation Date coincident with
or immediately preceding such distribution.

      At  the  request  of  the  Participant  (or,  if  applicable,  his  or her
Beneficiary),  the Pension and Benefits  Committee  shall,  if  administratively
feasible,  commence benefit payment or make such distribution prior to the close
of the Plan Year in which the Participant's Termination of Employment occurs. In
such event, the benefit payable to the Participant or Beneficiary shall be based
upon (i) the vested  amount (as provided in Paragraph A of Section  Fourteen) in
such Participant's (a) Company  Discretionary  Contribution Account, (b) Company
Matching  Contribution  Account,  and (c)  Transfer  Account  and (ii) the total
amount  in his or her  other  Accounts  as of  the  Valuation  Date  immediately
preceding the commencement or distribution,  supplemented,  where applicable, by

                                       40
<PAGE>

an amount  representing  any Salary  Reduction  Contributions,  Company Matching
Contributions and Company Discretionary Contributions contributed to the Plan on
behalf of such  Participant  subsequent to such  Valuation Date and any Rollover
and Transfer Amounts  contributed to the Plan by such Participant  subsequent to
such  Valuation  Date.  In the event that an Employee  incurs a  Termination  of
Employment after the attainment of age fifty-five (55), any distribution made to
such Employee shall be exempt from the ten percent (10%) additional tax on early
distributions imposed under Section 72(t) of the Internal Revenue Code.

      Notwithstanding  the foregoing,  if the total vested benefits payable to a
Participant  under this Paragraph B exceed Five Thousand Dollars ($5,000) on the
date of  commencement  or  distribution,  such  benefits  may not commence or be
distributed to such  Participant  before he or she reaches his or her Retirement
Date unless he or she consents to an earlier distribution.

      In the event that a commencement  or distribution is made pursuant to this
Paragraph  B to  a  Participant  who,  at  the  time  of  such  commencement  or
distribution,  is not one hundred  percent (100%) vested in the amount in his or
her Company  Discretionary  Contribution  Account or his or her Company Matching
Contribution  Account or his or her Transfer Account,  the following rules shall
apply:

           (i)  ESTABLISHMENT  OF  SEPARATE  LEDGER  ACCOUNT.  The  Pension  and
Benefits  Committee  shall  establish  a separate  ledger  account  (hereinafter
referred to as the "Separate  Account") for such  Participant  as of the time of
such  commencement or distribution.  The balance in such  Participant's  Company
Discretionary  Contribution Account,  Company Matching Contribution Account, and
Transfer Account immediately following such distribution shall be transferred to
this Separate  Account and shall constitute the initial balance of this Separate
Account.   For  this  purpose,   all  references  to  a  Participant's   Company

                                      41
<PAGE>

Discretionary Contribution Account and Company Matching Contribution Account and
Transfer  Account in the Plan shall be deemed  applicable to such  Participant's
Separate Account.

           (ii) SUBSEQUENT  PAYMENTS.  In the event that after such distribution
the  former  Employee  is  rehired  by the  Company  but  then  again  incurs  a
Termination  of  Employment  at a time  when such  Participant  is less than one
hundred  percent  (100%)  vested  in his  or  her  Separate  Account,  then  the
nonforfeitable  portion of such  Participant's  Separate Account for purposes of
Paragraph A of Section Thirteen shall be an amount equal to:

                (A) The vesting  percentage  set forth in Paragraph A of Section
Thirteen  applicable  to  such  Participant  at  the  time  of  such  subsequent
distribution,

                MULTIPLIED BY:

                (B) The sum of the present balance in the Separate  Account plus
the sum of all prior distribution amounts,

                LESS:

                The sum of all prior distribution amounts.

      C.  METHODS OF PAYMENT OF BENEFITS.  Except as otherwise  provided in this
Section Fourteen,  the Pension and Benefits Committee shall cause the Trustee to
make  distribution  of benefits  pursuant to Sections  Ten,  Eleven,  Twelve and
Paragraph A of Section Thirteen in accordance with the method of distribution as
set forth below,  based upon the value of the  Accounts as of the last  business
day immediately  preceding the distribution,  selected by the Participant (or in
the case of death benefits, by the Participant's beneficiary):

           (i) NORMAL FORM OF BENEFIT. The normal form of benefit under the Plan
shall be a lump sum distribution to the Participant or Beneficiary.

                                       42
<PAGE>

           (ii) OPTIONAL FORMS OF BENEFIT.  The  Participant or Beneficiary  may
elect a life annuity form of distribution  instead of the normal form of benefit
which is a lump sum distribution. Annuity payments may be made over (a) the life
of  the  Participant,  (b)  the  lives  of  the  Participant  and  a  designated
Beneficiary,  (c) a period certain and continuous not extending  beyond the life
expectancy  of the  Participant,  or (d) a period  certain  and  continuous  not
extending beyond the joint and last survivor expectancy of the Participant and a
designated Beneficiary subject to the following rules:

      D. METHODS OF PAYMENT OF OPTIONAL BENEFITS.

                (a) UNMARRIED  PARTICIPANTS.  If a Participant is not married on
his or her Annuity Starting Date and if such Participant elects an optional form
of payment set forth in Paragraph (C)(ii),  above, such  Participant's  benefits
shall be paid in the form of an annuity  providing  monthly  payments for his or
her lifetime,  unless such  Participant  elects,  not more than ninety (90) days
prior to his or her Annuity  Starting  Date, to have his or her benefits paid to
him or her in an optional form of annuity payment set forth in Paragraph (C)(ii)
above.

                (b) MARRIED PARTICIPANTS.

                I. IN GENERAL. If a Participant is married on his or her Annuity
Starting  Date and if such  Participant  elects an optional  form of payment set
forth in Paragraph C(ii) above,  then such  Participant  shall be deemed to have
elected to receive his or her benefits under the Plan in the form of a Qualified
Joint  and  Survivor  Annuity,   except  as  otherwise   provided  in  Paragraph
C(ii)(b)(II)  below.

                II.  ELECTION  TO RECEIVE  ALTERNATIVE  FORM OF ANNUITY  BENEFIT
PAYMENT.  A Participant who otherwise would be deemed to have elected to receive
any benefit or portion of his or her  benefit in the form of a  Qualified  Joint

                                       43
<PAGE>

and Survivor Annuity may elect to receive his or her benefit in an optional form
of annuity benefit payment provided that (A) the Participant makes such election
in writing not more than  ninety (90) days prior to his or her Annuity  Starting
Date, (B) such election is received by the Pension and Benefits  Committee prior
to the Participant's Annuity Starting Date and (C) EITHER (i) such Participant's
spouse consents in writing to waive the right to receive benefits  pursuant to a
Qualified Joint and Survivor Annuity not more than ninety (90) days prior to the
Participant's Annuity Starting Period or (ii) the Participant establishes to the
satisfaction of the Pension and Benefits Committee that his or her spouse cannot
be located or that such written consent cannot be obtained because of such other
circumstances as the Internal Revenue Service may prescribe by regulation.

      For purposes of this subparagraph  (b)(II), a spousal consent shall not be
valid unless such consent (A) is in writing, (B) acknowledges the effect of such
election and (C) is witnessed by a notary public. The Participant's  spouse must
also  consent to the  identity of any  non-spouse  Beneficiary  designated.  Any
subsequent  election  must also  include such spousal  consent.

                III. NOTICE OF QUALIFIED JOINT AND SURVIVOR ANNUITY AND OPTIONAL
FORMS OF PAYMENT.  If an optional form of benefit is elected by the  Participant
no more than ninety (90) days prior to a  Participant's  Annuity  Starting Date,
the Pension and Benefits  Committee shall provide the  Participant,  by personal
delivery or first class mail,  with a written  explanation  of (A) the terms and
conditions of the Qualified  Joint and Survivor  Benefit payment under the Plan,
(B) the Participant's right to make, and the effect of, an election to waive the
Qualified Joint and Survivor Benefit form of benefit payment under the Plan, (C)
the  Participant's  right to make, and the effect of, a revocation of a previous
election to waive the Qualified Joint and Survivor Benefit form of payment under

                                       44
<PAGE>

the Plan, (D) the rights of the Participant's  spouse with regard to the various
forms  of  benefit  payment  available  under  the  Plan,  (E)  the  eligibility
conditions and other material  features of the optional annuity forms of benefit
payment  available under the Plan and (F) sufficient  additional  information to
explain the relative  values of the optional  annuity  forms of benefit  payment
available  under the  Plan.

                IV. REVOCATION OF ELECTION. Any election by a Participant not to
receive his or her benefit in the Qualified  Joint and Survivor  Annuity form of
benefit payment applicable to such Participant under the Plan may be revoked  by
the  Participant  at any  time  prior  to his or her  Annuity  Starting  Date by
delivery of written notice to the Pension and Benefits Committee.  Once revoked,
such election may be reinstated by the  Participant  at any time, and any number
of times,  prior to his or her  Annuity  Starting  Date in  accordance  with the
provisions of subparagraph (ii)(b)(II) of this Paragraph C.

      E. TIMING OF  DISTRIBUTION.  Unless a Participant  elects  otherwise,  the
distribution  of his or her  benefits  must begin by no later than the  sixtieth
(60th) day after the close of the Plan Year in which the latest of the following
events occurs: (i) the Participant  reaches his or her Retirement Date, (ii) the
tenth  (10th)   anniversary  of  the  date  on  which  the   Participant   began
participation in the Plan, or (iii) the Participant  terminates  employment with
the Company. Notwithstanding the above, if the amount of the distribution cannot
be ascertained by the sixtieth (60th) day after the close of the applicable Plan
Year,  or if it is not  possible to make such  payment on such date  because the
Pension and Benefits  Committee is unable to locate the Participant after making
reasonable  efforts to do so, the  distribution  of the  Participant's  benefits
retroactive  to such date may be made no later  than  sixty  (60) days after the
earliest date on which the amount of such distribution can be ascertained or the
date on which the Participant is located, whichever the case may be.

                                       45
<PAGE>

      F. MINIMUM DISTRIBUTION REQUIREMENTS. Notwithstanding the foregoing and in
accordance  with the  provisions  of Section  40l(a)(9) of the Internal  Revenue
Code,  including  Prop.  Treas.  Reg.  ss.  1.401(a)(9)-2,   a  distribution  of
retirement  benefits  shall  commence  no later  than a  Participant's  Required
Beginning  Date which shall mean the later of (i) April 1 of the  calendar  year
following  the  calendar  year in which a  Participant  attains  age seventy and
one-half  (70-1/2),  or (ii) April 1 of the calendar year following the calendar
year in which  such  Participant  retires  from  employment  with  the  Company.
Notwithstanding  the  foregoing,  with  respect  to a  Five-Percent  Owner,  the
distributions  of such  Participant's  benefit under the Plan shall  commence no
later than April 1 of the calendar year following the calendar year in which the
Participant attains age seventy and one-half (70-1/2) regardless of whether such
Participant  is still  employed by the Company or an Affiliated  Company at that
time.  In the  event  the  Participant  dies  after  distribution  of his or her
benefits  has begun,  but  before  the  Participant's  full  benefits  have been
distributed, the remaining portion of such benefits will be distributed at least
as rapidly as under the method of distribution  being used as of the date of his
or her  death.  In the event a  Participant  dies prior to  commencement  of the
receipt of benefits,  the death benefits  attributable to such Participant shall
be  distributed  within  five (5) years of the  Participant's  death,  provided,
however,  that any portion of the death  benefit which is payable to (or for the
benefit of) a designated  Beneficiary  may be distributed to such  Participant's
Beneficiary  commencing within one (1) year of the Participant's death, over the
life of such  Beneficiary  (or  over a  period  not  extending  beyond  the life
expectancy  of such  Beneficiary),  unless  the  designated  Beneficiary  is the
Participant's  surviving  spouse,  in which  case  distributions  need not begin
earlier than the date on which the  Participant  would have attained age seventy

                                       46
<PAGE>

and one-half  (70-1/2).  The provisions of this Paragraph F of Section  Fourteen
override  any  distribution  options  in this  Plan  inconsistent  with  Section
401(a)(9) of the Internal  Revenue Code.

      For purposes of this  Paragraph,  life  expectancies  shall be  calculated
using the expected return  multiples in Tables V and VI of Treasury  Regulations
Section  1.72-9  and,  unless  the  Participant   elects  otherwise,   shall  be
recalculated  annually. In this regard, a Participant's life expectancy shall be
recalculated  each  year  using the  Participant's  attained  age as of  his/her
birthday during that year. If the Participant elects to have his or her required
minimum  required  distributions  paid  over the  joint  life and last  survivor
expectancy of the  Participant  and  the  Participant's  designated  Beneficiary
is  his or  her  spouse,  such  spouse's  remaining  life  expectancy  shall  be
recalculated  each year  using the  spouse's  attained  age as of such  spouse's
birthday during that year. If the Participant elects to have his or her required
minimum  distributions paid over the joint life and last survivor  expectancy of
the  Participant  and his or her designated  Beneficiary  and the  Participant's
designated  Beneficiary  is  not  his  or her  spouse,  his  or  her  designated
Beneficiary's remaining life expectancy shall be calculated as of the first year
for which the Participant was required to receive a minimum  distribution  under
Section  401(a)(9) of the Internal  Revenue Code and shall be reduced by one (1)
for each year thereafter.

      G.  DISTRIBUTION  OF SMALL  ACCOUNT  BALANCES.  Notwithstanding  any other
provision of the Plan to the contrary, if the total value of the vested Accounts
to be distributed to a Participant  (or, if applicable,  his or her Beneficiary)
on  account  of  such  Participant's  retirement  after  attaining  his  or  her
Retirement Date or after sustaining a Total and Permanent Disability, his or her
death, or his or her Termination of Employment is Five Thousand Dollars ($5,000)
or less on the date of  distribution,  the Pension and Benefits  Committee shall
distribute  such benefits to such  Participant  (or, if  applicable,  his or her

                                       47
<PAGE>

Beneficiary)  in the  form of a  single  payment  of the  total  amount  of such
benefits.  Such  payment  shall be made no later  than sixty (60) days after the
Valuation  Date of the Plan Year within which such  Participant so retires after
attaining his or her Retirement  Date or after  sustaining a Total and Permanent
Disability, dies or incurs a Termination of Employment, or as soon thereafter as
is  administratively  feasible.  Such payment shall be in full  discharge of all
obligations  under the Plan with  respect to such  Participant  or  Beneficiary.
However, no distribution may be made pursuant to this Paragraph F after the date
benefit  payments  commence  under the Plan  without the written  consent of the
Participant (or, if the Participant has died, his or her surviving spouse).

      H. WITHDRAWALS.

           (i) AGE 59-1/2.  A Participant  may withdraw the full value of his or
her  Vested  Accounts,  including  earnings  thereon,  at any  time on or  after
attaining age fifty-nine and one-half (59-1/2), upon giving at least thirty (30)
days advance notice to the Trustee.

           (ii)  HARDSHIP  WITHDRAWALS.  A  Participant  who has not reached age
fifty-nine  and one-half  (59-1/2) may withdraw an amount from his or her vested
Accounts prior to Termination of Employment only if such  Participant  displays,
to the satisfaction of the Pension and Benefits Committee,  that such withdrawal
is necessary in light of a financial  hardship,  that the amount requested to be
withdrawn  does not exceed  the  amount  required  to meet the  financial  needs
created by the hardship and that such an amount is not reasonably available from
the other resources of the Participant. The amounts which may be withdrawn under
this Paragraph H shall not include earnings and gains on a Participant's  Salary
Reduction Contribution Account and may not exceed the value of his or her vested
Accounts at the time of  withdrawal.

           The following expenses shall be deemed to constitute an immediate and
heavy financial need: (i) medical expenses  incurred by the Participant,  his or
her spouse or  dependents;  (ii) the  purchase of a principal  residence  of the
Participant (excluding mortgage payments);  (iii) the payment of tuition for the

                                       48
<PAGE>

next semester or quarter of post-secondary education for the Participant, his or
her spouse,  children or  dependents;  and (iv)  expenses  needed to prevent the
eviction of the  Participant  from, or the  foreclosure  of the mortgage on, the
Participant's  principal  residence.  A withdrawal shall be permitted under this
Paragraph H only if the Participant has obtained all  distributions  (other than
hardship  distributions) and loans (if applicable) currently available under all
plans maintained by the Company.

      A Participant  who has received a withdrawal  pursuant to this Paragraph H
shall not be permitted to make or receive  Salary  Reduction  Contributions  for
twelve months after receipt of the hardship distribution,  and his or her salary
reduction  elections  shall be suspended for such period.  Furthermore,  for the
calendar year  following the  withdrawal,  the Maximum  Deferral  Amount for the
Participant shall be reduced by the amount of the Participant's Salary Reduction
Contributions  for the calendar  year during which the  withdrawal  occurred.  A
Participant who receives a hardship  withdrawal shall not be permitted to submit
an  application  for another  hardship  withdrawal  until the  expiration of six
months from the date of distribution of the prior hardship withdrawal.

      I. ELIGIBLE ROLLOVER DISTRIBUTIONS. Notwithstanding any other provision of
the  Plan  that  would  otherwise  limit a  Distributee's  election  under  this
Paragraph I, a Distributee may elect,  at the time and in the manner  prescribed
by the Pension and Benefits Committee, to have all or any portion of an Eligible
Rollover  Distribution paid directly to an Eligible Retirement Plan specified by
the Distributee in a Direct Rollover.

      As used in this Paragraph I, the following  terms shall have the following
meanings:

           (i) "Eligible Rollover  Distribution"  shall mean any distribution of
all or any portion of the balance to the credit of a Distributee under the Plan,
except that the term "Eligible Rollover  Distribution" shall not include (a) any
distribution  that is one of a series of substantially  equal periodic  payments
(not less  frequently  than annually) made for the life (or life  expectancy) of
the  Distributee  or  the  joint  lives  (or  joint  life  expectancies)  of the

                                       49
<PAGE>

Distributee and the Distributee's  designated Beneficiary,  (b) any distribution
that is one of a series  of  substantially  equal  periodic  payments  (not less
frequently than annually) made for a specified period of ten (10) years or more,
(c) any distribution to the extent such distribution is  required  under Section
40l(a)(9) of the Internal Revenue Code, (d) the portion of any distribution that
is not  includible in gross income  (determined  without regard to the exclusion
for net  unrealized  appreciation  with respect to Company  securities),  or (e)
effective for  distributions  after December 31, 1999,  any hardship  withdrawal
pursuant to Paragraph H of Section Fourteen.

           (ii)  "Eligible   Retirement  Plan"  shall  mean  (a)  an  individual
retirement account described in Section 408(a) of the Internal Revenue Code, (b)
an individual  retirement  annuity  described in Section  408(b) of the Internal
Revenue Code,  (c) an annuity plan  described in Section  403(a) of the Internal
Revenue Code or (d) a qualified  trust which is  described in Section  401(a) of
the  Internal  Revenue Code and is exempt from tax under  Section  501(a) of the
Internal Revenue Code and which is part of a defined contribution plan the terms
of which permit the acceptance of Eligible Rollover  Distributions.  In the case
of an Eligible Rollover Distribution made to the surviving spouse of an Employee
or former Employee, the term "Eligible Retirement Plan" shall mean an individual
retirement  account  described in Section 408(a) of the Internal Revenue Code or
an individual  retirement  annuity  described in Section  408(b) of the Internal
Revenue Code.

           (iii)  "Distributee"  shall mean an Employee or former Employee,  the
surviving  spouse of an  Employee  or former  Employee,  or the spouse or former
spouse of an  Employee  or former  Employee  who is an  alternate  payee under a
Qualified Domestic Relations Order (as defined in Section 414(p) of the Internal
Revenue Code).

           (iv)  "Direct  Rollover"  shall  mean a  payment  by the  Plan to the
Eligible Retirement Plan specified by the Distributee.

                                       50
<PAGE>

      J. LOANS TO PARTICIPANTS.  Upon application made in the form prescribed by
the Plan  Administrator  of an active  Participant,  the  Pension  and  Benefits
Committee shall make a loan to the Participant, provided

           (i) that the total amount of any such loan to the  Participant  shall
not exceed  the  LESSER of (a) Fifty  Thousand  Dollars  ($50,000)  or (b) fifty
percent (50%) of the total amount of the  Participant's  vested  Accounts at the
time of the loan minus the highest  outstanding  loan balance at any time within
the last twelve (12) months; and

           (ii) that the amount of the loan shall not be less than One  Thousand
Dollars ($1,000).

      A Participant may only have two (2)  outstanding  loans at any given time.
All loans shall be considered as investments of the  Participant  receiving such
loan and interest paid on the outstanding balance of the loan will be treated as
earnings credited to the Participant's Accounts with respect to such outstanding
balance.  Interest  shall be charged on such loans at the prime rate as reported
in the WALL  STREET  JOURNAL  on the first day of the month in which the loan is
withdrawn,  plus two percent  (2%).  Such loans shall be secured by a portion of
the Participant's  vested Accounts (which portion shall not exceed fifty percent
(50%) of the total  amount of such  Accounts)  equal to the  amount of the loan.

      Each loan made to the  Participant  pursuant to this  Paragraph J shall be
subject to  substantially  level  amortization  over the term of the loan,  with
payments due no less frequently than quarterly. Any such loan by its terms shall
be required to be repaid  within five (5) years of the date of the loan is made.
Any such loan shall be repaid through salary withholding or other means approved
by the Pension and Benefits Committee. In the event a Participant does not repay
all or any  portion  of such  loan when the same  becomes  due and  payable,  in
addition to any legal  remedies  which the Pension and  Benefits  Committee  may
have,  the Pension and Benefits  Committee may, upon the occurrence of any event

                                       51
<PAGE>

permitting a distribution of the Participant's  Accounts under this Plan, deduct
the unpaid amount of such loan from the Participant's Accounts in the Plan. If a
Participant  has a Termination  of Employment  before full  repayment of a loan,
such  Participant  must repay the outstanding loan balance in full within thirty
(30) days of the  Termination  of  Employment  or such unpaid amount of the loan
will be  deducted  from the  Participant's  Accounts  in the  Plan  prior to the
distribution pursuant to Paragraph B of Section Fourteen.

      The Participant loan program  established  under this Paragraph J shall be
subject to the terms and conditions of a separate written  document,  titled the
"Rules and Procedures  Governing Plan Loans to Participants,"  which document is
hereby  incorporated  by  reference  into the Plan.  Such "Rules and  Procedures
Governing  Plan  Loans  to  Participants"  shall  contain,  at  a  minimum,  the
information   required   under   Department   of   Labor   Regulations   Section
2550.408b-1(d)(2).  The  terms  and  conditions  of the  "Rules  and  Procedures
Governing Plan Loans to  Participants"  shall be established and approved by the
Pension and  Benefits  Committee,  which shall have the  authority to amend such
terms and  conditions  from time to time.  A copy of the most recent  "Rules and
Procedures  Governing  Plan  Loans  to  Participants"  shall  at  all  times  be
maintained by the Pension and Benefits Committee or its delegate.

      K. BENEFITS OF PERSONS WHO CANNOT BE LOCATED.  If the Pension and Benefits
Committee determines in good faith that a Participant or Beneficiary entitled to
receive a benefit payment hereunder cannot be located,  the Pension and Benefits
Committee shall nevertheless give written notice to such person of the fact that
such  benefit  payment  is payable  to him or her under the Plan.  Such  written
notice  shall be given by  United  States  mail to the  person  entitled  to the
benefit payment (according to the records of the Plan) at the last known address
of such person. In addition,  the Pension and Benefits  Committee shall use such
other means as are reasonably available to it in order to ascertain the location
of such  person.  If such  Participant  or  Beneficiary  makes no claim for such

                                       52
<PAGE>

benefit  payment  before the  earlier of (i) a period of two (2) years after the
giving of such  written  notice or (ii) the  termination  of the Plan,  then the
Pension  and  Benefits  Committee  shall  declare a  forfeiture  of the  benefit
otherwise payable to such person, provided such person has not yet been located.

      Notwithstanding  the foregoing,  if a claim for payment of such benefit is
thereafter  made by the  Participant  or  Beneficiary,  such  benefit  shall  be
reinstated  and paid in full.  If such a valid  claim for payment of benefits is
subsequently  made,  the funds needed to pay such  benefit  shall be drawn first
from any amounts  forfeited  under the provisions of this Paragraph K during the
Plan Year in which such payment is required.  If such sources are not sufficient
to fully pay such  benefits,  the  Company  shall  make a  special  contribution
earmarked to fund the remainder of the amount needed.

      Subject to the  immediately  preceding  paragraph,  all amounts  which are
forfeited  during a Plan Year under this Paragraph K shall be used to reduce the
future cost of benefits by  applying  such  forfeited  amounts to the current or
following  year's  Company  Matching   Contribution  or  Company   Discretionary
Contribution, to the extent made.

      L. DISTRIBUTION FOR MINOR  BENEFICIARY.  In the event a distribution is to
be made to a minor,  then the Pension and  Benefits  Committee  may, in its sole
discretion, direct that such distribution be paid to the legal guardian (as such
term is defined under the applicable state or country),  or if none, to a parent
of such Beneficiary or a responsible  adult with whom the Beneficiary  maintains
his or her residence, or to the custodian for such Beneficiary under the Uniform
Gift to Minors Act or Gift to Minors  Act, if such is  permitted  by the laws of
the  state in which  said  Beneficiary  resides.  Such a  payment  to the  legal
guardian or parent of a minor Beneficiary shall fully discharge the Trustee, the
Company and the Plan from further liability on account thereof.

                                       53
<PAGE>

     M.  DISTRIBUTION  OF COMPANY  STOCK.  Notwithstanding  the  foregoing,  the
distribution of the benefits  attributable to that portion of the  Participant's
Company  Discretionary  Contribution  Account and Company Matching  Contribution
Account  held in the form of  Company  Stock  shall be made in whole  shares  of
Company  Stock.  Any cash  balance in the  Participant's  Company  Discretionary
Contribution  Account  and/or  Company  Matching  Contribution  Account which is
related to Company  Stock (such as dividend  payments)  shall be used to acquire
for  distribution  the maximum  number of whole shares or other units of Company
Stock at the then fair  market  value.  Any  fractional  unit of the  unexpended
balance  shall be  distributed  in cash.  If Company  Stock is not available for
purchase by the Trustee,  then the Trustee  shall hold such cash  balance  until
Company  Stock is acquired  and then make such  distribution.  If the Trustee is
unable to purchase the Company Stock required for distribution,  it shall make a
distribution in cash within six (6) months after the date the  distribution  was
to be made, except in the case of a retirement distribution, which shall be made
within  sixty  (60)  days  after  the  close  of the  Plan  Year  in  which  the
Participant's retirement occurs.

                                       54
<PAGE>

                                 SECTION FIFTEEN

                           ADMINISTRATION OF THE PLAN

      A. RESPONSIBILITY FOR ADMINISTRATION OF THE PLAN. The Pension and Benefits
Committee shall be responsible for the management,  operation and administration
of the Plan.  Notwithstanding the foregoing, the Board of Directors, in its sole
discretion, shall be authorized  to  abolish or suspend the Pension and Benefits
Committee  and to  designate  the  Trustee as  responsible  for the  management,
operation and  administration  of the Plan. Any such  designation of the Trustee
shall  be  valid  only  if  the  Trustee  acknowledges  in  writing  that  it is
responsible for the management, operation and administration of the Plan. In the
event of such designation of the Trustee,  the Trustee shall thereupon have full
authority and control over the management,  operation and  administration of the
Plan,  all functions and powers of the Pension and Benefits  Committee  shall be
exercised by the Trustee and all references in the Plan and Trust to the Pension
and  Benefits  Committee  shall mean the  Trustee  unless and until the Board of
Directors  reappoints or reinstates the Pension and Benefits  Committee pursuant
to the provisions of Paragraph B of this Section Fifteen.

      B. APPOINTMENT OF PENSION AND BENEFITS  COMMITTEE.  The Board of Directors
shall appoint a Pension and Benefits Committee  consisting of at least three (3)
persons  and no more than  five (5)  persons.  Any  member  of the  Pension  and
Benefits  Committee  may resign upon ten (10) days prior  written  notice to the
Board of  Directors.  The Board of Directors  shall be  authorized to remove any
member  of the  Pension  and  Benefits  Committee  at any  time  and in its sole
discretion  and to appoint a  successor  whenever a vacancy on the  Pension  and
Benefits Committee occurs.

      C.  RESPONSIBILITY FOR ADMINISTRATION OF THE TRUST FUND. The Trustee shall
be responsible for the management and investment of the Trust Fund in accordance
with the provisions of the Trust Agreement.

                                       55
<PAGE>

      D.  DELEGATION OF POWERS.  The Pension and Benefits  Committee  and/or the
Trustee may appoint such  assistants or  representatives  as they deem necessary
for the effective  exercise of their duties in administering the Plan and Trust.
The  Pension and  Benefits  Committee  and/or  the  Trustee may delegate to such
assistants  and  representatives  any powers and duties,  both  ministerial  and
discretionary, as they deem expedient or appropriate.

      E. RECORDS. All acts and determinations with respect to the administration
of the Plan made by the Pension and Benefits  Committee  and any  assistants  or
representatives  appointed  by it  shall be duly  recorded  by the  Pension  and
Benefits Committee or by the assistant or representative appointed by it to keep
such  records.  All  records,  together  with  such  other  documents  as may be
necessary for the  administration of the Plan, shall be preserved in the custody
of the Pension and  Benefits  Committee  or the  assistants  or  representatives
appointed by it.

      F. GENERAL ADMINISTRATIVE POWERS. The Pension and Benefits Committee shall
have all powers  necessary to administer the Plan in accordance  with its terms,
including the power to construe the Plan and  determine  all questions  that may
arise thereunder. In the exercise of such powers under the Plan, the Pension and
Benefits Committee shall have discretionary  authority to interpret the terms of
the Plan (including, but not limited to, the power to interpret any ambiguity in
the Plan) and to determine  eligibility  for and entitlement to Plan benefits in
accordance with the terms of the Plan. Any  interpretation or determination made
pursuant to such  discretionary  authority shall be given full force and effect,
unless it can be shown that the  interpretation  or determination  was arbitrary
and capricious.

      G.  APPOINTMENT OF PROFESSIONAL  ASSISTANTS AND INVESTMENT  MANAGERS.  The
Pension and Benefits Committee may engage accountants, attorneys, physicians and
such other  personnel  as it deems  necessary  or  advisable.  The  Pension  and
Benefits Committee,  in its sole discretion,  may appoint one or more Investment

                                       56
<PAGE>

Managers to manage  (including the power to acquire or dispose of) all or any of
the assets of the Trust provided that such appointment is approved  by the Board
of  Directors.  The  functions  of any such  persons  engaged by the Pension and
Benefits  Committee  shall be limited to the  specific  services  and duties for
which they are engaged, and such persons shall have no other duties, obligations
or  responsibilities  under the Plan or Trust.  Such persons  shall  exercise no
discretionary  authority or discretionary  control  respecting the management of
the Plan,  and,  unless  engaged  specifically  as  Investment  Managers,  shall
exercise no authority or control  respecting  management or  disposition  of the
assets of the Trust.  The fees and costs of such services are an  administrative
expense of the Plan to be paid out of the Trust Fund,  except to the extent that
such fees and costs are paid directly by the Company.

      H.  ACTIONS BY THE  PENSION  AND  BENEFITS  COMMITTEE.  All actions of the
Pension and  Benefits  Committee  shall be taken  pursuant to the  decision of a
majority of the then members of the Pension and Benefits Committee.

      I.  DIRECTIVES  OF THE PENSION AND BENEFITS  COMMITTEE.  Directives of the
Pension and  Benefits  Committee  to the Trustee  shall be delivered in writing,
signed by an  appropriate  member of the  Pension  and  Benefits  Committee.

      J.  DISCRETIONARY  ACTS.  Any  discretionary  actions of the  Pension  and
Benefits Committee or the Company with respect to the administration of the Plan
shall  be made in a  manner  which  does not  discriminate  in  favor of  Highly
Compensated Employees. In the event the Pension and Benefits Committee exercises
any discretionary  authority under the Plan with respect to a Participant who is
a member of the Pension and Benefits  Committee,  such  discretionary  authority
shall be exercised  solely and  exclusively  by those members of the Pension and
Benefits  Committee other than such Participant,  or, if such Participant is the
sole member of the Pension and Benefits Committee,  such discretionary authority
shall be exercised solely and exclusively by the Board of Directors.

                                       57
<PAGE>

      K.  RESPONSIBILITY OF PENSION AND BENEFITS  COMMITTEE.  The members of the
Pension and Benefits Committee and their assistants and  representatives  (other
than any  Investment  Managers)  shall be free from all liability for their acts
and  conduct  in the  administration  of the Plan and Trust  except  for acts of
willful misconduct or gross negligence;  provided,  however,  that the foregoing
shall not  relieve  any of them from any  responsibility  or  liability  for any
responsibility, obligation or duty that they may have pursuant to ERISA.

      L.  INDEMNITY BY THE  COMPANY.  In the event and to the extent not insured
against by any  insurance  company  pursuant  to  provisions  of any  applicable
insurance  policy,  the Company shall indemnify and hold harmless the members of
the Pension and Benefits  Committee  and their  assistants  and  representatives
(other than any Investment Managers) from any and all claims,  demands, suits or
proceedings  in  connection  with the Plan or Trust  that may be  brought by the
Company's   employees,   the  Participants  or  their   Beneficiaries  or  legal
representatives,  or by any other  person,  corporation,  entity,  government or
agency thereof, provided,  however, that such indemnification shall not apply to
any such person for such person's acts of willful misconduct or gross negligence
in connection with the Plan or Trust.

      M. PAYMENT OF FEES AND EXPENSES.  The Trustee,  the members of the Pension
and  Benefits  Committee  and  their  assistants  and  representatives  shall be
entitled to payment from the Trust Fund for all  reasonable  costs,  charges and
expenses incurred in the  administration of the Plan and Trust,  including,  but
not  limited  to,  reasonable  fees for  accounting,  legal and  other  services
rendered,  to the extent incurred by the Trustee, the members of the Pension and
Benefits  Committee or their  assistants  and  representatives  in the course of
performance  of their duties under the Plan and the Trust,  except to the extent
that such fees and costs are paid directly by the Company.  Notwithstanding  any
other provision of the Plan or Trust, no person who receives full-time  pay from
the  Company  shall  receive  compensation  from  the  Trust  Fund,  except  for
reimbursement of expenses properly and actually incurred.

                                       58
<PAGE>

      N. PLAN  ADMINISTRATOR.  The Pension and Benefits  Committee  shall be the
"administrator" (as defined in Section 3(l6)(A) of ERISA) of the Plan, and shall
be responsible for the  performance of all reporting and disclosure  obligations
under ERISA and all other  obligations  required or permitted to be performed by
the  Plan  Administrator  under  ERISA.  The  Plan  Administrator  shall  be the
designated  agent for service of legal process.

      O.   ALLOCATION   AND   DELEGATION  OF  PENSION  AND  BENEFITS   COMMITTEE
RESPONSIBILITIES.  The Pension and Benefits  Committee  may,  upon approval of a
majority  thereof,  (i)  allocate  among any of the  members of the  Pension and
Benefits  Committee  any of the  responsibilities  of the Pension  and  Benefits
Committee under the Plan or (ii) designate any person,  firm or corporation that
is not a member of the Pension and  Benefits  Committee  to carry out any of its
responsibilities  under the Plan. Any such  allocation or  designation  shall be
made pursuant to a written  instrument  executed by a majority of the members of
the Pension and Benefits Committee.

                                 SECTION SIXTEEN

                            BENEFIT CLAIMS PROCEDURE

      A. CLAIMS FOR  BENEFITS.  Any claim for  benefits  under the Plan shall be
made in  writing  to the  Pension  and  Benefits  Committee.  If such  claim for
benefits is wholly or  partially  denied,  the Pension  and  Benefits  Committee
shall, within sixty (60) days after receipt of the claim, notify the Participant
or Beneficiary of the denial of the claim. Such notice of denial (i) shall be in
writing,  (ii) shall be written in a manner  calculated  to be understood by the
Participant or  Beneficiary,  and (iii) shall contain (a) the specific reason or
reasons for denial of the claim, (b) a specific reference to the pertinent Plan
provisions  upon which the denial is based,  (c) a description of any additional
material  or  information   necessary  to  perfect  the  claim,  along  with  an
explanation  of why  such  material  or  information  is  necessary,  and (d) an
explanation of the claim review procedure as set forth in this Section Sixteen.

                                       59
<PAGE>

      B. REQUEST FOR REVIEW OF DENIAL.  Within sixty (60) days after the receipt
by the Participant or Beneficiary of a written notice of denial of the claim, or
such later time as shall be deemed  reasonable taking into account the nature of
the  benefit  subject to the claim and any other  attendant  circumstances,  the
Participant  or  Beneficiary  may file a written  request  with the  Pension and
Benefits  Committee  that it conduct a full and fair review of the denial of the
claim for benefits.

      C. DECISION ON REVIEW OF DENIAL.  The Pension and Benefits Committee shall
deliver to the Participant or Beneficiary a written decision on the claim within
sixty (60) days after the receipt of the  aforesaid  request for review,  except
that if there are special  circumstances (such as the need to hold a hearing, if
necessary)  which  require an extension of time for  processing,  the  aforesaid
sixty (60) day period shall be extended sixty (60) days. Such decision shall (i)
be  written  in a manner  calculated  to be  understood  by the  Participant  or
Beneficiary,  (ii) include the  specific  reason or reasons for the decision and
(iii) contain a specific  reference to the pertinent Plan  provisions upon which
the  decision  is based.

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<PAGE>

                                SECTION SEVENTEEN

                           INALIENABILITY OF BENEFITS

      A. IN GENERAL.  The right of any Participant or Beneficiary to any benefit
or payment  under the Plan or Trust or to any Account  maintained as provided by
the Plan shall not be subject to voluntary or involuntary  transfer,  alienation
or assignment, and, to the fullest extent permitted by law, shall not be subject
to attachment, execution, garnishment, sequestration or other legal or equitable
process.  In the event a  Participant  or  Beneficiary  who is  receiving  or is
entitled to receive  benefits  under the Plan  attempts  to assign,  transfer or
dispose of such  right,  or if an attempt is made to subject  said right to such
process,  such  assignment,  transfer  or  disposition  shall be null and  void.
Notwithstanding  the  above,  a  Participant's  benefits  under this Plan may be
offset by any amount the  Participant  is ordered or required to pay to the Plan
in  connection  with a judgment of  conviction  for a crime,  civil  judgment or
settlement  agreement issued or entered into after August 5, 1997, and described
in Section 40l(a)(13)(C) of the Internal Revenue Code.

      B. QUALIFIED DOMESTIC RELATIONS ORDERS. Notwithstanding Paragraph A above,
benefits  shall  be  payable  to an  individual  other  than  a  Participant  in
accordance with the applicable  requirements of any Qualified Domestic Relations
Order (as defined below) pursuant to the following provisions:

           (i) The  term  "Qualified  Domestic  Relations  Order"  shall  mean a
judgment,  decree,  or  order  (including  approval  of  a  property  settlement
agreement) which relates to the provision of child support, alimony payments, or
marital property rights to a spouse,  former spouse, child or other dependent of
a  Participant,  which  creates or recognizes  the  existence of an  alternative
payee's right to, or assigns to an alternate  payee the right to, receive all or

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<PAGE>

a portion of the benefits payable with respect to a Participant  under the Plan,
and which meets the following requirements:

                (a) such order  shall  specify  the name and last known  mailing
address (if any) of the  Participant  and each  alternate  payee  covered by the
order,

                (b) such order  shall  specify the amount or  percentage  of the
Participant's  benefits to be paid by the Plan to each such  alternate  payee or
the manner in which such amount or percentage is to be determined,

                (c) such order shall specify the number of payments or period to
which such order applies,

                (d) such  order  shall  specify  each plan to which  such  order
applies,

                (e) such order shall not require the Plan to provide any type or
form of benefits or any option not otherwise provided under the Plan,

                (f) such order shall not  require the Plan to provide  increased
benefits (determined on the basis of actuarial value), and

                (g) such order  shall not  require the payment of benefits to an
alternate  payee which are required to be paid to another  alternate payee under
another order previously determined to be a Qualified Domestic Relations Order.

           (ii) The  Pension and  Benefits  Committee  shall  determine a set of
nondiscriminatory and reasonable procedures to determine the qualified status of
domestic relations orders and to administer  distributions  under such qualified
orders in accordance with Section 414(p) of the Internal Revenue Code.

           (iii)  To  the  extent  that a  Qualified  Domestic  Relations  Order
provides that a former spouse is to be treated as the  Participant's  spouse for
purposes  of the death  benefits  payable  under  this Plan,  the  Participant's
current spouse will not be treated as the Participant's spouse for this purpose.

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<PAGE>

           (iv) In addition to  establishing  procedures to handle requests made
pursuant  to  Qualified   Domestic   Relations  Orders,  the  Plan  shall  allow
Participants  to make  special  arrangements  for  the  computation  of  Account
balances in order to comply with the provisions of antenuptial  agreements which
require a  differentiation  between  the value of  Account  balances  prior to a
marriage  and  increases  in the  value  of such  Account  balances  whether  by
contributions and/or by earnings subsequent to the date of the marriage.

           (v) If  specified  in the order,  the  alternate  payee may  commence
benefit  payments under the Plan and pursuant to the order upon the later of (a)
the date the  alternate  payee attains age  twenty-one  (21) or (b) the date the
order is finalized.

           (vi) If  specified  in the order,  the  alternate  payee may commence
benefit  payments under the Plan and pursuant to the order upon the later of (a)
the date the assets  subject to the order have been  segregated  or (b) the date
the order is finalized.

                                SECTION EIGHTEEN

                            INVESTMENT OF TRUST FUND

      At a meeting  duly  called for such  purpose,  the  Pension  and  Benefits
Committee  shall  establish  a funding  policy  and method  consistent  with the
objectives of the Plan and the requirements of Title I of ERISA. The Pension and
Benefits  Committee  shall meet at least  annually to review such funding policy
and method.  In establishing  and reviewing such funding policy and method,  the
Pension and Benefits Committee shall endeavor to determine the Plan's short-term
and long-term  objectives and financial needs,  taking into account the need for
liquidity to pay benefits and the need for investment  growth.

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<PAGE>

                                SECTION NINETEEN

                             AMENDMENT OF THE PLAN

      The  Company  may  amend  the Plan at any  time,  and  from  time to time,
pursuant to written  resolutions of the Board of Directors.  No such  amendment,
however, shall have the effect of reducing any then nonforfeitable percentage of

benefits of any Participant as computed in accordance with the vesting  schedule
under Section  Thirteen of the Plan.  If the Plan is amended and such  amendment
would,  at any  time,  decrease  the  percentage  of vested  benefits  which any
Participant  would  have  been  entitled  to  receive  had the  Plan not been so
amended,  then each  Participant who is employed by the Company on the date such
amendment  is adopted,  or the date such  amendment is  effective,  whichever is
later,  and who has  three  (3) or more  Years of  Service  as of the end of the
period within which such Participant may make the election  provided for herein,
shall be  permitted,  beginning  on the  date  such  amendment  is  adopted,  to
irrevocably  elect to have his or her vested interest computed without regard to
such  amendment.  Written notice of such amendment and the  availability of such
election must be given to each such Participant, and each such Participant shall
be granted a period of sixty (60) days after the later of (i) his or her receipt
of such notice,  or (ii) the effective  date of such  amendment  within which to
make such  election.  Such  election  shall be exercised by the  Participant  by
delivering  or  sending  written  notice  thereof  to the  Company  prior to the
expiration of such sixty (60) day period.

                                 SECTION TWENTY

                             PERMANENCY OF THE PLAN

      A. RIGHT TO TERMINATE PLAN. The Company  contemplates  that the Plan shall
be  permanent  and  that it  shall be able to make  contributions  to the  Plan.
Nevertheless,   in   recognition   of  the  fact  that  future   conditions  and
circumstances cannot now be entirely foreseen, the Company reserves the right to
terminate either the Plan or both the Plan and the Trust.

                                       64
<PAGE>

      B.  MERGER OR  CONSOLIDATION  OF THE  PLAN.  The Plan may not be merged or
consolidated  with, nor may its assets or  liabilities  be  transferred  to, any
other plan unless each Participant would receive a benefit immediately after the
merger, consolidation,  or transfer (if the other plan then terminated) which is
equal to or  greater  than the  benefit he or she would  have been  entitled  to
receive immediately before the merger, consolidation,  or transfer (if this Plan
had then terminated).

                               SECTION TWENTY-ONE

                 DISCONTINUANCE OF CONTRIBUTIONS AND TERMINATION

      A.  DISCONTINUANCE OF CONTRIBUTIONS.  Whenever the Company determines that
it is impossible or inadvisable for it to make further contributions as provided
in the Plan, the Board of Directors may, without terminating the Trust, adopt an
appropriate  resolution  permanently  discontinuing all further contributions by
the  Company.  A certified  copy of such  resolution  shall be  delivered to the
Pension and  Benefits  Committee  and the Trustee.  Thereafter,  the Pension and
Benefits  Committee  and  the  Trustee  shall  continue  to  administer  all the
provisions of the Plan which are  necessary and remain in force,  other than the
provisions  relating to contributions by the Company.  However,  the Trust shall
remain in  existence  and all of the  provisions  of the Trust  Agreement  shall
remain in force.

      B. TERMINATION OF PLAN AND TRUST. If the Board of Directors  determines to
terminate the Plan and Trust completely,  the Plan and Trust shall be terminated
as of the date  specified in certified  copies of  resolutions  of such Board of
Directors, delivered to the Pension and Benefits Committee and the Trustee. Upon
such  termination  of the Plan and  Trust,  after  payment of all  expenses  and
proportional  adjustment of the Accounts of Participants employed by the Company
to reflect such expenses,  Trust Fund profits or losses,  and allocations of any
previously unallocated funds to the date of termination, the  Participants shall

                                       65
<PAGE>

be entitled to receive the amount then credited to their respective  Accounts in
the Trust. The Pension and Benefits Committee may make payment of such amount in
cash or in assets of the Trust Fund.

      C. RIGHTS TO BENEFITS UPON TERMINATION OF PLAN OR COMPLETE  DISCONTINUANCE
OF CONTRIBUTIONS. Upon the termination or partial termination of the Plan or the
complete  discontinuance  of  contributions  by the  Company,  the rights of the
Participants  (or,  in the  case  of a  partial  termination,  each  Participant
affected by the  termination)  to the amount  credited to his or her Accounts at
such time shall be nonforfeitable  without reference to any formal action on the
part of the Company, the Pension and Benefits Committee or the Trustee.

                               SECTION TWENTY-TWO

                         STATUS OF EMPLOYMENT RELATIONS

      The adoption and  maintenance of the Plan and Trust shall not be deemed to
constitute  a  contract   between  the  Company  and  its  Employees  or  to  be
consideration  for, or an  inducement  or condition  of, the  employment  of any
person. Nothing herein contained shall be deemed (i) to give to any Employee the
right to be retained in the employ of the  Company;  (ii) to affect the right of
the Company to discipline  or discharge any Employee at any time;  (iii) to give
the Company the right to require any  Employee to remain in its employ;  or (iv)
to affect any  Employee's  right to terminate his or her employment at any time.

                              SECTION TWENTY-THREE

                            BENEFITS PAYABLE BY TRUST

      All benefits  payable  under the Plan shall be paid or provided for solely
from the Trust. The Company assumes no liability or responsibility therefor.

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<PAGE>

                               SECTION TWENTY-FOUR

                         EXCLUSIVE BENEFIT OF TRUST FUND

      A. LIMITATION UPON REVERSIONS.  Except as provided in Paragraphs B hereof,
the assets of the Trust Fund shall not inure to the  benefit of the  Company and
shall be held for the exclusive  purposes of providing  benefits to Participants
and their  Beneficiaries and defraying  reasonable expenses of administering the
Plan.

      B. MISTAKE OF FACT. In the event that all or any portion of a contribution
made to the  portion  of the  Trust  attributable  to the Plan is  based  upon a
mistake  of fact,  the excess  amount of the  contribution  attributable  to the
mistake of fact shall be returned to the  Company,  as promptly as  practicable,
but in no event later than one (1) year after the payment of the contribution.

                               SECTION TWENTY-FIVE

                                 APPLICABLE LAW

     The  Plan  and  the  Trust  which  is a part  hereof  shall  be  construed,
regulated, interpreted and administered under and in accordance with the laws of
the State of New York  (except its laws  regarding  choice of law) to the extent
not preempted by ERISA.

                               SECTION TWENTY-SIX

                      INTERPRETATION OF THE PLAN AND TRUST

      It is  the  intention  of  the  Company  that  the  Plan,  and  the  Trust
established  by the  Company  to  implement  the  Plan,  shall  comply  with the
provisions of Section 401 and 501 of the Internal Revenue Code, the requirements
of ERISA  and the  corresponding  provisions  of any  subsequent  laws,  and the
provisions of the Plan and Trust Agreement shall be construed to effectuate such
intention.

                                       67
<PAGE>

                              SECTION TWENTY-SEVEN

                    ADOPTION OF PLAN BY AFFILIATED COMPANIES

      Any Affiliated Company,  whether or not presently existing,  may, with the
approval of the Board of Directors and the Pension and Benefits Committee, adopt
the Plan and Trust by means of appropriate  corporate  action of such Affiliated
Company and by executing such documents as the Board of Directors may require in
order  for such  Affiliated  Company  to become a party to the  Trust.  Any such
Affiliated  Company  which  adopts the Plan and Trust as  provided  above  shall
thereafter be included within the meaning of the term "Company" when used in the
Plan and Trust,  except that the  authority to amend or terminate the Plan shall
remain the exclusive responsibility of Viatel, Inc.

                              SECTION TWENTY-EIGHT

                        TOP-HEAVY CONTINGENCY PROVISIONS

      A. APPLICATION.  The provisions of this Section  Twenty-Eight are included
in the Plan pursuant to Section  401(a)(10)(B)(ii)  of the Internal Revenue Code
and  shall  become  applicable  only if the Plan  becomes a  Top-Heavy  Plan (as
defined  below) under Section  416(g) of the Internal  Revenue Code for any Plan
Year.

      B.  DETERMINATION  OF TOP-HEAVY  STATUS OF PLAN. The  determination  as to
whether  the Plan has  become a  Top-Heavy  Plan for any such Plan Year shall be
made  as  of  the  last  day  of  the  immediately   preceding  Plan  Year  (the
"Determination  Date"),  and the Plan  shall be a  "Top-Heavy  Plan" only if the
present value of the aggregate Account balances under the Plan for Key Employees
(as defined  below)  exceeds  sixty  percent  (60%) of the present  value of the
aggregate  Account  balances  under  the  Plan  for  all  Employees  and  former
Employees.  For such  purpose, the  aggregate Account balances shall be computed
and adjusted  pursuant to Section  416(g) of the  internal  Revenue Code and the
regulations issued thereunder.

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<PAGE>

      As used herein,  the term "Key Employee" shall mean any Employee or former
Employee  who at any time  during the  current  Plan Year or any of the four (4)
preceding Plan Years meets the criteria under Section  4l6(i)(l) of the Internal
Revenue Code. A "Key Employee" shall include the following:

           (i) an  officer  of the  Company  or an  Affiliated  Company  if such
individual's  annual  compensation  exceeds  fifty  percent  (50%) of the dollar
limitation then in effect under Section  415(b)( 1 )(A) of the Internal  Revenue
Code;

           (ii) an actual or constructive  owner (using the attribution rules of
Section  318 of the  Internal  Revenue  Code)  of one of the  ten  (10)  largest
ownership  interests (as defined in Treas.  Reg. ss. 1.416-1,  T-19) in value in
the Company or an Affiliated Company if such individual's  compensation  exceeds
one hundred percent (100%) of the dollar limitation then in effect under Section
4l5(c)(l)(A) of the Internal Revenue Code;

           (iii) a Five-Percent Owner;

           (iv) a "one-percent owner" (as described in Section  416(i)(1)(B)(ii)
of the Internal Revenue Code) of the Company or an Affiliated Company who has an
annual  compensation from the Company or an Affiliated  Company of more than One
Hundred and Fifty Thousand Dollars ($150,000),  as adjusted for increases in the
cost of living  pursuant to 401(a)(17) of the Internal  Revenue Code; or

           (v) the  Beneficiary  of any  deceased  Employee  or former  Employee
described  in  Subparagraph  (i),  (ii),  (iii),  or (iv) above.  In the event a
Beneficiary of an Employee or former Employee  qualifies as a Key Employee,  any
benefits payable to such  Beneficiary  shall be treated as benefits payable to a
Key Employee.

      For  purposes  of  Subparagraphs  (i),  (ii)  and  (iv)  above,  the  term
"compensation"  shall mean  compensation as defined in Section  4l4(q)(4) of the

                                       69
<PAGE>

Internal  Revenue Code.  For purposes of  Subparagraph  (i) above,  no more than
fifty (50) employees  (or, if lesser,  the greater of three (3) employees or ten
percent (10%) of all employees) shall be treated as officers.

      The term "Non-Key Employee" shall mean any Employee or former Employee who
is not  currently a Key  Employee.  The term  "Non-Key  Employee"  shall include
former Key Employees,  but such former Key Employees shall be excluded  entirely
from the calculations to determine whether the Plan is a Top-Heavy Plan.

      C.  CONSIDERATION  OF MULTIPLE  PLANS IN DETERMINING  TOP-HEAVY  STATUS OF
PLAN. All plans of the Company or an Affiliated  Company which are included in a
Required Aggregation Group or in a Permissive Aggregation Group (both as defined
below) with this Plan shall be considered  together in determining  whether this
Plan is a  Top-Heavy  Plan.  Each plan of the Company or an  Affiliated  Company
which is required to be included in an aggregation  group  (whether  required or
permissive)  shall be treated as a  Top-Heavy  Plan if such group is a Top-Heavy
Group (as defined below).  For these purposes,  a "Required  Aggregation  Group"
shall mean (i) each plan of the Company or an Affiliated  Company in which a Key
Employee  is a  participant  plus  (ii) each  other  plan of the  Company  or an
Affiliated  Company which is required to exist in order for the plans  contained
in (i), above, to meet the  nondiscrimination  requirements of Section 40l(a)(4)
or 410 of the Internal Revenue Code. A "Permissive Aggregation Group" shall mean
(i) a  Required  Aggregation  Group  plus  (ii) any  other  plan or plans of the
Company  or an  Affiliated  Company  which  are  able  to  separately  meet  the
nondiscrimination  requirements  of Sections  401(a)(4)  and 410 of the Internal
Revenue Code but which the Company or an  Affiliated  Company  elects to include
within such group.

      An aggregation group (either permissive or required) shall be a "Top-Heavy
Group"  only if the sum of (a)  the  present  value  of the  cumulative  accrued
benefits for Key  Employees  under all defined  benefit  plans  included in such

                                       70
<PAGE>

group and (b) the total of the  account  balances  for Key  Employees  under all
defined contribution plans included in such group exceeds sixty percent (60%) of
the accrued  benefits and account  balances  determined  for all  employees  and
former employees covered under such plans. For these purposes,  account balances
shall be computed and adjusted  pursuant to the  principles of Section 416(g) of
the Internal  Revenue Code. In determining the cumulative  accrued  benefits and
account balances for purposes of this top-heavy test:

           (i) The present value of the cumulative  accrued  benefits of all Key
Employees shall be increased by the aggregate distributions made with respect to
each such  individual  under the Plan during the previous five (5) years (ending
on  the  Determination   Date).  This  Subparagraph  (i)  shall  also  apply  to
distributions  under a  terminated  plan which  would have been  required  to be
included in an aggregation group had the plan not been terminated;

           (ii) The extent to which  rollovers and transfers  must be taken into
account  shall be made in  accordance  with Section 416 of the Internal  Revenue
Code and the regulations issued thereunder; and

           (iii) The account  balances and accrued benefits of (a) an individual
who is not  currently a Key  Employee but who was a Key Employee in a prior year
or (b) an  individual  who is a Key  Employee  but  who has  not  performed  any
services  for the Company or an  Affiliated  Company at any time during the five
(5)-year period ending on the Determination Date, shall be disregarded.

      D.  MINIMUM  BENEFITS.  For any Plan Year in which the Plan is a Top-Heavy
Plan,  each  Participant  who is a Non-Key  Employee  and who is employed by the
Company or an Affiliated Company on the last day of the Plan Year (regardless of
whether such Participant completed one thousand (1,000) or more Hours of Service
during  such  Plan  Year)  shall  receive  a  minimum   allocation  of  employee
contributions  under this Plan which, when combined with the amount of any other
contributions  and/or  forfeitures  allocated to his or her  accounts  under any
other  defined  contribution  plans  maintained  by the Company or an Affiliated

                                       71
<PAGE>

Company,  shall be no less than the lesser of (i) three  percent  (3%) of his or
her Limitation Year  Compensation  for such Plan Year or (ii) such percentage of
his or her Limitation Year Compensation for such Plan Year which is equal to the
highest  percentage of Limitation Year Compensation for such Plan Year which any
Key  Employee  received  in the  form of  employee  contributions  to his or her
Accounts in this Plan for such Plan Year.  Any  contributions  made to a Non-Key
Employee's accounts under this or any other defined contribution plan maintained
by the Company which are made on behalf of such Non-Key  Employee  pursuant to a
cash or deferred  arrangement  satisfying the  requirements of Section 401(k) of
the Internal  Revenue  Code may not be used to satisfy  this minimum  allocation
requirement.

      For  purposes  of  this  Paragraph  D,  a  Participant's  Limitation  Year
Compensation  for any Plan Year shall not  include  any amounts in excess of One
Hundred and Seventy  Thousand Dollars  ($170,000),  as adjusted for increases in
the cost of living pursuant to Section 401(a)(17) of the Internal Revenue Code.

      E.  ADJUSTMENT OF SECTION 415  LIMITATIONS IN PLAN YEARS IN WHICH THE PLAN
IS  TOP-HEAVY.  For any Plan Year in which  the Plan is a  Top-Heavy  Plan,  the
references  to  a  factor  of  one  and  twenty-five  one-hundredths  (1.25)  in
Subparagraph  (iii) of  Paragraph G of Section Six of the Plan shall be modified
so as to  constitute  references  to a factor of one (1.0) unless the  aggregate
Account  balances  attributable  to Key  Employees  under the Plan do not exceed
ninety  percent  (90%) of the total  Account  balances  under the Plan,  and the
Company   has  made  the   additional   contributions   specified   in   Section
4l6(h)(2)(A)(ii)(II) of the Internal Revenue Code.

                                       72
<PAGE>

                               SECTION TWENTY-NINE

        UNIFORMED SERVICES EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT OF 1994

      Notwithstanding any provision of the Plan to the contrary,  contributions,
benefits and Hours of Service with respect to qualified  military  service shall
be provided in accordance with Section 414(u) of the Internal Revenue Code. Loan
repayments  shall be  suspended  under  this  Plan as  permitted  under  Section
4l4(u)(4) of the Internal Revenue Code.

                                       73
<PAGE>

                                   APPENDIX A

     Affiliated Companies which have adopted the Plan:

        AFFILIATED COMPANY NAME                              DATE OF ADOPTION

         Destia Communications Inc                            January 1, 2000

<PAGE>

                                   APPENDIX B

     The definition of "Year of Service" as set forth in Section Two of the Plan
shall include Years of Service with the following entities:

     1. Destia Communications Inc.

<PAGE>

                                TABLE OF CONTENTS
                                                                            PAGE
SECTION ONE - PURPOSE OF PLAN..................................................1
         A.       Designation..................................................1
         B.       Purpose......................................................1
         C.       Automatic Participation......................................1
SECTION TWO - DEFINITIONS......................................................1
         A.       Definitions..................................................1
SECTION THREE - REQUIREMENTS FOR ELIGIBILITY..................................14
         A.       Salary Reduction Contributions..............................14
         B.       Company Matching Contributions..............................14
         C.       Company Discretionary Contributions.........................15
SECTION FOUR - PARTICIPATION IN THE PLAN......................................15
         A.       Participation in Plan.......................................15
         B.       Rollover Amount.............................................15
SECTION FIVE - CONTRIBUTIONS..................................................16
         A.       Salary Reduction Contributions..............................16
         B.       Company Matching Contributions..............................18
         C.       Nondiscrimination Rules Applicable to Salary
                  Reduction Contributions.....................................18
         D.       Nondiscrimination Rules Applicable to Company
                  Matching Contributions......................................21
         E.       Additional Adjustments......................................23
         F.       Company Discretionary Contributions.........................24
         G.       Date of Payment of Company Discretionary Contributions......24
         H.       Qualified Nonelective Contributions.........................24
         I.       Additional Deferral Opportunities...........................25
SECTION SIX - ALLOCATION TO PARTICIPANTS' ACCOUNTS............................25
         A.       Maintenance of Accounts.....................................25
         B.       Method of Allocating Salary Reduction Contributions.........25
         C.       Method of Allocating Company Matching Contributions.........25
         D.       Method of Allocating Company Discretionary Contributions....26
         E.       Limitation on Annual Additions..............................26
         F.       Limitations on Annual Additions Due to Participation
                  in Other Defined Contribution Plans.........................29
         G.       Definitions Relating to Annual Additions Limitations........29
SECTION SEVEN - VALUATION OF TRUST FUND.......................................31
SECTION EIGHT - PARTICIPANT'S ACCOUNTS........................................31
         A.       Separate Accounts...........................................31
         B.       Accounts of Participants Transferred to an
                  Affiliated Company..........................................31
         C.       Annual Adjustment of Participant's Accounts.................32
         D.       Investment of Contributions and Voting of Company Stock.....32
SECTION NINE - COMMON TRUST FUND..............................................34
SECTION TEN - DISABILITY BENEFITS.............................................34
SECTION ELEVEN - RETIREMENT BENEFITS..........................................35
SECTION TWELVE - DEATH BENEFITS...............................................35
         A.       Death Benefits..............................................35
         B.       Designation of Beneficiaries................................36

                                       i
<PAGE>

                                TABLE OF CONTENTS
                                  (continued)
                                                                            PAGE
         C.       Failure of Participant to Designate.........................36
         D.       Beneficiaries' Rights.......................................37
SECTION THIRTEEN - EMPLOYMENT TERMINATION BENEFITS............................37
         A.       Vesting Upon Termination of Employment......................37
         B.       Forfeiture of Non-Vested Amount.............................37
SECTION FOURTEEN - PAYMENT OF BENEFITS........................................39
         A.       Retirement, Disability and Death Benefits...................39
         B.       Employment Termination Benefits.............................40
         C.       Methods of Payment of Benefits..............................42
         D.       Methods of Payment of Optional Benefits.....................43
         E.       Timing of Distribution......................................45
         F.       Minimum Distribution Requirements...........................46
         G.       Distribution of Small Account Balances......................47
         H.       Withdrawals.................................................48
         I.       Eligible Rollover Distributions.............................49
         J.       Loans to Participants.......................................51
         K.       Benefits of Persons Who Cannot Be Located...................52
         L.       Distribution for Minor Beneficiary..........................53
         M.       Distribution of Company Stock...............................54
SECTION FIFTEEN - ADMINISTRATION OF THE PLAN..................................55
         A.       Responsibility for Administration of the Plan...............55
         B.       Appointment of Pension and Benefits Committee...............55
         C.       Responsibility for Administration of the Trust Fund.........55
         D.       Delegation of Powers........................................56
         E.       Records.....................................................56
         F.       General Administrative Powers...............................56
         G.       Appointment of Professional Assistants and
                  Investment Managers.........................................56
         H.       Actions by the Pension and Benefits Committee...............57
         I.       Directives of the Pension and Benefits Committee............57
         J.       Discretionary Acts..........................................57
         K.       Responsibility of Pension and Benefits Committee............58
         L.       Indemnity by the Company....................................58
         M.       Payment of Fees and Expenses................................58
         N.       Plan Administrator..........................................59
         O.       Allocation and Delegation of Pension and Benefits
                  Committee Responsibilities..................................59
SECTION SIXTEEN - BENEFIT CLAIMS PROCEDURE....................................59
         A.       Claims for Benefits.........................................59
         B.       Request for Review of Denial................................60
         C.       Decision on Review of Denial................................60
SECTION SEVENTEEN - INALIENABILITY OF BENEFITS................................61
         A.       In General..................................................61
         B.       Qualified Domestic Relations Orders.........................61
SECTION EIGHTEEN - INVESTMENT OF TRUST FUND...................................63

                                       ii
<PAGE>

                                TABLE OF CONTENTS
                                  (continued)
                                                                            PAGE
SECTION NINETEEN - AMENDMENT OF THE PLAN......................................64
SECTION TWENTY - PERMANENCY OF THE PLAN.......................................64
         A.       Right to Terminate Plan.....................................64
         B.       Merger or Consolidation of the Plan.........................65
SECTION TWENTY-ONE - DISCONTINUANCE OF CONTRIBUTIONS AND TERMINATION..........65
         A.       Discontinuance of Contributions.............................65
         B.       Termination of Plan and Trust...............................65
         C.       Rights to Benefits Upon Termination of Plan or
                  Complete Discontinuance of Contributions....................66
SECTION TWENTY-TWO - STATUS OF EMPLOYMENT RELATIONS...........................66
SECTION TWENTY-THREE - BENEFITS PAYABLE BY TRUST..............................66
SECTION TWENTY-FOUR - EXCLUSIVE BENEFIT OF TRUST FUND.........................67
         A.       Limitation upon Reversions..................................67
         B.       Mistake of Fact.............................................67
SECTION TWENTY-FIVE - APPLICABLE LAW..........................................67
SECTION TWENTY-SIX - INTERPRETATION OF THE PLAN AND TRUST.....................67
SECTION TWENTY-SEVEN - ADOPTION OF PLAN BY AFFILIATED COMPANIES...............68
SECTION TWENTY-EIGHT - TOP-HEAVY CONTINGENCY PROVISIONS.......................68
         A.       Application.................................................68
         B.       Determination of Top-Heavy Status of Plan...................68
         C.       Consideration of Multiple Plans in Determining
                  Top-Heavy Status of Plan....................................70
         D.       Minimum Benefits............................................71
         E.       Adjustment of Section 415 Limitations in Plan Years
                  in which the Plan Is Top-Heavy..............................72
SECTION TWENTY-NINE - UNIFORMED SERVICES EMPLOYMENT AND REEMPLOYMENT
                      RIGHTS ACT OF 1994......................................73

                                      iiiEXHIBIT 10.36
                                                                  CONFORMED COPY

                            DATED 20th October, 2000

                    DRESDNER KLEINWORT BENSON FINANCE LIMITED
            as Lessor (in its capacity as security trustee for and on
              behalf of itself and each of the Lessor Risk Parties)

                                       and

                         VIATEL U.K. LIMITED (as Lessee)

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

                         MASTER LEASE PURCHASE AGREEMENT

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

                                  ALLEN & OVERY
                                     London

<PAGE>

                                    CONTENTS
<TABLE>
<CAPTION>
CLAUSE                                                                                                     PAGE
<S>      <C>                                                                                              <C>
1.       Interpretation.......................................................................................1
2.       Leasing; Quiet Enjoyment............................................................................25
3.       Delivery, Risk and Acceptance.......................................................................25
4.       Period of Leasing...................................................................................27
5.       Rentals.............................................................................................27
6.       Payments............................................................................................29
7.       Conditions Precedent................................................................................32
8.       Representations and Warranties of Lessee............................................................35
9.       Representations and Warranties of Lessor............................................................38
10.      Disclaimer and Exclusion of Liability; Lessor Security Interests....................................39
11.      Protection of Lessor's Interests....................................................................43
12.      Operational Undertakings............................................................................46
13.      Inspection of the Equipment.........................................................................53
14.      Insurance...........................................................................................53
15.      Event of Loss.......................................................................................57
16.      Default.............................................................................................64
17.      Dealings with Equipment following Termination or Expiry.............................................70
18.      Disposal............................................................................................72
19.      Indemnities.........................................................................................73
20.      Tax indemnity and Other Provisions..................................................................75
21.      Increased Costs and Funding Problems................................................................83
22.      Changes to the Parties..............................................................................85
23.      Costs, Expenses and Fees............................................................................88
24.      Evidence and Calculations...........................................................................89
25.      Amendments and Waivers..............................................................................89
26.      Set off.............................................................................................89
27.      Severability........................................................................................90
28.      Counterparts........................................................................................90
29.      Notices.............................................................................................90
30.      Language............................................................................................91
31.      Continuation of Indemnities.........................................................................91
32.      Indemnifiable Persons...............................................................................92
33.      Governing Law.......................................................................................92
34.      Illegality..........................................................................................92
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
SCHEDULES
<S>      <C>                                                                                                <C>
1.       Lease Schedule......................................................................................93
2.       Certificate of Acceptance...........................................................................97
3.       Part I - Conditions Precedent Documents.............................................................99
         Part II - Conditions Precedent to Leasing of Equipment.............................................101
         Part III - Conditions Precedent Documents..........................................................106
4.       Loss Payee Clause..................................................................................107
5.       Form of Written Non-Disclosure Agreement...........................................................108
6.       Form of Permitted Sub-Lease........................................................................112
7.       Form of Notices to Landlords.......................................................................154
8.       Schedule of Euro and [Redacted] High Yield Notes...................................................164
9.       Form of Subordination Letter Agreement.............................................................165

SIGNATORIES.................................................................................................173
</TABLE>

<PAGE>

THIS MASTER LEASE PURCHASE AGREEMENT is dated 20th October, 2000,

BETWEEN:

(1)      DRESDNER KLEINWORT BENSON FINANCE LIMITED (Registered No. 212857) whose
         registered  office is at 20 Fenchurch  Street,  London EC3P 3DB (in its
         capacity  as  security  trustee for and on behalf of itself and each of
         the Lessor Risk Parties and  together  with its  successors,  permitted
         assigns and permitted transferees, the "LESSOR"); and

(2)      VIATEL U.K. LIMITED (Registered No. 2968371) whose registered office is
         at Parnell House, 25 Wilton Road, London SW1V 1LW (the "LESSEE").

WHEREAS:

The Lessee wishes to lease from the Lessor and the Lessor is willing to lease to
the Lessee the Equipment on the terms of this Master Agreement.

IT IS AGREED as follows:

1.       INTERPRETATION

1.1      DEFINITIONS

         In this Master Agreement:

         "ACCEPTANCE COST"

         means,  in respect of any  Equipment,  an amount  equal to the  finance
         charges  calculated on the price of that Equipment as determined  under
         the Nortel Supply  Contract  (excluding any VAT thereon) for the period
         from the Ship Date of that  Equipment to the Initial Term Start Date in
         respect of that  Equipment at the Acceptance  Rate for that  Equipment,
         such finance  charges to accrue from day to day and to be calculated on
         the basis of a 360 day year.

         "ACCEPTANCE RATE"

         means in respect of any Equipment, the aggregate of the Cost of Funds
         and the Margin.

         "ACQUISITION COST"

         means,  in respect  of any  Equipment  which is the  subject of a Lease
         Schedule, the aggregate of the price of that Equipment under the Nortel
         Supply  Contract and any other contract for the provision of any of the
         Services  (excluding  any VAT) and, in the case of any  Equipment,  the
         Acceptance Cost for that Equipment as set out in that Lease Schedule.

         "ADDITIONAL ASSUREDS"

         means each of the persons  required to be named as additional  assureds
         under Clause 14.5(a) (Provisions common to insurances).

<PAGE>

         "ADJUSTED EURO QUOTE"

         means, in respect of any Initial Term Start Date, a Euro Quote less the
         Relevant Swap Rate in respect of Euros (which  figure shall  illustrate
         the Viatel high yield risk premium for Euros).

         "AFFILIATE"

         means,  in relation to a person,  a Subsidiary or a holding  company of
         that person or any other Subsidiary of that holding company.

         "AGENT'S FEES LETTER"

         means the agent's fee side letter of even date between the Lessor and
         the Lessee.

         "AGGREGATE ACQUISITION COST"

         means the aggregate of the Acquisition Costs under each of the Lease
         Schedules.

         "APPLICABLE LAW"

         means,  as  the  context  may  require,  all  or  any  laws,  statutes,
         proclamations,  treaties,  bylaws, directives,  regulations,  statutory
         instruments,  rules,  orders,  decisions,  circulars,  codes,  decrees,
         injunctions,  resolutions,  judgments,  rules of  court,  delegated  or
         subordinate  legislation,  rules of common  law or any  European  Union
         legislation  at any time or from  time to time in  force in a  Relevant
         Country  and  which  are  or  may  become  applicable  to  this  Master
         Agreement,  any  agreement  or  document  referred  to in  this  Master
         Agreement or any other Transaction Documents, and have force of law, as
         the same may be subjected to any Change in Law from time to time.

         "APPROVED AGENT"

         means a bank or other financial  institution mutually acceptable to the
         Lessee,  the Lessor and Nortel for the purpose of fixing the Euro Quote
         in accordance with the provisions of Clause 21.3(b).  Without  limiting
         the  foregoing,  the parties agree that  following  banks and financial
         institutions are mutually acceptable for this purpose:  Lloyds TSB Bank
         plc,  Barclays  Bank  Plc,  HSBC  Bank  plc,  Banque  International  de
         Luxembourg and Toronto Dominion Bank.

         "ASSIGNMENT"

         means the Security  Assignment re Nortel  Supply  Contract of even date
         herewith between the Lessee and the Lessor.

         "BOARD OF DIRECTORS"

         means the board of directors of the Lessee, any Permitted Sub-Lessee or
         any Guarantor,  as the case may be, or any duly authorised committee of
         such board.

         "BREAK COSTS"

         has the meaning given to it in Clause 6.8 (Break Costs indemnity).

                                       2
<PAGE>

         "BUSINESS DAY"

         means a day (other than a Saturday or a Sunday) on which banks are open
         for general business in London and New York.

         "CAPITAL OUTSTANDING"

         means, in relation to any Equipment the subject of a Lease Schedule and
         for  any  date,  the  amount  set  out  in  the  "Schedule  of  Capital
         Outstanding" annexed to that Lease Schedule (being the schedule annexed
         as at the date  that  Lease  Schedule  is  entered  into or such  other
         schedule  as may  have  been  substituted  therefor  from  time to time
         following a prepayment  by the Lessee under Clause  16.3(a) or an Event
         of Loss in respect of part of the Equipment pursuant to Clause 15.5(c))
         opposite that date (if the relevant date is a Rental  Payment Date) and
         opposite the immediately preceding Rental Payment Date (if the relevant
         date is not a Rental Payment Date).

         "CERTIFICATE OF ACCEPTANCE"

         means,  in relation to any Equipment,  the  certificate in the form set
         out in Schedule 2  (Certificate  of  Acceptance)  (or otherwise in such
         form as the Lessor may reasonably require) relating to that Equipment.

         "CHANGE IN LAW"

         means the  application to any person of any  Applicable  Law, which did
         not apply to such person  prior to the date of this  Master  Agreement,
         or, after the date of this Master  Agreement,  any change (whether with
         immediate,  prospective or  retrospective  effect) in, or any change in
         the practice of application of any Applicable Law  (including,  without
         limitation, any Applicable Law ceasing to apply, being withdrawn or not
         being  renewed,  becoming  effective  or being varied and any change in
         interpretation of any Applicable Law by any competent authority).

         "CHANGE OF CONTROL"

         means such time as (i) a "person"  or a "group"  (within the meaning of
         Sections 13(d) and 14(d)(2) of the  Securities  Exchange Act of 1934 of
         the United States of America (the "EXCHANGE ACT")) becomes the ultimate
         "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
         more than 50% of the total  voting power of the voting stock of Viatel,
         Inc.  or the  Lessee or any  Permitted  Sub-Lessee  on a fully  diluted
         basis,  and if, in the case of the Lessee or any Permitted  Sub-Lessee,
         the  Lessee  or such  Permitted  Sub-Lessee  ceases  to be a member  of
         Viatel,  Inc.'s Group; or (ii) individuals who on the 19th March,  1999
         constituted the Board of Directors of Viatel,  Inc.  (together with any
         new  directors  whose  election  by such  Board of  Directors  or whose
         nomination  to such Board of Directors  for election by Viatel,  Inc.'s
         stockholders  was  approved  by a vote of at  least  two-thirds  of the
         members of such  Board of  Directors  then in office  who  either  were
         members of such Board of Directors on 19th March 1999 or whose election
         or nomination  for election was  previously so approved)  cease for any
         reason  to  constitute  a  majority  of the  members  of the  Board  of
         Directors of Viatel, Inc.

         "COLLOCATION ACKNOWLEDGEMENT"

         means, in respect of any Collocation Agreement,  the agreement, in form
         and  substance  reasonably  acceptable  to the  Lessor  and the  Lessee
         entered or to be entered into between the  counterparty to the relevant
         Collocation Agreement, the Lessor, the Lessee and, if appropriate,  the

                                       3
<PAGE>

         relevant   Permitted   Sub-Lessee  and  relating  to  that  Collocation
         Agreement   whereby  the  counterparty  to  the  relevant   Collocation
         Agreement,  inter alia, acknowledges the ownership by the Lessor of the
         Equipment  located or to be located on  premises  owned by or leased to
         the counterparty to the relevant Collocation Agreement.

         "COLLOCATION AGREEMENT"

         means any  licence  agreement  made  between the  counterparty  to such
         licence  agreement  (being the  ultimate  lessee or  sub-lessee  of the
         premises on which the  Equipment  is or is to be  installed  unless the
         relevant site is owned by, or leased to, Viatel, Inc. or another member
         of  Viatel,  Inc.'s  Group)  and the  Lessee  or, as the case may be, a
         Permitted  Sub-Lessee in respect of certain  premises in one or more of
         the Relevant  Countries in which some or all of the  Equipment is to be
         located.

         "COMMENCEMENT DATE"

         means, in respect of any Equipment, the date on which such Equipment is
         accepted  and placed in service by the Lessee as evidenced by a Network
         Acceptance Certificate in respect of such Equipment.

        "COMMITMENT"

        [Redacted]

         "COMMITMENT FEE LETTER"

         means the commitment fee side letter of even date between the Lessor
         and the Lessee.

        "COMMITMENT PERIOD"

        [Redacted]

         "COMPENSATION AWARD"

         means the amount in Euros  converted  at the then  prevailing  exchange
         rate of the proceeds of any condemnation or other compensatory proceeds
         or awards  arising on Compulsory  Acquisition  of the Equipment  (other
         than the Services).

         "COMPULSORY ACQUISITION"

         means requisition of the Equipment (other than the Services) for title,
         other  compulsory  acquisition or  requisition of the Equipment  (other
         than the Services)  (otherwise  than by requisition for use or hire not
         involving  requisition for title), or condemnation,  seizure,  capture,
         nationalisation,    appropriation,    expropriation,   deprivation   or
         confiscation  for any reason of the Equipment (other than the Services)
         by any authority.

         "COMPULSORILY ACQUIRED"

         will be construed accordingly.

                                       4
<PAGE>

         "COST OF FUNDS"

         means, in respect of a Lease  Schedule,  the interest rate swap offered
         rate for Euros proposed by the Lessor on the date which falls three (3)
         Business  Days  prior to the  Initial  Term  Start  Date for such Lease
         Schedule,  in respect  of a period  equal to the  average  life of such
         Lease Schedule and which is acceptable to the Lessee. In the event that
         such rate is not  acceptable to the Lessee,  then the rate shall be the
         annual interest rate swap offered rate that the Lessor obtains from the
         ICAPEURO screen provided by Reuters, which the Lessor then interpolates
         to  reflect  the  average  life of the  relevant  Lease  Schedule,  and
         converts into a monthly rate, in each case plus 5 basis points.

         "DEED OF NOVATION"

         means the deed of  novation  dated on or about the date of this  Master
         Agreement to be entered into by,  Viatel,  Inc. and the Lessee by which
         Nortel Optical and Viatel,  Inc.  transfer their respective  rights and
         obligations  under the Nortel Supply  Contract to Nortel and the Lessee
         respectively.

         "DEFAULT RATE"

         means,  in respect of any Lease  Schedule,  two (2) per cent. per annum
         above the aggregate of the Costs of Funds and the Margin.

         "DELIVERY"

         means, in respect of an item of the Equipment, the delivery of the item
         by the Lessor to the Lessee under this Master Agreement.

         "DETACHABLE ADDITIONS"

         has the meaning in Clause 12.13(b) (Title to replacements etc.).

         "ELECTION PROCEDURE"

        [Redacted]

                                       5
<PAGE>

         "ENVIRONMENT"

         means all, or any of, the following  media,  the air (including the air
         within   buildings  and  the  air  within  other  natural  or  man-made
         structures above or below ground),  water (including ground and surface
         water) and land (including surface and subsurface soil).

         "ENVIRONMENTAL AFFILIATE"

         means an agent,  employee,  independent  contractor,  sub-contractor or
         other person in a contractual  relationship with the Lessee relating to
         the Equipment or its operation.

         "ENVIRONMENTAL APPROVALS"

         means any authorisation required under applicable Environmental Laws.

         "ENVIRONMENTAL CLAIM"

         means any written or oral notice or assertion  from anyone,  including,
         without limitation, any government,  alleging any breach, contravention
         or violation of any Environmental Law or the existence of any liability
         or  potential  liability  arising from such  breach,  contravention  or
         violation  or the  presence of Hazardous  Material  including,  without
         limitation,  liability to conduct, pay for or for damages in respect of
         any investigation or audit clean-up, redemption, administrative cost or
         charge or expense,  damage to the Environment or any natural  resource,
         property loss or damage,  personal  injury or any penalty  attaching or
         relating to the  presence,  emission,  release or leak of any Hazardous
         Material in or to the Environment.

         "ENVIRONMENTAL LAWS"

         means  any  or  all   applicable  law  (whether   civil,   criminal  or
         administrative),  common law, statute,  statutory  instrument,  treaty,
         convention,  regulation,  directive, by-law, demand, decree, ordinance,
         injunction,  resolution,  order,  judgment,  rule,  permit,  licence or
         restriction  (in each  case  having  the  force  of law)  and  codes of
         practice or conduct,  circulars  and  guidance  notes  having  legal or
         judicial import or effect,  in each case of any Governmental  Authority
         in any applicable jurisdiction relating to or concerning:

         (a)  pollution or contamination of the Environment;

         (b)  harm,  whether  actual or potential,  to mankind and human senses,
              other living organisms and ecological systems;

                                       6
<PAGE>

         (c)  the  generation,   manufacture,   processing,   distribution,  use
              (including  abuse),  treatment,  storage,  disposal,  transport or
              handling of Hazardous Materials; and

         (d)  the  emission,   leak,  release,   spill  or  discharge  into  the
              Environment of noise, vibration,  dust, fumes, gas, odours, smoke,
              steam effluvia,  heat, light, radiation (of any kind),  infection,
              electricity  or any  Hazardous  Material  and any  matter or thing
              capable of constituting a nuisance or an actionable tort or breach
              of statutory duty of any kind in respect of such matters,

         including,  without limitation, the following laws of the United States
         of America: the Comprehensive Environmental Response,  Compensation and
         Liability   Act  of  1980,   as  amended,   the   Hazardous   Materials
         Transportation  Act,  as amended,  the Oil  Pollution  Act of 1990,  as
         amended,  the Resource  Conservation and Recovery Act, as amended,  and
         the Toxic Substances Control Act, as amended,  together,  in each case,
         with the  regulations  promulgated  and the  guidance  issued  pursuant
         thereto.

         "EQUIPMENT"

         means together each and every item of optical network,  transmission or
         other  equipment  supplied  by  the  Seller  as set  out  in the  Lease
         Schedules  and including the Seller  provided  cabinet  and/or racks in
         which the same has been, or is to be,  installed  together with,  where
         the context so permits,  all  Technical  Records  relating  thereto and
         Services to be provided in connection with such equipment and including
         any and all  parts,  components,  equipment  and  accessories  (whether
         assembled  or  self  assembly)  installed  thereon  or  therein  on the
         Commencement  Date which form part of such Equipment (or which,  having
         been  removed  therefrom,  remain the  property  of the Lessor) and all
         substitutions,  replacements and  modifications  required by law, other
         modifications and replacements from time to time made to that Equipment
         in accordance with or permitted by the terms of this Master  Agreement,
         (but  excluding all items that cease to be subject to the terms of this
         Master   Agreement)  and,  unless  the  context   otherwise   requires,
         references to "EQUIPMENT" shall include a reference to any of them or a
         reference to any part of it.

         "EURO" and "E"

         means the lawful currency in a Participating Member State.

        "EURO QUOTE"

        [Redacted]

                                       7
<PAGE>

        [Redacted]

         "EVENT OF DEFAULT"

         means any event specified in Clause 16.1 (Events of Default).

         "EVENT OF LOSS"

         in respect of all the  Equipment  (other  than the  Services),  has the
         meaning given in Clause 15.1 (Event of Loss of the  Equipment)  and, in
         respect of part only of the Equipment  (other than the  Services),  has
         the  meaning  given  in  Clause  15.2  (Event  of  Loss  of part of the
         Equipment).

         "FACILITY FEE LETTER"

         means the facility fee side  letter of even date between the Lessor and
         the Lessee.

        "FIXING PERIOD"

         means  the  period  ending  [Redacted]  from the  date of this  Master
         Agreement.

         "GOVERNMENTAL AUTHORITY"

         means:

         (a)  any  government  (de jure or de facto) of a  Relevant  Country  or
              political subdivision of a Relevant Country, or local jurisdiction
              in a Relevant Country; and/or

         (b)  any governmental authority or statutory,  legal, fiscal,  monetary
              or  administrative  body or  supra-national  body  (whether  it be
              domestic, foreign, international, state or local and including any
              such  authority  or  body of the  European  Union  and the  United
              Nations)   which  operates  or  has   jurisdiction,   directly  or
              indirectly, in a Relevant Country; and/or

         (c)  any instrumentality,  board,  commission,  court, or agency of any
              thereof, however constituted.

                                       8
<PAGE>

         "GROUP"

         means in relation to any company, that company and any company which is
         a holding  company or subsidiary of that company and any  subsidiary of
         such holding company.

         "GUARANTORS"

         means together Viatel,  Inc., a company incorporated and existing under
         the laws of the  State of New  York  and  with its  principal  place of
         business at 685 Third Avenue, New York, NY 10017, U.S.A. together with,
         if and when the same is established, any holding company of Viatel U.K.
         Limited and "GUARANTOR" shall mean any of them.

         "HAZARDOUS MATERIAL"

         means any element or  substance,  whether  natural or  artificial,  and
         whether consisting of gas, liquid, solid or vapour,  whether on its own
         or in any  combination  with any other element or  substance,  which is
         listed,  identified,  defined or determined by any Environmental Law to
         be, to have  been,  or to be capable  of being or  becoming  harmful to
         mankind  or  any  living  organism  or  damaging  to  the  Environment,
         including,  without  limitation,  oil (as defined in the United  States
         Comprehensive Environmental Response, Compensation and Liability Act of
         1980, as amended).

         "INDEMNIFIABLE PERSON"

         means each of the Lessor,  each  Lessor Risk Party,  each member of the
         Lessor  Group,  each  member of a Lessor Risk  Party's  Group and their
         respective shareholders,  agents, subcontractors,  partners, receivers,
         assigns, directors, officers, servants and employees and the dependants
         of any of the foregoing.

        "INITIAL TERM"

         means,  in respect of any  Equipment  which is the subject of a Network
         Acceptance Certificate,  the period commencing on the Commencement Date
         for that Equipment and continuing until the day preceding the day which
         falls  [Redacted]  months (or, if the Initial  Term Start Date falls in
         the period described in proviso (ii) to the definition of "INITIAL TERM
         START DATE",  [Redacted]  months) after the Initial Term Start Date for
         that Equipment.

                                       9
<PAGE>

        "INITIAL TERM START DATE"

         means, in respect of any Equipment,  the last Business Day of the month
         during the Commitment  Period in which the Commencement Date in respect
         of that Equipment occurs PROVIDED ALWAYS THAT:

         (a)  if the  Commencement  Date  for  any  Equipment  occurs  ten  (10)
              Business Days or less before the end of a month,  the Initial Term
              Start Date for that  Equipment  shall be the last  Business Day of
              the immediately succeeding month during the Commitment Period; and

         (b)  if the  Commencement  Date occurs ten (10)  Business  Days or less
              prior to the end of the Commitment  Period, the Initial Term Start
              Date for the relevant  Equipment shall be the last Business Day of
              [Redacted]

         "INSTALMENT SALE AGREEMENT"

         means the  instalment  sale  agreement  entered or to be  entered  into
         between the Lessor and the Seller in respect of the Equipment.

         "INSURANCE PROCEEDS"

         means the proceeds of any of the Insurances relating to loss of or
         damage to the Equipment or any item thereof.

         "INSURANCES"

         means:

         (a)  all  contracts  and policies of  insurance  which are from time to
              time  effected  in  respect  of  the  Equipment  under  Clause  14
              (Insurance) or which are otherwise  required to be taken out under
              this Master Agreement; and

         (b)  all benefits thereunder and all claims in respect thereof,

         (in the case of (a) and (b) above, as the interests of the Lessor may
         appear).

         "IRRECOVERABLE VAT"

         means  any VAT paid by or on behalf of the  Lessor in  relation  to any
         matter or  transaction in respect of supplies of goods or services made
         to the Lessor (or any company  which is treated as a member of the same
         group as the Lessor for VAT purposes) in connection  with the Equipment
         and  any  associated   transaction  in  connection  with  the  Lessor's
         acquisition  of the  Equipment if in respect of such payment and to the
         extent thereof the Lessor (or the representative member of the Lessor's
         VAT group,  if the Lessor is treated as a member of a VAT group) is not
         entitled to recover such amount from the authority  responsible for the
         collection  of VAT or is not entitled to receive and retain a credit in
         full as  "INPUT  TAX"  as a  deduction  against  "OUTPUT  TAX"  (as the
         expressions  "OUTPUT  TAX" and "INPUT TAX" are  defined,  in the United
         Kingdom,  in  Section 24 VATA 1994 and in any other  Relevant  Country,
         equivalent  terms under  equivalent  legislation)  under, in the United
         Kingdom,  Section 25 VATA 1994 and in any other  Relevant  Country,  an
         equivalent  term under  equivalent  legislation  in  relation to VAT in
         which such supplies are treated as made.

         "LEASE GUARANTEE"

         means the guarantee and indemnity of even date herewith by Viatel, Inc.
         in favour of the  Lessor in respect  of the  obligations  of the Lessee
         under this Master Agreement and the other Transaction  Documents or, as
         the case may be, such other  guarantee and indemnity which might at any
         time replace the same by the Guarantors on a joint and several basis in
         favour of the Lessor in respect of those obligations.

                                       10
<PAGE>

         "LEASE PARTICIPANT"

         means a party (other than the Lessor) to any Lease Participation
         Arrangements.

         "LEASE PARTICIPATION ARRANGEMENTS"

         means arrangements  entered into by the Lessor and/or the Seller and/or
         any third party:

         (a)  pursuant to which such other third party (but not the Seller),  in
              consideration of an agreed percentage of the Lease Payments due to
              the Lessor under this Master Agreement,  shall deposit monies with
              the Lessor by way of funded sub-participation; or

         (b)  the effect and  intention of which is to transfer to the Seller or
              such other  third party from the Lessor the risk of non payment by
              the Lessee under this Master Agreement.

         "LEASE SCHEDULE"

         means,  in relation to the  Equipment or a part thereof  which is to be
         located in a particular Relevant Country,  leased to the Lessee and (if
         applicable)  sub-leased to a particular Permitted  Sub-Lessee,  a lease
         schedule  to be  entered  into  between  the  Lessor  and the Lessee in
         respect of that  Equipment in  substantially  the same form as that set
         out in Schedule 1 (Form of Lease  Schedule)  (or otherwise in such form
         as the Lessor may reasonably require).

         "LESSOR GROUP"

         means the  Lessor  and any other  member of the Group of  companies  of
         which the Lessor is a member.

         "LESSOR RISK PARTIES"

         means  together the Lessor,  the Seller and any Lease  Participant  and
         "LESSOR RISK PARTY" means any of them.

         "LESSOR SECURITY INTEREST"

         means  any  Security   Interest  on  the  Equipment  which  the  Lessee
         establishes arises as a result of:

          (a)  claims  against  or  affecting  the Lessor  other  than  Security
               Interests  arising  as a  result  of  its  participation  in  the
               transactions contemplated by the Transaction Documents;

          (b)  acts or  omissions  of the  Lessor  which do not  constitute  the
               performance  of obligations  or  liabilities,  or the exercise of
               rights, by the Lessor under any of the Transaction Documents; or

          (c)  the  non-payment  of Taxes imposed on the Lessor other than Taxes
               the subject of any  indemnity  in favour of the Lessor  under the
               Transaction  Documents  or where  the  liability  to pay,  or the
               amount  of,  such Taxes is being  disputed  by the Lessor in good
               faith by appropriate proceedings diligently pursued and a stay of
               enforcement is in effect with respect to the Security Interest.

                                       11
<PAGE>

         "LOSSES"

         means any and all costs, expenses,  payments, charges, losses, demands,
         liabilities,   claims  (including   Environmental   Claims),   actions,
         proceedings,  penalties,  fines,  damages,  judgments,  orders or other
         actions.

         "MAKE WHOLE AMOUNT"

         means, in respect of a Lease Schedule, the sum equal to the excess, if
         any, of:

         (a)  the sum of the present value of each of the remaining  payments of
              Periodic  Rent  under  such  Lease  Schedule,  discounted  by  the
              Reinvestment  Rate  of the  Lessor  on the  date  of the  relevant
              prepayment; over

         (b)  the Capital Outstanding under such Lease Schedule plus the accrued
              but unpaid finance charge on that Capital Outstanding  (calculated
              at the  aggregate  of the Cost of Funds and the  Margin) up to and
              including the relevant Termination Date.

        "MARGIN"

        [Redacted]

         "MASTER AGREEMENT"

         means this master lease purchase agreement.

         "MASTER SUPPLEMENTAL AND AMENDMENT AGREEMENT IN RELATION TO THE NORTEL
         SUPPLY CONTRACT"

         means the  agreement  of that title  dated on or about the date of this
         Master  Agreement  between  Nortel (in its capacity as seller under the
         Nortel Supply Contract),  the Lessor and the Lessee (in its capacity as
         purchaser under the Nortel Supply Contract).

         "MATERIAL ADVERSE CHANGE"

         means:

         (a)  a materially adverse effect on the business,  condition (financial
              or  otherwise),  operations,  performance or properties of Viatel,
              Inc.'s  Group  taken as a whole  since  the date of  Viatel,  Inc.
              Group's most recent  audited annual  financial  statements for the
              period to 31st  December,  1999  (except for matters  disclosed in
              Viatel,  Inc.'s Form 10-Q for the fiscal  quarter ended 30th June,
              2000 filed with the U.S.  Securities and Exchange  Commission (the
              "SECOND QUARTER 2000 10-Q")); or

         (b)  a material  impairment of the ability of the Lessee, any Permitted
              Sub-Lessee or either or both of the Guarantors to perform when due
              their respective obligations under or to remain in compliance with
              the Transaction Documents to which they are or will be a party.

                                       12
<PAGE>

         "MATERIAL CONTRACTS"

         includes:

         (a)  any  material  licence  issued  to  the  Lessee,   either  of  the
              Guarantors  or any  other  member  of  Viatel,  Inc.'s  Group  and
              required    for    the    installation    and    utilisation    of
              telecommunications  networks in the  Relevant  Countries  in which
              Equipment is located; or

         (b)  any other  licence or agreement the  termination  or expiration of
              which would cause a Material Adverse Change.

         "NET INSURANCE PROCEEDS"

          means,  in  relation  to an  Event  of Loss,  any  Insurance  Proceeds
          referable  thereto  unconditionally  received  by the Lessor  less the
          costs and  expenses  of the Lessor  referred  to in Clause  15.6(a)(i)
          (Application of Insurance Proceeds and Compensatory Awards).

         "NETWORK"

         has the meaning given to it in the Nortel Supply Contract.

         "NETWORK ACCEPTANCE"

         has the meaning given to it in the Nortel Supply Contract.

         "NETWORK ACCEPTANCE CERTIFICATE"

         means,  in respect of any of the  Equipment  (other than the  Services)
         that undergoes  Network  Acceptance  Tests, the Acceptance  Certificate
         relating to that Equipment signed by the Network  Acceptance Manager of
         the Lessee, the relevant  Permitted  Sub-Lessee or, as the case may be,
         Viatel,  Inc. upon  satisfactory  completion by that Equipment of those
         Network Acceptance Tests.

         "NETWORK ACCEPTANCE TEST"

         has the meaning given to it in the Nortel Supply Contract.

         "NORTEL"

         means  Nortel  Networks  plc  (Registered  No.   3937799),   a  company
         incorporated  under  the laws of  England  and Wales  whose  registered
         office  is  at  Maidenhead  Office  Park,  Westacott  Way,  Maidenhead,
         Berkshire SL6 3QH, England.

         "NORTEL DEED OF NOVATION"

         means the deed of novation of even date  herewith  entered into between
         Nortel, the Lessor, the Lessee and Viatel,  Inc. pursuant to which this
         Master Agreement and the other relevant Transaction Documents are to be

                                       13
<PAGE>

         novated by the Lessor to Nortel in the circumstances and subject to the
         conditions set out therein.

         "NORTEL NETWORKS GROUP"

         means any company  which is a member of the Group of companies to which
         Nortel belongs.

         "NORTEL OPTICAL"

         means Nortel Networks  Optical  Components  Limited  (formerly known as
         Nortel  Networks  plc  and  before  that  as  Nortel  plc),  a  company
         incorporated  under  the laws of  England  and  Wales  (Registered  No.
         251571) whose registered office is at Maidenhead Office Park, Westacott
         Way, Maidenhead, Berkshire SL6 3QH, England.

         "NORTEL SUPPLY CONTRACT"

         means the  equipment  purchase  agreement  dated  30th  December,  1998
         between  Viatel,  Inc., (as buyer) and Nortel Optical (under its former
         name of  Nortel  plc) (as  Seller)  in  respect  of,  inter  alia,  the
         Equipment, the Software and certain services in relation thereto all as
         more  particularly  described in the  equipment  purchase  agreement as
         amended and supplemented from time to time and as novated to Nortel and
         the Lessee  pursuant to the Deed of Novation,  together with (i) Orders
         in  respect  of the  Equipment  and (ii) the  Master  Supplemental  and
         Amendment Agreement in relation to the Nortel Supply Contract.

         "ORDER"

         has the meaning given to it in the Nortel Supply Contract.

         "OUTSTANDING AMOUNTS"

         means any amount  payable by the Lessee  (including  but not limited to
         Rental) which has fallen due under any of the Transaction Documents but
         which is unpaid.

         "PARENT BANK"

         means Dresdner Bank A.G., London Branch.

         "PARENT BANK'S SPOT RATE OF EXCHANGE"

         means the Parent Bank's spot rate of exchange for the purchase of Euros
         in the London  foreign  exchange  market with any other  currency at or
         about 11.00 a.m. on a particular day.

         "PARTICIPATING MEMBER STATE"

         means a Member of state of the  European  Communities  that  adopts the
         Euro as its currency in  accordance  with  legislation  of the European
         Union relating to European Economic and Monetary Union.

                                       14
<PAGE>

         "PARTICIPATION"

         means  the  amount  paid  by  a  Lease   Participant  under  the  Lease
         Participation  Arrangements  in order to acquire  the  relevant  rights
         granted by those Lease Participation Arrangements.

         "PARTY"

         means a party to this Master Agreement.

         "PERIODIC RENT"

         means, in respect of that part of the Equipment which is the subject of
         a Lease  Schedule,  the amount to be paid by way of scheduled  rent for
         that Equipment,  the amounts and dates for payment of which will be set
         out in that Lease Schedule and which will be calculated by reference to
         Clause 5.2(a)(ii).

         "PERMITTED SECURITY INTEREST"

         means:

         (a)  any lien in respect of Taxes which are either not yet assessed or,
              if assessed,  are not yet due and payable,  or are being contested
              in good faith by appropriate  proceedings  (and for the payment of
              which adequate  reserves or an adequate bond have been provided by
              the Lessee);

         (b)  any lien of a  mechanic,  repairer,  workman or  storage  facility
              provider or other  similar lien arising in the ordinary  course of
              business  by  statute  or by  operation  of  law,  in  respect  of
              obligations  which are not overdue or which are being contested in
              good  faith by  appropriate  proceedings  (and for the  payment of
              which adequate  reserves or an adequate bond have been provided by
              the Lessee);

         (c)  any lien or other right of  detention  arising out of any judgment
              or award with respect to which at the  relevant  time an appeal is
              being  presented in good faith and with respect to which there has
              been secured a stay of execution pending such appeal;

         (d)  any Lessor Security Interest;

         (e)  any lien in favour of any Member of the Nortel  Networks  Group or
              any of its suppliers under the Nortel Supply Contract;

         (f)  any Security Interest created by the Transaction Documents; and

         (g)  any Security Interest consented to in writing by the Lessor,

         PROVIDED  THAT,  in the  case  of (a) to (c) and (e)  above,  any  such
         proceedings, or the continued existence of such lien or other right, do
         not  involve  any  likelihood  of the sale,  forfeiture  or loss of the
         Equipment or any interest therein.

                                       15
<PAGE>

         "PERMITTED SUB-LEASE"

          means,  in respect of any or all of the Equipment which is the subject
          of a Lease Schedule, a sub-lease of such Equipment entered into by the
          Lessee  with a  Permitted  Sub-Lessee  (other  than one in the  United
          States of America, [Redacted] or [Redacted]) substantially in the form
          of the pro-forma  sub-lease at Part I of Schedule 6 (Form of Permitted
          Sub-Lease), for a Permitted Sub-Lease in the United States of America,
          substantially  in the form of the  pro-forma  sub-lease  at Part II of
          Schedule 6 (Form of Permitted Sub-Lease), for a Permitted Sub-Lease in
          [Redacted],  substantially  in the form of the pro-forma  sub-lease at
          Part  III of  Schedule  6 (Form of  Permitted  Sub-Lease)  and,  for a
          Permitted  Sub-Lease in [Redacted],  substantially  in the form of the
          pro-forma  sub-lease  at Part IV of  Schedule  6  (Form  of  Permitted
          Sub-Lease)  and  satisfying  the  conditions  set out in  Clause  12.3
          (Possession and sub-leasing).

         "PERMITTED SUB-LESSEE"

         means a sub-lessee which is a member of Viatel,  Inc.'s Group and which
         has its  principal  place of business in the Relevant  Country in which
         the Equipment to be sub-leased to such sub-lessee is installed.

         "POTENTIAL EVENT OF DEFAULT"

         means  an  event  which  with  the  giving  of  notice,  lapse of time,
         determination  of  materiality  or fulfilment  of any other  applicable
         condition (or any  combination of the foregoing),  would  constitute an
         Event of Default.

         "PROCEEDS"

         means the proceeds of any sale or disposal of any of the Equipment.

         "PROVISIONAL ACCEPTANCE CERTIFICATE"

         means the acceptance  certificate relating to any Equipment (other than
         the Services) that undergoes Provisional Acceptance Tests signed by the
         Lessee or Permitted  Sub-Lessee  or, as the case may be,  Viatel,  Inc.
         upon  satisfactory  completion by that  Equipment of those  Provisional
         Acceptance Tests.

         "PROVISIONAL ACCEPTANCE TESTS"

         has the meaning given to it in the Nortel Supply Contract.

         "REINVESTMENT RATE"

         means,  in respect of the Capital  Outstanding  under a Lease Schedule,
         the interest rate swap bid rate for Euros proposed by the Lessor on the
         date  which  falls  three  (3)  Business  Days  prior  to the  proposed
         Termination Date for such Lease Schedule,  in respect of a period equal
         to the  remaining  average  life of such  Lease  Schedule  and which is
         acceptable to the Lessee. In the event that such rate is not acceptable
         to the Lessee, then the rate shall be the annual interest rate swap bid
         rate that the Lessor  obtains  from the  ICAPEURO  screen  provided  by
         Reuters,  which the Lessor then  interpolates  to reflect the remaining
         average life of the relevant Lease Schedule and converts into a monthly
         rate, in each case less 5 basis points.  If there is no rate  available
         on the ICAPEURO screen provided by Reuters,  then the rate shall be the

                                       16
<PAGE>

         average  of the  annual  interest  rate swap bid rates  that the Lessor
         obtains  from each of Barclays  Bank Plc,  HSBC Bank plc and Lloyds TSB
         Bank plc  interpolated  and converted  into a monthly rate as aforesaid
         less 5 basis points.

         "RELEVANT COUNTRY"

         means,  according  to the  context in which it is used,  the country in
         which the Lessor, the Lessee, a Permitted  Sub-Lessee or a Guarantor is
         incorporated or in which the Equipment is located from time to time.

        "RELEVANT SWAP RATE"

        [Redacted]

         "RENTAL"

         means Periodic Rent and any other amount expressed to be payable by the
         Lessee under this Master  Agreement or any Lease  Schedule as rental or
         additional rental.

                                       17
<PAGE>

         "RENTAL PAYMENT DATE"

         means,  for each Lease  Schedule,  the Initial  Term Start Date and the
         last  Business Day of each month for the  remainder of the Initial Term
         for that Lease Schedule.

         "REQUISITIONED EQUIPMENT"

         has the meaning given to it in Clause 15.8 (Requisition for hire).

         "SECURITY INTEREST"

         means any mortgage,  pledge,  security interest,  encumbrance,  lien or
         charge of any kind (including, without limitation, any conditional sale
         or other title  retention  agreement or lease in the nature  thereof or
         any agreement to give any security interest).

         "SECURITY TRUSTEE AGREEMENT"

         means the  security  trustee  agreement  entered or to be entered  into
         between the Lessor and each other Lessor Risk Party.

         "SELLER"

         means Nortel or any member of the Nortel Networks Group in its capacity
         as seller of the Equipment to the Lessor.

         "SERVICES"

         means, in relation to the Equipment,  Services (as that term is defined
         in  the  Nortel  Supply  Contract)   together  with  the  provision  of
         maintenance, spares management (pursuant to any Service Level Agreement
         entered into between  Nortel and the Lessee) and any extended  warranty
         provided by Nortel to the Lessee.

         "SETTLEMENT DATE"

         means,  in relation to an Event of Loss the 120th day after the date of
         occurrence of the Event of Loss.

         "SHIP DATE"

         means  the  date on  which a  product  ordered  by  Viatel  or a Viatel
         Affiliate is shipped from Nortel's or an Affiliate of Nortel's facility
         or in the case of  Software  which is  downloaded,  the date upon which
         such software is downloaded to the System;  however Ship Date shall not
         mean the date on which  non-licensed  software (as  described in Clause
         19.3 of Annex A (General  Conditions) to the Nortel Supply Contract) is
         activated.

         "SIGNIFICANT SUBSIDIARY"

         means, at any date of determination, any Subsidiary of Viatel, Inc.
         that, together with its Subsidiaries (as defined in the Schedule of
         Covenants to the Lease Guarantee):

                                       18
<PAGE>

         (a)  for the most recent  fiscal year of Viatel,  Inc.,  accounted  for
              more than 10 per cent.  of the  consolidated  revenues  of Viatel,
              Inc.; or

         (b)  as of the end of such fiscal  year,  was the owner of more than 10
              per cent. of the consolidated assets of Viatel, Inc.,

         all as set forth in the most recently available  consolidated financial
         statements of Viatel, Inc. for such fiscal year.

         "SOFTWARE"

         means the set of machine readable  instructions  provided by the Seller
         for the control and operation of the System.

         "SPECIFICATION"

         means any  specification  incorporated  in Annex D of the Nortel Supply
         Contract.

         "SUB-LEASE ASSIGNMENT"

         means the deed of assignment of the Permitted  Sub-Leases to be entered
         into by the Lessor and the Lessee.

         "SUB-LESSEE INSOLVENCY EVENT"

         means the occurrence of any of the events set out in Clauses 16.1(f) to
         (j) inclusive in respect of a Permitted Sub-Lessee.

         "SUBORDINATION LETTER AGREEMENT"

         means  the  Subordination  Letter  Agreement  in the  form of Part I of
         Schedule 9 (Form of Subordination  Letter Agreement) and in the case of
         any  Permitted  Sub-Lessee  in  [Redacted],  in the  form of Part II of
         Schedule 9 (Form of subordination  Letter Agreement) to be entered into
         between the Lessor,  the Lessee and any  Permitted  Sub-Lessee to which
         the Lessee sub-leases any Equipment pursuant to Clause 12.3 (Possession
         and   sub-leasing),   by  which  (among  other  things)  the  Permitted
         Sub-Lessee  confirms that its rights under the  Permitted  Sub-Lease to
         which it is a party are  subordinate to the Lessor's  rights under this
         Master Agreement and as owner of that Equipment.

         "SUBSIDIARY"

         means,  with  respect  to any Person (as  defined  in the  Schedule  of
         Covenants to the Lease  Guarantee),  any  corporation,  association  or
         other  business  entity of which  more than 50 per cent.  of the voting
         power of the  outstanding  Voting  Stock (as defined in the Schedule of
         Covenants to the Lease Guarantee) is owned, directly or indirectly,  by
         such Person  and/or one or more other  Subsidiaries  of such Person (as
         defined in the Schedule of Covenants to the Lease Guarantee).

                                       19
<PAGE>

         "SYSTEM"

         means the  Equipment  and Software  integrated as necessary to meet the
         requirements  of the  Specification  and the  other  provisions  of the
         Nortel Supply Contract.

         "TA 1988"

         means the Income and Corporation Taxes Act 1988.

         "TAX LIABILITY"

         means in respect of any person:

         (a)  any  liability or any increase in the  liability of that person to
              make any payment or payments of or in respect of Tax;

         (b)  the loss,  or setting off  against  income,  profits or gains,  or
              against  any  liability  to make a payment or  payments  of, or in
              respect of Tax, of any relief,  allowance,  deduction or credit (a
              "RELIEF")  which  would  otherwise  have  been  available  to that
              person; and

         (c)  the loss,  or setting off against any  liability to make a payment
              or payments of or in respect of Tax,  of a right to  repayment  of
              Tax which would otherwise have been available to that person;

         and in any case  falling  within (b) or (c) above the amount that is to
         be treated as a Tax Liability shall be determined as follows:

         (i)  in a case which falls within (b) above,  and where the Relief that
              was the  subject of the loss or setting off was or would have been
              a deduction from or offset against Tax, the Tax Liability shall be
              the amount of that Relief;

         (ii) in a case which falls  within (b) above,  and which  involves  the
              loss of a Relief which would  otherwise  have been  available as a
              deduction from or offset  against gross income,  profits or gains,
              the Tax  Liability  shall be the amount of Tax which would (on the
              basis  of the  Tax  rates  current  at the  date of the  loss  and
              assuming that the person has sufficient  gross income,  profits or
              gains to utilise the  Relief)  have been saved but for the loss of
              the Relief;

         (iii)in a case which falls  within (b) above,  and which  involves  the
              setting off of a Relief which would  otherwise have been available
              as a deduction  from or offset  against gross  income,  profits or
              gains, the Tax Liability shall be the amount of Tax which has been
              or will be saved in consequence of the setting off; or

         (iv) in a case which falls within (c) above, the Tax Liability shall be
              the amount of the repayment  that would have been obtained but for
              the loss or setting off.

         For the purposes of this definition any question of whether any relief,
         allowance, deduction, credit or right to repayment of tax has been lost
         or set off,  and if so,  the date on  which  that  loss or set off took
         place, shall be conclusively  determined by the Lessor,  acting in good
         faith.

                                       20
<PAGE>

         "TAXES"

         means all present and future taxes, levies, duties,  imposts,  charges,
         of any kind  whatsoever,  payable at the  instance of or imposed by any
         Governmental Authority, together with any penalties,  additions, fines,
         surcharges or interest relating thereto and "TAX", "TAX" and "TAXATION"
         will be construed  accordingly  (subject to the  definitions of VAT and
         Irrecoverable VAT herein).

         "TECHNICAL RECORDS"

         means,  in relation  to the  Equipment,  all  manuals,  logs,  records,
         technical data, drawings, schedules and other materials,  documents and
         Software  (whether  kept or to be kept in  compliance  with  any law or
         regulation  or  the  requirements  of  any  Governmental  Authority  or
         otherwise) relating to the Equipment,  its ownership,  operation,  use,
         maintenance or repair (and whether kept in written or electronic form).

         "TERMINATION"

         means a  termination  of the leasing of the  Equipment the subject of a
         Lease Schedule by reason of:

         (a)  the service of a notice by the Lessor on the Lessee  under  Clause
              16.2 (Termination by Lessor); or

         (b)  the service by the Lessee of a Voluntary Termination Notice; or

         (c)  an Event of Loss occurring in respect of all of that Equipment; or

         (d)  the   occurrence   of  an   illegality   event  under   Clause  34
              (Illegality); or

         (e)  the occurrence of one of the mandatory  prepayment  events set out
              in Clause 16.5.

         "TERMINATION AMOUNT"

         means,  in respect of the items of Equipment which are the subject of a
         Lease Schedule and for any date, the aggregate of the following amounts
         for that Lease Schedule:

         (a)  the Capital Outstanding set out opposite that date in the Schedule
              of Capital  Outstanding  to the  relevant  Lease  Schedule (if the
              relevant  date is a Rental  Payment  Date) or, as the case may be,
              set out opposite the immediately  preceding Rental Payment Date in
              the Schedule of Capital Outstanding to the relevant Lease Schedule
              (if the relevant date is a day other than a Rental Payment Date);

         (b)  any unpaid Rental and any other Outstanding Amounts (to the extent
              not included in Capital Outstanding under paragraph (a) above);

         (c)  any and all  accrued  but unpaid  finance  charges on the  Capital
              Outstanding  calculated  at  the  rate  per  annum  which  is  the
              aggregate of the Cost of Funds and the Margin; and

         (d)  the Make Whole Amount.

                                       21
<PAGE>

         "TERMINATION DATE"

         means:

         (a)  in the case of a notice  served by the Lessor  under  Clause  16.2
              (Termination by Lessor), the date on which that notice is served;

         (b)  in  the  case  of a  Voluntary  Termination  Notice  or a  Partial
              Voluntary Termination Notice, the date for prepayment specified in
              such notice;

         (c)  in the case of an Event of Loss,  the Business Day  following  the
              Settlement Date;

         (d)  in the case of an illegality  event under Clause 34  (illegality),
              the day falling one day before such illegality event; and

         (e)  in the case of the  occurrence of one of the mandatory  prepayment
              events set out in Clause  16.5,  the date upon which the Lessee is
              obliged to make the mandatory prepayment pursuant to Clause 16.5.

        "TIER 1 COUNTRY"

         means any of the United Kingdom, [Redacted],  United States of America,
         [Redacted].

        "TIER 2 COUNTRY"

        [Redacted]

         "TRANSACTION DOCUMENTS"

         means:

         (a)  this Master Agreement;

         (b)  each Lease Schedule;

         (c)  each Certificate of Acceptance;

         (d)  the Security Assignment re Nortel Supply Contract;

         (e)  the Lease Guarantee;

         (f)  the Master Supplemental and Amendment Agreement in relation to the
              Nortel Supply Contract;

         (g)  each agreement in respect of Lease Participation Arrangements;

         (h)  the Sub-Lease Assignment;

         (i)  the Deed of Novation;

         (j)  the Nortel Deed of Novation; and

                                       22
<PAGE>

         (k)  any and all other documents,  agreements and letters,  between the
              Lessor  and the  Lessee  (whether  or not  amongst  others) to the
              extent relating to the Equipment,

         and all notices,  consents,  certificates and other documents from time
         to time issued  pursuant to any of the above and all other  agreements,
         letters and documents designated as such by the Parties.

         "VAT"

         means value added tax as provided for in the VATA 1994 and in any other
         Relevant  Country,  equivalent  legislation  and  legislation  (whether
         delegated  or  otherwise)  supplemental  to  it or in  any  primary  or
         subordinate  legislation  promulgated by the European Union or any body
         or agency  thereof and any tax similar or equivalent to value added tax
         imposed by any country other than the United Kingdom and any similar or
         turnover  Tax  replacing  or  introduced  in  addition  to  any  of the
         foregoing.

         "VATA 1994"

         means the Value Added Tax Act 1994.

         "VIATEL, INC."

         means a company  incorporated  and existing under the laws of the State
         of  Delaware  and with its  principal  place of  business  at 685 Third
         Avenue, New York, NY 10017, U.S.A.

         "VOLUNTARY TERMINATION NOTICE"

         has the meaning given to it in Clause 16.3(b).

1.2      CONSTRUCTION

         (a)  In this Master Agreement unless the contrary  intention  appears a
              reference to:

              (i)   an  "AGREEMENT"  includes  a  concession,   contract,  deed,
                    instrument,  franchise,  licence,  treaty or undertaking (in
                    each case, whether oral or written);

                    an   "AMENDMENT"   includes  a   supplement,   novation   or
                    re-enactment and "AMENDED" is to be construed accordingly;

                    "ASSETS"  includes present and future  properties,  revenues
                    and rights of every description;

                    "AUTHORISATION"   includes   an   authorisation,    consent,
                    approval, resolution, licence, permit, exemption, filing and
                    registration;

                    "INCLUDING"  or "IN  PARTICULAR" is to be construed as being
                    by way of  illustration  or  emphasis  and not  limiting  or
                    prejudicial to the generality of any foregoing words;

                    a "PERSON" includes any individual,  company, unincorporated
                    association  or body of persons  (including  a  partnership,
                    joint venture or consortium), Governmental Authority, state,
                    agency,  international  organisation or other entity and its
                    successors and assigns;

                                       23
<PAGE>

                    a  "REGULATION"  includes  any  regulation,  rule,  official
                    directive,  request  (not  having the force of law but which
                    banks and  financial  institutions  in any Relevant  Country
                    customarily comply with) or guideline (whether or not having
                    the force of law) of any Governmental Authority;

                    "SUBSIDIARY"   and  "HOLDING   COMPANY"  have  the  meanings
                    respectively  given to them by sections  736 and 736A of the
                    Companies Act 1985;

              (ii)  a Clause or a  Schedule  or  Appendix  is a  reference  to a
                    clause  of  or  a  schedule   or  appendix  to  this  Master
                    Agreement;

              (iii) a Paragraph  is a reference  to a paragraph of a Schedule to
                    this Master Agreement;

              (iv)  a Transaction Document or another document is a reference to
                    that Transaction Document or other document as amended;

              (v)   a time of the day is a reference to London time; and

              (vi)  words  importing  the plural shall  include the singular and
                    vice versa.

         (b)  In this Master Agreement unless the contrary  intention  appears a
              reference to a provision  of law is a reference to that  provision
              as amended or  re-enacted  and (i) includes  any statute,  decree,
              constitution,  regulation,  order,  judgment or  directive  of any
              Governmental Authority; (ii) includes any treaty, pact, compact or
              other agreement to which any Governmental Authority is a signatory
              or party;  and  (iii)  includes  any  judicial  or  administrative
              interpretation or application thereof.

         (c)  Unless  the  contrary  intention  appears  or it  is  specifically
              defined therein, a term used in any other Transaction  Document or
              in any notice given under or in  connection  with any  Transaction
              Document  has the same  meaning in that  Transaction  Document  or
              notice as in this Master Agreement.

         (d)  The index to and the  headings  in this Master  Agreement  are for
              convenience  only and are to be ignored in construing  this Master
              Agreement.

         (e)  Wherever  in this  Master  Agreement  the  Lessee is  required  to
              indemnify  the Lessor or any Lessor  Risk Party  "after  Tax" this
              shall mean that the payment to be made under the  indemnity  shall
              be  sufficient  to ensure  that the Lessor or, as the case may be,
              the relevant Lessor Risk Party is fully  indemnified in respect of
              the relevant matter but receives no net benefit as a result of the
              indemnity  payment  taking into account both any Tax  liability of
              the Lessor or, as the case may be, the relevant  Lessor Risk Party
              in respect of the receipt of the indemnity payment and the benefit
              of any deduction or Tax relief to which the Lessor or, as the case
              may be, the  relevant  Lessor Risk Party is entitled in respect of
              payment of the liability giving rise to the indemnity payment.

         (f)  For the purposes of this Master Agreement,  the Cost of Funds, the
              Margin  and any other  interest  rate shall be  calculated  on the
              basis of the actual number of days elapsed and a 360 day year.

                                       24
<PAGE>

2.       LEASING; QUIET ENJOYMENT

2.1      AGREEMENT TO LEASE

         The Lessor  agrees to lease and the Lessee  agrees to take on lease the
         Equipment on and subject to the terms of this Master Agreement.

2.2      QUIET ENJOYMENT

         The Lessor  recognises the Lessee's right to quiet  enjoyment,  use and
         possession of the Equipment in the ordinary  course of its business and
         agrees,  so long as no Event of Default or  Potential  Event of Default
         has  occurred  and  is  continuing  and  subject  to the  terms  of the
         Transaction    Documents   (other   than   the   Lease    Participation
         Arrangements),  that the Lessor will not  interrupt or  interfere  with
         such quiet enjoyment,  use and possession during the Lease Period.  The
         Lessor  will  not be  liable  to the  Lessee  for any  interruption  or
         interference of or with the Lessee's  enjoyment,  use and possession to
         the extent  the same  arises  directly  or  indirectly  from any act or
         omission of any person other than the Lessor.

2.3      NATURE OF LESSOR'S AND LESSEE'S INTERESTS

         (a)  The Lessee acknowledges that the Lessor is acquiring the Equipment
              under the  Instalment  Sale  Agreement  and that,  as between  the
              Parties  and  subject to the  Lessee's  rights  under this  Master
              Agreement and to Permitted  Security  Interests (other than Lessor
              Security  Interests),  as  from  the  Commencement  Date  for  any
              Equipment  the Lessor  will be the owner of and have title to that
              Equipment except as otherwise provided expressly herein.

         (b)  The Lessee's sole rights in the Equipment  will be as bailee under
              this Master  Agreement and the Lessee will not acquire or have any
              right to acquire legal or beneficial ownership of the Equipment or
              any proprietary interest therein.

3.       DELIVERY, RISK AND ACCEPTANCE

3.1      DELIVERY

         Delivery of an item of the  Equipment by the Lessor to the Lessee under
         this Master  Agreement shall be deemed to take place  immediately  upon
         execution  of a  Network  Acceptance  Certificate  in  respect  of that
         Equipment by the Lessee or the relevant Permitted  Sub-Lessee acting in
         each case  through  its  Network  Acceptance  Manager  (and if a person
         purports to sign a Network Acceptance Certificate in that capacity, the
         Lessor  shall be  entitled  to assume  that such  person is in fact the
         Network  Acceptance  Manager for the Lessee or, as the case may be, the
         relevant Permitted Sub-Lessee).

3.2      RISK

         After  Delivery  of an item of  Equipment  the  item  will be in  every
         respect  at the sole risk of the Lessee who will bear all risk of loss,
         theft or  destruction  of, or damage to, the item from any cause of any
         kind.

                                       25
<PAGE>

3.3      ACCEPTANCE

         (a)  Acceptance of an item of the Equipment under this Master Agreement
              shall be deemed to take  place  immediately  upon  execution  of a
              Network Acceptance Certificate in respect of that Equipment by the
              Lessee or, the relevant  Permitted  Sub-Lessee acting in each case
              through its Network  Acceptance  Manager (and if a person purports
              to sign a Network  Acceptance  Certificate in that  capacity,  the
              Lessor shall be entitled to assume that such person is in fact the
              Network  Acceptance Manager for the Lessee or, as the case may be,
              the relevant Permitted Sub-Lessee).  The execution and delivery of
              a Network Acceptance  Certificate shall,  without the need for any
              further action being taken,  constitute  irrevocable acceptance by
              the Lessee of the item of  Equipment  for lease  under this Master
              Agreement  without any  qualification  or reservation.  The Lessee
              acknowledges  that  its  or,  as the  case  may be,  the  relevant
              Permitted  Sub-Lessee's  or,  as the  case  may be,  the  relevant
              authorised   agent's   execution   and  delivery  of  any  Network
              Acceptance  Certificate shall conclusively  establish,  as between
              the Lessor and the Lessee,  that the Equipment has been  inspected
              by the Lessee,  is in good repair and working  order and is of the
              design,  manufacture  and  capacity  selected by the Lessee and is
              accepted by the Lessee under the applicable Lease Schedule.

         (b)  If and to the extent that title to or risk in any Equipment  shall
              pass to the  Lessor  prior  to the  Commencement  Date or any such
              Equipment  shall  come into the  possession  of the Lessee (or any
              party acting on behalf of the Lessee)  (otherwise than by way of a
              leasing under this Master  Agreement) the Lessee shall,  so far as
              practicable,  in  any  such  event  from  such  time  perform  and
              undertake  in favour of the Lessor all of the  obligations  of the
              Lessee  (other than to pay Periodic  Rent) to be  performed  under
              this  Master  Agreement  as  if  the  leasing  under  this  Master
              Agreement had commenced.

         (c)  The Lessee  acknowledges  and agrees  that,  with  effect from the
              Commencement  Date in respect of any Equipment until the date that
              the Lessee  signs a Lease  Schedule in respect of that  Equipment,
              the  Lessee  is  bound  by the  terms  of this  Master  Agreement,
              together with any riders,  schedules or amendments  hereto,  as if
              the  Lessee  had  signed  a  Lease  Schedule  in  respect  of that
              Equipment  and shall perform and undertake in favour of the Lessor
              all of the  obligations  imposed  on the  Lessee  (other  than the
              obligation to pay Periodic Rent) to be performed under this Master
              Agreement as if a Lease  Schedule in respect of that Equipment had
              been signed by the Lessee.

3.4      RESPONSIBILITY FOR DELAY AND COSTS

         (a)  The  Lessor's  ability to  perform  its  obligations  to lease the
              Equipment  under this Master  Agreement is dependent  upon the due
              and punctual  performance by the Seller of its  obligations  under
              the Nortel Supply Contract and the Instalment Sale Agreement.  The
              Lessor will have no  responsibility  to the Lessee for, or arising
              out of, any delay in or failure to effect  Delivery of any item of
              the  Equipment or for any Event of Loss or damage  incurred in the
              course of Delivery.

         (b)  The Lessee will be responsible for all costs and expenses incurred
              in  connection  with  the  Lessor's   purchase  of  the  Equipment
              (including  shipment,  delivery and installation) not specifically
              agreed as being part of the  Acquisition  Cost.  The Lessee  shall
              indemnify the Lessor on demand against all such costs and expenses
              incurred by the Lessor.

         (c)  The Lessee hereby agrees to indemnify,  defend and hold the Lessor
              and Lessor Risk Parties  (other than the Seller in its capacity as
              supplier  of the  Equipment  under  the  Nortel  Supply  Contract)
              harmless from any liability  which the Lessor or any of the Lessor
              Risk Parties (other than the Seller in its capacity as supplier of

                                       26
<PAGE>

              the Equipment under the Nortel Supply Contract)  suffers or incurs
              to any other  manufacturer or supplier arising from the failure of
              the Lessee to lease any  Equipment  which is acquired or agreed to
              be  acquired  by the  Lessor at the  request  of the Lessee or for
              which the Lessor has  assumed an  obligation  to  purchase  at the
              request of the Lessee.

4.       PERIOD OF LEASING

         The  leasing  of each  item of the  Equipment  shall be  deemed to have
         commenced  on the  Commencement  Date  for  such  Equipment  and  shall
         continue  until  expiration  of the  Initial  Term for  such  Equipment
         subject to the  provisions  for earlier  termination  contained in this
         Master Agreement.

5.       RENTALS

5.1      FIXING OF EURO QUOTE

         [Redacted]

5.2      CALCULATION OF PERIODIC RENT AND CAPITAL OUTSTANDING

         (a)  Before issuing a Lease  Schedule to the Lessee in accordance  with
              Clause 5.2(b) below, the Lessor shall calculate:

              (i)  the Acceptance Cost, Acquisition Cost and Capital Outstanding
                   for the  Equipment  which  is to be  subject  to  that  Lease
                   Schedule; and

              (ii) the Periodic Rent for the Equipment which is to be subject to
                   that Lease  Schedule.  Each amount of Periodic  Rent shall be
                   the  amount  determined  by the  Lessor  which,  if  paid  in

                                       27
<PAGE>

                   [Redacted]  (or, if the Initial  Term Start Date falls in the
                   period  described  in  proviso  (ii)  to  the  definition  of
                   "Initial Term Start Date",  [Redacted]) equal monthly amounts
                   commencing  on the Initial Term Start Date and on each Rental
                   Payment  Date  thereafter,  would  repay in full the  Capital
                   Outstanding  on the  Initial  Term Start Date  together  with
                   finance charges on the balance  outstanding from time to time
                   of the Capital  Outstanding  calculated on a daily basis at a
                   rate per annum equal to the applicable Acceptance Rate.

                   The  calculations  referred to in (i) and (ii) above shall be
                   made on the basis that the price of the Equipment the subject
                   of the  relevant  Lease  Schedule  under  the  Nortel  Supply
                   Contract is in Euros.

         (b)  No later than three  Business Days prior to the Initial Term Start
              Date in respect of any  Equipment  which is to be the subject of a
              Lease  Schedule,  the Lessor  shall  complete  and  deliver to the
              Lessee a Certificate  of Acceptance  and Lease Schedule in respect
              of that Equipment for signature. For each Initial Term Start Date,
              there shall be one Lease  Schedule in respect of all the Equipment
              which is, or is to be located in a  particular  Relevant  Country,
              leased to the  Lessee and  sub-leased  to a  particular  Permitted
              Sub-Lessee.  The Lessee shall promptly and, in any event, no later
              than one  Business  Day prior to the  relevant  Initial Term Start
              Date  execute the relevant  Certificate  of  Acceptance  and Lease
              Schedule and redeliver the same to the Lessor.  If the Lessee does
              not execute  the  relevant  Certificate  of  Acceptance  and Lease
              Schedule  prior to the Initial  Term Start Date,  the Lessee shall
              nevertheless  be deemed to accept the  relevant  Equipment  and to
              agree to the terms of the  relevant  Lease  Schedule  as if it had
              signed such Lease  Schedule and the terms and  conditions  of that
              Lease Schedule and this Master  Agreement  shall then apply to the
              relevant Equipment.

5.3      ACCEPTANCE COST

         The  Acceptance  Cost  for any  Equipment  will be  capitalised  on the
         Initial Term Start Date for that  Equipment and will  constitute a part
         of the Acquisition Cost of the Equipment.

5.4      PERIODIC RENTAL

         Periodic Rent shall be due and payable in Euros in respect of each item
         of  Equipment  without  prior  notice or  demand by the  Lessee on each
         Rental  Payment  Date in respect of that item of  Equipment  during the
         Initial Term for that item of Equipment.

6.       PAYMENTS

6.1      CURRENCY

         (a)  All amounts payable by the Lessee under the Transaction  Documents
              by way of indemnity or reimbursement of any costs, expenses, Taxes
              and the like incurred or suffered by any Indemnifiable Person are,
              except as otherwise provided in the Transaction Documents, payable
              in the  currency  in which the cost,  expense,  Tax or other  like
              amount was incurred or suffered.

         (b)  Any  payments  or  prepayments  of Rentals,  Capital  Outstanding,
              Termination  Amount  and  finance  charges  thereon  under a Lease
              Schedule are payable in Euros.

         (c)  Any other amounts  payable under the  Transaction  Documents  are,
              except as otherwise provided in the Transaction Documents, payable
              in Euros.

                                       28
<PAGE>

6.2      PLACE AND MANNER

         (a)  All  payments  to be made by the  Lessee,  under  the  Transaction
              Documents  will  be  made  to the  Lessor  at  Dresdner  Bank  AG,
              Frankfurt,  Swift Code:  DRESDEFF,  for the  account of  Kleinwort
              Benson Ltd., Swift Code: KBENGB22, A/C 499/08047728/11,  Favour of
              Dresdner   Kleinwort  Benson  Finance   Limited,   Account  Number
              259357802,or such other account(s) as the Lessor may notify to the
              Lessee in writing for this purpose.

         (b)  Payments  under the  Transaction  Documents to the Lessor shall be
              made for value on the due date at such  times and in such funds as
              the Lessor may  specify  to the Lessee as being  customary  at the
              time for the settlement of transactions  in the relevant  currency
              in the place for payment.

         (c)  All  payments  to be  made by the  Lessee  under  the  Transaction
              Documents  shall be made without  set-off or  counterclaim  and in
              such funds as the recipient may specify as being  customary at the
              time  for  the  settlement  of  transactions  in the  currency  in
              question.

         (d)  All  payments  to be made by the  Lessor to the  Lessee  under the
              Transaction  Documents  shall be made for value on the due date to
              such account of the Lessee in the  principal  financial  centre of
              the relevant  currency  (or, in the case of payments in Euros,  in
              the principal financial centre of a Participating  Member State or
              London)  as the  Lessee may by  reasonable  notice  specify to the
              Lessor for this purpose.

6.3      LATE PAYMENTS

         If the Lessee  fails to make a payment  in full  under the  Transaction
         Documents  to the Lessor when due and payable  (taking into account any
         applicable grace period) it will, on demand, pay to the Lessor (without
         prejudice  to any other  rights and  remedies  available to the Lessor)
         interest  on the  amount  outstanding  at the  Default  Rate  from  and
         including the date of demand. Such interest will be compounded monthly.

6.4      CALCULATIONS

         Interest  under Clause 6.3 (Late  Payments)  and the fees payable under
         Clause 23.2 (Fees)  accrue  from day to day and are  calculated  on the
         basis of the actual number of days elapsed and a year of 360 days.

6.5      BUSINESS DAYS

         Whenever  any payment  falls due on a day which is not a Business  Day,
         the due date will be the next succeeding Business Day.

6.6      NET AGREEMENT

         The Lessee's  obligations  under this Master Agreement are absolute and
         unconditional and will not be affected by, or contingent upon, any act,
         omission, matter or thing which, but for this provision, would or might
         reduce,  release  or  prejudice  (in  whole  or in  part)  any  of  its
         obligations under this Master Agreement including:

         (a)  any  right  of  set-off,  counterclaim,   recoupment,  suspension,
              deduction  or  defence  or other  right  which  any Party may have
              against another (unless and to the extent mandatorily  required by
              law to be exercised);

                                       29
<PAGE>

         (b)  any  unavailability or interruption of use of any of the Equipment
              for any reason  including its Compulsory  Acquisition  (subject as
              provided in Clause 15.5  (Consequences of an Event of Loss)),  any
              prohibition  or other  restriction  against its use,  operation or
              possession,  or any other  interference with its use, operation or
              possession (except as a result of a breach by the Lessor of Clause
              2.2 (Quiet Enjoyment));

         (c)  any lack or  invalidity of title or any other defect in the title,
              quality,  condition,  design,  operation  or  fitness  for  use or
              purpose of the  Equipment or any embargo or the  ineligibility  of
              the Equipment for any particular use or trade;

         (d)  the absence or  withdrawal  of any  authorisation  relating to the
              Equipment or any lack or  invalidity of or any other defect in any
              other  documentation  or the  registration  of  any  documentation
              relating to the  Equipment  under the laws of England or any other
              Relevant Country;

         (e)  subject as provided in Clause  15.5  (Consequences  of an Event of
              Loss),  any Event of Loss of or any other loss of or damage to the
              Equipment;

         (f)  any  failure,  breach  or delay on the part of any  Party  however
              fundamental,  whether  with  or  without  fault  on its  part,  in
              performing  or  complying  with  any  of  the  provisions  of  any
              Transaction  Document  (other than any breach by the Lessor of its
              obligations  under the  Instalment  Sale  Agreement  which  breach
              prevents the Lessee, or as the case may be, the relevant Permitted
              Sub-Lessee  from using the Equipment or any part of it or prevents
              the Lessor passing title to the Equipment or any part of it to the
              Lessee in accordance with this Master Agreement);

         (g)  any   insolvency,   bankruptcy,    reorganisation,    arrangement,
              readjustment   of  debt,   dissolution,   liquidation  or  similar
              proceedings  by or  against  the Lessor or the Lessee or any other
              person; or

         (h)  any invalidity or unenforceability or lack of due authorisation of
              or other defect in any Transaction Document,

         it being the declared  intention of the Parties that the  provisions of
         this  Clause 6.6 and the  obligations  of the Lessee to pay the amounts
         expressed to be payable  under this Master  Agreement  will survive any
         frustration  and that,  except as  expressly  provided  in this  Master
         Agreement,  no moneys payable under this Master Agreement by the Lessee
         to the Lessor will in any  circumstances  be  repayable  to the Lessee.
         Nothing in this Clause 6.6 shall  constitute  a waiver by the Lessee of
         any right to claim damages  against the Lessor and/or other relief from
         the  courts  arising  out of any  breach by the  Lessor of its  express
         obligations  under this  Master  Agreement  and the  Lessee's  right to
         termination as a consequence  of  repudiatory or fundamental  breach by
         the Lessor and  provided  further that the Lessee shall not be bound to
         continue to pay Periodic  Rent to the Lessor if it is bound by an order
         of a court of competent  jurisdiction directing it to make payment to a
         third party.

6.7      TIME OF THE ESSENCE

         Punctual  payment  of  amounts  payable by the Lessee to the Lessor and
         performance  by  the  Lessee  of  its  obligations  under  this  Master
         Agreement  shall,  subject to any  express  periods of grace set out in
         Clause 16.1  (Events of Default)  or  elsewhere,  be of the essence and
         conditions of this Master Agreement.

                                       30
<PAGE>

6.8      BREAK COSTS INDEMNITY

         The Lessee agrees to indemnify the Lessor on demand  against any Losses
         (including  any loss of margin or other  loss,  premium  or  expense on
         account  of  funds  borrowed,  contracted  for or  utilised  to fund or
         maintain  the  funding  of  any  amount  payable  or  paid  by  way  of
         Acquisition  Cost (or any part  thereof) or any other  amount due or to
         become due under this  Master  Agreement  or which may be  incurred  in
         liquidating  or employing any such funds) ("BREAK  COSTS")  incurred by
         the Lessor as a consequence of:

         (a)  any delay in or  non-delivery  of any of the  Equipment  under the
              Nortel Supply  Contract  and/or the  Instalment  Sale Agreement or
              this Master Agreement or the non-payment of all or any part of the
              purchase price for the Equipment  under the Nortel Supply Contract
              and/or  the  Instalment  Sale  Agreement  for  any  reason  on the
              anticipated due date therefor (other than by reason of a breach by
              the Lessor of its  express  obligations  under the  Nortel  Supply
              Contract  and/or the Instalment Sale Agreement or by reason of the
              operation of Clause 7.6 (Lessee's conditions  precedent) or Clause
              7.7 (Further Lessee's  conditions  precedent)) or the operation of
              Clause 7.5(a) (Failure to satisfy conditions precedent);

         (b)  the receipt of any Rental otherwise than on a Rental Payment Date;
              or

         (c)  any Termination  (other than a Termination in respect of which the
              Make Whole Amount is payable).

6.9      CHANGE OF CURRENCY

(a)      Unless  otherwise  prohibited  by law,  if more  than one  currency  or
         currency  unit are at the same time  recognised  by the central bank of
         any country as the lawful currency of that country, then:

         (i)  any reference in the Transaction Documents to, and any obligations
              arising under the  Transaction  Documents in, the currency of that
              country  shall be  translated  into,  or paid in, the  currency or
              currency unit of that country designated by the Lessor; and

         (ii) any  translation  from one  currency or  currency  unit to another
              shall  be at the  official  rate  of  exchange  recognised  by the
              central bank for the  conversion of that currency or currency unit
              into  the  other,  rounded  up  or  down  by  the  Lessor  (acting
              reasonably).

(b)      If a change in any currency of a country occurs,  this Master Agreement
         will,  to the extent the Lessor  (acting  reasonably)  specifies  to be
         necessary, be amended to comply with any generally accepted conventions
         and market practice in the relevant  interbank  market and otherwise to
         reflect the change in currency.

7.       CONDITIONS PRECEDENT

7.1      DOCUMENTARY CONDITIONS PRECEDENT

         This Master  Agreement shall become effective upon its execution by the
         Parties but the  obligations of the Lessor under this Master  Agreement
         including  its  obligation  to purchase and supply any  Equipment to be
         leased  hereunder  are  subject  to the  condition  that the Lessor has
         received all of the  documents  set out in Part I of Schedule 3 in form
         and substance satisfactory to the Lessor and the Lessor Risk Parties.

                                       31
<PAGE>

7.2      GENERAL CONDITIONS PRECEDENT

         The  obligations of the Lessor under this Master  Agreement to purchase
         and supply any  Equipment or enter into any lease thereof in accordance
         with this  Master  Agreement  are  subject  to the  further  conditions
         precedent  that as of the date the Lessor would but for this Clause 7.2
         be obligated to do so:

         (a)  no Event of Default or Potential Event of Default has occurred and
              is continuing or might result from the leasing of the Equipment;

         (b)  the representations and warranties in Clause 8.1  (Representations
              and  warranties of Lessee) and in Clause 5 of the Lease  Guarantee
              are true and accurate in all material  respects as if made on such
              date by reference to the facts and circumstances then existing and
              will remain true and correct in all material respects  immediately
              after execution of the Transaction Documents;

         (c)  no change has occurred after the date of this Master  Agreement in
              any  Applicable  Law or in the  interpretation  of any such law or
              regulation which in the Lessor's opinion would make it illegal for
              the  Lessor or the Lessee or either of the  Guarantors  to perform
              any  of  their  respective   obligations   under  the  Transaction
              Documents;

         (d)  the  Lessor  has   received   such  other   documents,   opinions,
              certificates,  authorisations  and  assurances  as the  Lessor may
              reasonably request;

         (e)  Viatel,  Inc., the Lessee,  Nortel Optical and Nortel have entered
              into the Deed of Novation;

         (f)  all undisputed  balances due and outstanding  from the Lessee,  or
              either of the Guarantors or any member of Viatel,  Inc.'s Group to
              the Nortel  Networks  Group are current,  or if not  current,  are
              being disputed in good faith;

         (g)  since  the  date  of the  most  recent  audited  annual  financial
              statements  of  Viatel,  Inc.'s  Group  for  the  period  to  31st
              December, 1999 (except for matters disclosed in the Second Quarter
              2000 10-Q), no Material Adverse Change has occurred;

         (h)  an agent for service of process in England for  Viatel,  Inc.  has
              been  appointed and evidence (in a form and  substance  reasonably
              satisfactory  to the Lessor) has been furnished to the Lessor both
              of the  appointment  of that agent for  service of process  and of
              that agent's acceptance of such appointment;

         (i)  the Lessor is  satisfied  with the  results  of its due  diligence
              including its review of all Material  Contracts of the Lessee, the
              Guarantors and the Permitted Sub-Lessees; and

         (j)  all necessary internal approvals from any party to any Transaction
              Document  which is required to furnish  such  approval  (including
              approvals  from the boards of directors  of  companies  within the
              Nortel  Networks  Group)  have been given in a form and  substance
              satisfactory to the Lessor.

                                       32
<PAGE>

7.3      CONDITIONS PRECEDENT TO LEASING OF EQUIPMENT

(a)      Without prejudice to Clause 7.1 (Documentary  conditions precedent) and
         Clause 7.2 (General conditions precedent), the obligation of the Lessor
         to supply each item of Equipment under this Master Agreement is subject
         to:

         (i)   the  conditions  precedent  set  out in  Part  II of  Schedule  3
               (Conditions   Precedent   Documents)   being   fulfilled  to  the
               satisfaction  of the Lessor (or waived in writing by the  Lessor)
               on or prior  to the  Initial  Term  Start  Date for such  item of
               Equipment  (or such other date as may be  specified in Part II of
               Schedule 3);

         (ii)  the  Acquisition  Cost of the Equipment when  aggregated with the
               Acquisition Cost of all Equipment  already supplied by the Lessor
               under this Master  Agreement  and the subject of Lease  Schedules
               not exceeding the Commitment; and

         (iii)the Lessor being  satisfied that any and all steps necessary to be
               taken prior to the Initial Term Start Date in each Tier 1 Country
               have  been  taken  to  protect   the   Lessor's   ownership   and
               repossession rights, including,  without limitation,  all filings
               and registrations.

(b)      The Lessor  shall not be required to pay the  Acquisition  Cost for any
         Equipment  unless and until the Lessee has executed a Lease Schedule in
         respect of such Equipment and all of the  conditions  precedent set out
         in Part II of Schedule 3  (Conditions  Precedent  Documents)  have been
         fulfilled  to the  satisfaction  of the Lessor (or waived in writing by
         the Lessor).

7.4      WAIVER OR DEFERRAL OF CONDITIONS PRECEDENT

(a)      The  conditions  precedent  referred  to in  Clauses  7.1  (Documentary
         conditions  precedent),  7.2  (General  conditions  precedent)  and 7.3
         (Conditions  precedent  to leasing of  Equipment)  are inserted for the
         sole benefit of the Lessor and may be waived or deferred in whole or in
         part subject to such conditions as the Lessor may notify to the Lessee.

(b)      The Lessee will, to the extent that it is capable of so doing,  use its
         commercially  reasonable endeavours to fulfil, or ensure fulfilment of,
         such conditions within the time specified.

7.5      FAILURE TO SATISFY CONDITIONS PRECEDENT

         If:

         (a)  any  of  the  conditions  precedent  referred  to in  Clauses  7.1
              (Documentary   conditions  precedent),   7.2  (General  conditions
              precedent) and 7.3 (Conditions  precedent to leasing of Equipment)
              to the leasing of any of the Equipment  (other than receipt of the
              relevant  Lease  Schedule  signed by the Lessee as  referred to in
              paragraph (i) of Part II of Schedule 3) which have not been waived
              or deferred by the Lessor  under Clause 7.4 (Waiver or deferral of
              conditions precedent) are not fulfilled to the satisfaction of the
              Lessor on or before the Initial Term Start Date in respect of that
              Equipment; or

         (b)  the  Lessee  shall  refuse  for any  reason  whatsoever  to accept
              delivery of any item of the Equipment otherwise  deliverable under
              this Master Agreement,

              then:

                                       33
<PAGE>

              (i)  the leasing of that Equipment shall  automatically  terminate
                   on the  Initial  Term Start Date for that  Equipment  and the
                   terms of the Master  Supplemental and Amendment  Agreement in
                   relation to the Nortel  Supply  Contract  shall then apply to
                   the relevant Equipment; and

              (ii) the Lessee will  indemnify  the Lessor on demand  against all
                   Losses  (including  Break Costs ) suffered or incurred by the
                   Lessor as a result of or in connection  with the  termination
                   of the leasing of the Equipment.

7.6      LESSEE'S CONDITIONS PRECEDENT

         The  obligations  of the Lessee to take the Equipment on lease from the
         Lessor are  subject to the  condition  that the Lessee has  received no
         later than the Initial Term Start Date all of the  documents set out in
         Part III of Schedule 3.

7.7      FURTHER LESSEE'S CONDITIONS PRECEDENT

         The  obligations  of the Lessee to take the Equipment on lease from the
         Lessor  are  subject  to  the  further  condition  precedent  that  the
         representations   and   warranties   of  the   Lessor   in   Clause   9
         (Representations  and warranties of Lessor) are true and accurate as at
         the date of this Master Agreement.

7.8      LESSEE'S WAIVER OR DEFERRAL OF CONDITIONS PRECEDENT

(a)      The conditions  precedent specified in Clauses 7.6 (Lessee's conditions
         precedent) and 7.7 (Further Lessee's conditions precedent) are inserted
         for the sole  benefit of the Lessee  and may be waived or  deferred  in
         whole or in part subject to such conditions as the Lessee may notify to
         the Lessor.

(b)      The Lessor will to the extent  that it is capable of so doing,  use its
         commercially  reasonable  endeavours to fulfil, or ensure fulfilment of
         such conditions within the time specified and otherwise under the terms
         of such notification.

8.       REPRESENTATIONS AND WARRANTIES OF LESSEE

8.1      REPRESENTATIONS AND WARRANTIES OF LESSEE

         The Lessee makes the  representations  and  warranties  set out in this
         Clause 8 to the Lessor.

8.2      STATUS

(a)      It is a corporation  or limited  liability  company duly  organised and
         validly  existing under the laws of the  jurisdiction of its formation;
         and

(b)      It has the  power  to own its  property  and  assets  and  carry on its
         business  as it is  now  being  conducted  and  is  the  holder  of all
         necessary licences material to the conduct of its business.

                                       34
<PAGE>

8.3      POWERS AND AUTHORITY

         It has the power to enter into and perform, and has taken all necessary
         action to authorise  the entry into,  performance  and delivery of, the
         Transaction  Documents  to  which  it is or  will  be a  party  and the
         transactions contemplated by those Transaction Documents.

8.4      LEGAL VALIDITY

         Each  Transaction   Document  to  which  it  is  or  will  be  a  party
         constitutes,  or when  executed  in  accordance  with the terms of that
         Transaction  Document  will  constitute,  its legal,  valid and binding
         obligation enforceable in accordance with the terms of that Transaction
         Document.

8.5      NON-CONFLICT

         The  entry  into  and  performance  by  it  of,  and  the  transactions
         contemplated by, the Transaction Documents do not and will not:

         (a)  conflict with any law or regulation or judicial or official order;
              or

         (b)  conflict with its constitutional documents; or

         (c)  conflict with any document  which is binding upon it or any of its
              assets; or

         (d)  result in the  creation of any Security  Interest  over any of its
              assets except as contemplated by the Transaction  Documents (other
              than the Lease Participation Arrangements).

8.6      NO DEFAULT

(a)      No Potential Event of Default is outstanding or might result from the
         entry into or performance of any Transaction Document to which the
         Lessee is a party; and

(b)      no other event is outstanding  which constitutes (or with the giving of
         notice,  lapse of time,  determination of materiality or the fulfilment
         of any other applicable  condition or any combination of the foregoing,
         might  constitute) a default under any document  which is binding on it
         or any of its assets to an extent or in a manner  which might  effect a
         Material Adverse Change.

8.7      AUTHORISATIONS

         All authorisations,  approvals, consents, licences, exemptions filings,
         recordings  and other  matters,  official  or  otherwise,  required  or
         desirable in connection with the entry into, performance,  validity and
         enforceability   of,  and  the   transactions   contemplated   by,  the
         Transaction Documents to which the Lessee is a party have been obtained
         or effected (as appropriate) and are in full force and effect.

8.8      FINANCIAL STATEMENTS

         The audited  Financial  Statements of Viatel,  Inc. for the fiscal year
         ended 31st December, 1999 delivered to the Lessor:

         (a)  have  been  prepared  in  accordance   with   generally   accepted
              accounting principles consistently applied; and

                                       35
<PAGE>

         (b)  fairly  represent  the  financial  condition  of the  Lessee,  and
              (except for any matters disclosed in the Second Quarter 2000 10-Q)
              nothing  has  occurred   which  would  be  reasonably   likely  to
              constitute  a  Material  Adverse  Change in  respect of the Lessee
              since the date of the balance sheet included in those accounts.

8.9      LITIGATION

         No litigation,  arbitration or  administrative  proceedings are current
         or, to its  knowledge,  pending or  threatened,  which has a reasonable
         likelihood  of  being  adversely   determined,   and  if  so  adversely
         determined, would effect a Material Adverse Change.

8.10     INFORMATION

         To the  best  of its  knowledge  and  belief  all  written  information
         supplied  by the  Lessee to the  Lessor was true as at the date that it
         was  supplied  and the Lessee has not failed to  disclose to the Lessor
         any  information  which,  if  disclosed,  might  adversely  affect  the
         decision  of a person  considering  whether to enter  into this  Master
         Agreement in the capacity of the Lessor.

8.11     OWNERSHIP

         It is a wholly owned Subsidiary of Viatel, Inc.

8.12     ENVIRONMENTAL

         Except as may already have been  disclosed by the Lessee in writing to,
         and acknowledged in writing by, the Lessor:

         (a)  the  Lessee  and  its   Environmental   Affiliates   have  without
              limitation  complied in all material  respects with the provisions
              of all applicable  Environmental Laws in relation to the Equipment
              (other than Services); and

         (b)  the Lessee and its  Environmental  Affiliates  have  obtained  all
              material  Environmental  Approvals  in relation  to the  Equipment
              (other  than  Services)  and  are in  compliance  in all  material
              respects with such Environmental Approvals.

8.13     INSURANCES

         All Insurances required to be effected under Clause 14 (Insurances) are
         in full force and effect,  all  premiums and  contributions  which have
         fallen due have been paid and no event or  circumstances  has  occurred
         nor has there been any  omission  to  disclose a fact which in any such
         case  would  entitle  any  insurer  to avoid or  otherwise  reduce  its
         liability under any of the Insurances.

8.14     MATERIAL CONTRACTS

(a)      Each  of  the  Material  Contracts  to  which  the  Lessee  is a  party
         constitutes its legal,  valid and binding obligation and is enforceable
         in accordance  with its terms (except as enforcement  may be limited by
         bankruptcy,  insolvency  or similar laws  affecting  creditors'  rights
         generally or  equitable  principles  relating to a limiting  creditors'
         rights  generally)  and  all   authorisations,   approvals,   consents,

                                       36
<PAGE>

         licences, exemptions,  filings, recordings, and other matters necessary
         in  connection   with  the  entry  into,   performance,   validity  and
         enforceability of the Material Contracts have been obtained or effected
         (as appropriate) and are in full force and effect.

(b)      Neither the Lessee nor any other  member of Viatel,  Inc.'s Group is in
         breach of its  obligations  under any Material  Contract in any respect
         which would be reasonably  likely to result in the termination  thereof
         nor, has anything  occurred  under, in respect of or in connection with
         any  Material  Contract  which  could  result in any such breach of any
         Material Contract.

8.15     MOVEABLE PROPERTY

         Subject to the Instalment Sale Agreement being entered into on or prior
         to the first Commencement Date, in each Relevant Country, the Equipment
         (other than Services)  belongs to the Lessor,  constitutes the Lessor's
         personal or moveable  property (as  appropriate)  and in each  Relevant
         Country  no person has any rights in or to any  Equipment  (other  than
         Services) by reason of that Equipment  (other than Services)  being, or
         being deemed to be, affixed to or attached to, or otherwise located on,
         real property.

8.16     REGISTRATIONS RE EQUIPMENT

         Except  for  those  registrations  referred  to in  Schedule  3 Part II
         (Conditions Precedent to leasing of Equipment),  it is not necessary to
         effect in any  Relevant  Country  in which any  Equipment  (other  than
         Services) is, or is to be located,  any registrations with any relevant
         Governmental  Authority  concerning the  installation of that Equipment
         (other than  Services) on real  property or the fixture,  attachment or
         location, or deemed fixture,  attachment or location, of that Equipment
         (other than Services) on that property or, as the case may be, in order
         to protect the ownership  and/or  security  interests of the Lessor and
         the other Lessor Risk Parties.

8.17     LEASE GUARANTEE

         The covenants  contained in the Lease Guarantee are not materially less
         onerous than those  contained in any indenture  entered into by Viatel,
         Inc.

8.18     TITLE TO THE EQUIPMENT

         Neither the Lessee nor any Permitted Sub-Lessee nor any other member of
         the Viatel,  Inc. Group has title to any Equipment which is or is to be
         the subject of a Lease Schedule.

8.19     PERMANENT ESTABLISHMENT

         Other than in  England  and Wales,  the  Lessee has not  established  a
         permanent  establishment  in any  other  Relevant  Country  where it is
         proposing  to  enter  into  a  Permitted  Sub-Lease  with  a  Permitted
         Sub-Lessee.

8.20     TIME FOR MAKING REPRESENTATIONS AND WARRANTIES

         The  representations  and warranties in this Clause 8 shall survive the
         execution of this Master Agreement:

         (a)  are made on the date of this Master Agreement; and

                                       37
<PAGE>

         (b)  (other than the representation and warranty set out in Clause 8.15
              (Taxes)  above) are deemed to be  repeated  on each  Initial  Term
              Start Date,  with  reference to the facts and  circumstances  then
              subsisting  as if made at such time except that each  reference to
              the financial  statements of Viatel, Inc. in Clause 8.8 (Financial
              Statements)  shall be  construed as a reference to the then latest
              available financial statements of the Lessee and each reference to
              the date as of such accounts were prepared shall be construed as a
              reference  to the  date as of  which  the  then  latest  available
              accounts of the Lessee were prepared.

9.       REPRESENTATIONS AND WARRANTIES OF LESSOR

9.1      REPRESENTATIONS AND WARRANTIES OF LESSOR

         The Lessor makes the  representations  and  warranties  set out in this
         Clause 9 to the Lessee on the date of this Master Agreement.

9.2      STATUS

         It  is a  limited  liability  company  duly  incorporated  and  validly
         existing under the laws of the jurisdiction of its incorporation.

9.3      POWERS AND AUTHORITY

         It has the power to enter into and perform, and has taken all necessary
         action to authorise  the entry into,  performance  and delivery of, the
         Transaction  Documents  to  which  it is or  will  be a  party  and the
         transactions contemplated by those Transaction Documents.

9.4      LEGAL VALIDITY

         Each  Transaction   Document  to  which  it  is  or  will  be  a  party
         constitutes,  or when  executed  in  accordance  with the terms of that
         Transaction  Document  will  constitute,  its legal,  valid and binding
         obligation enforceable in accordance with the terms of that Transaction
         Document except as enforcement may be limited by bankruptcy, insolvency
         or similar  laws  affecting  creditors'  rights  generally or equitable
         principle relating to or limiting creditors' rights generally.

10.      DISCLAIMER AND EXCLUSION OF LIABILITY; LESSOR SECURITY INTERESTS

10.1     DISCLAIMER

         THE LESSEE ACKNOWLEDGES AND AGREES THAT:

         (a)  THE EQUIPMENT HAS BEEN SELECTED BY THE LESSEE (AND NOT THE LESSOR)
              IN  ACCORDANCE  WITH THE TERMS OF THE NORTEL  SUPPLY  CONTRACT FOR
              ACQUISITION BY THE LESSOR UNDER THE INSTALMENT  SALE AGREEMENT AND
              LEASING BY THE LESSEE FROM THE LESSOR UNDER THIS MASTER  AGREEMENT
              AND THE  LESSOR  HAS NOT  BEEN AND  WILL  NOT BE  INVOLVED  IN THE
              DESIGN,   MANUFACTURE,   CONSTRUCTION   OR   INSTALLATION  OF  THE
              EQUIPMENT;

         (b)  THE LESSEE IS  LEASING  EACH ITEM OF THE  EQUIPMENT  IN AN "AS IS,
              WHERE IS"  CONDITION,  WITH ALL FAULTS AND SUBJECT TO ALL SECURITY

                                       38
<PAGE>

              INTERESTS AND DEBTS (OTHER THAN LESSOR  SECURITY  INTERESTS) AS AT
              THE COMMENCEMENT DATE FOR THAT EQUIPMENT AND DELIVERY OF A NETWORK
              ACCEPTANCE  CERTIFICATE  FOR  THAT  EQUIPMENT  WILL BE  CONCLUSIVE
              PROOF,  AS BETWEEN THE PARTIES,  THAT THE LESSEE'S DULY AUTHORISED
              TECHNICAL  EXPERTS HAVE HAD FULL  OPPORTUNITY  TO INSPECT THE ITEM
              AND THAT THE ITEM IS IN GOOD WORKING  ORDER AND REPAIR,  COMPLETE,
              OF SATISFACTORY  QUALITY,  FIT FOR ANY PURPOSE FOR WHICH IT MAY BE
              INTENDED OR REQUIRED, WITHOUT DEFECT (WHETHER IN CONDITION, DESIGN
              OR  OTHERWISE   AND  WHETHER  OR  NOT   DISCOVERABLE   AS  AT  THE
              COMMENCEMENT   DATE  FOR  THAT   EQUIPMENT)   AND  IN  EVERY   WAY
              SATISFACTORY TO THE LESSEE (ALL OF THE FOREGOING,  HOWEVER,  BEING
              STATED FOR THE  LESSOR'S  BENEFIT  ONLY  WITHOUT  PREJUDICE TO THE
              LESSEE'S RIGHTS AND REMEDIES AGAINST THE SELLER);

         (c)  SUBJECT  TO  CLAUSE  2.2  (QUIET  ENJOYMENT),  NO  REPRESENTATION,
              WARRANTY,  TERM OR  CONDITION  (EXPRESS  OR  IMPLIED  AND  WHETHER
              STATUTORY  OR  OTHERWISE)  HAS BEEN OR IS GIVEN BY OR ON BEHALF OF
              THE LESSOR NOR ANY OTHER  LESSOR RISK PARTY (OTHER THAN THE SELLER
              IN ITS  CAPACITY  AS  SUPPLIER  OF THE  EQUIPMENT  PURSUANT TO THE
              NORTEL  SUPPLY  CONTRACT)  AND THE LESSOR (ON BEHALF OF ITSELF AND
              EACH SUCH LESSOR RISK PARTY) HEREBY DISCLAIMS ANY  REPRESENTATION,
              WARRANTY,  TERM  OR  CONDITION  WHATSOEVER,  IN  RELATION  TO  THE
              EQUIPMENT INCLUDING AS TO TITLE,  DESCRIPTION,  VALUE,  CONDITION,
              DESIGN, CAPACITY,  QUALITY,  DURABILITY,  OPERATION,  PERFORMANCE,
              FITNESS OR SUITABILITY  OR  ELIGIBILITY  FOR ANY PARTICULAR USE OR
              PURPOSE,   AS  TO  THE   ABSENCE  OF  DEFECTS   (WHETHER   OR  NOT
              DISCOVERABLE) OR ANY INFRINGEMENT OF ANY INTELLECTUAL  PROPERTY OR
              OTHER  RIGHTS  OF  ANY  PERSONS,  ALL  OF  WHICH  REPRESENTATIONS,
              WARRANTIES, TERMS AND CONDITIONS ARE HEREBY EXCLUDED;

         (d)  THE  LESSOR  WILL HAVE NO  LIABILITY  TO THE LESSEE AND THE LESSEE
              WILL  HAVE NO  RIGHT,  CLAIM OR  REMEDY  OF ANY KIND  AGAINST  THE
              LESSOR, IN EACH CASE, HOWSOEVER AND WHERESOEVER  ARISING,  WHETHER
              IN  CONTRACT,   TORT  OR  OTHERWISE,  IN  RESPECT  OF  ANY  LOSSES
              (INCLUDING  CONSEQUENTIAL  AND INDIRECT LOSSES AND LOSS OF PROFIT,
              SPECIAL DAMAGES OR ANY DAMAGES/LOSSES ARISING FROM OR ATTRIBUTABLE
              TO FAILURE  TO REALISE  EXPECTED  SAVINGS,  LOSS OF DATA,  CAPITAL
              DOWNTIME  COSTS,  LOSS  OF  USE,  LOSS  OF  GOODWILL  OR  LOSS  OF
              ANTICIPATED  OR ACTUAL  REVENUE)  ARISING AS A DIRECT OR  INDIRECT
              RESULT  OF ANY LOSS OF OR  DAMAGE  (INCLUDING  DEATH,  INJURY  AND
              DISEASE) TO OR ANY  UNAVAILABILITY  (WHETHER  INITIALLY OR FOR ANY
              PERIOD)  OF THE  EQUIPMENT  OR ANY  OTHER  ASSETS  OR ANY  PERSONS
              IRRESPECTIVE OF WHETHER SUCH LOSS, DAMAGE OR UNAVAILABILITY  SHALL
              ARISE FROM ANY ACT OR OMISSION OF THE LESSOR OR ANY PERSON  ACTING
              ON ITS BEHALF  (INCLUDING THE NEGLIGENCE OF THE LESSOR OR ANY SUCH
              PERSON);

         (e)  THE  DESCRIPTION  OF  THE  EQUIPMENT   CONTAINED  IN  ANY  OF  THE
              TRANSACTION DOCUMENTS IS FOR IDENTIFICATION PURPOSES ONLY;

                                       39
<PAGE>

         (f)  SUBJECT TO THE EXPRESS  TERMS OF THIS  AGREEMENT AND SAVE FOR DULY
              AUTHORISED  EMPLOYEES  OF THE  LESSOR,  NO PERSON  (INCLUDING  ANY
              DEALER OR SUPPLIER  OR ANY PERSON  THROUGH  WHOM THE  TRANSACTIONS
              CONTEMPLATED   BY  THE   TRANSACTION   DOCUMENTS   MAY  HAVE  BEEN
              INTRODUCED, NEGOTIATED OR CONDUCTED) HAS ANY AUTHORITY (EXPRESS OR
              IMPLIED) TO ACT AS THE  LESSOR'S  AGENT OR TO MAKE ANY  STATEMENT,
              REPRESENTATION OR WARRANTY ON BEHALF OF THE LESSOR.

10.2     WAIVER

(a)      WITHOUT  PREJUDICE TO THE GENERALITY OF CLAUSE 10.1  (DISCLAIMER),  THE
         LESSEE  WAIVES,  AS BETWEEN  ITSELF AND THE  LESSOR,  ALL ITS RIGHTS IN
         RESPECT OF ANY WARRANTY, REPRESENTATION,  TERM OR CONDITION OF THE TYPE
         REFERRED TO IN CLAUSE 10.1(c) (DISCLAIMER).

(b)      THE  LESSEE  ACKNOWLEDGES  AND  AGREES  THAT  ANY  DAMAGE  TO OR  LOSS,
         DESTRUCTION,  OR  UNFITNESS  OF,  OR DEFECT  IN THE  EQUIPMENT,  OR THE
         INABILITY OF THE LESSEE TO USE THE EQUIPMENT FOR ANY REASON WHATSOEVER,
         OR ANY OTHER CIRCUMSTANCE WHATSOEVER SHALL NOT:

<PAGE>

         (i)   GIVE  RISE TO ANY  DEFENCE,  COUNTERCLAIM,  OR  RIGHT  OF  SETOFF
               AGAINST  THE LESSOR OR ANY OTHER  LESSOR  RISK PARTY  (EXCEPT THE
               SELLER  IN ITS  CAPACITY  AS  SUPPLIER  UNDER THE  NORTEL  SUPPLY
               CONTRACT); OR

         (ii)  PERMIT ANY ABATEMENT OR  RECOUPMENT  OF, OR REDUCTION IN PERIODIC
               RENT; OR

         (iii) ALLOW THE LESSEE TO CANCEL,  TERMINATE,  MODIFY OR REPUDIATE  THE
               APPLICABLE LEASE SCHEDULE; OR

         (iv)  RELIEVE THE LESSEE OF, OR EXCUSE THE LESSEE FROM, THE PERFORMANCE
               OF  ITS   OBLIGATIONS   UNDER  THE  APPLICABLE   LEASE  SCHEDULES
               INCLUDING,  BUT NOT  LIMITED TO, ITS  OBLIGATION  TO PAY THE FULL
               AMOUNT OF PERIODIC  RENT,  WHICH  OBLIGATIONS  ARE  ABSOLUTE  AND
               UNCONDITIONAL.

10.3     NO OBLIGATION TO REPLACE ETC.

         If any item of Equipment is lost, damaged,  Compulsorily Acquired, worn
         out, in need of repair or otherwise  unfit or  unavailable,  the Lessor
         and each other Lessor Risk Party (other than the Seller in its capacity
         as supplier of the Equipment  pursuant to the Nortel  Supply  Contract)
         will:

         (a)  have no liability or  responsibility of any kind in respect of any
              such loss, damage,  Compulsory  Acquisition,  wearing out, want of
              repair, unfitness or unavailability; and

         (b)  be under no obligation to:

              (i)   provide any replacement for such item of Equipment;

                                       40
<PAGE>

              (ii)  repair,  maintain,  reinstate  or insure  the  Equipment  or
                    secure its release or return; or

              (iii) compensate the Lessee in respect  thereof nor, except to the
                    extent expressly  provided in this Master Agreement,  return
                    to or otherwise account to the Lessee for all or any part of
                    any  Periodic  Rent or  other  sum  that  has  been  paid in
                    advance.

10.4     NO EXCLUSION

         Without  prejudice  to  the  indemnities  given  by the  Lessee  in the
         Transaction Documents, nothing in this Clause 10 shall exclude or limit
         any  liability on the part of the Lessor or any other Lessor Risk Party
         to the Lessee:

         (a)  in contract  for any breach by the Lessor or any other Lessor Risk
              Party  of  its  express   obligations  to  the  Lessee  under  the
              Transaction Documents; or

         (b)  to the extent  that the Lessor or any other  Lessor Risk Party may
              be  precluded  by  Applicable  Law from  excluding or limiting its
              liability and in particular nothing in this Clause 10 shall afford
              to the Lessor or any other  Lessor Risk Party any wider  exclusion
              of any  liability of the Lessor or any other Lessor Risk Party for
              death or personal  injury than the Lessor or any other Lessor Risk
              Party may  effectively  exclude having regard to the provisions of
              the Unfair Contract Terms Act 1977.

10.5     LESSOR SECURITY INTERESTS

         Other  than  pursuant  to  and  in  accordance   with  the  Transaction
         Documents,  the Lessor will not knowingly create or permit to arise any
         Lessor  Security  Interests in any of the Equipment  which is not fully
         subordinate to the interest of the Lessee in the Equipment  pursuant to
         this Master Agreement.

10.6     RIGHTS AGAINST SUPPLIERS

(a)      Without prejudice to the other provisions of this Clause 10 and subject
         as  provided  below,  if the  Lessee  is  dissatisfied  with any of the
         Equipment  or any  Services  provided  in  connection  with it then the
         Lessee's  sole remedy  will be to take the matter up with the  original
         supplier  or  manufacturer  of the  Equipment  and  the  Lessee  shall,
         notwithstanding any such claim,  continue to pay the Lessor all amounts
         due and to become due under the applicable Lease Schedule and the other
         Transaction Documents.

(b)      Prior to the Lessee  making a claim under any supplier or  manufacturer
         condition, warranty or guarantee the Lessee will notify the Lessor.

(c)      Nothing in this  Clause  10.6 will  entitle  the Lessee to carry on any
         proceedings  in the  name of the  Lessor  without  the  Lessor's  prior
         written  consent  (which consent the Lessor may give or withhold in its
         absolute discretion).

(d)      To the extent  that the Lessor  has the  benefits  of any or all of the
         conditions,   warranties   and   guarantees   of  the   suppliers   and
         manufacturers  of the Equipment and providers of the Services,  subject
         always to the Security Assignment re Nortel Supply Contract, the Lessor
         hereby  assigns  them to the  Lessee.  To the  extent  that any of such

                                       41
<PAGE>

         conditions,  warranties and guarantees are  non-assignable,  the Lessor
         will,  subject  always to the  Security  Assignment  re  Nortel  Supply
         Contract,   hold  the  benefit  of  such  conditions,   warranties  and
         guarantees  on trust for the Lessee (or as the Lessee may  direct)  and
         will enforce such conditions, warranties and guarantees for the benefit
         of the Lessee at the Lessee's direction.

10.7     CONFIRMATION

         The Lessee  acknowledges that Clauses 3.1 (Delivery),  3.3 (Acceptance)
         and 3.4 (Refusal),  7.3(b) and 10.1 to 10.6 inclusive (the  "IDENTIFIED
         CLAUSES")  have  been  the  subject  of full and  free  discussion  and
         negotiation  between the  parties,  the Lessee  fully  understands  the
         provisions of the Identified  Clauses and the implications  thereof and
         that the Rental  and other  amounts  payable  by it under  this  Master
         Agreement have been calculated and the insurance  provisions agreed, in
         the light of such  discussions  and negotiation and taking full account
         of the terms of the identified clauses. The Lessee further acknowledges
         and accepts that the provisions of the Identified  Clauses are fair and
         reasonable to be included in this Master Agreement having regard to the
         circumstances  which  were,  or ought  reasonably  to have  been in the
         contemplation  of the  Lessee  and the  Lessor at the time this  Master
         Agreement was entered into.

11.      PROTECTION OF LESSOR'S INTERESTS

11.1     PROTECTION OF LESSOR'S INTERESTS

         The Lessee will:

         (a)  on or before the  Commencement  Date  relating  to any item of the
              Equipment  (other than  Services) and at the request of the Lessor
              where the Lessor has  received  advice  from legal  counsel in the
              Relevant  Country  that  it is  necessary  or  advisable  in  that
              Relevant  Country to protect its interest,  the Lessee shall affix
              or cause to be affixed to the Equipment (other than Services),  in
              a conspicuous  place, a label or plaque stating that the Equipment
              (other than Services) is owned by the Lessor;

         (b)  not place or permit to be  placed  on the  Equipment  (other  than
              Services)any  other plates or insignia  dealing with the rights of
              any person in the  Equipment  (other than  Services) but this will
              not prohibit the Lessee's  usual livery and  advertising  material
              (if any);

         (c)  not,  directly or indirectly,  create,  incur,  assume,  suffer or
              permit to subsist any Security  Interest on or with respect to the
              Equipment  (other  than  Permitted  Security   Interests)  or  any
              interest therein or in this Master Agreement or the Insurances and
              promptly,  take such action as may be necessary  to discharge  any
              such Security Interest;

         (d)  not,  directly  or  indirectly,  sell or dispose of, or purport to
              sell or dispose of, the Equipment or any interest therein nor hold
              itself out as the owner of the Equipment or as having any power to
              sell or dispose of the Equipment;

         (e)  not pledge the credit of the Lessor,  whether for any maintenance,
              service, repairs, overhauls of, or modifications to, the Equipment
              or otherwise;

         (f)  not do any act or thing  which  could  reasonably  be  expected to
              prejudice or jeopardise  the rights and  interests  (whether as to
              ownership,  security  or  otherwise)  of the  Lessor in and to the
              Equipment and use all reasonable endeavours to take such action as

                                       42
<PAGE>

              Lessor's counsel has advised to be necessary or has recommended to
              prevent  those  rights  and  interests  from being  prejudiced  or
              jeopardised,  and to keep the  Equipment  free from all  claims of
              other  persons  (including  Compulsory   Acquisition,   execution,
              distress, impounding, arrest and forfeiture), except in respect of
              Lessor  Security  Interests,  and, in the event of any such claim,
              use  all  reasonable  endeavours  to  ensure  the  release  of the
              Equipment as soon as practicably possible; and

         (g)  take  whatever  action  the  Lessor  may  reasonably  require  for
              perfecting  or  protecting  the  rights  of the  Lessor  under the
              Transaction   Documents   (other  than  the  Lease   Participation
              Arrangements)  and the  interests  of the Lessor in the  Equipment
              including  the  execution  and delivery of any  documents  and the
              giving  of  any  notice  or  direction   and  the  making  of  any
              registration  which,  in each case, the Lessor  reasonably  thinks
              expedient.

11.2     NOTIFICATION OF EVENTS

         The Lessee shall notify the Lessor:

         (a)  as soon as practicable,  but in any event within five (5) Business
              Days after the occurrence  thereof, of any Event of Loss to all or
              any part of the Equipment;

         (b)  as soon as practicable  after becoming aware thereof,  of any loss
              of or damage to the Equipment  (not amounting to an Event of Loss)
              where  the  cost  of  repair,   reinstatement  or  replacement  is
              reasonably likely to be in excess of E1,000,000;

         (c)  as soon as reasonably practicable after becoming aware thereof, of
              any Security Interest (other than a Permitted  Security  Interest)
              having become, or being alleged to have become, attached to any of
              the  Equipment or any interest  therein or the  Insurances  or the
              enforcement  or attempted  enforcement  of any  Security  Interest
              against the Equipment, any such interest or the Insurances;

         (d)  as soon as reasonably practicable after becoming aware thereof, of
              any execution,  forfeiture,  distress,  impounding,  attachment or
              other equivalent legal process in any relevant  jurisdiction being
              levied or enforced  upon the Equipment or seizure of any Equipment
              (not amounting to Compulsory Acquisition);

         (e)  as soon as reasonably practicable after becoming aware thereof, of
              any  injury or damage to any person or  property  caused by, or in
              connection with, the Equipment which is reasonably  likely to give
              rise to (i) a claim against an Indemnifiable  Person;  or (ii) any
              other claim or claims in aggregate in excess of E1,000,000;

         (f)  as soon as reasonably practicable after becoming aware thereof, of
              any  other  occurrence  in  respect  of  the  Equipment  which  is
              reasonably likely to involve an Indemnifiable Person or the Lessee
              in any  loss,  liability  or  claim  in  aggregate  in  excess  of
              E1,000,000;

         (g)  as  soon as  practicable  after  becoming  aware  thereof,  of any
              Potential  Event of Default  together  with  details of any action
              being taken in connection therewith;

         (h)  within five (5) Business  Days of receipt  thereof,  of any notice
              from any Governmental Authority which is reasonably likely to give
              rise to the revocation,  termination,  material adverse amendment,
              suspension or withdrawal of any material authorisation  (including

                                       43
<PAGE>

              any  Environmental  Approval) which relates to the Equipment or is
              necessary  for  the  possession,  installation,  location,  use or
              operation of the Equipment; and

         (i)  as soon as practicable after becoming aware thereof, of it ceasing
              to be a wholly owned Subsidiary of Viatel, Inc.

11.3     SUPPLY OF INFORMATION

         The Lessee will supply to the Lessor:

         (a)  as soon as  reasonably  practicable  and in any event  within  the
              earlier of (i) 270 days of the end of its financial  year and (ii)
              any relevant  statutorily required time period from the end of its
              financial year, the annual audited report and financial statements
              of the Lessee for that financial year;

         (b)  as soon as the same are available,  unaudited  quarterly  internal
              financial  statements  or  management  accounts in  whatever  form
              available and statements of income and retained  earnings for such
              year; and

         (c)  promptly, such further information in the possession or control of
              the Lessee regarding its financial condition and operations or the
              Equipment as the Lessor may reasonably request.

11.4     TAXATION AUTHORITIES

         The Lessee will as soon as reasonably  practicable  after the Lessee or
         the Lessor  has  received  a request  from any  Inland  Revenue or H.M.
         Customs  &  Excise  (or  any  equivalent  body in a  Relevant  Country)
         official,  inform the Lessor of that  request (if made to the  Lessee),
         furnish to that official such  information  as may be in the possession
         or control of the Lessee and as may be required by that  official to be
         so furnished about the Equipment or the leasing of the Equipment or the
         use to  which  the  same is  being  or has been put and will as soon as
         reasonably  practicable  after  receipt  of a request  from the  Lessor
         furnish to the Lessor such  information and documents in the possession
         or control of the  Lessee  and which the  Lessor  requires  in order to
         enable the  Lessor to  respond to a request of the Lessor  from such an
         official.

11.5     TAXES AND OTHER OUTGOINGS

         The Lessee shall  promptly pay (and if requested by the Lessor  produce
         to the Lessor evidence of the payment thereof):

         (a)  all licence and registration fees, Taxes and other amounts payable
              in respect of the Equipment or its possession or operation; and

         (b)  all  rent,  fees,  charges,  Taxes and other  amounts  payable  in
              respect of any premises  where the  Equipment is from time to time
              located  whether such  payments are to be made under a Collocation
              Agreement or otherwise,

         except to the extent that the payment is being  contested in good faith
         by appropriate proceedings,  in respect of which adequate reserves have
         been provided and for which an appropriate bond has been provided or in
         respect of which execution has been stayed.

                                       44
<PAGE>

11.6     MOVEABLE PROPERTY

(a)      The Lessor and the Lessee agrees that it is their  intention that title
         to the Equipment (other than Services) or any part of it shall not pass
         to the  Lessee by reason of the same being  attached  or affixed by any
         means  whatsoever  to, or  resting  by its own  weight  on, any land or
         buildings  but shall  remain the personal  property of the Lessor.  The
         Lessee  waives any right which it may at any time have in the Equipment
         (other  than  Services)  or any part of it as a result  of  having  any
         interest in any such land or buildings.

(b)      The Lessee  shall take in each  Relevant  Country all such steps as the
         Lessor  is  advised  by legal  counsel  in that  Relevant  Country  are
         necessary or recommended to prevent,  to the extent  possible under the
         Applicable Law of each Relevant  Country in which the Equipment  (other
         than Services) is or is to be located,  any person,  including  without
         limitation the Lessee's landlords and such landlords' mortgagees,  from
         acquiring, having or retaining any rights in or to the Equipment (other
         than  Services)  by reason  of its being  affixed  or  attached  to, or
         otherwise  located on, real  property  including,  without  limitation,
         effecting any and all registrations  with all Governmental  Authorities
         it is  necessary  to  effect  in each  Relevant  Country  in which  the
         Equipment (other than Services) is or is to be located.  In particular,
         but without  limitation on the  generality  of the preceding  sentence,
         where the Lessor has received advice from legal counsel in the Relevant
         Country  that it is  necessary  or  recommended  so to do in  order  to
         protect the Lessor's  interest in the Equipment  (other than  Services)
         the Lessee will ensure that all persons  having any interest  from time
         to time in any such land or buildings in that Relevant Country in which
         the Equipment  (other than Services) may from time to time be installed
         (whether such interest arises as landlord, tenant, lessee, mortgagee or
         otherwise) shall prior to the installation of the Equipment (other than
         Services),  or if later  upon  acquisition  of such  interest,  receive
         written  notice of the  Lessor's  ownership  interest in the  Equipment
         (other than  Services) and will obtain from such persons and deliver to
         the Lessor  written  waivers in such form as the Lessor may  reasonably
         require of any rights  which they may have or acquire in the  Equipment
         (other than Services).

11.7     PROCURING OF GUARANTEE

         The  Lessee  undertakes  with the Lessor  that if a holding  company is
         established  to own the Lessee  and/or  Viatel,  Inc.'s other  European
         Subsidiaries,  the Lessee  shall  procure that  promptly  upon the same
         being  established  (and in any event  within 15 Business  Days),  such
         holding  company  enters into a guarantee and indemnity with the Lessor
         on a joint and several basis with Viatel, Inc. and in substantially the
         same form  (mutatis  mutandis)  as the Lease  Guarantee in place at the
         date of this Master Agreement.

12.      OPERATIONAL UNDERTAKINGS

12.1     DURATION AND APPLICATION

         The undertakings in this Clause 12:

         (a)  remain  in force  from the date of this  Master  Agreement  until,
              following  the end of the Initial  Term,  the Equipment is sold or
              otherwise disposed of or returned to the Lessor under the terms of
              this Master Agreement; and

         (b)  apply save to the extent, in any particular case, the Lessor gives
              to the Lessee its prior written consent to the contrary.

                                       45
<PAGE>

12.2     LOCATION

(a)      The Equipment  shall be located in a Tier 1 Country or a Tier 2 Country
         and at the address  specified in the applicable  Lease Schedule or such
         other  location as the Lessor may agree in writing (such  agreement not
         to be unreasonably withheld, delayed or conditioned) and may be removed
         therefrom to another location only either:

         (i)  if the Lessor confirms to the Lessee that it is satisfied that the
              ownership  interest in, and repossession  rights in respect of the
              relevant  Equipment are not adversely  affected by the location of
              the Equipment in such other location; or

         (ii) for the  purpose of repairs,  modification  or  maintenance  which
              cannot be  effected  while the item  remains  on or at the land or
              building  in  question   but  upon   completion   of  the  repair,
              modification or maintenance the item will be promptly  returned to
              and (as  applicable)  re-installed  at the land or  building  from
              which it was removed.

(b)      The Lessee  may  remove an item of  Equipment  in  connection  with the
         exercise by the Seller of its  right/obligation  pursuant to the Nortel
         Supply  Contract  to  replace  any  part  of  the  Equipment  which  is
         defective.

(c)      The Lessee shall procure that no  Transaction  Document,  including any
         Permitted  Sub-Lease,  shall be  deposited  with a state  or  judiciary
         office in [Redacted].

12.3     POSSESSION AND SUB-LEASING

(a)      The  Lessee  will keep the  Equipment  leased to it  pursuant  to Lease
         Schedules  to which it is a party in its own  physical  possession  and
         control and will not (save as provided  in Clause  12.3(b))  sub-lease,
         lend or otherwise part with possession of the Equipment  except for the
         purpose of repairs,  modifications  or  maintenance  as provided for in
         Clause 12.2(a)(ii).

(b)      As long as no Potential Event of Default has occurred and is continuing
         the Lessee may sublease the Equipment without the prior written consent
         of the Lessor to any  Permitted  Sub-Lessee,  provided  always that any
         such sub-lease shall comply with the following terms and conditions:

         (i)   the subject matter of any sub-lease  shall be all (and not a part
               only) of the  Equipment  which is the  subject  matter of a Lease
               Schedule;

         (ii)  the  Permitted  Sub-Lessee  shall  have  its  principal  place of
               business in the Relevant Country in which the relevant  Equipment
               is or is to be installed;

         (iii) it shall provide that it is subject and  subordinate  to both the
               Lessor's and the Lessor Risk Parties' rights,  title and interest
               in and to the Equipment under this Master Agreement and the other
               Transaction Documents;

         (iv)  it will not release the Lessee from any of its obligations  under
               this Master Agreement or any of the other Transaction Documents;

         (v)   it will  enable  the Lessor to  receive  prior to such  sub-lease
               being entered into a  satisfactory  legal opinion from counsel in
               the appropriate Relevant Country stating that such sub-lease will
               not  adversely  affect the Lessor's  interests  and rights in the
               Equipment  and this Master  Agreement  and the other  Transaction
               Documents;

                                       46
<PAGE>

         (vi)  it  shall  require  the  Permitted  Sub-Lessee  to  maintain  the
               Equipment on the same terms as those set out in this Clause 12;

         (vii) notwithstanding any such sub-lease, the Insurances in relation to
               the  relevant  Equipment to which the Lessee is obliged to effect
               pursuant to Clause 14 (Insurances) shall remain in full force and
               effect;

         (viii)it will not (including any extensions  thereto) extend beyond the
               Initial Term for the relevant Lease Schedule; and

         (ix)  it  will  not  contain   provisions   permitting   any  Permitted
               Sub-Lessees  to  sub-sub-lease,   lend  or  otherwise  part  with
               possession  of the Equipment and each  Permitted  Sub-Lease  will
               expressly prohibit sub-sub-leasing by the Permitted Sub-Lessee.

(c)      The Lessee undertakes that in arranging the sub-leasing of any
         Equipment it will:

         (i)   at all times  protect and preserve the Lessor's  interests in the
               Equipment including, without limitation (at no cost to the Lessor
               and as conditions  precedent to the  sub-leasing  of the relevant
               Equipment pursuant to the relevant Permitted Sub-lease):

               (A)  entering  into with the  Lessor  the  Sub-Lease  Assignment,
                    serving notice of such assignment on the relevant  Permitted
                    Sub-Lessee   and  procuring  an   acknowledgement   of  such
                    assignment from the Permitted Sub-Lessee;

               (B)  procuring   a  legal   opinion,   in  form   and   substance
                    satisfactory  to the Lessor,  from counsel in each  Relevant
                    Country in which the  Equipment  the  subject of a Permitted
                    Sub-Lease is located stating that (to the extent the laws of
                    that  Relevant   Country  are  applicable)  the  Transaction
                    Documents  and  the  interests  (whether  as  to  ownership,
                    repossession  or  security)  of the  Lessor  and  any of the
                    Lessor Risk Parties in the  Equipment,  will  continue to be
                    enforceable  in  accordance  with their terms  after  giving
                    effect to such Permitted Sub-Lease; and

               (C)  procuring  or, as the case may be,  entering  into all other
                    documents  as the Lessor  shall be  advised  by counsel  are
                    reasonably  necessary  or  desirable in order to protect the
                    Lessor's  interest  under this Master  Agreement  and in the
                    Equipment;

         (ii)  be  responsible  for and indemnify the Lessor for all  reasonable
               costs and expenses  (including legal fees) incurred by the Lessor
               and  any of the  Lessor  Risk  Parties  in  connection  with  any
               Permitted Sub-Lease;

         (iii) remain  liable to pay and  perform all of its  obligations  under
               this  Master  Agreement  and  the  other  Transaction   Documents
               notwithstanding any such Permitted Sub-Lease.  The Lessee accepts
               that under no circumstances  will the Lessee be released from any
               of its obligations  under this Master  Agreement as a consequence
               of a Permitted Sub-Lease to a Permitted Sub-Lessee and the Lessee
               fully warrants the  performance  by all Permitted  Sub-Lessees of
               all obligations contained in the Permitted Sub-Leases referred to
               in this Clause 12.3.  The acceptance by the Lessor of a Permitted
               Sub-Lease  pursuant to this Clause 12.3 shall not be construed as
               a waiver to any right,  title or claim the Lessor has against the
               Lessee or any Permitted sub-Lessee under this Master Agreement.

(d)      The Lessee will provide to the Lessor copies of any Permitted Sub-Lease
         and other ancillary  documentation  (i) no later than five (5) Business
         Days prior to the scheduled  execution date of such Permitted Sub-Lease

                                       47
<PAGE>

         and  thereafter  (ii) executed  copies of the  Permitted  Sub-Lease and
         other ancillary  documentation  within ten (10) Business Days after the
         date of execution thereof.

(e)      Any  Permitted  Sub-Lessee  may transfer all (but not some only) of its
         rights  and  obligations  under a  Permitted  Sub-Lease  to a member of
         Viatel, Inc.'s Group provided that:

         (i)   the Lessee  would have been  entitled  to enter into a  Permitted
               Sub-Lease with the relevant  transferee  pursuant to the terms of
               this Clause 12.3; and

         (ii)  the  Lessee  notifies  the Lessor of such  transfer  at least two
               Business  Days prior to it becoming  effective,  serves notice of
               the Sub-Lease  Assignment on the relevant transferee and procures
               that the transferee acknowledges such assignment, such notice and
               acknowledgement  to be in the  forms  annexed  to  the  Sub-Lease
               Assignment, mutatis mutandis.

12.4     OPERATION

(a)      The Lessee  will use the  Equipment,  or ensure that the  Equipment  is
         used,  (i) in a skilful  and  proper  manner,  in  accordance  with any
         operating instructions of the manufacturer or supplier and generally in
         accordance with good industry standards; and (ii) only by competent and
         properly trained personnel.

(b)      The Lessee will use the Equipment solely in the conduct of its business
         and will not use the  Equipment  or allow it to be used in any  illegal
         trade or business or for any purpose or in any place  prohibited  by or
         prejudicial to the terms, or outside the cover, of the Insurances.

(c)      The Lessee will not at any time represent the Lessor as being in any
         way connected or associated with the operation of the Equipment.

12.5     COMPLIANCE WITH LAW

         The Lessee will comply with all Applicable Laws, regulation,  codes and
         standards  from time to time  governing the  Equipment  (other than the
         Services),  its use, possession and operation except to the extent that
         non-compliance  with any  Applicable  Law  would  not,  or would not be
         likely to, have a material adverse effect on:

         (i)   the Equipment;

         (ii)  the Lessor's rights under the Transaction Documents;

         (iii) the ability of the Lessee, the Guarantors or any of the Permitted
               Sub-Lessees  to perform their  respective  obligations  under the
               Transaction Documents;

         (iv)  the Lessor's  rights,  title and interest in and to the Equipment
               (other than the Services); or

         (v)      the ability of the Lessor or any other member of the Parent
                  Bank's Group to carry on its business in the Relevant Country.

12.6     AUTHORISATIONS

         The  Lessee  will  ensure  that  all   authorisations   (including  all
         Environmental  Approvals) governing,  or necessary or required for, the
         use,  possession  and operation of the Equipment  (other than Services)

                                       48
<PAGE>

         are  obtained  and  maintained  and  will  ensure  compliance  with all
         conditions  attaching thereto,  except where failure so to comply would
         not have an adverse effect on the Lessor's  rights,  title and interest
         in the Equipment (other than Services) or on the ability of the Lessee,
         the  Guarantors or any of the Permitted  Sub-Lessees  to carry on their
         respective business in the Relevant Country.

12.7     SAFETY

         The Lessee  will be  responsible  for all  aspects of the safety of the
         Equipment  (other  than  Services)  including  its  safe  installation,
         condition,  operation and storage.  The Lessee will take all reasonable
         steps having  regard to the nature of its business to ensure the safety
         of all  persons  and  property  from any losses or damage  arising as a
         result of the possession, use or operation of the Equipment (other than
         Services)  or  otherwise  connected  with  the  Equipment  (other  than
         Services).  In particular the Lessee will comply with the  requirements
         of, and recommendations made under, the Health and Safety at Work etc.,
         Act 1974 (or any equivalent  legislation  in any Relevant  Country) and
         any  regulations  made  thereunder  (and whether such  requirements  or
         recommendations  are  applicable to the Lessee or the Lessor)  ("SAFETY
         LAW")  except to the  extent  that  non-compliance  with any Safety Law
         would not, or would not be likely to, have an adverse effect on:

         (i)   the Equipment (other than Services);

         (ii)  the Lessor's rights under the Transaction Documents;

         (iii) the ability of the Lessee, the Guarantors or any of the Permitted
               Sub-Lessees  to perform their  respective  obligations  under the
               Transaction Documents;

         (iv)  the Lessor's rights,  title and interest in and to the Equipment;
               or

         (v)   the  ability  of the  Lessor  or any other  member of the  Parent
               Bank's Group to carry on its business in the Relevant Country.

12.8     MAINTENANCE

(a)      The Lessee will  ensure that the  Equipment  (other than  Services)  is
         maintained, serviced, repaired, overhauled and tested:

         (i)   in  conformity   with  all  Applicable   Laws,   regulations  and
               standards;

         (ii)  so as to keep each item of Equipment  (other than Services) in as
               good  operating  condition  (normal wear and tear excepted) as on
               the Commencement Date for that item of Equipment;

         (iii) in accordance with any recommended  maintenance  programme of the
               manufacturer   or  supplier  and  as  may  be  required  for  any
               continuing warranty or guarantee; and

         (iv)  in  accordance  with  prudent  industry  standards  and their own
               standard  practices for similar equipment owned or leased by them
               or any of them.

(b)      The  Lessee  will  maintain  or cause to be  maintained  the  Technical
         Records  in  conformity   with  all  laws  and   regulations   and  the
         requirements  of any  Governmental  Authority  governing  the Equipment

                                       49
<PAGE>

         (other than Services) and good industry  standards and so as to keep an
         accurate and complete  record of all work  undertaken  on the Equipment
         (other  than  Services)   (whether  in  compliance  with  the  Lessee's
         obligations  under  Clause  12.8(a) or not) and all monies  expended in
         connection with that work. As soon as reasonably  practicable following
         receipt of a request the Lessee will  provide  copies of the  Technical
         Records to the Lessor.

12.9     ENVIRONMENTAL

         The Lessee will comply or ensure  compliance  with  Environmental  Laws
         applicable to the Equipment  (other than Services)  and/or any activity
         on or in any  land or  building  in which  the  Equipment  (other  than
         Services) or any item thereof may from time to time be installed (where
         Viatel, Inc. is responsible for the operation and/or management of that
         land or  building  whether as owner,  as  landlord,  as lessee or other
         occupier or otherwise  howsoever)  and shall  obtain,  maintain in full
         force and effect and comply  with any and all  Environmental  Approvals
         except to the extent that  non-compliance  with any  Environmental  Law
         would not, or would not be likely to, have an adverse effect on:

         (i)   the Equipment (other than Services);

         (ii)  the Lessor's rights under the Transaction Documents;

         (iii) the ability of the Lessee, the Guarantors or any of the Permitted
               Sub-Lessees  to perform their  respective  obligations  under the
               Transaction Documents;

         (iv)  the Lessor's  rights,  title and interest in and to the Equipment
               (other than Services); or

         (v)   the  ability  of the  Lessor  or any other  member of the  Parent
               Bank's Group to carry on its business in the Relevant Country.

12.10    REPLACEMENT OF PARTS

         The Lessee will promptly  replace in accordance with standard  industry
         customs and  practices  all parts of any item of the  Equipment  (other
         than  Services)  which may from  time to time  become  worn out,  lost,
         stolen,  confiscated,  seized,  destroyed,  damaged  beyond  repair  or
         rendered unfit for use for any reason  whatsoever  other than any items
         of the Equipment (other than Services) the subject of an Event of Loss.
         Parts may only be removed  from any item of the  Equipment  (other than
         Services)  for  this  purpose  or  for  the  purpose  of   alterations,
         additions,  modifications or maintenance under the terms of this Master
         Agreement.  Any  replacement  part will be of at least equal  remaining
         useful life and utility to the removed part and  reasonably  considered
         suitable by the Lessee.

12.11    REQUIRED MODIFICATIONS ETC.

         The Lessee will make all  alterations,  additions and  modifications to
         any item of the Equipment  (other than  Services) that may from time to
         time be required to comply with (i) all Applicable  Laws governing that
         Equipment (other than Services),  its possession,  use,  maintenance or
         operation;  and (ii) the  requirements  for any condition,  warranty or
         guarantee from the manufacturer or supplier.

                                       50
<PAGE>

12.12    OTHER MODIFICATIONS ETC.

(a)      The Lessee  may at its  discretion  make any  alteration,  addition  or
         modification  to any item of the Equipment  (other than Services) which
         it  reasonably  considers  desirable  for the proper  operation of that
         Equipment (other than Services) or the Lessee's  business so long as no
         such  alteration,  addition or  modification  reduces the  saleability,
         value or utility of that  Equipment  (other than  Services) or prevents
         that Equipment  (other than Services) from being operated in a safe and
         proper  manner or results in the Lessee being unable to comply with its
         obligations  under  this  Master  Agreement  and the other  Transaction
         Documents.

(b)      Save as  provided in Clause  12.11  (Required  modifications  etc.) and
         Clause 12.12(a), the Lessee may not make any alterations,  additions or
         modifications to any item of the Equipment (other than Services).

12.13    TITLE TO REPLACEMENTS ETC.

(a)      Subject to Clause 12.13(b), the Lessee will ensure that all replacement
         parts under Clause 12.10  (Replacement  of parts) and all parts forming
         part of any  alteration,  addition or  modification  under Clause 12.11
         (Required   modifications   etc.)  or   under   Clause   12.12   (Other
         modifications  etc.) will  either,  prior to  becoming  attached  to or
         incorporated  into any item of the  Equipment  (other  than  Services),
         become the property of the Lessor or be such that,  upon  attachment or
         incorporation,  title to them will,  without  further act,  vest in the
         Lessor,  in each  case,  free of all  Security  Interests  (other  than
         Permitted  Security  Interests) and claims of third  parties.  All such
         parts  will,  upon  attachment  or  incorporation,  become part of that
         Equipment (other than Services) and subject to the terms of this Master
         Agreement and the other Transaction Documents for all purposes.

(b)      Clause 12.13(a) shall not apply to additions  ("DETACHABLE  ADDITIONS")
         to any item of the Equipment  (other than Services)  under Clause 12.12
         (Other  modifications  etc.) which do not form an integral  part of the
         Equipment (other than Services), which can be removed without damage to
         that  Equipment  (other than  Services)  and which are not  required to
         maintain the  saleability,  value or utility of that  Equipment  (other
         than  Services) or so that that  Equipment  (other than  Services)  can
         continue to operate in a safe and proper  manner.  Title to  Detachable
         Additions  will  not vest in the  Lessor  and  until  the sale or other
         disposal of that  Equipment or until its return to the Lessor under the
         terms of this  Master  Agreement  the Lessee may detach all  Detachable
         Additions  but,  to the extent not so detached at the time of any sale,
         disposal  or return,  title will pass to the Lessor and the Lessor will
         not be required  to  compensate  the Lessee  therefor or account to the
         Lessee for any sales proceeds received in respect thereof.

12.14    NOTIFICATION

         As soon as reasonably  practicable following the making of any material
         alteration,  modification  or  addition  to any  item of the  Equipment
         (other than  Services) the Lessee will notify the Lessor in writing and
         provide  reasonable  details  thereof  including,  in  the  case  of  a
         Detachable Addition,  sufficient information so as to enable the Lessor
         to  identify  the  Detachable  Addition  in  question  and  where it is
         attached.

12.15    NON-INSTALLED ITEMS

(a)      The Lessee  will  ensure  that any item of the  Equipment  (other  than
         Services)  which  is not at any time  installed  in a  network  will be
         properly and safely stored.

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<PAGE>

(b)      All items of Equipment (other than Services) at any time removed from a
         network will remain the property of the Lessor no matter where  located
         until such time as such items  shall be  replaced  by items  which have
         been  incorporated  or  installed in or attached to a network and which
         meet the requirements for replacement items specified in this Clause 12
         and which have become the property of the Lessor.

13.      INSPECTION OF THE EQUIPMENT

(a)      At any reasonable time and upon reasonable notice (having regard to any
         terms and  conditions  of access  imposed on the Lessee or, as the case
         may be, the relevant  Permitted  Sub-Lessee by the landlord or licensor
         of any  facility  where the  Equipment  is  located)  the Lessor or its
         authorised  representative  may inspect or survey the Equipment  (other
         than Services) and the Technical Records.  For this purpose, the Lessee
         will  provide,  free of  charge,  all  facilities  reasonably  required
         therefor  and shall use all  reasonable  endeavours  to ensure that the
         Lessor and its authorised  representatives have access to the Equipment
         (other than Services) and the Technical  Records to effect  inspections
         and surveys in accordance with this Clause 13.

(b)      The Lessor will have no duty to make any such  inspection  and will not
         incur any  liability  or  obligation  by reason of not  making any such
         inspection.  The Lessor shall avoid any unreasonable disturbance of the
         operations of the Lessee and/or any Permitted  Sub-Lessees.  The Lessor
         or its  authorised  agents may, with regard to all of the Equipment and
         at the cost of the Lessee:

         (i)   once per year, make an inspection of the whole or any part of the
               Equipment (other than Services);

         (ii)  at any time thereafter make further  inspection of that Equipment
               (other than  Services)  during that year  provided that the costs
               and  expenses of those  subsequent  inspections  shall be for the
               account of the Lessor unless it discovers  that the Lessee is not
               in material compliance with its respective  obligations under the
               Transaction  Documents or an Event of Default has occurred and is
               subsisting in which case the cost shall be for the account of the
               Lessee; and

         (iii) providing  an Event of Default has  occurred  and is  subsisting,
               conduct any number of inspections of the whole or any part of the
               Equipment (other than Services).

14.      INSURANCE

14.1     SCOPE OF INSURANCES

         The Lessee will ensure that insurance is effected and maintained:

         (a)  of the  Equipment  against "all risks" of loss of or damage to the
              Equipment;

         (b)  against  liability  to third  parties  (including  any claim by an
              employee,  agent or contractor of the Lessee against an Additional
              Insured)  for  death,  injury or  disease to persons or loss of or
              damage to property  caused by or arising  out of or in  connection
              with the Equipment including its design,  construction,  operation
              or condition; and

         (c)  against  such  further   risks  as  may  be  required  by  law  or
              regulation.

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<PAGE>

14.2     DURATION OF INSURANCES

(a)      Subject to Clause  14.2(b),  the Lessee's  undertakings  in Clause 14.1
         (Scope of  insurances)  will  remain in force in  respect of an item of
         Equipment  from  the  Commencement  Date  for  that  item of  Equipment
         throughout  the Initial Term until,  following the  termination  of the
         leasing of the Equipment,  title to the Equipment  passes to the Lessee
         or the  Equipment  is sold or otherwise  disposed of (in each case,  in
         accordance with the terms of this Master  Agreement) or, in the case of
         an Event of  Default  returned  to the  Lessor  under the terms of this
         Master Agreement.

(b)      Without prejudice to Clause 14.2(a), the Lessee's undertaking in Clause
         14.1(b) (Scope of  insurances)  will continue for a period of two years
         following the end of the Initial Term for any reason.

14.3     TERMS OF LOSS OR DAMAGE INSURANCES

(a)      The insurance  required to be effected  under Clause  14.1(a) (Scope of
         insurances) will be in an amount at least equal to the greater of:

         (i)   115 per cent.  of the Capital  Outstanding  on the  Initial  Term
               Start  Date  or,  as the  case may be,  at the  beginning  of the
               relevant subsequent policy period; and

         (ii)  the replacement value of the Equipment from time to time.

(b)      Each policy of insurance  effected in  compliance  with Clause  14.1(a)
         (Scope of insurances) will:

         (i)   insure  the  Equipment  on an agreed  value  basis  such that the
               insurers do not have the right to replace the Equipment;

         (ii)  contain a loss payee clause  substantially in the form set out in
               Schedule 4 (Loss payee clause); and

         (iii) not be subject to any deductible  which would result in any claim
               under the insurances required to be effected under Clause 14.1(a)
               (Scope of insurances) being reduced in aggregate by more than ten
               thousand US Dollars (US$10,000).

14.4     TERMS OF THIRD PARTY LIABILITY INSURANCES

(a)      The insurance  required to be effected  under Clause  14.1(b) (Scope of
         insurances)  will  be for,  subject  to  Clause  14.10  (Protection  of
         Additional  Assureds),  a combined single limit of not less than twenty
         five million US Dollars  (US$25,000,000)  for any one occurrence and in
         the aggregate in any year in respect of product liability.

(b)      Each policy of insurance  effected in  compliance  with Clause  14.1(b)
         (Scope of insurances) will:

         (i)  contain a "cross  liabilities  clause"  which  provides  that each
              Additional  Assured will be entitled to be  indemnified in respect
              of claims made by any other assured; and

         (ii) have no deductible.

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<PAGE>

14.5     PROVISIONS COMMON TO INSURANCES

         Each  policy   effected  in  compliance  with  Clause  14.1  (Scope  of
         insurances) will:

         (a)  name  the  Lessor  and,  in the  case of any  policy  effected  in
              compliance with Clause 14.1(b) (Scope of insurances),  each member
              of the Lessor Group,  each Lessor Risk Party (excluding the Seller
              in its capacity as the supplier of the Equipment  under the Nortel
              Supply Contract) and each member of each Lessor Risk Party's Group
              and their respective successors, assigns, shareholders,  officers,
              directors,  employees, secondees and agents as additional assureds
              for their respective rights and interests;

         (b)  provide  that the  insurance  is primary  and without any right of
              contribution  from any other  insurance  carried by any Additional
              Assured;

         (c)  provide that the insurers waive any rights of:

              (i)  recourse to and subrogation against the Additional  Assureds;
                   and

              (ii) set off and  counterclaim  other  than in  respect  of unpaid
                   premiums directly attributable to the Equipment;

         (d)  provide that the Additional  Assureds have no  responsibility  for
              premiums;

         (e)  provide that the cover  provided to the  Additional  Assureds will
              not be  invalidated  by, and will insure each  Additional  Assured
              regardless  of, any act or omission of any person  (including  any
              misrepresentation, non-disclosure, want of due diligence or breach
              or violation of any warranty,  declaration or condition  contained
              in the policy);

         (f)  not  contain  any   provision   for   cancellation   or  automatic
              termination  of  cover  (but  this  will  not  prohibit  insurers'
              entitlement to lapse cover for non-payment of premium);

         (g)  provide  that the cover  provided to the  Additional  Assureds may
              only be cancelled or materially altered in a manner adverse to any
              of the Additional  Assureds or allowed to lapse for non-payment of
              premium by the  insurers  giving not less than 30 days' (but seven
              days or such period as may be customarily  available in respect of
              war risks) notice in writing to the Lessor;

         (h)  contain a  "severability  of interest  clause" which provides that
              the  policy  will  operate  in all  respects,  except the limit of
              liability or sum assured,  as if a separate policy had been issued
              to  each  party  insured  thereunder   (including  the  Additional
              Assureds); and

         (i)  contain  only  such  exclusions  from  cover as may be  usual  and
              customary  in the  insurance  of  equipment of the same or similar
              type to the Equipment as used in the same or similar businesses to
              that of the Lessee.

14.6     GENERAL PROVISIONS

         Each  policy   effected  in  compliance  with  Clause  14.1  (Scope  of
         insurances) will be:

         (a)  placed through reputable brokers of international standing;

                                       54
<PAGE>

         (b)  placed with insurers approved by the Lessor,  such approval not to
              be unreasonably withheld; and

         (c)  in a form and contain  such  provisions  as are  customary  in the
              relevant  insurance  market and not contain  any term,  condition,
              limitation  or  exception   which  has  the  effect  of  limiting,
              restricting  or modifying,  or is  inconsistent  with,  any of the
              requirements of this Clause 14.

14.7     EVIDENCE OF INSURANCES

         In respect of all the  insurances  required to be  effected  under this
         Clause  14 the  Lessee  will  ensure  that in  respect  of each item of
         Equipment:

         (a)  on or before the Commencement Date for that item of Equipment, the
              Lessor  is  provided  with  certificates  of  insurance  from  the
              insurers or insurance brokers in a form satisfactory to the Lessor
              together with copies of the policy or policies and evidence of the
              payment of premiums;

         (b)  on the occasion of each renewal,  prior to the renewal  date,  the
              Lessor is provided with  confirmation of renewal from the insurers
              or insurance brokers in a form satisfactory to the Lessor together
              with details of any changes to the policy or policies and evidence
              of the payment of premiums;

         (c)  there is in force at all times in favour of the Lessor  letters of
              undertaking  from the insurers or  insurance  brokers for the time
              being in a form satisfactory to the Lessor;

         (d)  insurers are notified  that the  Equipment is leased by the Lessor
              to the Lessee;

         (e)  if so requested,  such information is provided to the Lessor as to
              the Insurances as the Lessor may reasonably request; and

         (f)  if  necessary  in  connection  with the making of any claim by any
              Additional  Assured,  the  originals of the policy or policies and
              related  documentation  are made available to the Lessor  promptly
              upon request.

14.8     FAILURE TO COMPLY

         If at any  time  the  Lessee  shall  fail  to  comply  with  any of the
         provisions of Clauses 14.1 (Scope of  insurances)  to 14.7 (Evidence of
         insurances)  inclusive  then  the  Lessor  shall be  entitled  (but not
         bound), after consultation with any brokers through whom the insurances
         were effected (and at the Lessee's  expense),  and without prejudice to
         the  Lessor's  right to treat such failure  (subject to any  applicable
         grace period) as an Event of Default:

         (i)  to procure such insurance  under the provisions of this Clause 14;
              and

         (ii) while such failure continues, to require that the Equipment is not
              used.

14.9     PRESERVATION OF INSURANCES

         The Lessee will not:

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         (a)  do or omit to do anything which is contrary to any of the terms of
              the  Insurances  required to be  effected  under this Clause 14 or
              which might entitle the insurers to cancel any policy or reduce or
              avoid any claim or liability under any policy; or

         (b)  change or modify any of the  Insurances  such that any interest of
              any Additional Assured would be materially adversely affected; or

         (c)  effect any other  insurance if a claim under such insurance  would
              result in the operation of any  contribution  clause in any of the
              policies of  insurance  required to be effected  under this Clause
              14.

14.10    PROTECTION OF ADDITIONAL ASSUREDS

(a)      If at any time due to  changes  in law or  regulation  or in  insurance
         market practice the Lessor's  insurance  adviser  certifies that in its
         opinion the insurances  required to be effected under this Clause 14 do
         not  adequately  cover the interests of the  Additional  Assureds,  the
         Lessor may notify the Lessee and the Lessee and its  insurance  adviser
         will consult with the Lessor and its  insurance  adviser with a view to
         agreeing  and  implementing  changes  to such  insurances  so that such
         interests are adequately  covered to the  satisfaction  of the Lessor's
         insurance adviser.

(b)      If within 45 days of the Lessor's notification under Clause 14.10(a) no
         changes have been  implemented to the insurances to the satisfaction of
         the Lessor's  insurance  adviser or if at any time the Lessee is unable
         due to changes in insurance  market  practice to  implement  any of the
         requirements  of Clauses 14.1 (Scope of  insurances)  to 14.6  (General
         provisions),  the Lessor  may,  at the  Lessee's  expense  and  without
         prejudice to its rights under Clause 14.8  (Failure to comply),  effect
         and maintain a Lessor's interest policy or policies with such insurers,
         through  such  brokers  and on such terms and at such  premiums  as the
         Lessor may (in  consultation  with its  insurance  adviser)  reasonably
         consider fit to ensure that the  interests of the  Additional  Assureds
         are adequately protected.

14.11    MEANING OF EQUIPMENT

         For the purposes of this Clause 14,  references to the Equipment or any
         part thereof exclude the Services or any of them.

15.      EVENT OF LOSS

15.1     EVENT OF LOSS OF THE EQUIPMENT

         "EVENT OF LOSS" in respect of all the Equipment means:

         (a)  any of the following occurring to the Equipment, taken as a whole:

              (i)   its actual,  constructive,  arranged,  agreed or compromised
                    total loss  (including  any damage to it which results in an
                    insurance settlement on the basis of total loss);

              (ii)  its  destruction,  damage  beyond  repair or being  rendered
                    permanently unfit for normal use for any reason;

              (iii) its Compulsory Acquisition;

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              (iv)  its  requisition  for use or hire for a period  exceeding 60
                    days; or

              (v)   its theft or  disappearance  resulting in loss of use by the
                    Lessee or any  Permitted  Sub-Lessee  of the Equipment for a
                    period exceeding 60 days in each case; and

         (b)  any of the events set out in Clause 15.1(a) occurring to part only
              of the  Equipment  where the  Acquisition  Cost  determined by the
              Lessor as  attributable  to the remainder of the Equipment is less
              than 10 per cent. of the Acquisition Cost of all the Equipment.

15.2     EVENT OF LOSS OF PART OF THE EQUIPMENT

         "EVENT OF LOSS" in respect of part only of the Equipment means, subject
         to Clause  15.1(b),  any of the events set out in Clause 15.1(a) (Event
         of Loss of all the  Equipment)  occurring to one or more discrete items
         of the Equipment.

15.3     DATE OF OCCURRENCE OF EVENT OF LOSS

         The date of  occurrence of an Event of Loss under Clause 15.1 (Event of
         Loss  of all  the  Equipment)  or  15.2  (Event  of Loss of part of the
         Equipment)  will be the date on which  the  relevant  event  set out in
         paragraphs  (i) to (v) of  Clause  15.1(a)  (Event  of  Loss of all the
         Equipment) occurs.

15.4     PROCEDURE AND PAYMENTS FOLLOWING AN EVENT OF LOSS

(a)      If any of the  Equipment  the  subject of a Lease  Schedule  suffers an
         Event of Loss as  defined  in Clause  15.1(a)  or 15.2 above the Lessee
         shall either:

         (i)  before the  Settlement  Date replace that Equipment with equipment
              of the same make, value and utility and procure, as the Lessor may
              require, that:

              (A)   title to that Equipment passes to the Lessor, and

              (B)   that  Equipment  becomes  subject to the  provisions  of the
                    Transaction Documents; or

         (ii) on the Settlement Date pending replacement of that Equipment,  pay
              the Capital Outstanding relating to that Equipment plus:

              (A)   any unpaid Rental (to the extent not included in the Capital
                    Outstanding)  together  with any and all  other  Outstanding
                    Amounts due and payable on or before the Settlement Date;

              (B)   any  and all  accrued  but  unpaid  finance  charges  on the
                    Capital  Outstanding  calculated  on a daily basis at a rate
                    per annum equal to the applicable Acceptance Rate; and

              (C)   the Make Whole Amount,

              into an escrow  account  and if within one year of the date of the
              Event of Loss that  Equipment has not been replaced with Equipment
              of the same make,  value and utility,  title has not passed to the

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              Lessor and the  Equipment is not subject to the  provisions of the
              Transaction Documents,  then the Lessor may apply the money in the
              escrow account  (including accrued interest) towards prepayment of
              the  Capital  Outstanding  in respect of that  Equipment  together
              with:

               (1)  any unpaid Rental (to the extent not included in the Capital
                    Outstanding) and any and all other  Outstanding  Amounts due
                    and payable on or prior to the date of payment;

               (2)  any  and all  accrued  but  unpaid  finance  charges  on the
                    Capital Outstanding on that date calculated on a daily basis
                    at a rate per annum equal to the applicable Acceptance Rate;
                    and

               (3)  the Make Whole Amount,

               and if the balance  standing to the credit of the escrow  account
               is not sufficient to discharge the Capital  Outstanding  together
               with the  amounts  referred to in (1) to (3)  inclusive  above in
               full,  the  Lessee  shall  forthwith  pay to the Lessor an amount
               equal to the deficit for application as aforesaid; or

         (iii) on  Settlement  Date  deliver to the  Lessor a standby  letter of
               credit  in form  and  substance  reasonably  satisfactory  to the
               Lessor issued by a bank reasonably  acceptable to the Lessor in a
               principal amount equal to the Capital Outstanding relating to the
               Equipment plus:

               (A)  any unpaid Rental (to the extent not included in the Capital
                    Outstanding)  together  with any and all  other  Outstanding
                    Amounts due and payable on or before the Settlement Date;

               (B)  any  and all  accrued  but  unpaid  finance  charges  on the
                    Capital  Outstanding  calculated  on a daily basis at a rate
                    per annum equal to the applicable Acceptance Rate; and

               (C)  the Make Whole Amount,

               and if  within  one  year of the date of the  Event of Loss  that
               Equipment has not been replaced with  Equipment of the same make,
               value and  utility,  title has not  passed to the  Lessor and the
               Equipment  is not subject to the  provisions  of the  Transaction
               Documents,  then the Lessor may make a demand  under the  standby
               letter of credit and use it  towards  prepayment  of the  Capital
               Outstanding relating to such Equipment together with:

               (1)  any unpaid Rental (to the extent not included in the Capital
                    Outstanding) and any and all other  Outstanding  Amounts due
                    and payable on or prior to the date of payment; and

               (2)  any  and all  accrued  but  unpaid  finance  charges  on the
                    Capital Outstanding on that date calculated on a daily basis
                    at a rate per annum equal to the applicable Acceptance Rate;
                    and

               (3)  the Make Whole Amount,

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               and if the amount which the Lessor is able to drawdown  under the
               letter of credit  is not  sufficient  to  discharge  the  Capital
               Outstanding  together with the amounts  referred to in (1) to (3)
               inclusive  above in full,  the Lessee shall  forthwith pay to the
               Lessor  an  amount  equal  to  the  deficit  for  application  as
               aforesaid; or

         (iv)  on the Settlement Date prepay the remaining  Capital  Outstanding
               relating to such Equipment together with:

               (A)  any unpaid Rental (to the extent not included in the Capital
                    Outstanding) and any and all other Outstanding  Amounts, due
                    and payable on or prior to the Settlement Date;

               (B)  any  and all  accrued  but  unpaid  finance  charges  on the
                    Capital  Outstanding  calculated  on a daily basis at a rate
                    per annum equal to the applicable Acceptance Rate; and

               (C)  the Make Whole Amount.

(b)      The amount  payable  under Clause  15.4(a)  will be paid as  additional
         rental and as  compensation  for the early  termination of the Lessee's
         obligation  to take on lease or, as the case may be, the leasing of the
         Equipment or the relevant part of it.

(c)      The Lessee's obligations pursuant to Clause 15.4(a):

         (i)   apply regardless of whether or not any Net Insurance  Proceeds or
               Compensation  Awards  are paid or  payable  to the  Lessor or the
               Lessee; and

         (ii)  are  (subject  to  the  provisions  of  Clause  15.6(b))  without
               prejudice to the Lessee's  obligations  to continue to pay Rental
               in respect  of the  Equipment  or the  relevant  part  during the
               period from and  including the date of occurrence of the Event of
               Loss in question to and  including  the  Settlement  Date,  which
               obligations shall apply notwithstanding the Event of Loss.

15.5     CONSEQUENCES OF AN EVENT OF LOSS

(a)      Following  the  occurrence  of an  Event  of Loss of all or part of the
         Equipment then,  unless the Lessee  replaces the relevant  Equipment in
         accordance  with Clause  15.4(a)(i),  (ii) or (iii),  on the Settlement
         Date in  question  (if Clause  15.4(a)(i)  applies) or on or before the
         first  anniversary  of the  Settlement  Date in  question  (if  Clauses
         15.4(a)(ii) or (iii) applies):

         (i)   the leasing of the Equipment or the relevant part; and

         (ii)  any  obligation  of the Lessor to acquire  the  Equipment  or the
               relevant part and to lease it to the Lessee,

         will, in each case, terminate.

(b)      Following  the  termination  of the leasing of all of the Equipment (or
         such part as is referred to in Clause  15.1) under  Clause  15.5(a) the
         Lessee's  obligations to pay Rentals that would  otherwise fall due for
         payment on or after the  Settlement  Date (or,  as the case may be, the
         first anniversary of the Settlement Date) will cease.

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(c)      Following the  termination of the leasing of part only of the Equipment
         (other than such part as is referred  to in Clause  15.1) under  Clause
         15.5(a) Rentals falling due for payment on or after the Settlement Date
         (or, as the case may be, the first  anniversary of the Settlement Date)
         and the Capital  Outstanding under the relevant Lease Schedules will be
         recalculated,  the relevant Lease Schedules amended accordingly and the
         "Schedules  of  Capital  Outstanding"  annexed  to the  relevant  Lease
         Schedules will be substituted  with  replacement  "Schedules of Capital
         Outstanding"   reflecting  the  recalculation  of  Capital  Outstanding
         referred to above.

(d)      The  provisions  of this  Clause  15.5  are  without  prejudice  to the
         Lessee's other  obligations under the Transaction  Documents  including
         its  obligations to pay any  adjustments  to Rental  (whenever the same
         fell due for  payment) or other  amounts  under any of the  Transaction
         Documents.

(e)      Notwithstanding  the occurrence of an Event of Loss or the  termination
         of the leasing of the Equipment or any part as a consequence the Lessee
         will not be  entitled  to any refund in respect of any Rentals or other
         amounts paid in advance.

(f)      Upon any  replacement  of or repayment for the Equipment as provided in
         this Clause 15, the Lease Schedule shall terminate only with respect to
         the Equipment so replaced or paid for, and the Lessor shall transfer to
         the Lessee title only to such  Equipment  "AS IS, WHERE IS",  "WITH ALL
         FAULTS",  and "WITH NO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR USE
         OR FOR ANY PARTICULAR PURPOSE, BUT, IN ALL CASES, FREE AND CLEAR OF ALL
         LESSOR SECURITY  INTERESTS AND FREE AND CLEAR OF ANY SECURITY INTERESTS
         CREATED BY THE  TRANSACTION  DOCUMENTS.  The Lessee  shall pay any VAT,
         sales or use taxes due on such transfer.

15.6     APPLICATION OF INSURANCE PROCEEDS AND COMPENSATORY AWARDS

(a)      Following the  occurrence of an Event of Loss in respect of all or part
         of the Equipment, unless the Lessee has replaced the relevant Equipment
         in  accordance  with Clause  15.4(a)(i),  (ii) or (iii),  any Insurance
         Proceeds and  Compensation  Awards  referable  thereto  unconditionally
         received by the Lessor in cleared funds will (subject to the provisions
         of paragraph (b)) be held by the Lessor pending the relevant Settlement
         Date,  following the occurrence of which, will be applied by the Lessor
         in the following order:

         (i)   first,  in  retention  by the  Lessor  for its own  account of an
               amount equal to all costs and expenses (including Taxes and legal
               fees) incurred by the Lessor in connection with the collection of
               those proceeds or awards (unless  otherwise paid or reimbursed by
               the Lessee);

         (ii)  secondly,  in  retention  by the Lessor for its own account of an
               amount equal to any Net Insurance  Proceeds and any  Compensatory
               Awards set-off, under Clause 15.4(a) (Payments following an Event
               of  Loss),  against  the  aggregate  of  any  amount  that  would
               otherwise be payable by the Lessee under Clause 15.4(a);

         (iii) thirdly,  as to any  balance in payment to the Lessee as a rebate
               of Rental.

(b)  If, prior to the relevant Settlement Date:

         (i)   the Lessor receives Insurance Proceeds; and

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<PAGE>

         (ii)  the amount of such Insurance  Proceeds is at least  sufficient to
               pay the  aggregate  of (x) the amount  which would become due for
               payment under Clause 15.4(a)(iv) on the relevant  Settlement Date
               (the  Reinvestment  Rate for the purposes of calculating the Make
               Whole  Amount  to be  determined  with  reference  to the date of
               receipt of the  Insurance  Proceeds) and (y) any and all Periodic
               Rent  falling due  between  the date of receipt of the  Insurance
               Proceeds and the Settlement Date,

         then on each Rental  Payment Date  falling on or before the  Settlement
         Date, the Lessor shall apply such part of the Insurance Proceeds in and
         towards  payment of the relevant  Periodic  Rent (and such  application
         shall  discharge  the  obligation  of the  Lessee to pay such  Periodic
         Rent).  Any  application  of  Insurance  Proceeds  pursuant  to Clauses
         15.6(a)  or  15.6(b)  shall be net of an  amount  equal to all  amounts
         applied by the Lessor in and towards  Periodic Rent in accordance  with
         this Clause 15.6(b).

(c)      Following the  occurrence of an Event of Loss in respect of all or part
         of the Equipment,  if the Lessee has replaced the relevant Equipment in
         accordance with Clause 15.4(a)(i), (ii) or (iii) any Insurance Proceeds
         and Compensatory Awards referable thereto  unconditionally  received by
         the  Lessor in  cleared  funds  will be  applied  by the  Lessor in the
         following order:

         (i)   first in retention by the Lessor for its own account of an amount
               equal to all costs and expenses  (including Taxes and Legal Fees)
               incurred by the Lessor in connection  with the  collection of the
               proceeds; and

         (ii)  secondly,  as to any  balance,  upon  receipt  by the  Lessor  of
               evidence reasonably satisfactory to it that repair or replacement
               of the  lost or  damaged  Equipment  has  been  completed,  in or
               towards  payment  of the  cost  of  repair  or  replacement  (any
               shortfall  being  borne by the Lessee) or, to the extent that the
               Lessee has borne such cost, in  reimbursement  to the Lessee (any
               surplus,  after completion of all repairs and replacement and the
               discharge  of all  costs  relating  thereto,  being  paid  to the
               Lessee).

15.7     DAMAGE NOT CONSTITUTING AN EVENT OF LOSS

(a)      In the event that the  Equipment  suffers  damage not  constituting  an
         Event  of Loss of all or any  part of the  Equipment  the  Lessee  will
         promptly   repair  or  replace  (in   compliance   with  Clauses  12.10
         (Replacement  of parts)  and 12.13  (Title to  replacements  etc.)) the
         Equipment or the relevant part.

(b)      Any  Insurance  Proceeds  unconditionally  received  by the  Lessor  in
         cleared  funds in respect of any loss of or damage to the Equipment not
         constituting  an Event of Loss of all or any part of the Equipment will
         be applied by the Lessor in the following order:

         (i)   firstly,  in  retention  by the Lessor for its own  account of an
               amount equal to all costs and expenses (including Taxes and legal
               fees) incurred by the Lessor in connection with the collection of
               the proceeds; and

         (ii)  secondly,  as to any  balance,  upon  receipt  by the  Lessor  of
               evidence  satisfactory  to it that repair or  replacement  of the
               lost or damaged  Equipment has been put in hand or completed,  in
               or  towards  payment  of the cost of repair or  replacement  (any
               shortfall  being  borne by the Lessee) or, to the extent that the
               Lessee has borne such cost, in  reimbursement  to the Lessee (any
               surplus, after completion of all repairs and replacements and the
               discharge  of all  costs  relating  thereto,  being  paid  to the
               Lessee).

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15.8     REQUISITION FOR HIRE

(a)      If all or part of the  Equipment  (the  "REQUISITIONED  EQUIPMENT")  is
         requisitioned  for use or hire by any  Governmental  Authority or other
         competent  authority  during the Initial  Term (and unless and until an
         Event of Loss  occurs in respect  of the  Requisitioned  Equipment,  in
         which case the other  provisions  of this  Clause 15 will  apply),  the
         leasing of the Equipment  including the  Requisitioned  Equipment  will
         continue in full force (subject to Clause 16.2 (Termination by Lessor))
         and the Lessee will continue to comply with all its  obligations  under
         this Master Agreement (including to pay Rental) other than, in the case
         of the  Requisitioned  Equipment,  non-financial  obligations which the
         Lessee is unable to comply with solely by virtue of the requisition.

(b)      Subject to no  Potential  Event of Default  having  occurred  and being
         continuing  and to Clause 26  (Set-off),  during the  Initial  Term the
         Lessee may receive all  requisition  hire (other than any  Compensation
         Award or any  compensation  referred to in Clause  15.8(d)) paid by any
         Governmental  Authority or other competent  authority on account of the
         requisition  and the  Lessor  will  account  to the Lessee for any such
         requisition hire received by it as soon as reasonably practicable after
         receipt.

(c)      The Lessee will as soon as practicable after the end of any requisition
         for use or hire cause the  Requisitioned  Equipment  to be put into the
         condition required by this Master Agreement.

(d)      The Lessor shall be entitled to all compensation  payable in respect of
         any change to the  structure,  state or condition of the  Requisitioned
         Equipment  arising  during the period of  requisition  but,  subject to
         Clause 26  (Set-off),  the  Lessor  will  apply  such  compensation  in
         reimbursing  the Lessee for the cost of complying with its  obligations
         under Clause 15.8(c).

(e)      If the Requisitioned Equipment is under requisition for use or for hire
         at the end of the Initial  Term then,  unless  otherwise  agreed by the
         Parties,  the  leasing of the  Equipment  including  the  Requisitioned
         Equipment  will  terminate in accordance  with the terms of this Master
         Agreement  and  title to the  Equipment  (including  the  Requisitioned
         Equipment)  shall pass to the Lessee in accordance  with the provisions
         of Clause 17.1 (End of Initial  Term  purchase  option and  Transfer of
         Title to the Equipment).

15.9     MEANING OF EQUIPMENT

         For the purposes of this Clause 15  references  to the Equipment or any
         part thereof exclude the Services or any of them.

16.      DEFAULT

16.1     EVENTS OF DEFAULT

         Each of the  following  events is an Event of Default  (whether  or not
         caused by any reason  whatsoever  outside  the control of the Lessee or
         any other person):

         (a)  NON-PAYMENT:

              (i)   the Lessee fails to pay any Periodic Rent or any Termination
                    Amounts  when due,  and,  other than in respect of a payment
                    under Clause 16.5(b) (Mandatory prepayment), such failure to
                    pay continues for five (5) Business Days; or

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              (ii)  the Lessee fails to pay any other sum required  hereunder or
                    under  any of the  other  Transaction  Documents,  and  such
                    failure continues for a period of ten (10) Business Days; or

              (iii) either of the  Guarantors  fail to pay when due any  amounts
                    owing to the Lessor under the Lease Guarantee, and:

                    (A)  where a demand  has been  made  upon the  Lessee,  such
                         failure to pay continues for five (5) Business Days; or

                    (B)  where a demand has not been made upon the Lessee,  such
                         failure to pay continues for ten (10) Business Days;

         (b)  INSURANCES:  any  of the  Insurances  are  not,  or  cease  to be,
              maintained in full force and effect;

         (c)  MISREPRESENTATION:   a  representation,   warranty,  statement  or
              certificate made by either of the Guarantors,  the Lessee,  or any
              Permitted  Sub-Lessees  in or in connection  with any  Transaction
              Document  or in any  document  delivered  by or on  behalf  of the
              Lessee,  the Guarantors or the Permitted  Sub-Lessees  under or in
              connection with any Transaction Document is false or misleading in
              any material respect when made or deemed to be made;

         (d)  BREACH  OF  COVENANTS:  any  of  the  Lessee,  the  Guarantors  or
              Permitted  Sub-Lessees  violates  or fails to  perform  any of the
              terms,  covenants or  conditions of the  Transaction  Documents to
              which  they are a party  (other  than such as are  referred  to in
              paragraphs  (a),  (b),  (c), (m), (n) and (o) of this Clause 16.1,
              and  Clause  6.8  of  the  Lease  Guarantee),  which  failure,  if
              remediable,  is not cured  within  30 days  after  written  notice
              thereof  is  given  by the  Lessor  to the  Lessee,  Guarantor  or
              Permitted Sub-Lessee;

         (e)  CROSS-DEFAULT: the Lessee, any Permitted Sub-Lessee, either of the
              Guarantors or any Significant  Subsidiary fails to pay when due or
              otherwise  defaults under any promissory note,  credit  agreement,
              loan  agreement,  conditional  sales contract,  guarantee,  lease,
              indenture,  bond,  debenture or other obligation  whatsoever in an
              amount which when  aggregated with any and all other such defaults
              exceeds ten million US Dollars  (USD10,000,000) (or the equivalent
              thereof  in  another  currency),  and  any  party  to  which  such
              obligation  is owed or a  holder  thereof  otherwise  declares  or
              causes the  obligations of the Lessee,  any Permitted  Sub-Lessee,
              either of the Guarantors or any Significant Subsidiary as the case
              may be,  thereunder  to become due and payable prior to the stated
              maturity thereof;

         (f)  INSOLVENCY:

              (i)   the  Lessee,  either of the  Guarantors  or any  Significant
                    Subsidiary are, or are deemed for the purposes of any law to
                    be, unable  generally to pay their debts as they fall due or
                    to be  insolvent,  or admit  inability to pay their debts as
                    they fall due; or

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              (ii)  the  Lessee,  either of the  Guarantors  or any  Significant
                    Subsidiary  suspend  making  payments on all or any class of
                    their  debts  or  announce  an  intention  to  do  so,  or a
                    moratorium   is   declared   in  respect  of  any  of  their
                    indebtedness;

         (g)  INSOLVENCY PROCEEDINGS:

              (i)   any petition is issued,  proposal to creditors is put or any
                    meeting  is  convened  in  connection  with  a  composition,
                    assignment  or  arrangement  with  creditors  of the Lessee,
                    either of the Guarantors or any Significant Subsidiary; or

              (ii)  a meeting of the Lessee,  the Guarantors or any  Significant
                    Subsidiary  is convened for the purpose of  considering  any
                    resolution for (or to petition for) their  winding-up or for
                    their administration or any such resolution is passed by the
                    Lessee,   either  of  the  Guarantors  or  any   Significant
                    Subsidiary; or

              (iii) any person presents a petition for the winding-up or for the
                    administration  of the Lessee,  either of the  Guarantors or
                    any Significant  Subsidiary and, in the case of presentation
                    of a winding-up  petition  which the person against whom the
                    petition is presented  reasonably  considers to be frivolous
                    or vexatious, the petition is not discharged or withdrawn:

                    (A)  in respect of a petition  presented  in a  jurisdiction
                         other than the United States of America, within 30 days
                         of its presentation; and

                    (B)  in respect of a petition presented in the United States
                         of America, within 60 days of its presentation; or

              (iv)  an order for the winding-up or administration of the Lessee,
                    either of the  Guarantors or any  Significant  Subsidiary is
                    made; or

              (v)   any other step (including petition,  proposal or convening a
                    meeting)  is  taken  with  a  view  to  the  rehabilitation,
                    administration,  custodianship,  liquidation,  winding-up or
                    dissolution  of the Lessee,  either of the Guarantors or any
                    Significant  Subsidiary or any other insolvency  proceedings
                    involving  the  Lessee,  either  of  the  Guarantors  or any
                    Significant Subsidiary;

         (h)  APPOINTMENT OF RECEIVERS AND MANAGERS:

              (i)   any liquidator,  trustee in bankruptcy,  judicial custodian,
                    compulsory  manager,   receiver,   administrative  receiver,
                    administrator  or the like is  appointed  in  respect of the
                    Lessee,   either  of  the  Guarantors  or  any   Significant
                    Subsidiary or any part of any of their assets; or

              (ii)  the directors of the Lessee, either of the Guarantors or any
                    Significant   Subsidiary   request  the   appointment  of  a
                    liquidator,  trustee  in  bankruptcy,   judicial  custodian,
                    compulsory  manager,   receiver,   administrative  receiver,
                    administrator or the like; or

              (iii) any other steps are taken to enforce any  Security  Interest
                    over  any  substantial  part of the  assets  of the  Lessee,
                    either of the Guarantors or any Significant Subsidiary or to
                    repossess any goods in the  possession of any of the Lessee,

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                    either of the Guarantors or any Significant Subsidiary under
                    any  hire  purchase,   conditional  sale,  chattel  leasing,
                    retention of title or similar agreement;

         (i)  CREDITORS'  PROCESS:  any attachment,  sequestration,  distress or
              execution affects any material assets of the Lessee, either of the
              Guarantors or any  Significant  Subsidiary  and is not  discharged
              within 14 days;

         (j)  ANALOGOUS PROCEEDINGS: there occurs, in relation to of the Lessee,
              either of the Guarantors or any Significant Subsidiary,  any event
              anywhere which  corresponds with, or is analogous to, any of those
              mentioned in Clauses 16.1(f) to 16.1(i) (inclusive);

         (k)  VALIDITY  AND  ENFORCEABILITY   CONTESTED:   if  the  validity  or
              enforceability  of any of the  Transaction  Documents shall at any
              time and for any  reason be  contested  by the Lessee or either of
              the  Guarantors  or the Lessee or either of the  Guarantors  shall
              deny that it has any, or any further, liability thereunder;

         (l)  UNLAWFULNESS:  any of the Transaction  Documents (other than Lease
              Participation  Arrangements)  shall at any time and for any reason
              become invalid or  unenforceable  or otherwise  cease to remain in
              full force and effect or it becomes  impossible or unlawful at any
              time for the Lessee or either of the  Guarantors  to fulfil  their
              respective  covenants and obligations under any of the Transaction
              Documents  to which they are a party or for the Lessor to exercise
              its  rights  under the  Transaction  Documents  (other  than Lease
              Participation Arrangements);

         (m)  EQUIPMENT:

              (i)   any steps are taken to enforce any Security  Interest (other
                    than a Lessor Security Interest) over the Equipment; or

              (ii)  any  execution,  forfeiture,  distress,  impounding or other
                    legal process (not amounting to Compulsory  Acquisition)  is
                    levied or enforced upon the Equipment;

         (n)  CESSATION  OF  BUSINESS:  the  Lessee or either of the  Guarantors
              ceases,  or threatens to cease,  to carry on all or a  substantial
              part of its business; and

         (o)  CONDITIONS  SUBSEQUENT:  the  Lessee  does not  fulfil  or  ensure
              fulfilment of any deferred  condition or other requirement  within
              any period  stipulated  by the Lessor  under Clause 7.3 (Waiver or
              deferral of conditions precedent).

16.2     TERMINATION BY LESSOR

(a)      The occurrence of an Event of Default,  to the extent that it comprises
         a failure by the Lessee to comply  with any of the  provisions  of this
         Master  Agreement,  shall go to the root of this Master  Agreement  and
         accordingly shall constitute a breach of condition which the Lessor may
         treat as a repudiation by the Lessee of this Master Agreement.

(b)      Without  prejudice  to any other  rights  or  remedies  of the  Lessor,
         whether under the Transaction  Documents or otherwise,  upon and at any
         time after the  occurrence  of an Event of Default  the Lessor  may, by
         notice to the Lessee terminate:

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         (i)   the  leasing of the  Equipment  and the  Lessor's  consent to the
               Lessee's possession of the Equipment; and

         (ii)  any  obligation  of the Lessor to acquire  the  Equipment  and to
               lease it to the Lessee,

         whereupon the same shall immediately terminate.

16.3     VOLUNTARY TERMINATION

(a)      Provided  that no Event of Default or  Potential  Event of Default  has
         then  occurred and is  continuing,  the Lessee shall have the option to
         terminate the leasing of all or any part of the Equipment  which is the
         subject of any one or more Lease  Schedules  entered  into  between the
         Lessor and the Lessee and to purchase  such  Equipment  on any day upon
         the terms and conditions set out in this Clause 16.3 provided that:

         (i)   either  (A) the Lessee  exercises  the  option to  terminate  the
               leasing of all of the  Equipment the subject of one or more Lease
               Schedules  or (B)  the  Capital  Outstanding  in  respect  of the
               relevant Equipment is at least E1,000,000; and

         (ii)  if paragraph  (i)(B) above  applies,  the Capital  Outstanding in
               respect  of  the  Equipment  remaining  the  subject  of a  Lease
               Schedule following such repayment is at least E1,000,000.

         The Lessee may terminate the leasing of part of the Equipment  which is
         the subject of one or more Lease  Schedules and purchase that Equipment
         where the Capital  Outstanding in respect of the Equipment  which would
         remain the subject of a Lease  Schedule  following  such repayment (the
         "REPAID  SCHEDULE")  would  be  less  than  E1,000,000   provided  that
         immediately following that repayment the Lessee consolidates the Repaid
         Schedule  with another  Lease  Schedule or Lease  Schedules so that the
         combined  Capital  Outstanding  of the Repaid  Schedule  and that other
         Lease Schedule or Lease Schedules is at least E1,000,000 (the "COMBINED
         SCHEDULE").

         If the  leasing of part only of the  Equipment  the  subject of a Lease
         Schedule is  terminated,  the  Capital  Outstanding  and the  remaining
         Periodic  Rents  under that Lease  Schedule  shall be  adjusted  by the
         Lessor accordingly and the 'Schedule of Capital Outstanding' under that
         Lease Schedule shall be replaced by a replacement  'Schedule of Capital
         Outstanding'   taking  account  of  the  repayment.   Such  replacement
         'Schedule of Capital  Outstanding' and the other new numbers shall form
         part of that Lease  Schedule  from the  relevant  Termination  Date and
         shall be  binding  upon the  Lessee in  substitution  for the  previous
         'Schedule of Capital Outstanding' and numbers.

(b)      If the Lessee desires to exercise the option set out in Clause 16.3(a),
         it shall give the Lessor  written  notice (the  "VOLUNTARY  TERMINATION
         NOTICE") of its  intention  so to do at least 90 days and not more than
         180 days before the proposed Termination Date,  specifying that part of
         the  Equipment  that is to be the  subject  of such  intention  and the
         proposed  Termination  Date. On the Termination  Date, the Lessee shall
         pay to the Lessor in respect of the  Equipment  an amount  equal to the
         aggregate of (without duplication):

         (i)   the relevant Termination Amount for each relevant Lease Schedule;
               and

         (ii)  any and all Taxes,  Irrecoverable  VAT and other charges incurred
               or  suffered  by the  Lessor or any other  Lessor  Risk  Party in
               connection  with or as a result of the early  termination  by the

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               Lessee  but not  including  any Taxes on or  measured  by the net
               income, profit or gains of the Lessor or, as the case may be, any
               such Lessor Risk Party,

                        (the "EARLY TERMINATION PRICE").

(c)      Upon payment of the Early Termination Price and all other sums then due
         under this Master  Agreement  and the  applicable  Lease  Schedule with
         respect to such  Equipment,  the Lessor shall  transfer legal title to,
         and all of its rights and  interests  in and to, such  Equipment to the
         Lessee "AS IS,  WHERE IS",  "WITH ALL FAULTS",  and WITH NO  WARRANTIES
         WHATSOEVER,  EITHER EXPRESS OR IMPLIED, INCLUDING,  WITHOUT LIMITATION,
         ANY  WARRANTIES  OF  MERCHANTABILITY  OR  FITNESS  FOR  USE  OR  FOR  A
         PARTICULAR  PURPOSE  BUT,  IN ALL  CASES,  FREE AND CLEAR OF ALL LESSOR
         SECURITY  INTERESTS AND FREE AND CLEAR OF ANY SECURITY INTEREST CREATED
         BY THE TRANSACTION DOCUMENTS.

(d)      Once served, a Voluntary Termination Notice will be irrevocable.

16.4     PAYMENTS ON TERMINATION

(a)      On the Termination  Date which is consequential on a termination by the
         Lessor  pursuant to Clause  16.2,  the Lessee will pay to the Lessor an
         amount equal to the aggregate of (without duplication):

         (i)   the relevant Termination Amount for each relevant Lease Schedule;

         (ii)  any other  costs  actually  incurred  by the  Lessor or any other
               Lessor  Risk  Party  (including,  without  limitation,  the Break
               Costs, if any);

         (iii) any and all Taxes,  Irrecoverable  VAT and other charges incurred
               or  suffered  by the  Lessor or any other  Lessor  Risk  Party in
               connection  with or as a result of the early  termination  by the
               Lessee  but not  including  any Taxes on or  measured  by the net
               income, profit or gains of the Lessor or, as the case may be, any
               such Lessor Risk Party; and

         (iv)  any and all costs,  fees and  expenses  incurred by the Lessor or
               any other Lessor Risk Party in connection  with or as a result of
               the termination by the Lessor.

(b)      The Early  Termination  Price payable under Clause 16.3(b) will be paid
         as additional  rental and the amount  payable under Clause 16.4, in the
         case of a termination  under Clause 16.2  (Termination  by Lessor) as a
         result  of  acceptance  by the  Lessor of a  repudiatory  breach by the
         Lessee of this Master Agreement, shall be payable as liquidated damages
         and, in all other cases, as a liquidated sum or debt.

16.5     MANDATORY PREPAYMENT

(a)      On the occurrence of a Sub-Lessee  Insolvency  Event,  the Lessee shall
         prepay the Capital Outstanding  relating to the Equipment sub-leased to
         that Permitted Sub-Lessee together with:

         (i)   any unpaid  Rental (to the extent  not  included  in the  Capital
               Outstanding)  and any and all Outstanding  Amounts due or payable
               on or prior to the date of that Sub-Lessee  Insolvency Event with
               respect to such Equipment; and

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         (ii)  any and all accrued but unpaid  finance  charges on such  Capital
               Outstanding  calculated  at  the  rate  per  annum  which  is the
               aggregate of the Cost of Funds and the Margin; and

         (iii) the Make Whole Amount.

(b)      Concurrently  with,  or prior to, a Change of  Control of either of the
         Guarantors,  the Lessee or any Permitted  Sub-Lessee taking effect, the
         Lessee shall have exercised its  prepayment  right under Clause 16.3 of
         this Master Agreement in respect of:

         (i)   in the case of a  proposed  Change  of  Control  of either of the
               Guarantors   or  of  the   Lessee,   the  whole  of  the  Capital
               Outstanding; and

         (ii)  in  the  case  of a  proposed  Change  of  Control  of any of the
               Permitted  Sub-Lessees,  so much of the  Capital  Outstanding  as
               relates to the Equipment sub-leased to that Permitted Sub-Lessee,

         and the Lessee  shall have  prepaid the  relevant  Capital  Outstanding
         relating to the relevant  Equipment (as described in sub-paragraphs (i)
         and (ii) above) together with:

         (A)   any unpaid  Rental (to the extent  not  included  in the  Capital
               Outstanding)  and any and all Outstanding  Amounts due or payable
               on or prior to the date of that Change of Control; and

         (B)   any and all accrued but unpaid  finance  charges on such  Capital
               Outstanding  calculated  at  the  rate  per  annum  which  is the
               aggregate of the Cost of Funds and the Margin; and

         (C)   the Make Whole Amount.

16.6     LESSEE'S CONTINUING OBLIGATIONS

(a)      Following the  termination of the leasing of the Equipment under Clause
         16.2 (Termination by Lessor) or Clause 16.3(a) (Voluntary  Termination)
         or 16.5 (Mandatory  Prepayment) the Lessee's obligations to pay Rentals
         that would  otherwise fall due for payment after the  Termination  Date
         will cease.

(b)      Following the  termination of the leasing of part only of the Equipment
         under Clause 16.3(a) (Voluntary  Termination),  Rentals falling due for
         payment  after  the  Termination  Date and the  amount  of the  Capital
         Outstanding  will be  recalculated  in accordance  with the replacement
         "Schedule of Capital  Outstanding"  which is calculated  for the Repaid
         Schedule or as the case may be the Combined  Schedule  and  substituted
         for  the  original  "Schedule  of  Capital  Outstanding"  to the  Lease
         Schedule that has been repaid in part of the Lease Schedule.

(c)      The  provisions  of this  Clause  16.6  are  without  prejudice  to the
         Lessee's other  obligations under the Transaction  Documents  including
         its obligation to pay any adjustments to Rental (whenever the same fell
         due  for  payment)  or  other  amounts  under  any of  the  Transaction
         Documents.

(d)      Notwithstanding  the termination of the leasing of the Equipment or any
         part under this Clause 16 the Lessee will not be entitled to any refund
         of any Rentals or other amounts paid in advance.

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17.      DEALINGS WITH EQUIPMENT FOLLOWING TERMINATION OR EXPIRY

17.1     END OF INITIAL TERM PURCHASE OPTION AND TRANSFER OF TITLE TO THE
         EQUIPMENT

(a)      Upon the  expiration  of the  Initial  Term with  respect  to any Lease
         Schedule which relates to any Equipment which is located in [Redacted],
         [Redacted],  [Redacted],  [Redacted],  the United  States of America or
         England  and  [Redacted],  the  Lessee  shall,  on giving not less than
         thirty (30) days prior  written  notice to the  Lessor,  or such lesser
         period as the Lessor may agree,  be entitled to purchase the  Equipment
         which is the subject of such Lease Schedule at the price of one hundred
         Euros (E/100) (the "OPTION  PRICE") in respect of each Lease  Schedule,
         provided that no Event of Default under Clause 16.1(a) has occurred and
         is continuing and no other amount is outstanding  under the Transaction
         Documents.  If the option is exercised,  the Option Price shall be paid
         as part of the final payment of Periodic  Rent by the relevant  Lessee,
         whereupon  the Lessor  shall  transfer  legal  title to, and all of its
         rights and interests in and to, the  Equipment  which is the subject of
         such Lease Schedule to the Lessee.

(b)      Upon the  expiration  of the  Initial  Term with  respect  to any Lease
         Schedule which relates to any Equipment  which is located in [Redacted]
         or [Redacted] and upon payment in full of the final payment of Periodic
         Rent by the Lessee,  the Lessor shall  transfer legal title to, and all
         of its  rights and  interests  in and to,  the  Equipment  which is the
         subject of such Lease  Schedule to the  Lessee.  For the  avoidance  of
         doubt,  until  payment in full by the Lessee of any amount  outstanding
         under or in  connection  with such Lease  Schedule,  the  Lessor  shall
         retain legal title to the Equipment  which is the subject of such Lease
         Schedule.

(c)      In the case of both Clause 17.1(a) and Clause 17.1(b) above, the Lessor
         shall  transfer  legal title to, and all of its rights and interests in
         and to, the  Equipment  which is the subject of such Lease  Schedule to
         the Lessee which is the party to that Lease Schedule "AS IS, WHERE IS",
         "WITH ALL FAULTS", and WITH NO WARRANTIES WHATSOEVER, EITHER EXPRESS OR
         IMPLIED,    INCLUDING,    WITHOUT   LIMITATION,   ANY   WARRANTIES   OF
         MERCHANTABILITY  OR FITNESS FOR USE OR FOR A PARTICULAR PURPOSE BUT, IN
         ALL CASES, FREE AND CLEAR OF ALL LESSOR SECURITY INTERESTS AND FREE AND
         CLEAR OF ANY SECURITY INTEREST CREATED BY THE TRANSACTION DOCUMENTS.

(d)      In the event that the Lessee  fails to  exercise  the  purchase  option
         referred to in Clause  17.1(a) in respect of any of the Equipment or in
         the  event  of an  Early  Termination  of  the  leasing  of  any of the
         Equipment  where title does not pass pursuant to any other provision of
         this Master Agreement the Lessor shall be entitled,  (but not obliged),
         by notice in writing to the Lessee, to transfer title to that Equipment
         to the Lessee whereupon the provisions of Clause 17.1(c) shall apply.

17.2     REDELIVERY

(a)      Subject to Clauses 16.3 and 17.1, following an early Termination of the
         Initial Term in respect of any of the  Equipment  the Lessee  will,  if
         required (and only if required) by the Lessor,  immediately  proceed to
         redeliver  the  relevant  Equipment  to the Lessor at such place in the
         country  in which  such  Equipment  is then  located  as the Lessor may
         reasonably  specify.  The costs of any such redelivery of the Equipment
         shall be for the account of the Lessee.

(b)      The Lessee will  redeliver  the  Equipment  or the  relevant  part in a
         condition  so as to  demonstrate  that the Lessee  has in all  respects
         complied  with their  obligations  under this Master  Agreement  and in
         particular the Equipment or the part will:

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         (i)   be  free  of  Security  Interests  (other  than  Lessor  Security
               Interests);

         (ii)  subject to any modifications  made under the terms of this Master
               Agreement, have installed thereon all equipment installed thereon
               at the relevant Commencement Date (or replacements  therefor) and
               all additions (other than Detachable Additions) thereto; and

         (iii) be accompanied by the Technical  Records  referable thereto which
               shall  be  complete  and up to date  and in  compliance  with the
               Lessee's   obligations   relating   thereto   under  this  Master
               Agreement.

(c)      If, in order to redeliver the  Equipment or relevant  part, it requires
         to be  deinstalled,  disassembled or crated the Lessee will ensure that
         it  is   deinstalled,   disassembled   and  crated  by  an   authorised
         representative  of the manufacturer or supplier or other service entity
         reasonably satisfactory to the Lessor.

17.3     REPOSSESSION

(a)      If  the  Lessee  fails  to  deliver  the  Equipment  or a  part  of the
         Equipment,  as the case may be,  following  a request to do so from the
         Lessor  under  Clause  17.2(a)  (Redelivery)  the Lessor  may,  without
         prejudice to the Lessee's  obligations  under this Master Agreement and
         the  Lessor's  other  rights and  remedies,  retake  possession  of the
         Equipment and the Technical Records.

(b)      In exercise of its rights under Clause  17.3(a) the Lessor,  its agents
         and  representatives  may enter upon any land or premises  where any of
         the  Equipment is or is believed to be located and do all lawful things
         or acts  necessary  or  advisable  without  breach of peace in order to
         retake possession of the Equipment and the Technical Records and remove
         them  from  the  land  or  premises  (including  the  severance  of any
         Equipment that may be a fixture).

(c)      To the extent the Lessor  considers it necessary or advisable to enable
         the Lessor to  exercise  its rights  under this  Clause 17.3 the Lessee
         will, promptly at the request of the Lessor,  exercise and enforce, and
         permit the Lessor to exercise  and  enforce,  any rights the Lessee may
         have in any lease,  licence or other agreement  relating to any land or
         premises and use all reasonable  endeavours to obtain any authorisation
         from any person with an interest in any land or premises.

(d)      The Lessor will have no  responsibility to the Lessee for any trespass,
         loss  or  damage  (unless  caused  by  wilful  misconduct  or  reckless
         disregard  with knowledge of the probable  consequences)  caused to any
         persons or property (including the Equipment and the Technical Records)
         in the exercise of the  Lessor's  rights under this Clause 17.3 and the
         Lessee will  indemnify the Lessor,  its agents and  representatives  on
         demand against any claim made in respect of any such trespass,  loss or
         damage,  unless such loss or damage is caused by wilful  misconduct  or
         reckless disregard with knowledge of the probable consequences.

17.4     STORAGE

         Subject to the title  transfer  provisions  of  Clauses  16.3 and 17.1,
         following an early Termination of the Initial Term in respect of any of
         the  Equipment  pending any  exercise by the Lessor of its rights under
         Clause  17.2  (Redelivery)  or the  completion  of a  disposal  of that
         Equipment or relevant part under Clause 18  (Disposal)  the Lessee will
         not use that Equipment and, unless the Lessor otherwise directs, ensure
         that such Equipment or the relevant part is safely and properly  stored

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         at the Lessee's  premises  (or at such other  address as the Lessor may
         reasonably designate) and at the Lessee's expense.

17.5     ASSIGNMENT OF WARRANTIES

         Following an early Termination of the Initial Term in respect of any of
         the Equipment and if (but only if) that  Equipment is to be redelivered
         to the Lessor  pursuant to Clause 17.2  (Redelivery),  the Lessee shall
         assign to the Lessor (or as the Lessor may  direct)  the benefit of all
         warranties,  indemnities  and  guarantees  which the Lessee may have in
         respect of the Equipment or to the extent that any of such  warranties,
         indemnities or guarantees are non-assignable they will hold the benefit
         of such  warranties,  indemnities or guarantees on trust for the Lessor
         (or as the Lessor may direct).

18.      DISPOSAL

         Following a  Termination  of the Initial  Term in respect of any of the
         Equipment  (other than the Services) and the service of a notice by the
         Lessor under Clause 17.1(d), that Equipment (other than Services) shall
         be at the sole risk and cost of the Lessee  and the  Lessee  shall deal
         with such Equipment (other than the Services) (including any storage or
         disposal of such  Equipment  (other than the  Services))  safely and in
         compliance  with all Applicable Laws and entirely at the Lessee's cost.
         Any storage of the relevant  Equipment  (other than Services)  shall be
         fully in accordance with Clause 17.4 (Storage).

19.      INDEMNITIES

19.1     GENERAL INDEMNITY

         The Lessee assumes  liability for and agree with the Lessor (whether or
         not  Delivery  of  all  or any of  the  Equipment  occurs  and  without
         prejudice  to any of the Lessor's  other  rights under the  Transaction
         Documents)  to  indemnify  each  Indemnifiable  Person  and  keep  each
         Indemnifiable  Person fully indemnified at all times on demand from and
         against any Losses (including in respect of death, injury or disease of
         or to any  person  or loss  of or  damage  to  property  of any  person
         (including the Equipment and the Technical  Records) or any loss of any
         other nature suffered by any person and any legal fees and expenses and
         costs  of  investigations  and  inspections  and  the  removal  of  the
         Equipment  and any costs  incurred by the Lessor in the exercise of any
         of its rights and powers  following a termination of the leasing of the
         Equipment  or any part) of any kind and nature which may be imposed on,
         incurred by, or asserted against at any time (whether before,  after or
         during the Initial Term and whether  before or after Delivery of any or
         all of the Equipment) any Indemnifiable Person or the Equipment (each a
         "LIABILITY")  in consequence  of or in any way relating to,  associated
         with or arising directly or indirectly, out of:

         (a)  the  design,  manufacture,  installation,  assembly,  description,
              testing, maintenance,  repair, refurbishment,  condition, service,
              overhaul, modification, change, alteration, loss, damage, removal,
              storage or technical  documentation of or for the Equipment or the
              Technical Records or any deficiency in or inadequacy of any of the
              foregoing or any  infringement  (or alleged  infringement)  of any
              intellectual property or other right of any kind or any breach of,
              or non-compliance with, any Environmental Law;

         (b)  the purchase,  sale,  ownership,  management,  control,  delivery,
              non-delivery,   import,   export,   possession,   use,  operation,
              registration,  non-registration,  insurance,  lack  of  insurance,
              leasing or sub-leasing of the Equipment; or

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         (c)  the  occurrence  of any Event of  Default  or  Potential  Event of
              Default,

         regardless of whether the  Equipment or Technical  Records were or were
         not in the possession or control of the Lessee at the relevant time and
         regardless of whether the Liability  arises out of, is  contributed  to
         by,  or is  attributable  to  any  negligent  act  or  omission  of any
         Indemnifiable Person.

19.2     EXCLUSIONS FROM GENERAL INDEMNITY

         The indemnities  contained in Clause 19.1 (General  indemnity) will not
         extend to any  Indemnifiable  Person to the extent  that the  Liability
         incurred by such Indemnifiable Person:

         (a)  is  caused  by any act on the  part of that  Indemnifiable  Person
              (excluding  any act of the Lessee acting in any capacity on behalf
              of an Indemnified  Person) which constitutes the wilful misconduct
              of, or recklessness with knowledge of the probable consequences on
              the part of, that Indemnifiable Person;

         (b)  is caused by any failure on the part of that Indemnifiable  Person
              to comply with any of its  specific  obligations  under any of the
              Transaction Documents;

         (c)  constitutes any part of the Acquisition Cost;

         (d)  constitutes  a  cost  which  is  expressly  to be  borne  by  that
              Indemnifiable  Person,  as  against  the  Lessee,  under any other
              provision  of  this  Master  Agreement  or the  other  Transaction
              Documents; or

         (e)  is a Liability to which Clause 20.1 (Tax indemnity) applies.

         The indemnities  contained in Clause 19.1 (General indemnity) will also
         not  extend  to the  Seller  (in that  capacity)  to the  extent of any
         liability  incurred by the Seller (in that  capacity) as a result of or
         related  to the  Seller's  breach  of any  term  of the  Nortel  Supply
         Contract.

19.3     CURRENCY INDEMNITY

(a)      If the Lessor  receives an amount in respect of the Lessee's  liability
         under the Transaction  Documents or if that liability is converted into
         a claim, proof, judgment or order in a currency other than the currency
         (the  "CONTRACTUAL  CURRENCY")  in which the amount is  expressed to be
         payable under the relevant Transaction Document:

         (i)   the  Lessee  shall   indemnify  the  Lessor  as  an   independent
               obligation  against any loss or liability  arising out of or as a
               result of the conversion;

         (ii)  if the amount  received by the Lessor,  when  converted  into the
               contractual  currency at a market rate in the usual course of its
               business, on the date of receipt, is less than the amount owed in
               the  contractual  currency,  the Lessee shall forthwith on demand
               pay to the Lessor an amount in the contractual  currency equal to
               the deficit; and

         (iii) the  Lessee  shall  forthwith  on demand  pay to the  Lessor  any
               exchange  costs and taxes  payable  in  connection  with any such
               conversion.

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(b)      The Lessee waives any right it may have in any  jurisdiction to pay any
         amount under the Transaction Documents in a currency other than that in
         which it is expressed to be payable.

19.4     NOTIFICATION OF INDEMNITY CLAIMS

         Without  prejudice  to the  provisions  of this  Clause 19 and  without
         limiting in any way, or being a condition  precedent or subsequent  to,
         the indemnities in favour of any Indemnifiable Person under this Master
         Agreement, the Lessor will:

         (a)  notify the Lessee in  writing  as soon as  reasonably  practicable
              after  receipt  by the Lessor of notice of a  Liability  (provided
              such notice is in writing), such notification to give such details
              as the Lessor  then has and which are,  in all the  circumstances,
              reasonable  having  regard  to the  contents  of the  notice  of a
              Liability  received  by the  Lessor  and any other  knowledge  the
              Lessor may have regarding that Liability; and

         (b)  where  reasonably  practicable  notify the Lessee of the  Lessor's
              intention to pay or ensure the payment of any monies in respect of
              that Liability before any payment is made.

19.5     RECOVERIES FROM THIRD PARTIES

         If any  Indemnifiable  Person  recovers from, or is paid by, any person
         (other  than the Lessee)  any amount  (other than under  Clause 20 (Tax
         indemnity  and other  provisions))  in respect of any payments  paid or
         discharged   by  the  Lessee   under  this   Clause  19,  then  if  the
         Indemnifiable Person has received payment of such amount and the Lessor
         is  satisfied  that  such  amount  is  unconditionally   available  for
         retention by the Indemnifiable  Person, the Lessor will ensure that the
         Lessee  is paid a sum  equal  to the  value of such  recovered  or paid
         amount,  such  payment  to  the  Lessee  to be  subject  always  to the
         provisions of Clause 20 (Tax indemnity and other provisions).

19.6     NOTIFICATION AND CONSULTATION

(a)      If the Lessor  becomes aware of any matter which gives rise to or would
         give rise to a liability  for which the Lessee  indemnifies  the Lessor
         under this Clause 19 then the Lessor shall notify the Lessee in writing
         accordingly.

(b)      If  reasonably  requested  by the Lessee in writing,  the Lessor  shall
         discuss with the Lessee what action to take in relation to such matter.
         The Lessor undertakes to consider in good faith any suggestions made by
         the Lessee in this regard.

(c)      If, contrary to any such suggestion from the Lessee, the Lessor decides
         that it wishes to settle or  compromise  any claim or not to defend any
         claim,  then the  Lessor  and the  Lessee  shall  identify  a  mutually
         acceptable  leading  counsel who shall be  instructed  to consider  the
         merits of the claim and any  settlement  offer  proposed by the Lessee.
         If, in the opinion of such leading counsel, there is a greater than 50%
         chance of such defence succeeding or of the claimant being awarded less
         than the settlement  offer, the Lessor shall comply with the suggestion
         of the Lessee to reject the settlement or proposal made by the claimant
         and/or  defend  the  claim,   PROVIDED   THAT  the  Lessee,   in  terms
         satisfactory to the Lessor agrees to indemnify and keep indemnified the
         Lessor on an after tax basis, in respect of all costs, claims, demands,
         losses and  expenses  suffered or  incurred by the Lessor in  rejecting
         such settlement offer and for defending the claim  (including,  without
         prejudice to the generality of the  foregoing,  such costs and expenses
         relating to court  proceedings  and any appeals against the decision of
         any  court in  favour  of the  claimant  in part or in whole) . For the
         avoidance of doubt,  the Lessee agrees that,  without the prior written

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         consent of the Lessor  (which the Lessor shall have full  discretion to
         withhold),  it  shall  not be  entitled  to use  the  Lessor's  name in
         connection with any claim.

20.      TAX INDEMNITY AND OTHER PROVISIONS

20.1     GENERAL TAX INDEMNITY

(a)      The Lessee shall indemnify each Indemnifiable Person on demand and keep
         that  Indemnifiable  Person  fully  indemnified  at all times on a full
         indemnity  and  after  tax  basis  from  and  against  any  and all Tax
         Liabilities of each Indemnifiable Person in respect of:

         (i)   the  Equipment   which  has  been  delivered  under  this  Master
               Agreement or any right, title or interest therein;

         (ii)  this Master Agreement,  or any of the other Transaction Documents
               or any  document,  payment or  transaction  contemplated  by this
               Master Agreement or any of the other Transaction Documents; and

         (iii) anything  done by any member of the Lessor  Group in  response to
               any request by the Lessee or any member of Viatel, Inc.'s Group.

(b)      The indemnities contained in Clause 20.1(a) shall not extend to any Tax
         Liability of an Indemnifiable Person to the extent:

         (i)   such Tax  Liability  is in respect  of tax on income,  profits or
               gains  attributable  to any  Rental,  Termination  Amount  or any
               amount  which  discharges  any  liability  to  pay  such  amounts
               actually  receivable  under this Master  Agreement  or any of the
               other  Transaction  Documents or to any other amounts  payable to
               and retained by the Lessor under this Master  Agreement or any of
               the  Transaction  Documents  or to any  sale  or  other  proceeds
               (including,   without  limitation,   insurance  monies)  actually
               received and  retained by the Lessor in respect of the  Equipment
               pursuant to any of the Transaction Documents;

         (ii)  against or in respect of any Tax  Liability  to an extent that it
               would  not have  arisen  or been  payable,  but for the  delay or
               failure by the Lessor or any member of the Lessor's  Group in the
               filing of Tax Returns on a due and timely basis or the payment of
               any Tax Liability  which delay or failure has not been  requested
               by the Lessee or any other member of Viatel, Inc.'s Group;

         (iii) the  matter in  respect  of which  the  obligation  to  indemnify
               arises,  results solely from any action which constitutes  wilful
               default or reckless  disregard  with  knowledge  of the  probable
               consequences of that Indemnifiable  Person or by an agent of that
               Indemnifiable Person (other than the Lessee);

         (iv)  such Tax Liability is in respect of Taxes in respect of which the
               Lessor  has  expressly  agreed  in  writing  in  any  Transaction
               Document or after the date hereof shall not be the responsibility
               of the Lessee;

         (v)   such Tax Liability is in respect of VAT;

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         (vi)  such Tax Liability is in respect of Taxes withheld or deducted at
               the source to the extent  such Taxes are  required to be withheld
               or deducted and are not based on a Change in Law;

         (vii) such Tax  Liability  is in  respect  of any  costs  for which the
               Lessee is liable to make payment pursuant to Clause 21 (Increased
               Costs and Funding Problems); or

         (viii)such Tax  Liability  is  suffered by the Lessor in respect of the
               payment  of a sum by way of  indemnity  pursuant  to this  Master
               Agreement or any other Lease Document.

(c)      The Lessor shall,  at the request and expense of the Lessee,  provide a
         certificate  from its accountants as to the amount of any Tax Liability
         which it claims from the Lessee under Clause 20.1.

(d)      If the Lessor or any Indemnifiable Person becomes aware of any Taxes in
         respect  of which the  Lessee  may be  required  to make a  payment  or
         increased  payment pursuant to this Clause 20.1, then, to the extent it
         can do so without  disclosing  the  affairs of its other  customers  or
         matters relating to its business which it regards as confidential,  the
         Lessor or such  Indemnifiable  Person (as the case may be) shall notify
         the Lessee in  writing  accordingly.  If  reasonably  requested  by the
         Lessee in writing, the Lessor or such Indemnifiable Person (as the case
         may be) shall  discuss  with the Lessee what action to take in relation
         to such Taxes.  The Lessor or any  Indemnifiable  Person  undertakes to
         consider  in good  faith  any  suggestions  made by the  Lessee in this
         regard,  but the  Lessee  recognises  that  neither  the Lessor nor any
         Indemnifiable  Person shall be bound to comply with such suggestions or
         appeal  against any assessment to tax or the rejection of any claim for
         relief,  and the Lessor or any Indemnifiable  Person may acting in good
         faith  settle  or  compromise  any  claim by any Tax  authority  in its
         absolute discretion.  If the Lessor or any Indemnifiable Person (as the
         case may be) at the  written  request of the Lessee does  challenge  or
         appeal any matter in  relation  to Taxes  which are the subject of this
         Clause  20.1(d),   the  Lessee  shall  indemnify  the  Lessor  or  that
         Indemnifiable  Person (as the case may be),  on an after tax basis,  in
         respect of all costs, claims,  demands, losses and expenses suffered or
         incurred by the Lessor or the relevant  Indemnifiable  Person in making
         such  challenge  or  appeal   (including,   without  prejudice  to  the
         generality  of the  foregoing,  such  costs and  expenses  relating  to
         appeals against the decision of any court in favour of the relevant Tax
         authority in part or in whole).

20.2     NON-DEDUCTIBILITY OF PAYMENTS BY LESSOR AND LESSOR RISK PARTIES

(a)      Notwithstanding  anything contained in the foregoing provisions of this
         Master  Agreement,  if any sum payable by or on behalf of the Lessor or
         any Lessor Risk Party under this Master  Agreement  or under any of the
         other Transaction  Documents will not or may not be fully deductible by
         the  Lessor  or the  relevant  Lessor  Risk  Party for the  purpose  of
         computing  its  liability to Taxes,  the Lessor or the relevant  Lessor
         Risk Party shall be entitled to  withhold  from any such  payment  such
         amount as the Lessor or the relevant  Lessor Risk Party shall determine
         in good faith to be required to put the Lessor or the  relevant  Lessor
         Risk Party in the same after-Tax  position as it would have been in had
         the  payment  been  fully  deductible  and any  receipt  by the  Lessor
         relating to that payment had been taxable.

(b)      If all or any part of such payment by the Lessor or the relevant Lessor
         Risk Party is made  without any such  withholding  by the Lessor or the
         relevant  Lessor  Risk  Party  (including,   without   limitation,   in
         circumstances  where the Lessor or the  relevant  Lessor  Risk Party is
         required to make a payment  without  such  withholding  pursuant to the
         provisions of this Master Agreement or any other Transaction  Document)
         and it  subsequently  proves  that  such  payment  (or any part of such

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         payment) is not  deductible  by the Lessor or the relevant  Lessor Risk
         Party as aforesaid, the Lessee shall on demand pay to the Lessor or the
         relevant  Lessor  Risk  Party by way of  indemnity  such  amount as the
         Lessor or the relevant  Lessor Risk Party shall determine in good faith
         to be  required  to put it in the same  after-Tax  position as it would
         have been in had the payment been fully  deductible  (after taking into
         account any  financial or cash flow  advantage or  disadvantage  to the
         Lessor or the relevant  Lessor Risk Party  resulting from the making of
         such payment).

(c)      If any payment is initially  made by the Lessor or the relevant  Lessor
         Risk Party subject to a withholding pursuant to this Clause 20.2 on the
         basis  that it is not an  allowable  deduction,  or that it will not be
         allowed as a deduction of the Lessor or the relevant  Lessor Risk Party
         for tax  purposes in the  financial  year of the Lessor or the relevant
         Lessor  Risk  Party  in  which it is  incurred  and it is  subsequently
         determined that it is so deductible,  such payment shall be made by the
         Lessor or the relevant Lessor Risk Party to the Lessee as the Lessor or
         the  relevant   Lessor  Risk  Party  shall   determine  in  good  faith
         appropriate  in order to put the  Lessor or the  relevant  Lessor  Risk
         Party in the same  after-Tax  position as it would have been in had the
         payment been fully  deductible and no withholding  had been made (after
         taking  into  account  any   financial   or  cash  flow   advantage  or
         disadvantage  received or suffered by the Lessor or the relevant Lessor
         Risk Party).

20.3     STAMP TAXES ETC.

         Without  prejudice  to the  generality  of  Clause  20.1  (General  Tax
         Indemnity),  the Lessee shall, on demand,  pay all stamp,  registration
         and  documentary  Taxes to which this  Master  Agreement  or any of the
         other Transaction  Documents is or at any time may be subject and shall
         indemnify  the Lessor and each Lessor Risk Party on demand  against any
         Losses  resulting  from any  failure  to pay or any delay in paying any
         such Taxes PROVIDED THAT the Lessor and each Lessor Risk Party shall be
         entitled  (but not obliged) to pay any such Taxes  (whether or not they
         are its primary  responsibility)  whereupon the Lessee shall  indemnify
         the Lessor and each  Lessor  Risk  Party on demand  against  any Losses
         resulting  from  any  failure  to pay or any  delay  on the part of the
         Lessee in paying any such Taxes and any  reasonable and proper costs or
         expenses incurred by the Lessor in relation thereto.

20.4     INSUFFICIENCY OF INDEMNITY PAYMENTS

(a)      If the  Lessor or any Lessor  Risk  Party  makes a payment or suffers a
         loss in respect of which it is entitled to be indemnified or reimbursed
         or otherwise  kept  harmless  pursuant to any  provision of this Master
         Agreement or any of the other  Transaction  Documents and the Lessor or
         the relevant Lessor Risk Party reasonably determines in good faith, and
         if reasonably  requested by the Lessee,  based on written advice of the
         Lessor's solicitors, accountants or counsel specialising in tax matters
         (a copy of which is provided to the Lessee) that:

         (i)   the loss or payment is not or is unlikely to be wholly deductible
               in  computing  the profits of the Lessor or the  relevant  Lessor
               Risk Party for the purposes of computing its Tax Liability whilst
               the payment to be made by way of indemnity or reimbursement  (for
               the purpose of this Clause  20.4(a),  the  "PAYMENT")  will or is
               likely to give rise to a Tax Liability for the Lessor; or

         (ii)  the Payment will or is likely to give rise to a Tax Liability for
               the Lessor or the  relevant  Lessor  Risk Party in any  financial
               year of the Lessor or the relevant Lessor Risk Party earlier than
               the  financial  year in which the loss or payment is or is likely
               to be  deductible,  then,  at the time of the  Payment the Lessee

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               shall  pay such an amount  (the  "ADDITIONAL  PAYMENT")  as will,
               after taking into account any Tax Liability likely to be suffered
               or  incurred by the Lessor or the  relevant  Lessor Risk Party in
               respect  of the  Payment  or the  Additional  Payment,  leave the
               Lessor or the  relevant  Lessor  Risk  Party in no better  and no
               worse an after Tax  position  than it would  have been in had the
               Payment not given rise to any such Tax  Liability and the loss or
               payment had not been so  deductible  PROVIDED THAT if at the time
               of the  Payment  the  Lessor or the  relevant  Lessor  Risk Party
               considers   that  no   Additional   Payment  is   necessary   but
               subsequently  determines acting reasonably and in good faith, and
               if reasonably requested by the Lessee, based on written advice of
               the Lessor's  solicitors,  accountants or counsel specialising in
               tax matters (a copy of which is  provided to the Lessee)  that an
               Additional  Payment is necessary so as to indemnify the Lessor or
               the relevant Lessor Risk Party,  the Additional  Payment shall be
               paid by the  Lessee to the  Lessor or the  relevant  Lessor  Risk
               Party following  demand by the Lessor or the Relevant Lessor Risk
               Party. At the Lessee's request,  the Lessor shall, as a condition
               to the  payment  of any  Additional  Amounts  under  this  Clause
               20.4(a),  provide  the Lessee with a schedule  setting  forth the
               Lessor's  calculations of any Additional  Payment  computed under
               this Clause 20.4(a),  and the Lessor shall reasonably and in good
               faith  co-operate  with the Lessee to  respond  to any  questions
               raised by the Lessee with respect to such calculations.

(b)      Without  prejudice  to the  generality  of  Clause  20.1  (General  Tax
         Indemnity),  if and to the extent that the Lessor reasonably determines
         in good faith (and if  reasonably  requested  by the  Lessee,  based on
         written  advice of the  Lessor's  solicitors,  accountants  or  counsel
         specialising  in tax  matters  (a  copy of  which  is  provided  to the
         Lessee)) that any sum (the "INDEMNITY SUM")  constituting  (directly or
         indirectly)  an  indemnity  to the Lessor but paid by the Lessee  under
         this Master Agreement or any other  Transaction  Document to any person
         other than the Lessor,  shall be treated as taxable in the hands of the
         Lessor,  the Lessee  shall  promptly  pay to the  Lessor  such sum (the
         "CORRESPONDING  SUM") as (after taking into account any Taxes  suffered
         by the Lessor on the Corresponding  Sum and any Tax deduction  received
         by the Lessor in respect of the payment  giving rise to the  indemnity)
         shall  reimburse the Lessor for any Taxes  suffered by it in respect of
         the  Indemnity  Sum after  taking into  account any  deduction  for tax
         purposes  obtained  by the  Lessor in  respect  of the  payment  of the
         Indemnity Sum.

20.5     PAYMENTS BY LESSEE

(a)      All  payments  due to or by the Lessor and each other Lessor Risk Party
         under  this  Agreement  and the other  Transaction  Documents  shall be
         calculated and made free and clear of and without  deduction for, or on
         account of, any present or future Taxes or other  charges of whatsoever
         nature,  now  or  hereafter  imposed  by  any  taxing  or  Governmental
         Authority  whatsoever  unless such deduction or withholding is required
         by law.

(b)      If such deduction or withholding is required by any law, regulation or
         regulatory requirement the Lessee shall:

         (i)   if the  payment  is to be made by the  Lessee,  ensure or procure
               that the  deduction or  withholding  is made and that it does not
               exceed the minimum legal requirement therefor;

         (ii)  pay,  or procure  the  payment  of, the full  amount  deducted or
               withheld  to  the  relevant   Taxation  or  other   authority  in
               accordance with the Applicable Law;

         (iii) (A)  if the  deduction  or  withholding  is so required  due to a
                    Change  in Law  and  if the  payment  is to be  made  by the
                    Lessee,  increase  the  payment  in  respect  of  which  the
                    deduction or  withholding is required so that the net amount
                    received  by the Lessor or the  relevant  other  Lessor Risk

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                    Party after the deduction or  withholding  shall be equal to
                    the amount  which the Lessor or the  relevant  other  Lessor
                    Risk Party (as the case may be) would have been  entitled to
                    receive  in  the  absence  of  any  requirement  to  make  a
                    deduction or withholding; or

               (B)  if the  deduction  or  withholding  is so required  due to a
                    Change in Law and if the payment is to be made by any person
                    other than the Lessee,  procure the payment or pay  directly
                    to the Lessor such sum (a "COMPENSATING SUM") as will, after
                    taking into account any  deduction or  withholding  which is
                    required  to be made in  respect  of the  Compensating  Sum,
                    result in the Lessor  or, as the case may be,  the  relevant
                    other Lessor Risk Party  receiving,  or, as the case may be,
                    paying, on the due date for payment,  a net sum equal to the
                    sum which the Lessor  or, as the case may be,  the  relevant
                    other Lessor Risk Party would have  received or, as the case
                    may be,  paid in the  absence  of any  obligation  to make a
                    deduction or withholding; and

         (iv)  promptly  deliver or procure  the  delivery  to the Lessor of any
               appropriate  receipts  evidencing  the  deduction or  withholding
               which has been made, or (in the absence of such receipts) provide
               a  certification  to the Lessor of the  deduction or  withholding
               made.

(c)      Each Indemnifiable Person agrees to furnish to the Lessee from time to
         time such duly executed and properly completed forms or certificates
         that are reasonably requested by the Lessee in order to claim any
         reduction of or exemption from any withholding or other tax imposed by
         any taxing authority in respect of any payments otherwise required to
         be made by the Lessee pursuant to this Master Agreement or other
         Transaction Document, which reduction or exemption may be available to
         such Indemnifiable Person under Applicable Law.

20.6     TAXATION UNDERTAKINGS

         The Lessee  hereby  undertakes  to the Lessor  from the date hereof and
         thereafter until the sale or other  disposition of all of the Equipment
         following the expiry or termination of the Initial Term that it will:

         (a)   Pay Taxes

               duly pay and  discharge  or cause to be paid and  discharged  all
               Taxes,  assessments  and  governmental  charges  levied  upon the
               Lessee or its  property  and  lawfully  payable  by the Lessee in
               respect of, or on the  Equipment,  not later than the due date of
               payment,  except  to the  extent  there is a good  faith  contest
               thereof by appropriate  proceedings by the Lessee,  PROVIDED THAT
               the  Lessee  shall  not be  required  to pay  and  discharge  any
               interest or penalties in relation to such Taxes,  assessments  or
               Governmental  Authority  charges to the extent that such interest
               or penalties would not have arisen but for an unreasonable  delay
               by the  Lessor in  notifying  the Lessee of the  relevant  Taxes,
               assessment or charge as soon as reasonably  practicable following
               the Lessor becoming aware of such Taxes,  assessment or charge in
               circumstances when the Lessee did not, at such time, know of such
               Taxes,  assessment  or charge  (and  would not have  known of the
               existence  of  such  Taxes,   assessment   or  charge  on  making
               reasonable enquiries).

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         (b)   Taxation authorities

               as soon as reasonably  practicable after the Lessee, has received
               a  request  from any  Inland  Revenue  or H.M.  Customs  & Excise
               official  (or any person  from an  equivalent  body in a Relevant
               Country)  inform  the  Lessor of that  request,  furnish  to that
               official such  information as may be in the possession or control
               of the Lessee and as may be  required  by that  official to be so
               furnished  about any Equipment or the leasing of the Equipment or
               the use to  which  the  same is being or has been put and will as
               soon as  reasonably  practicable  after receipt of a request from
               the Lessor furnish to the Lessor such  information  and documents
               in the  possession  or control of the Lessee and which the Lessor
               requires in order to enable the Lessor to respond to a request of
               the Lessor from such an official.

20.7     VALUE ADDED TAX

(a)      All  payments  made by the Lessee under this Master  Agreement  and the
         other  Transaction  Documents are calculated  without regard to VAT. If
         any such payment constitutes the whole or any part of the consideration
         for a taxable or deemed taxable supply  (whether that supply is taxable
         pursuant to the exercise of an option or otherwise) by the Lessor,  the
         amount of that  payment  shall be  increased  by an amount equal to the
         amount of VAT which is chargeable  in respect of the taxable  supply in
         question subject to the production by the Lessor of a valid VAT invoice
         (where applicable) in respect of the VAT in question.

(b)      In respect of each item of Equipment,  subject to the production by the
         Lessor of a valid VAT invoice (where  applicable) in respect of the VAT
         in question,  the Lessee shall pay to the Lessor on or before the fifth
         (5th)  Business Day preceding the date on which the relevant VAT is due
         to be  accounted  for by the  Lessor  to H.M.  Customs  & Excise or any
         equivalent body in a Relevant  Country an amount equal to the amount of
         VAT for which the Lessor is obliged to account to H.M. Customs & Excise
         or any equivalent  body in a Relevant  Country in respect of the supply
         under this Master  Agreement  and the relevant  Lease  Schedule of such
         item of Equipment.

(c)      If, in respect of any item of Equipment, the Lessor determines that the
         consideration  for the supply  thereof under this Master  Agreement and
         the relevant Lease Schedule is increased or decreased, then:

         (i)   if the  consideration  for the  supply is  increased,  the Lessee
               shall pay to the Lessor on demand (or, if later five (5) Business
               Days before the same is due to be accounted  for by the Lessor to
               H.M.  Customs  &  Excise  or any  equivalent  body in a  Relevant
               Country)  an amount  equal to the  amount of  additional  VAT for
               which the Lessor is  obliged to account to H.M.  Customs & Excise
               or any equivalent body in a Relevant Country; and

         (ii)  if the  consideration  for the  supply is  decreased,  the Lessor
               shall issue a credit note to the Lessee in an amount equal to the
               credit which the Lessor claims from H.M.  Customs & Excise or any
               equivalent body in a Relevant Country in respect of the reduction
               in consideration, and that amount shall be deducted from the next
               payment  of  Periodic  Rent due from the Lessee in respect of the
               relevant  item of Equipment or shall be  reimbursed to the Lessee
               within two (2) Business  Days of demand by the Lessee if there is
               no further payment of Periodic Rent due or to the extent that the
               next such payment is less than the amount in question.

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(d)      Any  payment  or other  consideration  to be made or  furnished  by the
         Lessor to the Lessee  pursuant  to or in  connection  with this  Master
         Agreement or any of the other Transaction  Documents or any transaction
         or document contemplated herein or therein may be increased or added to
         by reference to (or as a result of any increase in the rate of) any VAT
         which  shall be or may become  chargeable  in  respect  of the  taxable
         supply  in  question  on  the  basis  that  the  relevant   payment  or
         consideration is stated on an exclusive of VAT basis.

(e)      If and to the extent that the Lessor (or any  company  which is treated
         as a member of the same group as the Lessor for VAT purposes) bears VAT
         which is Irrecoverable  VAT then the Lessee shall on or within five (5)
         Business Days of demand  indemnify and keep indemnified the Lessor upon
         demand against such Irrecoverable VAT such indemnity being in an amount
         equal to the  after-Tax  cost to the Lessor of such  Irrecoverable  VAT
         together  with  interest  thereon at the rate of LIBOR  calculated on a
         seven day basis and  compounded  quarterly from the date upon which the
         Lessor  made  payment  of the amount of such  Irrecoverable  VAT to but
         excluding the date of payment of the amount of the indemnity.

20.8     DUE DATE OF PAYMENT IN RESPECT OF TAX LIABILITIES

         Where the Lessee  becomes  liable to make any payment  pursuant to this
         Master Agreement or in relation to any Transaction  Document in respect
         of a Tax  Liability  suffered or incurred by the Lessor or, as the case
         may be, any of the Lessor Risk Parties,  the due date for the making of
         that payment shall be:

         (a)  in a case that involves an actual payment of Tax, the later of (i)
              three Business Days before the last date that is the date on which
              the Lessor or, as the case may be, the relevant  Lessor Risk Party
              has to pay to the appropriate tax authority the Tax that has given
              rise to the  Lessee's  liability  under this Master  Agreement  in
              order to avoid  incurring  a  liability  or a charge or penalty in
              respect of that Tax  Liability  and (ii) the date  falling  twenty
              Business  Days after the Lessee has been notified by the Lessor in
              accordance  with  Clause  29  (Notices)  that  the  Lessee  has  a
              liability for an amount under this Agreement; or

         (b)  in a case  that  involves  the loss or  setting  off of a right to
              repayment  of Tax,  the later of (i) the date when such  repayment
              would have been due but for such loss or setting  off and (ii) the
              date falling five Business Days after the Lessee has been notified
              by the Lessor in  accordance  with  Clause 29  (Notices)  that the
              Lessee has a liability for an amount under this Agreement; or

         (c)  in a case which involves the loss or setting off of a Relief,  the
              later of (i) the date  that is the last  date on  which,  assuming
              that the  Relief  would  have been used on the first  occasion  on
              which,  but for such loss or setting  off,  the Relief  could have
              been used, the Lessor or, as the case may be, the relevant  Lessor
              Risk Party has to pay to the  appropriate  tax  authority  any Tax
              which,  but for such loss or setting off, would have been saved by
              virtue of the Relief in order to avoid  incurring a  liability  to
              interest  or a charge or penalty in respect of that Tax  Liability
              and (ii) the date falling five  Business Days after the Lessee has
              been  notified  by  the  Lessor,  in  accordance  with  Clause  29
              (Notices),  that the Lessee has a  liability  for an amount  under
              this Agreement; or

         (d)  in any other case,  the date falling five  Business Days after the
              date when the Lessee has been notified by the Lessor in accordance
              with Clause 29  (Notices)  that the Lessee has a liability  for an
              amount under this Agreement.

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20.9     MITIGATION

(a)      Without  prejudice  to the  provisions  of Clauses  20.5  (Payments  by
         Lessee),  21.1  (Increased  Costs),  21.3  (Funding  Problems)  and  34
         (Illegality),  the Lessor confirms that if any of the circumstances set
         out in Clauses 20.5 (Payments by Lessee),  21.1 (Increased Costs), 21.3
         (Funding Problems) and 34 (Illegality) arise as a result of a Change in
         Law and,  if the Lessee so  requests,  the Lessor  shall  consult for a
         period not exceeding  thirty (30) days with the Lessee (at the Lessee's
         cost)  with a view to  finding a means for  reducing  or  avoiding  the
         withholding  or increased  cost or reduction in its return or reduction
         in the  amount of any  payment  received  or  avoiding  the  illegality
         (including,   without  limitation,   by  transferring  its  rights  and
         obligations  or the rights and  obligations  of any other  Lessor  Risk
         Party  under the  Transaction  Documents  to another  branch  office or
         another  person)  PROVIDED  THAT the  Lessor  shall  not be  under  any
         obligation to enter into, or to continue with, such consultations or to
         take, or to continue,  any such action if, in its bona fide opinion, to
         do so would be likely to (a) have an adverse  effect upon its business,
         operation  or  financial  condition,  or  (b)  result  in  its  rights,
         interests,  anticipated  financial  return  or  position  under  or  in
         relation to any of the  Transaction  Documents  being  materially  less
         favourable  to it than would  have been the case in the  absence of the
         relevant withholding or increased cost unless indemnified or secured to
         its satisfaction in respect thereof,  or (c) involve it in any unlawful
         act  or  activity  or  (d)  (unless   indemnified  or  secured  to  its
         satisfaction)  involve it in any  liability to Tax or any expense which
         is  significant  in the bona fide opinion of the Lessor or the relevant
         Lessor Risk Party or (e) involve it in any  disclosure of any documents
         and/or  information  relating  to its  business  or  affairs  which  it
         considers (in its bona fide opinion) to be of a confidential nature. If
         the relevant event falls within Clause 21.1 (Increased Costs) or Clause
         34 (Illegality) and by the end of any such thirty (30) day consultation
         period, no agreement has been reached between the Lessee and the Lessor
         in respect  of any such  increased  cost or  illegality  affecting  the
         relevant Lessor Risk Party (the "AFFECTED PARTY"),  the Lessee shall be
         entitled  to  nominate a bank or  financial  institution  (the  "LESSEE
         NOMINEE")  to  replace  the  Affected  Party  and,  following  any such
         nomination,  the Lessor shall take such reasonable  action as is within
         its power to effect  within a reasonable  time a transfer of the rights
         and obligations of such Affected Party under the Transaction  Documents
         to such Lessee Nominee.

(b)      The  provisions  of Clause  20.9  above are  without  prejudice  to the
         provisions  of Clauses  20.5  (Payments  by  Lessee),  21.1  (Increased
         Costs),  21.3 (Funding  problems) and 34  (Illegality)  which remain in
         full force and effect  subject  only as affected by the  provisions  of
         Clause 20.2.

20.10    [Redacted] WITHHOLDING TAX

         Subject to Clause  20.5,  any amount  expressed  to be payable or to be
         calculated  under  this  Master  Agreement  is, or, as the case may be,
         shall be expressed as a minimum payment,  net of any applicable legally
         required   withholding  for  [Redacted]   withholding  taxes.  For  the
         avoidance  of doubt,  the Lessor  agrees that if it  recovers  from the
         Lessee an amount in respect of a deduction or  withholding  pursuant to
         Clause  20.5,  it cannot make a claim  against the Lessee in respect of
         the same deduction or withholding under this Clause 20.10.

21.      INCREASED COSTS AND FUNDING PROBLEMS

21.1     INCREASED COSTS

(a)      Subject to Clause 21.2  (Exceptions),  the Lessee  shall  forthwith  on
         demand by the Lessor pay to the Lessor the amount of any increased cost
         incurred  by the  Lessor,  any other  member of the Lessor  Group,  any

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<PAGE>

         Lessor Risk Party or any other member of any Lessor Risk Party's  Group
         as a result of the introduction of or compliance with any Change in Law
         (including  any law or  regulation  relating to change in currency of a
         country, or reserve asset,  special deposit,  cash ratio,  liquidity or
         capital adequacy  requirements or any other form of banking or monetary
         control).  Any request for  payment  from the Lessee  under this Clause
         21.1(a) shall be made in writing and shall set forth the basis therefor
         and the calculation thereof in reasonable detail.

(b)      In this Master Agreement "INCREASED COSTS" means:

         (i)   a cost or  additional  cost  incurred  by the  Lessor,  any other
               member of the Lessor  Group,  any Lessor  Risk Party or any other
               member of the relevant  Lessor Risk Party's  Group as a result of
               it having entered into, or performing, maintaining or funding its
               obligations  under or pursuant  to, this Master  Agreement or any
               other Transaction Document; or

         (ii)  that portion of a cost or additional cost incurred by the Lessor,
               any other  member of the Lessor  Group,  any Lessor Risk Party or
               any other  member of the relevant  Lessor Risk  Party's  Group in
               making payment of,  funding or maintaining  all or any amounts of
               Capital  Outstanding  or all or any  commitments  or  obligations
               under or in connection  with this Master  Agreement or any of the
               other  Transaction  Documents  as is  attributable  to it  making
               payment  of,  funding  or   maintaining   such  amounts  or  such
               commitments or obligations; or

         (iii) a reduction in any amount payable to the Lessor, any other member
               of the Lessor Group, any Lessor Risk Party or any other member of
               the relevant Lessor Risk Party's Group or in the effective return
               to the Lessor,  any other member of the Lessor Group,  any Lessor
               Risk  Party or any  other  member  of the  relevant  Lessor  Risk
               Party's   Group  under  this  Master   Agreement   or  any  other
               Transaction Document or (to the extent that it is attributable to
               this Master Agreement or any other  Transaction  Document) on its
               capital; or

         (iv)  the amount of any payment made by the Lessor, any other member of
               the Lessor  Group,  any Lessor Risk Party or any other  member of
               the  relevant  Lessor  Risk  Party's  Group or the  amount of any
               interest or other return foregone by the Lessor, any other member
               of the Lessor Group, any Lessor Risk Party or any other member of
               the relevant Lessor Risk Party's Group calculated by reference to
               any amount received or receivable by the Lessor, any other member
               of the Lessor Group, any Lessor Risk Party or any other member of
               the relevant  Lessor Risk Party's  Group under any of this Master
               Agreement and the other Transaction Documents.

(c)      When  calculating an increased  cost, the Lessor may allocate or spread
         costs, liabilities and losses to or across the liabilities or assets of
         itself,  any other member of the Lessor Group, any Lessor Risk Party or
         any other member of the relevant  Lessor Risk Party's Group,  any class
         of such  liabilities  or assets,  and on such  basis,  as it  considers
         appropriate.  Nothing  contained  in this  Clause 21 shall  oblige  the
         Lessor or any Lessor Risk Party to disclose any information relating to
         the way in which they and members of the Lessor  Group or any member of
         the relevant  Lessor Risk Party's Group employ their capital or arrange
         their internal financial affairs.

21.2     EXCEPTIONS

         Clause 21.1 (Increased  costs) does not apply to any increased costs to
         the extent compensated for by the operation of Clause 20 (Tax indemnity
         and other provisions).

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21.3     FUNDING PROBLEMS

         [Redacted]

22.      CHANGES TO THE PARTIES

22.1     SUCCESSORS AND ASSIGNS

         The provisions of this Master Agreement shall be binding upon and inure
         to the  benefit  of the  Parties  and their  successors  and  permitted
         assigns and transferees.

22.2     DEALINGS BY THE LESSEE

         The Lessee will not sell,  assign or otherwise  transfer their interest
         in this Master Agreement without the consent of the Lessor.

22.3     DEALINGS BY THE LESSOR

(a)      Subject to Clause 22.4 the Lessor may:

         (i)   transfer  or assign the whole or any part of its rights in and to
               this Master Agreement, the Equipment and the Lease Schedules to a
               member of the  Lessor's  Group,  a member of the Nortel  Networks
               Group or the Seller; or

         (ii)  transfer  or assign the whole or any part of its rights in and to
               this Master Agreement, the Equipment and the Lease Schedules to a
               third party provided that the Lessor obtains the written  consent
               of  the  Lessee  and  Viatel,   Inc.  (such  consent  not  to  be
               unreasonably withheld,  conditioned or delayed). No such transfer
               or assignment  shall be effective,  and payments  hereunder shall

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<PAGE>

               continue to be payable to the Lessor  unless and until the Lessor
               gives  notice  to the  Lessee  in  writing  of such  transfer  or
               assignment.  Immediately upon receipt of such notice,  the Lessee
               shall  record  such  transfer  or  assignment,  and the  name and
               address of the  transferee  on a register  maintained to show the
               ownership  of  the  Lessor's   interest   hereunder  and  in  the
               Equipment;

(b)      It is a condition of any transfer or assignment under Clause 22.3(a)
         above, that:

         (i)   equivalent  rights and  obligations of the Lessor under the other
               Transaction Documents are transferred to such company at the same
               time;

         (ii)  any costs and expenses  (including stamp duties) properly payable
               in respect of any such transfer will be for the Lessor's account;

         (iii) the Lessor shall use all reasonable endeavours (and shall consult
               in good  faith  with  the  Lessee  to try to  determine  the most
               appropriate   course  of  action)  to  ensure  that  no  proposed
               transferee shall have a domicile for Tax purposes which would, as
               a result of such proposed  transferee  entering into the relevant
               Transaction  Documents,  result in  obligations  of the Lessee to
               withhold Taxes from payments  hereunder  which  obligations  they
               were not under prior to the transfer.  If the Lessor does not use
               all  such  reasonable  endeavours,  then the  obligations  of the
               Lessee  shall be limited to the extent  which would have  applied
               had no such transfer taken place.  The Lessee shall  otherwise be
               liable for any such increased obligations;

         (iv)  the transferee or assignee has acknowledged the Lessee's right to
               quiet  enjoyment  in respect of the  Equipment  under  Clause 2.2
               (Quiet Enjoyment) of this Master Agreement;

         (v)   before  the  assignment  or  transfer,  and  after  the  proposed
               transferee  has entered into a written  non-disclosure  agreement
               substantially  in  the  form  of  Schedule  5  (Form  of  written
               non-disclosure  agreement)  (or such other form as may be agreed)
               the Lessee will:

               (A)  make a copy of Viatel, Inc.'s business plan available to any
                    proposed assignee or transferee;

               (B)  provide  management time to discuss for a reasonable  amount
                    of time that  business  plan with the assignee or transferee
                    during normal business hours; and

               (C)  provide  all  information  including  (but not  limited  to)
                    documents,   management   or  other  reports  and  financial
                    statements  as may  reasonably be requested by that assignee
                    or transferee.

(c)      Upon any transfer under Clause 22.3(a) the transferring  Lessor will be
         released  from all its  obligations  to the Lessee  under  this  Master
         Agreement and the other  Transaction  Documents other than  obligations
         which the  transferring  Lessor has not so transferred and which remain
         outstanding.  The Lessee will enter into such  documents  as the Lessor
         may  reasonably   require  in  order  to  effect  such  a  transfer  or
         assignment.

22.4     LEASE PARTICIPATION ARRANGEMENTS

         The Lessor may enter into Lease  Participation  Arrangements in respect
         of the whole or any part of its  right,  title and  interest  in and to
         this Master  Agreement,  the  Equipment  and any Lease  Schedule with a

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         Lessor  Risk  Party  subject to the terms and  conditions  of any Lease
         Schedule provided that:

         (a)  the amount  sub-participated to a Lease Participant  pursuant to a
              Lease  Participation  Arrangement  is not less than  five  million
              Euros (E5,000,000);

         (b)  the Lessor shall not enter into Lease  Participation  Arrangements
              with any person or entity who could reasonably be regarded (at the
              time of entry into such  Lease  Participation  Arrangements)  as a
              competitor to the main business carried on by Viatel, Inc. at that
              time;

         (c)  the Lessor  shall  consult  in good  faith with the Lessee  (for a
              reasonable  period  of time not to  exceed  10  business  days) in
              respect of the identity of any proposed Lease Participant;

         (d)  the Lease Participant is an entity:

              (i)   which is a bank, insurance company, investment bank, pension
                    fund or any other  financial  institution  or  institutional
                    investor; or

              (ii)  which, as part of its normal activities  conducts or engages
                    in investment business.

         (e)  the Lessee  continues to enjoy the right to the quiet enjoyment of
              the Equipment as set out in Clause 2.2 (Quiet Enjoyment);

         (f)  before entry into the Lease Participant Arrangements and after the
              proposed sub-participant has entered into a written non-disclosure
              agreement substantially in the form of Schedule 5 (Form of written
              non-disclosure agreement (or such other form as may be agreed) the
              Lessee will:

              (A)   make a copy of Viatel, Inc.'s business plan available to any
                    proposed sub-participant;

              (B)   provide  management time to discuss for a reasonable  amount
                    of time that business plan with the  sub-participant  during
                    normal business hours; and

              (C)   provide  all  information  including  (but not  limited  to)
                    documents,   management   or  other  reports  and  financial
                    statements   as  may   reasonably   be   requested  by  that
                    sub-participant; and

         (g)  if the Lease  Participant  is not a United  States person (as such
              term is used in Section  7701(a)(30 of the U.S.  Internal  Revenue
              Code  of  1986,as  amended),  such  Lease  Participant  is able to
              deliver to the Lessee a U.S.  Internal Revenue Service Form W-8BEN
              or Form  W-8ECI,  or  successor  form,  certifying  to such  Lease
              Participant's  entitlement  to  a  complete  exemption  from  U.S.
              withholding  tax  with  respect  to  the  portion  of  the  Rental
              attributable to Equipment located in the United States.

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<PAGE>

23.      COSTS, EXPENSES AND FEES

23.1     COSTS AND EXPENSES

(a)      The Lessee will  forthwith on demand pay or reimburse to the Lessor and
         Nortel Networks plc all reasonable costs and expenses  (including legal
         fees  (capped  for  the  Viatel  documentation  of the  transaction  at
         [Redacted] if documentary  closing takes place or the parties terminate
         discussions  on or before 30th  September,  2000 and at  [Redacted]  if
         documentary closing takes place or the parties terminate discussions on
         or after 1st October, 2000 but before 20th October,  2000, such figures
         being inclusive of  disbursements  but exclusive of VAT and include the
         fees of English  counsel  and  counsel  in each Tier 1  Country)  on an
         unqualified full indemnity basis, printing and publishing costs, telex,
         telephone,   facsimile  and  travel  costs,  filing,  registration  and
         approval costs and other out-of-pocket expenses) incurred by the Lessor
         in connection with:

         (i)      the   negotiation,   preparation  and   documentation  of  the
                  transactions contemplated by the Transaction Documents and any
                  amendment,  waiver or consent from time to time in  connection
                  with any of the Transaction Documents;

         (ii)     the execution of the Transaction Documents;

         (iii)    the  syndication and initial  sub-participation  by the Lessor
                  (but not any subsequent sub-participation by any then existing
                  Lessor  Risk  Parties,  the costs in respect of which shall be
                  for the account of that Lessor Risk Party);

         (iv)     the  preservation or enforcement or attempted  preservation or
                  enforcement  of any right or remedy of the Lessor or any other
                  Lessor Risk Party under or in connection  with the Transaction
                  Documents  or  the  Equipment  including  in  relation  to the
                  tracing or recovery of possession of the Equipment (whether or
                  not successful);

         (v)      the  termination of the leasing of all or any of the Equipment
                  for any  reason  including  the  collection  of any  Insurance
                  Proceeds or Compensatory Awards or the sale or disposal of any
                  of the Equipment; and

         (vi)     the  Insurances  (to the  extent  the  Lessee  has  failed  to
                  maintain  the same)  including  in  relation to any renewal or
                  changes to the terms of any policy and the operation of Clause
                  14.10 (Protection of Additional Assureds).

(b)      Subject as otherwise provided in the Transaction  Documents,  any costs
         and  expenses  incurred  by  the  Lessee  in  the  performance  of  its
         obligations or exercise of its rights under the  Transaction  Documents
         will be borne by the Lessee and the Lessor will have no  responsibility
         or liability in connection with them.

(c)      If the Lessee  fails to comply  with any of its  obligations  under the
         Transaction  Documents  the Lessor may,  but is not obliged to,  effect
         compliance  and the Lessee will  reimburse the Lessor on demand for all
         costs and expenses incurred by the Lessor in so doing.

23.2     FEES

(a)      The Lessee shall pay to the Lessor for its own account an agency fee in
         accordance with the Agent's Fee Letter.

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<PAGE>

(b)      The Lessee shall pay to the Lessor a commitment fee in accordance  with
         the Commitment Fees Letter.

(c)      The Lessee  shall pay to the Lessor a facility fee in  accordance  with
         the Facility Fee Letter.

24.      EVIDENCE AND CALCULATIONS

24.1     ACCOUNTS

         Accounts  maintained  by the  Lessor in  connection  with  this  Master
         Agreement  are  conclusive  (save for manifest  error)  evidence of the
         matters to which they relate.

24.2     CERTIFICATES AND DETERMINATIONS

         Any  certification  or  determination by the Lessor of a rate or amount
         under any of the  Transaction  Document  is, in the absence of manifest
         error, conclusive evidence of the matters to which it relates.

25.      AMENDMENTS AND WAIVERS

25.1     PROCEDURE

         The terms of this Master Agreement may not be amended or waived without
         the agreement in writing of the Lessor and the Lessee.

25.2     WAIVERS AND REMEDIES CUMULATIVE

(a)      The rights of each Party under the Transaction Documents:

         (i)   may be exercised as often as necessary;

         (ii)  are  cumulative and not exclusive of its rights under the general
               law; and

         (iii) may be waived only in writing and specifically.

(b)      Delay in exercising or  non-exercise  of any such right is not a waiver
         of that right.

(c)      Nothing in this Master  Agreement shall limit or affect a party's right
         to  recover  damages  for  breach  of the  provisions  of  this  Master
         Agreement.

26.      SET OFF

         The Lessor may set off any matured  obligation owed by the Lessee under
         the  Transaction  Documents  (to the extent  beneficially  owned by the
         Lessor)  against any  obligation  (whether or not matured)  owed by the
         Lessor  to the  Lessee,  regardless  of the place of  payment,  booking
         branch or  currency of either  obligation.  If the  obligations  are in
         different  currencies,  the Lessor may cause the Parent Bank to convert
         either  obligation  at a market rate of exchange in the usual course of
         business of the Parent  Bank for the  purpose of the setoff.  If either
         obligation is unliquidated or unascertained,  the Lessor may set off in
         an  amount  estimated  by it in good  faith  to be the  amount  of that
         obligation.

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27.      SEVERABILITY

         If a  provision  of any  Transaction  Document  is or becomes  illegal,
         invalid or unenforceable in any jurisdiction, that shall not affect:

         (a)  the validity or  enforceability  in that jurisdiction of any other
              provision of the Transaction Documents; or

         (b)  the validity or enforceability  in other  jurisdictions of that or
              any other provision of the Transaction Documents.

28.      COUNTERPARTS

         This  Agreement may be executed in any number of  counterparts,  and by
         each party in separate counterparts, and this has the same effect as if
         the signatures on the counterparts were on a single copy of this Master
         Agreement.

29.      NOTICES

29.1     GIVING OF NOTICES

         All notices or other  communications  under or in  connection  with the
         Transaction  Documents shall be given in writing and, unless  otherwise
         stated,  may be made by letter or  facsimile.  Any such  notice will be
         deemed to be given as follows:

         (a)  if by letter, when delivered personally or on actual receipt;

         (b)  if by facsimile, when received in legible form.

         However,  a notice given in accordance with the above but received on a
         non working day or after  business  hours in the place of receipt  will
         only be deemed to be given on the next working day in that place.

29.2     ADDRESSES FOR NOTICES

(a)      The address and facsimile number of the Lessor are:

         Address:       PO Box 18075
                        Riverbank House
                        2 Swan Lane
                        London
                        EC4R 3UX

         Facsimile:     +44 (0) 20 7475 9594

         Attn:          Kevin Whiting, Leasing Team

         or such  other as the  Lessor may notify to the Lessee by not less than
         five Business Days' notice.

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<PAGE>

(b)      The address and facsimile number of the Lessee are:

         Address:          Parnell House
                           25 Wilton Road
                           London
                           SW1V 1LW

         Facsimile:        +44 207 828 1907

         Attn:             General Counsel

         with a copy to:

         Address:          Viatel, Inc.
                           685 Third Avenue - 24th Floor
                           New York  NY 10017

         Facsimile:        00 1 212 350 9250

         Attn:             General Counsel

         or such  other as the  Lessee may notify to the Lessor by not less than
         five Business Days' notice.

30.      LANGUAGE

         (a)  Any  notice  given  under or in  connection  with any  Transaction
              Document shall be in English.

         (b)  All  other  documents  provided  under or in  connection  with any
              Transaction Document shall be:

              (i)   in English; or

              (ii)  if  not  in  English,  accompanied  by a  certified  English
                    translation and, in this case, the English translation shall
                    prevail unless the document is a statutory or other official
                    document.

31.      CONTINUATION OF INDEMNITIES

         The  indemnities  in this  Master  Agreement  will  continue  in  force
         notwithstanding  the end or earlier  termination of the Initial Term or
         the sale or other  disposal of any of the Equipment or the cessation of
         business of the Lessee or any other person or any other fact,  event or
         circumstance of any kind whether similar to the foregoing or not.

32.      INDEMNIFIABLE PERSONS

         (a)  All  rights  expressed  to  be  granted  to or in  favour  of  any
              Indemnifiable  Person under this Master  Agreement (other than the
              Lessor)  are given to the  Lessor on behalf  of, and in trust for,
              that Indemnifiable Person.

         (b)  Without  duplicating the liability of the Lessee under this Master
              Agreement,   where  in  this  Master  Agreement  an  indemnity  is
              expressed to be for the benefit of an Indemnifiable  Person (other
              than the  Lessor),  the Lessor will be entitled to  indemnify  the
              Indemnifiable  Person on the same  terms  (but with any  necessary

                                       89
<PAGE>

              changes) as the  indemnity  expressed to be for the benefit of the
              Indemnifiable  Person and the Lessee will on demand  indemnify the
              Lessor  and hold the Lessor  harmless  on a full  indemnity  basis
              against  each  amount  paid  or  payable  by  the  Lessor  to  the
              Indemnified Person under any such indemnity.

33.      GOVERNING LAW

         This Agreement is governed by English law.

34.      ILLEGALITY

         (a)  If it is or becomes unlawful in any jurisdiction for:

              (i)   a Lessor risk Party to give effect to any of its obligations
                    as  contemplated  by  this  Master  Agreement  or any  other
                    relevant   Transaction   Document   or   to   maintain   its
                    Participation; or

              (ii)  if it is or becomes illegal for the Lessee, either Guarantor
                    or any  Permitted  Sub-Lessee  to perform  their  respective
                    obligations under the Transaction Documents;

         the unutilised portion of the Commitment will be cancelled and will not
         be capable of being redrawn.

         (b)  The Lessee  shall pay, on any  Equipment  affected by Clause 34(a)
              above,  an amount  equivalent  to the amount  that would have been
              payable  under  paragraph  (a)(iv) of Clause 15.4  (Procedure  and
              Payments  following an Event of Loss) had that Equipment  suffered
              an Event of Loss, except that the Lessee shall pay Break Costs but
              shall not pay the Make Whole Amount.

THIS AGREEMENT has been entered into on the date stated at the beginning of this
Master Agreement.

                                       90
<PAGE>

                                   SCHEDULE 1

                                 LEASE SCHEDULE

This Lease Schedule dated the [ ] 200[0][1]("LEASE SCHEDULE"), by and between:

(1)      DRESDNER KLEINWORT BENSON FINANCE LIMITED (the "LESSOR"), and

(2)      Viatel U.K. LIMITED (the "LESSEE").

This Lease Schedule incorporates by reference the above-referenced  Master Lease
Purchase  Agreement  dated [ ], 2000 and made  between the Lessor and the Lessee
and  any  riders,  schedules,   amendments  or  documents  attached  thereto  or
incorporated  therein,  now or  hereafter  executed  between  the Lessor and the
Lessee (the  "MASTER  AGREEMENT").  Any and all  capitalised  terms used in this
Lease Schedule shall have the meanings given to them in the Master Agreement.

1.       LEASE

1.1      Subject to the terms and conditions  set forth in this Lease  Schedule,
         the Lessor  hereby  leases to the Lessee and the Lessee  hereby  leases
         from the  Lessor  the  property  described  in  Clause 3 below  and all
         Technical  Records  relating  thereto (the  "EQUIPMENT") and the lessor
         agrees to procure the Services to be provided in connection therewith.

1.2      This Lease  Schedule  evidences a separate,  distinct  and  independent
         lease and contractual  agreement  between the Lessor and the Lessee. In
         the event of a conflict  between  the Master  Agreement  and this Lease
         Schedule,  the  terms  and  conditions  of this  Lease  Schedule  shall
         prevail.

2.       EQUIPMENT

         The Lessor,  at the  express  request of the  Lessee,  has  acquired or
         agreed to  acquire  the  Equipment  from  Nortel  Networks  plc and its
         Affiliates.  The Lessor has made no  representations or recommendations
         regarding  the  choice of Nortel  Networks  plc and its  Affiliates  as
         manufacturers or suppliers.  The Lessee has negotiated or agreed to the
         warranties  given by Nortel  Networks  plc and its  Affiliates  and all
         other terms relating to the Equipment directly with Nortel Networks plc
         and its  Affiliates  without the  assistance  or  participation  of the
         Lessor.

3.       DESCRIPTION OF EQUIPMENT; LOCATION

         The description of the Equipment,  including  quantity,  model/feature,
         identification  and/or  serial  number  and  location,  is set forth in
         Attachment A incorporated by reference herein.

4.       ACQUISITION COST; INITIAL TERM; PERIODIC RENT; ASSUMED INTEREST RATE;
         RENT PAYMENT DATE

<TABLE>

<S>                                                  <C>
4.1      Acquisition Cost:                           [          ]

4.2      Total Finance Charge:                       [          ]

                                       91
<PAGE>

4.3      Initial Term:                               [Redacted]  Months from the
                                                     Initial Term Start Date

4.4      Initial Term Start Date:                    [          ]

4.5      Cost of Funds:                              [          ] per annum

4.6      Margin:                                     [          ] per annum

4.7      Periodic Rent:                              Euro [          ]]

4.8      Rental Payment Date:                        The Initial Term Start Date
                                                     and the last  Business  Day
                                                     of  each  month  during the
                                                     Initial Term.

</TABLE>

5.       EARLY TERMINATION.

         See the Schedule of Capital Outstanding attached to this Lease
         Schedule.

6.       GOVERNING LAW

         THIS LEASE  SCHEDULE  SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
         WITH, ENGLISH LAW.

IN  WITNESS  WHEREOF,  the Lessor and the  Lessee,  each by its duly  authorised
officer or agent,  have duly executed and delivered  this Lease Schedule the day
and year first written above.

DRESDNER KLEINWORT BENSON                       VIATEL U.K. LIMITED
FINANCE LIMITED
By:                                             By:

Name:                                           Name:

Title:                                          Title:

                                       92
<PAGE>

                         SCHEDULE OF CAPITAL OUTSTANDING

<TABLE>
<CAPTION>

                    RENT PAYMENT DATE                CAPITAL OUTSTANDING (E)
<S>                                                  <C>

</TABLE>

                                       93
<PAGE>

                         ATTACHMENT A TO LEASE SCHEDULE

<TABLE>
<CAPTION>

DESCRIPTION OF EQUIPMENT                            LOCATION OF EQUIPMENT
<S>                                                 <C>

</TABLE>

                                       94
<PAGE>

                                   SCHEDULE 2

                            CERTIFICATE OF ACCEPTANCE
                             [Letterhead of Lessee]

To:      DRESDNER KLEINWORT BENSON FINANCE LIMITED
                                                                          [Date]

Lease  Agreement  (the  "LEASE")  dated [ ] between  Viatel  U.K.  Limited  (the
"LESSEE") and Dresdner  Kleinwort  Benson  Finance  Limited (the  "LESSOR") (the
"LEASE") regarding [ ] (the "EQUIPMENT").

The Lessee hereby certifies that:

1.       On [      ] it received the equipment described in the attached
         Equipment Description and that it [comprises] [is comprised in] the
         Equipment.

2.       The Lessee's duly  authorised  technical  experts have  inspected  that
         equipment and the Lessee is satisfied  that it is in good working order
         and repair,  complete, of satisfactory quality, fit for any purpose for
         which it may be intended or required,  without  defect and in every way
         satisfactory.

3.       Accordingly, for the purposes of the Lease, that equipment has been
         delivered to and accepted by the Lessee from the Lessor without
         qualification or reservation.

The Lessee also hereby certifies that:

A.       The representations and warranties of the Lessee contained in the Lease
         are true and accurate on and as of the date of this Certificate.

B.       No Event of Default or Potential Event of Default (as defined in the
         Lease) has occurred and is continuing at the date of this Certificate
         or is likely to result from any circumstances of which it is aware.

SIGNED

For and on behalf of

[LESSEE]

                                       95
<PAGE>

                      [Attachment - Equipment Description]

                                       96
<PAGE>

                                   SCHEDULE 3

                         CONDITIONS PRECEDENT DOCUMENTS

                                     PART I

1.       CORPORATE DOCUMENTATION

(a)      Certified  copies of the  constitutional  documents of the Lessee,  any
         Permitted   Sub-Lessees   and  the   Guarantors   (including,   without
         limitation, of the "by-laws" ("statuts") as published in the [Redacted]
         in respect of any  [Redacted]  Permitted  Sub-Lessee and details of the
         legal form and identities of the directors in respect of any [Redacted]
         Permitted Sub-Lessee).

(b)      Certified  copies of resolutions of the board of directors or of a duly
         constituted  committee  of the board of  directors  of the Lessee,  any
         Permitted  Sub-Lessees and the Guarantors approving and authorising its
         appropriate  officer(s)  to execute (and seal if required)  and deliver
         each of the  Transaction  Documents  to which it is or is to be a party
         and to give all notices and take all other action required thereunder.

(c)      Specimen   signatures  of  each  of  the  persons   authorised  in  the
         resolutions  referred to in paragraph 1(b) above  authenticated  by the
         company secretary or equivalent officer of the relevant entity.

2.       TRANSACTION DOCUMENTS

         Originals of the following  duly executed by all parties to them (other
         than the Lessor):

         (a)  this Master Agreement;

         (b)  the Lease Guarantee;

         (c)  the Security Assignment re. Nortel Supply Contract;

         (d)  the Commitment Fee Letter, the Agent's Fee Letter and the Facility
              Fee Letter;

         (e)  the Master Supplemental and Amendment Agreement in relation to the
              Nortel Supply Contract;

         (f)  the Sub-Lease Assignment;

         (g)  the Deed of Novation;

         (h)  the Nortel Deed of Novation; and

         (i)  any other Transaction Document.

3.       OTHER DOCUMENTS

(a)      Receipt  by  the  Lessor  of a  certified  copy  of the  Nortel  Supply
         Contract.

                                       97
<PAGE>

(b)      Receipt by the Lessor of originals of the Instalment Sale Agreement and
         the Security Trustee Agreement duly executed by all parties (other than
         the Lessor).

4.       FEES

         Receipt by the Lessor of the Agency Fee and the Facility Fee.

5.       GENERAL

(a)      A copy  of any  other  authorisation  or  other  document,  opinion  or
         assurance  necessary  or desirable  in the  reasonable  judgment of the
         Lessor in connection  with the entry into and  performance  of, and the
         transactions  contemplated  by any  Transaction  Document  or  for  the
         validity and enforceability of any Transaction Document;

(b)      A copy of the latest annual audited financial statements of each of:

         (i)   the Lessee; and

         (ii)  Viatel, Inc.

6.       LEGAL OPINIONS

         Legal  Opinions,  in a form and  substance  satisfactory  to the Lessor
         from:

         (i)   Allen & Overy, English counsel;

         (ii)  Allen & Overy, New York counsel;

         (iii) [Redacted];

         (iv)  [Redacted];

         (v)   [Redacted];

         (vi)  [Redacted];

         (vii) [Redacted];

         (viii) [Redacted];

         (ix)  Bird & Bird, English counsel for Lessee;

         (x)   James P Prenetta, Jr., in-house counsel for Viatel, Inc.

                                       98
<PAGE>

                                     PART II
                  CONDITIONS PRECEDENT TO LEASING OF EQUIPMENT

(a)      no Event of Default or  Potential  Event of Default has occurred and is
         continuing;

(b)      the  representations  and warranties in Clause 8  (Representations  and
         warranties of Lessee) and in Clause 5 (Representations  and Warranties)
         of the Lease Guarantee are true and accurate as if made on the relevant
         Initial  Term Start Date by  reference  to the facts and  circumstances
         then  existing as if made at such time except  that each  reference  to
         financial  statements  in Clause  8.8  (Financial  Information)  and in
         Clause  5.6  (Financial  Statements)  of the Lease  Guarantee  shall be
         construed as a reference to the then latest  available  accounts of the
         Lessee or, as the case may be, the Guarantors and each reference to the
         date as of which such accounts  were  prepared  shall be construed as a
         reference to the date as of which the then latest available accounts of
         the Lessee or, as the case may be, the Guarantors were prepared;

(c)      no Change in Law has occurred  after the date of this Master  Agreement
         which in the Lessor's or any Lessor Risk Parties' opinion would make it
         illegal or impossible for any of the Lessor,  the Lessee, the Permitted
         Sub-Lessees,  the  Guarantors or the Lessor Risk Parties to perform any
         of their respective  obligations  under this Master Agreement or any of
         the other Transaction Documents;

(d)      receipt by the Lessor of the Certificate of Acceptance for the relevant
         Equipment duly executed by the Lessee;

(e)      the proposed  Commencement Date is a date falling within the Commitment
         Period;

(f)      neither the Lessee,  any of the Permitted  Sub-Lessees or either of the
         Guarantors has suffered any Material Adverse Change;

(g)      the Lease Schedule in respect of the relevant Equipment executed by the
         Lessee;

(h)      no breach of Material Contracts;

(i)      a legal opinion,  in a form and substance  satisfactory  to the Lessor,
         has  been  provided  in the  Relevant  Country  in which  the  relevant
         Equipment the subject of the relevant drawdown is to be located;

(j)      all undisputed  balances due and  outstanding to Nortel  Networks Group
         from the Lessee,  Permitted  Sub-Lessee or Guarantor are current or, if
         not current, are being disputed in good faith;

(k)      certificates  of  insurance  in respect of the  insurances  required by
         Clause 14 (Insurance);

(l)      a certified copy of each Permitted Sub-Lease;

(m)      a copy of each Subordination Letter Agreement;

(n)      a copy of each legal opinion referred to in Clause 12.3(b)(v);

(o)      the Lessor is satisfied that title to the Equipment remains solely with
         Nortel;

                                       99
<PAGE>

(p)      receipt by the Lessor of any Collocation Agreement which relates to the
         premises on which any of the relevant Equipment is to be located,  duly
         executed by all parties and in full force and effect;

(q)      receipt by the Lessor of any Collocation  Acknowledgment  which relates
         to  the  premises  on  which  any of the  relevant  Equipment  is to be
         located, duly executed by all parties other than the Lessor and in full
         force and effect;

(r)      where any Equipment is to be sub-leased to a Permitted Sub-Lessee in:

         (i)      [Redacted], evidence that:

                  (A)      a plate has been  affixed to the  cabinet  containing
                           the Equipment  which  sufficiently  identifies to any
                           creditors  of  that  Permitted  Sub-Lessee  that  the
                           Equipment  belongs  to the  Lessor  and does not form
                           part of the assets of that Permitted Sub-Lessee;

                  (B)      prior to any of the Equipment  being delivered to the
                           relevant premises,  the relevant Permitted Sub-Lessee
                           has served notices  ([Redacted] as may be required by
                           the Lessor) and  otherwise  in the  relevant  form of
                           Schedule 7 (Form of Notices  to  Landlords)  upon the
                           landlords   and  any   superior   landlords   of  the
                           premises/land on which the Equipment is to be located
                           by registered post and the landlords and any superior
                           landlords  have been  requested  to  acknowledge  and
                           confirm their agreement to such notices;

                  (C)      prior to any additional  Equipment being delivered to
                           the relevant premises,  the Lessee has served notices
                           ([Redacted]  as may be  required  by the  Lessor) and
                           otherwise in the relevant form of Schedule 7 (Form of
                           Notices  to  Landlords)  upon the  landlords  and any
                           superior  landlords of the premises/land on which the
                           Equipment is to be located by registered post and the
                           landlords  and  any  superior   landlords  have  been
                           requested to acknowledge  and confirm their agreement
                           to such notices; and

                  (D)      the  Lessee  has  served  notice  upon the  Permitted
                           Sub-Lessee  in the form of Part I of the  Schedule to
                           the Sub-Lease Assignment (Form of Notice to Permitted
                           Sub-Lessee)   and  the   Permitted   Sub-Lessee   has
                           acknowledged  that  notice in the form of Part III of
                           the  Schedule to the  Sub-Lease  Assignment  (Form of
                           Acknowledgement of Permitted Sub-Lessee).

         (ii)     [Redacted], evidence that:

                  (A)      a plate has been  affixed to the  cabinet  containing
                           the Equipment  which  sufficiently  identifies to any
                           creditors  of  that  Permitted  Sub-Lessee  that  the
                           Equipment  belongs  to the  Lessor  and does not form
                           part of the assets of that Permitted Sub-Lessee;

                  (B)      prior  to  or  on  the  day  that  the  Equipment  is
                           installed on the  premises,  the  relevant  Permitted
                           Sub- Lessee has served  notices (in  [Redacted] if so
                           required by the Lessor) and otherwise in the relevant
                           form of  Schedule 7 (Form of  Notices  to  Landlords)
                           upon the landlords and any superior  landlords of the

                                      100
<PAGE>

                           premises/land  on which the  Equipment is or is to be
                           located by registered  post and the landlords and any
                           superior landlords have been requested to acknowledge
                           and confirm their agreement to such notices;

                  (C)      the  Lessee has  served  notice by  bailiff  upon the
                           Permitted  Sub-Lessee  in the  form  of Part I of the
                           Schedule to the Sub-Lease  Assignment (Form of Notice
                           to Permitted Sub-Lessee) and the Permitted Sub-Lessee
                           has acknowledged  that notice in the form of Part III
                           of the Schedule to the Sub-Lease  Assignment (Form of
                           Acknowledgement of Permitted Sub-Lessee);

                  (D)      the Lessee has executed the  Permitted  Sub-Lease and
                           the  relevant  sub-lease  lease  schedule in the form
                           required for  registration  with the commercial court
                           of the area in which the Permitted Sub-Lessee has its
                           registered  office and has presented  those documents
                           to the relevant commercial court for registration;

                  (E)      the Lessee and the Permitted  Sub-Lessee have entered
                           into  an  agreement  in the  form of  Part  IV(A)  of
                           Schedule 6 (Form of Permitted Sub-Lease); and

                  (F)      from time to time at the  request  of the  Lessor the
                           Lessee has presented for registration  each Sub-Lease
                           Lease Schedule;

         (iii)    [Redacted], evidence that:

                  (A)      prior  to  or  on  the  day  that  the  Equipment  is
                           installed on the  premises,  the  relevant  Permitted
                           Sub-Lessee  has served  notices (in  [Redacted] if so
                           required  by the  Lessor)  in the form of  Schedule 7
                           (Form of Notices to Landlords) upon the landlords and
                           any superior  landlords of the premises/land on which
                           the  Equipment  is or is to be located by  registered
                           post  and  that  the   landlords   and  any  superior
                           landlords  have been  requested  to  acknowledge  and
                           confirm their agreement to such notices;

                  (B)      the  Lessee has  served  notice by  bailiff  upon the
                           Permitted  Sub-Lessee  in the  form of Part II of the
                           Schedule to the Sub-Lease  Assignment (Form of Notice
                           to Permitted  Sub-Lessee in [Redacted])  and that the
                           Permitted  Sub-Lessee has acknowledge  that notice in
                           the form of Part IV of the Schedule to the  Sub-Lease
                           Assignment  (Form  of  Acknowledgement  of  Permitted
                           Sub-Lessee in [Redacted]);

                  (C)      the Lessee and the Permitted  Sub-Lessee have entered
                           into an  agreement  in the  form of  Part  III(A)  of
                           Schedule 6 (Form of Permitted Sub-Lease); and

                  (D)      the relevant  Transaction  Documents,  including  the
                           Permitted  Sub-Lease,   have  been  executed  outside
                           [Redacted]  and have not been  deposited with a state
                           or judiciary office in [Redacted];

         (iv)     [Redacted], evidence that:

                  (A)      the relevant Permitted  Sub-Lessee has served notices
                           (in  [Redacted]  if so  required  by the  Lessor) and
                           otherwise in the relevant form of Schedule 7 (Form of
                           Notices  to  Landlords)  upon the  landlords  and any
                           superior  landlords of the premises/land on which the
                           Equipment is or is to be located by  registered  post
                           and that the  landlords  and any  superior  landlords
                           have been requested to acknowledge  and confirm their
                           agreement to such notices; and

                                      101
<PAGE>

                  (B)      the Lessee has served notice by registered  post upon
                           the Lessee in the form of Part I of the  Schedule  to
                           the Sub-Lease Assignment (Form of Notice to Permitted
                           Sub-Lessee)  and that the  Permitted  Sub-Lessee  has
                           acknowledged  that  notice in the form of Part III of
                           the  Schedule to the  Sub-Lease  Assignment  (Form of
                           Acknowledgement of Permitted Sub-Lessee);

         (v)      [Redacted],

                  (A)      evidence   of   satisfaction   of   any   local   law
                           requirements     or     recommendations     following
                           determination  of  the  same  by  the  Lessor  at the
                           relevant time; and

                  (B)      an  amendment  satisfactory  to the  Lessor to Clause
                           17.1 (Dealings with Equipment  following  termination
                           or   expiry)  to  reflect   local   requirements   or
                           recommendations  following  determination of the same
                           by the Lessor at the relevant time;

         (vi)     [Redacted], evidence that:

                  (A)      the Lessee  has  served  notices  (in  [Redacted]  if
                           required by the Lessor) and otherwise in the relevant
                           form of  Schedule 7 (Form of  Notices  to  Landlords)
                           upon the landlords and any superior  landlords of the
                           premises/land  on which the  Equipment is or is to be
                           located by registered post and that the landlords and
                           any  superior   landlords   have  been  requested  to
                           acknowledge  and  confirm  their  agreement  to  such
                           notices; and

                  (B)      the  Lessee  has  served  notice  upon the  Permitted
                           Sub-Lessee  in the form of Part I of the  Schedule to
                           the Sub-Lease Assignment (Form of Notice to Permitted
                           Sub-Lessee) has acknowledged  that notice in the form
                           of  Part  III  of  the  Schedule  to  the   Sub-Lease
                           Assignment  (Form  of  Acknowledgement  of  Permitted
                           Sub-Lessee);

         (vii)    United States of America, evidence that:

                  (A)      the relevant Permitted  Sub-Lessee has served notices
                           in the  relevant  form of Schedule 7 (Form of Notices
                           to  Landlords)  upon the  landlords  and any superior
                           landlords of the premises/land on which the Equipment
                           is or is to be  located by  registered  mail and that
                           the  landlords and any superior  landlords  have been
                           requested to acknowledge  and confirm their agreement
                           to such notices;

                  (B)      the Lessee has filed a UCC-1  Financing  Statement in
                           accordance  with  Article  9 (Part 4) of the New York
                           Commercial  Code for the Sub-Lease  Assignment,  such
                           filing  to be made  with the  Secretary  of State and
                           also in the country where the Equipment is located;

                  (C)      two  originals  of the  IRS  Form  W-8BEN  have  been
                           completed  and signed by each of Nortel  Networks plc
                           and the  Lessor and  delivered  to each of the Lessee
                           and  Viatel,   Inc.   upon  signing  of  this  Master
                           Agreement; and

                  (D)      an original of the IRS Form W-8BEN has been completed
                           and  signed by  Viatel,  Inc.  and  delivered  to the
                           Lessor upon signing of this Master Agreement;

                                      102
<PAGE>

         (viii)   [Redacted],

                  (A)      evidence   of   satisfaction   with  any   local  law
                           requirements     or     recommendations     following
                           determination  of  the  same  by  the  Lessor  at the
                           relevant time; and

                  (B)      an  amendment  satisfactory  to the  Lessor to Clause
                           17.1 (Dealings with Equipment  following  termination
                           or  expiry)  to  reflect  local law  requirements  or
                           recommendations  following  determination of the same
                           by the Lessor at the relevant time.

                                      103
<PAGE>

                         CONDITIONS PRECEDENT DOCUMENTS

                                    PART III

1.       A  certified  copy  of the  authorised  signatory  book  of the  Lessor
         together  with (if the same is required to establish  the  authority of
         the person  who signs on behalf of the  Lessor) a  certified  copy of a
         power of  attorney  in favour of the person  who signs the  Transaction
         Documents on behalf of the Lessor.

2.       Originals  of the  documents  listed in  paragraph  2 to Part I of this
         Schedule  3,  executed  by all  parties to them other than the  Lessee,
         Permitted Sub-Lessees and Guarantors.

                                      104
<PAGE>

                                   SCHEDULE 4

                                LOSS PAYEE CLAUSE

All  recoveries  under  this  policy  in  respect  of loss of or  damage  to the
Equipment or any of it shall be applied as follows:

(a)      At any time during the Initial Term, all claims hereunder in respect of
         an Event of Loss to all or any of the  Equipment  shall be paid in full
         to such account of the Lessor as the Lessor may notify to the insurers.

(b)      All claims in respect of major loss or damage  (that is to say any loss
         or damage  not  constituting  an Event of Loss the claim in  respect of
         which exceeds  E1,000,000  (or the  equivalent  in any other  currency)
         inclusive of any  deductible)  shall be paid in full to such account of
         the Lessor as the Lessor may notify to the insurers.

(c)      All other  claims  hereunder  shall be paid in full to the Lessee or to
         its order,  unless and until the Lessor  shall have  notified  insurers
         that an Event of Default has occurred,  whereupon all such claims shall
         be paid to such  account  of the Lessor as the Lessor may notify to the
         insurers.

All  recoveries  under this policy  which the  Lessor,  any member of the Lessor
Group,  any Lessor Risk Party,  any member of each Lessor Risk Party's  Group or
their  respective  successors,   assigns,  shareholders,   officers,  directors,
employees, secondees and agents or the Lessee may be entitled to make in respect
of liability to third  parties,  incurred by them shall be paid to the person to
whom the liability (or alleged liability) covered by this policy was incurred or
to the extent  that the  liability  (or  alleged  liability)  to such person has
previously been discharged by the Lessor,  any Lessor Risk Party,  the Lessee or
any of the other  persons  referred to above (the "Paying  Party"),  such moneys
shall be paid to the Paying Party or its order in reimbursement of the moneys so
expended  by it  in  or  towards  satisfaction  of  such  liability  or  alleged
liability.

                                      105
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                                   SCHEDULE 5

                    FORM OF WRITTEN NON-DISCLOSURE AGREEMENT

                            NON-DISCLOSURE AGREEMENT

THIS  NON-DISCLOSURE  AGREEMENT  is made and  entered  into as of the ___ day of
_______, 2000, by ____________, a _____________ with an address at _____________
(the "Evaluating Party"), for the benefit of VIATEL U.K. LIMITED (Registered No.
2968371) whose  registered  office is at Parnell House, 25 Wilton Road,  London,
SW1V 1LW (the  "Lessee"),  and  VIATEL,  INC.,  a Delaware  corporation  with an
address at 685 Third Avenue, New York, New York 10017 ("Viatel").

WHEREAS,  DRESDNER KLEINWORT BENSON FINANCE LIMITED (Registered No. 21285) whose
registered office is at 20 Fenchurch Street,  London,  EC3P 3DB (in its capacity
as  security  trustee  for and on behalf of itself and each of the  Lessor  Risk
Parties,  the  "Lessor"),  and Lessee  are  parties  to a certain  Master  Lease
Purchase Agreement, dated [ ], 2000 (the "Lease Agreement");

WHEREAS, the Lessor may be interested in assigning or transferring, or selling a
sub-participation  in, all or part of its rights and obligations under the Lease
Agreement to the Evaluating Party;

WHEREAS,  the Evaluating Party is interested in conducting certain due diligence
for the purpose of determining  the  feasibility of it acquiring such rights and
obligations  of the  Lessor  under the Lease  Agreement  or a  sub-participation
therein (the "Evaluation"); and

WHEREAS,  for purposes of the  Evaluation,  the Lessee and Viatel are willing to
make  certain  information  available to the  Evaluating  Party on the terms and
conditions contained herein.

NOW,  THEREFORE,  in consideration of the payment and receipt of 10 Euros by the
Lessee  to  the  Evaluating  Party  and  other  good  and  value  consideration,
including,  but not limited to the  promises  contained  herein (the receipt and
adequacy of which is hereby  acknowledged by the Evaluating  Party), the parties
hereto agree as follows:

         1. DEFINITION OF CONFIDENTIAL INFORMATION.  "Confidential  Information"
means (i) a copy of Viatel's  business  plan (as it may be updated and revised),
(ii)  Viatel's  management  reports  and  financial  statements,  (iii)  written
non-public  information,  (iv) electronic  communications or information and (v)
oral  communications  (including,  but not  limited  to the  Evaluating  Party's
discussions  with  management of the Lessee or Viatel) that the Lessee or Viatel
furnishes to the Evaluating  Party, and to its Affiliates or any Other Recipient
(as hereinafter  defined) in connection  with the Evaluation,  together with any
analysis, forecast,  interpretation or other document prepared by the Evaluating
Party,  any of its Affiliates or any Other Recipient which contains or otherwise
reflects  directly or indirectly such  information.  "CONFIDENTIAL  INFORMATION"
does not include any  information  which (i) generally  became  available to the
public,  other than as a result of a disclosure by the Evaluating Party or Other
Recipient  that  constituted  a breach of an  obligation to the Lessee or Viatel
under this Agreement,  (ii) the Evaluating  Party or Other Recipient is required
to disclose by judicial or administrative process in connection with any action,
suit or proceeding or claim or otherwise by Applicable Law, (iii) is obtained by
the Evaluating party or Other Recipient from any source other than the Lessee or
Viatel,  provided  that such  source (x) has not, to the  Evaluating  Party's or
Other Recipient's  knowledge  entered into a  confidentiality  or non-disclosure
agreement  with  respect  to  such  information  and (y) is not  providing  such
information in breach of such confidentiality or non-disclosure  agreement, (iv)
was or is independently developed by the Evaluating Party or Other Recipient, or
(v) was lawfully available to the Evaluating Party or Other Recipient on a non-
confidential  basis  before  the date of this  Agreement.  Information  shall be
deemed to be in the public domain if it becomes a matter of public  knowledge or
is contained in materials  available to the public  (including for the avoidance

                                      106
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of doubt  any  filing  made  with the  United  States  Securities  and  Exchange
Commission,  any other  securities  commission  (or similarly  acting entity) to
which either the Lessee or Viatel is required to publicly  disclose  information
or any press  release).  For the purposes of this  Agreement,  "APPLICABLE  LAW"
means,  as the context may require,  all or any laws,  statutes,  proclamations,
treaties, bylaws, directives, regulations, statutory instruments, rules, orders,
decisions, circulars, codes, decrees, injunctions, resolutions, judgments, rules
of  court,  delegated  or  subordinate  legislation,  rules of common  law,  any
European  Union  legislation  at any  time or from  time to time in  force  in a
Relevant  Country  or  any  practice,   concession,   ruling,  request,  notice,
guideline,  statement of policy or practice  statement by any central bank, tax,
fiscal,  governmental,   local,  international,   national  or  other  competent
authority  or agency  (whether  or not having the force of law but in respect of
which  compliance by entities of the type and nature of the Evaluating  Party in
the relevant  jurisdiction  is  customary),  as the same may be subjected to any
Change in Law from time to time.

         2. USE OF CONFIDENTIAL INFORMATION. The Evaluating Party agrees that it
shall not use any part of the Confidential  Information in any manner other than
for the exclusive purpose of the Evaluation.

         3. NON-DISCLOSURE TO OTHER PARTIES. The Evaluating party agrees that it
will keep the Confidential Information confidential.  The Evaluating Party shall
not,  without the prior written  consent of Viatel,  disclose any portion of the
Confidential Information to any person other than to its Affiliates, its and its
Affiliates'  respective directors,  officers,  and employees,  and its and their
counsel and other  professional  advisors  (such counsel and other  professional
advisors, together with their representatives and affiliates, are referred to as
"Other  Recipients"),  in each case who are directly  involved in the Evaluation
and whose access to the  Confidential  Information is necessary to assist in the
Evaluation;  provided, that such Affiliates,  directors, officers, employees and
Other  Recipients  shall be informed by the Evaluating Party of the confidential
nature of such  information and shall agree to be bound by this  agreement.  The
Evaluating  Party agrees to cause its directors,  officers,  employees and Other
Recipients  to comply with this  agreement,  and the  Evaluating  Party shall be
responsible for any breach of this agreement by any of them. For the purposes of
this Agreement,  "Affiliate"  means the ultimate holding company or companies of
the  Evaluating  Party or any  subsidiary  of such holding  company or companies
("holding company" and "subsidiary" having the same meanings ascribed to them in
sections 736 and 736A of the Companies Act 1985, as amended).  For the avoidance
of  doubt,  nothing  in  this  Agreement  prevents  the  Evaluating  Party  from
consulting with Lessor or Nortel Networks plc with respect to the Evaluation.

         4. SECURITIES LAWS. The Evaluating Party acknowledges that it is aware,
and that it will advise its relevant representatives that the securities laws of
the United States may prohibit any person who receives any material,  non-public
information of Viatel or Lessee from purchasing or selling  securities of Viatel
or from communicating  such information to any other person under  circumstances
in which it is reasonably  foreseeable that such person is likely to purchase or
sell such securities.

         5. RETURN OR DESTRUCTION OF DOCUMENTS.  If the Evaluating  Party ceases
for any reason to proceed with  acquiring  rights and  obligations of the Lessor
under the Lease Agreement or a sub-participation  therein, or otherwise upon the
request of the Lessee or Viatel,  the Evaluating  Party and each Other Recipient
shall  promptly  deliver  to the  Lessee  or  Viatel  all  written  Confidential
Information,  and shall destroy any copies of the  Confidential  Information and
any  portion  of  such  information  as  may  consist  of  analysis,   forecast,
interpretation  or other  document  prepared  by the  Evaluating  Party or Other
Recipient which is in its or their possession or under its or their custody and
control  and  expunge  any   Confidential   Information,   analysis,   forecast,
interpretation  or other  document  from any computer,  word  processor or other
device in its or their possession or under its or their custody or control (save
where regulatory  requirements  dictates otherwise).  The Evaluating Party shall
certify to Viatel that all  confidential  information has been returned and such
destruction has been effected, as appropriate.

                                      107
<PAGE>

         6.  DISCLOSURE BY OPERATION OF APPLICABLE LAW. If either the Evaluating
Party or any Other  Recipient  or any of its  representatives  is  requested  or
legally  compelled  pursuant  to  any  Applicable  Law  to  disclose  any of the
Confidential  Information,  the  Evaluating  Party or such Other  Recipient will
provide  the  Lessee  and  Viatel  with  prompt  notice  so that it may  make an
application to the appropriate  court for injunctive relief or other appropriate
remedy to prevent  such  disclosure.  If such  injunction  or other  appropriate
remedy is not  obtained,  or the  Lessee and Viatel  waive  compliance  with the
provisions  of this  Section 6 (the  Lessee and Viatel  being  deemed to have so
waived  compliance if either the Lessee or Viatel fails to initiate  proceedings
for an injunction or other  appropriate  remedy  within  seventy-two  (72) hours
after notice of the intended  disclosure is given pursuant to the first sentence
of this Section 6 or to the end of the next working day (if the seventy-two (72)
hour period ends on a weekend)),  the Evaluating  Party or such Other  Recipient
will  furnish  only that  portion of the  Confidential  Information  which it is
legally  required  to furnish  and will  exercise  reasonable  efforts to obtain
reliable assurance that confidential treatment will be accorded to the furnished
Confidential Information.

         7. INJUNCTIVE  RELIEF.  The Evaluating Party acknowledges that remedies
at law including  damages may be inadequate  to protect  against  breach of this
Agreement,  and it agrees in  advance  to the  granting  of  injunctive  relief,
specific performance or other equitable relief in favor of the Lessee and Viatel
without proof of actual damages.  Nothing contained herein shall be construed as
prohibiting the disclosing  party from pursuing any other remedies  available to
it, either at law or in equity, for such threatened or actual breach,  including
specific performance and recovery of monetary damages.

         8. SEVERABILITY. Any provision of this Agreement which is 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.

         9. WAIVER.  No failure or delay by any party hereto in  exercising  any
right, power or privilege hereunder 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 right, power or privilege hereunder.

         10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with English Law. All parties to the Agreement irrevocably agree that
the courts of England are to have exclusive  jurisdiction  to settle any dispute
which may arise out of or in connection with the Agreement and that  accordingly
any suit,  action  or  proceedings  arising  out of or in  connection  with this
Agreement shall be brought in such courts.

         11. COUNTERPARTS.  This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

         12. ENTIRE AGREEMENT;  AMENDMENT. This constitutes the entire agreement
between  the  parties  as to the  substantive  matters  described  herein.  This
Agreement  may  not be  altered,  modified,  amended  or  revoked  except  by an
instrument in writing  signed by the party against whom the  enforcement  of any
such alteration, modification, amendment or revocation is sought.

         13. TERM.  This Agreement shall end two (2) years from the date hereof,
provided  however,  that if the  Evaluating  Party  becomes a party to the Lease
Agreement, or a Lessor Risk Party thereunder, this Agreement shall be superseded
as to the  Evaluating  Party  by  Clause  35 of the  Lease  Agreement  (but  the
Evaluating  Party  shall  remain  obligated  to enforce  each Other  Recipient's
compliance with this Agreement).

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<PAGE>

         14.  CAPITALIZED  TERM.  Capitalized  terms used but not defined herein
shall have the meaning ascribed to such terms in the Lease Agreement.

AS WITNESS  whereof the duly  authorised  representatives  of the parties hereto
have executed this Agreement the day and year first above written .

Executed this [           ] day of [           ],

For and on behalf of [                      ]

                                      109
<PAGE>

                                   SCHEDULE 6

                           FORM OF PERMITTED SUB-LEASE

                               SUBLEASE AGREEMENT

                                     PART I

                    [FOR ALL SUB-LESSEES EXCEPT US SUB-LESSEE,
                    [Redacted] SUB-LESSEE AND [Redacted] SUB-LESSEE]

THIS  SUBLEASE  AGREEMENT  dated  as of this  _____  day of  ____________,  2000
(hereinafter  referred to as this  "Sublease") is executed by and between VIATEL
U.K. LIMITED  (Registered No. 2968371),  a company  organized and existing under
English  law,  with its  mailing  address and chief place of business at Parnell
House,  25 Wilton Road,  London SW1V 1LW,  England  (hereinafter  referred to as
"Sublessor")  and  [Viatel  Sub]  a  company  incorporated  under  the  laws  of
____________,   with  its  mailing  address  and  chief  place  of  business  at
_______________________________________________   (hereinafter  referred  to  as
"Sublessee").

WHEREAS, the Sublessee wishes to lease from the Sublessor,  and the Sublessor is
willing  to lease to the  Sublessee  the  equipment  specified  in the  sublease
schedules  in the form of  Exhibit  A hereto  (each a  "Sublease  Schedule"  and
collectively the "Sublease  Schedules")  executed and delivered by Sublessor and
Sublessee  from time to time after the  execution  and delivery of this Sublease
(collectively the "Equipment").

WHEREAS, the Sublessor is leasing the equipment as lessee pursuant to the Master
Lease Purchase Agreement,  dated ____, 2000 (the "Base Lease"), between Dresdner
Kleinwort Benson Finance Limited (in its capacity as security trustee for and on
behalf  of  itself  and  each of the  Lessor  Risk  Parties  (together  with its
successors,  permitted  assigns and  permitted  transferees,  the  "Lessor") and
Sublessor  (unless otherwise  indicated,  capitalized terms used herein have the
meanings given to such terms in the Base Lease);

NOW, THEREFORE, IT IS AGREED AS FOLLOWS:

1.   SUBLEASE:

(a)      The Sublessor  agrees to sublease and the  Sublessee  agrees to take on
         sublease the Equipment on and subject to the terms of this Sublease.

(b)      The  Equipment is subject and  subordinate  to the Base Lease under and
         pursuant to which  Sublessor has acquired no present right,  title,  or
         interest in or to any of the Equipment other than a leasehold estate.

(c)      This Sublease shall be confirmed and effective as to items of Equipment
         only upon: (i) due execution of the Base Lease and the  commencement of
         the leasing of the Equipment  under the Base Lease;  (ii) due execution
         by  Sublessor  and  Sublessee  of a  Sublease  Schedule  covering  such
         Equipment; (iii) due execution and delivery by Sublessor and acceptance
         by Lessor of a Sublease Assignment covering such Sublease Schedule, and
         service of a notice of such  assignment on the Sublessee and receipt by
         the Lessor of a signed acknowledgement by the Sublessee of such notice;
         and (iv) such other documents as Sublessor may reasonably require. Upon
         satisfaction  of (i) to (iv) above,  the  Equipment  described  therein
         shall be deemed to have been delivered to and accepted by Sublessee for
         sublease under this Sublease.

                                      110
<PAGE>

2.   TERM:

The term of this  Sublease for  Equipment  will commence on the day specified in
the Sublease  Schedule  covering such Equipment as the  "Commencement  Date" and
will continue for the period specified as the "Term" in such Sublease  Schedule,
as the same may be extended pursuant to the provisions of such Sublease Schedule
relating to renewal,  if any, but subject always to the Base Lease.  The term of
this Sublease  (including all  extensions  hereto) for Equipment will not in any
event extend beyond the Initial Term of the relevant  Lease  Schedule  under the
Base Lease.

3.   RENT:

(a)      Sublessee  agrees to pay rent for  Equipment  during  the Term for such
         Equipment  on the due dates and in the amount set forth in the Sublease
         Schedule covering such Equipment. If any payment hereunder falls due on
         a date  which is not a  Business  Day,  such  payment  shall be due and
         payable on the next succeeding Business Day.

(b)      (i)   All  payments  made by the  Sublessee  under  this  Sublease  are
               calculated without regard to VAT. If any such payment constitutes
               the  whole  or any part of the  consideration  for a  taxable  or
               deemed taxable supply (whether that supply is taxable pursuant to
               the exercise of an option or  otherwise)  by the  Sublessor,  the
               amount of that  payment  shall be increased by an amount equal to
               the amount of VAT which is  chargeable  in respect of the taxable
               supply in question  subject to the production by the Sublessor of
               a valid VAT invoice  (where  applicable) in respect of the VAT in
               question.

         (ii)  In respect of each item of Equipment,  subject to the  production
               by the  Sublessor of a valid VAT invoice  (where  applicable)  in
               respect of the VAT in question,  the  Sublessee  shall pay to the
               Sublessor on or before the fifth (5th) Business Day preceding the
               date on which the relevant VAT is due to be accounted  for by the
               Sublessor to the applicable  taxing  authority an amount equal to
               the  amount of VAT for which the then  Sublessor  is  obliged  to
               account  to the  applicable  taxing  authority  in respect of the
               supply under this Sublease and the relevant  Sublease Schedule of
               such item of Equipment.

         (iii) If, in respect of any item of Equipment, the Sublessor determines
               that the consideration for the supply thereof under this Sublease
               and the relevant  Sublease  Schedule is  increased or  decreased,
               then:

               (A)  if the  consideration  for  the  supply  is  increased,  the
                    Sublessee shall pay to the Sublessor on demand (or, if later
                    five  (5)  Business  Days  before  the  same  is  due  to be
                    accounted  for by the  Sublessor  to the  applicable  taxing
                    authority) an amount equal to the amount of  additional  VAT
                    for which the  Sublessor  is  obligated  to  account  to the
                    applicable taxing authority; and

               (B)  if the  consideration  for  the  supply  is  decreased,  the
                    Sublessor  shall issue a credit note to the  Sublessee in an
                    amount equal to the credit which the  Sublessor  claims from
                    the applicable  taxing authority in respect of the reduction
                    in consideration, and that amount shall be deducted from the
                    next  payment of rent due from the  Sublessee  in respect of
                    the relevant item of Equipment or shall be reimbursed to the
                    Sublessee  within  two (2)  Business  Days of  demand by the
                    Sublessee  if there is no further  payment of rent due or to
                    the  extent  that the next  such  payment  is less  than the
                    amount in question.

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<PAGE>

         (iv)  Any payment of other consideration to be made or furnished by the
               Sublessor to the Sublessee pursuant to or in connection with this
               Sublease or any transaction or document  contemplated  herein may
               be  increased  or added to by reference to (or as a result of any
               increase  in the rate of) any VAT  which  shall be or may  become
               chargeable  in respect of the  taxable  supply in question on the
               basis that the relevant  payment or consideration is stated on an
               exclusive of VAT basis.

         (v)   If and to the extent that the  Sublessor (or any company which is
               treated  as a member of the same group as the  Sublessor  for VAT
               purposes) bears VAT which is Irrecoverable VAT then the Sublessee
               shall on or within five (5) Business Days of demand indemnify and
               keep   indemnified   the  Sublessor   upon  demand  against  such
               Irrecoverable  VAT such indemnity being in an amount equal to the
               after-Tax  cost  to  the  Sublessor  of  such  Irrecoverable  VAT
               together with interest thereon at the rate of LIBOR calculated on
               a seven  day basis and  compounded  quarterly  from the date upon
               which  the   Sublessor   made  payment  of  the  amount  of  such
               Irrecoverable  VAT to but  excluding  the date of  payment of the
               amount of the indemnity.

(c)      (i)   All payments due to or by the Sublessor under this Sublease shall
               be  calculated  and made free and clear of and without  deduction
               for,  or on  account  of, any  present  or future  Taxes or other
               charges of  whatsoever  nature,  now or hereafter  imposed by any
               taxing or Governmental Authority whatsoever unless such deduction
               or withholding is required by law.

         (ii)  If  such  deduction  or  withholding  is  required  by  any  law,
               regulation or regulatory requirement the Sublessee shall:

               (A)  if the  payment  is to be made by the  Sublessee,  ensure or
                    procure that the deduction or  withholding  is made and that
                    it does not exceed the minimum legal requirement therefor;

               (B)  pay, or procure the payment of, the full amount  deducted or
                    withheld to the relevant  authority in  accordance  with the
                    Applicable Law;

               (C)  (1)  if the deduction or withholding is so required due to a
                         Change in Law and if the  payment  is to be made by the
                         Sublessee, increase the payment in respect of which the
                         deduction  or  withholding  is required so that the net
                         amount received by the Sublessor after the deduction or
                         withholding  shall  be equal to the  amount  which  the
                         Sublessor  would have been  entitled  to receive in the
                         absence  of any  requirement  to  make a  deduction  or
                         withholding; or

                    (2)  if the deduction or withholding is so required due to a
                         Change in Law and if the  payment  is to be made by any
                         person other that the Sublessee, procure the payment or
                         pay directly to the Sublessor such sum (a "Compensating
                         Sum") as will,  after taking into account any deduction
                         or withholding  which is required to be made in respect
                         of  the  Compensating  Sum,  result  in  the  Sublessor
                         receiving,  or, as the case may be, paying,  on the due

                                      112
<PAGE>

                         date for payment,  a net sum equal to the sum which the
                         Sublessor  would have  received or, as the case may be,
                         paid  in  the  absence  of  any  obligation  to  make a
                         deduction or withholding; and

               (D)  promptly deliver or procure the delivery to the Sublessor of
                    any  appropriate   receipts   evidencing  the  deduction  or
                    withholding  which has been made, or (in the absence of such
                    receipts)  provide a  certification  to the Sublessor of the
                    deduction or withholding made.

         (iii) The  Sublessor  agrees to furnish to the  Sublessee  from time to
               time  such  duly  executed  and  properly   completed   forms  or
               certificates  that are  reasonably  requested by the Sublessee in
               order to claim any reduction of or exemption from any withholding
               or other tax  imposed by any taxing  authority  in respect of any
               payments  otherwise required to be made by the Sublessee pursuant
               to this Sublease,  which  reduction or exemption may be available
               to the Sublessor under Applicable Law.

4.   BASE LEASE:

During the Term of this Sublease with respect to Equipment,  Sublessee shall (a)
maintain  such  Equipment  on the same terms as those set forth in Section 12 of
the Base Lease and (b) insure such  Equipment in  compliance  with Section 14 of
the Base Lease.  In addition,  if a termination  of the leasing of any Equipment
occurs under the Base Lease and  Sublessor is required to return such  Equipment
to Lessor, Sublessee shall immediately redeliver such Equipment to Sublessor or,
at Sublessor's direction,  to Lessor, at such place in the country in which such
Equipment is then located as Sublessor or Lessor, as the case may be, reasonably
specifies,  and will  otherwise  co-operate  with  Sublessor in  returning  such
Equipment to Lessor in the  condition in which such  Equipment is required to be
returned pursuant to the terms of the Base Lease.  Notwithstanding the foregoing
or any other provision of this Sublease or any Sublease Schedule,  the Sublessor
and  Sublessee  acknowledge  and agree that the  execution  and delivery of this
Sublease and Sublease  Schedules shall not release the Sublessor from any of its
obligations under the Base Lease or the Transaction Documents.

5.   SUBORDINATION:

Sublessor  warrants  that  during  the Term of this  Sublease  with  respect  to
Equipment,  so long as no  event  of  default  shall  have  occurred  hereunder,
Sublessor will not interrupt Sublessee's  possession,  use and operation of such
Equipment.   Nevertheless,   Sublessee   acknowledges  that  this  Sublease  and
Sublessee's  rights  hereunder  to the  possession,  use  and  enjoyment  of the
Equipment are subject and  subordinate  to all terms and  provisions of the Base
Lease, a copy of which has been provided to Sublessee,  and to the rights of the
Lessor  and  Lessor  Risk  Parties  thereunder  and under the other  Transaction
Documents;  provided,  however,  that upon  termination  of the  leasing  of any
Equipment under the Base Lease in  circumstances  where Sublessor is required to
return such Equipment to Lessor, Lessor may terminate this Sublease with respect
to such Equipment and the right of Sublessee to possess such Equipment.

6.   INDEMNIFICATION:

Sublessee agrees to indemnify,  save and keep harmless Sublessor and its agents,
employees,  successors and assigns from and against any and all losses, damages,
penalties,  injuries,  claims,  actions and suits,  including  legal expenses of
whatsoever  kind and nature,  in contract or tort,  howsoever  arising  from any
cause  whatsoever,  including but not limited to,  strict  liability in tort, or
otherwise arising out of (i) the selection, manufacture, acceptance or rejection
of the Equipment under this Sublease, the delivery, lease, sublease, possession,
maintenance,  use, condition,  return or operation of the Equipment  (including,

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<PAGE>
without  limitation,  latent or other defects,  whether or not  discoverable  by
Sublessor  and any claim for patent,  trademark or copyright  infringement);  or
(ii)  the  condition  of the  Equipment  disposed  of  after  use by  Sublessee.
Sublessee  will, upon request of Sublessor,  at its own expense,  defend any and
all actions based on or arising out of any of the foregoing.

7.   ASSIGNMENT, POSSESSION AND RETURN:

     (a)  Subject to  paragraph  (b) below,  the  Sublessee  will not  sublease,
          assign or otherwise transfer or relinquish possession of the Equipment
          and any such sublease,  assignment or transfer will,  without  further
          act or  instrument,  be void  and of no force or  effect.  Subject  to
          clause  7(c),  at the end of the  Term  for any  Equipment,  Sublessee
          shall, if required,  and only if required,  redeliver the Equipment to
          Sublessor in such place in the country in which such Equipment is then
          located  as  Sublessor  shall  reasonably  specify  in  the  condition
          Sublessee is required to maintain  such  Equipment as provided in this
          Sublease.

     (b)  The  Sublessee  may transfer all (but not some only) of its rights and
          obligations under this Sub-Lease to any member of Viatel, Inc.'s Group
          if the Lessee  would  have been  entitled  to enter  into a  Permitted
          Sub-Lease  with such  assignee  under  Clause  12.3 of the Base Lease,
          provided  that,  prior  to such  assignment  becoming  effective,  the
          SubLessor shall notify the Lessor of the proposed transfer, shall give
          notice of the Sub-Lease Assignment to the transferee and shall procure
          an  acknowledgement  to such notice, in each case in the form required
          by the Sub-Lease Assignment, mutatis mutandis.

     (c)  Upon the expiration of the Term for any Equipment;

                                 [ALTERNATIVE A]

[the  Sublessee,  on not less than thirty (30) days prior written  notice to the
Sublessor,  or such lesser period as the Sublessor may agree,  shall be entitled
to purchase  such  Equipment at a price of one hundred Euros (E100) (the "Option
Price") in respect of each Sublease Schedule, so long as no default under Clause
8(a) of this  Sub-Lease  or Event of Default  under  Clause  16.1(a) of the Base
Lease has occurred and is continuing  and no other amount is  outstanding  under
the Transaction Documents.  Upon (i) payment of the Option Price at or following
the expiration of the Term for such Equipment and (ii) the transfer to Sublessor
of legal title to, and all rights and interests in and to, such  Equipment,  the
Sublessor  shall transfer legal title to, and all of its rights and interests in
and to, such Equipment to the Sublessee.]

                                 [ALTERNATIVE B]

[so long as no default  under Clause 8(a) of this  Sub-Lease or Event of Default
under Clause  16.1(a) of the Base Lease has occurred  and is  continuing  and no
other amount is outstanding  under the  Transaction  Documents then  immediately
upon the transfer to  Sublessor of legal title to, and all rights and  interests
in and to, such Equipment,  the Sublessor shall transfer legal title to, and all
of its rights and interests in and to, such Equipment to the Sublessee.]

The Sublessor  shall transfer legal title to, and all of its rights and interest
in and to, any Equipment as provided above "AS IS, WHERE IS", "WITH ALL FAULTS",
AND WITH NO WARRANTIES WHATSOEVER, EITHER EXPRESS OR IMPLIED.

                                      114
<PAGE>

8.   DEFAULTS; REMEDIES:

Each of the following will constitute a default  hereunder:  (a) Sublessee fails
to pay rent or any other  amount when due under this  Sublease  or any  Sublease
Schedule;  (b)  Sublessee  breaches  any other term,  provision,  obligation  or
covenant of this Sublease which breach,  if  remediable,  is not cured within 30
days after written  notice  thereof is given by the Sublessor to the  Sublessee;
and (c) a Sublessee  Insolvency  Event shall occur.  Upon the  occurrence of any
default under this Sublease, Sublessor, at its option, may do any one or more of
the  following:  (1) declare this Sublease and all of the Sublease  Schedules in
default upon notice to  Sublessee;  (2) proceed by  appropriate  court action or
actions at law or in equity or in insolvency  or  bankruptcy as permitted  under
Applicable Law,  including to enforce  performance by Sublessee of the covenants
and terms of this  Sublease  and/or to  recover  damages  for the breach of this
Sublease;  (3) terminate  this Sublease and all of the Sublease  Schedules  upon
notice to  Sublessee;  and (4)  whether or not this  Sublease  and the  Sublease
Schedules  are  terminated,  and  without  notice to  Sublessee,  repossess  the
Equipment  wherever found,  with or without legal process,  and for this purpose
Sublessor  and/or its agents may enter upon any premises of or under the control
or  jurisdiction  of Sublessee or any agent of Sublessee  without  liability for
suit,  action or other  proceeding by Sublessor (any damages  occasioned by such
repossession  being  herein  expressly  waived by  Sublessee  except for damages
occasioned  by the gross  negligence  or wilful  misconduct  of Sublessor or its
agents)  and remove the  Equipment  therefrom.  The  remedies  provided  in this
Section 8 in favour of Sublessor are not  exclusive  but will be cumulative  and
will be in addition to all other remedies in Sublessor's  favour  existing under
Applicable Law, including at law, in equity or in bankruptcy.

9.   ASSIGNMENT OF SUBLEASE:

     (a)  Sublessee  acknowledges  receipt of a copy of the notice of  Sub-Lease
          Assignment.  Sublessee  hereby agrees to execute and deliver to Lessor
          the  Acknowledgement  in the form attached as Part II of Schedule I to
          the Sub-Lease Assignment.

     (b)  Lessor may sell and/or assign the Equipment  and/or Base Lease, all as
          provided  for in the Base  Lease,  whereupon  without  further  act or
          instrument  (except for written  notice to  Sublessee  of such sale or
          assignment),  such purchaser or assignee of the Equipment and the Base
          Lease shall  assume the benefits of this  Sublease  and the  Sub-Lease
          Assignment   and  the   obligations   of  the   Sublessee   under  the
          Acknowledgement.

     (c)  Notwithstanding any term or provision contained in this Sublease,  the
          obligations  of the Lessee  under the Base Lease are and shall  remain
          obligations of the Sublessor.

10. NO OWNERSHIP INTEREST IN EQUIPMENT; REPOSSESSION OF EQUIPMENT:

In no event shall this  Sublease be  construed as a sale of the  Equipment,  and
except as provided in clause 7(b), Sublessee shall acquire no ownership,  title,
property,  right or interest in or with respect to the Equipment  other than its
leasehold interest hereunder. It is the express intention of the parties that if
the leasing of the Equipment terminates in accordance with the terms of the Base
Lease and  Sublessor  is  required  to return the  Equipment  to Lessor,  if the
Equipment  is not so  returned in  accordance  with the terms of the Base Lease,
Lessor shall have the right to pursue all remedies under Applicable Law to cause
the  return  of the  Equipment,  including,  without  limitation,  the  right to
repossess the Equipment in accordance with Applicable Law and the Base Lease.

                                      115
<PAGE>

11.  MISCELLANEOUS:

The terms of this  Sublease  shall not be waived,  altered,  modified,  amended,
supplemented or terminated in any manner whatsoever except by written instrument
signed by Sublessor and Sublessee.  This Sublease and any instrument referred to
herein  together  with the Sublease  Schedules  and all  attachments  and riders
thereto  signed by the parties or  delivered  in  connection  herewith  shall be
governed by the laws of England,  constitute the entire agreement of the parties
with respect to the subject matter hereof and will  collectively  constitute the
Sublease with respect to the Equipment and supersede all  negotiations and prior
written or oral  agreements of the parties with respect  thereto.  Any provision
contained in this  Sublease  which may be invalid  under  applicable  law or any
government  rule or regulation  will be deemed  omitted,  modified or altered to
conform thereto.

12.  JURISDICTION:

FOR THE BENEFIT OF THE SUBLESSOR AND THE LESSOR,  THE SUBLESSEE  AGREES THAT THE
COURTS OF ENGLAND HAVE  JURISDICTION  TO SETTLE ANY DISPUTES IN CONNECTION  WITH
THIS SUBLEASE AND ACCORDINGLY SUBMITS TO THE JURISDICTION OF THE ENGLISH COURTS.

Without prejudice to any other mode of service, the Sublessee:

     (a)  irrevocably  appoints as its agent for service of process  Viatel U.K.
          Limited in relation to any  proceedings  before the English  courts in
          connection with this Sublease;

     (b)  agrees that failure by a process  agent to notify the Sublessee of the
          process will not invalidate the proceedings concerned;

     (c)  consents to the service of process relating to any such proceedings by
          prepaid  posting of a copy of the  process to its address set forth in
          the caption to this Sublease; and

     (d)  agrees that if the  appointment  of any person  mentioned in paragraph
          (a) above  ceases to be  effective  the  Sublessee  shall  immediately
          appoint a further  person in England  to accept  service of process on
          its behalf in England and,  failing such  appointment  within  fifteen
          (15) days,  the  Sublessor  is  entitled  to appoint  such a person by
          notice to the Sublessee.

The Sublessee  waives objection to the English courts on grounds of inconvenient
forum or otherwise as regards proceedings in connection with this Sublease;  and
agrees  that a judgment  or order of an English  court in  connection  with this
Sublease is conclusive  and binding on it and may be enforced  against it in the
courts of any other jurisdiction.

Nothing in this clause  limits the right of the Sublessor or the Lessor to bring
proceedings  against the Sublessee in connection with this Sublease in any other
court of competent jurisdiction or concurrently in more than one jurisdiction.

VIATEL U.K. LIMITED                 ___________________________________________
 (Sublessor)                             (Sublessee)

By:_____________________________    By:________________________________________
     (Signature)  (Title)                      (Signature)   (Title)

                                      116
<PAGE>

      SUBLEASE SCHEDULE NO. __________ TO SUBLEASE DATED ___________, 2000

    THE EQUIPMENT IS LEASED TO SUBLESSOR (IDENTIFIED BELOW) UNDER THE MASTER
      LEASE PURCHASE AGREEMENT DATED _____________, 2000, LEASE SCHEDULE(S)
                           NO(S). ___________________

VIATEL U.K. LIMITED
(Sublessor)                                                (Sublessee)

PARNELL HOUSE, 25 WILTON ROAD            ______________________________________
                                         (Street)

LONDON SWIV 1LW, ENGLAND                 ______________________________________
                                         (City, Postal Code, Country)

The Sublease  Agreement is  incorporated  herein by reference as if set forth at
length and  Sublessee  and  Sublessor  confirm  that the  Sublease  Agreement is
subject  and  subordinate  to the  Master  Lease  Purchase  Agreement  and Lease
Schedule(s)  referenced above and otherwise confirm all the terms and provisions
of the  Sublease  Agreement  except  as  specifically  set  forth  herein to the
contrary.

A.       EQUIPMENT

This  Sublease  Schedule  covers  certain  Equipment  described  more  fully  in
Attachment 1 attached hereto and made a part hereof.

B.       DEFINITIONS AND MEANINGS OF CERTAIN TERMS

1.       Commencement Date: ________________________________.

2.       Term of  Sublease:  _____________  days  followed  by a  basic  term of
         [Redacted] months, and ending on

3.       Sublease Monthly Rent: __________________________________, plus VAT, if
         any.

4        Additional Provisions:

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

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

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

C.       RENT PAYMENTS

All rent and all other payments  under the Sublease  Agreement are to be made to
Sublessor to the following account:

                                      117
<PAGE>

Except as expressly  modified  hereby,  all terms and provisions of the Sublease
Agreement remain in full force and effect.  The parties hereto have caused their
duly  authorized   officers  to  execute  this  Sublease   Schedule  as  of  the
Commencement Date.

VIATEL U.K. LIMITED                             -------------------------------
               (Sublessor)                                 (Sublessee)

By:
   ------------------------------------         -------------------------------

---------------------------------------         -------------------------------
(Title)                         (Date)          (Title)           (Date)

                                      118
<PAGE>

                                     PART II

                               [FOR US SUB-LESSEE]

THIS  SUBLEASE  AGREEMENT  dated  as of this  _____  day of  ____________,  2000
(hereinafter  referred to as this  "Sublease") is executed by and between VIATEL
U.K. LIMITED  (Registered No. 2968371),  a company  organized and existing under
English  law,  with its  mailing  address and chief place of business at Parnell
House,  25 Wilton Road,  London SW1V 1LW,  England  (hereinafter  referred to as
"Sublessor")  and  [Viatel  Sub]  a  company  incorporated  under  the  laws  of
____________,   with  its  mailing  address  and  chief  place  of  business  at
_______________________________________________   (hereinafter  referred  to  as
"Sublessee").

WHEREAS, the Sublessee wishes to lease from the Sublessor,  and the Sublessor is
willing  to lease to the  Sublessee  the  equipment  specified  in the  sublease
schedules  in the form of  Exhibit  A hereto  (each a  "Sublease  Schedule"  and
collectively the "Sublease  Schedules")  executed and delivered by Sublessor and
Sublessee  from time to time after the  execution  and delivery of this Sublease
(collectively the "Equipment").

WHEREAS, the Sublessor is leasing the equipment as lessee pursuant to the Master
Lease Purchase Agreement,  dated ____, 2000 (the "Base Lease"), between Dresdner
Kleinwort Benson Finance Limited (in its capacity as security trustee for and on
behalf  of  itself  and  each of the  Lessor  Risk  Parties  (together  with its
successors,  permitted  assigns and  permitted  transferees,  the  "Lessor") and
Sublessor  (unless otherwise  indicated,  capitalized terms used herein have the
meanings given to such terms in the Base Lease);

NOW, THEREFORE, IT IS AGREED AS FOLLOWS:

1.   SUBLEASE:

(a)      The Sublessor  agrees to sublease and the  Sublessee  agrees to take on
         sublease the Equipment on and subject to the terms of this Sublease.

(b)      The  Equipment is subject and  subordinate  to the Base Lease under and
         pursuant to which  Sublessor has acquired no present right,  title,  or
         interest in or to any of the Equipment other than a leasehold estate.

(c)      This Sublease shall be confirmed and effective as to items of Equipment
         only upon: (i) due execution of the Base Lease and the  commencement of
         the leasing of the Equipment under the Base Lease; (ii) due - execution
         by  Sublessor  and  Sublessee  of a  Sublease  Schedule  covering  such
         Equipment; (iii) due execution and delivery by Sublessor and acceptance
         by Lessor of a Sublease Assignment covering such Sublease Schedule, and
         service of a notice of such  assignment on the Sublessee and receipt by
         the Lessor of a signed acknowledgement by the Sublessee of such notice;
         and (iv) such other documents as Sublessor may reasonably require. Upon
         satisfaction  of (i) to (iv) above,  the  Equipment  described  therein
         shall be deemed to have been delivered to and accepted by Sublessee for
         sublease under this Sublease.

                                      119
<PAGE>

2.   TERM:

The term of this  Sublease for  Equipment  will commence on the day specified in
the Sublease  Schedule  covering such Equipment as the  "Commencement  Date" and
will continue for the period specified as the "Term" in such Sublease  Schedule,
as the same may be extended pursuant to the provisions of such Sublease Schedule
relating to renewal,  if any, but subject always to the Base Lease.  The term of
this Sublease  (including all  extensions  hereto) for Equipment will not in any
event extend beyond the Initial Term of the relevant  Lease  Schedule  under the
Base Lease.

3.   RENT:

(a)      Sublessee  agrees to pay rent for  Equipment  during  the Term for such
         Equipment  on the due dates and in the amount set forth in the Sublease
         Schedule covering such Equipment. If any payment hereunder falls due on
         a date  which is not a  Business  Day,  such  payment  shall be due and
         payable on the next succeeding Business Day.

(b)      (i)   All  payments  made by the  Sublessee  under  this  Sublease  are
               calculated without regard to VAT. If any such payment constitutes
               the  whole  or any part of the  consideration  for a  taxable  or
               deemed taxable supply (whether that supply is taxable pursuant to
               the exercise of an option or  otherwise)  by the  Sublessor,  the
               amount of that  payment  shall be increased by an amount equal to
               the amount of VAT which is  chargeable  in respect of the taxable
               supply in question  subject to the production by the Sublessor of
               a valid VAT invoice  (where  applicable) in respect of the VAT in
               question.

         (ii)  In respect of each item of Equipment,  subject to the  production
               by the  Sublessor of a valid VAT invoice  (where  applicable)  in
               respect of the VAT in question,  the  Sublessee  shall pay to the
               Sublessor on or before the fifth (5th) Business Day preceding the
               date on which the relevant VAT is due to be accounted  for by the
               Sublessor to the applicable  taxing  authority an amount equal to
               the  amount of VAT for which the then  Sublessor  is  obliged  to
               account  to the  applicable  taxing  authority  in respect of the
               supply under this Sublease and the relevant  Sublease Schedule of
               such item of Equipment.

         (iii) If, in respect of any item of Equipment, the Sublessor determines
               that the consideration for the supply thereof under this Sublease
               and the relevant  Sublease  Schedule is  increased or  decreased,
               then:

               (A)  if the  consideration  for  the  supply  is  increased,  the
                    Sublessee shall pay to the Sublessor on demand (or, if later
                    five  (5)  Business  Days  before  the  same  is  due  to be
                    accounted  for by the  Sublessor  to the  applicable  taxing
                    authority) an amount equal to the amount of  additional  VAT
                    for which the  Sublessor  is  obligated  to  account  to the
                    applicable taxing authority; and

               (B)  if the  consideration  for  the  supply  is  decreased,  the
                    Sublessor  shall issue a credit note to the  Sublessee in an
                    amount equal to the credit which the  Sublessor  claims from
                    the applicable  taxing authority in respect of the reduction
                    in consideration, and that amount shall be deducted from the
                    next  payment of rent due from the  Sublessee  in respect of
                    the relevant item of Equipment or shall be reimbursed to the
                    Sublessee  within  two (2)  Business  Days of  demand by the
                    Sublessee  if there is no further  payment of rent due or to
                    the  extent  that the next  such  payment  is less  than the
                    amount in question.

                                      120
<PAGE>

         (iv)  Any payment of other consideration to be made or furnished by the
               Sublessor to the Sublessee pursuant to or in connection with this
               Sublease or any transaction or document  contemplated  herein may
               be  increased  or added to by reference to (or as a result of any
               increase  in the rate of) any VAT  which  shall be or may  become
               chargeable  in respect of the  taxable  supply in question on the
               basis that the relevant  payment or consideration is stated on an
               exclusive of VAT basis.

         (v)   If and to the extent that the  Sublessor (or any company which is
               treated  as a member of the same group as the  Sublessor  for VAT
               purposes) bears VAT which is Irrecoverable VAT then the Sublessee
               shall on or within five (5) Business Days of demand indemnify and
               keep   indemnified   the  Sublessor   upon  demand  against  such
               Irrecoverable  VAT such indemnity being in an amount equal to the
               after-Tax  cost  to  the  Sublessor  of  such  Irrecoverable  VAT
               together with interest thereon at the rate of LIBOR calculated on
               a seven  day basis and  compounded  quarterly  from the date upon
               which  the   Sublessor   made  payment  of  the  amount  of  such
               Irrecoverable  VAT to but  excluding  the date of  payment of the
               amount of the indemnity.

(c)      (i)   All payments due to or by the Sublessor under this Sublease shall
               be  calculated  and made free and clear of and without  deduction
               for,  or on  account  of, any  present  or future  Taxes or other
               charges of  whatsoever  nature,  now or hereafter  imposed by any
               taxing or Governmental Authority whatsoever unless such deduction
               or withholding is required by law.

         (ii)  If  such  deduction  or  withholding  is  required  by  any  law,
               regulation or regulatory requirement the Sublessee shall:

               (A)  if the  payment  is to be made by the  Sublessee,  ensure or
                    procure that the deduction or  withholding  is made and that
                    it does not exceed the minimum legal requirement therefor;

               (B)  pay, or procure the payment of, the full amount  deducted or
                    withheld to the relevant  authority in  accordance  with the
                    Applicable Law;

               (C)  (1)  if the deduction or withholding is so required due to a
                         Change in Law and if the  payment  is to be made by the
                         Sublessee, increase the payment in respect of which the
                         deduction  or  withholding  is required so that the net
                         amount received by the Sublessor after the deduction or
                         withholding  shall  be equal to the  amount  which  the
                         Sublessor  would have been  entitled  to receive in the
                         absence  of any  requirement  to  make a  deduction  or
                         withholding; or

                    (2)  if the deduction or withholding is so required due to a
                         Change in Law and if the  payment  is to be made by any
                         person other that the Sublessee, procure the payment or
                         pay directly to the Sublessor such sum (a "Compensating
                         Sum") as will,  after taking into account any deduction
                         or withholding  which is required to be made in respect
                         of  the  Compensating  Sum,  result  in  the  Sublessor
                         receiving,  or, as the case may be, paying,  on the due
                         date for payment,  a net sum equal to the sum which the
                         Sublessor  would have  received or, as the case may be,
                         paid  in  the  absence  of  any  obligation  to  make a
                         deduction or withholding; and

                                      121
<PAGE>

               (D)  promptly deliver or procure the delivery to the Sublessor of
                    any  appropriate   receipts   evidencing  the  deduction  or
                    withholding  which has been made, or (in the absence of such
                    receipts)  provide a  certification  to the Sublessor of the
                    deduction or withholding made.

         (iii) The  Sublessor  agrees to furnish to the  Sublessee  from time to
               time  such  duly  executed  and  properly   completed   forms  or
               certificates  that are  reasonably  requested by the Sublessee in
               order to claim any reduction of or exemption from any withholding
               or other tax  imposed by any taxing  authority  in respect of any
               payments  otherwise required to be made by the Sublessee pursuant
               to this Sublease,  which  reduction or exemption may be available
               to the  Sublessor  under  Applicable  Law.  Without  limiting the
               foregoing,  the  Sublessor  shall,  prior to the due date for the
               first rent payment due  hereunder,  deliver a duly completed U.S.
               Internal  Revenue Service Form W-8BEN to the Sublessee  (claiming
               complete  exemption  from U.S.  withholding  tax) with respect to
               payments made under this Sublease,  and shall,  from time to time
               deliver  to the  Sublessee  such  new  or  updated  forms  as are
               required  to  claim  exemption  from  U.S.  withholding  tax with
               respect to payment made under this Sublease.

4.   BASE LEASE:

During the Term of this Sublease with respect to Equipment,  Sublessee shall (a)
maintain  such  Equipment  on the same terms as those set forth in Section 12 of
the Base Lease and (b) insure such  Equipment in  compliance  with Section 14 of
the Base Lease.  In addition,  if a termination  of the leasing of any Equipment
occurs under the Base Lease and  Sublessor is required to return such  Equipment
to Lessor, Sublessee shall immediately redeliver such Equipment to Sublessor or,
at Sublessor's direction,  to Lessor, at such place in the country in which such
Equipment is then located as Sublessor or Lessor, as the case may be, reasonably
specifies,  and will  otherwise  co-operate  with  Sublessor in  returning  such
Equipment to Lessor in the  condition in which such  Equipment is required to be
returned pursuant to the terms of the Base Lease.  Notwithstanding the foregoing
or any other provision of this Sublease or any Sublease Schedule,  the Sublessor
and  Sublessee  acknowledge  and agree that the  execution  and delivery of this
Sublease and Sublease  Schedules shall not release the Sublessor from any of its
obligations under the Base Lease or the Transaction Documents.

5.   SUBORDINATION:

Sublessor  warrants  that  during  the Term of this  Sublease  with  respect  to
Equipment,  so long as no  event  of  default  shall  have  occurred  hereunder,
Sublessor will not interrupt Sublessee's  possession,  use and operation of such
Equipment.   Nevertheless,   Sublessee   acknowledges  that  this  Sublease  and
Sublessee's  rights  hereunder  to the  possession,  use  and  enjoyment  of the
Equipment are subject and  subordinate  to all terms and  provisions of the Base
Lease, a copy of which has been provided to Sublessee,  and to the rights of the
Lessor  and  Lessor  Risk  Parties  thereunder  and under the other  Transaction
Documents;  provided,  however,  that upon  termination  of the  leasing  of any
Equipment under the Base Lease in  circumstances  where Sublessor is required to
return such Equipment to Lessor, Lessor may terminate this Sublease with respect
to such Equipment and the right of Sublessee to possess such Equipment.

6.   INDEMNIFICATION:

Sublessee agrees to indemnify,  save and keep harmless Sublessor and its agents,
employees,  successors and assigns from and against any and all losses, damages,
penalties,  injuries,  claims,  actions and suits,  including  legal expenses of
whatsoever  kind and nature,  in contract or tort,  howsoever  arising  from any

                                      122
<PAGE>

cause  whatsoever,  including but not limited to,  strict  liability in tort, or
otherwise arising out of (i) the selection, manufacture, acceptance or rejection
of the Equipment under this Sublease, the delivery, lease, sublease, possession,
maintenance,  use, condition,  return or operation of the Equipment  (including,
without  limitation,  latent or other defects,  whether or not  discoverable  by
Sublessor  and any claim for patent,  trademark or copyright  infringement);  or
(ii)  the  condition  of the  Equipment  disposed  of  after  use by  Sublessee.
Sublessee  will, upon request of Sublessor,  at its own expense,  defend any and
all actions based on or arising out of any of the foregoing.

7.   ASSIGNMENT, POSSESSION AND RETURN:

(a)      Subject to paragraph (b) below, the Sublessee will not sublease, assign
         or otherwise transfer or relinquish possession of the Equipment and any
         such  sublease,  assignment or transfer  will,  without  further act or
         instrument,  be void and of no force or effect. Subject to clause 7(c),
         at the end of the Term for any Equipment, Sublessee shall, if required,
         and only if  required,  redeliver  the  Equipment  to Sublessor in such
         place in the  country  in  which  such  Equipment  is then  located  as
         Sublessor  shall  reasonably  specify  in the  condition  Sublessee  is
         required to maintain such Equipment as provided in this Sublease.

(b)      The  Sublessee  may  transfer all (but not some only) of its rights and
         obligations under this Sub-Lease to any member of Viatel,  Inc.'s Group
         if the  Lessee  would  have been  entitled  to enter  into a  Permitted
         Sub-Lease  with such  assignee  under  Clause  12.3 of the Base  Lease,
         provided  that,  prior  to  such  assignment  becoming  effective,  the
         Sublessor shall notify the Lessor of the proposed transfer,  shall give
         notice of the Sub-Lease  Assignment to the transferee and shall procure
         an acknowledgement to such notice, in each case in the form required by
         the Sub-Lease Assignment, mutatis mutandis.

(c)      Upon the  expiration of the Term for any Equipment;  the Sublessee,  on
         not less than thirty (30) days prior written  notice to the  Sublessor,
         or such lesser period as the Sublessor may agree,  shall be entitled to
         purchase  such  Equipment  at a price of one hundred  Euros (E100) (the
         "Option  Price") in respect of each  Sublease  Schedule,  so long as no
         default  under Clause 8(a) of this  Sub-Lease or Event of Default under
         Clause  16.1(a) of the Base Lease has occurred and is continuing and no
         other amount is outstanding under the Transaction  Documents.  Upon (i)
         payment of the Option Price at or following the  expiration of the Term
         for such  Equipment  and (ii) the  transfer to Sublessor of legal title
         to,  and all  rights  and  interests  in and to,  such  Equipment,  the
         Sublessor  shall  transfer  legal  title to,  and all of its rights and
         interests in and to, such Equipment to the Sublessee.

The Sublessor  shall transfer legal title to, and all of its rights and interest
in and to, any Equipment as provided above "AS IS, WHERE IS", "WITH ALL FAULTS",
AND WITH NO WARRANTIES WHATSOEVER, EITHER EXPRESS OR IMPLIED.

8.   DEFAULTS; REMEDIES:

Each of the following will constitute a default  hereunder:  (a) Sublessee fails
to pay rent or any other  amount when due under this  Sublease  or any  Sublease
Schedule;  (b)  Sublessee  breaches  any other term,  provision,  obligation  or
covenant of this Sublease which breach,  if  remediable,  is not cured within 30
days after written  notice  thereof is given by the Sublessor to the  Sublessee;
and (c) a Sublessee  Insolvency  Event shall occur.  Upon the  occurrence of any
default under this Sublease, Sublessor, at its option, may do any one or more of
the  following:  (1) declare this Sublease and all of the Sublease  Schedules in
default upon notice to  Sublessee;  (2) proceed by  appropriate  court action or
actions at law or in equity or in insolvency  or  bankruptcy as permitted  under
Applicable Law,  including to enforce  performance by Sublessee of the covenants

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<PAGE>

and terms of this  Sublease  and/or to  recover  damages  for the breach of this
Sublease;  (3) terminate  this Sublease and all of the Sublease  Schedules  upon
notice to  Sublessee;  and (4)  whether or not this  Sublease  and the  Sublease
Schedules  are  terminated,  and  without  notice to  Sublessee,  repossess  the
Equipment  wherever found,  with or without legal process,  and for this purpose
Sublessor  and/or its agents may enter upon any premises of or under the control
or  jurisdiction  of Sublessee or any agent of Sublessee  without  liability for
suit,  action or other  proceeding by Sublessor (any damages  occasioned by such
repossession  being  herein  expressly  waived by  Sublessee  except for damages
occasioned  by the gross  negligence  or wilful  misconduct  of Sublessor or its
agents)  and remove the  Equipment  therefrom.  The  remedies  provided  in this
Section 8 in favour of Sublessor are not  exclusive  but will be cumulative  and
will be in addition to all other remedies in Sublessor's  favour  existing under
Applicable Law, including at law, in equity or in bankruptcy.

9.   ASSIGNMENT OF SUBLEASE:

(a)      Sublessee  acknowledges  receipt of a copy of the  notice of  Sub-Lease
         Assignment.  Sublessee  hereby  agrees to execute and deliver to Lessor
         the  Acknowledgement  in the form  attached as Part II of Schedule I to
         the Sub-Lease Assignment.

(b)      Lessor may sell and/or assign the Equipment  and/or Base Lease,  all as
         provided  for in the  Base  Lease,  whereupon  without  further  act or
         instrument  (except for  written  notice to  Sublessee  of such sale or
         assignment  and the name and address of the transferee is recorded in a
         registered  maintained to show the  ownership of the Lessor's  interest
         under the Base Lease),  and  provided  that the name and address of the
         transferee of the Lessor under the Base Lease is recorded in a register
         maintained  by the  Sublessee  to show the  ownership  of the  Lessor's
         interest  under the Base  Lease,  such  purchaser  or  assignee  of the
         Equipment and the Base Lease shall assume the benefits of this Sublease
         and the Sub-Lease Assignment and the obligations of the Sublessee under
         the Acknowledgement.

(c)      Notwithstanding any term or provision  contained in this Sublease,  the
         obligations  of the Lessee  under the Base  Lease are and shall  remain
         obligations of the Sublessor.

(d)      In the event the Sublessor transfers,  sells or assigns its interest in
         the  Equipment  or the  Sublease or any  interest  thereunder,  no such
         transfer, sale or assignment shall be effective,  and payment hereunder
         shall  continue  to be  payable to the  Sublessor  unless and until the
         Sublessor  gives notice to the  Sublessee in writing of such  transfer,
         sale or  assignment,  and  immediately  upon receipt of such notice the
         Sublessee shall record such transfer, sale or assignment,  and the name
         and address of the  transferee,  in a register  maintained  to show the
         ownership of the Sublessor's interest hereunder and in the Equipment.

10. NO OWNERSHIP INTEREST IN EQUIPMENT; REPOSSESSION OF EQUIPMENT:

In no event shall this  Sublease be  construed as a sale of the  Equipment,  and
except as provided in clause 7(b), Sublessee shall acquire no ownership,  title,
property,  right or interest in or with respect to the Equipment  other than its
leasehold interest hereunder. It is the express intention of the parties that if
the leasing of the Equipment terminates in accordance with the terms of the Base
Lease and  Sublessor  is  required  to return the  Equipment  to Lessor,  if the
Equipment  is not so  returned in  accordance  with the terms of the Base Lease,
Lessor shall have the right to pursue all remedies under Applicable Law to cause
the  return  of the  Equipment,  including,  without  limitation,  the  right to
repossess the Equipment in accordance  with  Applicable  Law and the Base Lease.
Notwithstanding any other provision of this Sublease to the contrary,  it is the
express intention of the parties that for U.S. federal income tax purposes,  the

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<PAGE>

Sublessee shall be treated as the owner of the Equipment and the Sublessor shall
be treated as a lender.

11.  MISCELLANEOUS:

The terms of this  Sublease  shall not be waived,  altered,  modified,  amended,
supplemented or terminated in any manner whatsoever except by written instrument
signed by Sublessor and Sublessee.  This Sublease and any instrument referred to
herein  together  with the Sublease  Schedules  and all  attachments  and riders
thereto  signed by the parties or  delivered  in  connection  herewith  shall be
governed by the laws of England,  constitute the entire agreement of the parties
with respect to the subject matter hereof and will  collectively  constitute the
Sublease with respect to the Equipment and supersede all  negotiations and prior
written or oral  agreements of the parties with respect  thereto.  Any provision
contained in this  Sublease  which may be invalid  under  applicable  law or any
government  rule or regulation  will be deemed  omitted,  modified or altered to
conform thereto.

12.  JURISDICTION:

FOR THE BENEFIT OF THE SUBLESSOR AND THE LESSOR,  THE SUBLESSEE  AGREES THAT THE
COURTS OF ENGLAND HAVE  JURISDICTION  TO SETTLE ANY DISPUTES IN CONNECTION  WITH
THIS SUBLEASE AND ACCORDINGLY SUBMITS TO THE JURISDICTION OF THE ENGLISH COURTS.

Without prejudice to any other mode of service, the Sublessee:

(a)      irrevocably  appoints as its agent for  service of process  Viatel U.K.
         Limited in relation  to any  proceedings  before the English  courts in
         connection with this Sublease;

(b)      agrees that failure by a process  agent to notify the  Sublessee of the
         process will not invalidate the proceedings concerned;

(c)      consents to the service of process  relating to any such proceedings by
         prepaid  posting of a copy of the  process to its  address set forth in
         the caption to this Sublease; and

(d)      agrees that if the appointment of any person mentioned in paragraph (a)
         above ceases to be effective the Sublessee shall immediately  appoint a
         further person in England to accept service of process on its behalf in
         England and,  failing such  appointment  within  fifteen (15) days, the
         Sublessor  is  entitled  to  appoint  such a person  by  notice  to the
         Sublessee.

The Sublessee  waives objection to the English courts on grounds of inconvenient
forum or otherwise as regards proceedings in connection with this Sublease;  and
agrees  that a judgment  or order of an English  court in  connection  with this
Sublease is conclusive  and binding on it and may be enforced  against it in the
courts of any other jurisdiction

Nothing in this clause  limits the right of the Sublessor or the Lessor to bring
proceedings  against the Sublessee in connection with this Sublease in any other
court of competent jurisdiction or concurrently in more than one jurisdiction.

VIATEL U.K. LIMITED                          ___________________________________
 (Sublessor)                                           (Sublessee)

By:________________________________       By:___________________________________
     (Signature)  (Title)                              (Signature)   (Title)

                                      125
<PAGE>

      SUBLEASE SCHEDULE NO. __________ TO SUBLEASE DATED ___________, 2000

        THE EQUIPMENT IS LEASED TO SUBLESSOR (IDENTIFIED BELOW) UNDER THE
           MASTER LEASE PURCHASE AGREEMENT DATED _____________, 2000,
                  LEASE SCHEDULE(S) NO(S). ___________________

VIATEL U.K. LIMITED                    -----------------------------------------
(Sublessor)                                              (Sublessee)

PARNELL HOUSE, 25 WILTON ROAD          -----------------------------------------
-----------------------------          (Street)

LONDON SWIV 1LW, ENGLAND               -----------------------------------------
-----------------------------          (City, Postal Code, Country)

         The Sublease  Agreement is  incorporated  herein by reference as if set
forth at length and Sublessee and Sublessor confirm that the Sublease  Agreement
is subject and  subordinate  to the Master Lease  Purchase  Agreement  and Lease
Schedule(s)  referenced above and otherwise confirm all the terms and provisions
of the  Sublease  Agreement  except  as  specifically  set  forth  herein to the
contrary.

A.       EQUIPMENT

         This Sublease Schedule covers certain Equipment described more fully in
         Attachment 1 attached hereto and made a part hereof.

B.       DEFINITIONS AND MEANINGS OF CERTAIN TERMS

         1.       Commencement Date: ________________________________.

         2.       Term of Sublease: _____________ days followed by a basic term
                  [Redacted]  and ending on

         3.       Sublease Monthly Rent: __________________________________,
                  plus VAT, if any.

         4        Additional Provisions:

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

C.       RENT PAYMENTS

All rent and all other payments  under the Sublease  Agreement are to be made to
Sublessor to the following account:

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<PAGE>

Except as expressly  modified  hereby,  all terms and provisions of the Sublease
Agreement remain in full force and effect.  The parties hereto have caused their
duly  authorized   officers  to  execute  this  Sublease   Schedule  as  of  the
Commencement Date.

VIATEL U.K. LIMITED                       -----------------------------------
                 (Sublessor)                          (Sublessee)

By:
   -----------------------------------    -----------------------------------

--------------------------------------    -----------------------------------
(Title)                         (Date)    (Title)                (Date)

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<PAGE>

                                    PART III

                            [FOR [Redacted] SUB-LESSEE]

THIS  SUBLEASE  AGREEMENT  dated  as of this  _____  day of  ____________,  2000
(hereinafter  referred to as this  "Sublease") is executed by and between VIATEL
U.K. LIMITED  (Registered No. 2968371),  a company  organized and existing under
English  law,  with its  mailing  address and chief place of business at Parnell
House,  25 Wilton Road,  London SW1V 1LW,  England  (hereinafter  referred to as
"Sublessor")  and  [Viatel  Sub]  a  company  incorporated  under  the  laws  of
____________,   with  its  mailing  address  and  chief  place  of  business  at
_______________________________________________   (hereinafter  referred  to  as
"Sublessee").

WHEREAS, the Sublessee wishes to lease from the Sublessor,  and the Sublessor is
willing  to lease to the  Sublessee  the  equipment  specified  in the  sublease
schedules  in the form of  Exhibit  A hereto  (each a  "Sublease  Schedule"  and
collectively the "Sublease  Schedules")  executed and delivered by Sublessor and
Sublessee  from time to time after the  execution  and delivery of this Sublease
(collectively the "Equipment").

WHEREAS, the Sublessor is leasing the equipment as lessee pursuant to the Master
Lease Purchase Agreement,  dated ____, 2000 (the "Base Lease"), between Dresdner
Kleinwort Benson Finance Limited (in its capacity as security trustee for and on
behalf  of  itself  and  each of the  Lessor  Risk  Parties  (together  with its
successors,  permitted  assigns and  permitted  transferees,  the  "Lessor") and
Sublessor  (unless otherwise  indicated,  capitalized terms used herein have the
meanings given to such terms in the Base Lease);

NOW, THEREFORE, IT IS AGREED AS FOLLOWS:

1.   SUBLEASE:

(a)      The Sublessor  agrees to sublease and the  Sublessee  agrees to take on
         sublease the Equipment on and subject to the terms of this Sublease.

(b)      The  Equipment is subject and  subordinate  to the Base Lease under and
         pursuant to which  Sublessor has acquired no present right,  title,  or
         interest in or to any of the Equipment other than a leasehold estate.

(c)      This Sublease shall be confirmed and effective as to items of Equipment
         only upon: (i) due execution of the Base Lease and the  commencement of
         the leasing of the Equipment  under the Base Lease;  (ii) due execution
         by  Sublessor  and  Sublessee  of a  Sublease  Schedule  covering  such
         Equipment; (iii) due execution and delivery by Sublessor and acceptance
         by Lessor of a Sublease Assignment covering such Sublease Schedule, and
         service of a notice of such  assignment on the Sublessee and receipt by
         the Lessor of a signed acknowledgement by the Sublessee of such notice;
         and (iv) such other documents as Sublessor may reasonably require. Upon
         satisfaction  of (i) to (iv) above,  the  Equipment  described  therein
         shall be deemed to have been delivered to and accepted by Sublessee for
         sublease under this Sublease.

2.   TERM:

The term of this  Sublease for  Equipment  will commence on the day specified in
the Sublease  Schedule  covering such Equipment as the  "Commencement  Date" and
will continue for the period specified as the "Term" in such Sublease  Schedule,
as the same may be extended pursuant to the provisions of such Sublease Schedule

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<PAGE>

relating to renewal,  if any, but subject always to the Base Lease.  The term of
this Sublease  (including all  extensions  hereto) for Equipment will not in any
event extend beyond the Initial Term of the relevant  Lease  Schedule  under the
Base Lease.

3.  RENT:

(a)      Sublessee  agrees to pay rent for  Equipment  during  the Term for such
         Equipment  on the due dates and in the amount set forth in the Sublease
         Schedule covering such Equipment. If any payment hereunder falls due on
         a date  which is not a  Business  Day,  such  payment  shall be due and
         payable on the next succeeding Business Day.

(b)      (i)   All  payments  made by the  Sublessee  under  this  Sublease  are
               calculated without regard to VAT. If any such payment constitutes
               the  whole  or any part of the  consideration  for a  taxable  or
               deemed taxable supply (whether that supply is taxable pursuant to
               the exercise of an option or  otherwise)  by the  Sublessor,  the
               amount of that  payment  shall be increased by an amount equal to
               the amount of VAT which is  chargeable  in respect of the taxable
               supply in question  subject to the production by the Sublessor of
               a valid VAT invoice  (where  applicable) in respect of the VAT in
               question.

         (ii)  In respect of each item of Equipment,  subject to the  production
               by the  Sublessor of a valid VAT invoice  (where  applicable)  in
               respect of the VAT in question,  the  Sublessee  shall pay to the
               Sublessor on or before the fifth (5th) Business Day preceding the
               date on which the relevant VAT is due to be accounted  for by the
               Sublessor to the applicable  taxing  authority an amount equal to
               the  amount of VAT for which the then  Sublessor  is  obliged  to
               account  to the  applicable  taxing  authority  in respect of the
               supply under this Sublease and the relevant  Sublease Schedule of
               such item of Equipment.

         (iii) If, in respect of any item of Equipment, the Sublessor determines
               that the consideration for the supply thereof under this Sublease
               and the relevant  Sublease  Schedule is  increased or  decreased,
               then:

               (A)  if the  consideration  for  the  supply  is  increased,  the
                    Sublessee shall pay to the Sublessor on demand (or, if later
                    five  (5)  Business  Days  before  the  same  is  due  to be
                    accounted  for by the  Sublessor  to the  applicable  taxing
                    authority) an amount equal to the amount of  additional  VAT
                    for which the  Sublessor  is  obligated  to  account  to the
                    applicable taxing authority; and

               (B)  if the  consideration  for  the  supply  is  decreased,  the
                    Sublessor  shall issue a credit note to the  Sublessee in an
                    amount equal to the credit which the  Sublessor  claims from
                    the applicable  taxing authority in respect of the reduction
                    in consideration, and that amount shall be deducted from the
                    next  payment of rent due from the  Sublessee  in respect of
                    the relevant item of Equipment or shall be reimbursed to the
                    Sublessee  within  two (2)  Business  Days of  demand by the
                    Sublessee  if there is no further  payment of rent due or to
                    the  extent  that the next  such  payment  is less  than the
                    amount in question.

         (iv)  Any payment of other consideration to be made or furnished by the
               Sublessor to the Sublessee pursuant to or in connection with this
               Sublease or any transaction or document  contemplated  herein may
               be  increased  or added to by reference to (or as a result of any
               increase  in the rate of) any VAT  which  shall be or may  become
               chargeable  in respect of the  taxable  supply in question on the

                                      129
<PAGE>

               basis that the relevant  payment or consideration is stated on an
               exclusive of VAT basis.

         (v)   If and to the extent that the  Sublessor (or any company which is
               treated  as a member of the same group as the  Sublessor  for VAT
               purposes) bears VAT which is Irrecoverable VAT then the Sublessee
               shall on or within five (5) Business Days of demand indemnify and
               keep   indemnified   the  Sublessor   upon  demand  against  such
               Irrecoverable  VAT such indemnity being in an amount equal to the
               after-Tax  cost  to  the  Sublessor  of  such  Irrecoverable  VAT
               together with interest thereon at the rate of LIBOR calculated on
               a seven  day basis and  compounded  quarterly  from the date upon
               which  the   Sublessor   made  payment  of  the  amount  of  such
               Irrecoverable  VAT to but  excluding  the date of  payment of the
               amount of the indemnity.

(c)      (i)   All payments due to or by the Sublessor under this Sublease shall
               be  calculated  and made free and clear of and without  deduction
               for,  or on  account  of, any  present  or future  Taxes or other
               charges of  whatsoever  nature,  now or hereafter  imposed by any
               taxing or Governmental Authority whatsoever unless such deduction
               or withholding is required by law.

         (ii)  If  such  deduction  or  withholding  is  required  by  any  law,
               regulation or regulatory requirement the Sublessee shall:

               (A)  if the  payment  is to be made by the  Sublessee,  ensure or
                    procure that the deduction or  withholding  is made and that
                    it does not exceed the minimum legal requirement therefor;

               (B)  pay, or procure the payment of, the full amount  deducted or
                    withheld to the relevant  authority in  accordance  with the
                    Applicable Law;

               (C)  (1)  if the deduction or withholding is so required due to a
                         Change in Law and if the  payment  is to be made by the
                         Sublessee, increase the payment in respect of which the
                         deduction  or  withholding  is required so that the net
                         amount received by the Sublessor after the deduction or
                         withholding  shall  be equal to the  amount  which  the
                         Sublessor  would have been  entitled  to receive in the
                         absence  of any  requirement  to  make a  deduction  or
                         withholding; or

                    (2)  if the deduction or withholding is so required due to a
                         Change in Law and if the  payment  is to be made by any
                         person other that the Sublessee, procure the payment or
                         pay directly to the Sublessor such sum (a "Compensating
                         Sum") as will,  after taking into account any deduction
                         or withholding  which is required to be made in respect
                         of  the  Compensating  Sum,  result  in  the  Sublessor
                         receiving,  or, as the case may be, paying,  on the due
                         date for payment,  a net sum equal to the sum which the
                         Sublessor  would have  received or, as the case may be,
                         paid  in  the  absence  of  any  obligation  to  make a
                         deduction or withholding; and

               (D)  promptly deliver or procure the delivery to the Sublessor of
                    any  appropriate   receipts   evidencing  the  deduction  or
                    withholding  which has been made, or (in the absence of such

                                      130
<PAGE>

                    receipts)  provide a  certification  to the Sublessor of the
                    deduction or withholding made.

         (iii) The  Sublessor  agrees to furnish to the  Sublessee  from time to
               time  such  duly  executed  and  properly   completed   forms  or
               certificates  that are  reasonably  requested by the Sublessee in
               order to claim any reduction of or exemption from any withholding
               or other tax  imposed by any taxing  authority  in respect of any
               payments  otherwise required to be made by the Sublessee pursuant
               to this Sublease,  which  reduction or exemption may be available
               to the Sublessor under Applicable Law.

4.   BASE LEASE:

During the Term of this Sublease with respect to Equipment,  Sublessee shall (a)
maintain  such  Equipment  on the same terms as those set forth in Section 12 of
the Base Lease and (b) insure such  Equipment in  compliance  with Section 14 of
the Base Lease.  In addition,  if a termination  of the leasing of any Equipment
occurs under the Base Lease and  Sublessor is required to return such  Equipment
to Lessor, Sublessee shall immediately redeliver such Equipment to Sublessor or,
at Sublessor's direction,  to Lessor, at such place in the country in which such
Equipment is then located as Sublessor or Lessor, as the case may be, reasonably
specifies,  and will  otherwise  co-operate  with  Sublessor in  returning  such
Equipment to Lessor in the  condition in which such  Equipment is required to be
returned pursuant to the terms of the Base Lease.  Notwithstanding the foregoing
or any other provision of this Sublease or any Sublease Schedule,  the Sublessor
and  Sublessee  acknowledge  and agree that the  execution  and delivery of this
Sublease and Sublease  Schedules shall not release the Sublessor from any of its
obligations under the Base Lease or the Transaction Documents.

5.   SUBORDINATION:

Sublessor  warrants  that  during  the Term of this  Sublease  with  respect  to
Equipment,  so long as no  event  of  default  shall  have  occurred  hereunder,
Sublessor will not interrupt Sublessee's  possession,  use and operation of such
Equipment.   Nevertheless,   Sublessee   acknowledges  that  this  Sublease  and
Sublessee's  rights  hereunder  to the  possession,  use  and  enjoyment  of the
Equipment are subject and  subordinate  to all terms and  provisions of the Base
Lease, a copy of which has been provided to Sublessee,  and to the rights of the
Lessor  and  Lessor  Risk  Parties  thereunder  and under the other  Transaction
Documents;  provided,  however,  that upon  termination  of the  leasing  of any
Equipment under the Base Lease in  circumstances  where Sublessor is required to
return such Equipment to Lessor, Lessor may terminate this Sublease with respect
to such Equipment and the right of Sublessee to possess such Equipment.

6.   INDEMNIFICATION:

Sublessee agrees to indemnify,  save and keep harmless Sublessor and its agents,
employees,  successors and assigns from and against any and all losses, damages,
penalties,  injuries,  claims,  actions and suits,  including  legal expenses of
whatsoever  kind and nature,  in contract or tort,  howsoever  arising  from any
cause  whatsoever,  including but not limited to,  strict  liability in tort, or
otherwise arising out of (i) the selection, manufacture, acceptance or rejection
of the Equipment under this Sublease, the delivery, lease, sublease, possession,
maintenance,  use, condition,  return or operation of the Equipment  (including,
without  limitation,  latent or other defects,  whether or not  discoverable  by
Sublessor  and any claim for patent,  trademark or copyright  infringement);  or
(ii)  the  condition  of the  Equipment  disposed  of  after  use by  Sublessee.
Sublessee  will, upon request of Sublessor,  at its own expense,  defend any and
all actions based on or arising out of any of the foregoing.

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<PAGE>

7.   ASSIGNMENT, POSSESSION AND RETURN:

(a)      Subject to paragraph (b) below, the Sublessee will not sublease, assign
         or otherwise transfer or relinquish possession of the Equipment and any
         such  sublease,  assignment or transfer  will,  without  further act or
         instrument,  be void and of no force or effect.  At the end of the Term
         for any Equipment,  Sublessee shall, if required, and only if required,
         redeliver  the  Equipment  to Sublessor in such place in the country in
         which such  Equipment  is then located as  Sublessor  shall  reasonably
         specify  in the  condition  Sublessee  is  required  to  maintain  such
         Equipment as provided in this Sublease.

(b)      The  Sublessee  may  transfer all (but not some only) of its rights and
         obligations under this Sub-Lease to any member of Viatel,  Inc.'s Group
         if the  Lessee  would  have been  entitled  to enter  into a  Permitted
         Sub-Lease  with such  assignee  under  Clause  12.3 of the Base  Lease,
         provided  that,  prior  to  such  assignment  becoming  effective,  the
         SubLessor shall notify the Lessor of the proposed transfer,  shall give
         notice of the Sub-Lease  Assignment to the transferee and shall procure
         an acknowledgement to such notice, in each case in the form required by
         the Sub-Lease Assignment, mutatis mutandis.

8.   DEFAULTS; REMEDIES:

Each of the following will constitute a default  hereunder:  (a) Sublessee fails
to pay rent or any other  amount when due under this  Sublease  or any  Sublease
Schedule;  (b)  Sublessee  breaches  any other term,  provision,  obligation  or
covenant of this Sublease which breach,  if  remediable,  is not cured within 30
days after written  notice  thereof is given by the Sublessor to the  Sublessee;
and (c) a Sublessee  Insolvency  Event shall occur.  Upon the  occurrence of any
default under this Sublease, Sublessor, at its option, may do any one or more of
the  following:  (1) declare this Sublease and all of the Sublease  Schedules in
default upon notice to  Sublessee;  (2) proceed by  appropriate  court action or
actions at law or in equity or in insolvency  or  bankruptcy as permitted  under
Applicable Law,  including to enforce  performance by Sublessee of the covenants
and terms of this  Sublease  and/or to  recover  damages  for the breach of this
Sublease;  (3) terminate  this Sublease and all of the Sublease  Schedules  upon
notice to  Sublessee;  and (4)  whether or not this  Sublease  and the  Sublease
Schedules  are  terminated,  and  without  notice to  Sublessee,  repossess  the
Equipment  wherever found,  with or without legal process,  and for this purpose
Sublessor  and/or its agents may enter upon any premises of or under the control
or  jurisdiction  of Sublessee or any agent of Sublessee  without  liability for
suit,  action or other  proceeding by Sublessor (any damages  occasioned by such
repossession  being  herein  expressly  waived by  Sublessee  except for damages
occasioned  by the gross  negligence  or wilful  misconduct  of Sublessor or its
agents)  and remove the  Equipment  therefrom.  The  remedies  provided  in this
Section 8 in favour of Sublessor are not  exclusive  but will be cumulative  and
will be in addition to all other remedies in Sublessor's  favour  existing under
Applicable Law, including at law, in equity or in bankruptcy.

9.   ASSIGNMENT OF SUBLEASE:

(a)      Sublessee  acknowledges  receipt of a copy of the  notice of  Sub-Lease
         Assignment.  Sublessee  hereby  agrees to execute and deliver to Lessor
         the  Acknowledgement  in the form  attached as Part II of Schedule I to
         the Sub-Lease Assignment.

(b)      Lessor may sell and/or assign the Equipment  and/or Base Lease,  all as
         provided  for in the  Base  Lease,  whereupon  without  further  act or
         instrument  (except for  written  notice to  Sublessee  of such sale or
         assignment),  such  purchaser or assignee of the Equipment and the Base
         Lease shall  assume the  benefits of this  Sublease  and the  Sub-Lease
         Assignment   and  the   obligations   of  the   Sublessee   under   the
         Acknowledgement.

                                      132
<PAGE>

(c)      Notwithstanding any term or provision  contained in this Sublease,  the
         obligations  of the Lessee  under the Base  Lease are and shall  remain
         obligations of the Sublessor.

10.  NO OWNERSHIP INTEREST IN EQUIPMENT; REPOSSESSION OF EQUIPMENT:

In no  event  shall  this  Sublease  be  construed  as a sale of the  Equipment,
Sublessee shall acquire no ownership,  title, property,  right or interest in or
with respect to the Equipment other than its leasehold interest hereunder. It is
the  express  intention  of the  parties  that if the  leasing of the  Equipment
terminates  in  accordance  with the terms of the Base  Lease and  Sublessor  is
required to return the Equipment to Lessor,  if the Equipment is not so returned
in accordance  with the terms of the Base Lease,  Lessor shall have the right to
pursue all remedies  under  Applicable Law to cause the return of the Equipment,
including,   without  limitation,  the  right  to  repossess  the  Equipment  in
accordance with Applicable Law and the Base Lease.

11.  MISCELLANEOUS:

The terms of this  Sublease  shall not be waived,  altered,  modified,  amended,
supplemented or terminated in any manner whatsoever except by written instrument
signed by Sublessor and Sublessee.  This Sublease and any instrument referred to
herein  together  with the Sublease  Schedules  and all  attachments  and riders
thereto  signed by the parties or  delivered  in  connection  herewith  shall be
governed by the laws of England,  constitute the entire agreement of the parties
with respect to the subject matter hereof and will  collectively  constitute the
Sublease with respect to the Equipment and supersede all  negotiations and prior
written or oral  agreements of the parties with respect  thereto.  Any provision
contained in this  Sublease  which may be invalid  under  applicable  law or any
government  rule or regulation  will be deemed  omitted,  modified or altered to
conform thereto.

12.  JURISDICTION:

FOR THE BENEFIT OF THE SUBLESSOR AND THE LESSOR,  THE SUBLESSEE  AGREES THAT THE
COURTS OF ENGLAND HAVE  JURISDICTION  TO SETTLE ANY DISPUTES IN CONNECTION  WITH
THIS SUBLEASE AND ACCORDINGLY SUBMITS TO THE JURISDICTION OF THE ENGLISH COURTS.

Without prejudice to any other mode of service, the Sublessee:

(a)      irrevocably  appoints as its agent for  service of process  Viatel U.K.
         Limited in relation  to any  proceedings  before the English  courts in
         connection with this Sublease;

(b)      agrees that failure by a process  agent to notify the  Sublessee of the
         process will not invalidate the proceedings concerned;

(c)      consents to the service of process  relating to any such proceedings by
         prepaid  posting of a copy of the  process to its  address set forth in
         the caption to this Sublease; and

(d)      agrees that if the appointment of any person mentioned in paragraph (a)
         above ceases to be effective the Sublessee shall immediately  appoint a
         further person in England to accept service of process on its behalf in
         England and,  failing such  appointment  within  fifteen (15) days, the
         Sublessor  is  entitled  to  appoint  such a person  by  notice  to the
         Sublessee.

The Sublessee  waives objection to the English courts on grounds of inconvenient
forum or otherwise as regards proceedings in connection with this Sublease;  and
agrees  that a judgment  or order of an English  court in  connection  with this

                                      133
<PAGE>

Sublease is conclusive  and binding on it and may be enforced  against it in the
courts of any other jurisdiction

Nothing in this clause  limits the right of the Sublessor or the Lessor to bring
proceedings  against the Sublessee in connection with this Sublease in any other
court of competent jurisdiction or concurrently in more than one jurisdiction.

VIATEL U.K. LIMITED
                                            -----------------------------------
 (Sublessor)                                     (Sublessee)

By:                                         By:
   ------------------------------------        --------------------------------
     (Signature)  (Title)                          (Signature)   (Title)

                                      134
<PAGE>

      SUBLEASE SCHEDULE NO. __________ TO SUBLEASE DATED ___________, 2000

             THE EQUIPMENT IS LEASED TO SUBLESSOR (IDENTIFIED BELOW)
      UNDER THE MASTER LEASE PURCHASE AGREEMENT DATED _____________, 2000,
                  LEASE SCHEDULE(S) NO(S). ___________________

VIATEL U.K. LIMITED
(Sublessor)                                         (Sublessee)

PARNELL HOUSE, 25 WILTON ROAD     ______________________________________________
                                    (Street)

LONDON SWIV 1LW, ENGLAND          ______________________________________________
                                  (City, Postal Code, Country)

The Sublease  Agreement is  incorporated  herein by reference as if set forth at
length and  Sublessee  and  Sublessor  confirm  that the  Sublease  Agreement is
subject  and  subordinate  to the  Master  Lease  Purchase  Agreement  and Lease
Schedule(s)  referenced above and otherwise confirm all the terms and provisions
of the  Sublease  Agreement  except  as  specifically  set  forth  herein to the
contrary.

A.       EQUIPMENT

This  Sublease  Schedule  covers  certain  Equipment  described  more  fully  in
Attachment 1 attached hereto and made a part hereof.

B.       DEFINITIONS AND MEANINGS OF CERTAIN TERMS

1.       Commencement Date: ________________________________.

2.       Term of  Sublease:  _____________  days  followed  by a  basic  term of
         [Redacted] months, and ending on

3.       Sublease Monthly Rent: __________________________________, plus VAT, if
         any.

4.        Additional Provisions:

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

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

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

C.       RENT PAYMENTS

All rent and all other payments  under the Sublease  Agreement are to be made to
Sublessor to the following account:

                                      135
<PAGE>

Except as expressly  modified  hereby,  all terms and provisions of the Sublease
Agreement remain in full force and effect.  The parties hereto have caused their
duly  authorized   officers  to  execute  this  Sublease   Schedule  as  of  the
Commencement Date.

VIATEL U.K. LIMITED                       _____________________________________
               (Sublessor)                              (Sublessee)

By:___________________________________    _____________________________________

--------------------------------------    -------------------------------------
(Title)               (Date)              (Title)              (Date)

                                      136
<PAGE>

                                  PART III (A)

    FORM OF AGREEMENT FOR ENTRY INTO BETWEEN LESSOR AND [Redacted] SUB-LESSEE

THIS AGREEMENT  dated as of this _____ day of  ____________,  2000  (hereinafter
referred to as this  "Agreement") is executed by and between VIATEL U.K. LIMITED
(Registered No.  2968371),  a company  organized and existing under English law,
with its mailing address and chief place of business at Parnell House, 25 Wilton
Road,  London SW1V 1LW,  England  (hereinafter  referred to as "Sublessor")  and
[Viatel Sub] a company  incorporated  under the laws of  ____________,  with its
mailing      address      and      chief      place     of      business      at
_______________________________________________   (hereinafter  referred  to  as
"Sublessee").

WHEREAS,  pursuant to the terms of a Sublease dated on or about the date of this
Agreement  (the  "Sub-Lease")  the  Sublessee  has leased from the Sublessor the
equipment specified in the Sub-Lease;

WHEREAS, the Sublessor is leasing the equipment as lessee pursuant to the Master
Lease Purchase Agreement,  dated ____, 2000 (the "Base Lease"), between Dresdner
Kleinwort Benson Finance Limited (in its capacity as security trustee for and on
behalf  of  itself  and  each of the  Lessor  Risk  Parties  (together  with its
successors,  permitted  assigns and  permitted  transferees,  the  "Lessor") and
Sublessor  (unless otherwise  indicated,  capitalized terms used herein have the
meanings given to such terms in the Base Lease); and

WHEREAS,  the Sublessor and the Sublessee wish to provide the terms of which the
equipment may become the property of the Sublessee.

NOW, THEREFORE, IT IS AGREED AS FOLLOWS:

1.   ASSIGNMENT, POSSESSION AND RETURN:

Upon the  expiration of the Term for any Equipment;  the Sublessee,  on not less
than  thirty (30) days prior  written  notice to the  Sublessor,  or such lesser
period as the Sublessor may agree,  shall be entitled to purchase such Equipment
at a price of one hundred  Euros (E100) (the "Option  Price") in respect of each
Sublease  Schedule,  so long as no default under Clause 8(a) of the Sub-Lease or
Event of Default  under  Clause  16.1(a) of the Base Lease has  occurred  and is
continuing and no other amount is outstanding  under the Transaction  Documents.
Upon (i) payment of the Option Price at or following the  expiration of the Term
for such Equipment and (ii) the transfer to Sublessor of legal title to, and all
rights and interests in and to, such  Equipment,  the Sublessor  shall  transfer
legal title to, and all of its rights and interests in and to, such Equipment to
the Sublessee.

The Sublessor  shall transfer legal title to, and all of its rights and interest
in and to, any Equipment as provided above "AS IS, WHERE IS", "WITH ALL FAULTS",
AND WITH NO WARRANTIES WHATSOEVER, EITHER EXPRESS OR IMPLIED.

2.  GOVERNING LAW AND JURISDICTION:

(a)  This  Agreement  shall be governed by the laws of England,  constitute  the
     entire agreement and the parties with respect to the subject matter hereof.
     Any provision of this Agreement  which may be invalid under  applicable law
     or any government rule or regulation  will be deemed  omitted,  modified or
     altered to conform thereto.

                                      137
<PAGE>

(b)  FOR THE BENEFIT OF THE SUBLESSOR AND THE LESSOR,  THE SUBLESSEE AGREES THAT
     THE  COURTS  OF  ENGLAND  HAVE  JURISDICTION  TO  SETTLE  ANY  DISPUTES  IN
     CONNECTION WITH THIS AGREEMENT AND ACCORDINGLY  SUBMITS TO THE JURISDICTION
     OF THE ENGLISH COURTS.

Without prejudice to any other mode of service, the Sublessee:

     (i)   irrevocably  appoints as its agent for service of process Viatel U.K.
           Limited in relation to any  proceedings  before the English courts in
           connection with this Agreement;

     (ii)  agrees that failure by a process agent to notify the Sublessee of the
           process will not invalidate the proceedings concerned;

     (iii) consents to the service of process  relating to any such  proceedings
           by prepaid  posting of a copy of the process to its address set forth
           in the caption to this Agreement; and

     (iv)  agrees that if the  appointment of any person  mentioned in paragraph
           (a) above  ceases to be effective  the  Sublessee  shall  immediately
           appoint a further  person in England to accept  service of process on
           its behalf in England and,  failing such  appointment  within fifteen
           (15) days,  the  Sublessor  is entitled  to appoint  such a person by
           notice to the Sublessee.

The Sublessee  waives objection to the English courts on grounds of inconvenient
forum or otherwise as regards proceedings in connection with this Agreement; and
agrees  that a judgment  or order of an English  court in  connection  with this
Agreement is conclusive and binding on it and may be enforced  against it in the
courts of any other jurisdiction.

Nothing in this clause  limits the right of the Sublessor or the Lessor to bring
proceedings against the Sublessee in connection with this Agreement in any other
court of competent jurisdiction or concurrently in more than one jurisdiction.

VIATEL U.K. LIMITED               _____________________________________________
 (Sublessor)                                  (Sublessee)

By:__________________________     By:__________________________________________
     (Signature)  (Title)                         (Signature)   (Title)

                                      138
<PAGE>

                                     PART IV

                           [FOR [Redacted] SUB-LESSEE]

THIS  SUBLEASE  AGREEMENT  dated  as of this  _____  day of  ____________,  2000
(hereinafter  referred to as this  "Sublease") is executed by and between VIATEL
U.K. LIMITED  (Registered No. 2968371),  a company  organized and existing under
English  law,  with its  mailing  address and chief place of business at Parnell
House,  25 Wilton Road,  London SW1V 1LW,  England  (hereinafter  referred to as
"Sublessor")  and  [Viatel  Sub]  a  company  incorporated  under  the  laws  of
____________,   with  its  mailing  address  and  chief  place  of  business  at
_______________________________________________   (hereinafter  referred  to  as
"Sublessee").

WHEREAS, the Sublessee wishes to lease from the Sublessor,  and the Sublessor is
willing  to lease to the  Sublessee  the  equipment  specified  in the  sublease
schedules  in the form of  Exhibit  A hereto  (each a  "Sublease  Schedule"  and
collectively the "Sublease  Schedules")  executed and delivered by Sublessor and
Sublessee  from time to time after the  execution  and delivery of this Sublease
(collectively the "Equipment").

WHEREAS, the Sublessor is leasing the equipment as lessee pursuant to the Master
Lease Purchase Agreement,  dated ____, 2000 (the "Base Lease"), between Dresdner
Kleinwort Benson Finance Limited (in its capacity as security trustee for and on
behalf  of  itself  and  each of the  Lessor  Risk  Parties  (together  with its
successors,  permitted  assigns and  permitted  transferees,  the  "Lessor") and
Sublessor  (unless otherwise  indicated,  capitalized terms used herein have the
meanings given to such terms in the Base Lease);

NOW, THEREFORE, IT IS AGREED AS FOLLOWS:

1.   SUBLEASE:

(a)      The Sublessor  agrees to sublease and the  Sublessee  agrees to take on
         sublease the Equipment on and subject to the terms of this Sublease.

(b)      The  Equipment is subject and  subordinate  to the Base Lease under and
         pursuant to which  Sublessor has acquired no present right,  title,  or
         interest in or to any of the Equipment other than a leasehold estate.

(c)      This Sublease shall be confirmed and effective as to items of Equipment
         only upon: (i) due execution of the Base Lease and the  commencement of
         the leasing of the Equipment  under the Base Lease;  (ii) due execution
         by  Sublessor  and  Sublessee  of a  Sublease  Schedule  covering  such
         Equipment; (iii) due execution and delivery by Sublessor and acceptance
         by Lessor of a Sublease Assignment covering such Sublease Schedule, and
         service of a notice of such  assignment on the Sublessee and receipt by
         the Lessor of a signed acknowledgement by the Sublessee of such notice;
         and (iv) such other documents as Sublessor may reasonably require. Upon
         satisfaction  of (i) to (iv) above,  the  Equipment  described  therein
         shall be deemed to have been delivered to and accepted by Sublessee for
         sublease under this Sublease.

2.   TERM:

The term of this  Sublease for  Equipment  will commence on the day specified in
the Sublease  Schedule  covering such Equipment as the  "Commencement  Date" and
will continue for the period specified as the "Term" in such Sublease  Schedule,
as the same may be extended pursuant to the provisions of such Sublease Schedule

                                      139
<PAGE>

relating to renewal,  if any, but subject always to the Base Lease.  The term of
this Sublease  (including all  extensions  hereto) for Equipment will not in any
event extend beyond the Initial Term of the relevant  Lease  Schedule  under the
Base Lease.

3.  RENT:

(a)      Sublessee  agrees to pay rent for  Equipment  during  the Term for such
         Equipment  on the due dates and in the amount set forth in the Sublease
         Schedule covering such Equipment. If any payment hereunder falls due on
         a date  which is not a  Business  Day,  such  payment  shall be due and
         payable on the next succeeding Business Day.

(b)      (i)   All  payments  made by the  Sublessee  under  this  Sublease  are
               calculated without regard to VAT. If any such payment constitutes
               the  whole  or any part of the  consideration  for a  taxable  or
               deemed taxable supply (whether that supply is taxable pursuant to
               the exercise of an option or  otherwise)  by the  Sublessor,  the
               amount of that  payment  shall be increased by an amount equal to
               the amount of VAT which is  chargeable  in respect of the taxable
               supply in question  subject to the production by the Sublessor of
               a valid VAT invoice  (where  applicable) in respect of the VAT in
               question.

         (ii)  In respect of each item of Equipment,  subject to the  production
               by the  Sublessor of a valid VAT invoice  (where  applicable)  in
               respect of the VAT in question,  the  Sublessee  shall pay to the
               Sublessor on or before the fifth (5th) Business Day preceding the
               date on which the relevant VAT is due to be accounted  for by the
               Sublessor to the applicable  taxing  authority an amount equal to
               the  amount of VAT for which the then  Sublessor  is  obliged  to
               account  to the  applicable  taxing  authority  in respect of the
               supply under this Sublease and the relevant  Sublease Schedule of
               such item of Equipment.

         (iii) If, in respect of any item of Equipment, the Sublessor determines
               that the consideration for the supply thereof under this Sublease
               and the relevant  Sublease  Schedule is  increased or  decreased,
               then:

               (A)  if the  consideration  for  the  supply  is  increased,  the
                    Sublessee shall pay to the Sublessor on demand (or, if later
                    five  (5)  Business  Days  before  the  same  is  due  to be
                    accounted  for by the  Sublessor  to the  applicable  taxing
                    authority) an amount equal to the amount of  additional  VAT
                    for which the  Sublessor  is  obligated  to  account  to the
                    applicable taxing authority; and

               (B)  if the  consideration  for  the  supply  is  decreased,  the
                    Sublessor  shall issue a credit note to the  Sublessee in an
                    amount equal to the credit which the  Sublessor  claims from
                    the applicable  taxing authority in respect of the reduction
                    in consideration, and that amount shall be deducted from the
                    next  payment of rent due from the  Sublessee  in respect of
                    the relevant item of Equipment or shall be reimbursed to the
                    Sublessee  within  two (2)  Business  Days of  demand by the
                    Sublessee  if there is no further  payment of rent due or to
                    the  extent  that the next  such  payment  is less  than the
                    amount in question.

         (iv)  Any payment of other consideration to be made or furnished by the
               Sublessor to the Sublessee pursuant to or in connection with this
               Sublease or any transaction or document  contemplated  herein may
               be  increased  or added to by reference to (or as a result of any
               increase  in the rate of) any VAT  which  shall be or may  become
               chargeable  in respect of the  taxable  supply in question on the

                                      140
<PAGE>

               basis that the relevant  payment or consideration is stated on an
               exclusive of VAT basis.

         (v)   If and to the extent that the  Sublessor (or any company which is
               treated  as a member of the same group as the  Sublessor  for VAT
               purposes) bears VAT which is Irrecoverable VAT then the Sublessee
               shall on or within five (5) Business Days of demand indemnify and
               keep   indemnified   the  Sublessor   upon  demand  against  such
               Irrecoverable  VAT such indemnity being in an amount equal to the
               after-Tax  cost  to  the  Sublessor  of  such  Irrecoverable  VAT
               together with interest thereon at the rate of LIBOR calculated on
               a seven  day basis and  compounded  quarterly  from the date upon
               which  the   Sublessor   made  payment  of  the  amount  of  such
               Irrecoverable  VAT to but  excluding  the date of  payment of the
               amount of the indemnity.

(c)      (i)   All payments due to or by the Sublessor under this Sublease shall
               be  calculated  and made free and clear of and without  deduction
               for,  or on  account  of, any  present  or future  Taxes or other
               charges of  whatsoever  nature,  now or hereafter  imposed by any
               taxing or Governmental Authority whatsoever unless such deduction
               or withholding is required by law.

         (ii)  If  such  deduction  or  withholding  is  required  by  any  law,
               regulation or regulatory requirement the Sublessee shall:

               (A)  if the  payment  is to be made by the  Sublessee,  ensure or
                    procure that the deduction or  withholding  is made and that
                    it does not exceed the minimum legal requirement therefor;

               (B)  pay, or procure the payment of, the full amount  deducted or
                    withheld to the relevant  authority in  accordance  with the
                    Applicable Law;

               (C)  (1)  if the deduction or withholding is so required due to a
                         Change in Law and if the  payment  is to be made by the
                         Sublessee, increase the payment in respect of which the
                         deduction  or  withholding  is required so that the net
                         amount received by the Sublessor after the deduction or
                         withholding  shall  be equal to the  amount  which  the
                         Sublessor  would have been  entitled  to receive in the
                         absence  of any  requirement  to  make a  deduction  or
                         withholding; or

                    (2)  if the deduction or withholding is so required due to a
                         Change in Law and if the  payment  is to be made by any
                         person other that the Sublessee, procure the payment or
                         pay directly to the Sublessor such sum (a "Compensating
                         Sum") as will,  after taking into account any deduction
                         or withholding  which is required to be made in respect
                         of  the  Compensating  Sum,  result  in  the  Sublessor
                         receiving,  or, as the case may be, paying,  on the due
                         date for payment,  a net sum equal to the sum which the
                         Sublessor  would have  received or, as the case may be,
                         paid  in  the  absence  of  any  obligation  to  make a
                         deduction or withholding; and

               (D)  promptly deliver or procure the delivery to the Sublessor of
                    any  appropriate   receipts   evidencing  the  deduction  or
                    withholding  which has been made, or (in the absence of such

                                      141
<PAGE>

                    receipts)  provide a  certification  to the Sublessor of the
                    deduction or withholding made.

         (iii) The  Sublessor  agrees to furnish to the  Sublessee  from time to
               time  such  duly  executed  and  properly   completed   forms  or
               certificates  that are  reasonably  requested by the Sublessee in
               order to claim any reduction of or exemption from any withholding
               or other tax  imposed by any taxing  authority  in respect of any
               payments  otherwise required to be made by the Sublessee pursuant
               to this Sublease,  which  reduction or exemption may be available
               to the Sublessor under Applicable Law.

4.   BASE LEASE:

During the Term of this Sublease with respect to Equipment,  Sublessee shall (a)
maintain  such  Equipment  on the same terms as those set forth in Section 12 of
the Base Lease and (b) insure such  Equipment in  compliance  with Section 14 of
the Base Lease.  In addition,  if a termination  of the leasing of any Equipment
occurs under the Base Lease and  Sublessor is required to return such  Equipment
to Lessor, Sublessee shall immediately redeliver such Equipment to Sublessor or,
at Sublessor's direction,  to Lessor, at such place in the country in which such
Equipment is then located as Sublessor or Lessor, as the case may be, reasonably
specifies,  and will  otherwise  co-operate  with  Sublessor in  returning  such
Equipment to Lessor in the  condition in which such  Equipment is required to be
returned pursuant to the terms of the Base Lease.  Notwithstanding the foregoing
or any other provision of this Sublease or any Sublease Schedule,  the Sublessor
and  Sublessee  acknowledge  and agree that the  execution  and delivery of this
Sublease and Sublease  Schedules shall not release the Sublessor from any of its
obligations under the Base Lease or the Transaction Documents.

5.   SUBORDINATION:

Sublessor  warrants  that  during  the Term of this  Sublease  with  respect  to
Equipment,  so long as no  event  of  default  shall  have  occurred  hereunder,
Sublessor will not interrupt Sublessee's  possession,  use and operation of such
Equipment.   Nevertheless,   Sublessee   acknowledges  that  this  Sublease  and
Sublessee's  rights  hereunder  to the  possession,  use  and  enjoyment  of the
Equipment are subject and  subordinate  to all terms and  provisions of the Base
Lease, a copy of which has been provided to Sublessee,  and to the rights of the
Lessor  and  Lessor  Risk  Parties  thereunder  and under the other  Transaction
Documents;  provided,  however,  that upon  termination  of the  leasing  of any
Equipment under the Base Lease in  circumstances  where Sublessor is required to
return such Equipment to Lessor, Lessor may terminate this Sublease with respect
to such Equipment and the right of Sublessee to possess such Equipment.

6.   INDEMNIFICATION:

Sublessee agrees to indemnify,  save and keep harmless Sublessor and its agents,
employees,  successors and assigns from and against any and all losses, damages,
penalties,  injuries,  claims,  actions and suits,  including  legal expenses of
whatsoever  kind and nature,  in contract or tort,  howsoever  arising  from any
cause  whatsoever,  including but not limited to,  strict  liability in tort, or
otherwise arising out of (i) the selection, manufacture, acceptance or rejection
of the Equipment under this Sublease, the delivery, lease, sublease, possession,
maintenance,  use, condition,  return or operation of the Equipment  (including,
without  limitation,  latent or other defects,  whether or not  discoverable  by
Sublessor  and any claim for patent,  trademark or copyright  infringement);  or
(ii)  the  condition  of the  Equipment  disposed  of  after  use by  Sublessee.
Sublessee  will, upon request of Sublessor,  at its own expense,  defend any and
all actions based on or arising out of any of the foregoing.

                                      142
<PAGE>

7.   ASSIGNMENT, POSSESSION AND RETURN:

(a)      Subject to paragraph (b) below, the Sublessee will not sublease, assign
         or otherwise transfer or relinquish possession of the Equipment and any
         such  sublease,  assignment or transfer  will,  without  further act or
         instrument,  be void and of no force or effect.  At the end of the Term
         for any Equipment,  Sublessee shall, if required, and only if required,
         redeliver  the  Equipment  to Sublessor in such place in the country in
         which such  Equipment  is then located as  Sublessor  shall  reasonably
         specify  in the  condition  Sublessee  is  required  to  maintain  such
         Equipment as provided in this Sublease.

(b)      The  Sublessee  may  transfer all (but not some only) of its rights and
         obligations under this Sub-Lease to any member of Viatel,  Inc.'s Group
         if the  Lessee  would  have been  entitled  to enter  into a  Permitted
         Sub-Lease  with such  assignee  under  Clause  12.3 of the Base  Lease,
         provided  that,  prior  to  such  assignment  becoming  effective,  the
         SubLessor shall notify the Lessor of the proposed transfer,  shall give
         notice of the Sub-Lease  Assignment to the transferee and shall procure
         an acknowledgement to such notice, in each case in the form required by
         the Sub-Lease Assignment, mutatis mutandis.

8.   DEFAULTS; REMEDIES:

Each of the following will constitute a default  hereunder:  (a) Sublessee fails
to pay rent or any other  amount when due under this  Sublease  or any  Sublease
Schedule;  (b)  Sublessee  breaches  any other term,  provision,  obligation  or
covenant of this Sublease which breach,  if  remediable,  is not cured within 30
days after written  notice  thereof is given by the Sublessor to the  Sublessee;
and (c) a Sublessee  Insolvency  Event shall occur.  Upon the  occurrence of any
default under this Sublease, Sublessor, at its option, may do any one or more of
the  following:  (1) declare this Sublease and all of the Sublease  Schedules in
default upon notice to  Sublessee;  (2) proceed by  appropriate  court action or
actions at law or in equity or in insolvency  or  bankruptcy as permitted  under
Applicable Law,  including to enforce  performance by Sublessee of the covenants
and terms of this  Sublease  and/or to  recover  damages  for the breach of this
Sublease;  (3) terminate  this Sublease and all of the Sublease  Schedules  upon
notice to  Sublessee;  and (4)  whether or not this  Sublease  and the  Sublease
Schedules  are  terminated,  and  without  notice to  Sublessee,  repossess  the
Equipment  wherever found,  with or without legal process,  and for this purpose
Sublessor  and/or its agents may enter upon any premises of or under the control
or  jurisdiction  of Sublessee or any agent of Sublessee  without  liability for
suit,  action or other  proceeding by Sublessor (any damages  occasioned by such
repossession  being  herein  expressly  waived by  Sublessee  except for damages
occasioned  by the gross  negligence  or wilful  misconduct  of Sublessor or its
agents)  and remove the  Equipment  therefrom.  The  remedies  provided  in this
Section 8 in favour of Sublessor are not  exclusive  but will be cumulative  and
will be in addition to all other remedies in Sublessor's  favour  existing under
Applicable Law, including at law, in equity or in bankruptcy.

9.   ASSIGNMENT OF SUBLEASE:

(a)      Sublessee  acknowledges  receipt of a copy of the  notice of  Sub-Lease
         Assignment.  Sublessee  hereby  agrees to execute and deliver to Lessor
         the  Acknowledgement  in the form  attached as Part II of Schedule I to
         the Sub-Lease Assignment.

(b)      Lessor may sell and/or assign the Equipment  and/or Base Lease,  all as
         provided  for in the  Base  Lease,  whereupon  without  further  act or
         instrument  (except for  written  notice to  Sublessee  of such sale or
         assignment),  such  purchaser or assignee of the Equipment and the Base
         Lease shall  assume the  benefits of this  Sublease  and the  Sub-Lease
         Assignment   and  the   obligations   of  the   Sublessee   under   the
         Acknowledgement.

                                      143
<PAGE>

(c)      Notwithstanding any term or provision  contained in this Sublease,  the
         obligations  of the Lessee  under the Base  Lease are and shall  remain
         obligations of the Sublessor.

10. NO OWNERSHIP INTEREST IN EQUIPMENT; REPOSSESSION OF EQUIPMENT:

In no  event  shall  this  Sublease  be  construed  as a sale of the  Equipment,
Sublessee shall acquire no ownership,  title, property,  right or interest in or
with respect to the Equipment other than its leasehold interest hereunder. It is
the  express  intention  of the  parties  that if the  leasing of the  Equipment
terminates  in  accordance  with the terms of the Base  Lease and  Sublessor  is
required to return the Equipment to Lessor,  if the Equipment is not so returned
in accordance  with the terms of the Base Lease,  Lessor shall have the right to
pursue all remedies  under  Applicable Law to cause the return of the Equipment,
including,   without  limitation,  the  right  to  repossess  the  Equipment  in
accordance with Applicable Law and the Base Lease.

11.  MISCELLANEOUS:

The terms of this  Sublease  shall not be waived,  altered,  modified,  amended,
supplemented or terminated in any manner whatsoever except by written instrument
signed by Sublessor and Sublessee.  This Sublease and any instrument referred to
herein  together  with the Sublease  Schedules  and all  attachments  and riders
thereto  signed by the parties or  delivered  in  connection  herewith  shall be
governed by the laws of England,  constitute the entire agreement of the parties
with respect to the subject matter hereof and will  collectively  constitute the
Sublease with respect to the Equipment and supersede all  negotiations and prior
written or oral  agreements of the parties with respect  thereto.  Any provision
contained in this  Sublease  which may be invalid  under  applicable  law or any
government  rule or regulation  will be deemed  omitted,  modified or altered to
conform thereto.

12.  JURISDICTION:

FOR THE BENEFIT OF THE SUBLESSOR AND THE LESSOR,  THE SUBLESSEE  AGREES THAT THE
COURTS OF ENGLAND HAVE  JURISDICTION  TO SETTLE ANY DISPUTES IN CONNECTION  WITH
THIS SUBLEASE AND ACCORDINGLY SUBMITS TO THE JURISDICTION OF THE ENGLISH COURTS.

Without prejudice to any other mode of service, the Sublessee:

(a)      irrevocably  appoints as its agent for  service of process  Viatel U.K.
         Limited in relation  to any  proceedings  before the English  courts in
         connection with this Sublease;

(b)      agrees that failure by a process  agent to notify the  Sublessee of the
         process will not invalidate the proceedings concerned;

(c)      consents to the service of process  relating to any such proceedings by
         prepaid  posting of a copy of the  process to its  address set forth in
         the caption to this Sublease; and

(d)      agrees that if the appointment of any person mentioned in paragraph (a)
         above ceases to be effective the Sublessee shall immediately  appoint a
         further person in England to accept service of process on its behalf in
         England and,  failing such  appointment  within  fifteen (15) days, the
         Sublessor  is  entitled  to  appoint  such a person  by  notice  to the
         Sublessee.

The Sublessee  waives objection to the English courts on grounds of inconvenient
forum or otherwise as regards proceedings in connection with this Sublease;  and
agrees  that a judgment  or order of an English  court in  connection  with this

                                      144
<PAGE>

Sublease is conclusive  and binding on it and may be enforced  against it in the
courts of any other jurisdiction.

Nothing in this clause  limits the right of the Sublessor or the Lessor to bring
proceedings  against the Sublessee in connection with this Sublease in any other
court of competent jurisdiction or concurrently in more than one jurisdiction.

VIATEL U.K. LIMITED                  ___________________________________________
 (Sublessor)                                      (Sublessee)

By:____________________________      By:________________________________________
     (Signature)  (Title)                             (Signature)   (Title)

                                      145
<PAGE>

      SUBLEASE SCHEDULE NO. __________ TO SUBLEASE DATED ___________, 2000

             THE EQUIPMENT IS LEASED TO SUBLESSOR (IDENTIFIED BELOW)
      UNDER THE MASTER LEASE PURCHASE AGREEMENT DATED _____________, 2000,
                  LEASE SCHEDULE(S) NO(S). ___________________

VIATEL U.K. LIMITED
(Sublessor)                                           (Sublessee)

PARNELL HOUSE, 25 WILTON ROAD
-----------------------------          ----------------------------------------
                                       (Street)

LONDON SWIV 1LW, ENGLAND
-----------------------------          ----------------------------------------
                                            (City, Postal Code, Country)

The Sublease  Agreement is  incorporated  herein by reference as if set forth at
length and  Sublessee  and  Sublessor  confirm  that the  Sublease  Agreement is
subject  and  subordinate  to the  Master  Lease  Purchase  Agreement  and Lease
Schedule(s)  referenced above and otherwise confirm all the terms and provisions
of the  Sublease  Agreement  except  as  specifically  set  forth  herein to the
contrary.

A.       EQUIPMENT

This  Sublease  Schedule  covers  certain  Equipment  described  more  fully  in
Attachment 1 attached hereto and made a part hereof.

B.       DEFINITIONS AND MEANINGS OF CERTAIN TERMS

1.       Commencement Date: ________________________________.

2.       Term of  Sublease:  _____________  days  followed  by a  basic  term of
         [Redacted] months, and ending on

3.       Sublease Monthly Rent: __________________________________, plus VAT, if
         any.

4        Additional Provisions:

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

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

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

C.       RENT PAYMENTS

All rent and all other payments  under the Sublease  Agreement are to be made to
Sublessor to the following account:

                                      146
<PAGE>

Except as expressly  modified  hereby,  all terms and provisions of the Sublease
Agreement remain in full force and effect.  The parties hereto have caused their
duly  authorized   officers  to  execute  this  Sublease   Schedule  as  of  the
Commencement Date.

VIATEL U.K. LIMITED                           _________________________________
                         (Sublessor)                          (Sublessee)

By: __________________________________        _________________________________

--------------------------------------        ---------------------------------
(Title)                         (Date)        (Title)                  (Date)

                                      147
<PAGE>

                                   PART IV(A)

    FORM OF AGREEMENT FOR ENTRY INTO BETWEEN LESSOR AND [Redacted] SUB-LESSEE

THIS AGREEMENT  dated as of this _____ day of  ____________,  2000  (hereinafter
referred to as this  "Agreement") is executed by and between VIATEL U.K. LIMITED
(Registered No.  2968371),  a company  organized and existing under English law,
with its mailing address and chief place of business at Parnell House, 25 Wilton
Road,  London SW1V 1LW,  England  (hereinafter  referred to as "Sublessor")  and
[Viatel Sub] a company  incorporated  under the laws of  ____________,  with its
mailing      address      and      chief      place     of      business      at
_______________________________________________   (hereinafter  referred  to  as
"Sublessee").

WHEREAS, pursuant to the terms of a Sub-Lease dated on or about the date of this
Agreement  (the  "SUB-LEASE")  the  Sublessee  has leased from the Sublessor the
equipment specified in the Sub-Lease;

WHEREAS, the Sublessor is leasing the equipment as lessee pursuant to the Master
Lease Purchase Agreement,  dated ____, 2000 (the "Base Lease"), between Dresdner
Kleinwort Benson Finance Limited (in its capacity as security trustee for and on
behalf  of  itself  and  each of the  Lessor  Risk  Parties  (together  with its
successors,  permitted  assigns and  permitted  transferees,  the  "Lessor") and
Sublessor  (unless otherwise  indicated,  capitalized terms used herein have the
meanings given to such terms in the Base Lease); and

WHEREAS,  the Sublessor and the Sublessee wish to provide the terms of which the
equipment may become the property of the Sublessee.

NOW, THEREFORE, IT IS AGREED AS FOLLOWS:

1.   ASSIGNMENT, POSSESSION AND RETURN:

Upon the  expiration  of the Term for any  Equipment so long as no default under
Clause 8(a) of the  Sub-Lease or Event of Default  under  Clause  16.1(a) of the
Base Lease has occurred  and is  continuing  and no other amount is  outstanding
under the Transaction  Documents then immediately upon the transfer to Sublessor
of legal title to, and all rights and interests in and to, such  Equipment,  the
Sublessor  shall transfer legal title to, and all of its rights and interests in
and to, such Equipment to the Sublessee.

The Sublessor  shall transfer legal title to, and all of its rights and interest
in and to, any Equipment as provided above "AS IS, WHERE IS", "WITH ALL FAULTS",
AND WITH NO WARRANTIES WHATSOEVER, EITHER EXPRESS OR IMPLIED.

2.  GOVERNING LAW AND JURISDICTION:

    (a)  This Agreement shall be governed by the laws of England, constitute the
         entire  agreement  and the parties with  respect to the subject  matter
         hereof.  Any  provision of this  Agreement  which may be invalid  under
         applicable  law or any  government  rule or  regulation  will be deemed
         omitted, modified or altered to conform thereto.

    (b)  FOR THE BENEFIT OF THE SUBLESSOR AND THE LESSOR,  THE SUBLESSEE  AGREES
         THAT THE COURTS OF ENGLAND HAVE  JURISDICTION TO SETTLE ANY DISPUTES IN
         CONNECTION  WITH  THIS  AGREEMENT  AND   ACCORDINGLY   SUBMITS  TO  THE
         JURISDICTION OF THE ENGLISH COURTS.

                                      148
<PAGE>

Without prejudice to any other mode of service, the Sublessee:

         (i)   irrevocably  appoints as its agent for service of process  Viatel
               U.K.  Limited in relation to any  proceedings  before the English
               courts in connection with this Agreement;

         (ii)  agrees that failure by a process agent to notify the Sublessee of
               the process will not invalidate the proceedings concerned;

         (iii) consents  to  the  service  of  process   relating  to  any  such
               proceedings  by prepaid  posting of a copy of the  process to its
               address set forth in the caption to this Agreement; and

         (iv)  agrees  that  if the  appointment  of  any  person  mentioned  in
               paragraph (a) above ceases to be effective  the  Sublessee  shall
               immediately appoint a further person in England to accept service
               of process on its behalf in England and, failing such appointment
               within  fifteen (15) days,  the  Sublessor is entitled to appoint
               such a person by notice to the Sublessee.

The Sublessee  waives objection to the English courts on grounds of inconvenient
forum or otherwise as regards proceedings in connection with this Agreement; and
agrees  that a judgment  or order of an English  court in  connection  with this
Agreement is conclusive and binding on it and may be enforced  against it in the
courts of any other jurisdiction.

Nothing in this clause  limits the right of the Sublessor or the Lessor to bring
proceedings against the Sublessee in connection with this Agreement in any other
court of competent jurisdiction or concurrently in more than one jurisdiction.

VIATEL U.K. LIMITED                   _____________________________
 (Sublessor)                                  (Sublessee)

By:____________________________      By:________________________________________
     (Signature)  (Title)                         (Signature)   (Title)

                                      149
<PAGE>

                                   SCHEDULE 7

                          FORMS OF NOTICES TO LANDLORDS

                           VIATEL [Redacted] SUB-LEASE

              [ON LETTERHEAD OF VIATEL [Redacted], AS APPROPRIATE]

           [TO BE PRODUCED IN THE [Redacted] LANGUAGE, AS APPROPRIATE]

         [PLACE], [DATE], 2000

         Sirs,

         Acting in your  capacity as landlord of the rented  premises  [DESCRIBE
         PREMISES] (the "PREMISES") with regard to the terms and conditions of a
         lease   agreement   signed  in  favour   of  Viatel   [INSERT   COMPANY
         HEADQUARTERS,  COMPANY REGISTRATION NUMBER] ("VIATEL") dated [DATE], we
         inform you, through this letter, that the leased equipment appearing in
         the list in the  Schedule  (the  "EQUIPMENT")  will be installed in the
         Premises as of [DATE [this date must be later than,  or on, the date of
         receipt of this letter]].

         The Equipment is the exclusive  property of Dresdner  Kleinwort  Benson
         Finance Limited, owner of the Equipment,  and Viatel has no property or
         possessory right whatsoever over the Equipment.

         This  notification  informs you in your  capacity as landlord  that the
         Equipment  is not the  property of Viatel,  and thus  prevents you from
         exercising any privilege over the Equipment with respect to obligations
         of Viatel [in accordance with the rights defined in [Redacted].

         You are kindly  requested to acknowledge  the receipt of this letter by
         signing a copy and returning it to the address above.

         Yours faithfully

         (SIGNATURE OF VIATEL [Redacted] SUB-LESSEE, AS APPROPRIATE)

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

         I confirm and acknowledge receipt:

         -------------------------------        --------------------------------
         Signed By                              Dated

-----------------------------
* Select as  approptiate  for [Redacted] notices.  Leave blank for [Redacted].

                                      150
<PAGE>

                                    SCHEDULE

        THE CABINET(S) TO WHICH A PLATE HAS BEEN AFFIXED IDENTIFYING THE
       OWNER OF THE EQUIPMENT AS DRESDNER KLEINWORT BENSON FINANCE LIMITED
         AND ALL EQUIPMENT IN THAT (THOSE) CABINET(S) INCLUDING, BUT NOT
          LIMITED TO, THE EQUIPMENT AS SET OUT IN THIS SCHEDULE BELOW:

                                LIST OF EQUIPMENT

                                [insert details]

                                      151
<PAGE>

                           VIATEL [Redacted] SUB-LEASE

                 [ON LETTERHEAD OF VIATEL [Redacted] SUB-LESSEE]

                   [TO BE PRODUCED IN THE [Redacted] LANGUAGE

         [PLACE], [DATE], 2000

         Sirs,

         Acting in your  capacity as landlord of the rented  premises  [DESCRIBE
         PREMISES] (the  "Premises") with regards to the terms and conditions of
         a  lease   agreement   signed  in  favour  of  Viatel  [INSERT  COMPANY
         HEADQUARTERS,  COMPANY REGISTRATION NUMBER] ("VIATEL") dated [DATE], we
         inform you, through this letter, that the leased equipment appearing in
         the list in the  Schedule  (the  "EQUIPMENT")  will be installed in the
         Premises as of [DATE [this date must be later than,  or on, the date of
         receipt of this letter]].

         The Equipment is the exclusive  property of Dresdner  Kleinwort  Benson
         Finance Limited, owner of the Equipment,  and Viatel has no property or
         possessory right whatsoever over the Equipment.

         This  notification  informs you in your  capacity as landlord  that the
         Equipment  is not the  property of Viatel,  and thus  prevents you from
         exercising any privilege over the Equipment with respect to obligations
         of Viatel.

         On behalf of Dresdner Kleinwort Benson Finance Limited,  you are kindly
         requested to  acknowledge  the receipt of this letter by signing a copy
         and returning it to the address above.

         Yours faithfully

         (SIGNATURE OF VIATEL [Redacted] SUB-LESSEE)

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

         I confirm and acknowledge receipt:

         ------------------------------        ---------------------------------
         Signed By                             Dated

                                      152
<PAGE>

                                    SCHEDULE

        THE CABINET(S) TO WHICH A PLATE HAS BEEN AFFIXED IDENTIFYING THE
       OWNER OF THE EQUIPMENT AS DRESDNER KLEINWORT BENSON FINANCE LIMITED
         AND ALL EQUIPMENT IN THAT (THOSE) CABINET(S) INCLUDING, BUT NOT
          LIMITED TO, THE EQUIPMENT AS SET OUT IN THIS SCHEDULE BELOW:

                                LIST OF EQUIPMENT

                                [insert details]

                                      153
<PAGE>

                               VIATEL US SUB-LEASE

                     [ON LETTERHEAD OF VIATEL US SUB-LESSEE]
                    (APPLIES TO BOTH NEW-JERSEY AND NEW-YORK)

         [ADDRESS]

         [PLACE], [DATE], 2000

         Sirs,

         Acting in your  capacity as landlord of the rented  premises  [DESCRIBE
         PREMISES] (the  "PREMISES") with regards to the terms and conditions of
         a  lease   agreement   signed  in  favour  of  Viatel  [INSERT  COMPANY
         HEADQUARTERS,  COMPANY REGISTRATION NUMBER]  ("Viatel")dated [DATE], we
         inform you, through this letter, that the leased equipment appearing in
         the list in the  Schedule  (the  "EQUIPMENT")  will be installed in the
         Premises as of [DATE [this date must be later than,  or on, the date of
         receipt of this letter]].

         The Equipment is the exclusive  property of Dresdner  Kleinwort  Benson
         Finance Limited, owner of the Equipment,  and Viatel has no property or
         possessory right whatsoever over the Equipment.

         This  notification  informs you in your  capacity as landlord  that the
         Equipment is not the property of Viatel.

         On behalf of Dresdner  Kleinwort  Benson Finance Limited you are kindly
         requested to  acknowledge  the receipt of this letter by signing a copy
         and returning it to the address above.

         Execution of this letter  indicates  that you have received  notice and
         waive and relinquish  any landlord's  lien or rights over the Equipment
         that may have been granted under the lease or  applicable  law and that
         you  acknowledge  that the  Equipment may be installed in or located on
         the  Premises  and is not and shall not be deemed a fixture  or part of
         the real  property  but  shall  at all  times  be  considered  personal
         property.

         By  signing  the  acknowledgement  below,  you will also be  permitting
         Dresdner  Kleinwort  Benson Finance Ltd or any appointed agent to enter
         your premises on short notice for the sole purpose of  repossessing  or
         removing the Equipment.

         Yours faithfully

         (SIGNATURE OF VIATEL US SUB-LESSEE)

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

         I confirm and  acknowledge  receipt and hereby waive any lien or rights
         over the  Equipment set out in the Schedule to this letter that I might
         otherwise  be  entitled  to  under  the  provisions  of  the  lease  or
         applicable law.

                                      154
<PAGE>

         I confirm that I will permit Dresdner  Kleinwort  Benson Finance Ltd or
         any  appointed  agent to enter my premises on short notice for the sole
         purpose of repossessing or removing the Equipment.

         -----------------------------------        ----------------------------
         Signed By                                  Dated

                                      155
<PAGE>

                                    SCHEDULE

        THE CABINET(S) TO WHICH A PLATE HAS BEEN AFFIXED IDENTIFYING THE
       OWNER OF THE EQUIPMENT AS DRESDNER KLEINWORT BENSON FINANCE LIMITED
       AND ALL THE EQUIPMENT IN THAT (THOSE) CABINET(S) INCLUDING, BUT NOT
          LIMITED TO, THE EQUIPMENT AS SET OUT IN THIS SCHEDULE BELOW:

                                LIST OF EQUIPMENT

                                [insert details]

                                      156
<PAGE>

                           VIATEL [Redacted] SUB-LEASE

                 [ON LETTERHEAD OF VIATEL [Redacted] SUB-LESSEE]

                   [TO BE PRODUCED IN THE [Redacted] LANGUAGE

         [PLACE], [DATE], 2000

         Sirs,

         Acting in your  capacity as landlord of the rented  premises  [DESCRIBE
         PREMISES] (the  "PREMISES") with regards to the terms and conditions of
         a  lease   agreement   signed  in  favour  of  Viatel  [INSERT  COMPANY
         HEADQUARTERS,  COMPANY REGISTRATION NUMBER] ("VIATEL") dated [DATE], we
         inform you, through this letter, that the leased equipment appearing in
         the list in the  Schedule  (the  "EQUIPMENT")  will be installed in the
         Premises as of [DATE [this date must be later than,  or on, the date of
         receipt of this letter]].

         The Equipment is the exclusive  property of Dresdner  Kleinwort  Benson
         Finance Limited, owner of the Equipment,  and Viatel has no property or
         possessory right whatsoever over the Equipment.

         This  notification  informs you in your  capacity as landlord  that the
         Equipment  is not the  property of Viatel,  and thus  prevents you from
         exercising any privilege over the Equipment with respect to obligations
         of Viatel.

         On behalf of Dresdner  Kleinwort  Benson Finance  Limited please sign a
         copy of this letter to indicate  your receipt and  confirmation  of the
         interests of Dresdner  Kleinwort Benson Finance Limited and then return
         it to the address above.

         Yours faithfully

         (SIGNATURE OF VIATEL [Redacted] SUB-LESSEE)

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

         I confirm  and  acknowledge  receipt  of the letter and of the title of
         Dresdner  Kleinwort  Benson Finance Limited to the Equipment set out in
         the Schedule to the letter:

         -----------------------------------        ----------------------------
         Signed By                                  Dated

                                      157
<PAGE>

                                    SCHEDULE

        THE CABINET(S) TO WHICH A PLATE HAS BEEN AFFIXED IDENTIFYING THE
       OWNER OF THE EQUIPMENT AS DRESDNER KLEINWORT BENSON FINANCE LIMITED
       AND ALL THE EQUIPMENT IN THAT (THOSE) CABINET(S) INCLUDING, BUT NOT
           LIMITED TO THE EQUIPMENT AS SET OUT IN THIS SCHEDULE BELOW:

                                LIST OF EQUIPMENT

                                [insert details]

                                      158
<PAGE>

                                   SCHEDULE 8

                SCHEDULE OF EURO AND [Redacted] HIGH YIELD NOTES

EURO HIGH YIELD NOTES:

1.       Euro 12.75 per cent. maturing 15th April, 2008.

2.       Euro 11.5 per cent. maturing 15th March, 2009.

[Redacted] HIGH YIELD NOTES:

[Redacted]

                                      159
<PAGE>

                                   SCHEDULE 9

                     FORM OF SUBORDINATION LETTER AGREEMENT

                                     PART I

            [FOR ALL SUB-LESSEE JURISDICTIONS OTHER THAN [Redacted]]

                           DATED               , 2000

                               VIATEL U.K. LIMITED

                                       and

                               [VIATEL SUB-LESSEE]

                                       and

                    DRESDNER KLEINWORT BENSON FINANCE LIMITED

                  --------------------------------------------
                         SUBORDINATION LETTER AGREEMENT
                  --------------------------------------------

                       [GRAPHIC OMITTED][GRAPHIC OMITTED]
                                     London

                                      160
<PAGE>

THIS AGREEMENT is dated [                                ], 2000,

BETWEEN:

(1)      VIATEL U.K. LIMITED (Registered No. 2968371) whose registered office is
         at Parnell  House,  25 Wilton Road,  London SW1V 1LW (together with its
         successors, permitted assigns and transferees, the "LESSEE");

(3)      VIATEL SUB-LESSEE [INSERT COMPANY DETAILS]; and

(2)      DRESDNER KLEINWORT BENSON FINANCE LIMITED (Registered No. 212857) whose
         registered office is at 20 Fenchurch Street,  London EC3P 3DB (together
         with its  successors,  permitted  assigns  and  permitted  transferees,
         "DKB").

IT IS AGREED AS FOLLOWS:

1.       Reference is made to :

         (a)      the Master Lease  Purchase  Agreement  dated [ ], 2000 between
                  DKB,  as  Lessor,  and the  Lessee,  (the  "MASTER  LEASE") in
                  relation to certain optical network and transmission equipment
                  as more fully described in the Master Lease (the "EQUIPMENT");

         (b)      the Sub-Lease  Agreement dated [ ], 2000 between the Lessee as
                  sub-lessor,  and  [Viatel  Sub-Lessee],   as  sub-lessee  (the
                  "EQUIPMENT  SUB-LEASE")  relating to certain of the  Equipment
                  (being that located in [relevant  jurisdiction] (the "RELEVANT
                  EQUIPMENT");

2.       A term  defined in the Master  Lease has the same  meaning when used in
         this Deed,  unless it is otherwise  defined in this Deed or the context
         otherwise requires.

3.       For the benefit of DKB, the Lessee and [Viatel Sub-Lessee]  acknowledge
         and agree that DKB has agreed to the  leasing of the  Equipment  to the
         Lessee  and  the  sub-leasing  of the  Relevant  Equipment  to  [Viatel
         Sub-Lessee]  on the basis that the  right,  title and  interest  of the
         Lessee and  [Viatel  Sub-Lessee]  (whether  pursuant  to or through the
         Master Lease or the Equipment Sub-Lease, at law or otherwise howsoever)
         in and to the  Equipment  (in respect of the  Lessee) and the  Relevant
         Equipment  (in  respect  of  [Viatel  Sub-Lessee])  is in all  respects
         subject  and  subordinate  to those of DKB as owner  and  lessor of the
         Equipment.

4.       In  consideration  of DKB agreeing to lease the Equipment to the Lessee
         pursuant  to  the  Master  Lease  and to the  leasing  of the  Relevant
         Equipment  to  [Viatel  Sub-Lessee]  and the  payment by DKB to [Viatel
         Sub-Lessee]  of E10  and  other  valuable  consideration,  receipt  and
         sufficiency  of which is hereby  acknowledged  by [Viatel  Sub-Lessee],
         [Viatel Sub-Lessee] agrees that:

         (a)   its rights under the Equipment Sub-Lease and its right, title and
               interest  in,  to  and  under  the  Relevant  Equipment  (whether
               pursuant  to  or  through  the  Master  Lease  or  the  Equipment
               Sub-Lease,  at  law  or  otherwise  howsoever)  are  subject  and
               subordinate  in all  respects  to DKB's  rights  under the Master
               Lease  and its  right,  title and  interest  in, to and under the
               Equipment  as  owner  and  lessor  of  the  Equipment  and to the
               Lessee's rights under the Master Lease;

         (b)   its  rights to  possession  of the  Relevant  Equipment,  and the
               sub-leasing  of it, under the  Equipment  Sub-Lease and any other
               right of  possession  which it may have at law or otherwise  will

                                      161
<PAGE>

               terminate  immediately and automatically  (and without any notice
               from or action by the  Lessee or DKB) on the  termination  of the
               leasing of the Equipment under the Master Lease for any reason;

         (c)   upon  written  notification  from  DKB that  the  leasing  of the
               Equipment or, as the case may be, the Relevant  Equipment,  under
               the  Master  Lease  has  terminated  and  that DKB  requires  the
               Relevant  Equipment  to be  redelivered  to it, it will  promptly
               redeliver  the Relevant  Equipment to DKB at [ ] or at such other
               place within [the relevant country] reasonably specified by DKB;

         (d)   it will have no claim  (including  without  limitation a claim in
               damages)  of any  kind  against  DKB or  the  Relevant  Equipment
               arising from any breach, non-performance or default by the Lessee
               or any termination of the leasing of the Relevant Equipment under
               the  Equipment  Sub-Lease  for any reason and will look solely to
               the  Lessee  in  respect  of any  such  claim  which  it may have
               pursuant to the Equipment Sub-Lease, at law or otherwise.

5.       This  agreement  shall  be  governed  by the laws of  England.  [Viatel
         Sub-Lessee]  agrees  for the  benefit  of DKB that any legal  action or
         proceedings arising out of or in connection with this agreement against
         [Viatel  Sub-Lessee] or any of its assets may be brought in the English
         courts and irrevocably and unconditionally  submits to the jurisdiction
         of such courts and waives objection to the English courts on grounds of
         inconvenient  forum or otherwise in connection  with this agreement and
         irrevocably designates,  appoints and empowers [Agent] [reference; ] at
         present of [ ] to receive for it and on its behalf,  service of process
         issued  out of the  English  courts in any legal  action or  proceeding
         arising out of and in connection with this agreement. The submission to
         such jurisdiction shall not (and shall not be construed so as to) limit
         the right of DKB to take proceedings against [Viatel Sub-Lessee] in the
         courts of any other  competent  jurisdiction,  nor shall the  taking of
         proceedings  in any one or more  jurisdictions  preclude  the taking of
         proceedings in any other  jurisdiction,  whether  concurrently  or not.
         [Viatel  Sub-Lessee] further agrees that only the courts of England and
         not  those  of  any  other  jurisdiction  shall  have  jurisdiction  to
         determine  any claim which  [Viatel  Sub-Lessee]  may have  against DKB
         arising out of and in connection with this agreement.

Signed by the  Lessee,  [Viatel  Sub-Lessee]  and DKB on the day and year  above
written.

SIGNED                                      )
                                            )
by Viatel U.K. Limited                      )
acting by [                ] and            )
[                ] acting under the         )
authority of that company:                  )

SIGNED                                      )
                                            )
by [Viatel Sub-Lessee]                      )
a company duly incorporated in [    ] acting)
by [              ] and [                 ] )
acting under the authority of that company: )

                                      162
<PAGE>

SIGNED BY

 .......................................
for and on behalf of DRESDNER
KLEINWORT BENSON FINANCE LIMITED

                                      163
<PAGE>

                                     PART II

                       [FOR VIATEL [Redacted] SUB-LESSEE]

                         DATED                    , 2000

                               VIATEL U.K. LIMITED

                                       and

                               [VIATEL SUB-LESSEE]

                                       and

                    DRESDNER KLEINWORT BENSON FINANCE LIMITED

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

                         SUBORDINATION LETTER AGREEMENT

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

                               [Graphic Omitted]
                                     London

                                      164
<PAGE>

THIS AGREEMENT is dated [                                     ], 2000,

BETWEEN:

(1)      VIATEL U.K. LIMITED (Registered No. 2968371) whose registered office is
         at Parnell  House,  25 Wilton Road,  London SW1V 1LW (together with its
         successors, permitted assigns and transferees, the "LESSEE");

(3)      VIATEL [Redacted] SUB-LESSEE [INSERT COMPANY DETAILS]; and

(2)      DRESDNER KLEINWORT BENSON FINANCE LIMITED (Registered No. 212857) whose
         registered office is at 20 Fenchurch Street,  London EC3P 3DB (together
         with its  successors,  permitted  assigns  and  permitted  transferees,
         "DKB").

IT IS AGREED AS FOLLOWS:

1.       Reference is made to :

         (a)      the Master Lease  Purchase  Agreement  dated [ ], 2000 between
                  DKB,  as  Lessor,  and the  Lessee,  (the  "MASTER  LEASE") in
                  relation to certain optical network and transmission equipment
                  as more fully described in the Master Lease (the "EQUIPMENT");

         (b)      the Sub-Lease  Agreement dated [ ], 2000 between the Lessee as
                  sub-lessor,  and [Viatel [Redacted] Sub-Lessee], as sub-lessee
                  (the  "EQUIPMENT   SUB-LEASE")  relating  to  certain  of  the
                  Equipment (being that located in [relevant  jurisdiction] (the
                  "RELEVANT EQUIPMENT");

2.       A term  defined in the Master  Lease has the same  meaning when used in
         this Deed,  unless it is otherwise  defined in this Deed or the context
         otherwise requires.

3.       For the benefit of DKB, the Lessee and [Viatel  [Redacted]  Sub-Lessee]
         acknowledge  and  agree  that  DKB has  agreed  to the  leasing  of the
         Equipment to the Lessee and the  sub-leasing of the Relevant  Equipment
         to [Viatel  [Redacted]  Sub-Lessee] on the basis that the right,  title
         and interest of the Lessee and [Viatel [Redacted]  Sub-Lessee] (whether
         pursuant to or through the Master Lease or the Equipment Sub-Lease,  at
         law or otherwise  howsoever) in and to the Equipment (in respect of the
         Lessee) and the Relevant  Equipment  (in respect of [Viatel  [Redacted]
         Sub-Lessee]) is in all respects subject and subordinate to those of DKB
         as owner and lessor of the Equipment.

4.       In  consideration  of DKB agreeing to lease the Equipment to the Lessee
         pursuant  to  the  Master  Lease  and to the  leasing  of the  Relevant
         Equipment to [Viatel  [Redacted]  Sub-Lessee] and the payment by DKB to
         [Viatel [Redacted] Sub-Lessee] of E10 and other valuable consideration,
         receipt  and  sufficiency  of which is hereby  acknowledged  by [Viatel
         [Redacted] Sub-Lessee], [Viatel [Redacted] Sub-Lessee] agrees that:

         (a)   its rights under the Equipment Sub-Lease and its right, title and
               interest  in,  to  and  under  the  Relevant  Equipment  (whether
               pursuant  to  or  through  the  Master  Lease  or  the  Equipment
               Sub-Lease,  at  law  or  otherwise  howsoever)  are  subject  and
               subordinate  in all  respects  to DKB's  rights  under the Master
               Lease  and its  right,  title and  interest  in, to and under the
               Equipment  as  owner  and  lessor  of  the  Equipment  and to the
               Lessee's rights under the Master Lease;

                                      165
<PAGE>

         (b)   its  rights to  possession  of the  Relevant  Equipment,  and the
               sub-leasing  of it, under the Equipment  Sub-Lease will terminate
               immediately and  automatically  on the termination of the leasing
               of the Equipment  or, as the case may be, the Relevant  Equipment
               under the Master Lease for any reason, as consequence of the fact
               that the Equipment  Sub-Lease  automatically  and by force of law
               will  be  rescinded  ([Redacted])  upon  the  termination  of the
               leasing of the  Equipment  or, as the case may be,  the  Relevant
               Equipment under the Master Lease for any reason;

         (c)   upon  written  notification  from  DKB that  the  leasing  of the
               Equipment or, as the case may be, the Relevant  Equipment,  under
               the  Master  Lease  has  terminated  and  that DKB  requires  the
               Relevant  Equipment  to be  redelivered  to it, it will  promptly
               redeliver  the Relevant  Equipment to DKB at [ ] or at such other
               place within [the relevant country] reasonably specified by DKB;

         (d)   it will have no claim  (including  without  limitation a claim in
               damages)  of any  kind  against  DKB or  the  Relevant  Equipment
               arising from any breach, non-performance or default by the Lessee
               or any termination of the leasing of the Relevant Equipment under
               the  Equipment  Sub-Lease  for any reason and will look solely to
               the  Lessee  in  respect  of any  such  claim  which  it may have
               pursuant to the Equipment Sub-Lease, at law or otherwise.

5.       This  agreement  shall  be  governed  by the laws of  England.  [Viatel
         [Redacted]  Sub-Lessee]  agrees  for the  benefit of DKB that any legal
         action  or  proceedings  arising  out  of or in  connection  with  this
         agreement against [Viatel  [Redacted]  Sub-Lessee] or any of its assets
         may  be   brought  in  the   English   courts   and   irrevocably   and
         unconditionally  submits to the  jurisdiction of such courts and waives
         objection  to the English  courts on grounds of  inconvenient  forum or
         otherwise in connection with this agreement and irrevocably designates,
         appoints  and  empowers  [Agent]  [reference;  ] at  present  of [ ] to
         receive for it and on its behalf,  service of process issued out of the
         English courts in any legal action or proceeding  arising out of and in
         connection  with this  agreement.  The submission to such  jurisdiction
         shall not (and shall not be  construed so as to) limit the right of DKB
         to take  proceedings  against  [Viatel  [Redacted]  Sub-Lessee]  in the
         courts of any other  competent  jurisdiction,  nor shall the  taking of
         proceedings  in any one or more  jurisdictions  preclude  the taking of
         proceedings in any other  jurisdiction,  whether  concurrently  or not.
         [Viatel [Redacted]  Sub-Lessee]  further agrees that only the courts of
         England and not those of any other jurisdiction shall have jurisdiction
         to determine any claim which [Viatel  [Redacted]  Sub-Lessee]  may have
         against DKB arising out of and in connection with this agreement.

Signed by the Lessee,  [Viatel[Redacted] Sub-Lessee] and DKB on the day and year
above written.

SIGNED                                      )
                                            )
by Viatel U.K. Limited                      )
acting by [                         ] and   )
[                   ] acting under the      )
authority of that company:                  )

                                      166
<PAGE>

SIGNED                                      )
                                            )
by [Viatel [Redacted] Sub-Lessee]           )
a company duly incorporated in [    ] acting)
by [              ] and [                 ] )
acting under the authority of that company: )

SIGNED BY

 .......................................................
for and on behalf of DRESDNER
KLEINWORT BENSON FINANCE LIMITED

                                      167
<PAGE>

                                   SIGNATORIES

LESSOR

DRESDNER KLEINWORT BENSON FINANCE LIMITED

By:      KEVIN JOHN WHITING                 By:      RICHARD ALASTAIR BIRCH
Name:    Kevin John Whiting                 Name:    Richard Alastair Birch
Title:   Authorised Signatory               Title:   Authorised Signatory

LESSEE

VIATEL U.K. LIMITED

By:      ALLAN L. SHAW                      By:      JAMES P. PRENETTA, JR.
Name:    Allan L. Shaw                      Name:    James P. Prenetta, Jr.
Title:   Director                           Title:   Director

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00024-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00024-of-00352.parquet"}]]